INTERPLEADER
By reason thereof, METROCAN and LEYCON
FIRST DIVISION
[G.R. No. 127913. September 13, 2001.]
RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs.
METRO CONTAINER CORPORATION, respondent.
Angara Abello Concepcion Regala & Cruz for petitioner.
Noel Mingoa for Ley Construction & Development Corp.
Mondragon & Montoya Law Offices for private respondent.
SYNOPSIS
For failure of Ley Construction Corporation (LEYCON) to settle
its loan obligations, Rizal Commercial Banking Corporation
(RCBC) instituted an extrajudicial foreclosure proceeding against
it. In a bidding, RCBC was adjudged the highest bidder. LEYCON
promptly filed an action for Nullification of Extrajudicial
Foreclosure Sale and Damages against RCBC docketed as Civil
Case No. 4037-V-93. Meanwhile, RCBC consolidated its
ownership over the property due to LEYCON's failure to redeem
the mortgaged property within the 12-month redemption period.
By virtue thereof, RCBC demanded rental payments from Metro
Container Corporation (METROCAN) which was leasing the
mortgaged property from LEYCON. On the other hand, on 26 May
1994, LEYCON filed an action for Unlawful Detainer against
METROCAN before the Metropolitan Trial Court (MeTC), Branch
82 of Valenzuela, Metro Manila, docketed as Civil Case No. 6202.
Consequently, METROCAN filed a complaint for Interpleader
against LEYCON and RCBC docketed as Civil Case No. 4398-V-94
before the Regional Trial Court, Branch 75 of Valenzuela to
compel them to interplead and litigate their several claims
among themselves and to determine which among them shall
rightfully receive the payment of monthly rentals on the subject
property. During the pre-trial conference of the interpleader
case, the trial court ordered the dismissal of the case insofar as
METROCAN and LEYCON were concerned in view of an amicable
settlement they entered into. On 31 October 1995, judgment was
rendered in the Unlawful Detainer case, which, among other
things, ordered METROCAN to pay LEYCON whatever rentals due
on the subject premises. The said decision became final and
executory.
separately filed a motion to dismiss in the interpleader case.
However, the said two motions were dismissed for lack of merit.
Thereafter, METROCAN sought relief from the Court of Appeals
via a petition for certiorari and prohibition. Thus, the Court of
Appeals granted the petition and ordered the dismissal of the
interpleader case. Hence, RCBC filed the instant petition.
The Court sustained the Court of Appeals. An action of
interpleader is afforded to protect a person not against double
liability but against double vexation in respect of one liability. It
requires, as an indispensable requisite, that "conflicting claims
upon the same subject matter are or may be made against the
plaintiff-in-interpleader who claims no interest whatever in the
subject matter or an interest which in whole or in part is not
disputed by the claimants. The decision in Civil Case No. 6202
resolved the conflicting claims insofar as payment of rentals was
concerned. Petitioner then was correct in saying that it is not
bound by the decision in Civil Case No. 5202. It is not a party
thereto. However, it could not compel METROCAN to pursue Civil
Case No. 4398-V-94. RCBC has other avenues to prove its claim. It
is not bereft of other legal remedies. In fact, the issue of
ownership can very well be threshed out in Civil Case No. 4037-
V-93, the case for Nullification of Extrajudicial Foreclosure Sale
and Damages filed by LEYCON against RCBC.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTION; UNLAWFUL
DETAINER; LIMITED TO THE QUESTION OF PHYSICAL OR
MATERIAL POSSESSION OF THE PREMISES. — It is also
undisputed that LEYCON, as lessor of the subject property filed
an action for unlawful detainer (Civil Case No. 6202) against its
lessee METROCAN. The issue in Civil Case No. 6202 is limited to
the question of physical or material possession of the premises.
The issue of ownership is immaterial therein and the outcome of
the case could not in any way affect conflicting claims of
ownership, in this case between RCBC and LEYCON. This was
made clear when the trial court, in denying RCBC's "Motion for
Inclusion . . . as an Indispensable Party" declared that "the final
determination of the issue of physical possession over the
subject premises between the plaintiff and the defendant shall
1
not in any way affect RCBC's claims of ownership over the said
premises, since RCBC is neither a co-lessor or co-lessee of the
same, hence he has no legal personality to join the parties herein
with respect to the issue of physical possession vis-à-vis the
contract of lease between the parties." As aptly pointed by the
MeTC, the issue in Civil Case No. 6202 is limited to the defendant
LEYCON's breach of the provisions of the Contract of Lease
Rentals.
2. ID.; ID.; INTERPLEADER; PURPOSE. — It should be
remembered that an action of interpleader is afforded to protect
a person not against double liability but against double vexation
in respect of one liability. It requires, as an indispensable
requisite, that "conflicting claims upon the same subject matter
are or may be made against the plaintiff-in-interpleader who
claims no interest whatever in the subject matter or an interest
which in whole or in part is not disputed by the claimants."
3. ID; ID.; INTERPLEADER FOR PAYMENT OF RENTALS; CEASED
TO EXIST WHEN THE DECISION OF THE LOWER COURT IN AN
UNLAWFUL DETAINER CASE INVOLVING THE SAME PROPERTY
BECOMES FINAL AND EXECUTORY. — When the decision in Civil
Case No. 6202 became final and executory, METROCAN has no
other alternative left but to pay the rentals to LEYCON. Precisely
because there was already a judicial fiat to METROCAN, there
was no more reason to continue with Civil Case No. 4398-V-94.
Thus, METROCAN moved for the dismissal of the interpleader
action not because it is no longer interested but because there is
no more need for it to pursue such cause of action.
4. ID.; ID.; ID.; ID.; CLAIM OF OWNERSHIP BY ONE OF THE
DEFENDANTS IS NOT AFFECTED. — Petitioner is correct in
saying that it is not bound by the decision in Civil Case No. 6202.
It is not a party thereto. However, it could not compel
METROCAN to pursue Civil Case No. 4398-V-94. RCBC has other
avenues to prove its claim. It is not bereft of other legal remedies.
In fact, the issue of ownership can very well be threshed out in
Civil Case No. 4037-V-93, the case for Nullification of
Extrajudicial Foreclosure Sale and Damages filed by LEYCON
against RCBC.
DECISION
KAPUNAN, J p:
Assailed in this petition for review on certiorari are the Decision,
promulgated on 18 October 1996 and the Resolution,
promulgated on 08 January 1997, of the Court of Appeals in CA-
G.R. SP No. 41294.
The facts of the case are as follows:
On 26 September 1990, Ley Construction Corporation (LEYCON)
contracted a loan from Rizal Commercial Banking Corporation
(RCBC) in the amount of Thirty Million Pesos (P30,000,000.00).
The loan was secured by a real estate mortgage over a property,
located in Barrio Ugong, Valenzuela, Metro Manila (now
Valenzuela City) and covered by TCT No. V-17223. LEYCON failed
to settle its obligations prompting RCBC to institute an
extrajudicial foreclosure proceedings against it. After LEYCON's
legal attempts to forestall the action of RBCB failed, the
foreclosure took place on 28 December 1992 with RCBC as the
highest bidder.
LEYCON promptly filed an action for Nullification of Extrajudicial
Foreclosure Sale and Damages against RCBC. The case, docketed
as Civil Case No. 4037-V-93, was raffled to the Regional Trial
Court (RTC) of Valenzuela, Branch 172. Meanwhile, RCBC
consolidated its ownership over the property due to LEYCON's
failure to redeem it within the 12-month redemption period and
TCT No. V-332432 was issued if favor of the bank. By virtue
thereof, RCBC demanded rental payments from Metro Container
Corporation (METROCAN) which was leasing the property from
LEYCON.
On 26 May 1994, LEYCON filed an action for Unlawful Detainer,
docketed as Civil Case No. 6202, against METROCAN before the
Metropolitan Trial Court (MeTC) of Valenzuela, Branch 82.
CcTHaD
On 27 May 1994, METROCAN filed a complaint for Interpleader,
docketed as Civil Case No. 4398-V-94 before the Regional Trial
Court of Valenzuela, Metro Manila, Branch 75 against LEYCON
and RCBC to compel them to interplead and litigate their several
claims among themselves and to determine which among them
shall rightfully receive the payment of monthly rentals on the
subject property. On 04 July 1995, during the pre-trial
conference in Civil Case No. 4398-V-94, the trial court ordered
the dismissal of the case insofar as METROCAN and LEYCON
2
were concerned in view of an amicable settlement they entered
by virtue of which METROCAN paid back rentals to LEYCON.
On 31 October 1995, judgment was rendered in Civil Case No.
6202, which among other things, ordered METROCAN to pay
LEYCON whatever rentals due on the subject premises. The
MeTC decision became final and executory.
On 01 February 1996, METROCAN moved for the dismissal of
Civil Case No. 4398-V-94 for having become moot and academic
due to the amicable settlement it entered with LEYCON on 04
July 1995 and the decision in Civil Case No. 6202 on 31 October
1995. LEYCON, likewise, moved for the dismissal of the case
citing the same grounds cited by METROCAN.
On 12 March 1996, the two motions were dismissed for lack of
merit. The motions for reconsideration filed by METROCAN and
LEYCON were also denied prompting METROCAN to seek relief
from the Court of Appeals via a petition for certiorari and
prohibition with prayer for the issuance of a temporary
restraining order and a writ of preliminary injunction. LEYCON,
as private respondent, also sought for the nullification of the RTC
orders.
In its Decision, promulgated on 18 October 1996, the Court of
Appeals granted the petition and set aside the 12 March 1996
and 24 June 1996 orders of the RTC. The appellate court also
ordered the dismissal of Civil Case No. 4398-V-94. RCBC's motion
for reconsideration was denied for lack of merit in the resolution
of 08 January 1997.
Hence, the present recourse.
RCBC alleged, that:
(1) THE DECISION OF THE METROPOLITAN TRIAL COURT IN
THE EJECTMENT CASE BETWEEN METROCAN AND LEYCON
DOES NOT AND CANNOT RENDER THE INTERPLEADER ACTION
MOOT AND ACADEMIC.
(2) WHILE A PARTY WHO INITIATES AN INTERPLEADER
ACTION MAY NOT BE COMPELLED TO LITIGATE IF HE IS NO
LONGER INTERESTED TO PURSUE SUCH CAUSE OF ACTION,
SAID PARTY MAY NOT UNILATERALLY CAUSE THE DISMISSAL
OF THE CASE AFTER THE ANSWER HAVE BEEN FILED.
FURTHER, THE DEFENDANTS IN AN INTERPLEADER SUIT
SHOULD BE GIVEN FULL OPPORTUNITY TO LITIGATE THEIR
RESPECTIVE CLAIMS. 1
We sustain the Court of Appeals.
Section 1, Rule 63 of the Revised Rules of Court 2 provides:
SECTION 1. Interpleader when proper. — Whenever conflicting
claims upon the same subject matter are or may be made against
a person, who claims no interest whatever in the subject matter,
or an interest which in whole or in part is not disputed by the
claimants, he may bring an action against the conflicting
claimants to compel them to interplead and litigate their several
claims among themselves.
In the case before us, it is undisputed that METROCAN filed the
interpleader action (Civil Case No. 4398-V-94) because it was
unsure which between LEYCON and RCBC was entitled to receive
the payment of monthly rentals on the subject property. LEYCON
was claiming payment of the rentals as lessor of the property
while RCBC was making a demand by virtue of the consolidation
of the title of the property in its name.
It is also undisputed that LEYCON, as lessor of the subject
property filed an action for unlawful detainer (Civil Case No.
6202) against its lessee METROCAN. The issue in Civil Case No.
6202 is limited to the question of physical or material possession
of the premises. 3 The issue of ownership is immaterial therein 4
and the outcome of the case could not in any way affect
conflicting claims of ownership, in this case between RCBC and
LEYCON. This was made clear when the trial court, in denying
RCBC's "Motion for Inclusion . . . as an Indispensable Party"
declared that "the final determination of the issue of physical
possession over the subject premises between the plaintiff and
the defendant shall not in any way affect RCBC's claims of
ownership over the said premises, since RCBC is neither a co-
lessor or co-lessee of the same, hence he has no legal personality
to join the parties herein with respect to the issue of physical
possession vis-a-vis the contract of lease between the parties." 5
As aptly pointed by the MeTC, the issue in Civil Case No. 6202 is
limited to the defendant LEYCON's breach of the provisions of
the Contract of Lease Rentals. 6
Hence, the reason for the interpleader action ceased when the
MeTC rendered judgment in Civil Case No. 6202 whereby the
court directed METROCAN to pay LEYCON "whatever rentals due
on the subject premises . . . ." While RCBC, not being a party to
Civil Case No. 6202, could not be bound by the judgment therein,
3
METROCAN is bound by the MeTC decision. When the decision in
Civil Case No. 6202 became final and executory, METROCAN has
no other alternative left but to pay the rentals to LEYCON.
Precisely because there was already a judicial fiat to METROCAN,
there was no more reason to continue with Civil Case No. 4398-
V-94. Thus, METROCAN moved for the dismissal of the
interpleader action not because it is no longer interested but
because there is no more need for it to pursue such cause of
action.
It should be remembered that an action of interpleader is
afforded to protect a person not against double liability but
against double vexation in respect of one liability. 7 It requires,
as an indispensable requisite, that "conflicting claims upon the
same subject matter are or may be made against the plaintiff-in-
interpleader who claims no interest whatever in the subject
matter or an interest which in whole or in part is not disputed by
the claimants." 8 The decision in Civil Case No. 6202 resolved the
conflicting claims insofar as payment of rentals was concerned.
Petitioner is correct in saying that it is not bound by the decision
in Civil Case No. 6202. It is not a party thereto. However, it could
not compel METROCAN to pursue Civil Case No. 4398-V-94.
RCBC has other avenues to prove its claim. Is not bereft of other
legal remedies. In fact, the issue of ownership can very well be
threshed out in Civil Case No. 4037-V-93, the case for
Nullification of Extrajudicial Foreclosure Sale and Damages filed
by LEYCON against RCBC. DcCEHI
WHEREFORE, the petition for review is DENIED and the Decision
of the Court of Appeals, promulgated on 18 October 1996, as well
as its Resolution promulgated on 08 January 1997, are
AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., Pardo and Ynares-Santiago, JJ., concur.
Puno, J., is on official leave.
||| (Rizal Commercial Banking Corp. v. Metro Container Corp., G.R.
No. 127913, [September 13, 2001], 417 PHIL 458-465)
FIRST DIVISION
[G.R. No. L-41818. February 18, 1976.]
ZOILA CO LIM, petitioner, vs. CONTINENTAL DEVELOPMENT
CORPORATION, respondent.
[G.R. No. L-41831. February 18, 1976.]
CONTINENTAL DEVELOPMENT CORPORATION, petitioner, vs.
BENITO GERVASIO TAN and ZOILA CO LIM, respondents.
SYNOPSIS
A complaint for interpleader was filed by Continental
Development Corporation (CDC) against Benito Gervacio Tan
and Zoila Co Lim, praying that said defendants be directed to
interplead and litigate their respective claims over the shares of
stock in its possession. CDC alleged that, since both defendants
claim ownership of the shares of stock, is it not in a position to
justly and correctly determine the conflicting claims; that it
cannot dispose of the shares of stock as both defendants
threatened to take punitive measure against it should it adopt
steps the may prejudice their respective interest; and that it has
no interest over the subject matter of the complaint.
The trial court dismissed the complain for lack of cause of action
invoking Section 35 of the Corporation Law (Act 1459, as
amended). CDC and defendant Zoila Co Lim filed their respective
motions for reconsideration of the trial court's order but the
same were denied, hence, these petitions for review on
certiorari.
The Supreme Court held that an active conflict of interests over
the shares of stock exist between the defendants, and the court a
quo gravely abused its discretion in dismissing the complaint for
interpleader without giving full opportunity to defendants to
litigate their respective claims, which dismissal has the effect of
determining the question of ownership in favor of defendant
Benito Gervacio Tan.
Petition granted with costs.
SYLLABUS
1. INTERPLEADER; DISMISSAL; ERROR TO DISMISS ACTION
WHERE CLEAR CONFLICT OF INTEREST EXISTS. — Since there
is an active conflict of interests between the two defendants over
4
the disputed shares of stock, which the plaintiff-in-interpleader
cannot justly and correctly decide thus rendering it impossible to
dispose the shares of stock in question, the dismissal of the
complaint is a grave abuse of the discretion and practically
decided the ownership of the shares of stock in favor of
defendant Benito Gervacio Tan without giving full opportunity to
both defendants to litigate their respective claims.
2. ID.; REQUISITES; CONFLICT OF INTEREST, THE ONLY
INDISPENSABLE REQUISITE IN INTERPLEADER. — Section 1,
Rule 63 of the Revised Rules of Court provides that, whenever
conflicting claims upon the same subject matter are or may be
made against a person, who claims no interest whatever in the
object matter, or an interest which in whole or in part is not
disputed by the claimants, he may bring an action against the
conflicting claimants to compel them to interplead and litigate
their several claims among themselves. The only indispensable
requisite required by this rule is that conflicting claims upon the
same subject matter are may be made against plaintiff-in-
interpleader who claims no interest whatever in the subject
matter or an interest which in whole or in part is not disputed by
the claimants (Beltran vs. PHHC, L-25138, 39 SCRA 145).
3. ID.; ID.; ID.; SUBJECT MATTER MUST BE THE SAME AND
DERIVED FROM THE SAME SOURCE. — An interpleader merely
demands that there be two or more claimants to the fund or
thing in dispute through separate and different interests. The
claims must be adverse before relief can be granted and the
parties sought to be interpleaded must be in a position to make
effective claims. The fund, thing, or duty over which the parties
assert adverse claims must be one and the same and derived
from the same source.
4. ID.; NATURE OF REMEDY; A PROTECTION AGAINST DOUBLE
VEXATION. — An action for interpleader is a remedy whereby a
person who has personal property in his possession or an
obligation to render wholly or partially, without claiming any
right in both comes to court and asks that the persons who claim
the said personal property or who consider themselves entitled
to demand compliance with the obligation, be required to litigate
among themselves, in order to determine finally who is entitled
to one or the other thing. The remedy is afforded not only to
protect a person against a double liability but to protect him
against a double vexation in respect of one liability.
DECISION
MAKASIAR, J p:
These two petitions seek a review of the order dated March 12,
1974 of the Judge presiding Branch XXVI of the Manila Court of
First Instance, dismissing petitioner Continental Development
Corporation' complaint.
The COURT resolved to treat these petitions as special civil
actions, the petition to dismiss filed by the respondent Benito
Gervasio Tan as answer and the cases as submitted for decision.
On November 26, 1973, herein petitioner Continental
Development Corporation filed a complaint for interpleader
against the defendants Benito Gervasio Tan and Zoila Co Lim,
alleging among others: LLphil
"2. That in the books of the plaintiff, there appears the name of
the defendant Benito Gervasio Tan as one of its stockholders
initially accredited sometime in 1957 with fifty (50) common
shares covered by certificates of stock Nos. 12 and 13, and
subsequently credited with seventy five (75) shares by way of
dividends covered by certificates of stock Nos. 20 and 25, or an
outstanding total stockholding of one hundred twenty five (125)
common shares of the par value of Two Hundred Fifty Pesos
(P250.00) each.
"3. That said defendant Benito Gervasio Tan, personally or
through his lawyer, has since December, 1972, been demanding
from plaintiff company, by letters and telegrams, the release to
him of the certificates of stock aforesaid but which the plaintiff
has not done so far and is prevented from doing so because of
the vehement and adverse claim thereto by the other defendant,
Zoila Co Lim.
"4. That the defendant Zoila Co Lim, by letters sent to the plaintiff
through her counsel, has laid claim and persists in claiming the
very same shares of stock being demanded by the other
defendant as aforesaid, alleging that said stocks really belonged
to her mother So Bi (alias Tawa), now already deceased, and
strongly denying her co-defendant's claim to the same.
"5. That both defendants, through their respective lawyers,
threaten to take punitive measures against the plaintiff company
5
should it take any steps that may prejudice their respective
interests in so far as the stocks in question are concerned.
"6. That plaintiff is not sufficiently informed of the rights of the
respective claimants and therefore not in a position to determine
justly and correctly their conflicting claims.
"7. That the plaintiff company has no interest of any kind in said
stocks and is ready and willing to deliver the corresponding
certificates of ownership to whomsoever as this Honorable Court
may direct." (pp. 22-23, rec.)
and praying that the defendants be directed to interplead and
litigate their respective claims over the aforementioned shares of
stock and to determine their respective rights thereto.
On January 7, 1974, herein respondent Benito Gervasio Tan, as
defendant in the lower court, filed a motion to dismiss the
complaint, on the ground, inter alia, that paragraph 2 of the
complaint itself states that the shares of stock in question are
recorded in the books of petitioner in the name of defendant
Benito Gervasio Tan, who should therefore be declared owner
thereof pursuant to Section 52 of the Corporation Law (pp. 25-
30, rec.). cdphil
On January 14, 1974, defendant in Zoila Co Lim filed her answer
expressly admitting paragraph 2 of the complaint, but alleging
that the said shares of stock had previously been delivered in
trust to the defendant Benito Gervasio Tan for her (Zoila's)
mother, the late So Bi, alias Tawa, the actual owner of the shares
of stock; that now Benito Gervasio Tan would want the re-
issuance and release to him of new replacement certificates,
which petitioner has not so far done; and that as the daughter
and heir of said So Bi, alias Tawa, she is now the owner of the
said shares of stock, which should be delivered to her (pp. 31-33,
rec.).
On January 22, 1974, petitioner Continental Development
Corporation filed its opposition to Benito's motion to dismiss
(pp. 34-40. G.R. No. L-41831).
In the questioned order dated March 12, 1974, the trial judge
dismissed the complaint for lack of cause of action, invoking
Section 35 of Act No. 1459, as amended, otherwise known as the
Corporation Law (pp. 41-42, G.R. No. L-41831).
Defendant Zoila Co Lim and herein petitioner as plaintiff, filed
their respective motions for reconsideration of the aforesaid
order (pp. 43-49, G.R. No. L-41831), to which the defendant
Benito Gervasio Tan filed his rejoinder (pp. 50-61, G.R. No. L-
41831). Said motions were denied in an order dated July 3, 1974.
Hence these petitions by Continental Development Corporation
and Zoila Co Lim.
It is patent from the pleadings in the lower court that both
defendants Benito Gervasio Tan and Zoila Co Lim assert
conflicting rights to the questioned shares of stock. Precisely in
his motion to dismiss the complaint for interpleader, defendant
Benito Gervasio Tan states that petitioner corporation, through
its Vice-President, notified him on July 23, 1973 "that the shares
of stock are in the possession of its treasurer Mr. Ty Lim, and
urged defendant to directly obtain them from the former, who
allegedly was on vacation at the time. Mr. Ty Lim, on August 30,
1973, through counsel, replied to the defendant Benito Gervasio
Tan that said certificates were not in his possession but
surmised, without reference to any record, that the same might
have been delivered to the deceased So Bi. And, on October 29,
1973, same counsel of Mr. Ty Lim, wrote the corporation, in
behalf of defendant Zoila Co Lim, alleged heir of So Bi, claiming
ownership of the stocks" (pp. 26, 27, G.R. No. L-41831).
Defendant Zoila Co Lim, on the other hand, as heretofore stated,
claims sole ownership of said shares of stock as inheritance from
her late mother So Bi, alias Tawa. LexLib
And petitioner Continental Development Corporation expressly
stated in the complaint that both defendants, through their
respective lawyers, threatened to take punitive measures against
it should it adopt any steps that may prejudice their respective
interests in the shares of stock in question; and that it is not
sufficiently informed of the rights of the respective claimants and
therefore not in a position to determine justly and correctly their
conflicting claims (pars. 5, 6 and 7 of the complaint, p. 23, rec.).
And in its opposition to the motion to dismiss its complaint,
petitioner Continental Development Corporation stressed that it
might be liable to one defendant should it comply with the
demands of the other with respect to the transfer or entry of the
shares of stock in the books of the corporation.
Since there is an active conflict of interests between the two
defendants, now herein respondent Benito Gervasio Tan and
petitioner Zoila Co Lim, over the disputed shares of stock, the
6
trial court gravely abused its discretion in dismissing the
complaint for interpleader, which practically decided ownership
of the shares of stock in favor of defendant Benito Gervasio Tan.
The two defendants, now respondents in G.R. No. L-41831,
should be given full opportunity to litigate their respective
claims.
Rule 63, Section 1 of the New Rules of Court tells us when a cause
of action exists to support a complaint in interpleader:
"Whenever conflicting claims upon the same subject matter are
or may be made against a person, who claims no interest
whatever in the subject matter, or an interest which in whole or
in part is not disputed by the claimants, he may bring an action
against the conflicting claimants to compel them to interplead
and litigate their several claims among themselves" (Emphasis
supplied).
This provision only requires as an indispensable requisite:
"that conflicting claims upon the same subject matter are or may
be made against the plaintiff-in-interpleader who claims no
interest whatever in the subject matter or an interest which in
whole or in part is not disputed by the claimants" (Beltran vs.
People's Homesite and Housing Corporation, No. L-25138, 29
SCRA 145).
This ruling, penned by Mr. Justice Teehankee, reiterated the
principle in Alvarez vs. Commonwealth (65 Phil. 302), that
"The action of interpleader, under Section 120, is a remedy
whereby a person who has personal property in his possession,
or an obligation to render wholly or partially, without claiming
any right in both comes to court and asks that the persons who
claim the said personal property or who consider themselves
entitled to demand compliance with the obligation, be required
to litigate among themselves, in order to determine finally who is
entitled to one or the other thing. The remedy is afforded not to
protect a person against a double liability but to protect him
against a double vexation in respect of one liability."
An interpleader merely demands as a sine qua non element
". . . that there be two or more claimants to the fund or thing in
dispute through separate and different interests. The claims
must be adverse before relief can be granted and the parties
sought to be interpleaded must be in a position to make effective
claims" (33 C.J. 430).
Additionally, the fund, thing, or duty over which the parties
assert adverse claims must be one and the same and derived
from the same source (33 C.J., 328; Martin, Rules of Court, 1969
ed., Vol. 3, 133-134; Moran, Rules of Court, 1970 ed., Vol. 3, 134-
136).
Indeed, petitioner corporation is placed in the same situation as
a lessee who does not know the person to whom he will pay the
rentals due to the conflicting claims over tine property leased, or
a sheriff who finds himself puzzled by conflicting claims to a
property seized by him. In these examples, the lessee
(Pangkalinawan vs. Rodas, 80 Phil. 28) and the sheriff (Sy-Quia
vs. Sheriff, 46 Phil. 400) were each allowed to file a complaint in
interpleader to determine the respective rights of the claimants.
prcd
WHEREFORE, THE PETITIONS ARE HEREBY GRANTED; THE
ORDER DATED MARCH 12, 1974 DISMISSING THE COMPLAINT
AND THE ORDER DATED JULY 3, 1974 DENYING THE MOTION
FOR RECONSIDERATION OF THE PETITIONERS IN THESE TWO
CASES ARE HEREBY SET ASIDE. WITH COSTS AGAINST
RESPONDENT BENITO GERVASIO TAN.
Teehankee (Chairman), Esguerra, Muñoz-Palma and Martin, JJ.,
concur.
||| (Lim v. Continental Development Corp., G.R. No. L-41818, L-
41831, [February 18, 1976], 161 PHIL 453-463)
THIRD DIVISION
[G.R. No. 185894. August 30, 2017.]
BELO MEDICAL GROUP, INC., petitioner, vs. JOSE L. SANTOS
and VICTORIA G. BELO, respondents.
DECISION
LEONEN, J p:
A conflict between two (2) stockholders of a corporation does
not automatically render their dispute as intra-corporate. The
nature of the controversy must also be examined. 1
In this Petition for Review on Certiorari 2 under Rule 45 of the
Rules of Court, Belo Medical Group, Inc. (Belo Medical Group)
7
assails the Regional Trial Court December 8, 2008 Joint
Resolution in Civil Case No. 08-397. 3 This Joint Resolution
granted respondent Jose L. Santos' (Santos) Motion to Dismiss
and Belo Medical Group's Complaint for interpleader and
Supplemental Complaint for Declaratory Relief against Santos
and Victoria G. Belo (Belo), and declared all other pending
incidents as moot. 4
The controversy began on May 5, 2008 5 when Belo Medical
Group received a request from Santos for the inspection of
corporate records. 6 Santos claimed that he was a registered
shareholder and a co-owner of Belo's shares, as these were
acquired while they cohabited as husband and wife. 7 Santos
sought advice on his probable removal as director of the
corporation considering that he was not notified of meetings
where he could have been removed. He also inquired on the
election of Alfredo Henares (Henares) as Corporate Secretary in
2007 when Santos had not been notified of a meeting for
Henares' possible election. Finally, he sought explanation on the
corporation's failure to inform him of the 2007 annual meeting
and the holding of an annual meeting in 2008. 8 Santos' concern
over the corporate operations arose from the alleged death of a
patient in one (1) of its clinics. 9
Santos was unsuccessful in inspecting the corporate books as
Henares, the officer-in-charge of corporate records, was
travelling. Belo Medical Group asked for time in order for
Henares to accommodate Santos' request. 10
After the first attempt to inspect, Belo wrote Belo Medical Group
on May 14, 2007 to repudiate Santos' co-ownership of her shares
and his interest in the corporation. She claimed that Santos held
the 25 shares in his name merely in trust for her, as she, and not
Santos, paid for these shares. She informed Belo Medical Group
that Santos already had a pending petition with the Regional
Trial Court to be declared as co-owner of her properties. She
asserted that unless a decision was rendered in Santos' favor, he
could not exercise ownership rights over her properties. 11
Belo also informed Belo Medical Group that Santos had a
business in direct competition with it. She suspected that Santos'
request to inspect the records of Belo Medical Group was a
means to obtain a competitor's business information, and was,
therefore, in bad faith. 12
A second inspection was attempted through a written demand by
Santos on May 15, 2008. 13 Again, he was unsuccessful.
Belo wrote to Belo Medical Group on May 20, 2008 to reiterate
her objections to Santos' attempts at inspecting corporate books
and his inquiry regarding a patient. Belo further manifested that
she was exercising her right as a shareholder to inspect the
books herself to establish that the 25 shares were not owned by
Santos, and that he did not pay for these shares. 14
Thus, Belo Medical Group filed a Complaint for Interpleader 15
with Branch 149, Regional Trial Court, Makati City on May 21,
2008. Belo Medical Group alleged that while Santos appeared to
be a registered stockholder, there was nothing on the record to
show that he had paid for the shares under his name. The
Complaint was filed "to protect its interest and compel [Belo and
Santos] to interplead and litigate their conflicting claims of
ownership of, as well as the corresponding right of inspection
arising from, the twenty-five (25) [Belo Medical Group] shares
between themselves pursuant to Rule 62 of the 1997 Rules of
Civil Procedure . . ." 16 The following reliefs were prayed for:
(i) issue an Order summoning and requiring defendants Santos
and Belo to interplead with each other to resolve their conflicting
claims of ownership of the 25 shares of stock of [Belo Medical
Group], including their opposing claims of exclusive entitlement
to inspect [Belo Medical Group] corporate records;
(ii) after due proceedings, render judgment in favor of the proper
defendant; and
(iii) allow plaintiff [Belo Medical Group] to recover attorney's
fees and litigation expenses in the amount of at least
Php1,000,000.00 jointly and solidarily against both defendants
and for them to pay the costs of suit. 17
On the same day, Henares wrote Belo's and Santos' respective
counsels to inform them of the Complaint. 18 Despite receipt,
Santos' counsel still proceeded to Belo Medical Group's Makati
office on May 22, 2008, where, again, they were unsuccessful in
inspecting the corporate books. 19
Santos, for the third time, sent a letter on May 22, 2008 to
schedule an inspection of the corporate books and warned that
continued rejection of his request exposed the corporation to
criminal liability. 20 Nothing came out of this last attempt as
well.
8
Belo and Belo Medical Group wrote to Santos on May 27, 2008 to
inform him that he was barred from accessing corporate records
because doing so would be inimical to Belo Medical Group's
interests. 21 Through another letter on May 28, 2008, Santos was
reminded of his majority share in The Obagi Skin Health, Inc., the
owner and operator of the House of Obagi (House of Obagi)
clinics. He was likewise reminded of the service of a notice of the
2007 special meeting of stockholders to his address at Valero
Street, Makati City, contrary to his claim. 22
On May 29, 2008, Belo Medical Group filed a Supplemental
Complaint 23 for declaratory relief under Rule 63 of the Rules of
Court. In its Supplemental Complaint, Belo Medical Group relied
on Section 74 24 of the Corporation Code to deny Santos' request
for inspection. It prayed that Santos be perpetually barred from
inspecting its books due to his business interest in a competitor.
25 Should the ruling for interpleader be in favor of Santos, Belo
Medical Group prayed that the trial court:
a. exercise its power under Rule 63 of the Revised Rules of Civil
Procedure and give a proper construction of Sections 74 and 75
of the Corporation Code in relation to the facts presented above,
and declare that plaintiff can rightfully decline defendant
Santos's request for inspection under those sections and related
provisions and jurisprudence; and
b. allow plaintiff to recover attorney's fees and litigation
expenses from defendant Santos in the amount of at least
PHP1,000,000.00 and the costs of suit. 26
Belo Medical Group's Complaint and Supplemental Complaint
were raffled to Branch 149 of the Regional Trial Court of Makati,
a special commercial court, 27 thus classifying them as intra-
corporate. 28
Belo filed her Answer Ad Cautelam with Cross-Claim to put on
record her defenses that Santos had no right to inspect the books
as he was not the owner of the 25 shares of stock in his name and
that he was acting in bad faith because he was a majority owner
of House of Obagi. 29
Belo further argued that the proceedings should not have been
classified as intra-corporate because while their right of
inspection as shareholders may be considered intra-corporate,
"it ceases to be that and becomes a full-blown civil law question
if competing rights of ownership are asserted as the basis for the
right of inspection." 30
Meanwhile, on several dates, the trial court sheriff attempted to
personally serve Santos with summons. 31 After unsuccessful
attempts, 32 the sheriff resorted to substituted service in Santos'
Makati office condominium unit. 33
On July 4, 2008, Belo Medical Group filed an Omnibus Motion for
Clarificatory Hearing and for Leave to File Consolidated Reply, 34
praying that the case be tried as a civil case and not as an intra-
corporate controversy. It argued that the Interim Rules of
Procedure Governing Intra-Corporate Controversies 35 did not
include special civil actions for interpleader and declaratory
relief found under the Rules of Court. Belo Medical Group
clarified that the issue on ownership of the shares of stock must
first be resolved before the issue on inspection could even be
considered ripe for determination. 36
Belo Medical Group later on moved that Santos be declared in
default. 37 Instead of filing an answer, Santos filed a Motion to
Dismiss. 38
Apart from procedural infirmities, Santos argued that Belo
Medical Group's Complaint and Supplemental Complaint must be
dismissed "for its failure to state, and ultimately, lack of, a cause
of action." 39 No ultimate facts were given to establish the act or
omission of Santos and Belo that violated Belo Medical Group's
rights. There was simply no conflict on the ownership of the 25
shares of stock under Santos' name. Based on the corporation's
2007 Articles of Incorporation and General Information Sheet,
Santos was reflected as a stockholder and owner of the 25 shares
of stock. No documentary evidence was submitted to prove that
Belo owned these shares and merely transferred them to Santos
as nominal shares. 40
Santos further argued that the filing of the complaints was an
afterthought to take attention away from Belo Medical Group's
criminal liability when it refused Santos' demand to inspect the
records of the corporation. For years, neither Belo Medical Group
nor Belo questioned Santos' standing in the corporation. No
change in ownership from Santos to another person was
reflected in the company's General Information Sheet. 41
Santos also invoked the doctrine of piercing the corporate veil as
Belo owned 90% of Belo Medical Group. Her claim over the 25
9
shares was a ploy to defeat Santos' right to inspect corporate
records. He asserts that the Complaint for interpleader was an
anticipatory move by the company to evade criminal liability
upon its denial of Santos' requests. 42
In addition, Santos argued that a prerequisite to filing these cases
is that the plaintiff has not yet incurred liability to any of the
parties. Since Belo Medical Group had already incurred criminal
liability, it could no longer file a complaint for interpleader or
declaratory relief. 43
Santos denied any conflict of interest because Belo Medical
Group's products and services differed from House of Obagi's. 44
Belo Medical Group's primary purpose was the management and
operation of skin clinics, 45 while the House of Obagi's main
purpose was the sale and distribution of high-end facial
products. 46
On October 29, 2008, Belo Medical Group filed its Opposition 47
and argued that the Motion to Dismiss was a prohibited pleading
under Section 8 of the Interim Rules of Procedure Governing
Intra-Corporate Controversies. HEITAD
Belo Medical Group reiterated that Belo and Santos must litigate
against each other to determine who rightfully owned the 25
shares. An accommodation of one of them, absent a resolution to
this issue, would make Belo Medical Group liable to the other. 48
On its supposed criminal liability when it refused Santos access
to corporate records, Belo Medical Group explained that the
independent liability necessary to defeat complaints for
interpleader arose from a final judgment and not merely a cause
of action that has accrued. 49
Finally, Belo Medical Group averred that substantiation must be
done during trial. The dismissal of the case would be premature.
50
Belo's Opposition dated October 29, 2008 raised the same
arguments of Belo Medical Group. 51
Santos filed his Reply to the Oppositions on November 18, 2008.
52 He agreed that the controversy was not intra-corporate but
civil in nature, as it involved ownership. 53 However, he stood
firm on his arguments that the case should be dismissed due to
the Complaints' failure to state a cause of action 54 and the trial
court's failure to acquire jurisdiction over his person. 55
On December 8, 2008, the assailed Joint Resolution 56 was
issued by the trial court resolving the following incidents: Belo
Medical Group's Omnibus Motion for Clarificatory Hearing and
for Leave to File Consolidated Reply and Motion to Declare
Santos in Default, and Santos' Motion to Dismiss. The trial court
declared the case as an intra-corporate controversy but
dismissed the Complaints. 57
The trial court characterized the dispute as "intrinsically
connected with the regulation of the corporation as it involves
the right of inspection of corporate records." 58 Included in
Santos and Belo's conflict was a shareholder's exclusive right to
inspect corporate records. In addition, the issue on the
ownership of shares requires the application of laws and
principles regarding corporations. 59
However, the Complaint could not flourish as Belo Medical Group
"failed to sufficiently allege conflicting claims of ownership over
the subject shares." 60 In justifying failure to state a cause of
action, the trial court reasoned:
Plaintiff clearly admits in the complaint that defendant Santos is
the registered stockholder of the subject shares albeit no records
show that he made any payments thereof. Also, notwithstanding
defendant Belo's claim that she is the true owner thereof, there
was no allegation that defendant Santos is no longer the holder
on record of the same or that it is now defendant Belo who is the
registered stockholder thereof. In fact, the complaint even alleges
that defendant Santos holds the 25 BMGI shares merely as
nominal qualifying shares in trust for defendant Belo. Thus, the
complaint failed to state a cause of action that would warrant the
resort to an action for interpleader. 61
Though a motion to dismiss is a prohibited pleading under the
Interim Rules of Procedure Governing Intra-Corporate
Controversies, the trial court ruled that Section 2, Rule 1 of these
rules allowed for the Rules of Court to apply suppletorily.
According to the Rules of Court,motions to dismiss are allowed in
interpleader cases. 62
Finally, the Complaint for Declaratory Relief was struck down as
improper because it sought an initial determination on whether
Santos was in bad faith and if he should be barred from
inspecting the books of the corporation. Only after resolving
these issues can the trial court determine his rights under
10
Sections 74 and 75 of the Corporation Code. The act of resolving
these issues is not within the province of the special civil action
as declaratory relief is limited to the construction and
declaration of actual rights and does not include the
determination of issues. 63
From the Joint Resolution, Belo and Belo Medical Group pursued
different remedies.
Belo filed her Petition for Review before the Court of Appeals
docketed as CA G.R. No. 08-397. 64
Belo Medical Group, on the other hand, directly filed its Petition
for Review with this Court, alleging that purely questions of law
are at issue.
Belo Medical Group argues that it is enough that there are two
(2) people who have adverse claims against each other and who
are in positions to make effective claims for interpleader to be
given due course. 65 Belo Medical Group cites Lim v. Continental
Development Corporation, 66 which allowed a complaint for
interpleader to continue because two (2) parties claimed
ownership over the same shares of stock. 67
On January 30, 2009, Belo Medical Group filed a
Manifestation/Disclosure 68 informing this Court that on
January 28, 2009, it received Belo's Petition for Review filed
before the Court of Appeals. On February 4, 2009, this Court also
received Belo's Manifestation 69 that she filed a Petition for
Review before the Court of Appeals, assailing the Joint Resolution
primarily because it dismissed her counterclaims. She also
furnished this Court a copy of her Manifestation filed with the
Court of Appeals to inform it of Belo Medical Group's Petition for
Review before this Court. 70
On April 15, 2009, Belo filed her Comment 71 and manifested
that she agrees with the arguments raised by Belo Medical
Group.
On April 28, 2009, Santos filed his Comment. 72 He argues that
the Petition filed by Belo Medical Group should be dismissed as
the wrong mode of appeal. It should have filed an appeal under
Rule 43, pursuant to the Interim Rules on Intra-Corporate
Disputes. 73 He alleges that Belo Medical Group committed
forum shopping. It filed the present Petition for Review after
Belo had already filed an appeal under Rule 43 before the Court
of Appeals. He asserts that Belo and Belo Medical Group have the
same interest. Belo, owner of 90% of the shares of stock of the
corporation, dictates Belo Medical Group's actions, which were
ultimately for Belo's benefit and interests. 74
Meanwhile, on July 31, 2009, the Court of Appeals dismissed
Belo's Petition for Review and ruled that the pending case before
this Court was the more appropriate vehicle to determine the
issues. 75
The issues for this Court's resolution are as follows:
First, whether or not Belo Medical Group, Inc. committed forum
shopping;
Second, whether or not the present controversy is intra-
corporate;
Third, whether or not Belo Medical Group, Inc. came to this Court
using the correct mode of appeal; and
Finally, whether or not the trial court had basis in dismissing
Belo Medical Group, Inc.'s Complaint for Declaratory Relief.
I
Neither Belo nor the Belo Medical Group is guilty of forum
shopping.
Forum shopping exists when parties seek multiple judicial
remedies simultaneously or successively, involving the same
causes of action, facts, circumstances, and transactions, in the
hopes of obtaining a favorable decision. 76 It may be
accomplished by a party defeated in one forum, in an attempt to
obtain a favorable outcome in another, "other than by appeal or a
special civil action for certiorari." 77
Forum shopping trivializes rulings of courts, abuses their
processes, cheapens the administration of justice, and clogs court
dockets. 78 In Top Rate Construction & General Services, Inc. v.
Paxton Development Corporation: 79
What is critical is the vexation brought upon the courts and the
litigants by a party who asks different courts to rule on the same
or related causes and grant the same or substantially the same
reliefs and in the process creates the possibility of conflicting
decisions being rendered by the different fora upon the same
issues. 80
Rule 7, Section 5 of the Rules of Court contains the rule against
forum shopping:
Section 5. Certification against forum shopping. — The plaintiff or
principal party shall certify under oath in the complaint or other
11
initiatory pleading asserting a claim for relief, or in a sworn
certification annexed thereto and simultaneously filed therewith:
(a) that he has not theretofore commenced any action or filed
any claim involving the same issues in any court, tribunal or
quasi-judicial agency and, to the best of his knowledge, no such
other action or claim is pending therein; (b) if there is such other
pending action or claim, a complete statement of the present
status thereof; and (c) if he should thereafter learn that the same
or similar action or claim has been filed or is pending, he shall
report that fact within five (5) days therefrom to the court
wherein his aforesaid complaint or initiatory pleading has been
filed. ATICcS
Failure to comply with the foregoing requirements shall not be
curable by mere amendment of the complaint or other initiatory
pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after
hearing. The submission of a false certification or non-
compliance with any of the undertakings therein shall constitute
indirect contempt of court, without prejudice to the
corresponding administrative and criminal actions. If the acts of
the party or his counsel clearly constitute willful and deliberate
forum shopping, the same shall be ground for summary dismissal
with prejudice and shall constitute direct contempt, as well as a
cause for administrative sanctions.
When willful and deliberate violation is clearly shown, it can be a
ground for all pending cases' summary dismissal with prejudice
81 and direct contempt. 82
Belo Medical Group filed its Petition for Review on Certiorari
under Rule 45 before this Court to appeal against the Joint
Resolution of the trial court. It did not file any other petition
related to the case, as indicated in its verification and
certification against forum shopping. It was Belo, a defendant in
Belo Medical Group's Complaint, who filed a separate appeal
under Rule 43 with the Court of Appeals primarily to protect her
counterclaims. Belo and Belo Medical Group both filed their
respective Petitions for Review on January 28, 2009, the last day
within the period allowed to do so. 83 The Court of Appeals
already ruled that litis pendencia was present when Belo and
Belo Medical Group filed their respective petitions on the same
date before different fora. The two petitions involved the same
parties, rights and reliefs sought, and causes of action. 84 This is
a decision this Court can no longer disturb.
Neither Belo Medical Group nor Belo can be faulted for willful
and deliberate violation of the rule against forum shopping. Their
prompt compliance of the certification against forum shopping
appended to their Petitions negates willful and deliberate intent.
Belo Medical Group was not remiss in its duty to inform this
Court of a similar action or proceeding related to its Petition. It
promptly manifested before this Court its receipt of Belo's
Petition before the Court of Appeals. Belo Medical Group and
Belo manifested before this Court that Belo filed a Rule 43
petition to protect her counterclaims and to question the same
Joint Resolution issued by the trial court. Both did so within five
(5) days from discovery, as they undertook in their respective
certificates against forum-shopping.
The issue of forum shopping has become moot. The appeal under
Rule 43 filed by Belo has been dismissed by the Court of Appeals
on the ground of litis pendentia. 85 The purpose of proscribing
forum shopping is the proliferation of contradictory decisions on
the same controversy. 86 This possibility no longer exists in this
case.
II
Belo Medical Group filed a case for interpleader, the proceedings
of which are covered by the Rules of Court. At its core, however,
it is an intra-corporate controversy.
A.M. No. 01-2-04-SC, or the Interim Rules of Procedure
Governing Intra-Corporate Controversies, enumerates the cases
where the rules will apply:
Section 1. (a) Cases Covered. — These Rules shall govern the
procedure to be observed in civil cases involving the following:
1. Devices or schemes employed by, or any act of, the board of
directors, business associates, officers or partners, amounting to
fraud or misrepresentation which may be detrimental to the
interest of the public and/or of the stockholders, partners, or
members of any corporation, partnership, or association;
2. Controversies arising out of intra-corporate, partnership, or
association relations, between and among stockholders,
members, or associates; and between, any or all of them and the
corporation, partnership, or association of which they are
stockholders, members, or associates, respectively;
12
3. Controversies in the election or appointment of directors,
trustees, officers, or managers of corporations, partnerships, or
associations;
4. Derivative suits; and
5. Inspection of corporate books. 87
The same rules prohibit the filing of a motion to dismiss:
Section 8. Prohibited Pleadings. — The following pleadings are
prohibited:
(1) Motion to dismiss;
(2) Motion for a bill of particulars;
(3) Motion for new trial, or for reconsideration of judgment or
order, or for re-opening of trial;
(4) Motion for extension of time to file pleadings, affidavits or
any other paper, except those filed due to clearly compelling
reasons. Such motion must be verified and under oath; and
(5) Motion for postponement and other motions of similar intent,
except those filed due to clearly compelling reasons. Such motion
must be verified and under oath.
To determine whether an intra-corporate dispute exists and
whether this case requires the application of these rules of
procedure, this Court evaluated the relationship of the parties.
The types of intra-corporate relationships were reviewed in
Union Glass & Container Corporation v. Securities and Exchange
Commission: 88
[a] between the corporation, partnership or association and the
public; [b] between the corporation, partnership or association
and its stockholders, partners, members, or officers; [c] between
the corporation, partnership or association and the state in so far
as its franchise, permit or license to operate is concerned; and [d]
among the stockholders, partners or associates themselves. 89
For as long as any of these intra-corporate relationships exist
between the parties, the controversy would be characterized as
intra-corporate. 90 This is known as the "relationship test."
DMRC Enterprises v. Este del Sol Mountain Reserve, Inc. 91
employed what would later be called as the "nature of
controversy test." It became another means to determine if the
dispute should be considered as intra-corporate.
In DMRC Enterprises, Este del Sol leased equipment from DMRC
Enterprises. Part of Este del Sol's payment was shares of stock in
the company. When Este del Sol defaulted, DMRC Enterprises
filed a collection case before the Regional Trial Court. Este del Sol
argued that it should have been filed before the Securities and
Exchange Commission as it involved an intra-corporate dispute
where a corporation was being compelled to issue its shares of
stock to subscribers. This Court held that it was not just the
relationship of the parties that mattered but also the conflict
between them:
The purpose and the wording of the law escapes the respondent.
Nowhere in said decree do we find even so much as an
intimidation that absolute jurisdiction and control is vested in
the Securities and Exchange Commission in all matters affecting
corporations. To uphold the respondent's argument would
remove without legal imprimatur from the regular courts all
conflicts over matters involving or affecting corporations,
regardless of the nature of the transactions which give rise to
such disputes. The courts would then be divested of jurisdiction
not by reason of the nature of the dispute submitted to them for
adjudication, but solely for the reason that the dispute involves a
corporation. This cannot be done. To do so would not only be to
encroach on the legislative prerogative to grant and revoke
jurisdiction of the courts but such a sweeping interpretation may
suffer constitutional infirmity. Neither can we reduce jurisdiction
of the courts by judicial fiat (Article X, Section 1, The
Constitution). 92
This Court now uses both the relationship test and the nature of
the controversy test to determine if an intra-corporate
controversy is present. 93
Applying the relationship test, this Court notes that both Belo
and Santos are named shareholders in Belo Medical Group's
Articles of Incorporation 94 and General Information Sheet for
2007. 95 The conflict is clearly intra-corporate as it involves two
(2) shareholders, although the ownership of stocks of one
stockholder is questioned. Unless Santos is adjudged as a
stranger to the corporation because he holds his shares only in
trust for Belo, then both he and Belo, based on official records,
are stockholders of the corporation. Belo Medical Group argues
that the case should not have been characterized as intra-
corporate because it is not between two shareholders as only
Santos or Belo can be the rightful stockholder of the 25 shares of
13
stock. This may be true. But this finding can only be made after
trial where ownership of the shares of stock is decided. TIADCc
The trial court cannot classify the case based on potentialities.
The two defendants in that case are both stockholders on record.
They continue to be stockholders until a decision is rendered on
the true ownership of the 25 shares of stock in Santos' name. If
Santos' subscription is declared fictitious and he still insists on
inspecting corporate books and exercising rights incidental to
being a stockholder, then, and only then, shall the case cease to
be intra-corporate.
Applying the nature of the controversy test, this is still an intra-
corporate dispute. The Complaint for interpleader seeks a
determination of the true owner of the shares of stock registered
in Santos' name. Ultimately, however, the goal is to stop Santos
from inspecting corporate books. This goal is so apparent that,
even if Santos is declared the true owner of the shares of stock
upon completion of the interpleader case, Belo Medical Group
still seeks his disqualification from inspecting the corporate
books based on bad faith. Therefore, the controversy shifts from
a mere question of ownership over movable property to the
exercise of a registered stockholder's proprietary right to inspect
corporate books.
Belo Medical Group argues that to include inspection of
corporate books to the controversy is premature considering
that there is still no determination as to who, between Belo and
Santos, is the rightful owner of the 25 shares of stock. Its actions
belie its arguments. Belo Medical Group wants the trial court not
to prematurely characterize the dispute as intra-corporate when,
in the same breath, it prospectively seeks Santos' perpetual
disqualification from inspecting its books. This case was never
about putting into light the ownership of the shares of stock in
Santos' name. If that was a concern at all, it was merely
secondary. The primary aim of Belo and Belo Medical Group was
to defeat his right to inspect the corporate books, as can be seen
by the filing of a Supplemental Complaint for declaratory relief.
The circumstances of the case and the aims of the parties must
not be taken in isolation from one another. The totality of the
controversy must be taken into account to improve upon the
existing tests. This Court notes that Belo Medical Group used its
Complaint for interpleader as a subterfuge in order to stop
Santos, a registered stockholder, from exercising his right to
inspect corporate books.
Belo made no claims to Santos' shares before he attempted to
inspect corporate books, and inquired about the Henares'
election as corporate secretary and the conduct of stockholders'
meetings. Even as she claimed Santos' shares as hers, Belo
proffered no initial proof that she had paid for these shares. She
failed to produce any document except her bare allegation that
she had done so. Even her Answer Ad Cautelam with Cross-Claim
96 contained bare allegations of ownership.
According to its Complaint, although Belo Medical Group's
records reflect Santos as the registered stockholder of the 25
shares, they did not show that Santos had made payments to
Belo Medical Group for these shares, "consistent with Belo's
claim of ownership over them." 97 The absence of any document
to establish that Santos had paid for his shares does not bolster
Belo's claim of ownership of the same shares. Santos remains a
stockholder on record until the contrary is shown.
Belo Medical Group cites Lim v. Continental Development
Corporation 98 as its basis for filing its Complaint for
interpleader. In Lim, Benito Gervasio Tan (Tan) appeared as a
stockholder of Continental Development Corporation. He
repeatedly requested the corporation to issue certificates of
shares of stock in his name but Continental Development
Corporation could not do this due to the claims of Zoila Co Lim
(Lim). Lim alleged that her mother, So Bi, was the actual owner
of the shares that were already registered in the corporate books
as Lim's, and she delivered these in trust to Lim before she died.
Lim wanted to have the certificates of shares cancelled and new
ones re-issued in his name. This Court ruled that Continental
Development Corporation was correct in filing a case for
interpleader:
Since there is an active conflict of interests between the two
defendants, now herein respondent Benito Gervasio Tan and
petitioner Zoila Co Lim, over the disputed shares of stock, the
trial court gravely abused its discretion in dismissing the
complaint for interpleader, which practically decided ownership
of the shares of stock in favor of defendant Benito Gervasio Tan.
The two defendants, now respondents in G.R. No. L-41831,
14
should be given full opportunity to litigate their respective
claims.
Rule 63, Section 1 of the New Rules of Court tells us when a cause
of action exists to support a complaint in interpleader:
Whenever conflicting claims upon the same subject matter are or
may be made against a person, who claims no interest whatever
in the subject matter, or an interest which in whole or in part is
not disputed by the claimants, he may bring an action against the
conflicting claimants to compel them to interplead and litigate
their several claims among themselves. . .
This provision only requires as an indispensable requisite:
that conflicting claims upon the same subject matter are or may
be made against the plaintiff-in-interpleader who claims no
interest whatever in the subject matter or an interest which in
whole or in part is not disputed by the claimants (Beltran vs.
People's Homesite and Housing Corporation, No. L-25138, 29
SCRA 145).
This ruling, penned by Mr. Justice Teehankee, reiterated the
principle in Alvarez vs. Commonwealth (65 Phil. 302), that
The action of interpleader, under section 120, is a remedy
whereby a person who has personal property in his possession,
or an obligation to render wholly or partially, without claiming
any right in both comes to court and asks that the persons who
claim the said personal property or who consider themselves
entitled to demand compliance with the obligation, be required
to litigate among themselves, in order to determine finally who is
entitled to one or the other thing. The remedy is afforded not to
protect a person against a double liability but to protect him
against a double vexation in respect of one liability.
An interpleader merely demands as a sine qua non element
. . . that there be two or more claimants to the fund or thing in
dispute through separate and different interests. The claims
must be adverse before relief can be granted and the parties
sought to be interpleaded must be in a position to make effective
claims (33 C.J. 430).
Additionally, the fund, thing, or duty over which the parties
assert adverse claims must be one and the same and derived
from the same source (33 C.J., 328; Martin, Rules of Court,1969
ed., Vol. 3, 133-134; Moran, Rules of Court,1970 ed., Vol. 3, 134-
136).
Indeed, petitioner corporation is placed in the same situation as
a lessee who does not know the person to whom he will pay the
rentals due to the conflicting claims over t[h]e property leased,
or a sheriff who finds himself puzzled by conflicting claims to a
property seized by him. In these examples, the lessee
(Pangkalinawan vs. Rodas, 80 Phil. 28) and the sheriff (Sy-Quia vs.
Sheriff, 46 Phil. 400) were each allowed to file a complaint in
interpleader to determine the respective rights of the claimants.
99
In Lim, the corporation was presented certificates of shares of
stock in So Bi's name. This proof was sufficient for Continental
Development Corporation to reasonably conclude that
controversy on ownership of the shares of stock existed.
Furthermore, the controversy in Lim was between a registered
stockholder in the books of the corporation and a stranger who
claimed to be the rightful transferee of the shares of stock of her
mother. The relationship of the parties and the circumstances of
the case establish the civil nature of the controversy, which was
plainly, ownership of shares of stock. Interpleader was not filed
to evade or defeat a registered stockholder's right to inspect
corporate books. It was borne by the sincere desire of a
corporation, not interested in the certificates of stock to be
issued to either claimant, to eliminate its liability should it favor
one over the other.
On the other hand, based on the facts of this case and applying
the relationship and nature of the controversy tests, it was
understandable how the trial court could classify the
interpleader case as intra-corporate and dismiss it. There was no
ostensible debate on the ownership of the shares that called for
an interpleader case. The issues and remedies sought have been
muddled when, ultimately, at the front and center of the
controversy is a registered stockholder's right to inspect
corporate books.
As an intra-corporate dispute, Santos should not have been
allowed to file a Motion to Dismiss. 100 The trial court should
have continued on with the case as an intra-corporate dispute
considering that it called for the judgments on the relationship
between a corporation and its two warring stockholders and the
relationship of these two stockholders with each other.
III
15
Rule 45 is the wrong mode of appeal.
A.M. No. 04-9-07-SC promulgated by this Court En Banc on
September 14, 2004 laid down the rules on modes of appeal in
cases formerly cognizable by the Securities and Exchange
Commission: AIDSTE
1. All decisions and final orders in cases falling under the Interim
Rules of Corporate Rehabilitation and the Interim Rules of
Procedure Governing Intra-Corporate Controversies under
Republic Act No. 8799 shall be appealable to the Court of Appeals
through a petition for review under Rule 43 of the Rules of Court.
2. The petition for review shall be taken within fifteen (15) days
from notice of the decision or final order of the Regional Trial
Court. Upon proper motion and the payment of the full amount of
the legal fee prescribed in Rule 141 as amended before the
expiration of the reglementary period, the Court of Appeals may
grant an additional period of fifteen (15) days within which to
file the petition for review. No further extension shall be granted
except for the most compelling reasons and in no case to exceed
fifteen (15) days.
On the other hand, Rule 43 of the Rules of Court allows for
appeals to the Court of Appeals to raise questions of fact, of law,
or a mix of both. Hence, a party assailing a decision or a final
order of the trial court acting as a special commercial court,
purely on questions of law, must raise these issues before the
Court of Appeals through a petition for review. 101 A.M. No. 04-
9-07-SC mandates it. Rule 43 allows it.
Belo Medical Group argues that since it raises only questions of
law, the proper mode of appeal is Rule 45 filed directly to this
Court. This is correct assuming there were no rules specific to
intra-corporate disputes. Considering that the controversy was
still classified as intra-corporate upon filing of appeal, special
rules, over general ones, must apply.
Based on the policy of judicial economy and for practical
considerations, 102 this Court will not dismiss the case despite
the wrong mode of appeal utilized. For one, it would be taxing in
time and resources not just for Belo Medical Group but also for
Santos and Belo to dismiss this case and have them refile their
petitions for review before the Court of Appeals. There would be
no benefit to any of the parties to dismiss the case especially
since the issues can already be resolved based on the records
before this Court. Also, the Court of Appeals already referred the
matter to this Court when it dismissed Belo's Petition for Review.
Remanding this case to the Court of Appeals would not only be
unprecedented, it would further delay its resolution.
IV
At the outset, this Court notes that two cases were filed by Belo
Medical Group: the Complaint for interpleader and the
Supplemental Complaint for Declaratory Relief. Under Rule 2,
Section 5 of the Rules of Court,a joinder of cause of action is
allowed, provided that it follows the conditions enumerated
below:
Section 5. Joinder of Causes of Action. — A party may in one
pleading assert, in the alternative or otherwise, as many causes
of action as he may have against an opposing party, subject to the
following conditions:
(a) The party joining the causes of action shall comply with the
rules on joinder of parties;
(b) The joinder shall not include special civil actions or actions
governed by special rules;
(c) Where the causes of action are between the same parties but
pertain to different venues or jurisdictions, the joinder may be
allowed in the Regional Trial Court provided one of the causes of
action falls within the jurisdiction of said court and the venue lies
therein; and
(d) Where the claims in all the causes of action are principally for
recovery of money, the aggregate amount claimed shall be the
test of jurisdiction. (Emphasis supplied)
Assuming this case continues on as an interpleader, it cannot be
joined with the Supplemental Complaint for declaratory relief as
both are special civil actions. However, as the case was classified
and will continue as an intra-corporate dispute, the simultaneous
complaint for declaratory relief becomes superfluous. The right
of Santos to inspect the books of Belo Medical Group and the
appreciation for his motives to do so will necessarily be
determined by the trial court together with determining the
ownership of the shares of stock under Santos' name.
The trial court may make a declaration first on who owns the
shares of stock and suspend its ruling on whether Santos should
be allowed to inspect corporate records. Or, it may rule on
whether Santos has the right to inspect corporate books in the
16
meantime while there has yet to be a resolution on the
ownership of shares. Remedies are available to Belo Medical
Group and Belo at any stage of the proceeding, should they carry
on in prohibiting Santos from inspecting the corporate books.
WHEREFORE, the Petition for Review of Belo Medical Group, Inc.
is PARTIALLY GRANTED. The December 8, 2008 Joint Resolution
of Branch 149, Regional Trial Court, Makati City in Civil Case No.
08-397 is REVERSED regarding its dismissal of the intra-
corporate case. Let this case be REMANDED to the commercial
court of origin for further proceedings.
SO ORDERED.
Velasco, Jr., Bersamin, Martires and Gesmundo, JJ., concur.
||| (Belo Medical Group, Inc. v. Santos, G.R. No. 185894, [August 30,
2017])
EN BANC
[G.R. No. L-25138. August 28, 1969.]
JOSE A. BELTRAN, ET AL., plaintiffs-appellants, vs. PEOPLE'S
HOMESITE & HOUSING CORPORATION, and GOVERNMENT
SERVICE INSURANCE SYSTEM, defendants-appellees.
Beltran, Cendaña, Camu, Pelias & Manuel for plaintiffs-
appellants.
Government Corporate Counsel Tomas P. Matic, Jr. and Assistant
Corporate Counsel Romualdo Valera for defendants-appellees.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; INTERPLEADER IS
NOT PROPER IN INSTANT CASE. — Where the two defendant-
government corporations sought to be interpleaded as
conflicting claimants have no conflicting claims against plaintiffs
(tenants), the special civil action of interpleader will not lie.
While the two defendants corporations may have conflicting
claims between themselves with regard to the management,
administration and ownership of Project 4, such conflicting
claims are not against the plaintiffs nor do they involve or affect
the plaintiffs.
2. ID.; ID.; INTERPLEADER; PURPOSE. — The action of
interpleader is a remedy whereby a person who has property in
his possession or has an obligation to render wholly or partially,
without claiming any right in both, comes to court and asks that
the defendants who have made upon him conflicting claims upon
the same property or who consider themselves entitled to
demand compliance with the obligation be required to litigate
among themselves in order to determine who is entitled to the
property or payment of the obligation. The remedy is afforded
not to protect a person against a double liability but to protect
him against a double vexation in respect of one liability.
3. ID.; ID.; ID.; NOT THE PROPER REMEDY FOR BREACH OF
CONTRACT. — The resolution of the issue of the right of
ownership over the houses and lots in Project 4 and the issue of
the status of the commitments, agreements and undertakings
made by the previous PHHC administration, affecting the
defendant corporations exclusively may not properly be sought
through the special civil action of interpleader. Should there be a
breach of the PHHC undertakings toward plaintiffs, plaintiffs'
recourse would be an ordinary action of specific performance or
other appropriate suit against either the PHHC or GSIS or both,
as the circumstances warrant.
DECISION
TEEHANKEE, J p:
Appeal on purely questions of law from an order of dismissal of
the complaint for interpleader, on the ground that it does not
state a cause of action, as certified to this Court by the Court of
Appeals. We affirm the dismissal on the ground that where the
defendants sought to be interpleaded as conflicting claimants
have no conflicting claims against plaintiff, as correctly found by
the trial court, the special Civil action of interpleader will not lie.
This interpleader suit was filed on August 21, 1962, by plaintiffs
in their own behalf and in behalf of all residents of Project 4 in
Quezon City, praying that the two defendant-government
corporations be compelled to litigate and interplead between
17
themselves their alleged conflicting claims involving said Project
4.
Plaintiffs' principal allegations in their complaint were as
follows: Since they first occupied in 1953 their respective
housing units at Project 4, under lease from the People's
Homesite & Housing Corporation (PHHC) and paying monthly
rentals therefore, they were assured by competent authority that
after five years of continuous occupancy, they would be entitled
to purchase said units. On February 21, 1961, the PHHC
announced to the tenants that the management, administration
and ownership of Project 4 would be transferred by the PHHC to
the Government Service Insurance System (GSIS) in payment of
PHHC debts to the GSIS. In the same announcement, the PHHC
also asked the tenants to signify their conformity to buy the
housing units at the selling price indicated on the back thereof,
agreeing to credit the tenants, as down payment on the selling
price, thirty (30%) percent of what had been paid by them as
rentals. The tenants accepted the PHHC offer, and on March 27,
1961, the PHHC announced in another circular that all payments
made by the tenants after March 31, 1961 would be considered
as amortizations or installment-payments. The PHHC
furthermore instructed the Project Housing Manager in a
memorandum of May 16, 1961 to accept as installments on the
selling price the payments made after March 31, 1961 by tenants
who were up-to-date in their accounts as of said date. In
September, 1961, pursuant to the PHHC-GSIS arrangement,
collections from tenants on rentals and/or installment payments
were delivered by the PHHC to the GSIS. On December 27, 1961,
the agreement of turn-over of administration and ownership of
PHHC properties, including Project 4, was executed by PHHC in
favor of GSIS, pursuant to the release of mortgage and amicable
settlement of the extrajudicial foreclosure proceedings instituted
in May, 1960 by GSIS against PHHC. Subsequently, however,
PHHC through its new Chairman-General Manager, Esmeraldo
Eco, refused to recognize all agreements and undertakings
previously entered into with GSIS, while GSIS insisted on its legal
rights to enforce the said agreements and was upheld in its
contention by both the Government Corporate Counsel and the
Secretary of Justice. Plaintiffs thus claimed that these conflicting
claims between the defendants-corporations caused them great
inconvenience and incalculable moral and material damage, as
they did not know to whom they should pay the monthly
amortizations or payments. They further alleged that as the
majority of them were GSIS policy holders, they preferred to
have the implementation of the outright sale in their favor
effected by the GSIS, since the GSIS was "legally entitled to the
management, administration and ownership of the PHHC
properties in question." 1
Upon urgent ex-partemotion of plaintiffs, the trial Court issued
on August 23, 1962 its Order designating the People's First
Savings Bank at Quezon City "to receive in trust the payments
from the plaintiffs on their monthly amortizations on PHHC lots
and to be released only upon proper authority of the Court." 2
On August 29, 1962, the two defendant corporations represented
by the Government Corporate Counsel filed a Motion to Dismiss
the complaint for failure to state a cause of action as well as to lift
the Court's order designating the People's First Savings Bank as
trustee to receive the tenants' payments on the PHHC lots.
The trial Court heard the motion on September 1, 1962 the
presence of all the parties, and thereafter issued its Order of
September 6, 1962, dismissing the Complaint, ruling that:
"During the hearing of the said motion and opposition thereto,
the counsel for the defendants ratified the allegations in his
motion and made of record that the defendant Government
Service Insurance System has no objection that payments on the
monthly amortizations from the residents of Project 4 be made
directly to the defendant People's Homesite and Housing
Corporation. From what appears in said motion and the
statement made in open court by the counsel for the defendants
that there is no dispute as to whom the residents of Project 4
should make their monthly amortizations payments, there is,
therefore, no cause of action for interpleading and that the order
of August 23, 1962 is not warranted by the circumstances
surrounding the case. In so far as payments are concerned,
defendant GSIS has expressed its conformity that they be made
directly to defendant PHHC. Counsel for defendants went further
to say that whatever dispute, if any, may exist between the two
corporations over the lots and buildings in Project 4, payments
made to the PHHC will not and cannot in any way affect or
18
prejudice the rights of the residents thereof as they will be
credited by either of the two defendants." 3
Plaintiffs subsequently filed their motion for reconsideration and
the trial court, "with a view to thresh out the matter once and for
all, " called the Managers of the two defendants-corporations and
the counsels for the parties to appear before it for a conference
on October 24, 1962. "During the conference," the trial court
related in its Order of November 20, 1962, denying plaintiffs'
Motion for Reconsideration, "Manager Diaz of the GSIS made of
record that he has no objection that payments be made to the
PHHC. On the other hand Manager Eco of the PHHC made of
record that at present there is a standing arrangement between
the GSIS and the PHHC that as long as there is showing that the
PHHC has remitted 100% of the total purchase price of a given
lot to the GSIS, the latter corporation shall authorize the issuance
of title to the corresponding lot. It was also brought out in said
conference that there is a new arrangement being negotiated
between the two corporations that only 50% of the purchase
price be remitted to the GSIS by the PHHC, instead of the 100%.
At any rate, the two Managers have assured counsel for the
plaintiffs that upon payment of the whole purchase price of a
given lot, the title corresponding to said lot will be issued." 4
On appeal, plaintiffs claim that the trial Court erred in dismissing
their suit, contending the allegations in their complaint "raise
questions of fact that can be established only by answer and trial
on the merits and not by a motion to dismiss heard by mere oral
manifestations in open court, " and that they "do not know who,
as between the GSIS and the PHHC, is the right and lawful party
to receive their monthly amortizations as would of eventually
entitle them to a clear title to their dwelling units." 5
Plaintiffs entirely miss the vital element of an action of
interpleader. Rule 63, Section I of the Revised Rules of court
(formerly Rule 14) requires as an indispensable element that
"conflicting claims upon the same subject matter are or may be
made" against the plaintiff-in-interpleader "who claims no
interest whatever in the subject matter or an interest which in
whole or in part is not disputed by the claimants. " While the two
defendant corporations may have conflicting claims between
themselves with regard to the management, administration and
ownership of Project 4, such conflicting claims are not against
the plaintiffs nor do they involve or affect the plaintiffs. No
allegation is made in their complaint that any corporation other
than the PHHC which was the only entity privy to their lease-
purchase agreement, ever made on them any claim or demand
for payment of the rentals or amortization payments. The
questions of fact raised in their complaint concerning the
enforceability and recognition or non-enforceability and non-
recognition of the turn-over agreement of December 27, 1961
between the two defendant corporations are irrelevant to their
action of interpleader, for these conflicting claims, loosely so-
called, are between two corporations and not against plaintiffs.
Both defendant corporation were in conformity and had no
dispute, as pointed out by the trial court that the monthly
payments and amortizations should be made directly to the
PHHC alone.
The record rejects plaintiffs claim that the trial court's order was
based on "mere oral manifestations in court." The Reply to
Opposition of September 11, 1962 filed by the Government
Corporate Counsel expressly "reiterates his manifestation in
open court that no possible injustice or prejudice would result to
plaintiffs by continuing to make payments of such rentals or
amortization to defendant PHHC because any such payments will
be recognized as long as they are proper, legal and in due course
by anybody who right take over the property. Specifically, any
such payments will be recognized by the GSIS in the event that
whatever conflict there might be (and this is only on the
hypothetical assumption that such conflict exists) between the
PHHC and the GSIS should finally be resolved in favor of the
GSIS." 6 The assurances and undertakings to the same effect
given by the Managers of the defendants-corporations at the
conference held by the trial Court are expressly embodied in the
Court's Order of November 20, 1962 quoted above. The GSIS'
undertaking to recognize and respect the previous commitments
of PHHC towards its tenants is expressly set forth in Par. 111,
Section M of the turn-over agreement, Annex "F" of plaintiffs'
complainant, wherein it is provided that "GSIS shall recognize
and respect all awards, contracts of sale, lease agreements and
transfer of rights of lots and housing units made and approved
by PHHC, subsisting as of the signing of this agreement, and
PHHC commitment to sell its housing projects 4, 6 and 8-A at the
19
selling prices less rental credits fixed by PHHC and as finally
approved by the OEC., PHHC, however, shall be liable and
answerable for any and all claims and consequences arising from
double or multiple awards or in the case of awards of non-
existing houses and/or lots." 7
In fine, the record shows clearly that there were no conflicting
claims by defendant corporations as against plaintiffs' tenants,
which they may properly be compelled in an interpleader suit to
interplead and litigate among themselves. Both defendant
corporations were agreed that PHHC should continue receiving
the tenants' payments, and that such payments would be duly
recognized even if the GSIS should eventually take over Project 4
by virtue of their turn-over agreement of December 27, 1961. As
held by this Court in an early case, the action of interpleader is a
remedy whereby a person who has property in his possession or
has an obligation to render wholly or partially, without claiming
any right in both, comes to court and asks that the defendants
who have made upon him conflicting claims upon the same
property or who consider themselves entitled to demand
compliance with the obligation be required to litigate among
themselves in order to determine who is entitled to the property
or payment of the obligation. "The remedy is afforded not to
protect a person against a double liability but to protect him
against a double vexation in respect of one liability. 8 Thus, in
another case, where the occupants of two different parcels of
land adjoining each other belonging to two separate plaintiffs,
but on which the occupants had constructed a building
encroaching upon both parcels of land, faced two ejectment suits
from the plaintiffs, each plaintiff claiming the right of possession
and recovery over his respective portion of the lands encroached
upon, this Court held that the occupants could not properly file
an interpleader suit against the plaintiffs to litigate their alleged
conflicting claims; for evidently, the two plaintiffs did not have
any conflicting claims upon the same subject matter against the
occupants, but were enforcing separate and distinct claims on
their respective properties. 9
Plaintiffs' other contention in their appeal is that
notwithstanding that the issue as to which of the defendants is
authorized to receive the tenants' payments was resolved in
favor of the PHHC, they had raised other issues that were not
resolved and would require rendition of judgment after trial on
the merits, such as "the issue of the right of ownership over the
houses and lots in Project 4 (and) the issue of the status of the
commitments, agreements and undertakings made by the
previous PHHC Administration, particularly those of the then
PHHC General Manager Bernardo Torres. 10 This contention is
without merit, for no conflicting claims have been made with
regard to such issues upon plaintiffs by defendant corporations,
who both bound themselves to recognize and respect the rights
of plaintiffs-tenants. The resolution of such issues affecting the
defendant corporations exclusively may not properly be sought
through the special civil action of interpleader. Should there be a
breach of the PHHC undertakings towards plaintiffs, plaintiffs'
recourse would be an ordinary action of specific performance or
other appropriate suit against either the PHHC or GSIS or both,
as the circumstances warrant.
We find no error, therefore, in the trial court's order of dismissal
of the complaint for interpleader and the lifting, as a
consequence, of its other order designating the People's First
Savings Bank as trustee to receive the tenants' payments on the
PHHC lots.
ACCORDINGLY, the trial Court's order of dismissal is hereby
affirmed. Without costs.
Concepcion, C.J., Dizon, Makalintal, Sanchez, Castro, Fernando,
Capistrano and Barredo, JJ., concur.
Reyes, J.B.L. and Zaldivar, JJ., are on official leave.
||| (Beltran v. People's Homesite & Housing Corp., G.R. No. L-
25138, [August 28, 1969], 139 PHIL 635-643)
20

THIRD DIVISION
[G.R. Nos. 72664-65. March 20, 1990.]
UNITED COCONUT PLANTERS BANK, petitioner, vs. HON.
INTERMEDIATE APPELLATE COURT and MAKATI BEL-AIR
CONDOMINIUM DEVELOPERS, INC., respondents.
Encanto, Mabugat & Associates for petitioner.
Mena Q. Taganas for private respondent.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; INTERPLEADER; A
COUNTERCLAIM ARISING OUT OF OR NECESSARILY
CONNECTED WITH SUCH REMEDY DEEMED COMPULSORY AND
DEPENDENT UPON THE LATTER. — Under Section 4, Rule 9 of
the Revised Rules of Court, a compulsory counterclaim is "one
which arises out of or is necessarily connected with the
transaction or occurrence that is the subject matter of the
opposing party's claim." Interpleader is a proper remedy where a
bank which had issued a manager's check is subjected to
opposing claims by persons who respectively claim a right to the
funds covered by the manager's check. The Bank is entitled to
take necessary precautions so that, as far possible, it does not
make a mistake as to who is entitled to payment; the necessary
precautions include, precisely, recourse to an interpleader suit.
In the instant case, petitioner Bank having been informed by
both Altiura and Makati Bel-Air of their respective positions in
their controversy, and Makati Bel-Air having refused the Bank's
suggestion voluntarily to refrain for fifteen (15) days from
presenting the check for payment, petitioner Bank felt compelled
to resort to the remedy of interpleader. It will be seen that
Makati Bel-Air's counter-claim arose out of or was necessarily
connected with the recourse of petitioner to this remedy of
interpleader. Makati Bel-Air was in effect claiming that petitioner
Bank had in bad faith refused to honor its undertaking to pay
represented by the manager's check it had issued. When the trial
court granted petitioner's motion for withdrawal of its
complaint-in-interpleader, as having become moot and academic
by reason of Makati Bel-Air's having cancelled the sale of the
office unit to Altiura and having returned the manager's check to
the Bank and acquiesced in the release of the funds to Altiura, the
trial court in effect held that petitioner Bank's recourse to
interpleader was proper and not a frivolous or malicious
maneuver to evade its obligation to pay to the party lawfully
entitled the funds represented by the manager's check. Having
done so, the trial court could not have logically allowed Makati
Bel-Air to recover on its counterclaim for damages against
petitioner Bank.
2. COMMERCIAL LAW; NEGOTIABLE INSTRUMENTS; CHECKS;
KNOWLEDGE OF DEFECT IN THE TITLE THEREOF; NOT
HOLDER IN DUE COURSE. — Makati Bel-Air was a party to the
contract of sale of an office condominium unit to Altiura, for the
payment of which the manager's check was issued. Accordingly,
Makati Bel-Air was fully aware, at the time it had received the
manager's check, that there was, or had arisen, at least partial
failure of consideration since it was unable to comply with its
obligation to deliver office space amounting to 165 square
meters to Altiura. Makati Bel-Air was also aware that petitioner
Bank had been informed by Altiura of the claimed defect in
Makati Bel-Air's title to the manager's check or its right to the
proceeds thereof. Vis a vis both Altiura and petitioner Bank,
Makati Bel-Air was not a holder in due course of the manager's
check.
RESOLUTION
FELICIANO, J p:
Petitioner seeks review of the decision of the respondent
appellate court dated 27 June 1985 which annulled and set aside
certain orders of the then Court of First Instance (CFI) of Rizal,
Branch 15, Makati so far as said orders dismissed private
respondents' counter-claim.
21
On 23 July 1979, petitioner United Coconut Planters Bark (Bank)
filed in the lower court a complaint-in-interpleader against
private respondent Makati Bel-Air Condominium Developers,
Inc. (Makati Bel-Air) and against Altiura Investors, Inc. (Altiura).
The subject matter of the complaint was a manager's check in the
amount of P494,000.00 issued by petitioner Bank payable to
Makati Bel-Air, having been purchased by Altiura. Altiura
delivered the check to Makati Bel-Air as part payment on an
office condominium unit in the Cacho-Gonzales Building, on 16
July 1979. LLjur
On 17 July 1979, petitioner Bank received from Altiura
instructions to hold payment on the manager's check, in view of
a material discrepancy in the area of the office unit purchased by
Altiura which unit actually measured 124.58 square meters,
instead of 165 square meters as stipulated in the contract of sale.
Petitioner Bank immediately requested private respondent
Makati Bel-Air, by a letter dated 17 July 1979, to advise the Bank
why it should not issue the stop payment order requested by
Altiura.
The next day, 18 July 1975, petitioner Bank received a reply from
Makati Bel-Air explaining the latter's side of the controversy and
at the same proposing a possible reduction of the office unit's
purchase price.
On 19 July 1979, petitioner Bank received a letter from Altiura of
even date requesting the Bank to hold payment of its manager's
check while Altiura was discussing Makati Bel-Air's proposal for
reduction of the purchase price and requesting the Bank to give
both parties fifteen (15) days within which to settle their
differences. By a letter dated on the same date, petitioner Bank
requested Makati Bel-Air to hold in abeyance for a period not
exceeding fifteen (15) days the presentation of the manager's
check, so that both parties could settle their differences amicably.
On 20 July 1979, petitioner Bank was advised in writing by
Makati Bel-Air that the latter did not agree to the request of the
Bank set out in the latter's letter of 19 July 1979.
Thereupon, petitioner Bank filed a complaint-in-interpleader
against Altiura and Makati Bel-Air to require the latter to litigate
with each other their respective claims over the funds
represented by the manager's check involved, and at the same
time asking the court for authority to deposit the funds in a
special account until the conflicting claims shall have been
adjudicated. The trial court ordered the deposit of the funds into
a special account with any reputable banking institution subject
to further orders of the court.
On 18 August 1979, Makati Bel-Air filed its answer and
incorporated therein a counter-claim against petitioner Bank and
a cross-claim against Altiura. In turn, Altiura filed an answer to
the complaint-in-interpleader, with motion to dismiss the cross-
claim of Makati Bel-Air. prLL
Meantime, on 23 July 1979, Altiura had filed a complaint for
rescission of the contract of sale of the condominium unit, with
damages, against Makati Bel-Air docketed as Civil Case No.
33967, which case was eventually consolidated with the
interpleader case.
On 29 August 1979, petitioner Bank filed a "motion to withdraw
complaint and motion to dismiss counter-claim", stating that
there was no longer any conflict between Makati Bel-Air and
Altiura as to who was entitled to the funds covered by the
manager's check, since Makati Bel-Air in its answer had alleged
that it had cancelled and rescinded the sale of the condominium
unit and had relinquished any claim it had over the funds
covered by the manager's check.
On 28 September 1979, Makati Bel-Air delivered to petitioner
Bank the original of the manager's check. On 18 February 1980,
the trial court in Civil Case No. 33961 issued an order directing
the release of the funds covered by the manager's check to
Altiura.
On 28 April 1983, the trial court issued an order resolving
petitioner Bank's motion to withdraw complaint-in-interpleader
and to dismiss counter-claim, declaring that motion to withdraw
22
the complaint-in-interpleader had been rendered moot and
academic by the court's earlier order of 18 February 1980
directing petitioner Bank to release to Altiura the P494,000.00
covered by the manager's check, which Makati Bel-Air had not
opposed nor appealed from. In the same order, the trial court
granted Makati Bel-Air's motion to consolidate Civil Case No.
33961 (the interpleader case) and Civil Case No. 33967 (the
rescission plus damages case).
On 12 July 1983, upon motion of petitioner Bank, the trial court
issued an order clarifying its 28 April 1983 order by stating that
the counter-claim of Makati Bel-Air was dismissed when the
funds covered by the manager's check were released to Altiura
without objection of Makati Bel-Air. At the same time, the order
denied Altiura's motion to dismiss Makati Bel-Air's cross-claim in
Civil Case No. 33961. prcd
Makati Bel-Air moved for reconsideration of the 12 July 1983
clarificatory order of the trial court, without success.
Makati Bel-Air then went to the respondent appellate court on
petition for certiorari.
In its decision dated 27 June 1985, the appellate court granted
certiorari and nullified the trial court's orders of 12 July and 30
August 1983 to the extent that these had dismissed Makati Bel-
Air's counter-claim. The appellate court held that the withdrawal
of the complaint-in-interpleader and its dismissal as moot and
academic did not operate ipso facto to dismiss Makati Bel-Air's
counter-claim for the reason that said counter-claim was based
on "an entirely different cause of action from that in the
complaint-[in]-interpleader"
In the instant Petition for Review on Certiorari, petitioner Bank
argues that Makati Bel-Air's counter-claim was compulsory in
nature and had therefore been dissolved when the complaint-in-
interpleader was withdrawn and dismissed. Makati Bel-Air
argues, upon the other hand, that its counterclaim was not a
compulsory one.
Makati Bel-Air's counterclaim in the interpleader proceedings
was for damages in the amount of P5,000,000.00, based upon the
theory that petitioner Bank had violated its guarantee embodied
in its manager's check when it in effect stopped payment of said
check, allegedly causing damages to Makati Bel-Air the latter
having allegedly issued checks against said funds.
Under Section 4, Rule 9 of the Revised Rules of Court, a
compulsory counterclaim is "one which arises out of or is
necessarily connected with the transaction or occurrence that is
the subject matter of the opposing party's claim." 1 Interpleader
is a proper remedy where a bank which had issued a manager's
check is subjected to opposing claims by persons who
respectively claim a right to the funds covered by the manager's
check. 2 The Bank is entitled to take necessary precautions so
that, as far possible, it does not make a mistake as to who is
entitled to payment; the necessary precautions include,
precisely, recourse to an interpleader suit. cdll
In the instant case, petitioner Bank having been informed by
both Altiura and Makati Bel-Air of their respective positions in
their controversy, and Makati Bel-Air having refused the Bank's
suggestion voluntarily to refrain for fifteen (15) days from
presenting the check for payment, petitioner Bank felt compelled
to resort to the remedy of interpleader. It will be seen that
Makati Bel-Air's counter-claim arose out of or was necessarily
connected with the recourse of petitioner to this remedy of
interpleader. Makati Bel-Air was in effect claiming that petitioner
Bank had in bad faith refused to honor its undertaking to pay
represented by the manager's check it had issued. When the trial
court granted petitioner's motion for withdrawal of its
complaint-in-interpleader, as having become moot and academic
by reason of Makati Bel-Air's having cancelled the sale of the
office unit to Altiura and having returned the manager's check to
the Bank and acquiesced in the release of the funds to Altiura, the
trial court in effect held that petitioner Bank's recourse to
interpleader was proper and not a frivolous or malicious
maneuver to evade its obligation to pay to the party lawfully
23
entitled the funds represented by the manager's check. Having
done so, the trial court could not have logically allowed Makati
Bel-Air to recover on its counterclaim for damages against
petitioner Bank.
There are other considerations supporting the conclusion
reached by this Court that respondent appellate court had
committed reversible error. Makati Bel-Air was a party to the
contract of sale of an office condominium unit to Altiura, for the
payment of which the manager's check was issued. Accordingly,
Makati Bel-Air was fully aware, at the time it had received the
manager's check, that there was, or had arisen, at least partial
failure of consideration since it was unable to comply with its
obligation to deliver office space amounting to 165 square
meters to Altiura. Makati Bel-Air was also aware that petitioner
Bank had been informed by Altiura of the claimed defect in
Makati Bel-Air's title to the manager's check or its right to the
proceeds thereof. Vis a vis both Altiura and petitioner Bank,
Makati Bel-Air was not a holder in due course 3 of the manager's
check. prLL
ACCORDINGLY, the Court Resolved to GRANT the Petition for
Review and to REVERSE and SET ASIDE the Decision of
respondent appellate court dated 27 June 1985 in AC-G.R. SP
Nos. 01669-70.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.
||| (United Coconut Planters Bank v. Intermediate Appellate
Court, G.R. Nos. 72664-65 (Resolution), [March 20, 1990], 262
PHIL 397-403)
SECOND DIVISION
[G.R. No. 133113. August 30, 2001.]
EDGAR H. ARREZA, petitioner, vs. MONTANO M. DIAZ, JR.,
respondent.
Maglasa & Uy for petitioner.
Fortun Narvasa & Salazar for respondent.
SYNOPSIS
An action for interpleader was filed with the RTC Makati by Bliss
Development Corporation against petitioner and respondent
regarding their conflicting claims over the subject housing unit.
Respondent asserted his right as a buyer for value and in good
faith of the subject property and asked for relief invoking the
jurisdiction of the court. Respondent, however, did not file a
claim for reimbursement. Judgment was rendered in favor of
petitioner which later attained finality. Thereafter, respondent
filed an action for reimbursement against petitioner and Bliss
Development Corporation representing the cost of acquisition
and improvements on the property. Petitioner moved to dismiss
on ground of res adjudicata. The motion was denied, as well as
the motion for reconsideration. On certiorari, the Court of
Appeals dismissed the petition. Motion for its reconsideration
was denied, hence, this recourse.
A party who has invoked the jurisdiction of the court is estopped
from challenging the jurisdiction of said court after it had
decided the case against him.
In res adjudicata, the judgment in the first action is conclusive as
to every matter offered and received as well as to any other
matter admissible therein. Having asserted his rights as a buyer
in good faith in his answer in the interpleader, his failure to set
up his claim for reimbursement which is in the nature of a
counterclaim is now barred.
24

SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; RES ADJUDICATA;
ELEMENTS. — The elements of res adjudicata are: (a) that the
former judgment must be final; (b) the court which rendered
judgment had jurisdiction over the parties and the subject
matter; (c) it must be a judgment on the merits; and (d) there
must be between the first and second causes of action identity of
parties, subject matter, and cause of action.
2. ID.; ID.; ESTOPPEL; PARTY WHO HAS INVOKED JURISDICTION
OF COURT TO SEEK AFFIRMATIVE RELIEF ESTOPPED FROM
CHALLENGING THE SAME AFTER RECEIVING AN ADVERSE
DECISION. — By asserting his right as a buyer for value and in
good faith of the subject property, and asking for relief arising
therefrom, respondent invoked the jurisdiction of the trial court.
Having invoked the jurisdiction of the Regional Trial Court of
Makati (Branch 146) by filing his answer to secure affirmative
relief against petitioner, respondent is now estopped from
challenging the jurisdiction of said court after it had decided the
case against him. Surely we cannot condone here the undesirable
practice of a party submitting his case for decision and then
accepting the judgment only if favorable, but attacking it on
grounds of jurisdiction when adverse.
3. ID.; ID.; RES JUDICATA; JUDGMENT IN FIRST ACTION
CONCLUSIVE AS TO EVERY MATTER OFFERED AND RECEIVED
AND AS TO ANY OTHER MATTER ADMISSIBLE THEREIN. —
Pursuant to Section 5 of Rule 62 of the 1997 Rules of Civil
Procedure respondent should have filed his claims against
petitioner Arreza in the interpleader action. Having asserted his
rights as a buyer in good faith in his answer, and praying relief
therefor, respondent Diaz should have crystallized his demand
into specific claims for reimbursement by petitioner Arreza. This
he failed to do. Such failure gains significance in light of our
ruling in Baclayon vs. Court of Appeals, 182 SCRA 761, 771–772
(1990). Having failed to set up his claim for reimbursement, said
claim of respondent Diaz being in the nature of a compulsory
counterclaim is now barred. In cases involving res adjudicata, the
parties and the causes of action are identical or substantially the
same in the prior as well as the subsequent action. The judgment
in the first action is conclusive as to every matter offered and
received therein and as to any other matter admissible therein
and which might have been offered for that purpose, hence said
judgment is an absolute bar to a subsequent action for the same
cause. The bar extends to questions "necessarily involved in an
issue, and necessarily adjudicated, or necessarily implied in the
final judgment, although no specific finding may have been made
in reference thereto, and although such matters were directly
referred to in the pleadings and were not actually or formally
presented." Said prior judgment is conclusive in a subsequent
suit between the same parties on the same subject matter, and
on the same cause of action, not only as to matters which were
decided in the first action, but also as to every other matter
which the parties could have properly set up in the prior suit.
SHaATC
4. ID.; ID.; ID.; ID.; CASE AT BAR. — In the present case, we find
there is an identity of causes of action between Civil Case No. 94-
2086 and Civil Case No. 96-1372. Respondent Diaz's cause of
action in the prior case, now the crux of his present complaint
against petitioner, was in the nature of an unpleaded compulsory
counterclaim, which is now barred. There being a former final
judgment on the merits in the prior case, rendered in Civil Case
No. 94-2086 by Branch 146 of the Regional Trial Court of Makati,
which acquired jurisdiction over the same parties, the same
subject property, and the same cause of action, the present
complaint of respondent herein (Diaz) against petitioner Arreza
docketed as Civil Case No. 96-1372 before the Regional Trial
Court of Makati, Branch 59 should be dismissed on the ground of
res adjudicata.
DECISION
QUISUMBING, J p:
This petition assails the decision 1 promulgated on December 24,
1997, and the resolution 2 dated March 6, 1998, by the Court of
Appeals in CA-G.R SP No. 43895. That decision dismissed the
25
petition for certiorari questioning the order 3 dated February 4,
1997 of the Regional Trial Court of Makati City, Branch 59, in
Civil Case No. 96-1372, which had denied petitioner's motion to
dismiss the complaint filed against him on grounds of res
adjudicata.
The factual antecedents of the present petition are culled from
the findings of the Court of Appeals.
Bliss Development Corporation is the owner of a housing unit
located at Lot 27. Block 30 New Capitol Estates I, Barangay
Matandang Balara, Quezon City. In the course of a case involving
a conflict of ownership between petitioner Edgar H. Arreza and
respondent Montano M. Diaz, Jr., 4 docketed as Civil Case No. 94-
2086 before the Regional Trial Court of Makati, Branch 146, Bliss
Development Corporation filed a complaint for interpleader.
ASHaDT
In a decision dated March 27, 1996, the trial court resolved the
conflict by decreeing as follows:
WHEREFORE, premises considered, the herein interpleader is
resolved in favor of defendant Edgar H. Arreza, and plaintiff Bliss
Development is granted cognizance of the May 6, 1991 transfer
of rights by Emiliano and Leonila Melgazo thru Manuel Melgazo,
to said defendant Edgar Arreza. The case is dismissed as against
defendant Montano M. Diaz, Jr.
The third-party complaint is likewise dismissed.
SO ORDERED.
The decision became final and was duly executed with Bliss
executing a Contract to Sell the aforementioned property to
petitioner Arreza. Respondent Diaz was constrained to deliver
the property with all its improvements to petitioner.
Thereafter respondent Diaz filed a complaint against Bliss
Development Corporation, Edgar H. Arreza, and Domingo Tapay
in the Regional Trial Court of Makati, Branch 59, docketed as
Civil Case No. 96-1372. He sought to hold Bliss Development
Corporation and petitioner Arreza liable for reimbursement to
him of P1,706,915;58 representing the cost of his acquisition and
improvements on the subject property with interest at 8% per
annum.
Petitioner Arreza filed a Motion to Dismiss the case, citing as
grounds res adjudicata or conclusiveness of the judgment in the
interpleader case as well as lack of cause of action.
In an Order dated February 4, 1997, the motion was denied for
lack of merit.
A Motion for Reconsideration filed by Arreza was likewise
denied on March 20, 1997.
On April 16, 1997, Arreza filed a petition for certiorari before the
Court of Appeals alleging that the Orders dated February 4 and
March 20, 1997, were issued against clear provisions of
pertinent laws, the Rules of Court, and established jurisprudence
such that respondent court acted without or in excess of
jurisdiction, or grave abuse of discretion amounting to lack or
excess of jurisdiction.
The petition was dismissed for lack of merit. The Court of
Appeals said:
The decision invoked by the petitioner as res adjudicata resolved
only the issue of who between Edgar H. Arreza and Montano Diaz
has the better right over the property under litigation. It did not
resolve the rights and obligations of the parties.
The action filed by Montano M. Diaz against Bliss Development
Corporation, et al. seeks principally the collection of damages in
the form of the payments Diaz made to the defendant and the
value of the improvements he introduced on the property —
matters that were not adjudicated upon in the previous case for
interpleader.
xxx xxx xxx
26

WHEREFORE, this petition is hereby DISMISSED with costs
against the petitioner.
SO ORDERED. 5
Petitioner's motion to reconsider the decision of the Court of
Appeals was denied. 6 Hence, the present petition, where
petitioner raises the following grounds for review:
I The issue for our resolution now is whether respondent Diaz's
THE CAUSE OF ACTION EMBODIED IN THE PRESENT RTC CASE
PERTAINING TO MR. DIAZ'S CLAIMS FOR REIMBURSEMENT OF
AMOUNTS WHICH HE ALLEGEDLY PAID TO BLISS BY WAY OF
PREMIUM OR INSTALLMENT PAYMENTS FOR THE
ACQUISITION OF THE PROPERTY WAS ERRONEOUSLY
BROUGHT AGAINST MR. ARREZA. ALSO, SAID CLAIMS ARE
BARRED BY RES ADJUDICATA OR CONCLUSIVENESS OF A PRIOR
JUDGMENT IN THE PRIOR RTC CASE WHICH WAS ULTIMATELY
AFFIRMED BY THIS HONORABLE COURT IN G.R. NO. 128726.
CEHcSI
II
THE CAUSE OF ACTION EMBODIED IN THE PRESENT RTC CASE
PERTAINING TO MR. DIAZ'S CLAIMS FOR REIMBURSEMENT OF
THE COST OF IMPROVEMENTS HE ALLEGEDLY INTRODUCED
TO THE PROPERTY IS LIKEWISE BARRED BY RES ADJUDICATA
OR CONCLUSIVENESS OF A PRIOR JUDGMENT IN THE PRIOR
RTC CASE WHICH WAS ULTIMATELY AFFIRMED BY THIS
HONORABLE COURT IN G.R NO. 128726.
III.
THE RULING IN THE PRIOR CA PETITION (CA-G.R. SP. NO.
41974) WHICH WAS ULTIMATELY AFFIRMED BY THIS
HONORABLE COURT IN G.R. NO. 128726 THAT THE DECISION IN
THE PRIOR RTC CASE SETTLED ALL CLAIMS WHICH MESSRS.
DIAZ AND ARREZA HAD AGAINST EACH OTHER CONSTITUTES
THE LAW OF THE CASE BETWEEN THEM AND SERVES AS BAR
TO THE FILING OF THE PRESENT RTC CASE INVOLVING THE
SAME CLAIMS.
IV.
IN ITS ENTIRETY, THE AMENDED COMPLAINT IN THE PRESENT
RTC CASE IS DISMISSIBLE ON THE GROUND OF LACK OF CAUSE
OF ACTION. 7
claims for reimbursement against petitioner Arreza are barred
by res adjudicata.
The elements of res adjudicata are: (a) that the former judgment
must be final; (b) the court which rendered judgment had
jurisdiction over the parties and the subject matter; (c) it must
be a judgment on the merits; and (d) there must be between the
first and second causes of action identity of the parties, subject
matter, and cause of action. 8
Worthy of note, the prior case for interpleader filed with Branch
146 of the Regional Trial Court of Makati, Civil Case No. 94-2086,
was settled with finality with this Court's resolution in G.R. No.
128726. 9 The judgment therein is now final.
When the Regional Trial Court of Makati (Branch 146) rendered
judgment, it had priorly acquired jurisdiction over the parties
and the subject matter. Respondent, however, contends that the
trial court did not acquire jurisdiction over the property subject
of the action, as the action was instituted in Makati City while the
subject unit is situated in Quezon City.
We find, however, that in his answer to the complaint dated
October 3, 1994, respondent alleged:
20. That should the said additional provision be declared valid
and in the remote possibility that the alleged conflicting claimant
is adjudged to possess better right herein answering defendant is
27
asserting his right as a buyer for value and in good faith against
all persons/parties concerned. 10 (Italics supplied)
Respondent in his answer also prayed that:
D. Should the said additional provision be found valid and in the
event his co-defendant is found to possess better rights, to
adjudge him (Diaz) entitled to rights as a buyer in good faith and
for value. 11
By asserting his right as a buyer for value and in good faith of the
subject property, and asking for relief arising therefrom,
respondent invoked the jurisdiction of the trial court. Having
invoked the jurisdiction of the Regional Trial Court of Makati
(Branch 146) by filing his answer to secure affirmative relief
against petitioner, respondent is now estopped from challenging
the jurisdiction of said court after it had decided the case against
him. Surely we cannot condone here the undesirable practice of a
party submitting his case for decision and then accepting the
judgment only if favorable, but attacking it on grounds of
jurisdiction when adverse. 12
Respondent also claims that there is no identity of causes of
action between Civil Case No. 94-2086, the prior case, and Civil
Case No. 96-1372, the present case subject of this petition, as the
former involved a complaint for interpleader while the latter
now involves an action for a sum of money and damages. He
avers that a complaint for interpleader is nothing more than the
determination of rights over the subject matter involved.
EHACcT
In its assailed decision, respondent Court of Appeals pointed out
that the 1997 Rules of Civil Procedure provide that in a case for
interpleader, the court shall determine the respective rights and
obligations of the parties and adjudicate their respective claims.
13 The appellate court noted, however, that the defendants in
that interpleader case, namely Diaz and Arreza, did not pursue
the issue of damages and reimbursement although the answer of
respondent Diaz did pray for affirmative relief arising out of the
rights of a buyer in good faith. 14
Following the same tack, respondent Diaz now alleges that the
issues in the prior case, Civil Case No. 94-2086, were delimited
by the pre-trial order which did not include matters of damages
and reimbursement as an issue. He faults petitioner for not
raising such issues in the prior case, with the result that the trial
court did not resolve the rights and obligations of the parties.
There being no such resolution, no similar cause of action exists
between the prior case and the present case, according to
respondent Diaz.
Respondent in effect argues that it was incumbent upon
petitioner as a party in Civil Case No. 94-2086 to put in issue
respondent's demands for reimbursement. However, it was not
petitioner's duty to do the lawyering for respondent. As stated by
the Court of Appeals, the court in a complaint for interpleader
shall determine the rights and obligations of the parties and
adjudicate their respective claims. Such rights, obligations, and
claims could only be adjudicated if put forward by the aggrieved
party in assertion of his rights. That party in this case referred to
respondent Diaz. The second paragraph of Section 5 of Rule 62 of
the 1997 Rules of Civil Procedure provides that the parties in an
interpleader action may file counterclaims, cross-claims, third
party complaints and responsive pleadings thereto, "as provided
by these Rules." The second paragraph was added to Section 5 to
expressly authorize the additional pleadings and claims
enumerated therein, in the interest of a complete adjudication of
the controversy and its incidents. 15
Pursuant to said Rules, respondent should have filed his claims
against petitioner Arreza in the interpleader action. Having
asserted his rights as a buyer in good faith in his answer, and
praying relief therefor, respondent Diaz should have crystallized
his demand into specific claims for reimbursement by petitioner
Arreza. This he failed to do. Such failure gains significance in light
of our ruling in Baclayon vs. Court of Appeals, 182 SCRA 761,
771-772 (1990), where this Court said:
A corollary question that We might as well resolve now
(although not raised as an issue in the present petition, but
28
conformably with Gayos, et al. v. Gayos, et al., G.R. No. L-27812,
September 26, 1975, 67 SCRA 146, that it is a cherished rule of
procedure that a court should always strive to settle the entire
controversy in a single proceeding leaving no root or branch to
bear the seeds in future litigation) is whether or not the private
respondents can still file a separate complaint against the
petitioners on the ground that they are builders in good faith and
consequently, recover the value of the improvements introduced
by them on the subject lot. The case of Heirs of Laureano
Marquez v. Valencia, 99 Phil. 740, provides the answer:
If, aside from relying solely on the deed of sale with a right to
repurchase and failure on the part of the vendors to purchase it
within the period stipulated therein, the defendant had set up an
alternative though inconsistent defense that he had inherited the
parcel of land from his late maternal grandfather and presented
evidence in support of both defenses, the overruling of the first
would not bar the determination by the court of the second. The
defendant having failed to set up such alternative defenses and
chosen or elected to rely on one only, the overruling thereof was
a complete determination of the controversy between the parties
which bars a subsequent action based upon an unpleaded
defense, or any other cause of action, except that of Failure of the
complaint to state a cause of action and of lack of jurisdiction of
the Court. The determination of the issue joined by the parties
constitutes res judicata. (italics supplied)
Although the alternative defense of being builders in good faith is
only permissive, the counterclaim for reimbursement of the
value of the improvements is in the nature of a compulsory
counterclaim. Thus, the failure by the private respondents to set
it up bars their right to raise it in a subsequent litigation (Rule 9,
Section 4 of the Rules of Court). While We realize the plight of the
private respondents, the rule on compulsory counterclaim is
designed to enable the disposition of the whole controversy at
one time and in one action. The philosophy of the rule is to
discourage multiplicity of suits. (Italics supplied) DcCIAa
Having failed to set up his claim for reimbursement, said claim of
respondent Diaz being in the nature of a compulsory
counterclaim is now barred. 16
In cases involving res adjudicata, the parties and the causes of
action are identical or substantially the same in the prior as well
as the subsequent action. The judgment in the first action is
conclusive as to every matter offered and received therein and as
to any other matter admissible therein and which might have
been offered for that purpose, hence said judgment is an absolute
bar to a subsequent action for the same cause. 17 The bar
extends to questions "necessarily involved in an issue, and
necessarily adjudicated, or necessarily implied in the final
judgment, although no specific finding may have been made in
reference thereto, and although such matters were directly
referred to in the pleadings and were not actually or formally
presented." 18 Said prior judgment is conclusive in a subsequent
suit between the same parties on the same subject matter, and
on the same cause of action, not only as to matters which were
decided in the first action, but also as to every other matter
which the parties could have properly set up in the prior suit. 19
In the present case, we find there is an identity of causes of
action between Civil Case No. 94-2086 and Civil Case No. 96-
1372. Respondent Diaz's cause of action in the prior case, now
the crux of his present complaint against petitioner, was in the
nature of an unpleaded compulsory counterclaim, which is now
barred. There being a former final judgment on the merits in the
prior case, rendered in Civil Case No. 94-2086 by Branch 146 of
the Regional Trial Court of Makati, which acquired jurisdiction
over the same parties, the same subject property, and the same
cause of action, the present complaint of respondent herein
(Diaz) against petitioner Arreza docketed as Civil Case No. 96-
1372 before the Regional Trial of Makati, Branch 59 should be
dismissed on the ground of res adjudicata.
WHEREFORE, the instant petition is GRANTED. The decision
dated December 24, 1997 and the resolution dated March 6,
1998 of the Court of Appeals in CA-G.R. SP No. 43895 are
REVERSED and SET ASIDE. Civil Case No. 96-1372 before the
29
Regional Trial Court of Makati City, Branch 59, is hereby ordered
DISMISSED as against herein petitioner Edgar H. Arreza. Costs
against respondent.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.
||| (Arreza v. Diaz, Jr., G.R. No. 133113, [August 30, 2001], 416
PHIL 451-462)
DECLARATORY RELIEF AND SIMILAR
REMEDIES
THIRD DIVISION
[G.R. No. 181303. September 17, 2009.]
CARMEN DANAO MALANA, MARIA DANAO ACORDA, EVELYN
DANAO, FERMINA DANAO, LETICIA DANAO and LEONORA
DANAO, the last two are represented herein by their
Attorney-in-Fact, MARIA DANAO ACORDA, petitioners, vs.
BENIGNO TAPPA, JERRY REYNA, SATURNINO CAMBRI and
SPOUSES FRANCISCO AND MARIA LIGUTAN, respondents.
DECISION
CHICO-NAZARIO, J p:
This is a Petition for Certiorari under Rule 65 of the Rules of
Court, assailing the Orders 1 dated 4 May 2007, 30 May 2007,
and 31 October 2007, rendered by Branch 3 of the Regional Trial
Court (RTC) of Tuguegarao City, which dismissed, for lack of
jurisdiction, the Complaint of petitioners Carmen Danao Malana,
Leticia Danao, Maria Danao Accorda, Evelyn Danao, Fermina
Danao, and Leonora Danao, against respondents Benigno Tappa,
Jerry Reyna, Saturnino Cambri, Francisco Ligutan and Maria
Ligutan, in Civil Case No. 6868.
Petitioners filed before the RTC their Complaint for
Reivindicacion, Quieting of Title, and Damages 2 against
respondents on 27 March 2007, docketed as Civil Case No. 6868.
Petitioners alleged in their Complaint that they are the owners of
a parcel of land covered by Transfer Certificate of Title (TCT) No.
T-127937 3 situated in Tuguegarao City, Cagayan (subject
property). Petitioners inherited the subject property from
Anastacio Danao (Anastacio), who died intestate. 4 During the
lifetime of Anastacio, he had allowed Consuelo Pauig (Consuelo),
who was married to Joaquin Boncad, to build on and occupy the
southern portion of the subject property. Anastacio and Consuelo
agreed that the latter would vacate the said land at any time that
Anastacio and his heirs might need it. 5
Petitioners claimed that respondents, Consuelo's family
members, 6 continued to occupy the subject property even after
her death, already building their residences thereon using
permanent materials. Petitioners also learned that respondents
were claiming ownership over the subject property. Averring
that they already needed it, petitioners demanded that
respondents vacate the same. Respondents, however, refused to
heed petitioners' demand. 7
Petitioners referred their land dispute with respondents to the
Lupong Tagapamayapa of Barangay Annafunan West for
conciliation. During the conciliation proceedings, respondents
asserted that they owned the subject property and presented
documents ostensibly supporting their claim of ownership.
HDTCSI
According to petitioners, respondents' documents were highly
dubious, falsified, and incapable of proving the latter's claim of
ownership over the subject property; nevertheless, they created
a cloud upon petitioners' title to the property. Thus, petitioners
were compelled to file before the RTC a Complaint to remove
such cloud from their title. 8 Petitioners additionally sought in
their Complaint an award against respondents for actual
damages, in the amount of P50,000.00, resulting from the latter's
baseless claim over the subject property that did not actually
belong to them, in violation of Article 19 of the Civil Code on
Human Relations. 9 Petitioners likewise prayed for an award
against respondents for exemplary damages, in the amount of
P50,000.00, since the latter had acted in bad faith and resorted to
30
unlawful means to establish their claim over the subject
property. Finally, petitioners asked to recover from respondents
P50,000.00 as attorney's fees, because the latter's refusal to
vacate the property constrained petitioners to engage the
services of a lawyer. 10
Before respondents could file their answer, the RTC issued an
Order dated 4 May 2007 dismissing petitioners' Complaint on
the ground of lack of jurisdiction. The RTC referred to Republic
Act No. 7691, 11 amending Batas Pambansa Blg. 129, otherwise
known as the Judiciary Reorganization Act of 1980, which vests
the RTC with jurisdiction over real actions, where the assessed
value of the property involved exceeds P20,000.00. It found that
the subject property had a value of less than P20,000.00; hence,
petitioners' action to recover the same was outside the
jurisdiction of the RTC. The RTC decreed in its 4 May 2007 Order
that:
The Court has no jurisdiction over the action, it being a real
action involving a real property with assessed value less than
P20,000.00 and hereby dismisses the same without prejudice. 12
Petitioners filed a Motion for Reconsideration of the
aforementioned RTC Order dismissing their Complaint. They
argued that their principal cause of action was for quieting of
title; the accion reivindicacion was included merely to enable
them to seek complete relief from respondents. Petitioner's
Complaint should not have been dismissed, since Section 1, Rule
63 of the Rules of Court 13 states that an action to quiet title falls
under the jurisdiction of the RTC. 14
In an Order dated 30 May 2007, the RTC denied petitioners'
Motion for Reconsideration. It reasoned that an action to quiet
title is a real action. Pursuant to Republic Act No. 7691, it is the
Municipal Trial Court (MTC) that exercises exclusive jurisdiction
over real actions where the assessed value of real property does
not exceed P20,000.00. Since the assessed value of subject
property per Tax Declaration No. 02-48386 was P410.00, the
real action involving the same was outside the jurisdiction of the
RTC. 15
Petitioners filed another pleading, simply designated as Motion,
in which they prayed that the RTC Orders dated 4 May 2007 and
30 May 2007, dismissing their Complaint, be set aside. They
reiterated their earlier argument that Section 1, Rule 63 of the
Rules of Court states that an action to quiet title falls under the
exclusive jurisdiction of the RTC. They also contended that there
was no obstacle to their joining the two causes of action, i.e.,
quieting of title and reivindicacion, in a single Complaint, citing
Rumarate v. Hernandez. 16 And even if the two causes of action
could not be joined, petitioners maintained that the misjoinder of
said causes of action was not a ground for the dismissal of their
Complaint. 17 caAICE
The RTC issued an Order dated 31 October 2007 denying
petitioners' Motion. It clarified that their Complaint was
dismissed, not on the ground of misjoinder of causes of action,
but for lack of jurisdiction. The RTC dissected Section 1, Rule 63
of the Rules of Court, which provides:
Section 1. Who may file petition. — Any person interested under
a deed, will, contract or other written instrument, or whose
rights are affected by a statute, executive order or regulation,
ordinance, or any other governmental regulation may, before
breach or violation thereof, bring an action in the appropriate
Regional Trial Court to determine any question of construction
or validity arising, and for a declaration of his rights or duties,
thereunder.
An action for the reformation of an instrument, to quiet title to
real property or remove clouds therefrom, or to consolidate
ownership under Article 1607 of the Civil Code, may be brought
under this Rule.
The RTC differentiated between the first and the second
paragraphs of Section 1, Rule 63 of the Rules of Court. The first
paragraph refers to an action for declaratory relief, which should
be brought before the RTC. The second paragraph, however,
refers to a different set of remedies, which includes an action to
quiet title to real property. The second paragraph must be read
in relation to Republic Act No. 7691, which vests the MTC with
jurisdiction over real actions, where the assessed value of the
real property involved does not exceed P50,000.00 in Metro
Manila and P20,000.00 in all other places. 18 The dispositive part
of the 31 October 2007 Order of the RTC reads:
31
This Court maintains that an action to quiet title is a real action.
[Herein petitioners] do not dispute the assessed value of the
property at P410.00 under Tax Declaration No. 02-48386. Hence,
it has no jurisdiction over the action.
In view of the foregoing considerations, the Motion is hereby
denied. 19
Hence, the present Petition, where petitioners raise the sole
issue of:
I brought before the appropriate RTC.
WHETHER OR NOT THE RESPONDENT JUDGE COMMITTED
GRAVE ABUSE OF DISCRETION IN DISMISSING THE COMPLAINT
OF THE PETITIONERS MOTU PROPRIO. 20
Petitioners' statement of the issue is misleading. It would seem
that they are only challenging the fact that their Complaint was
dismissed by the RTC motu proprio. Based on the facts and
arguments set forth in the instant Petition, however, the Court
determines that the fundamental issue for its resolution is
whether the RTC committed grave abuse of discretion in
dismissing petitioners' Complaint for lack of jurisdiction. cSaADC
The Court rules in the negative.
An action for declaratory relief should be filed by a person
interested under a deed, a will, a contract or other written
instrument, and whose rights are affected by a statute, an
executive order, a regulation or an ordinance. The relief sought
under this remedy includes the interpretation and determination
of the validity of the written instrument and the judicial
declaration of the parties' rights or duties thereunder. 21
Petitions for declaratory relief are governed by Rule 63 of the
Rules of Court. The RTC correctly made a distinction between the
first and the second paragraphs of Section 1, Rule 63 of the Rules
of Court.
The first paragraph of Section 1, Rule 63 of the Rules of Court,
describes the general circumstances in which a person may file a
petition for declaratory relief, to wit:
Any person interested under a deed, will, contract or other
written instrument, or whose rights are affected by a statute,
executive order or regulation, ordinance, or any other
governmental regulation may, before breach or violation thereof,
bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and
for a declaration of his rights or duties, thereunder. (Emphasis
ours.)
As the afore-quoted provision states, a petition for declaratory
relief under the first paragraph of Section 1, Rule 63 may be
Section 1, Rule 63 of the Rules of Court further provides in its
second paragraph that:
An action for the reformation of an instrument, to quiet title to
real property or remove clouds therefrom, or to consolidate
ownership under Article 1607 of the Civil Code, may be brought
under this Rule. (Emphasis ours.) TaSEHC
The second paragraph of Section 1, Rule 63 of the Rules of Court
specifically refers to (1) an action for the reformation of an
instrument, recognized under Articles 1359 to 1369 of the Civil
Code; (2) an action to quiet title, authorized by Articles 476 to
481 of the Civil Code; and (3) an action to consolidate ownership
required by Article 1607 of the Civil Code in a sale with a right to
repurchase. These three remedies are considered similar to
declaratory relief because they also result in the adjudication of
the legal rights of the litigants, often without the need of
execution to carry the judgment into effect. 22
To determine which court has jurisdiction over the actions
identified in the second paragraph of Section 1, Rule 63 of the
Rules of Court, said provision must be read together with those
of the Judiciary Reorganization Act of 1980, as amended.
It is important to note that Section 1, Rule 63 of the Rules of
Court does not categorically require that an action to quiet title
be filed before the RTC. It repeatedly uses the word "may" — that
an action for quieting of title "may be brought under [the] Rule"
on petitions for declaratory relief, and a person desiring to file a
petition for declaratory relief "may . . . bring an action in the
appropriate Regional Trial Court". The use of the word "may" in a
32
statute denotes that the provision is merely permissive and
indicates a mere possibility, an opportunity or an option. 23
In contrast, the mandatory provision of the Judiciary
Reorganization Act of 1980, as amended, uses the word "shall"
and explicitly requires the MTC to exercise exclusive original
jurisdiction over all civil actions which involve title to or
possession of real property where the assessed value does not
exceed P20,000.00, thus:
Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal
Trial Courts and Municipal Circuit Trial Courts in Civil Cases. —
Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts shall exercise:
xxx xxx xxx
(3) Exclusive original jurisdiction in all civil actions which
involve title to, possession of, real property, or any interest
therein where the assessed value of the property or interest
therein does not exceed Twenty thousand pesos (P20,000.00) or,
in civil actions in Metro Manila, where such assessed value does
not exceeds Fifty thousand pesos (P50,000.00) exclusive of
interest, damages of whatever kind, attorney's fees, litigation
expenses and costs: . . . (Emphasis ours.) TEaADS
As found by the RTC, the assessed value of the subject property
as stated in Tax Declaration No. 02-48386 is only P410.00;
therefore, petitioners' Complaint involving title to and
possession of the said property is within the exclusive original
jurisdiction of the MTC, not the RTC.
Furthermore, an action for declaratory relief presupposes that
there has been no actual breach of the instruments involved or of
rights arising thereunder. 24 Since the purpose of an action for
declaratory relief is to secure an authoritative statement of the
rights and obligations of the parties under a statute, deed, or
contract for their guidance in the enforcement thereof, or
compliance therewith, and not to settle issues arising from an
alleged breach thereof, it may be entertained only before the
breach or violation of the statute, deed, or contract to which it
refers. A petition for declaratory relief gives a practical remedy
for ending controversies that have not reached the state where
another relief is immediately available; and supplies the need for
a form of action that will set controversies at rest before they
lead to a repudiation of obligations, an invasion of rights, and a
commission of wrongs. 25
Where the law or contract has already been contravened prior to
the filing of an action for declaratory relief, the courts can no
longer assume jurisdiction over the action. In other words, a
court has no more jurisdiction over an action for declaratory
relief if its subject has already been infringed or transgressed
before the institution of the action. 26
In the present case, petitioners' Complaint for quieting of title
was filed after petitioners already demanded and respondents
refused to vacate the subject property. In fact, said Complaint
was filed only subsequent to the latter's express claim of
ownership over the subject property before the Lupong
Tagapamayapa, in direct challenge to petitioners' title.
Since petitioners averred in the Complaint that they had already
been deprived of the possession of their property, the proper
remedy for them is the filing of an accion publiciana or an accion
reivindicatoria, not a case for declaratory relief. An accion
publiciana is a suit for the recovery of possession, filed one year
after the occurrence of the cause of action or from the unlawful
withholding of possession of the realty. An accion reivindicatoria
is a suit that has for its object one's recovery of possession over
the real property as owner. 27
Petitioners' Complaint contained sufficient allegations for an
accion reivindicatoria. Jurisdiction over such an action would
depend on the value of the property involved. Given that the
subject property herein is valued only at P410.00, then the MTC,
not the RTC, has jurisdiction over an action to recover the same.
The RTC, therefore, did not commit grave abuse of discretion in
dismissing, without prejudice, petitioners' Complaint in Civil
Case No. 6868 for lack of jurisdiction. TCaEAD
As for the RTC dismissing petitioners' Complaint motu proprio,
the following pronouncements of the Court in Laresma v.
Abellana 28 proves instructive:
It is axiomatic that the nature of an action and the jurisdiction of
a tribunal are determined by the material allegations of the
complaint and the law at the time the action was commenced.
Jurisdiction of the tribunal over the subject matter or nature of
33
an action is conferred only by law and not by the consent or
waiver upon a court which, otherwise, would have no
jurisdiction over the subject matter or nature of an action. Lack
of jurisdiction of the court over an action or the subject matter of
an action cannot be cured by the silence, acquiescence, or even
by express consent of the parties. If the court has no jurisdiction
over the nature of an action, it may dismiss the same ex mero
motu or motu proprio. . . . . (Emphasis supplied.)
Since the RTC, in dismissing petitioners' Complaint, acted in
complete accord with law and jurisprudence, it cannot be said to
have done so with grave abuse of discretion amounting to lack or
excess of jurisdiction. An act of a court or tribunal may only be
considered to have been committed in grave abuse of discretion
when the same was performed in a capricious or whimsical
exercise of judgment, which is equivalent to lack of jurisdiction.
The abuse of discretion must be so patent and gross as to amount
to an evasion of a positive duty or to a virtual refusal to perform
a duty enjoined by law or to act at all in contemplation of law, as
where the power is exercised in an arbitrary and despotic
manner by reason of passion or personal hostility. 29 No such
circumstances exist herein as to justify the issuance of a writ of
certiorari.
IN VIEW OF THE FOREGOING, the instant Petition is DISMISSED.
The Orders dated 4 May 2007, 30 May 2007 and 31 October
2007 of the Regional Trial Court of Tuguegarao City, Branch 3,
dismissing the Complaint in Civil Case No. 6868, without
prejudice, are AFFIRMED. The Regional Trial Court is ordered to
REMAND the records of this case to the Municipal Trial Court or
the court of proper jurisdiction for proper disposition. Costs
against the petitioners.
SO ORDERED.
Ynares-Santiago, Velasco, Jr., Nachura and Peralta, JJ., concur.
||| (Malana v. Tappa, G.R. No. 181303, [September 17, 2009], 616
PHIL 177-191)
THIRD DIVISION
[G.R. No. 157866. February 14, 2007.]
AUGUSTO MANGAHAS and MARILOU VERDEJO, petitioners,
vs. HON. JUDGE VICTORIA ISABEL PAREDES, Presiding Judge,
Br. 124, Regional Trial Court, Caloocan City; SHERIFF ERLITO
BACHO, Br. 124, Regional Trial Court, Caloocan City; and
AVELINO BANAAG, respondents.
DECISION
CHICO-NAZARIO, J p:
This petition for Declaratory Relief, Certiorari, Prohibition With
Prayer For Provisional Remedy filed by petitioners Augusto
Mangahas and Marilou Verdejo seeks to nullify and set aside the
14 February 2003 Order 1 of the Regional Trial Court (RTC),
Branch 124, Caloocan City, denying their Motion to Suspend
Execution in Civil Case No. C-19097.
The instant controversy arose from a verified complaint for
Ejectment filed by private respondent Avelino Banaag on 31
January 1997 before the Metropolitan Trial Court (MeTC),
Branch 49, Caloocan City, against petitioners. Private respondent
alleged that he is the registered owner of the disputed property
identified as Lot 4, Block 21, located in Maligaya Park
Subdivision, Caloocan City, as evidenced by Transfer Certificate
of Title (TCT) No. 196025 of the Registry of Deeds of Caloocan
City. Private respondent averred that petitioners constructed
houses on the property without his knowledge and consent and
that several demands were made, but the same fell on deaf ears
as petitioners refused to vacate the premises. This prompted
private respondent to refer the matter to the Lupon Tagapayapa
for conciliation. The recourse proved futile since the parties were
not able to settle amicably. Private respondent then filed an
ejectment suit before the MeTC.
34
On 23 April 1997, petitioners filed their answer denying having
unlawfully deprived private respondent possession of the
contested property. Petitioners claimed that they have resided in
the subject lot with the knowledge and conformity of the true
owner thereof, Pinagkamaligan Indo-Agro Development
Corporation (PIADECO), as evidenced by a Certificate of
Occupancy signed by PIADECO's president in their favor.
On 10 July 1997, petitioners filed a Manifestation And Motion To
Suspend Proceedings on the ground that the subject property is
part of the Tala Estate and that the RTC of Quezon City, Branch
85, in Civil Case No. Q-96-29810 issued a Writ of Preliminary
Injunction dated 10 November 1997, enjoining the MeTCs of
Quezon City and Caloocan City from ordering the eviction and
demolition of all occupants of the Tala Estate. They posited that
the injunction issued by the Quezon City RTC is enforceable in
Caloocan City because both cities are situated within the National
Capital Region. AaHTIE
In an order dated 7 August 1997, the MeTC denied said
manifestation and motion. It ratiocinated that the injunction
issued by the Quezon City RTC has binding effect only within the
territorial boundaries of the said court and since Caloocan City is
not within the territorial area of same, the injunction it issued is
null and void for lack of jurisdiction.
For failure of the parties to arrive at a compromise agreement
during the preliminary conference, they were required to submit
their respective position papers containing their positions on the
following issues: (a) whether or not the torrens title of private
respondent is a valid basis of his right to eject petitioners, (b)
whether the MeTC has jurisdiction to hear and decide the case,
and (c) whether either the private respondent or petitioners are
entitled to their respective claims for damages.
In their position paper, petitioners insisted that they are entitled
to the possession of the land because they have been occupants
thereof as early as 1978, long before the property was acquired
by private respondent. Since they possessed the property for that
long, the MeTC has no jurisdiction to hear and decide the case as
ejectment suit applies only to instances where possession of the
land lasted for a period of not more than one year. In addition,
they claimed that private respondent has not proffered any
evidence that he has prior physical possession over the property.
Petitioners reiterated their posture in the motion to suspend
proceedings wherein they urged the MeTC to respect the Writ of
Preliminary Injunction issued by the Quezon City RTC. They also
alleged that private respondent's certificate of title originated
from a fictitious title.
In a decision dated 5 October 1999, the MeTC ruled for private
respondent. It opined that TCT No. 196025 in private
respondent's name was an indefeasible proof of his ownership of
the lot and his inherent right to possess the same. This title
entitled private respondent better right to possess the subject
property over petitioners' Certificate of Occupancy executed in
their favor by PIADECO. It held that it has jurisdiction over the
controversy since private respondent filed the case within one
year from the time the demand to vacate was given to
petitioners. The decretal portion of the decision reads:
Wherefore, judgment is hereby rendered for the plaintiff,
ordering defendants Augusto Mangahas, Victor Solis, Elisa M.
Dionila, Joselito Mangahas and Rogelio Verdejo and all persons
claiming right under them as follows:
1) To vacate the lot in question by removing their houses erected
thereat and restore possession of the lot to the plaintiff;
2) To pay plaintiff a reasonable compensation for their use of the
premises for the period from August, 1996 until the property is
vacated at the rate of two thousand (P2,000.00) pesos per
month;
3) To reimburse to plaintiff the sum of ten thousand
(P10,000.00) pesos as and for attorney's fees; [and]
4) To pay the costs of this suit. 2
35
On 2 December 1999, petitioners appealed to the RTC, which
case was docketed as Civil Case No. C-19097. In a Decision dated
16 November 2000, the trial court affirmed in toto the MeTC
decision. It ruled that the MeTC was correct in denying
petitioners' motion to suspend proceedings anchored on the
Writ of Preliminary Injunction issued by the Quezon City RTC
reasoning that the writ of the latter court is limited only to its
territorial area, thus, the same has no binding effect on the MeTC
of Caloocan City. It sustained the MeTC's ruling that the latter
court has jurisdiction over the case as the same has been filed
within the reglementary period from the date of demand to
vacate. Furthermore, the RTC stated that the validity of private
respondent's title cannot be assailed collaterally in the instant
case. EHACcT
On 18 December 2000, petitioners filed a motion for
reconsideration which the RTC denied in a resolution dated 1
June 2001.
Unfazed, petitioners appealed the ruling of the RTC to the Court
of Appeals on 6 June 2001 which was docketed as CA-G.R. SP No.
65076.
In a Decision 3 dated 25 April 2002, the Court of Appeals
affirmed the ruling of the RTC. Petitioners' Motion for
Reconsideration was, likewise, denied in a Resolution dated 20
November 2002.
The decision of the Court of Appeals became final and executory
on 13 December 2002.
Meanwhile, on 11 December 2000, private respondent filed with
the RTC a motion for execution pending appeal which was
opposed by petitioners. In an order dated 12 September 2001,
the RTC granted the motion.
To implement and enforce its decision, the same court on 27
September 2001 issued a Writ of Execution. On 28 September
2001, petitioners filed a Motion to Reconsider Order dated 12
September 2001 which was denied in an order dated 5 February
2002.
On 17 January 2003, petitioners filed a Motion to Suspend
Execution before the RTC. Said motion was denied in an order
dated 14 February 2003. On 05 March 2003, Sheriff Erlito Bacho
implemented and enforced the writ of execution.
Hence, the instant recourse.
At the outset it must be pointed out that petitioners' direct
recourse to this Court via petition for Declaratory Relief,
Certiorari, Prohibition With Prayer For Provisional Remedy is an
utter disregard of the hierarchy of courts and should have been
dismissed outright. This Court's original jurisdiction to issue
writs of certiorari, prohibition, mandamus, quo warranto, habeas
corpus and injunction is not exclusive. 4 It is shared by this Court
with the Regional Trial Courts and the Court of Appeals. 5 Such
concurrence of jurisdiction does not give the petitioners
unbridled freedom of choice of court forum. 6 A direct recourse
of the Supreme Court's original jurisdiction to issue these writs
should be allowed only when there are special and important
reasons therefor, clearly and specifically set out in the petition. 7
In the instant case, petitioners have not offered any exceptional
or compelling reason not to observe the hierarchy of courts.
Hence, the petition should have been filed with the Regional Trial
Court.
Equally noteworthy is petitioners' resort to this Court through
petition for declaratory relief. This action is not among the
petitions within the original jurisdiction of the Supreme Court. 8
Rule 63 of the Rules of Court which deals with actions for
declaratory relief, enumerates the subject matter thereof, i.e.,
deed, will, contract or other written instrument, the construction
or validity of statute or ordinance. Inasmuch as this enumeration
is exclusive, petitioners' action to declare the RTC order denying
their motion to suspend execution, not being one of those
enumerated, should warrant the outright dismissal of this case. 9
36
At any rate, since the complete records of this case have already
been elevated, this Court deems it wise to resolve the
controversy on the merits.
Petitioners assail the Order dated 14 February 2003 of the RTC
Caloocan City and its Decision dated 16 November 2000 on the
sole ground that the said court is precluded from issuing said
Order and Decision by virtue of the Writ of Injunction issued on
10 November 1997 by the Quezon City RTC. cSCADE
It must be remembered that the issue on the enforceability of the
injunction order originating from the Quezon City RTC had
already been litigated and finally decided when the Court of
Appeals in CA-G.R. SP No. 65076 affirmed the Decision of the RTC
in Civil Case No. C-19097. Said Decision had become final and
executory per Entry of Judgment dated 25 April 2002. 10 The
relevant portion of the Court of Appeals' Decision reads:
The petitioners postulate that the Writ of Preliminary Injunction
dated November 10, 1997 which emanated from the Regional
Trial Court of Quezon City should have prompted the Regional
Trial Court of Caloocan City to suspend the ejectment
proceedings then pending before it. It was the petitioners'
contention that the injunction writ issued in Quezon City is
enforceable also in Caloocan City inasmuch [as] both cities are
situated within the National Capital Region.
Under Sec. 17 of B.P. 129, the exercise of jurisdiction of the
Regional Trial Courts and their judges is basically regional in
scope (Malaoan vs. Court of Appeals, 232 SCRA 249), but under
Sec. 18, it may be limited to the territorial area of the branch in
which the judges sits (OCA vs. Matas, August 2, 1995).
Sec. 18 of B.P. 129 states:
"Sec. 18. Authority to Define Territory Appurtenant to Each
Branch. — The Supreme Court shall define the territory over
which a branch of the Regional Trial Court shall exercise its
authority. The territory thus defined shall be deemed to be the
territorial area of the branch concerned for purposes of
determining the venue of all suits, proceedings or actions,
whether civil or criminal, as well as determining the
Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts over which the said branch may exercise
appellate jurisdiction. . . ."
Taking Our bearings from the above pronouncement, the
Regional Trial Court of Caloocan City could not be deemed to
have committed a reversible error when it denied the
petitioners' Motion to Suspend Proceedings. Apparently, the
extent of the enforceability of an injunction writ issued by the
Regional Trial Court is defined by the territorial region where the
magistrate presides. 11
Consequently, the issue involving the binding effect of the
injunction issued by the Quezon City RTC became the law of the
case between the parties. Under this legal principle, whatever is
irrevocably established as the controlling legal rule or decision
between the parties in the same case continues to be the law of
the case, so long as the facts on which the decision was
predicated continue. 12 Stated otherwise, the doctrine holds that
once an appellate court has declared the law in a case that
declaration continues to hold even in subsequent appeal. 13 The
reason lies in the fact that public policy dictates that litigations
must be terminated at some definite time and that the prevailing
party should not be denied the fruits of his victory by some
subterfuge devised by the losing party. 14
Petitioners are therefore barred from assailing the ruling that the
injunction issued by the Quezon City RTC has no binding effect to
the courts of Caloocan City as this issue had already been passed
upon with finality. Issues should be laid to rest at some point;
otherwise there would be no end to litigation. As elucidated in
Hufana v. Genato: 15
It is well established that when a right or fact has been judicially
tried and determined by a court of competent jurisdiction, so
long as it remains unreversed, it should be conclusive upon the
parties and those in privity with them. The dictum therein laid
down became the law of the case and what was once irrevocably
37
established as the controlling legal rule or decision, continues to
be binding between the same parties as long as the facts on
which the decision was predicated, continue to be the facts of the
case before the court. Hence, the binding effect and
enforceability of that dictum can no longer be relitigated anew
since said issue had already been resolved and finally laid to rest
in that aforementioned case ( Miranda v. CA, 141 SCRA 306
[1986]), if not by the principle of res judicata, but at least by
conclusiveness of judgment.
Quite conspicuously, the instant petition assailing the order of
the RTC denying petitioners' motion to suspend execution is a
ploy to deprive private respondent of the fruits of his hard-won
case. It must be stressed that once a decision becomes final and
executory, it is the ministerial duty of the presiding judge to issue
a writ of execution except in certain cases, as when subsequent
events would render execution of judgment unjust. 16
Petitioners did not allege nor proffer any evidence that this case
falls within the exception. Hence, there is no reason to vacate the
writ of execution issued by the RTC.
WHEREFORE, the petition is DENIED. The Order of the Regional
Trial Court, Branch 124, Caloocan City, denying petitioners'
Motion to Suspend Execution dated 14 February 2003 in Civil
Case No. C-19097 is AFFIRMED. Costs against petitioners.
SO ORDERED.
Ynares-Santiago, Austria-Martinez and Callejo, Sr., JJ., concur.
Nachura, J., is on leave.
||| (Mangahas v. Paredes, G.R. No. 157866, [February 14, 2007],
544 PHIL 635-645)
EN BANC
[G.R. No. 159357. April 28, 2004.]
Brother MARIANO "MIKE" Z. VELARDE, petitioner, vs. SOCIAL
JUSTICE SOCIETY, respondent.
DECISION
PANGANIBAN, J p:
A decision that does not conform to the form and substance
required by the Constitution and the law is void and deemed
legally inexistent. To be valid, decisions should comply with the
form, the procedure and the substantive requirements laid out in
the Constitution, the Rules of Court and relevant circulars/orders
of the Supreme Court. For the guidance of the bench and the bar,
the Court hereby discusses these forms, procedures and
requirements.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of
Court, assailing the June 12, 2003 Decision 2 and July 29, 2003
Order 3 of the Regional Trial Court (RTC) of Manila (Branch 49).
4
The challenged Decision was the offshoot of a Petition for
Declaratory Relief 5 filed before the RTC-Manila by herein
Respondent Social Justice Society (SJS) against herein Petitioner
Mariano "Mike" Z. Velarde, together with His Eminence, Jaime
Cardinal Sin, Executive Minister Eraño Manalo, Brother Eddie
Villanueva and Brother Eliseo F. Soriano as co-respondents. The
Petition prayed for the resolution of the question "whether or
not the act of a religious leader like any of herein respondents, in
endorsing the candidacy of a candidate for elective office or in
urging or requiring the members of his flock to vote for a
specified candidate, is violative of the letter or spirit of the
constitutional provisions . . ." 6
Alleging that the questioned Decision did not contain a statement
of facts and a dispositive portion, herein petitioner filed a
Clarificatory Motion and Motion for Reconsideration before the
trial court. Soriano, his co-respondent, similarly filed a separate
Motion for Reconsideration. In response, the trial court issued
the assailed Order, which held as follows:
38
". . . [T]his Court cannot reconsider, because what it was asked to
do, was only to clarify a Constitutional provision and to declare
whether acts are violative thereof. The Decision did not make a
dispositive portion because a dispositive portion is required only
in coercive reliefs, where a redress from wrong suffered and the
benefit that the prevailing party wronged should get. The step
that these movants have to take, is direct appeal under Rule 45 of
the Rules of Court, for a conclusive interpretation of the
Constitutional provision to the Supreme Court.” 7
The Antecedent Proceedings
On January 28, 2003, SJS filed a Petition for Declaratory Relief
("SJS Petition") before the RTC-Manila against Velarde and his
aforesaid co-respondents. SJS, a registered political party, sought
the interpretation of several constitutional provisions, 8
specifically on the separation of church and state; and a
declaratory judgment on the constitutionality of the acts of
religious leaders endorsing a candidate for an elective office, or
urging or requiring the members of their flock to vote for a
specified candidate.
The subsequent proceedings were recounted in the challenged
Decision in these words:
". . .. Bro. Eddie Villanueva submitted, within the original period
[to file an Answer], a Motion to Dismiss. Subsequently, Executive
Minister Eraño Manalo and Bro. Mike Velarde, filed their Motions
to Dismiss. While His Eminence Jaime Cardinal L. Sin, filed a
Comment and Bro. Eli Soriano, filed an Answer within the
extended period and similarly prayed for the dismissal of the
Petition. All sought the dismissal of the Petition on the common
grounds that it does not state a cause of action and that there is
no justiciable controversy. They were ordered to submit a
pleading by way of advisement, which was closely followed by
another Order denying all the Motions to Dismiss. Bro. Mike
Velarde, Bro. Eddie Villanueva and Executive Minister Eraño
Manalo moved to reconsider the denial. His Eminence Jaime
Cardinal L. Sin, asked for extension to file memorandum. Only
Bro. Eli Soriano complied with the first Order by submitting his
Memorandum . . .
". . . the Court denied the Motions to Dismiss, and the Motions for
Reconsideration filed by Bro. Mike Velarde, Bro. Eddie Villanueva
and Executive Minister Eraño Manalo, which raised no new
arguments other than those already considered in the motions to
dismiss . . ." 9
After narrating the above incidents, the trial court said that it had
jurisdiction over the Petition, because "in praying for a
determination as to whether the actions imputed to the
respondents are violative of Article II, Section 6 of the
Fundamental Law, [the Petition] has raised only a question of
law." 10 It then proceeded to a lengthy discussion of the issue
raised in the Petition — the separation of church and state —
even tracing, to some extent, the historical background of the
principle. Through its discourse, the court a quo opined at some
point that the "[e]ndorsement of specific candidates in an
election to any public office is a clear violation of the separation
clause." 11
After its essay on the legal issue, however, the trial court failed to
include a dispositive portion in its assailed Decision. Thus,
Velarde and Soriano filed separate Motions for Reconsideration
which, as mentioned earlier, were denied by the lower court.
Hence, this Petition for Review. 12
This Court, in a Resolution 13 dated September 2, 2003, required
SJS and the Office of the Solicitor General (OSG) to submit their
respective comments. In the same Resolution, the Court gave the
other parties — impleaded as respondents in the original case
below — the opportunity to comment, if they so desired. cIHSTC
On April 13, 2004, the Court en banc conducted an Oral
Argument. 14
The Issues
In his Petition, Brother Mike Velarde submits the following
issues for this Court's resolution:
"1. Whether or not the Decision dated 12 June 2003 rendered by
the court a quo was proper and valid;
"2. Whether or not there exists justiceable controversy in herein
respondent's Petition for declaratory relief;
"3. Whether or not herein respondent has legal interest in filing
the Petition for declaratory relief;
"4. Whether or not the constitutional question sought to be
resolved by herein respondent is ripe for judicial determination;
"5. Whether or not there is adequate remedy other than the
declaratory relief; and,
39
"6. Whether or not the court a quo has jurisdiction over the
Petition for declaratory relief of herein respondent." 15
During the Oral Argument, the issues were narrowed down and
classified as follows:
"A. Procedural Issues
"Did the Petition for Declaratory Relief raise a justiciable
controversy? Did it state a cause of action? Did respondent have
any legal standing to file the Petition for Declaratory Relief?
"B. Substantive Issues
"1. Did the RTC Decision conform to the form and substance
required by the Constitution, the law and the Rules of Court?
"2. May religious leaders like herein petitioner, Bro. Mike
Velarde, be prohibited from endorsing candidates for public
office? Corollarily, may they be banned from campaigning against
said candidates?"
The Court's Ruling
The Petition of Brother Mike Velarde is meritorious.
Procedural Issues:
Requisites of Petitions
for Declaratory Relief
Section 1 of Rule 63 of the Rules of Court, which deals with
petitions for declaratory relief, provides in part:
"Section 1. Who may file petition. — Any person interested under
a deed, will, contract or other written instrument, whose rights
are affected by a statute, executive order or regulation,
ordinance, or any other governmental regulation may, before
breach or violation thereof, bring an action in the appropriate
Regional Trial Court to determine any question of construction
or validity arising, and for a declaration of his rights or duties
thereunder."
Based on the foregoing, an action for declaratory relief should be
filed by a person interested under a deed, a will, a contract or
other written instrument, and whose rights are affected by a
statute, an executive order, a regulation or an ordinance. The
purpose of the remedy is to interpret or to determine the validity
of the written instrument and to seek a judicial declaration of the
parties' rights or duties thereunder. 16 The essential requisites
of the action are as follows: (1) there is a justiciable controversy;
(2) the controversy is between persons whose interests are
adverse; (3) the party seeking the relief has a legal interest in the
controversy; and (4) the issue is ripe for judicial determination.
17
Justiciable Controversy
Brother Mike Velarde contends that the SJS Petition failed to
allege, much less establish before the trial court, that there
existed a justiciable controversy or an adverse legal interest
between them; and that SJS had a legal right that was being
violated or threatened to be violated by petitioner. On the
contrary, Velarde alleges that SJS premised its action on mere
speculations, contingent events, and hypothetical issues that had
not yet ripened into an actual controversy. Thus, its Petition for
Declaratory Relief must fail.
A justiciable controversy refers to an existing case or
controversy that is appropriate or ripe for judicial
determination, not one that is conjectural or merely anticipatory.
18 The SJS Petition for Declaratory Relief fell short of this test. It
miserably failed to allege an existing controversy or dispute
between the petitioner and the named respondents therein.
Further, the Petition did not sufficiently state what specific legal
right of the petitioner was violated by the respondents therein;
and what particular act or acts of the latter were in breach of its
rights, the law or the Constitution.
As pointed out by Brother Eliseo F. Soriano in his Comment, 19
what exactly has he done that merited the attention of SJS? He
confesses that he does not know the answer, because the SJS
Petition (as well as the assailed Decision of the RTC) "yields
nothing in this respect." His Eminence, Jaime Cardinal Sin, adds
that, at the time SJS filed its Petition on January 28, 2003, the
election season had not even started yet; and that, in any event,
he has not been actively involved in partisan politics.
An initiatory complaint or petition filed with the trial court
should contain "a plain, concise and direct statement of the
ultimate facts on which the party pleading relies for his claim . .
.." 20 Yet, the SJS Petition stated no ultimate facts.
Indeed, SJS merely speculated or anticipated without factual
moorings that, as religious leaders, the petitioner and his co-
respondents below had endorsed or threatened to endorse a
candidate or candidates for elective offices; and that such actual
or threatened endorsement "will enable [them] to elect men to
40
public office who [would] in turn be forever beholden to their
leaders, enabling them to control the government"[;] 21 and
"pos[ing] a clear and present danger of serious erosion of the
people's faith in the electoral process[;] and reinforc[ing] their
belief that religious leaders determine the ultimate result of
elections," 22 which would then be violative of the separation
clause.
Such premise is highly speculative and merely theoretical, to say
the least. Clearly, it does not suffice to constitute a justiciable
controversy. The Petition does not even allege any indication or
manifest intent on the part of any of the respondents below to
champion an electoral candidate, or to urge their so-called flock
to vote for, or not to vote for, a particular candidate. It is a time-
honored rule that sheer speculation does not give rise to an
actionable right.
Obviously, there is no factual allegation that SJS' rights are being
subjected to any threatened, imminent and inevitable violation
that should be prevented by the declaratory relief sought. The
judicial power and duty of the courts to settle actual
controversies involving rights that are legally demandable and
enforceable 23 cannot be exercised when there is no actual or
threatened violation of a legal right.
All that the 5-page SJS Petition prayed for was "that the question
raised in paragraph 9 hereof be resolved." 24 In other words, it
merely sought an opinion of the trial court on whether the
speculated acts of religious leaders endorsing elective candidates
for political offices violated the constitutional principle on the
separation of church and state. SJS did not ask for a declaration
of its rights and duties; neither did it pray for the stoppage of any
threatened violation of its declared rights. Courts, however, are
proscribed from rendering an advisory opinion. 25
Cause of Action
Respondent SJS asserts that in order to maintain a petition for
declaratory relief, a cause of action need not be alleged or
proven. Supposedly, for such petition to prosper, there need not
be any violation of a right, breach of duty or actual wrong
committed by one party against the other.
Petitioner, on the other hand, argues that the subject matter of
an action for declaratory relief should be a deed, a will, a contract
(or other written instrument), a statute, an executive order, a
regulation or an ordinance. But the subject matter of the SJS
Petition is "the constitutionality of an act of a religious leader to
endorse the candidacy of a candidate for elective office or to urge
or require the members of the flock to vote for a specified
candidate." 26 According to petitioner, this subject matter is
"beyond the realm of an action for declaratory relief." 27
Petitioner avers that in the absence of a valid subject matter, the
Petition fails to state a cause of action and, hence, should have
been dismissed outright by the court a quo.
A cause of action is an act or an omission of one party in violation
of the legal right or rights of another, causing injury to the latter.
28 Its essential elements are the following: (1) a right in favor of
the plaintiff; (2) an obligation on the part of the named defendant
to respect or not to violate such right; and (3) such defendant's
act or omission that is violative of the right of the plaintiff or
constituting a breach of the obligation of the former to the latter.
29
The failure of a complaint to state a cause of action is a ground
for its outright dismissal. 30 However, in special civil actions for
declaratory relief, the concept of a cause of action under ordinary
civil actions does not strictly apply. The reason for this exception
is that an action for declaratory relief presupposes that there has
been no actual breach of the instruments involved or of rights
arising thereunder. 31 Nevertheless, a breach or violation should
be impending, imminent or at least threatened.
A perusal of the Petition filed by SJS before the RTC discloses no
explicit allegation that the former had any legal right in its favor
that it sought to protect. We can only infer the interest,
supposedly in its favor, from its bare allegation that it "has
thousands of members who are citizens-taxpayers-registered
voters and who are keenly interested in a judicial clarification of
the constitutionality of the partisan participation of religious
leaders in Philippine politics and in the process to insure
adherence to the Constitution by everyone . . .." 32
Such general averment does not, however, suffice to constitute a
legal right or interest. Not only is the presumed interest not
personal in character; it is likewise too vague, highly speculative
and uncertain. 33 The Rules require that the interest must be
material to the issue and affected by the questioned act or
41
instrument, as distinguished from simple curiosity or incidental
interest in the question raised. 34
To bolster its stance, SJS cites the Corpus Juris Secundum and
submits that the "[p]laintiff in a declaratory judgment action
does not seek to enforce a claim against [the] defendant, but
seeks a judicial declaration of [the] rights of the parties for the
purpose of guiding [their] future conduct, and the essential
distinction between a 'declaratory judgment action' and the
usual 'action' is that no actual wrong need have been committed
or loss have occurred in order to sustain the declaratory
judgment action, although there must be no uncertainty that the
loss will occur or that the asserted rights will be invaded." 35
SJS has, however, ignored the crucial point of its own reference
— that there must be no uncertainty that the loss will occur or
that the asserted rights will be invaded. Precisely, as discussed
earlier, it merely conjectures that herein petitioner (and his co-
respondents below) might actively participate in partisan
politics, use "the awesome voting strength of its faithful flock [to]
enable it to elect men to public office . . ., enabling [it] to control
the government." 36
During the Oral Argument, though, Petitioner Velarde and his co-
respondents below all strongly asserted that they had not in any
way engaged or intended to participate in partisan politics. They
all firmly assured this Court that they had not done anything to
trigger the issue raised and to entitle SJS to the relief sought.
Indeed, the Court finds in the Petition for Declaratory Relief no
single allegation of fact upon which SJS could base a right of relief
from the named respondents. In any event, even granting that it
sufficiently asserted a legal right it sought to protect, there was
nevertheless no certainty that such right would be invaded by the
said respondents. Not even the alleged proximity of the elections
to the time the Petition was filed below (January 28, 2003) would
have provided the certainty that it had a legal right that would be
jeopardized or violated by any of those respondents. caADIC
Legal Standing
Legal standing or locus standi has been defined as a personal and
substantial interest in the case, such that the party has sustained
or will sustain direct injury as a result of the challenged act. 37
Interest means a material interest in issue that is affected by the
questioned act or instrument, as distinguished from a mere
incidental interest in the question involved. 38
Petitioner alleges that "[i]n seeking declaratory relief as to the
constitutionality of an act of a religious leader to endorse, or
require the members of the religious flock to vote for a specific
candidate, herein Respondent SJS has no legal interest in the
controversy"; 39 it has failed to establish how the resolution of
the proffered question would benefit or injure it.
Parties bringing suits challenging the constitutionality of a law,
an act or a statute must show "not only that the law [or act] is
invalid, but also that [they have] sustained or [are] in immediate
or imminent danger of sustaining some direct injury as a result
of its enforcement, and not merely that [they] suffer thereby in
some indefinite way." 40 They must demonstrate that they have
been, or are about to be, denied some right or privilege to which
they are lawfully entitled, or that they are about to be subjected
to some burdens or penalties by reason of the statute or act
complained of. 41
First, parties suing as taxpayers must specifically prove that they
have sufficient interest in preventing the illegal expenditure of
money raised by taxation. 42 A taxpayer's action may be
properly brought only when there is an exercise by Congress of
its taxing or spending power. 43 In the present case, there is no
allegation, whether express or implied, that taxpayers' money is
being illegally disbursed.
Second, there was no showing in the Petition for Declaratory
Relief that SJS as a political party or its members as registered
voters would be adversely affected by the alleged acts of the
respondents below, if the question at issue was not resolved.
There was no allegation that SJS had suffered or would be
deprived of votes due to the acts imputed to the said
respondents. Neither did it allege that any of its members would
be denied the right of suffrage or the privilege to be voted for a
public office they are seeking.
Finally, the allegedly keen interest of its "thousands of members
who are citizens-taxpayers-registered voters" is too general 44
and beyond the contemplation of the standards set by our
jurisprudence. Not only is the presumed interest impersonal in
character; it is likewise too vague, highly speculative and
uncertain to satisfy the requirement of standing. 45
42

Transcendental Importance
In any event, SJS urges the Court to take cognizance of the
Petition, even sans legal standing, considering that "the issues
raised are of paramount public interest."
In not a few cases, the Court has liberalized the locus standi
requirement when a petition raises an issue of transcendental
significance or paramount importance to the people. 46 Recently,
after holding that the IBP had no locus standi to bring the suit, the
Court in IBP v. Zamora 47 nevertheless entertained the Petition
therein. It noted that "the IBP has advanced constitutional issues
which deserve the attention of this Court in view of their
seriousness, novelty and weight as precedents." 48
Similarly in the instant case, the Court deemed the constitutional
issue raised in the SJS Petition to be of paramount interest to the
Filipino people. The issue did not simply concern a delineation of
the separation between church and state, but ran smack into the
governance of our country. The issue was both transcendental in
importance and novel in nature, since it had never been decided
before.
The Court, thus, called for Oral Argument to determine with
certainty whether it could resolve the constitutional issue
despite the barren allegations in the SJS Petition as well as the
abbreviated proceedings in the court below. Much to its chagrin,
however, counsels for the parties — particularly for Respondent
SJS — made no satisfactory allegations or clarifications that
would supply the deficiencies hereinabove discussed. Hence,
even if the Court would exempt this case from the stringent locus
standi requirement, such heroic effort would be futile because
the transcendental issue cannot be resolved anyway.
Proper Proceedings Before
the Trial Court
To prevent a repetition of this waste of precious judicial time and
effort, and for the guidance of the bench and the bar, the Court
reiterates the elementary procedure 49 that must be followed by
trial courts in the conduct of civil cases. 50
Prefatorily, the trial court may — motu proprio or upon motion
of the defendant — dismiss a complaint 51 (or petition, in a
special civil action) that does not allege the plaintiff's (or
petitioner's) cause or causes of action. 52 A complaint or petition
should contain "a plain, concise and direct statement of the
ultimate facts on which the party pleading relies for his claim or
defense." 53 It should likewise clearly specify the relief sought.
54
Upon the filing of the complaint/petition and the payment of the
requisite legal fees, the clerk of court shall forthwith issue the
corresponding summons to the defendants or the respondents,
with a directive that the defendant answer 55 within 15 days,
unless a different period is fixed by the court. 56 The summons
shall also contain a notice that if such answer is not filed, the
plaintiffs/petitioners shall take a judgment by default and may
be granted the relief applied for. 57 The court, however, may —
upon such terms as may be just — allow an answer to be filed
after the time fixed by the Rules. 58
If the answer sets forth a counterclaim or cross-claim, it must be
answered within ten (10) days from service. 59 A reply may be
filed within ten (10) days from service of the pleading responded
to. 60
When an answer fails to tender an issue or admits the material
allegations of the adverse party's pleading, the court may, on
motion of that party, direct judgment on such pleading (except in
actions for declaration of nullity or annulment of marriage or for
legal separation). 61 Meanwhile, a party seeking to recover upon
a claim, a counterclaim or crossclaim — or to obtain a
declaratory relief — may, at any time after the answer thereto
has been served, move for a summary judgment in its favor. 62
Similarly, a party against whom a claim, a counterclaim or
crossclaim is asserted — or a declaratory relief sought — may, at
any time, move for a summary judgment in its favor. 63 After the
motion is heard, the judgment sought shall be rendered
forthwith if there is a showing that, except as to the amount of
damages, there is no genuine issue as to any material fact; and
that the moving party is entitled to a judgment as a matter of law.
64
Within the time for — but before — filing the answer to the
complaint or petition, the defendant may file a motion to dismiss
based on any of the grounds stated in Section 1 of Rule 16 of the
Rules of Court. During the hearing of the motion, the parties shall
submit their arguments on the questions of law, and their
evidence on the questions of fact. 65 After the hearing, the court
43
may dismiss the action or claim, deny the motion, or order the
amendment of the pleadings. It shall not defer the resolution of
the motion for the reason that the ground relied upon is not
indubitable. In every case, the resolution shall state clearly and
distinctly the reasons therefor. 66
If the motion is denied, the movant may file an answer within the
balance of the period originally prescribed to file an answer, but
not less than five (5) days in any event, computed from the
receipt of the notice of the denial. If the pleading is ordered to be
amended, the defendant shall file an answer within fifteen (15)
days, counted from the service of the amended pleading, unless
the court provides a longer period. 67
After the last pleading has been served and filed, the case shall be
set for pretrial, 68 which is a mandatory proceeding. 69 A
plaintiff's/ petitioner's (or its duly authorized representative's)
non-appearance at the pretrial, if without valid cause, shall result
in the dismissal of the action with prejudice, unless the court
orders otherwise. A similar failure on the part of the defendant
shall be a cause for allowing the plaintiff/petitioner to present
evidence ex parte, and the court to render judgment on the basis
thereof. 70
The parties are required to file their pretrial briefs; failure to do
so shall have the same effect as failure to appear at the pretrial.
71 Upon the termination thereof, the court shall issue an order
reciting in detail the matters taken up at the conference; the
action taken on them, the amendments allowed to the pleadings;
and the agreements or admissions, if any, made by the parties
regarding any of the matters considered. 72 The parties may
further avail themselves of any of the modes of discovery, 73 if
they so wish. ECISAD
Thereafter, the case shall be set for trial, 74 in which the parties
shall adduce their respective evidence in support of their claims
and/or defenses. By their written consent or upon the
application of either party, or on its own motion, the court may
also order any or all of the issues to be referred to a
commissioner, who is to be appointed by it or to be agreed upon
by the parties. 75 The trial or hearing before the commissioner
shall proceed in all respects as it would if held before the court.
76
Upon the completion of such proceedings, the commissioner
shall file with the court a written report on the matters referred
by the parties. 77 The report shall be set for hearing, after which
the court shall issue an order adopting, modifying or rejecting it
in whole or in part; or recommitting it with instructions; or
requiring the parties to present further evidence before the
commissioner or the court. 78
Finally, a judgment or final order determining the merits of the
case shall be rendered. The decision shall be in writing,
personally and directly prepared by the judge, stating clearly and
distinctly the facts and the law on which it is based, signed by the
issuing magistrate, and filed with the clerk of court. 79
Based on these elementary guidelines, let us examine the
proceedings before the trial court in the instant case.
First, with respect to the initiatory pleading of the SJS. Even a
cursory perusal of the Petition immediately reveals its gross
inadequacy. It contained no statement of ultimate facts upon
which the petitioner relied for its claim. Furthermore, it did not
specify the relief it sought from the court, but merely asked it to
answer a hypothetical question.
Relief, as contemplated in a legal action, refers to a specific
coercive measure prayed for as a result of a violation of the
rights of a plaintiff or a petitioner. 80 As already discussed
earlier, the Petition before the trial court had no allegations of
fact 81 or of any specific violation of the petitioner's rights,
which the respondents had a duty to respect. Such deficiency
amounted to a failure to state a cause of action; hence, no
coercive relief could be sought and adjudicated. The Petition
evidently lacked substantive requirements and, we repeat,
should have been dismissed at the outset.
Second, with respect to the trial court proceedings. Within the
period set to file their respective answers to the SJS Petition,
Velarde, Villanueva and Manalo filed Motions to Dismiss;
Cardinal Sin, a Comment; and Soriano, within a priorly granted
extended period, an Answer in which he likewise prayed for the
dismissal of the Petition. 82 SJS filed a Rejoinder to the Motion of
Velarde, who subsequently filed a Sur-Rejoinder. Supposedly,
there were "several scheduled settings, in which the "[c]ourt was
apprised of the respective positions of the parties." 83 The
nature of such settings — whether pretrial or trial hearings —
44
was not disclosed in the records. Before ruling on the Motions to
Dismiss, the trial court issued an Order 84 dated May 8, 2003,
directing the parties to submit their memoranda. Issued shortly
thereafter was another Order 85 dated May 14, 2003, denying all
the Motions to Dismiss.
In the latter Order, the trial court perfunctorily ruled:
"The Court now resolves to deny the Motions to Dismiss, and
after all the memoranda are submitted, then, the case shall be
deemed as submitted for resolution." 86
Apparently, contrary to the requirement of Section 2 of Rule 16
of the Rules of Court, the Motions were not heard. Worse, the
Order purportedly resolving the Motions to Dismiss did not state
any reason at all for their denial, in contravention of Section 3 of
the said Rule 16. There was not even any statement of the
grounds relied upon by the Motions; much less, of the legal
findings and conclusions of the trial court.
Thus, Velarde, Villanueva and Manalo moved for reconsideration.
Pending the resolution of these Motions for Reconsideration,
Villanueva filed a Motion to suspend the filing of the parties'
memoranda. But instead of separately resolving the pending
Motions fairly and squarely, the trial court again transgressed
the Rules of Court when it immediately proceeded to issue its
Decision, even before tackling the issues raised in those Motions.
Furthermore, the RTC issued its "Decision" without allowing the
parties to file their answers. For this reason, there was no joinder
of the issues. If only it had allowed the filing of those answers,
the trial court would have known, as the Oral Argument revealed,
that the petitioner and his co-respondents below had not
committed or threatened to commit the act attributed to them
(endorsing candidates) — the act that was supposedly the
factual basis of the suit.
Parenthetically, the court a quo further failed to give a notice of
the Petition to the OSG, which was entitled to be heard upon
questions involving the constitutionality or validity of statutes
and other measures. 87
Moreover, as will be discussed in more detail, the questioned
Decision of the trial court was utterly wanting in the
requirements prescribed by the Constitution and the Rules of
Court.
All in all, during the loosely abbreviated proceedings of the case,
the trial court indeed acted with inexplicable haste, with total
ignorance of the law — or, worse, in cavalier disregard of the
rules of procedure — and with grave abuse of discretion.
Contrary to the contentions of the trial judge and of SJS,
proceedings for declaratory relief must still follow the process
described above — the petition must state a cause of action; the
proceedings must undergo the procedure outlined in the Rules of
Court; and the decision must adhere to constitutional and legal
requirements.
First Substantive Issue:
Fundamental Requirements
of a Decision
The Constitution commands that "[n]o decision shall be rendered
by any court without expressing therein clearly and distinctly the
facts and the law on which it is based. No petition for review or
motion for reconsideration of a decision of the court shall be
refused due course or denied without stating the basis therefor."
88
Consistent with this constitutional mandate, Section 1 of Rule 36
of the Rules on Civil Procedure similarly provides:
"Sec. 1. Rendition of judgments and final orders. — A judgment or
final order determining the merits of the case shall be in writing
personally and directly prepared by the judge, stating clearly and
distinctly the facts and the law on which it is based, signed by
him and filed with the clerk of court."
In the same vein, Section 2 of Rule 120 of the Rules of Court on
Criminal Procedure reads as follows:
"Sec. 2. Form and contents of judgments. — The judgment must be
written in the official language, personally and directly prepared
by the judge and signed by him and shall contain clearly and
distinctly a statement of the facts proved or admitted by the
accused and the law upon which the judgment is based.
"xxx xxx xxx."
Pursuant to the Constitution, this Court also issued on January
28, 1988, Administrative Circular No. 1, prompting all judges "to
make complete findings of facts in their decisions, and scrutinize
closely the legal aspects of the case in the light of the evidence
presented. They should avoid the tendency to generalize and
45
form conclusions without detailing the facts from which such
conclusions are deduced."
In many cases, 89 this Court has time and time again reminded
"magistrates to heed the demand of Section 14, Article VIII of the
Constitution." The Court, through Chief Justice Hilario G. Davide
Jr. in Yao v. Court of Appeals, 90 discussed at length the
implications of this provision and strongly exhorted thus:
"Faithful adherence to the requirements of Section 14, Article
VIII of the Constitution is indisputably a paramount component
of due process and fair play. It is likewise demanded by the due
process clause of the Constitution. The parties to a litigation
should be informed of how it was decided, with an explanation of
the factual and legal reasons that led to the conclusions of the
court. The court cannot simply say that judgment is rendered in
favor of X and against Y and just leave it at that without any
justification whatsoever for its action. The losing party is entitled
to know why he lost, so he may appeal to the higher court, if
permitted, should he believe that the decision should be
reversed. A decision that does not clearly and distinctly state the
facts and the law on which it is based leaves the parties in the
dark as to how it was reached and is precisely prejudicial to the
losing party, who is unable to pinpoint the possible errors of the
court for review by a higher tribunal. More than that, the
requirement is an assurance to the parties that, in reaching
judgment, the judge did so through the processes of legal
reasoning. It is, thus, a safeguard against the impetuosity of the
judge, preventing him from deciding ipse dixit. Vouchsafed
neither the sword nor the purse by the Constitution but
nonetheless vested with the sovereign prerogative of passing
judgment on the life, liberty or property of his fellowmen, the
judge must ultimately depend on the power of reason for
sustained public confidence in the justness of his decision."
THADEI
In People v. Bugarin, 91 the Court also explained:
"The requirement that the decisions of courts must be in writing
and that they must set forth clearly and distinctly the facts and
the law on which they are based serves many functions. It is
intended, among other things, to inform the parties of the reason
or reasons for the decision so that if any of them appeals, he can
point out to the appellate court the finding of facts or the rulings
on points of law with which he disagrees. More than that, the
requirement is an assurance to the parties that, in reaching
judgment, the judge did so through the processes of legal
reasoning. . . .."
Indeed, elementary due process demands that the parties to a
litigation be given information on how the case was decided, as
well as an explanation of the factual and legal reasons that led to
the conclusions of the court. 92
In Madrid v. Court of Appeals, 93 this Court had instructed
magistrates to exert effort to ensure that their decisions would
present a comprehensive analysis or account of the factual and
legal findings that would substantially address the issues raised
by the parties.
In the present case, it is starkly obvious that the assailed
Decision contains no statement of facts — much less an
assessment or analysis thereof — or of the court's findings as to
the probable facts. The assailed Decision begins with a statement
of the nature of the action and the question or issue presented.
Then follows a brief explanation of the constitutional provisions
involved, and what the Petition sought to achieve. Thereafter, the
ensuing procedural incidents before the trial court are tracked.
The Decision proceeds to a full-length opinion on the nature and
the extent of the separation of church and state. Without
expressly stating the final conclusion she has reached or
specifying the relief granted or denied, the trial judge ends her
"Decision" with the clause "SO ORDERED."
What were the antecedents that necessitated the filing of the
Petition? What exactly were the distinct facts that gave rise to the
question sought to be resolved by SJS? More important, what
were the factual findings and analysis on which the trial court
based its legal findings and conclusions? None were stated or
implied. Indeed, the RTC's Decision cannot be upheld for its
failure to express clearly and distinctly the facts on which it was
based. Thus, the trial court clearly transgressed the
constitutional directive.
The significance of factual findings lies in the value of the
decision as a precedent. How can it be so if one cannot apply the
ruling to similar circumstances, simply because such
circumstances are unknown? Otherwise stated, how will the
46
ruling be applied in the future, if there is no point of factual
comparison?
Moreover, the court a quo did not include a resolutory or
dispositive portion in its so-called Decision. The importance of
such portion was explained in the early case Manalang v. Tuason
de Rickards, 94 from which we quote:
"The resolution of the Court on a given issue as embodied in the
dispositive part of the decision or order is the investitive or
controlling factor that determines and settles the rights of the
parties and the questions presented therein, notwithstanding the
existence of statements or declaration in the body of said order
that may be confusing."
The assailed Decision in the present case leaves us in the dark as
to its final resolution of the Petition. To recall, the original
Petition was for declaratory relief. So, what relief did the trial
court grant or deny? What rights of the parties did it conclusively
declare? Its final statement says, "SO ORDERED." But what
exactly did the court order? It had the temerity to label its
issuance a "Decision," when nothing was in fact decided.
Respondent SJS insists that the dispositive portion can be found
in the body of the assailed Decision. It claims that the issue is
disposed of and the Petition finally resolved by the statement of
the trial court found on page 10 of its 14-page Decision, which
reads: "Endorsement of specific candidates in an election to any
public office is a clear violation of the separation clause." 95
We cannot agree.
In Magdalena Estate, Inc. v. Caluag, 96 the obligation of the party
imposed by the Court was allegedly contained in the text of the
original Decision. The Court, however, held:
". . . The quoted finding of the lower court cannot supply
deficiencies in the dispositive portion. It is a mere opinion of the
court and the rule is settled that where there is a conflict
between the dispositive part and the opinion, the former must
prevail over the latter on the theory that the dispositive portion
is the final order while the opinion is merely a statement
ordering nothing." (Italics in the original)
Thus, the dispositive portion cannot be deemed to be the
statement quoted by SJS and embedded in the last paragraph of
page 10 of the assailed 14-page Decision. If at all, that statement
is merely an answer to a hypothetical legal question and just a
part of the opinion of the trial court. It does not conclusively
declare the rights (or obligations) of the parties to the Petition.
Neither does it grant any — much less, the proper — relief under
the circumstances, as required of a dispositive portion.
Failure to comply with the constitutional injunction is a grave
abuse of discretion amounting to lack or excess of jurisdiction.
Decisions or orders issued in careless disregard of the
constitutional mandate are a patent nullity and must be struck
down as void. 97
Parts of a Decision
In general, the essential parts of a good decision consist of the
following: (1) statement of the case; (2) statement of facts; (3)
issues or assignment of errors; (4) court ruling, in which each
issue is, as a rule, separately considered and resolved; and,
finally, (5) dispositive portion. The ponente may also opt to
include an introduction or a prologue as well as an epilogue,
especially in cases in which controversial or novel issues are
involved. 98
An introduction may consist of a concise but comprehensive
statement of the principal factual or legal issue/s of the case. In
some cases — particularly those concerning public interest; or
involving complicated commercial, scientific, technical or
otherwise rare subject matters — a longer introduction or
prologue may serve to acquaint readers with the specific nature
of the controversy and the issues involved. An epilogue may be a
summation of the important principles applied to the resolution
of the issues of paramount public interest or significance. It may
also lay down an enduring philosophy of law or guiding
principle.
Let us now, again for the guidance of the bench and the bar,
discuss the essential parts of a good decision.
1. Statement of the Case
The Statement of the Case consists of a legal definition of the
nature of the action. At the first instance, this part states whether
the action is a civil case for collection, ejectment, quieting of title,
foreclosure of mortgage, and so on; or, if it is a criminal case, this
part describes the specific charge — quoted usually from the
accusatory portion of the information — and the plea of the
accused. Also mentioned here are whether the case is being
47
decided on appeal or on a petition for certiorari, the court of
origin, the case number in the trial court, and the dispositive
portion of the assailed decision.
In a criminal case, the verbatim reproduction of the criminal
information serves as a guide in determining the nature and the
gravity of the offense for which the accused may be found
culpable. As a rule, the accused cannot be convicted of a crime
different from or graver than that charged.
Also, quoting verbatim the text of the information is especially
important when there is a question on the sufficiency of the
charge, or on whether qualifying and modifying circumstances
have been adequately alleged therein.
To ensure that due process is accorded, it is important to give a
short description of the proceedings regarding the plea of the
accused. Absence of an arraignment, or a serious irregularity
therein, may render the judgment void, and further
consideration by the appellate court would be futile. In some
instances, especially in appealed cases, it would also be useful to
mention the fact of the appellants' detention, in order to dispose
of the preliminary query — whether or not they have abandoned
their appeal by absconding or jumping bail. ADEHTS
Mentioning the court of origin and the case number originally
assigned helps in facilitating the consolidation of the records of
the case in both the trial and the appellate courts, after entry of
final judgment.
Finally, the reproduction of the decretal portion of the assailed
decision informs the reader of how the appealed case was
decided by the court a quo.
2. Statement of Facts
There are different ways of relating the facts of the case. First,
under the objective or reportorial method, the judge summarizes
— without comment — the testimony of each witness and the
contents of each exhibit. Second, under the synthesis method, the
factual theory of the plaintiff or prosecution and then that of the
defendant or defense is summarized according to the judge's
best light. Third, in the subjective method, the version of the facts
accepted by the judge is simply narrated without explaining
what the parties' versions are. Finally, through a combination of
objective and subjective means, the testimony of each witness is
reported and the judge then formulates his or her own version of
the facts.
In criminal cases, it is better to present both the version of the
prosecution and that of the defense, in the interest of fairness
and due process. A detailed evaluation of the contentions of the
parties must follow. The resolution of most criminal cases, unlike
civil and other cases, depends to a large extent on the factual
issues and the appreciation of the evidence. The plausibility or
the implausibility of each version can sometimes be initially
drawn from a reading of the facts. Thereafter, the bases of the
court in arriving at its findings and conclusions should be
explained.
On appeal, the fact that the assailed decision of the lower court
fully, intelligently and correctly resolved all factual and legal
issues involved may partly explain why the reviewing court finds
no reason to reverse the findings and conclusions of the former.
Conversely, the lower court's patent misappreciation of the facts
or misapplication of the law would aid in a better understanding
of why its ruling is reversed or modified.
In appealed civil cases, the opposing sets of facts no longer need
to be presented. Issues for resolution usually involve questions
of law, grave abuse of discretion, or want of jurisdiction; hence,
the facts of the case are often undisputed by the parties. With few
exceptions, factual issues are not entertained in non-criminal
cases. Consequently, the narration of facts by the lower court, if
exhaustive and clear, may be reproduced; otherwise, the
material factual antecedents should be restated in the words of
the reviewing magistrate.
In addition, the reasoning of the lower court or body whose
decision is under review should be laid out, in order that the
parties may clearly understand why the lower court ruled in a
certain way, and why the reviewing court either finds no reason
to reverse it or concludes otherwise.
3. Issues or Assignment of Errors
Both factual and legal issues should be stated. On appeal, the
assignment of errors, as mentioned in the appellant's brief, may
be reproduced in toto and tackled seriatim, so as to avoid
motions for reconsideration of the final decision on the ground
that the court failed to consider all assigned errors that could
affect the outcome of the case. But when the appellant presents
48
repetitive issues or when the assigned errors do not strike at the
main issue, these may be restated in clearer and more coherent
terms.
Though not specifically questioned by the parties, additional
issues may also be included, if deemed important for substantial
justice to be rendered. Note that appealed criminal cases are
given de novo review, in contrast to noncriminal cases in which
the reviewing court is generally limited to issues specifically
raised in the appeal. The few exceptions are errors of
jurisdiction; questions not raised but necessary in arriving at a
just decision on the case; or unassigned errors that are closely
related to those properly assigned, or upon which depends the
determination of the question properly raised.
4. The Court's Ruling
This part contains a full discussion of the specific errors or issues
raised in the complaint, petition or appeal, as the case may be; as
well as of other issues the court deems essential to a just
disposition of the case. Where there are several issues, each one
of them should be separately addressed, as much as practicable.
The respective contentions of the parties should also be
mentioned here. When procedural questions are raised in
addition to substantive ones, it is better to resolve the former
preliminarily.
5. The Disposition or Dispositive Portion
In a criminal case, the disposition should include a finding of
innocence or guilt, the specific crime committed, the penalty
imposed, the participation of the accused, the modifying
circumstances if any, and the civil liability and costs. In case an
acquittal is decreed, the court must order the immediate release
of the accused, if detained, (unless they are being held for
another cause) and order the director of the Bureau of
Corrections (or wherever the accused is detained) to report,
within a maximum of ten (10) days from notice, the exact date
when the accused were set free.
In a civil case as well as in a special civil action, the disposition
should state whether the complaint or petition is granted or
denied, the specific relief granted, and the costs. The following
test of completeness may be applied. First, the parties should
know their rights and obligations. Second, they should know how
to execute the decision under alternative contingencies. Third,
there should be no need for further proceedings to dispose of the
issues. Fourth, the case should be terminated by according the
proper relief. The "proper relief" usually depends upon what the
parties seek in their pleadings. It may declare their rights and
duties, command the performance of positive prestations, or
order them to abstain from specific acts. The disposition must
also adjudicate costs.
The foregoing parts need not always be discussed in sequence.
But they should all be present and plainly identifiable in the
decision. Depending on the writer's character, genre and style,
the language should be fresh and free-flowing, not necessarily
stereotyped or in a fixed form; much less highfalutin, hackneyed
and pretentious. At all times, however, the decision must be
clear, concise, complete and correct.
Second Substantive Issue:
Religious Leaders' Endorsement
of Candidates for Public Office
The basic question posed in the SJS Petition — WHETHER
ENDORSEMENTS OF CANDIDACIES BY RELIGIOUS LEADERS IS
UNCONSTITUTIONAL — undoubtedly deserves serious
consideration. As stated earlier, the Court deems this
constitutional issue to be of paramount interest to the Filipino
citizenry, for it concerns the governance of our country and its
people. Thus, despite the obvious procedural transgressions by
both SJS and the trial court, this Court still called for Oral
Argument, so as not to leave any doubt that there might be room
to entertain and dispose of the SJS Petition on the merits.
Counsel for SJS has utterly failed, however, to convince the Court
that there are enough factual and legal bases to resolve the
paramount issue. On the other hand, the Office of the Solicitor
General has sided with petitioner insofar as there are no facts
supporting the SJS Petition and the assailed Decision.
We reiterate that the said Petition failed to state directly the
ultimate facts that it relied upon for its claim. During the Oral
Argument, counsel for SJS candidly admitted that there were no
factual allegations in its Petition for Declaratory Relief. Neither
were there factual findings in the assailed Decision. At best, SJS
merely asked the trial court to answer a hypothetical question. In
effect, it merely sought an advisory opinion, the rendition of
49
which was beyond the court's constitutional mandate and
jurisdiction. 99
Indeed, the assailed Decision was rendered in clear violation of
the Constitution, because it made no findings of facts and final
disposition. Hence, it is void and deemed legally inexistent.
Consequently, there is nothing for this Court to review, affirm,
reverse or even just modify.
Regrettably, it is not legally possible for the Court to take up, on
the merits, the paramount question involving a constitutional
principle. It is a time-honored rule that "the constitutionality of a
statute [or act] will be passed upon only if, and to the extent that,
it is directly and necessarily involved in a justiciable controversy
and is essential to the protection of the rights of the parties
concerned." 100
WHEREFORE, the Petition for Review of Brother Mike Velarde is
GRANTED. The assailed June 12, 2003 Decision and July 29, 2003
Order of the Regional Trial Court of Manila (Branch 49) are
hereby DECLARED NULL AND VOID and thus SET ASIDE. The SJS
Petition for Declaratory Relief is DISMISSED for failure to state a
cause of action.
Let a copy of this Decision be furnished the Office of the Court
Administrator to evaluate and recommend whether the trial
judge may, after observing due process, be held administratively
liable for rendering a decision violative of the Constitution, the
Rules of Court and relevant circulars of this Court. No costs.
SO ORDERED.
Davide, Jr., C .J ., Puno, Quisumbing, Sandoval-Gutierrez, Carpio,
Austria-Martinez, Carpio Morales, Callejo, Sr., Azcuna and Tinga, JJ
., concur.
Vitug, J ., concurs in the result.
Ynares-Santiago, J ., took no part.
Corona, J ., is on leave.
||| (Velarde v. Social Justice Society, G.R. No. 159357, [April 28,
2004], 472 PHIL 285-327)
EN BANC
[G.R. No. 204603. September 24, 2013.]
REPUBLIC OF THE PHILIPPINES, represented by THE
EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE
SECRETARY OF FOREIGN AFFAIRS, THE SECRETARY OF
NATIONAL DEFENSE, THE SECRETARY OF THE INTERIOR
AND LOCAL GOVERNMENT, THE SECRETARY OF FINANCE,
THE NATIONAL SECURITY ADVISER, THE SECRETARY OF
BUDGET AND MANAGEMENT, THE TREASURER OF THE
PHILIPPINES, THE CHIEF OF STAFF OF THE ARMED FORCES
OF THE PHILIPPINES, and THE CHIEF OF THE PHILIPPINE
NATIONAL POLICE, petitioners, vs. HERMINIO HARRY
ROQUE, MORO CHRISTIAN PEOPLE'S ALLIANCE, FR. JOE
DIZON, RODINIE SORIANO, STEPHANIE ABIERA, MARIA
LOURDES ALCAIN, VOLTAIRE ALFEREZ, CZARINA MAY
ALTEZ, SHERYL BALOT, RENIZZA BATACAN, EDAN MARRI
CAÑETE, LEANA CARAMOAN, ALDWIN CAMANCE, RENE
DELORINO, PAULYN MAY DUMAN, RODRIGO FAJARDO III,
ANNA MARIE GO, ANNA ARMINDA JIMENEZ, MARY ANN LEE,
LUISA MANALAYSAY, MIGUEL MUSNGI, MICHAEL OCAMPO,
NORMAN ROLAND OCANA III, WILLIAM RAGAMAT, MARICAR
RAMOS, CHERRY LOU REYES, MELISSA ANN SICAT, CRISTINE
MAE TABING, VANESSA TORNO, and HON. JUDGE ELEUTERIO
L. BATHAN, as Presiding Judge of Regional Trial Court,
Quezon City, Branch 92, respondents.
RESOLUTION
PERLAS-BERNABE, J p:
Assailed in this petition for certiorari 1 are the April 23, 2012 2
and July 31, 2012 3 Orders of the Regional Trial Court of Quezon
City, Branch 92 (RTC) in Special Civil Action (SCA) No. Q-07-
60778, denying petitioners' motion to dismiss (subject motion to
dismiss) based on the following grounds: (a) that the Court had
yet to pass upon the constitutionality of Republic Act No. (RA)
9372, 4 otherwise known as the "Human Security Act of 2007," in
the consolidated cases of Southern Hemisphere Engagement
Network, Inc. v. Anti-Terrorism Council 5 (Southern Hemisphere);
and (b) that private respondents' petition for declaratory relief
was proper.
50
The Facts
On July 17, 2007, private respondents filed a Petition 6 for
declaratory relief before the RTC, assailing the constitutionality
of the following sections of RA 9372: (a) Section 3, 7 for being
void for vagueness; 8 (b) Section 7, 9 for violating the right to
privacy of communication and due process and the privileged
nature of priest-penitent relationships; 10 (c) Section 18, 11 for
violating due process, the prohibition against ex post facto laws
or bills of attainder, the Universal Declaration of Human Rights,
and the International Covenant on Civil and Political Rights, as
well as for contradicting Article 125 12 of the Revised Penal
Code, as amended; 13 (d) Section 26, 14 for violating the right to
travel; 15 and (e) Section 27, 16 for violating the prohibition
against unreasonable searches and seizures. 17 EaIDAT
Petitioners moved to suspend the proceedings, 18 averring that
certain petitions (SC petitions) raising the issue of RA 9372's
constitutionality have been lodged before the Court. 19 The said
motion was granted in an Order dated October 19, 2007. 20
On October 5, 2010, the Court promulgated its Decision 21 in the
Southern Hemisphere cases and thereby dismissed the SC
petitions.
On February 27, 2012, petitioners filed the subject motion to
dismiss, 22 contending that private respondents failed to satisfy
the requisites for declaratory relief. Likewise, they averred that
the constitutionality of RA 9372 had already been upheld by the
Court in the Southern Hemisphere cases.
In their Comment/Opposition, 23 private respondents countered
that: (a) the Court did not resolve the issue of RA 9372's
constitutionality in Southern Hemisphere as the SC petitions were
dismissed based purely on technical grounds; and (b) the
requisites for declaratory relief were met.
The RTC Ruling
On April 23, 2012, the RTC issued an Order 24 which denied the
subject motion to dismiss, finding that the Court did not pass
upon the constitutionality of RA 9372 and that private
respondents' petition for declaratory relief was properly filed.
Petitioners moved for reconsideration 25 which was, however,
denied by the RTC in an Order dated July 31, 2012. 26 The RTC
observed that private respondents have personal and substantial
interests in the case and that it would be illogical to await the
adverse consequences of the aforesaid law's implementation
considering that the case is of paramount impact to the Filipino
people. 27
Hence, the instant petition. CSIDTc
The Issues Before the Court
The present controversy revolves around the issue of whether or
not the RTC gravely abused its discretion when it denied the
subject motion to dismiss.
Asserting the affirmative, petitioners argue that private
respondents failed to satisfy the requirements for declaratory
relief and that the Court had already sustained with finality the
constitutionality of RA 9372.
On the contrary, private respondents maintain that the
requirements for declaratory relief have been satisfied and that
the Court has yet to resolve the constitutionality of RA 9372,
negating any grave abuse of discretion on the RTC's part.
The Court's Ruling
The petition is meritorious.
An act of a court or tribunal can only be considered as with grave
abuse of discretion when such act is done in a capricious or
whimsical exercise of judgment as is equivalent to lack of
jurisdiction. 28 It is well-settled that the abuse of discretion to be
qualified as "grave" must be so patent or gross as to constitute an
evasion of a positive duty or a virtual refusal to perform the duty
or to act at all in contemplation of law. 29 In this relation, case
law states that not every error in the proceedings, or every
erroneous conclusion of law or fact, constitutes grave abuse of
discretion. 30 The degree of gravity, as above-described, must be
met. SDIaCT
Applying these principles, the Court observes that while no grave
abuse of discretion could be ascribed on the part of the RTC
when it found that the Court did not pass upon the
constitutionality of RA 9372 in the Southern Hemisphere cases, it,
however, exceeded its jurisdiction when it ruled that private
respondents' petition had met all the requisites for an action for
declaratory relief. Consequently, its denial of the subject motion
to dismiss was altogether improper.
To elucidate, it is clear that the Court, in Southern Hemisphere,
did not make any definitive ruling on the constitutionality of RA
9372. The certiorari petitions in those consolidated cases were
51
dismissed based solely on procedural grounds, namely: (a) the
remedy of certiorari was improper; 31 (b) petitioners therein
lack locus standi; 32 and (c) petitioners therein failed to present
an actual case or controversy. 33 Therefore, there was no grave
abuse of discretion.
The same conclusion cannot, however, be reached with regard to
the RTC's ruling on the sufficiency of private respondents'
petition for declaratory relief.
Case law states that the following are the requisites for an action
for declaratory relief: first, the subject matter of the controversy
must be a deed, will, contract or other written instrument,
statute, executive order or regulation, or ordinance; second, the
terms of said documents and the validity thereof are doubtful
and require judicial construction; third, there must have been no
breach of the documents in question; fourth, there must be an
actual justiciable controversy or the "ripening seeds" of one
between persons whose interests are adverse; fifth, the issue
must be ripe for judicial determination; and sixth, adequate relief
is not available through other means or other forms of action or
proceeding. 34 SaETCI
Based on a judicious review of the records, the Court observes
that while the first, 35 second, 36 and third 37 requirements
appear to exist in this case, the fourth, fifth, and sixth
requirements, however, remain wanting.
As to the fourth requisite, there is serious doubt that an actual
justiciable controversy or the "ripening seeds" of one exists in
this case.
Pertinently, a justiciable controversy refers to an existing case or
controversy that is appropriate or ripe for judicial
determination, not one that is conjectural or merely anticipatory.
38 Corollary thereto, by "ripening seeds" it is meant, not that
sufficient accrued facts may be dispensed with, but that a dispute
may be tried at its inception before it has accumulated the
asperity, distemper, animosity, passion, and violence of a full
blown battle that looms ahead. The concept describes a state of
facts indicating imminent and inevitable litigation provided that
the issue is not settled and stabilized by tranquilizing
declaration. 39 cACEaI
A perusal of private respondents' petition for declaratory relief
would show that they have failed to demonstrate how they are
left to sustain or are in immediate danger to sustain some direct
injury as a result of the enforcement of the assailed provisions of
RA 9372. Not far removed from the factual milieu in the Southern
Hemisphere cases, private respondents only assert general
interests as citizens, and taxpayers and infractions which the
government could prospectively commit if the enforcement of
the said law would remain untrammelled. As their petition
would disclose, private respondents' fear of prosecution was
solely based on remarks of certain government officials which
were addressed to the general public. 40 They, however, failed to
show how these remarks tended towards any prosecutorial or
governmental action geared towards the implementation of RA
9372 against them. In other words, there was no particular, real
or imminent threat to any of them. As held in Southern
Hemisphere:
Without any justiciable controversy, the petitions have become
pleas for declaratory relief, over which the Court has no original
jurisdiction. Then again, declaratory actions characterized by
"double contingency," where both the activity the petitioners
intend to undertake and the anticipated reaction to it of a public
official are merely theorized, lie beyond judicial review for lack
of ripeness.
The possibility of abuse in the implementation of RA 9372 does
not avail to take the present petitions out of the realm of the
surreal and merely imagined. Such possibility is not peculiar to
RA 9372 since the exercise of any power granted by law may be
abused. Allegations of abuse must be anchored on real events
before courts may step in to settle actual controversies involving
rights which are legally demandable and enforceable. 41
(Emphasis supplied; citations omitted)
Thus, in the same light that the Court dismissed the SC petitions
in the Southern Hemisphere cases on the basis of, among others,
lack of actual justiciable controversy (or the ripening seeds of
one), the RTC should have dismissed private respondents'
petition for declaratory relief all the same. cDTaSH
It is well to note that private respondents also lack the required
locus standi to mount their constitutional challenge against the
implementation of the above-stated provisions of RA 9372 since
they have not shown any direct and personal interest in the case.
42 While it has been previously held that transcendental public
52
importance dispenses with the requirement that the petitioner
has experienced or is in actual danger of suffering direct and
personal injury, 43 it must be stressed that cases involving the
constitutionality of penal legislation belong to an altogether
different genus of constitutional litigation. 44 Towards this end,
compelling State and societal interests in the proscription of
harmful conduct necessitate a closer judicial scrutiny of locus
standi, 45 as in this case. To rule otherwise, would be to corrupt
the settled doctrine of locus standi, as every worthy cause is an
interest shared by the general public. 46
As to the fifth requisite for an action for declaratory relief,
neither can it be inferred that the controversy at hand is ripe for
adjudication since the possibility of abuse, based on the above-
discussed allegations in private respondents' petition, remain
highly-speculative and merely theorized. It is well-settled that a
question is ripe for adjudication when the act being challenged
has had a direct adverse effect on the individual challenging it. 47
This private respondents failed to demonstrate in the case at bar.
Finally, as regards the sixth requisite, the Court finds it irrelevant
to proceed with a discussion on the availability of adequate
reliefs since no impending threat or injury to the private
respondents exists in the first place.
All told, in view of the absence of the fourth and fifth requisites
for an action for declaratory relief, as well as the irrelevance of
the sixth requisite, private respondents' petition for declaratory
relief should have been dismissed. Thus, by giving due course to
the same, it cannot be gainsaid that the RTC gravely abused its
discretion. TaCIDS
WHEREFORE, the petition is GRANTED. Accordingly, the April
23, 2012 and July 31, 2012 Orders of the Regional Trial Court of
Quezon City, Branch 92 in SCA No. Q-07-60778 are REVERSED
and SET ASIDE and the petition for declaratory relief before the
said court is hereby DISMISSED.
SO ORDERED.
Sereno, C.J., Carpio, Velasco, Jr., Leonardo-de Castro, Del Castillo,
Abad, Perez, Reyes and Leonen, JJ., concur.
Brion and Villarama, Jr., JJ., are on leave.
Peralta, Bersamin and Mendoza, JJ., are on official leave.
||| (Republic v. Roque, G.R. No. 204603, [September 24, 2013], 718
PHIL 294-308)
THIRD DIVISION
[G.R. No. 144101. September 16, 2005.]
ANTONIO P. TAMBUNTING, JR. and COMMERCIAL HOUSE OF
FINANCE, INC., petitioners, vs. SPOUSES EMILIO SUMABAT
and ESPERANZA BAELLO, respondents.
Soo Gutierrez Leogardo & Lee for respondents.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; DECLARATORY
RELIEF; A COURT HAS NO MORE JURISDICTION OVER AN
ACTION FOR DECLARATORY RELIEF IF THE STATUTE, DEED,
CONTRACT, ETC., SUBJECT THEREOF, HAS ALREADY BEEN
INFRINGED OR TRANSGRESSED BEFORE THE INSTITUTION OF
THE ACTION. — An action for declaratory relief should be filed
by a person interested under a deed, will, contract or other
written instrument, and whose rights are affected by a statute,
executive order, regulation or ordinance before breach or
violation thereof. The purpose of the action is to secure an
authoritative statement of the rights and obligations of the
parties under a statute, deed, contract, etc. for their guidance in
its enforcement or compliance and not to settle issues arising
from its alleged breach. It may be entertained only before the
breach or violation of the statute, deed, contract, etc. to which it
refers. Where the law or contract has already been contravened
prior to the filing of an action for declaratory relief, the court can
no longer assume jurisdiction over the action. In other words, a
court has no more jurisdiction over an action for declaratory
relief if its subject, i.e., the statute, deed, contract, etc., has
already been infringed or transgressed before the institution of
the action. Under such circumstances, inasmuch as a cause of
action has already accrued in favor of one or the other party,
there is nothing more for the court to explain or clarify short of a
judgment or final order.
2. ID.; ID.; ID.; ID.; ABSENT JURISDICTION, THE TRIAL COURT'S
DECISION OVER THE ACTION FOR DECLARATORY RELIEF IS
VOID AND WITHOUT LEGAL EFFECT; CASE AT BAR. — Here, an
infraction of the mortgage terms had already taken place before
the filing of Civil Case No. C-7496. Thus, the CFI lacked
53
jurisdiction when it took cognizance of the case in 1979. And in
the absence of jurisdiction, its decision was void and without
legal effect. As this Court held in Arevalo v. Benedicto:
Furthermore, the want of jurisdiction by a court over the subject-
matter renders its judgment void and a mere nullity, and
considering that a void judgment is in legal effect no judgment,
by which no rights are divested, from which no rights can be
obtained, which neither binds nor bars any one, and under which
all acts performed and all claims flowing out of are void, and
considering further, that the decision, for want of jurisdiction of
the court, is not a decision in contemplation of law, and, hence,
can never become executory, it follows that such a void judgment
cannot constitute a bar to another case by reason of res judicata.
3. CIVIL LAW; PRESCRIPTION; AN ACTION TO ENFORCE A
RIGHT ARISING FROM A MORTGAGE SHOULD BE ENFORCED
WITHIN TEN YEARS FROM THE TIME THE RIGHT OF ACTION
ACCRUES; CASE AT BAR. — Article 1142 of the Civil Code is
clear. A mortgage action prescribes after ten years. An action to
enforce a right arising from a mortgage should be enforced
within ten years from the time the right of action accrues.
Otherwise, it will be barred by prescription and the mortgage
creditor will lose his rights under the mortgage. Here,
petitioners' right of action accrued in May 1977 when
respondents defaulted in their obligation to pay their loan
amortizations. It was from that time that the ten-year period to
enforce the right under the mortgage started to run. The period
was interrupted when respondents filed Civil Case No. C-6329
sometime after May 1977 and the CFI restrained the intended
foreclosure of the property. However, the period commenced to
run again on November 9, 1977 when the case was dismissed.
4. ID.; ID.; ID.; FILING OF AN ACTION FOR DECLARATORY
RELIEF WILL NOT INTERRUPT THE RUNNING OF THE TEN-
YEAR PRESCRIPTIVE PERIOD WHERE THE COURT LACKS
JURISDICTION OVER THE ACTION. — The respondents'
institution of Civil Case No. C-7496 in the CFI on March 16, 1979
did not interrupt the running of the ten-year prescriptive period
because, as discussed above, the court lacked jurisdiction over
the action for declaratory relief. All proceedings therein were
without legal effect. Thus, petitioners could have enforced their
right under the mortgage, including its foreclosure, only until
November 7, 1987, the tenth year from the dismissal of Civil Case
No. C-6329. Thereafter, their right to do so was already barred by
prescription. The foreclosure held on February 8, 1995 was
therefore some seven years too late. The same thing can be said
about the public auction held on March 27, 1995, the
consolidation of title in CHFI's favor and the issuance of TCT No.
310191 in its name. They were all void and did not exist in the
eyes of the law.
DECISION
CORONA, J p:
This petition for review on certiorari under Rule 45 of the Rules
of Court assails the February 11, 2000 decision of the Regional
Trial Court (RTC) of Caloocan City, Branch 120, in Civil Case No.
C-16822.
This case involves a dispute over a parcel of land situated in
Caloocan City covered by TCT No. (87655) 18837. It was
previously registered in the names of respondents, spouses
Emilio Sumabat and Esperanza Baello. On May 3, 1973,
respondents mortgaged it to petitioner Antonio Tambunting, Jr.
to secure the payment of a P7,727.95 loan. In August 1976,
respondents were informed that their indebtedness had
ballooned to P15,000 for their failure to pay the monthly
amortizations. In May 1977, because respondents defaulted in
their obligation, petitioner Commercial House of Finance, Inc.
(CHFI), as assignee of the mortgage, initiated foreclosure
proceedings on the mortgaged property but the same did not
push through. It was restrained by the then Court of First
Instance (CFI) of Caloocan City, Branch 33 (now RTC Branch
123) in Civil Case No. C-6329, a complaint for injunction filed by
respondents against petitioners. However, the case was
subsequently dismissed for failure of the parties to appear at the
hearing on November 9, 1977.
On March 16, 1979, respondents filed an action for declaratory
relief with the CFI of Caloocan City, Branch 33, seeking a
declaration of the extent of their actual indebtedness. It was
docketed as Civil Case No. C-7496. Petitioners were declared in
default for failure to file an answer within the reglementary
period. They moved for the dismissal of the action on the ground
that its subject, the mortgage deed, had already been breached
prior to the filing of the action. The motion was denied for having
54
been filed out of time and petitioners had already been declared
in default.
On January 8, 1981, the CFI rendered its decision. It fixed
respondents' liability at P15,743.83 and authorized them to
consign the amount to the court for proper disposition. In
compliance with the decision, respondents consigned the
required amount on January 9, 1981.
In March 1995, respondents received a notice of sheriff’s sale
indicating that the mortgage had been foreclosed by CHFI on
February 8, 1995 and that an extrajudicial sale of the property
would be held on March 27, 1995.
On March 27, 1995, respondents instituted Civil Case No. C-
16822, a petition for preliminary injunction, damages and
cancellation of annotation of encumbrance with prayer for the
issuance of a temporary restraining order, with the RTC of
Caloocan City, Branch 120. However, the public auction
scheduled on that same day proceeded and the property was
sold to CHFI as the highest bidder. Respondents failed to redeem
the property during the redemption period. Hence, title to the
property was consolidated in favor of CHFI and a new certificate
of title (TCT No. 310191) was issued in its name. In view of these
developments, respondents amended their complaint to an
action for nullification of foreclosure, sheriff's sale and
consolidation of title, reconveyance and damages.
On February 11, 2000, the RTC issued the assailed decision. It
ruled that the 1981 CFI decision in Civil Case No. C-7496 (fixing
respondents' liability at P15,743.83 and authorizing
consignation) had long attained finality. The mortgage was
extinguished when respondents paid their indebtedness by
consigning the amount in court. Moreover, the ten-year period
within which petitioners should have foreclosed the property
was already barred by prescription. They abused their right to
foreclose the property and exercised it in bad faith. As a
consequence, the trial court nullified the foreclosure and
extrajudicial sale of the property, as well as the consolidation of
title in CHFI's name in 1995. It then ordered the register of deeds
of Caloocan City to cancel TCT No. 310191 and to reconvey the
property to respondents. It also held petitioners liable for moral
damages, exemplary damages and attorney's fees.
Petitioners moved for a reconsideration of the trial court's
decision but it was denied. Hence, this petition. cICHTD
Petitioners claim that the trial court erred when it affirmed the
validity of the consignation. They insist that the CFI was barred
from taking cognizance of the action for declaratory relief since,
petitioners being already in default in their loan amortizations,
there existed a violation of the mortgage deed even before the
institution of the action. Hence, the CFI could not have rendered
a valid judgment in Civil Case No. C-7496 and the consignation
made pursuant to a void judgment was likewise void.
Respondents also fault the trial court for holding that their right
to foreclose the property had already prescribed.
True, the trial court erred when it ruled that the 1981 CFI
decision in Civil Case No. C-7496 was already final and executory.
An action for declaratory relief should be filed by a person
interested under a deed, will, contract or other written
instrument, and whose rights are affected by a statute, executive
order, regulation or ordinance before breach or violation thereof.
1 The purpose of the action is to secure an authoritative
statement of the rights and obligations of the parties under a
statute, deed, contract, etc. for their guidance in its enforcement
or compliance and not to settle issues arising from its alleged
breach. 2 It may be entertained only before the breach or
violation of the statute, deed, contract, etc. to which it refers. 3
Where the law or contract has already been contravened prior to
the filing of an action for declaratory relief, the court can no
longer assume jurisdiction over the action. 4 In other words, a
court has no more jurisdiction over an action for declaratory
relief if its subject, i.e., the statute, deed, contract, etc., has already
been infringed or transgressed before the institution of the
action. Under such circumstances, inasmuch as a cause of action
has already accrued in favor of one or the other party, there is
nothing more for the court to explain or clarify short of a
judgment or final order.
Here, an infraction of the mortgage terms had already taken
place before the filing of Civil Case No. C-7496. Thus, the CFI
lacked jurisdiction when it took cognizance of the case in 1979.
And in the absence of jurisdiction, its decision was void and
without legal effect. As this Court held in Arevalo v. Benedicto: 5
55
Furthermore, the want of jurisdiction by a court over the subject-
matter renders its judgment void and a mere nullity, and
considering that a void judgment is in legal effect no judgment,
by which no rights are divested, from which no rights can be
obtained, which neither binds nor bars any one, and under which
all acts performed and all claims flowing out of are void, and
considering further, that the decision, for want of jurisdiction of
the court, is not a decision in contemplation of law, and, hence,
can never become executory, it follows that such a void judgment
cannot constitute a bar to another case by reason of res judicata.
Nonetheless, the petition must fail.
Article 1142 of the Civil Code is clear. A mortgage action
prescribes after ten years.
An action to enforce a right arising from a mortgage should be
enforced within ten years from the time the right of action
accrues. 6 Otherwise, it will be barred by prescription and the
mortgage creditor will lose his rights under the mortgage.
Here, petitioners' right of action accrued in May 1977 when
respondents defaulted in their obligation to pay their loan
amortizations. It was from that time that the ten-year period to
enforce the right under the mortgage started to run. The period
was interrupted when respondents filed Civil Case No. C-6329
sometime after May 1977 and the CFI restrained the intended
foreclosure of the property. However, the period commenced to
run again on November 9, 1977 when the case was dismissed.
The respondents' institution of Civil Case No. C-7496 in the CFI
on March 16, 1979 did not interrupt the running of the ten-year
prescriptive period because, as discussed above, the court lacked
jurisdiction over the action for declaratory relief. All proceedings
therein were without legal effect. Thus, petitioners could have
enforced their right under the mortgage, including its
foreclosure, only until November 7, 1987, the tenth year from the
dismissal of Civil Case No. C-6329. Thereafter, their right to do so
was already barred by prescription.
The foreclosure held on February 8, 1995 was therefore some
seven years too late. The same thing can be said about the public
auction held on March 27, 1995, the consolidation of title in
CHFI's favor and the issuance of TCT No. 310191 in its name.
They were all void and did not exist in the eyes of the law.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioners.
SO ORDERED.
Panganiban, Sandoval-Gutierrez, Carpio Morales and Garcia, JJ.,
concur.
||| (Tambunting, Jr. v. Spouses Sumabat, G.R. No. 144101,
[September 16, 2005], 507 PHIL 94-100)
SECOND DIVISION
[G.R. No. 184203. November 26, 2014.]
CITY OF LAPU-LAPU, petitioner, vs. PHILIPPINE ECONOMIC
ZONE AUTHORITY, respondent.
[G.R. No. 187583. November 26, 2014.]
PROVINCE OF BATAAN, represented by GOVERNOR ENRIQUE
T. GARCIA, JR., and EMERLINDA S. TALENTO, in her capacity
as Provincial Treasurer of Bataan, petitioners, vs.
PHILIPPINE ECONOMIC ZONE AUTHORITY, respondent.
DECISION
LEONEN, J p:
The Philippine Economic Zone Authority is exempt from
payment of real property taxes.
These are consolidated 1 petitions for review on certiorari the
City of Lapu-Lapu and the Province of Bataan separately filed
against the Philippine Economic Zone Authority (PEZA).
In G.R. No. 184203, the City of Lapu-Lapu (the City) assails the
Court of Appeals' decision 2 dated January 11, 2008 and
resolution 3 dated August 6, 2008, dismissing the City's appeal
for being the wrong mode of appeal. The City appealed the
Regional Trial Court, Branch 111, Pasay City's decision finding
the PEZA exempt from payment of real property taxes.
In G.R. No. 187583, the Province of Bataan (the Province) assails
the Court of Appeals' decision 4 dated August 27, 2008 and
resolution 5 dated April 16, 2009, granting the PEZA's petition
for certiorari. The Court of Appeals ruled that the Regional Trial
Court, Branch 115, Pasay City gravely abused its discretion in
finding the PEZA liable for real property taxes to the Province of
Bataan. EISCaD
56
Facts common to the consolidated petitions
In the exercise of his legislative powers, 6 President Ferdinand E.
Marcos issued Presidential Decree No. 66 in 1972, declaring as
government policy the establishment of export processing zones
in strategic locations in the Philippines. Presidential Decree No.
66 aimed "to encourage and promote foreign commerce as a
means of making the Philippines a center of international trade,
of strengthening our export trade and foreign exchange position,
of hastening industrialization, of reducing domestic
unemployment, and of accelerating the development of the
country." 7
To carry out this policy, the Export Processing Zone Authority
(EPZA) was created to operate, administer, and manage the
export processing zones established in the Port of Mariveles,
Bataan 8 and such other export processing zones that may be
created by virtue of the decree. 9
The decree declared the EPZA non-profit in character 10 with all
its revenues devoted to its development, improvement, and
maintenance. 11 To maintain this non-profit character, the EPZA
was declared exempt from all taxes that may be due to the
Republic of the Philippines, its provinces, cities, municipalities,
and other government agencies and instrumentalities. 12
Specifically, Section 21 of Presidential Decree No. 66 declared the
EPZA exempt from payment of real property taxes:
Section 21. Non-profit Character of the Authority; Exemption from
Taxes. — The Authority shall be non-profit and shall devote and
use all its returns from its capital investment, as well as excess
revenues from its operations, for the development, improvement
and maintenance and other related expenditures of the Authority
to pay its indebtedness and obligations and in furtherance and
effective implementation of the policy enunciated in Section 1 of
this Decree. In consonance therewith, the Authority is hereby
declared exempt: EHSTDA
xxx xxx xxx
(b) From all income taxes, franchise taxes, realty taxes and all
other kinds of taxes and licenses to be paid to the National
Government, its provinces, cities, municipalities and other
government agencies and instrumentalities[.]
In 1979, President Marcos issued Proclamation No. 1811,
establishing the Mactan Export Processing Zone. Certain parcels
of land of the public domain located in the City of Lapu-Lapu in
Mactan, Cebu were reserved to serve as site of the Mactan Export
Processing Zone.
In 1995, the PEZA was created by virtue of Republic Act No. 7916
or "the Special Economic Zone Act of 1995" 13 to operate,
administer, manage, and develop economic zones in the country.
14 The PEZA was granted the power to register, regulate, and
supervise the enterprises located in the economic zones. 15 By
virtue of the law, the export processing zone in Mariveles, Bataan
became the Bataan Economic Zone 16 and the Mactan Export
Processing Zone the Mactan Economic Zone. 17
As for the EPZA, the law required it to "evolve into the PEZA in
accordance with the guidelines and regulations set forth in an
executive order issued for [the] purpose." 18 EHSIcT
On October 30, 1995, President Fidel V. Ramos issued Executive
Order No. 282, directing the PEZA to assume and exercise all of
the EPZA's powers, functions, and responsibilities "as provided
in Presidential Decree No. 66, as amended, insofar as they are not
inconsistent with the powers, functions, and responsibilities of
the PEZA, as mandated under [the Special Economic Zone Act of
1995]." 19 All of EPZA's properties, equipment, and assets,
among others, were ordered transferred to the PEZA. 20
Facts of G.R. No. 184203
In the letter 21 dated March 25, 1998, the City of Lapu-Lapu,
through the Office of the Treasurer, demanded from the PEZA
P32,912,350.08 in real property taxes for the period from 1992
to 1998 on the PEZA's properties located in the Mactan
Economic Zone.
The City reiterated its demand in the letter 22 dated May 21,
1998. It cited Sections 193 and 234 of the Local Government
Code of 1991 that withdrew the real property tax exemptions
previously granted to or presently enjoyed by all persons. The
City pointed out that no provision in the Special Economic Zone
Act of 1995 specifically exempted the PEZA from payment of real
property taxes, unlike Section 21 of Presidential Decree No. 66
that explicitly provided for EPZA's exemption. Since no legal
provision explicitly exempted the PEZA from payment of real
property taxes, the City argued that it can tax the PEZA.
The City made subsequent demands 23 on the PEZA. In its last
reminder 24 dated May 13, 2002, the City assessed the PEZA
57
P86,843,503.48 as real property taxes for the period from 1992
to 2002.
On September 11, 2002, the PEZA filed a petition for declaratory
relief 25 with the Regional Trial Court of Pasay City, praying that
the trial court declare it exempt from payment of real property
taxes. The case was raffled to Branch 111.
The City answered 26 the petition, maintaining that the PEZA is
liable for real property taxes. To support its argument, the City
cited a legal opinion dated September 6, 1999 issued by the
Department of Justice, 27 which stated that the PEZA is not
exempt from payment of real property taxes. The Department of
Justice based its opinion on Sections 193 and 234 of the Local
Government Code that withdrew the tax exemptions, including
real property tax exemptions, previously granted to all persons.
DCcSHE
A reply 28 was filed by the PEZA to which the City filed a
rejoinder. 29
Pursuant to Rule 63, Section 3 of Rules of Court, 30 the Office of
the Solicitor General filed a comment 31 on the PEZA's petition
for declaratory relief. It agreed that the PEZA is exempt from
payment of real property taxes, citing Sections 24 and 51 of the
Special Economic Zone Act of 1995.
The trial court agreed with the Solicitor General. Section 24 of
the Special Economic Zone Act of 1995 provides:
SEC. 24. Exemption from National and Local Taxes. — Except for
real property taxes on land owned by developers, no taxes, local
and national, shall be imposed on business establishments
operating within the ECOZONE. In lieu thereof, five percent (5%)
of the gross income earned by all business enterprises within the
ECOZONE shall be paid and remitted as follows:
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the
business establishments to the treasurer's office of the
municipality or city where the enterprise is located.
Section 51 of the law, on the other hand, provides:
SEC. 51. Ipso-Facto Clause. — All privileges, benefits, advantages
or exemptions granted to special economic zones under Republic
Act No. 7227, shall ipso-facto be accorded to special economic
zones already created or to be created under this Act. The free
port status shall not be vested upon new special economic zones.
Based on Section 51, the trial court held that all privileges,
benefits, advantages, or exemptions granted to special economic
zones created under the Bases Conversion and Development Act
of 1992 apply to special economic zones created under the
Special Economic Zone Act of 1995. Since these benefits include
exemption from payment of national or local taxes, these benefits
apply to special economic zones owned by the PEZA.
According to the trial court, the PEZA remained tax-exempt
regardless of Section 24 of the Special Economic Zone Act of
1995. It ruled that Section 24, which taxes real property owned
by developers of economic zones, only applies to private
developers of economic zones, not to public developers like the
PEZA. The PEZA, therefore, is not liable for real property taxes on
the land it owns. HCEaDI
Characterizing the PEZA as an agency of the National
Government, the trial court ruled that the City had no authority
to tax the PEZA under Sections 133 (o) and 234 (a) of the Local
Government Code of 1991.
In the resolution 32 dated June 14, 2006, the trial court granted
the PEZA's petition for declaratory relief and declared it exempt
from payment of real property taxes.
The City filed a motion for reconsideration, 33 which the trial
court denied in its resolution 34 dated September 26, 2006.
The City then appealed 35 to the Court of Appeals.
The Court of Appeals noted the following issues the City raised in
its appellant's brief: (1) whether the trial court had jurisdiction
over the PEZA's petition for declaratory relief; (2) whether the
PEZA is a government agency performing governmental
functions; and (3) whether the PEZA is exempt from payment of
real property taxes.
The issues presented by the City, according to the Court of
Appeals, are pure questions of law which should have been
raised in a petition for review on certiorari directly filed before
this court. Since the City availed itself of the wrong mode of
appeal, the Court of Appeals dismissed the City's appeal in the
decision 36 dated January 11, 2008.
The City filed a motion for extension of time to file a motion for
reconsideration, 37 which the Court of Appeals denied in the
resolution 38 dated April 11, 2008.
58
Despite the denial of its motion for extension, the City filed a
motion for reconsideration. 39 In the resolution 40 dated August
6, 2008, the Court of Appeals denied that motion.
In its petition for review on certiorari with this court, 41 the City
argues that the Court of Appeals "hid under the skirts of
technical rules" 42 in resolving its appeal. The City maintains
that its appeal involved mixed questions of fact and law.
According to the City, whether the PEZA performed
governmental functions "cannot completely be addressed by law
but [by] the factual and actual activities [the PEZA is] carrying
out." 43 EcASIC
Even assuming that the petition involves pure questions of law,
the City contends that the subject matter of the case "is of
extreme importance with [far-reaching] consequence that [its
magnitude] would surely shape and determine the course of our
nation's future." 44 The Court of Appeals, the City argues, should
have resolved the case on the merits.
The City insists that the trial court had no jurisdiction to hear the
PEZA's petition for declaratory relief. According to the City, the
case involves real property located in the City of Lapu-Lapu. The
petition for declaratory relief should have been filed before the
Regional Trial Court of the City of Lapu-Lapu. 45
Moreover, the Province of Bataan, the City of Baguio, and the
Province of Cavite allegedly demanded real property taxes from
the PEZA. The City argues that the PEZA should have likewise
impleaded these local government units as respondents in its
petition for declaratory relief. For its failure to do so, the PEZA
violated Rule 63, Section 2 of the Rules of Court, and the trial
court should have dismissed the petition. 46
This court ordered the PEZA to comment on the City's petition
for review on certiorari. 47
At the outset of its comment, the PEZA argues that the Court of
Appeals' decision dated January 11, 2008 had become final and
executory. After the Court of Appeals had denied the City's
appeal, the City filed a motion for extension of time to file a
motion for reconsideration. Arguing that the time to file a motion
for reconsideration is not extendible, the PEZA filed its motion
for reconsideration out of time. The City has no more right to
appeal to this court. 48
The PEZA maintains that the City availed itself of the wrong
mode of appeal before the Court of Appeals. Since the City raised
pure questions of law in its appeal, the PEZA argues that the
proper remedy is a petition for review on certiorari with this
court, not an ordinary appeal before the appellate court. The
Court of Appeals, therefore, correctly dismissed outright the
City's appeal under Rule 50, Section 2 of the Rules of Court. 49
On the merits, the PEZA argues that it is an agency and
instrumentality of the National Government. It is therefore
exempt from payment of real property taxes under Sections 133
(o) and 234 (a) of the Local Government Code. 50 It adds that the
tax privileges under Sections 24 and 51 of the Special Economic
Zone Act of 1995 applied to it. 51 cIECaS
Considering that the site of the Mactan Economic Zone is a
reserved land under Proclamation No. 1811, the PEZA claims
that the properties sought to be taxed are lands of public
dominion exempt from real property taxes. 52
As to the jurisdiction issue, the PEZA counters that the Regional
Trial Court of Pasay had jurisdiction to hear its petition for
declaratory relief under Rule 63, Section 1 of the Rules of Court.
53 It also argued that it need not implead the Province of Bataan,
the City of Baguio, and the Province of Cavite as respondents
considering that their demands came after the PEZA had already
filed the petition in court. 54
Facts of G.R. No. 187583
After the City of Lapu-Lapu had demanded payment of real
property taxes from the PEZA, the Province of Bataan followed
suit. In its letter 55 dated May 29, 2003, the Province, through
the Office of the Provincial Treasurer, informed the PEZA that it
would be sending a real property tax billing to the PEZA. Arguing
that the PEZA is a developer of economic zones, the Province
claimed that the PEZA is liable for real property taxes under
Section 24 of the Special Economic Zone Act of 1995.
In its reply letter 56 dated June 18, 2003, the PEZA requested the
Province to suspend the service of the real property tax billing. It
cited its petition for declaratory relief against the City of Lapu-
Lapu pending before the Regional Trial Court, Branch 111, Pasay
City as basis.
The Province argued that serving a real property tax billing on
the PEZA "would not in any way affect [its] petition for
59
declaratory relief before [the Regional Trial Court] of Pasay City."
57 Thus, in its letter 58 dated June 27, 2003, the Province
notified the PEZA of its real property tax liabilities for June 1,
1995 to December 31, 2002 totalling P110,549,032.55.
After having been served a tax billing, the PEZA again requested
the Province to suspend collecting its alleged real property tax
liabilities until the Regional Trial Court of Pasay City resolves its
petition for declaratory relief. 59
The Province ignored the PEZA's request. On January 20, 2004,
the Province served on the PEZA a statement of unpaid real
property tax for the period from June 1995 to December 2004.
60
The PEZA again requested the Province to suspend collecting its
alleged real property taxes. 61 The Province denied the request
in its letter 62 dated January 29, 2004, then served on the PEZA a
warrant of levy 63 covering the PEZA's real properties located in
Mariveles, Bataan. CTacSE
The PEZA's subsequent requests 64 for suspension of collection
were all denied by the Province. 65 The Province then served on
the PEZA a notice of delinquency in the payment of real property
taxes 66 and a notice of sale of real property for unpaid real
property tax. 67 The Province finally sent the PEZA a notice of
public auction of the latter's properties in Mariveles, Bataan. 68
On June 14, 2004, the PEZA filed a petition for injunction 69 with
prayer for issuance of a temporary restraining order and/or writ
of preliminary injunction before the Regional Trial Court of
Pasay City, arguing that it is exempt from payment of real
property taxes. It added that the notice of sale issued by the
Province was void because it was not published in a newspaper
of general circulation as required by Section 260 of the Local
Government Code. 70
The case was raffled to Branch 115. aTAEHc
In its order 71 dated June 18, 2004, the trial court issued a
temporary restraining order against the Province. After the PEZA
had filed a P100,000.00 bond, 72 the trial court issued a writ of
preliminary injunction, 73 enjoining the Province from selling
the PEZA's real properties at public auction.
On March 3, 2006, the PEZA and Province both manifested that
each would file a memorandum after which the case would be
deemed submitted for decision. The parties then filed their
respective memoranda. 74
In the order 75 dated January 31, 2007, the trial court denied the
PEZA's petition for injunction. The trial court ruled that the PEZA
is not exempt from payment of real property taxes. According to
the trial court, Sections 193 and 234 of the Local Government
Code had withdrawn the real property tax exemptions
previously granted to all persons, whether natural or juridical.
76 As to the tax exemptions under Section 51 of the Special
Economic Zone Act of 1995, the trial court ruled that the
provision only applies to businesses operating within the
economic zones, not to the PEZA. 77
The PEZA filed before the Court of Appeals a petition for
certiorari 78 with prayer for issuance of a temporary restraining
order.
The Court of Appeals issued a temporary restraining order,
enjoining the Province and its Provincial Treasurer from selling
PEZA's properties at public auction scheduled on October 17,
2007. 79 It also ordered the Province to comment on the PEZA's
petition.
In its comment, 80 the Province alleged that it received a copy of
the temporary restraining order only on October 18, 2007 when
it had already sold the PEZA's properties at public auction.
Arguing that the act sought to be enjoined was already fait
accompli, the Province prayed for the dismissal of the petition for
certiorari.
The PEZA then filed a supplemental petition for certiorari,
prohibition, and mandamus 81 against the Province, arguing that
the Provincial Treasurer of Bataan acted with grave abuse of
discretion in issuing the notice of delinquency and notice of sale.
It maintained that it is exempt from payment of real property
taxes because it is a government instrumentality. It added that its
lands are property of public dominion which cannot be sold at
public auction.
The PEZA also filed a motion 82 for issuance of an order
affirming the temporary restraining order and a writ of
preliminary injunction to enjoin the Province from consolidating
title over the PEZA's properties. LexLib
In its resolution 83 dated January 16, 2008, the Court of Appeals
admitted the supplemental petition for certiorari, prohibition,
60
and mandamus. It required the Province to comment on the
supplemental petition and to file a memorandum on the PEZA's
prayer for issuance of temporary restraining order.
The Province commented 84 on the PEZA's supplemental
petition, to which the PEZA replied. 85
The Province then filed a motion 86 for leave to admit attached
rejoinder with motion to dismiss. In the rejoinder with motion to
dismiss, 87 the Province argued for the first time that the Court
of Appeals had no jurisdiction over the subject matter of the
action.
According to the Province, the PEZA erred in filing a petition for
certiorari. Arguing that the PEZA sought to reverse a Regional
Trial Court decision in a local tax case, the Province claimed that
the court with appellate jurisdiction over the action is the Court
of Tax Appeals. The PEZA then prayed that the Court of Appeals
dismiss the petition for certiorari for lack of jurisdiction over the
subject matter of the action.
The Court of Appeals held that the issue before it was whether
the trial court judge gravely abused his discretion in dismissing
the PEZA's petition for prohibition. This issue, according to the
Court of Appeals, is properly addressed in a petition for
certiorari over which it has jurisdiction to resolve. It, therefore,
maintained jurisdiction to resolve the PEZA's petition for
certiorari. 88
Although it admitted that appeal, not certiorari, was the PEZA's
proper remedy to reverse the trial court's decision, 89 the Court
of Appeals proceeded to decide the petition for certiorari in "the
broader interest of justice." 90
The Court of Appeals ruled that the trial court judge gravely
abused his discretion in dismissing the PEZA's petition for
prohibition. It held that Section 21 of Presidential Decree No. 66
and Section 51 of the Special Economic Zone Act of 1995 granted
the PEZA exemption from payment of real property taxes. 91
Based on the criteria set in Manila International Airport Authority
v. Court of Appeals, 92 the Court of Appeals found that the PEZA
is an instrumentality of the national government. No taxes,
therefore, could be levied on it by local government units. 93
In the decision 94 dated August 27, 2008, the Court of Appeals
granted the PEZA's petition for certiorari. It set aside the trial
court's decision and nullified all the Province's proceedings with
respect to the collection of real property taxes from the PEZA.
The Province filed a motion for reconsideration, 95 which the
Court of Appeals denied in the resolution 96 dated April 16,
2009 for lack of merit.
In its petition for review on certiorari with this court, 97 the
Province of Bataan insists that the Court of Appeals had no
jurisdiction to take cognizance of the PEZA's petition for
certiorari. The Province maintains that the Court of Tax Appeals
had jurisdiction to hear the PEZA's petition since it involved a
local tax case decided by a Regional Trial Court. 98 TSHEIc
The Province reiterates that the PEZA is not exempt from
payment of real property taxes. The Province points out that the
EPZA, the PEZA's predecessor, had to be categorically exempted
from payment of real property taxes. The EPZA, therefore, was
not inherently exempt from payment of real property taxes and
so is the PEZA. Since Congress omitted from the Special
Economic Zone Act of 1995 a provision specifically exempting
the PEZA from payment of real property taxes, the Province
argues that the PEZA is a taxable entity. It cited the rule in
statutory construction that provisions omitted in revised
statutes are deemed repealed. 99
With respect to Sections 24 and 51 of the Special Economic Zone
Act of 1995 granting tax exemptions and benefits, the Province
argues that these provisions only apply to business
establishments operating within special economic zones, 100
not to the PEZA.
This court ordered the PEZA to comment on the Province's
petition for review on certiorari. 101
In its comment, 102 the PEZA argues that the Court of Appeals
had jurisdiction to hear its petition for certiorari since the issue
was whether the trial court committed grave abuse of discretion
in denying its petition for injunction. The PEZA maintains that it
is exempt from payment of real property taxes under Section 21
of Presidential Decree No. 66 and Section 51 of the Special
Economic Zone Act of 1995.
The Province filed its reply, 103 reiterating its arguments in its
petition for review on certiorari.
On the PEZA's motion, 104 this court consolidated the petitions
filed by the City of Lapu-Lapu and the Province of Bataan. 105
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The issues for our resolution are the following:
I. Whether the Court of Appeals erred in dismissing the City of
Lapu-Lapu's appeal for raising pure questions of law;
II. Whether the Regional Trial Court, Branch 111, Pasay City had
jurisdiction to hear, try, and decide the City of Lapu-Lapu's
petition for declaratory relief; EAISDH
III. Whether the petition for injunction filed before the Regional
Trial Court, Branch 115, Pasay City, is a local tax case appealable
to the Court of Tax Appeals; and
IV. Whether the PEZA is exempt from payment of real property
taxes.
We deny the consolidated petitions.
I.
The Court of Appeals did not err in
dismissing the City of Lapu-Lapu's
appeal for raising pure questions of law
Under the Rules of Court, there are three modes of appeal from
Regional Trial Court decisions. The first mode is through an
ordinary appeal before the Court of Appeals where the decision
assailed was rendered in the exercise of the Regional Trial
Court's original jurisdiction. Ordinary appeals are governed by
Rule 41, Sections 3 to 13 of the Rules of Court. In ordinary
appeals, questions of fact or mixed questions of fact and law may
be raised. 106
The second mode is through a petition for review before the
Court of Appeals where the decision assailed was rendered by
the Regional Trial Court in the exercise of its appellate
jurisdiction. Rule 42 of the Rules of Court governs petitions for
review before the Court of Appeals. In petitions for review under
Rule 42, questions of fact, of law, or mixed questions of fact and
law may be raised. 107 caEIDA
The third mode is through an appeal by certiorari before this
court under Rule 45 where only questions of law shall be raised.
108
A question of fact exists when there is doubt as to the truth or
falsity of the alleged facts. 109 On the other hand, there is a
question of law if the appeal raises doubt as to the applicable law
on a certain set of facts. 110
Under Rule 50, Section 2, an improper appeal before the Court of
Appeals is dismissed outright and shall not be referred to the
proper court:
SEC. 2. Dismissal of improper appeal to the Court of Appeals. — An
appeal under Rule 41 taken from the Regional Trial Court to the
Court of Appeals raising only questions of law shall be dismissed,
issues purely of law not being reviewable by said court. Similarly,
an appeal by notice of appeal instead of by petition for review
from the appellate judgment of a Regional Trial Court shall be
dismissed. EIAaDC
An appeal erroneously taken to the Court of Appeals shall not be
transferred to the appropriate court but shall be dismissed
outright.
Rule 50, Section 2 repealed Rule 50, Section 3 of the 1964 Rules
of Court, which provided that improper appeals to the Court of
Appeals shall not be dismissed but shall be certified to the
proper court for resolution:
Sec. 3. Where appealed case erroneously, brought. — Where the
appealed case has been erroneously brought to the Court of
Appeals, it shall not dismiss the appeal, but shall certify the case
to the proper court, with a specific and clear statement of the
grounds therefor.
With respect to appeals by certiorari directly filed before this
court but which raise questions of fact, paragraph 4 (b) of
Circular No. 2-90 dated March 9, 1990 states that this court
"retains the option, in the exercise of its sound discretion and
considering the attendant circumstances, either itself to take
cognizance of and decide such issues or to refer them to the
Court of Appeals for determination." cACTaI
In Indoyon, Jr. v. Court of Appeals, 111 we said that this court
"cannot tolerate ignorance of the law on appeals." 112 It is not
this court's task to determine for litigants their proper remedies
under the Rules. 113
We agree that the City availed itself of the wrong mode of appeal
before the Court of Appeals. The City raised pure questions of
law in its appeal. The issue of whether the Regional Trial Court of
Pasay had jurisdiction over the PEZA's petition for declaratory
relief is a question of law, jurisdiction being a matter of law. 114
The issue of whether the PEZA is a government instrumentality
exempt from payment of real property taxes is likewise a
62
question of law since this question is resolved by examining the
provisions of the PEZA's charter as well as other laws relating to
the PEZA. 115
The Court of Appeals, therefore, did not err in dismissing the
City's appeal pursuant to Rule 50, Section 2 of the Rules of Court.
Nevertheless, considering the important questions involved in
this case, we take cognizance of the City's petition for review on
certiorari in the interest of justice.
In Municipality of Pateros v. The Honorable Court of Appeals, 116
the Municipality of Pateros filed an appeal under Rule 42 before
the Court of Appeals, which the Court of Appeals denied outright
for raising pure questions of law. This court agreed that the
Municipality of Pateros "committed a procedural infraction" 117
and should have directly filed a petition for review on certiorari
before this court. Nevertheless, "in the interest of justice and in
order to write finis to [the] controversy," 118 this court "opt[ed]
to relax the rules" 119 and proceeded to decide the case. This
court said: DcTSHa
While it is true that rules of procedure are intended to promote
rather than frustrate the ends of justice, and while the swift
unclogging of the dockets of the courts is a laudable objective, it
nevertheless must not be met at the expense of substantial
justice.
The Court has allowed some meritorious cases to proceed
despite inherent procedural defects and lapses. This is in keeping
with the principle that rules of procedure are mere tools
designed to facilitate the attainment of justice, and that strict and
rigid application of rules which should result in technicalities
that tend to frustrate rather than promote substantial justice
must always be avoided. It is a far better and more prudent cause
of action for the court to excuse a technical lapse and afford the
parties a review of the case to attain the ends of justice, rather
than dispose of the case on technicality and cause grave injustice
to the parties, giving a false impression of speedy disposal of
cases while actually resulting in more delay, if not a miscarriage
of justice. 120
Similar to Municipality of Pateros, we opt to relax the rules in this
case. The PEZA operates or otherwise administers special
economic zones all over the country. Resolving the substantive
issue of whether the PEZA is taxable for real property taxes will
clarify the taxing powers of all local government units where
special economic zones are operated. This case, therefore, should
be decided on the merits.
II.
The Regional Trial Court of Pasay had no
jurisdiction to hear, try, and decide the
PEZA's petition for declaratory relief
against the City of Lapu-Lapu
Rule 63 of the Rules of Court governs actions for declaratory
relief. Section 1 of Rule 63 provides:
SECTION 1. Who may file petition. — Any person interested
under a deed, will, contract or other written instrument, or
whose rights are affected by a statute, executive order or
regulation, ordinance, or any other governmental regulation
may, before breach or violation, thereof, bring an action in the
appropriate Regional Trial Court to determine any question of
construction or validity arising, and for a declaration of his rights
or duties, thereunder.
An action for reformation of an instrument, to quiet title to real
property or remove clouds therefrom, or to consolidate
ownership under Article 1607 of the Civil Code, may be brought
under this Rule.
The court with jurisdiction over petitions for declaratory relief is
the Regional Trial Court, the subject matter of litigation in an
action for declaratory relief being incapable of pecuniary
estimation. 121 Section 19 of the Judiciary Reorganization Act of
1980 provides: aHECST
SEC. 19. Jurisdiction in Civil Cases. — Regional Trial Courts shall
exercise exclusive original jurisdiction:
(1) In all civil actions in which the subject of litigation is
incapable of pecuniary estimation[.]
Consistent with the law, the Rules state that a petition for
declaratory relief is filed "in the appropriate Regional Trial
Court." 122
A special civil action for declaratory relief is filed for a judicial
determination of any question of construction or validity arising
from, and for a declaration of rights and duties, under any of the
following subject matters: a deed, will, contract or other written
instrument, statute, executive order or regulation, ordinance, or
any other governmental regulation. 123 However, a declaratory
63
judgment may issue only if there has been "no breach of the
documents in question." 124 If the contract or statute subject
matter of the action has already been breached, the appropriate
ordinary civil action must be filed. 125 If adequate relief is
available through another form of action or proceeding, the other
action must be preferred over an action for declaratory relief.
126
In Ollada v. Central Bank of the Philippines, 127 the Central Bank
issued CB-IED Form No. 5 requiring certified public accountants
to submit an accreditation under oath before they were allowed
to certify financial statements submitted to the bank. Among
those financial statements the Central Bank disallowed were
those certified by accountant Felipe B. Ollada. 128 TEDaAc
Claiming that the requirement "restrained the legitimate pursuit
of one's trade," 129 Ollada filed a petition for declaratory relief
against the Central Bank.
This court ordered the dismissal of Ollada's petition "without
prejudice to [his] seeking relief in another appropriate action."
130 According to this court, Ollada's right had already been
violated when the Central Bank refused to accept the financial
statements he prepared. Since there was already a breach, a
petition for declaratory relief was not proper. Ollada must
pursue the "appropriate ordinary civil action or proceeding."
131 This court explained:
Petitioner commenced this action as, and clearly intended it to be
one for Declaratory Relief under the provisions of Rule 66 of the
Rules of Court. On the question of when a special civil action of
this nature would prosper, we have already held that the
complaint for declaratory relief will not prosper if filed after a
contract, statute or right has been breached or violated. In the
present case such is precisely the situation arising from the facts
alleged in the petition for declaratory relief. As vigorously
claimed by petitioner himself, respondent had already invaded
or violated his right and caused him injury — all these giving him
a complete cause of action enforceable in an appropriate
ordinary civil action or proceeding. The dismissal of the action
was, therefore, proper in the light of our ruling in De Borja vs.
Villadolid, 47 O.G. (5) p. 2315, and Samson vs. Andal, G.R. No. L-
3439, July 31, 1951, where we held that an action for declaratory
relief should be filed before there has been a breach of a contract,
statutes or right, and that it is sufficient to bar such action, that
there had been a breach — which would constitute actionable
violation. The rule is that an action for Declaratory Relief is
proper only if adequate relief is not available through the means
of other existing forms of action or proceeding (1 C.J.S. 1027-
1028). 132 cDHCAE
It is also required that the parties to the action for declaratory
relief be those whose rights or interests are affected by the
contract or statute in question. 133 "There must be an actual
justiciable controversy or the 'ripening seeds' of one" 134
between the parties. The issue between the parties "must be ripe
for judicial determination." 135 An action for declaratory relief
based on theoretical or hypothetical questions cannot be filed for
our courts are not advisory courts. 136
In Republic v. Roque, 137 this court dismissed respondents'
petition for declaratory relief for lack of justiciable controversy.
According to this court, "[the respondents'] fear of prospective
prosecution [under the Human Security Act] was solely based on
remarks of certain government officials which were addressed to
the general public." 138
In Velarde v. Social Justice Society, 139 this court refused to
resolve the issue of "whether or not [a religious leader's
endorsement] of a candidate for elective office or in urging or
requiring the members of his flock to vote for a specific
candidate is violative [of the separation clause]." 140 According
to the court, there was no justiciable controversy and ordered
the dismissal of the Social Justice Society's petition for
declaratory relief. This court explained:
Indeed, SJS merely speculated or anticipated without factual
moorings that, as religious leaders, the petitioner and his co-
respondents below had endorsed or threatened to endorse a
candidate or candidates for elective offices; and that such actual
or threatened endorsement "will enable [them] to elect men to
public office who [would] in turn be forever beholden to their
leaders, enabling them to control the government"[;] and
"pos[ing] a clear and present danger of serious erosion of the
people's faith in the electoral process[;] and reinforc[ing] their
belief that religious leaders determine the ultimate result of
elections," which would then be violative of the separation
clause.
64
Such premise is highly speculative and merely theoretical, to say
the least. Clearly, it does not suffice to constitute a justiciable
controversy. The Petition does not even allege any indication or
manifest intent on the part of any of the respondents below to
champion an electoral candidate, or to urge their so-called flock
to vote for, or not to vote for, a particular candidate. It is a time-
honored rule that sheer speculation does not give rise to an
actionable right. IAcTaC
Obviously, there is no factual allegation that SJS' rights are being
subjected to any threatened, imminent and inevitable violation
that should be prevented by the declaratory relief sought. The
judicial power and duty of the courts to settle actual
controversies involving rights that are legally demandable and
enforceable cannot be exercised when there is no actual or
threatened violation of a legal right.
All that the 5-page SJS Petition prayed for was "that the question
raised in paragraph 9 hereof be resolved." In other words, it
merely sought an opinion of the trial court on whether the
speculated acts of religious leaders endorsing elective candidates
for political offices violated the constitutional principle on the
separation of church and state. SJS did not ask for a declaration
of its rights and duties; neither did it pray for the stoppage of any
threatened violation of its declared rights. Courts, however, are
proscribed from rendering an advisory opinion. 141
In sum, a petition for declaratory relief must satisfy six
requisites:
[F]irst, the subject matter of the controversy must be a deed, will,
contract or other written instrument, statute, executive order or
regulation, or ordinance; second, the terms of said documents
and the validity thereof are doubtful and require judicial
construction; third, there must have been no breach of the
documents in question; fourth, there must be an actual
justiciable controversy or the "ripening seeds" of one between
persons whose interests are adverse; fifth, the issue must be ripe
for judicial determination; and sixth, adequate relief is not
available through other means or other forms of action or
proceeding. 142 (Emphases omitted) HTCAED
We rule that the PEZA erred in availing itself of a petition for
declaratory relief against the City. The City had already issued
demand letters and real property tax assessment against the
PEZA, in violation of the PEZA's alleged tax-exempt status under
its charter. The Special Economic Zone Act of 1995, the subject
matter of PEZA's petition for declaratory relief, had already been
breached. The trial court, therefore, had no jurisdiction over the
petition for declaratory relief.
There are several aspects of jurisdiction. 143 Jurisdiction over
the subject matter is "the power to hear and determine cases of
the general class to which the proceedings in question belong."
144 It is conferred by law, which may either be the Constitution
or a statute. 145 Jurisdiction over the subject matter means "the
nature of the cause of action and the relief sought." 146 Thus, the
cause of action and character of the relief sought as alleged in the
complaint are examined to determine whether a court had
jurisdiction over the subject matter. 147 Any decision rendered
by a court without jurisdiction over the subject matter of the
action is void. 148 TaDAHE
Another aspect of jurisdiction is jurisdiction over the person. It is
"the power of [a] court to render a personal judgment or to
subject the parties in a particular action to the judgment and
other rulings rendered in the action." 149 A court automatically
acquires jurisdiction over the person of the plaintiff upon the
filing of the initiatory pleading. 150 With respect to the
defendant, voluntary appearance in court or a valid service of
summons vests the court with jurisdiction over the defendant's
person. 151 Jurisdiction over the person of the defendant is
indispensable in actions in personam or those actions based on a
party's personal liability. 152 The proceedings in an action in
personam are void if the court had no jurisdiction over the
person of the defendant. 153 DSacAE
Jurisdiction over the res or the thing under litigation is acquired
either "by the seizure of the property under legal process,
whereby it is brought into actual custody of the law; or as a
result of the institution of legal proceedings, in which the power
of the court is recognized and made effective." 154 Jurisdiction
over the res is necessary in actions in rem or those actions
"directed against the thing or property or status of a person and
seek judgments with respect thereto as against the whole world."
155 The proceedings in an action in rem are void if the court had
no jurisdiction over the thing under litigation. 156
65
In the present case, the Regional Trial Court had no jurisdiction
over the subject matter of the action, specifically, over the
remedy sought. As this court explained in Malana v. Tappa: 157
. . . an action for declaratory relief presupposes that there has been
no actual breach of the instruments involved or of rights arising
thereunder. Since the purpose of an action for declaratory relief is
to secure an authoritative statement of the rights and obligations
of the parties under a statute, deed, or contract for their guidance
in the enforcement thereof, or compliance therewith, and not to
settle issues arising from an alleged breach thereof, it may be
entertained only before the breach or violation of the statute, deed,
or contract to which it refers. A petition for declaratory relief
gives a practical remedy for ending controversies that have not
reached the state where another relief is immediately available;
and supplies the need for a form of action that will set
controversies at rest before they lead to a repudiation of
obligations, an invasion of rights, and a commission of wrongs.
HSCATc
Where the law or contract has already been contravened prior to
the filing of an action for declaratory relief, the courts can no
longer assume jurisdiction over the action. In other words, a court
has no more jurisdiction over an action for declaratory relief if its
subject has already been infringed or transgressed before the
institution of the action. 158 (Emphasis supplied)
The trial court should have dismissed the PEZA's petition for
declaratory relief for lack of jurisdiction.
Once an assessment has already been issued by the assessor, the
proper remedy of a taxpayer depends on whether the
assessment was erroneous or illegal.
An erroneous assessment "presupposes that the taxpayer is
subject to the tax but is disputing the correctness of the amount
assessed." 159 With an erroneous assessment, the taxpayer
claims that the local assessor erred in determining any of the
items for computing the real property tax, i.e., the value of the
real property or the portion thereof subject to tax and the proper
assessment levels. In case of an erroneous assessment, the
taxpayer must exhaust the administrative remedies provided
under the Local Government Code before resorting to judicial
action.
The taxpayer must first pay the real property tax under protest.
Section 252 of the Local Government Code provides:
SECTION 252. Payment Under Protest. — (a) No protest shall be
entertained unless the taxpayer first pays the tax. There shall be
annotated on the tax receipts the words "paid under protest".
The protest in writing must be filed within thirty (30) days from
payment of the tax to the provincial, city treasurer or municipal
treasurer, in the case of a municipality within Metropolitan
Manila Area, who shall decide the protest within sixty (60) days
from receipt.
(b) The tax or a portion thereof paid under protest, shall be held
in trust by the treasurer concerned.
(c) In the event that the protest is finally decided in favor of the
taxpayer, the amount or portion of the tax protested shall be
refunded to the protestant, or applied as tax credit against his
existing or future tax liability.
(d) In the event that the protest is denied or upon the lapse of the
sixty day period prescribed in subparagraph (a), the taxpayer
may avail of the remedies as provided for in Chapter 3, Title II,
Book II of this Code. aCcADT
Should the taxpayer find the action on the protest unsatisfactory,
the taxpayer may appeal with the Local Board of Assessment
Appeals within 60 days from receipt of the decision on the
protest:
SECTION 226. Local Board of Assessment Appeals. — Any owner
or person having legal interest in the property who is not
satisfied with the action of the provincial, city or municipal
assessor in the assessment of his property may, within sixty (60)
days from the date of receipt of the written notice of assessment,
appeal to the Board of Assessment Appeals of the provincial or
city by filing a petition under oath in the form prescribed for the
purpose, together with copies of the tax declarations and such
affidavits or documents submitted in support of the appeal.
EICDSA
Payment under protest and appeal to the Local Board of
Assessment Appeals are "successive administrative remedies to
a taxpayer who questions the correctness of an assessment." 160
The Local Board Assessment Appeals shall not entertain an
appeal "without the action of the local assessor" 161 on the
protest.
66
If the taxpayer is still unsatisfied after appealing with the Local
Board of Assessment Appeals, the taxpayer may appeal with the
Central Board of Assessment Appeals within 30 days from
receipt of the Local Board's decision:
SECTION 229. Action by the Local Board of Assessment Appeals. —
(a) The Board shall decide the appeal within one hundred twenty
(120) days from the date of receipt of such appeal. The Board,
after hearing, shall render its decision based on substantial
evidence or such relevant evidence on record as a reasonable
mind might accept as adequate to support the conclusion.
(b) In the exercise of its appellate jurisdiction, the Board shall
have the power to summon witnesses, administer oaths, conduct
ocular inspection, take depositions, and issue subpoena and
subpoena duces tecum. The proceedings of the Board shall be
conducted solely for the purpose of ascertaining the facts
without necessarily adhering to technical rules applicable in
judicial proceedings.
(c) The secretary of the Board shall furnish the owner of the
property or the person having legal interest therein and the
provincial or city assessor with a copy of the decision of the
Board. In case the provincial or city assessor concurs in the
revision or the assessment, it shall be his duty to notify the
owner of the property or the person having legal interest therein
of such fact using the form prescribed for the purpose. The owner
of the property or the person having legal interest therein or the
assessor who is not satisfied with the decision of the Board, may,
within thirty (30) days after receipt of the decision of said Board,
appeal to the Central Board of Assessment Appeals, as herein
provided. The decision of the Central Board shall be final and
executory. (Emphasis supplied)
On the other hand, an assessment is illegal if it was made without
authority under the law. 162 In case of an illegal assessment, the
taxpayer may directly resort to judicial action without paying
under protest the assessed tax and filing an appeal with the Local
and Central Board of Assessment Appeals.
In Ty v. Trampe, 163 the Municipal Assessor of Pasig sent
Alejandro B. Ty a notice of assessment with respect to Ty's real
properties in Pasig. Without resorting to the administrative
remedies under the Local Government Code, Ty filed before the
Regional Trial Court a petition, praying that the trial court nullify
the notice of assessment. In assessing the real property taxes
due, the Municipal Assessor used a schedule of market values
solely prepared by him. This, Ty argued, was void for being
contrary to the Local Government Code requiring that the
schedule of market values be jointly prepared by the provincial,
city, and municipal assessors of the municipalities within the
Metropolitan Manila Area. ETISAc
This court ruled that the assessment was illegal for having been
issued without authority of the Municipal Assessor. Reconciling
provisions of the Real Property Tax Code and the Local
Government Code, this court held that the schedule of market
values must be jointly prepared by the provincial, city, and
municipal assessors of the municipalities within the
Metropolitan Manila Area.
As to the issue of exhaustion of administrative remedies, this
court held that Ty did not err in directly resorting to judicial
action. According to this court, payment under protest is
required only "where there is a question as to the
reasonableness of the amount assessed." 164 As to appeals
before the Local and Central Board of Assessment Appeals, they
are "fruitful only where questions of fact are involved." 165
TCADEc
Ty raised the issue of the legality of the notice of assessment, an
issue that did not go into the reasonableness of the amount
assessed. Neither did the issue involve a question of fact. Ty
raised a question of law and, therefore, need not resort to the
administrative remedies provided under the Local Government
Code.
In the present case, the PEZA did not avail itself of any of the
remedies against a notice of assessment. A petition for
declaratory relief is not the proper remedy once a notice of
assessment was already issued.
Instead of a petition for declaratory relief, the PEZA should have
directly resorted to a judicial action. The PEZA should have filed
a complaint for injunction, the "appropriate ordinary civil action"
166 to enjoin the City from enforcing its demand and collecting
the assessed taxes from the PEZA. After all, a declaratory
judgment as to the PEZA's tax-exempt status is useless unless the
City is enjoined from enforcing its demand.
67
Injunction "is a judicial writ, process or proceeding whereby a
party is ordered to do or refrain from doing a certain act." 167 "It
may be the main action or merely a provisional remedy for and
as incident in the main action." 168 The essential requisites of a
writ of injunction are: "(1) there must be a right in esse or the
existence of a right to be protected; and (2) the act against which
the injunction is directed to constitute a violation of such right."
169 aIcETS
We note, however, that the City confused the concepts of
jurisdiction and venue in contending that the Regional Trial
Court of Pasay had no jurisdiction because the real properties
involved in this case are located in the City of Lapu-Lapu.
On the one hand, jurisdiction is "the power to hear and
determine cases of the general class to which the proceedings in
question belong." 170 Jurisdiction is a matter of substantive law.
171 Thus, an action may be filed only with the court or tribunal
where the Constitution or a statute says it can be brought. 172
Objections to jurisdiction cannot be waived and may be brought
at any stage of the proceedings, even on appeal. 173 When a case
is filed with a court which has no jurisdiction over the action, the
court shall motu proprio dismiss the case. 174
On the other hand, venue is "the place of trial or geographical
location in which an action or proceeding should be brought."
175 In civil cases, venue is a matter of procedural law. 176 A
party's objections to venue must be brought at the earliest
opportunity either in a motion to dismiss or in the answer;
otherwise the objection shall be deemed waived. 177 When the
venue of a civil action is improperly laid, the court cannot motu
proprio dismiss the case. 178
The venue of an action depends on whether the action is a real or
personal action. Should the action affect title to or possession of
real property, or interest therein, it is a real action. The action
should be filed in the proper court which has jurisdiction over
the area wherein the real property involved, or a portion thereof,
is situated. 179 If the action is a personal action, the action shall
be filed with the proper court where the plaintiff or any of the
principal plaintiffs resides, or where the defendant or any of the
principal defendants resides, or in the case of a non-resident
defendant where he may be found, at the election of the plaintiff.
180 AEIcTD
The City was objecting to the venue of the action, not to the
jurisdiction of the Regional Trial Court of Pasay. In essence, the
City was contending that the PEZA's petition is a real action as it
affects title to or possession of real property, and, therefore, the
PEZA should have filed the petition with the Regional Trial Court
of Lapu-Lapu City where the real properties are located.
However, whatever objections the City has against the venue of
the PEZA's action for declaratory relief are already deemed
waived. Objections to venue must be raised at the earliest
possible opportunity. 181 The City did not file a motion to
dismiss the petition on the ground that the venue was
improperly laid. Neither did the City raise this objection in its
answer.
In any event, the law sought to be judicially interpreted in this
case had already been breached. The Regional Trial Court of
Pasay, therefore, had no jurisdiction over the PEZA's petition for
declaratory relief against the City.
III.
The Court of Appeals had no jurisdiction
over the PEZA's petition for certiorari
against the Province of Bataan
Appeal is the remedy "to obtain a reversal or modification of a
judgment on the merits." 182 A judgment on the merits is one
which "determines the rights and liabilities of the parties based
on the disclosed facts, irrespective of the formal, technical or
dilatory objections." 183 It is not even necessary that the case
proceeded to trial. 184 So long as the "judgment is general" 185
and "the parties had a full legal opportunity to be heard on their
respective claims and contentions," 186 the judgment is on the
merits. DaTICE
On the other hand, certiorari is a special civil action filed to annul
or modify a proceeding of a tribunal, board, or officer exercising
judicial or quasi-judicial functions. 187 Certiorari, which in Latin
means "to be more fully informed," 188 was originally a remedy
in the common law. This court discussed the history of the
remedy of certiorari in Spouses Delos Santos v. Metropolitan Bank
and Trust Company: 189 SDEHCc
In the common law, from which the remedy of certiorari evolved,
the writ of certiorari was issued out of Chancery, or the King's
Bench, commanding agents or officers of the inferior courts to
68
return the record of a cause pending before them, so as to give
the party more sure and speedy justice, for the writ would enable
the superior court to determine from an inspection of the record
whether the inferior court's judgment was rendered without
authority. The errors were of such a nature that, if allowed to
stand, they would result in a substantial injury to the petitioner
to whom no other remedy was available. If the inferior court
acted without authority, the record was then revised and
corrected in matters of law. The writ of certiorari was limited to
cases in which the inferior court was said to be exceeding its
jurisdiction or was not proceeding according to essential
requirements of law and would lie only to review judicial or
quasi-judicial acts. 190
In our jurisdiction, the term "certiorari" is used in two ways. An
appeal before this court raising pure questions of law is
commenced by filing a petition for review on certiorari under
Rule 45 of the Rules of Court. An appeal by certiorari, which
continues the proceedings commenced before the lower courts,
191 is filed to reverse or modify judgments or final orders. 192
Under the Rules, an appeal by certiorari must be filed within 15
days from notice of the judgment or final order, or of the denial
of the appellant's motion for new trial or reconsideration. 193
A petition for certiorari under Rule 65, on the other hand, is an
independent and original action filed to set aside proceedings
conducted without or in excess of jurisdiction or with grave
abuse of discretion amounting to lack or excess of jurisdiction.
194 Under the Rules, a petition for certiorari may only be filed if
there is no appeal or any plain, speedy, or adequate remedy in
the ordinary course of law. 195 The petition must be filed within
60 days from notice of the judgment, order, or resolution. 196
DTSIEc
Because of the longer period to file a petition for certiorari, some
litigants attempt to file petitions for certiorari as substitutes for
lost appeals by certiorari. However, Rule 65 is clear that a
petition for certiorari will not prosper if appeal is available.
Appeal is the proper remedy even if the error, or one of the
errors, raised is grave abuse of discretion on the part of the court
rendering judgment. 197 If appeal is available, a petition for
certiorari cannot be filed.
In this case, the trial court's decision dated January 31, 2007 is a
judgment on the merits. Based on the facts disclosed by the
parties, the trial court declared the PEZA liable to the Province of
Bataan for real property taxes. The PEZA's proper remedy
against the trial court's decision, therefore, is appeal.
Since the PEZA filed a petition for certiorari against the trial
court's decision, it availed itself of the wrong remedy. As the
Province of Bataan contended, the trial court's decision dated
January 31, 2007 "is only an error of judgment appealable to the
higher level court and may not be corrected by filing a petition
for certiorari." 198 That the trial court judge allegedly
committed grave abuse of discretion does not make the petition
for certiorari the correct remedy. The PEZA should have raised
this ground in an appeal filed within 15 days from notice of the
assailed resolution.
This court, "in the liberal spirit pervading the Rules of Court and
in the interest of substantial justice," 199 has treated petitions
for certiorari as an appeal: "(1) if the petition for certiorari was
filed within the reglementary period within which to file a
petition for review on certiorari; (2) when errors of judgment are
averred; and (3) when there is sufficient reason to justify the
relaxation of the rules." 200 Considering that "the nature of an
action is determined by the allegations of the complaint or the
petition and the character of the relief sought," 201 a petition
which "actually avers errors of judgment rather than errors than
that of jurisdiction" 202 may be considered a petition for review.
However, suspending the application of the Rules has its
disadvantages. Relaxing procedural rules may reduce the
"effective enforcement of substantive rights," 203 leading to
"arbitrariness, caprice, despotism, or whimsicality in the
settlement of disputes." 204 Therefore, for this court to suspend
the application of the Rules, the accomplishment of substantial
justice must outweigh the importance of predictability of court
procedures.
The PEZA's petition for certiorari may be treated as an appeal.
First, the petition for certiorari was filed within the 15-day
reglementary period for filing an appeal. The PEZA filed its
petition for certiorari before the Court of Appeals on October 15,
2007, 205 which was 12 days from October 3, 2007 206 when
69
the PEZA had notice of the trial court's order denying the motion
for reconsideration. ECDaTI
Second, the petition for certiorari raised errors of judgment. The
PEZA argued that the trial court erred in ruling that it is not
exempt from payment of real property taxes given Section 21 of
Presidential Decree No. 66 and Sections 11 and 51 of the Special
Economic Zone Act of 1995. 207
Third, there is sufficient reason to relax the rules given the
importance of the substantive issue presented in this case.
However, the PEZA's petition for certiorari was filed before the
wrong court. The PEZA should have filed its petition before the
Court of Tax Appeals.
The Court of Tax Appeals has the exclusive appellate jurisdiction
over local tax cases decided by Regional Trial Courts. Section 7,
paragraph (a) (3) of Republic Act No. 1125, as amended by
Republic Act No. 9282, provides:
Sec. 7. Jurisdiction. — The [Court of Tax Appeals] shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein
provided:
xxx xxx xxx
3. Decisions, orders or resolutions of the Regional Trial Courts in
local tax cases originally decided or resolved by them in the
exercise of their original or appellate jurisdiction[.] ISCaDH
The local tax cases referred to in Section 7, paragraph (a) (3) of
Republic Act No. 1125, as amended, include cases involving real
property taxes. Real property taxation is governed by Book II of
the Local Government Code on "Local Taxation and Fiscal
Matters." Real property taxes are collected by the Local
Treasurer, 208 not by the Bureau of Internal Revenue in charge
of collecting national internal revenue taxes, fees, and charges.
209
Section 7, paragraph (a) (5) of Republic Act No. 1125, as
amended by Republic Act No. 9282, separately provides for the
exclusive appellate jurisdiction of the Court of Tax Appeals over
decisions of the Central Board of Assessment Appeals involving
the assessment or collection of real property taxes: DTISaH
Sec. 7. Jurisdiction. — The [Court of Tax Appeals] shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein
provided:
xxx xxx xxx
5. Decisions of the Central Board of Assessment Appeals in the
exercise of its appellate jurisdiction over cases involving the
assessment and taxation of real property originally decided by
the provincial or city board of assessment appeals[.]
This separate provision, nevertheless, does not bar the Court of
Tax Appeals from taking cognizance of trial court decisions
involving the collection of real property tax cases. Sections 256
210 and 266 211 of the Local Government Code expressly allow
local government units to file "in any court of competent
jurisdiction" civil actions to collect basic real property taxes.
Should the trial court rule against them, local government units
cannot be barred from appealing before the Court of Tax Appeals
— the "highly specialized body specifically created for the
purpose of reviewing tax cases." 212
We have also ruled that the Court of Tax Appeals, not the Court
of Appeals, has the exclusive original jurisdiction over petitions
for certiorari assailing interlocutory orders issued by Regional
Trial Courts in a local tax case. We explained in The City of Manila
v. Hon. Grecia-Cuerdo 213 that while the Court of Tax Appeals
has no express grant of power to issue writs of certiorari under
Republic Act No. 1125, 214 as amended, the tax court's judicial
power as defined in the Constitution 215 includes the power to
determine "whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on the part
of the [Regional Trial Court] in issuing an interlocutory order of
jurisdiction in cases falling within the exclusive appellate
jurisdiction of the tax court." 216 We further elaborated: AEDcIH
Indeed, in order for any appellate court to effectively exercise its
appellate jurisdiction, it must have the authority to issue, among
others, a writ of certiorari. In transferring exclusive jurisdiction
over appealed tax cases to the CTA, it can reasonably be assumed
that the law intended to transfer also such power as is deemed
necessary, if not indispensable, in aid of such appellate
jurisdiction. There is no perceivable reason why the transfer
should only be considered as partial, not total.
xxx xxx xxx
If this Court were to sustain petitioners' contention that
jurisdiction over their certiorari petition lies with the CA, this
Court would be confirming the exercise by two judicial bodies,
the CA and the CTA, of jurisdiction over basically the same
70
subject matter — precisely the split-jurisdiction situation which
is anathema to the orderly administration of justice. The Court
cannot accept that such was the legislative motive, especially
considering that the law expressly confers on the CTA, the
tribunal with the specialized competence over tax and tariff
matters, the role of judicial review over local tax cases without
mention of any other court that may exercise such power. Thus,
the Court agrees with the ruling of the CA that since appellate
jurisdiction over private respondents' complaint for tax refund is
vested in the CTA, it follows that a petition for certiorari seeking
nullification of an interlocutory order issued in the said case
should, likewise, be filed with the same court. To rule otherwise
would lead to an absurd situation where one court decides an
appeal in the main case while another court rules on an incident
in the very same case. HAECID
Stated differently, it would be somewhat incongruent with the
pronounced judicial abhorrence to split jurisdiction to conclude
that the intention of the law is to divide the authority over a local
tax case filed with the RTC by giving to the CA or this Court
jurisdiction to issue a writ of certiorari against interlocutory
orders of the RTC but giving to the CTA the jurisdiction over the
appeal from the decision of the trial court in the same case. It is
more in consonance with logic and legal soundness to conclude
that the grant of appellate jurisdiction to the CTA over tax cases
filed in and decided by the RTC carries with it the power to issue
a writ of certiorari when necessary in aid of such appellate
jurisdiction. The supervisory power or jurisdiction of the CTA to
issue a writ of certiorari in aid of its appellate jurisdiction should
co-exist with, and be a complement to, its appellate jurisdiction
to review, by appeal, the final orders and decisions of the RTC, in
order to have complete supervision over the acts of the latter.
217 (Citations omitted)
In this case, the petition for injunction filed before the Regional
Trial Court of Pasay was a local tax case originally decided by the
trial court in its original jurisdiction. Since the PEZA assailed a
judgment, not an interlocutory order, of the Regional Trial Court,
the PEZA's proper remedy was an appeal to the Court of Tax
Appeals.
Considering that the appellate jurisdiction of the Court of Tax
Appeals is to the exclusion of all other courts, the Court of
Appeals had no jurisdiction to take cognizance of the PEZA's
petition. The Court of Appeals acted without jurisdiction in
rendering the decision in CA-G.R. SP No. 100984. Its decision in
CA-G.R. SP No. 100984 is void. 218 TAaEIc
The filing of appeal in the wrong court does not toll the period to
appeal. Consequently, the decision of the Regional Trial Court,
Branch 115, Pasay City, became final and executory after the
lapse of the 15th day from the PEZA's receipt of the trial court's
decision. 219 The denial of the petition for injunction became
final and executory.
IV.
The remedy of a taxpayer depends on the
stage in which the local government unit
is enforcing its authority to impose real
property taxes
The proper remedy of a taxpayer depends on the stage in which
the local government unit is enforcing its authority to collect real
property taxes. For the guidance of the members of the bench
and the bar, we reiterate the taxpayer's remedies against the
erroneous or illegal assessment of real property taxes.
Exhaustion of administrative remedies under the Local
Government Code is necessary in cases of erroneous
assessments where the correctness of the amount assessed is
assailed. The taxpayer must first pay the tax then file a protest
with the Local Treasurer within 30 days from date of payment of
tax. 220 If protest is denied or upon the lapse of the 60-day
period to decide the protest, the taxpayer may appeal to the
Local Board of Assessment Appeals within 60 days from the
denial of the protest or the lapse of the 60-day period to decide
the protest. 221 The Local Board of Assessment Appeals has 120
days to decide the appeal. 222
If the taxpayer is unsatisfied with the Local Board's decision, the
taxpayer may appeal before the Central Board of Assessment
Appeals within 30 days from receipt of the Local Board's
decision. 223
The decision of the Central Board of Assessment Appeals is
appealable before the Court of Tax Appeals En Banc. 224 The
appeal before the Court of Tax Appeals shall be filed following
the procedure under Rule 43 of the Rules of Court. 225
71
The Court of Tax Appeals' decision may then be appealed before
this court through a petition for review on certiorari under Rule
45 of the Rules of Court raising pure questions of law. 226
In case of an illegal assessment where the assessment was issued
without authority, exhaustion of administrative remedies is not
necessary and the taxpayer may directly resort to judicial action.
227 The taxpayer shall file a complaint for injunction before the
Regional Trial Court 228 to enjoin the local government unit
from collecting real property taxes.
The party unsatisfied with the decision of the Regional Trial
Court shall file an appeal, not a petition for certiorari, before the
Court of Tax Appeals, the complaint being a local tax case
decided by the Regional Trial Court. 229 The appeal shall be filed
within fifteen (15) days from notice of the trial court's decision.
HAECID
The Court of Tax Appeals' decision may then be appealed before
this court through a petition for review on certiorari under Rule
45 of the Rules of Court raising pure questions of law. 230
In case the local government unit has issued a notice of
delinquency, the taxpayer may file a complaint for injunction to
enjoin the impending sale of the real property at public auction.
In case the local government unit has already sold the property
at public auction, the taxpayer must first deposit with the court
the amount for which the real property was sold, together with
interest of 2% per month from the date of sale to the time of the
institution of action. The taxpayer may then file a complaint to
assail the validity of the public auction. 231 The decisions of the
Regional Trial Court in these cases shall be appealable before the
Court of Tax Appeals, 232 and the latter's decisions appealable
before this court through a petition for review on certiorari
under Rule 45 of the Rules of Court. 233 cSCADE
V.
The PEZA is exempt from payment of
real property taxes
The jurisdictional errors in this case render these consolidated
petitions moot. We do not review void decisions rendered
without jurisdiction.
However, the PEZA alleged that several local government units,
including the City of Baguio and the Province of Cavite, have
issued their respective real property tax assessments against the
PEZA. Other local government units will likely follow suit, and
either the PEZA or the local government units taxing the PEZA
may file their respective actions against each other.
In the interest of judicial economy 234 and avoidance of
conflicting decisions involving the same issues, 235 we resolve
the substantive issue of whether the PEZA is exempt from
payment of real property taxes.
Real property taxes are annual taxes levied on real property such
as lands, buildings, machinery, and other improvements not
otherwise specifically exempted under the Local Government
Code. 236 Real property taxes are ad valorem, with the amount
charged based on a fixed proportion of the value of the property.
237 Under the law, provinces, cities, and municipalities within
the Metropolitan Manila Area have the power to levy real
property taxes within their respective territories. 238 SCHTac
The general rule is that real properties are subject to real
property taxes. This is true especially since the Local
Government Code has withdrawn exemptions from real property
taxes of all persons, whether natural or juridical:
SEC. 234. Exemptions from Real Property Tax. — The following
are exempted from payment of real property tax:
(a) Real property owned by the Republic of the Philippines or
any of its political subdivisions except when the beneficial use
thereof has been granted, for consideration or otherwise, to a
taxable person;
(b) Charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, nonprofit or religious cemeteries
and all lands, buildings, and improvements actually, directly, and
exclusively used for religious, charitable or educational
purposes;
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned
or -controlled corporations engaged in the supply and
distribution of water and/or generation and transmission of
electric power;
(d) All real property owned by duly registered cooperatives as
provided under R.A. No. 6938; and CAaSHI
(e) Machinery and equipment used for pollution control and
environmental protection.
72
Except as provided herein, any exemption from payment of real
property taxes previously granted to, or presently enjoyed by, all
persons, whether natural or juridical, including government-
owned or -controlled corporations are hereby withdrawn upon the
effectivity of this Code. (Emphasis supplied)
The person liable for real property taxes is the "taxable person
who had actual or beneficial use and possession [of the real
property for the taxable period,] whether or not [the person
owned the property for the period he or she is being taxed]." 239
The exceptions to the rule are provided in the Local Government
Code. Under Section 133 (o), local government units have no
power to levy taxes of any kind on the national government, its
agencies and instrumentalities and local government units:
SEC. 133. Common Limitations on the Taxing Powers of Local
Government Units. — Unless otherwise provided herein, the
exercise of taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:
xxx xxx xxx
(o) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities and local
government units.
Specifically on real property taxes, Section 234 enumerates the
persons and real property exempt from real property taxes:
SEC. 234. Exemptions from Real Property Tax. — The following
are exempted from payment of real property tax:
(a) Real property owned by the Republic of the Philippines or any
of its political subdivisions except when the beneficial use thereof
has been granted, for consideration or otherwise, to a taxable
person;
(b) Charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, nonprofit or religious cemeteries
and all lands, buildings, and improvements actually, directly, and
exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned or
-controlled corporations engaged in the supply and distribution of
water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as
provided under R.A. No. 6938; and DECcAS
(e) Machinery and equipment used for pollution control and
environmental protection.
Except as provided herein, any exemption from payment of real
property tax previously granted to, or presently enjoyed by, all
persons, whether natural or juridical, including all government-
owned or -controlled corporations are hereby withdrawn upon
the effectivity of this Code. (Emphasis supplied)
For persons granted tax exemptions or incentives before the
effectivity of the Local Government Code, Section 193 withdrew
these tax exemption privileges. These persons consist of both
natural and juridical persons, including government-owned or
controlled corporations:
SEC. 193. Withdrawal of Tax Exemption Privileges. — Unless
otherwise provided in this code, tax exemptions or incentives
granted to or presently enjoyed by all persons, whether natural
or juridical, including government-owned or controlled
corporations, except local water districts, cooperatives duly
registered under R.A. 6938, non stock and non profit hospitals
and educational institutions, are hereby withdrawn upon
effectivity of this Code.
As discussed, Section 234 withdrew all tax privileges with
respect to real property taxes. DTEIaC
Nevertheless, local government units may grant tax exemptions
under such terms and conditions as they may deem necessary:
SEC. 192. Authority to Grant Tax Exemption Privileges. — Local
government units may, through ordinances duly approved, grant
tax exemptions, incentives or reliefs under such terms and
conditions as they may deem necessary.
In Mactan Cebu International Airport Authority v. Hon. Marcos,
240 this court classified the exemptions from real property taxes
into ownership, character, and usage exemptions.
Ownership exemptions are exemptions based on the ownership
of the real property. The exemptions of real property owned by
the Republic of the Philippines, provinces, cities, municipalities,
barangays, and registered cooperatives fall under this
classification. 241
Character exemptions are exemptions based on the character of
the real property. Thus, no real property taxes may be levied on
charitable institutions, houses and temples of prayer like
73
churches, parsonages, or convents appurtenant thereto,
mosques, and non profit or religious cemeteries. 242
Usage exemptions are exemptions based on the use of the real
property. Thus, no real property taxes may be levied on real
property such as: (1) lands and buildings actually, directly, and
exclusively used for religious, charitable or educational purpose;
(2) machineries and equipment actually, directly and exclusively
used by local water districts or by government-owned or
controlled corporations engaged in the supply and distribution
of water and/or generation and transmission of electric power;
and (3) machinery and equipment used for pollution control and
environmental protection. 243 TEHDIA
Persons may likewise be exempt from payment of real properties
if their charters, which were enacted or reenacted after the
effectivity of the Local Government Code, exempt them payment
of real property taxes. 244
V. (A)
The PEZA is an instrumentality of the national government
An instrumentality is "any agency of the National Government,
not integrated within the department framework, vested with
special functions or jurisdiction by law, endowed with some if
not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter." 245
Examples of instrumentalities of the national government are the
Manila International Airport Authority, 246 the Philippine
Fisheries Development Authority, 247 the Government Service
Insurance System, 248 and the Philippine Reclamation
Authority. 249 These entities are not integrated within the
department framework but are nevertheless vested with special
functions to carry out a declared policy of the national
government.
Similarly, the PEZA is an instrumentality of the national
government. It is not integrated within the department
framework but is an agency attached to the Department of Trade
and Industry. 250 Book IV, Chapter 7, Section 38 (3) (a) of the
Administrative Code of 1987 defines "attachment": DaTHAc
SEC. 38. Definition of Administrative Relationship. — Unless
otherwise expressly stated in the Code or in other laws defining
the special relationships of particular agencies, administrative
relationships shall be categorized and defined as follows:
xxx xxx xxx
(3) Attachment. — (a) This refers to the lateral relationship
between the department or its equivalent and the attached
agency or corporation for purposes of policy and program
coordination. The coordination may be accomplished by having
the department represented in the governing board of the
attached agency or corporation, either as chairman or as a
member, with or without voting rights, if this is permitted by the
charter; having the attached corporation or agency comply with
a system of periodic reporting which shall reflect the progress of
the programs and projects; and having the department or its
equivalent provide general policies through its representative in
the board, which shall serve as the framework for the internal
policies of the attached corporation or agency[.]
Attachment, which enjoys "a larger measure of independence"
251 compared with other administrative relationships such as
supervision and control, is further explained in Beja, Sr. v. Court
of Appeals: 252
An attached agency has a larger measure of independence from
the Department to which it is attached than one which is under
departmental supervision and control or administrative
supervision. This is borne out by the "lateral relationship"
between the Department and the attached agency. The
attachment is merely for "policy and program coordination."
With respect to administrative matters, the independence of an
attached agency from Departmental control and supervision is
further reinforced by the fact that even an agency under a
Department's administrative supervision is free from
Departmental interference with respect to appointments and
other personnel actions "in accordance with the decentralization
of personnel functions" under the Administrative Code of 1987.
Moreover, the Administrative Code explicitly provides that
Chapter 8 of Book IV on supervision and control shall not apply
to chartered institutions attached to a Department. 253 SAEHaC
With the PEZA as an attached agency to the Department of Trade
and Industry, the 13-person PEZA Board is chaired by the
Department Secretary. 254 Among the powers and functions of
the PEZA is its ability to coordinate with the Department of
Trade and Industry for policy and program formulation and
implementation. 255 In strategizing and prioritizing the
74
development of special economic zones, the PEZA coordinates
with the Department of Trade and Industry. 256
The PEZA also administers its own funds and operates
autonomously, with the PEZA Board formulating and approving
the PEZA's annual budget. 257 Appointments and other
personnel actions in the PEZA are also free from departmental
interference, with the PEZA Board having the exclusive and final
authority to promote, transfer, assign and reassign officers of the
PEZA. 258
As an instrumentality of the national government, the PEZA is
vested with special functions or jurisdiction by law. Congress
created the PEZA to operate, administer, manage and develop
special economic zones in the Philippines. 259 Special economic
zones are areas with highly developed or which have the
potential to be developed into agro-industrial, industrial
tourist/recreational, commercial, banking, investment and
financial centers. 260 By operating, administering, managing,
and developing special economic zones which attract
investments and promote use of domestic labor, the PEZA carries
out the following policy of the Government:
SECTION 2. Declaration of Policy. — It is the declared policy of
the government to translate into practical realities the following
State policies and mandates in the 1987 Constitution, namely:
(a) "The State recognizes the indispensable role of the private
sector, encourages private enterprise, and provides incentives to
needed investments." (Sec. 20, Art. II) CSDTac
(b) "The State shall promote the preferential use of Filipino
labor, domestic materials and locally produced goods, and adopt
measures that help make them competitive." (Sec. 12, Art. XII)
In pursuance of these policies, the government shall actively
encourage, promote, induce and accelerate a sound and balanced
industrial, economic and social development of the country in
order to provide jobs to the people especially those in the rural
areas, increase their productivity and their individual and family
income, and thereby improve the level and quality of their living
condition through the establishment, among others, of special
economic zones in suitable and strategic locations in the country
and through measures that shall effectively attract legitimate and
productive foreign investments. 261
Being an instrumentality of the national government, the PEZA
cannot be taxed by local government units.
Although a body corporate vested with some corporate powers,
262 the PEZA is not a government-owned or controlled
corporation taxable for real property taxes.
Section 2 (13) of the Introductory Provisions of the
Administrative Code of 1987 defines the term "government-
owned or controlled corporation":
SEC. 2. General Terms Defined. — Unless the specific words of the
text, or the context as a whole, or a particular statute, shall
require a different meaning: aAHISE
xxx xxx xxx
(13) Government-owned or controlled corporation refers to any
agency organized as a stock or non-stock corporation, vested
with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or
through its instrumentalities either wholly, or, where applicable
as in the case of stock corporations, to the extent of at least fifty-
one (51) per cent of its capital stock: Provided, That government-
owned or controlled corporations may be further categorized by
the Department of the Budget, the Civil Service Commission, and
the Commission on Audit for purposes of the exercise and
discharge of their respective powers, functions and
responsibilities with respect to such corporations.
Government entities are created by law, specifically, by the
Constitution or by statute. In the case of government-owned or
controlled corporations, they are incorporated by virtue of
special charters 263 to participate in the market for special
reasons which may be related to dysfunctions or inefficiencies of
the market structure. This is to adjust reality as against the
concept of full competition where all market players are price
takers. Thus, under the Constitution, government-owned or
controlled corporations are created in the interest of the
common good and should satisfy the test of economic viability.
264 Article XII, Section 16 of the Constitution provides:
Section 16. The Congress shall not, except by general law,
provide for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations
may be created or established by special charters in the interest
of the common good and subject to the test of economic viability.
75
Economic viability is "the capacity to function efficiently in
business." 265 To be economically viable, the entity "should not
go into activities which the private sector can do better." 266
TCASIH
To be considered a government-owned or controlled
corporation, the entity must have been organized as a stock or
non-stock corporation. 267
Government instrumentalities, on the other hand, are also
created by law but partake of sovereign functions. When a
government entity performs sovereign functions, it need not
meet the test of economic viability. In Manila International
Airport Authority v. Court of Appeals, 268 this court explained:
In contrast, government instrumentalities vested with corporate
powers and performing governmental or public functions need
not meet the test of economic viability. These instrumentalities
perform essential public services for the common good, services
that every modern State must provide its citizens. These
instrumentalities need not be economically viable since the
government may even subsidize their entire operations. These
instrumentalities are not the "government-owned or controlled
corporations" referred to in Section 16, Article XII of the 1987
Constitution.
Thus, the Constitution imposes no limitation when the
legislature creates government instrumentalities vested with
corporate powers but performing essential governmental or
public functions. Congress has plenary authority to create
government instrumentalities vested with corporate powers
provided these instrumentalities perform essential government
functions or public services. However, when the legislature
creates through special charters corporations that perform
economic or commercial activities, such entities — known as
"government-owned or controlled corporations" — must meet
the test of economic viability because they compete in the
market place.
xxx xxx xxx
Commissioner Blas F. Ople, proponent of the test of economic
viability, explained to the Constitutional Commission the
purpose of this test, as follows: CSaITD
MR. OPLE: Madam President, the reason for this concern is really
that when the government creates a corporation, there is a sense
in which this corporation becomes exempt from the test of
economic performance. We know what happened in the past. If a
government corporation loses, then it makes its claim upon the
taxpayers' money through new equity infusions from the
government and what is always invoked is the common good.
That is the reason why this year, out of a budget of P115 billion
for the entire government, about P28 billion of this will go into
equity infusions to support a few government financial
institutions. And this is all taxpayers' money which could have
been relocated to agrarian reform, to social services like health
and education, to augment the salaries of grossly underpaid
public employees. And yet this is all going down the drain.
Therefore, when we insert the phrase "ECONOMIC VIABILITY"
together with the "common good," this becomes a restraint on
future enthusiasts for state capitalism to excuse themselves from
the responsibility of meeting the market test so that they become
viable. And so, Madam President, I reiterate, for the committee's
consideration and I am glad that I am joined in this proposal by
Commissioner Foz, the insertion of the standard of "ECONOMIC
VIABILITY OR THE ECONOMIC TEST," together with the common
good.
xxx xxx xxx
Clearly, the test of economic viability does not apply to
government entities vested with corporate powers and
performing essential public services. The State is obligated to
render essential public services regardless of the economic
viability of providing such service. The non-economic viability of
rendering such essential public service does not excuse the State
from withholding such essential services from the public. 269
(Emphases and citations omitted) SHcDAI
The law created the PEZA's charter. Under the Special Economic
Zone Act of 1995, the PEZA was established primarily to perform
the governmental function of operating, administering,
managing, and developing special economic zones to attract
investments and provide opportunities for preferential use of
Filipino labor.
Under its charter, the PEZA was created a body corporate
endowed with some corporate powers. However, it was not
organized as a stock 270 or non-stock 271 corporation. Nothing
in the PEZA's charter provides that the PEZA's capital is divided
76
into shares. 272 The PEZA also has no members who shall share
in the PEZA's profits. DAEaTS
The PEZA does not compete with other economic zone
authorities in the country. The government may even subsidize
the PEZA's operations. Under Section 47 of the Special Economic
Zone Act of 1995, "any sum necessary to augment [the PEZA's]
capital outlay shall be included in the General Appropriations Act
to be treated as an equity of the national government." 273
The PEZA, therefore, need not be economically viable. It is not a
government-owned or controlled corporation liable for real
property taxes.
V. (B)
The PEZA assumed the non-profit character, including the tax
exempt
status, of the EPZA
The PEZA's predecessor, the EPZA, was declared non-profit in
character with all its revenues devoted for its development,
improvement, and maintenance. Consistent with this non-profit
character, the EPZA was explicitly declared exempt from real
property taxes under its charter. Section 21 of Presidential
Decree No. 66 provides: HEcSDa
Section 21. Non-profit Character of the Authority; Exemption from
Taxes. — The Authority shall be non-profit and shall devote and
use all its returns from its capital investment, as well as excess
revenues from its operations, for the development, improvement
and maintenance and other related expenditures of the Authority
to pay its indebtedness and obligations and in furtherance and
effective implementation of the policy enunciated in Section 1 of
this Decree. In consonance therewith, the Authority is hereby
declared exempt:
xxx xxx xxx
(b) From all income taxes, franchise taxes, realty taxes and all
other kinds of taxes and licenses to be paid to the National
Government, its provinces, cities, municipalities and other
government agencies and instrumentalities[.] ADEaHT
The Special Economic Zone Act of 1995, on the other hand, does
not specifically exempt the PEZA from payment of real property
taxes.
Nevertheless, we rule that the PEZA is exempt from real property
taxes by virtue of its charter. A provision in the Special Economic
Zone Act of 1995 explicitly exempting the PEZA is unnecessary.
The PEZA assumed the real property exemption of the EPZA
under Presidential Decree No. 66.
Section 11 of the Special Economic Zone Act of 1995 mandated
the EPZA "to evolve into the PEZA in accordance with the
guidelines and regulations set forth in an executive order issued
for this purpose." President Ramos then issued Executive Order
No. 282 in 1995, ordering the PEZA to assume the EPZA's
powers, functions, and responsibilities under Presidential Decree
No. 66 not inconsistent with the Special Economic Zone Act of
1995:
SECTION 1. Assumption of EPZA's Powers and Functions by
PEZA. All the powers, functions and responsibilities of EPZA as
provided under its Charter, Presidential Decree No. 66, as
amended, insofar as they are not inconsistent with the powers,
functions and responsibilities of the PEZA, as mandated under
Republic Act No. 7916, shall hereafter be assumed and exercised
by the PEZA. Henceforth, the EPZA shall be referred to as the
PEZA. TICaEc
The following sections of the Special Economic Zone Act of 1995
provide for the PEZA's powers, functions, and responsibilities:
SEC. 5. Establishment of ECOZONES. — To ensure the viability and
geographical dispersal of ECOZONES through a system of
prioritization, the following areas are initially identified as
ECOZONES, subject to the criteria specified in Section 6:
xxx xxx xxx
The metes and bounds of each ECOZONE are to be delineated
and more particularly described in a proclamation to be issued
by the President of the Philippines, upon the recommendation of
the Philippine Economic Zone Authority (PEZA), which shall be
established under this Act, in coordination with the municipal
and/or city council, National Land Use Coordinating Committee
and/or the Regional Land Use Committee.
SEC. 6. Criteria for the Establishment of Other ECOZONES. — In
addition to the ECOZONES identified in Section 5 of this Act,
other areas may be established as ECOZONES in a proclamation
to be issued by the President of the Philippines subject to the
evaluation and recommendation of the PEZA, based on a detailed
feasibility and engineering study which must conform to the
following criteria:
77
(a) The proposed area must be identified as a regional growth
center in the Medium-Term Philippine Development Plan or by
the Regional Development Council;
(b) The existence of required infrastructure in the proposed
ECOZONE, such as roads, railways, telephones, ports, airports,
etc., and the suitability and capacity of the proposed site to
absorb such improvements; cSCTID
(c) The availability of water source and electric power supply for
use of the ECOZONE;
(d) The extent of vacant lands available for industrial and
commercial development and future expansion of the ECOZONE
as well as of lands adjacent to the ECOZONE available for
development of residential areas for the ECOZONE workers;
(e) The availability of skilled, semi-skilled and non-skilled
trainable labor force in and around the ECOZONE;
(f) The area must have a significant incremental advantage over
the existing economic zones and its potential profitability can be
established;
(g) The area must be strategically located; and
(h) The area must be situated where controls can easily be
established to curtail smuggling activities.
Other areas which do not meet the foregoing criteria may be
established as ECOZONES: Provided, That the said area shall be
developed only through local government and/or private sector
initiative under any of the schemes allowed in Republic Act No.
6957 (the build-operate-transfer law), and without any financial
exposure on the part of the national government: Provided,
further, That the area can be easily secured to curtail smuggling
activities: Provided, finally, That after five (5) years the area
must have attained a substantial degree of development, the
indicators of which shall be formulated by the PEZA. AHDaET
SEC. 7. ECOZONE to be a Decentralized Agro-Industrial, Industrial,
Commercial/Trading, Tourist, Investment and Financial
Community. — Within the framework of the Constitution, the
interest of national sovereignty and territorial integrity of the
Republic, ECOZONE shall be developed, as much as possible, into
a decentralized, self-reliant and self-sustaining industrial,
commercial/trading, agro-industrial, tourist, banking, financial
and investment center with minimum government intervention.
Each ECOZONE shall be provided with transportation,
telecommunications, and other facilities needed to generate
linkage with industries and employment opportunities for its
own inhabitants and those of nearby towns and cities. SaIEcA
The ECOZONE shall administer itself on economic, financial,
industrial, tourism development and such other matters within
the exclusive competence of the national government.
The ECOZONE may establish mutually beneficial economic
relations with other entities within the country, or, subject to the
administrative guidance of the Department of Foreign Affairs
and/or the Department of Trade and Industry, with foreign
entities or enterprises.
Foreign citizens and companies owned by non-Filipinos in
whatever proportion may set up enterprises in the ECOZONE,
either by themselves or in joint venture with Filipinos in any
sector of industry, international trade and commerce within the
ECOZONE. Their assets, profits and other legitimate interests
shall be protected: Provided, That the ECOZONE through the
PEZA may require a minimum investment for any ECOZONE
enterprises in freely convertible currencies: Provided, further,
That the new investment shall fall under the priorities, thrusts
and limits provided for in the Act.
SEC. 8. ECOZONE to be Operated and Managed as Separate
Customs Territory. — The ECOZONE shall be managed and
operated by the PEZA as separate customs territory.
The PEZA is hereby vested with the authority to issue certificate
of origin for products manufactured or processed in each
ECOZONE in accordance with the prevailing rules or origin, and
the pertinent regulations of the Department of Trade and
Industry and/or the Department of Finance.
SEC. 9. Defense and Security. — The defense of the ECOZONE and
the security of its perimeter fence shall be the responsibility of
the national government in coordination with the PEZA. Military
forces sent by the national government for the purpose of
defense shall not interfere in the internal affairs of any of the
ECOZONE and expenditure for these military forces shall be
borne by the national government. The PEZA may provide and
establish the ECOZONES' internal security and firefighting forces.
SEC. 10. Immigration. — Any investor within the ECOZONE
whose initial investment shall not be less than One Hundred Fifty
Thousand Dollars ($150,000.00), his/her spouse and dependent
78
children under twenty-one (21) years of age shall be granted
permanent resident status within the ECOZONE. They shall have
freedom of ingress and egress to and from the ECOZONE without
any need of special authorization from the Bureau of
Immigration.
The PEZA shall issue working visas renewable every two (2)
years to foreign executives and other aliens, processing highly-
technical skills which no Filipino within the ECOZONE possesses,
as certified by the Department of Labor and Employment. The
names of aliens granted permanent resident status and working
visas by the PEZA shall be reported to the Bureau of Immigration
within thirty (30) days after issuance thereof.
SEC. 13. General Powers and Functions of the Authority. — The
PEZA shall have the following powers and functions:
(a) To operate, administer, manage and develop the ECOZONE
according to the principles and provisions set forth in this Act;
ADcEST
(b) To register, regulate and supervise the enterprises in the
ECOZONE in an efficient and decentralized manner;
(c) To coordinate with local government units and exercise
general supervision over the development, plans, activities and
operations of the ECOZONES, industrial estates, export
processing zones, free trade zones, and the like;
(d) In coordination with local government units concerned and
appropriate agencies, to construct, acquire, own, lease, operate
and maintain on its own or through contract, franchise, license,
bulk purchase from the private sector and build-operate-transfer
scheme or joint venture, adequate facilities and infrastructure,
such as light and power systems, water supply and distribution
systems, telecommunication and transportation, buildings,
structures, warehouses, roads, bridges, ports and other facilities
for the operation and development of the ECOZONE;
(e) To create, operate and/or contract to operate such agencies
and functional units or offices of the authority as it may deem
necessary;
(f) To adopt, alter and use a corporate seal; make contracts,
lease, own or otherwise dispose of personal or real property; sue
and be sued; and otherwise carry out its duties and functions as
provided for in this Act;
(g) To coordinate the formulation and preparation of the
development plans of the different entities mentioned above;
(h) To coordinate with the National Economic Development
Authority (NEDA), the Department of Trade and Industry (DTI),
the Department of Science and Technology (DOST), and the local
government units and appropriate government agencies for
policy and program formulation and implementation; and
(i) To monitor and evaluate the development and requirements
of entities in subsection (a) and recommend to the local
government units or other appropriate authorities the location,
incentives, basic services, utilities and infrastructure required or
to be made available for said entities.
SEC. 17. Investigation and Inquiries. — Upon a written formal
complaint made under oath, which on its face provides
reasonable basis to believe that some anomaly or irregularity
might have been committed, the PEZA or the administrator of the
ECOZONE concerned, shall have the power to inquire into the
conduct of firms or employees of the ECOZONE and to conduct
investigations, and for that purpose may subpoena witnesses,
administer oaths, and compel the production of books, papers,
and other evidences: Provided, That to arrive at the truth, the
investigator(s) may grant immunity from prosecution to any
person whose testimony or whose possessions of documents or
other evidence is necessary or convenient to determine the truth
in any investigation conducted by him or under the authority of
the PEZA or the administrator of the ECOZONE concerned.
SEC. 21. Development Strategy of the ECOZONE. — The strategy
and priority of development of each ECOZONE established
pursuant to this Act shall be formulated by the PEZA, in
coordination with the Department of Trade and Industry and the
National Economic and Development Authority; Provided, That
such development strategy is consistent with the priorities of the
national government as outlined in the medium-term Philippine
development plan. It shall be the policy of the government and
the PEZA to encourage and provide Incentives and facilitate
private sector participation in the construction and operation of
public utilities and infrastructure in the ECOZONE, using any of
the schemes allowed in Republic Act No. 6957 (the build-
operate-transfer law). AaHcIT
79
SEC. 22. Survey of Resources. — The PEZA shall, in coordination
with appropriate authorities and neighboring cities and
municipalities, immediately conduct a survey of the physical,
natural assets and potentialities of the ECOZONE areas under its
jurisdiction.
SEC. 26. Domestic Sales. — Goods manufactured by an ECOZONE
enterprise shall be made available for immediate retail sales in
the domestic market, subject to payment of corresponding taxes
on the raw materials and other regulations that may be adopted
by the Board of the PEZA.
However, in order to protect the domestic industry, there shall
be a negative list of Industries that will be drawn up by the PEZA.
Enterprises engaged in the industries included in the negative
list shall not be allowed to sell their products locally. Said
negative list shall be regularly updated by the PEZA.
The PEZA, in coordination with the Department of Trade and
Industry and the Bureau of Customs, shall jointly issue the
necessary implementing rules and guidelines for the effective
Implementation of this section. THaDAE
SEC. 29. Eminent Domain. — The areas comprising an ECOZONE
may be expanded or reduced when necessary. For this purpose,
the government shall have the power to acquire, either by
purchase, negotiation or condemnation proceedings, any private
lands within or adjacent to the ECOZONE for:
a. Consolidation of lands for zone development purposes;
b. Acquisition of right of way to the ECOZONE; and
c. The protection of watershed areas and natural assets valuable
to the prosperity of the ECOZONE.
If in the establishment of a publicly-owned ECOZONE, any person
or group of persons who has been occupying a parcel of land
within the Zone has to be evicted, the PEZA shall provide the
person or group of persons concerned with proper disturbance
compensation: Provided, however, That in the case of displaced
agrarian reform beneficiaries, they shall be entitled to the
benefits under the Comprehensive Agrarian Reform Law,
including but not limited to Section 36 of Republic Act No. 3844,
in addition to a homelot in the relocation site and preferential
employment in the project being undertaken.
SEC. 32. Shipping and Shipping Register. — Private shipping and
related business including private container terminals may
operate freely in the ECOZONE, subject only to such minimum
reasonable regulations of local application which the PEZA may
prescribe.
The PEZA shall, in coordination with the Department of
Transportation and Communications, maintain a shipping
register for each ECOZONE as a business register of convenience
for ocean-going vessels and issue related certification.
Ships of all sizes, descriptions and nationalities shall enjoy access
to the ports of the ECOZONE, subject only to such reasonable
requirement as may be prescribed by the PEZA in coordination
with the appropriate agencies of the national government.
SEC. 33. Protection of Environment. — The PEZA, in coordination
with the appropriate agencies, shall take concrete and
appropriate steps and enact the proper measure for the
protection of the local environment. aSIAHC
SEC. 34. Termination of Business. — Investors in the ECOZONE
who desire to terminate business or operations shall comply
with such requirements and procedures which the PEZA shall
set, particularly those relating to the clearing of debts. The assets
of the closed enterprise can be transferred and the funds con be
remitted out of the ECOZONE subject to the rules, guidelines and
procedures prescribed jointly by the Bangko Sentral ng Pilipinas,
the Department of Finance and the PEZA.
SEC. 35. Registration of Business Enterprises. — Business
enterprises within a designated ECOZONE shall register with the
PEZA to avail of all incentives and benefits provided for in this
Act.
SEC. 36. One Stop Shop Center. — The PEZA shall establish a one
stop shop center for the purpose of facilitating the registration of
new enterprises in the ECOZONE. Thus, all appropriate
government agencies that are involved in registering, licensing
or issuing permits to investors shall assign their representatives
to the ECOZONE to attend to Investor's requirements.
SEC. 39. Master Employment Contracts. — The PEZA, in
coordination with the Department of Labor and Employment,
shall prescribe a master employment contract for all ECOZONE
enterprise staff members and workers, the terms of which
provide salaries and benefits not less than those provided under
this Act, the Philippine Labor Code, as amended, and other
relevant issuances of the national government.
80
SEC. 41. Migrant Worker. — The PEZA, in coordination with the
Department of Labor and Employment, shall promulgate
appropriate measures and programs leading to the expansion of
the services of the ECOZONE to help the local governments of
nearby areas meet the needs of the migrant workers. HCaDIS
SEC. 42. Incentive Scheme. — An additional deduction equivalent
to one-half (1/2) of the value of training expenses incurred in
developing skilled or unskilled labor or for managerial or other
management development programs incurred by enterprises in
the ECOZONE can be deducted from the national government's
share of three percent (3%) as provided in Section 24.
The PEZA, the Department of Labor and Employment, and the
Department of Finance shall jointly make a review of the
incentive scheme provided in this section every two (2) years or
when circumstances so warrant.
SEC. 43. Relationship with the Regional Development Council. —
The PEZA shall determine the development goals for the
ECOZONE within the framework of national development plans,
policies and goals, and the administrator shall, upon approval by
the PEZA Board, submit the ECOZONE plans, programs and
projects to the regional development council for inclusion in and
as inputs to the overall regional development plan. cHTCaI
SEC. 44. Relationship with the Local Government Units. — Except
as herein provided, the local government units comprising the
ECOZONE shall retain their basic autonomy and identity. The
cities shall be governed by their respective charters and the
municipalities shall operate and function in accordance with
Republic Act No. 7160, otherwise known as the Local
Government Code of 1991.
SEC. 45. Relationship of PEZA to Privately-Owned Industrial
Estates. — Privately-owned industrial estates shall retain their
autonomy and independence and shall be monitored by the PEZA
for the implementation of incentives. HIaTDS
SEC. 46. Transfer of Resources. — The relevant functions of the
Board of Investments over industrial estates and agri-export
processing estates shall be transferred to the PEZA. The
resources of government-owned Industrial estates and similar
bodies except the Bases Conversion Development Authority and
those areas identified under Republic Act No. 7227, are hereby
transferred to the PEZA as the holding agency. They are hereby
detached from their mother agencies and attached to the PEZA
for policy, program and operational supervision.
The Boards of the affected government-owned industrial estates
shall be phased out and only the management level and an
appropriate number of personnel shall be retained. ScTIAH
Government personnel whose services are not retained by the
PEZA or any government office within the ECOZONE shall be
entitled to separation pay and such retirement and other
benefits they are entitled to under the laws then in force at the
time of their separation: Provided, That in no case shall the
separation pay be less than one and one-fourth (1 1/4) month of
every year of service.
The non-profit character of the EPZA under Presidential Decree
No. 66 is not inconsistent with any of the powers, functions, and
responsibilities of the PEZA. The EPZA's non-profit character,
including the EPZA's exemption from real property taxes, must
be deemed assumed by the PEZA.
In addition, the Local Government Code exempting
instrumentalities of the national government from real property
taxes was already in force 274 when the PEZA's charter was
enacted in 1995. It would have been redundant to provide for the
PEZA's exemption in its charter considering that the PEZA is
already exempt by virtue of Section 133 (o) of the Local
Government Code.
As for the EPZA, Commonwealth Act No. 470 or the Assessment
Law was in force when the EPZA's charter was enacted. Unlike
the Local Government Code, Commonwealth Act No. 470 does
not contain a provision specifically exempting instrumentalities
of the national government from payment of real property taxes.
275 It was necessary to put an exempting provision in the
EPZA's charter.
Contrary to the PEZA's claim, however, Section 24 of the Special
Economic Zone Act of 1995 is not a basis for the PEZA's
exemption. Section 24 of the Special Economic Zone Act of 1995
provides: DEaCSA
Sec. 24. Exemption from National and Local Taxes. — Except for
real property taxes on land owned by developers, no taxes, local
and national, shall be imposed on business establishments
operating within the ECOZONE. In lieu thereof, five percent (5%)
81
of the gross income earned by all business enterprises within the
ECOZONE shall be paid and remitted as follows:
(a) Three percent (3%) to the National Government;
(b) Two percent (2%) which shall be directly remitted by the
business establishments to the treasurer's office of the
municipality or city where the enterprise is located. (Emphasis
supplied)
Tax exemptions provided under Section 24 apply only to
business establishments operating within economic zones.
Considering that the PEZA is not a business establishment but an
instrumentality performing governmental functions, Section 24
is inapplicable to the PEZA.
Also, contrary to the PEZA's claim, developers of economic zones,
whether public or private developers, are liable for real property
taxes on lands they own. Section 24 does not distinguish
between a public and private developer. Thus, courts cannot
distinguish. 276 Unless the public developer is exempt under the
Local Government Code or under its charter enacted after the
Local Government Code's effectivity, the public developer must
pay real property taxes on their land. HAIaEc
At any rate, the PEZA cannot be taxed for real property taxes
even if it acts as a developer or operator of special economic
zones. The PEZA is an instrumentality of the national
government exempt from payment of real property taxes under
Section 133 (o) of the Local Government Code. As this court said
in Manila International Airport Authority, "there must be express
language in the law empowering local governments to tax
national government instrumentalities. Any doubt whether such
power exists is resolved against local governments." 277
V. (C)
Real properties under the PEZA's title are owned by the Republic
of the
Philippines
Under Section 234 (a) of the Local Government Code, real
properties owned by the Republic of the Philippines are exempt
from real property taxes:
SEC. 234. Exemptions from Real Property Tax. — The following
are exempted from payment of real property tax:
(a) Real property owned by the Republic of the Philippines or
any of its political subdivisions except when the beneficial use
thereof has been granted, for consideration or otherwise, to a
taxable person[.]
Properties owned by the state are either property of public
dominion or patrimonial property. Article 420 of the Civil Code
of the Philippines enumerates property of public dominion:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character; HcSDIE
(2) Those which belong to the State, without belonging for public
use, and are intended for some public service or for the
development of the national wealth.
Properties of public dominion are outside the commerce of man.
These properties are exempt from "levy, encumbrance or
disposition through public or private sale." 278 As this court
explained in Manila International Airport Authority:
Properties of public dominion, being for public use, are not
subject to levy, encumbrance or disposition through public or
private sale. Any encumbrance, levy on execution or auction sale
of any property of public dominion is void for being contrary to
public policy. Essential public services will stop if properties of
public dominion are subject to encumbrances, foreclosures and
auction sale[.] 279 THAICD
On the other hand, all other properties of the state that are not
intended for public use or are not intended for some public
service or for the development of the national wealth are
patrimonial properties. Article 421 of the Civil Code of the
Philippines provides:
Art. 421. All other property of the State, which is not of the
character stated in the preceding article, is patrimonial property.
Patrimonial properties are also properties of the state, but the
state may dispose of its patrimonial property similar to private
persons disposing of their property. Patrimonial properties are
within the commerce of man and are susceptible to prescription,
unless otherwise provided. 280
In this case, the properties sought to be taxed are located in
publicly owned economic zones. These economic zones are
property of public dominion. The City seeks to tax properties
located within the Mactan Economic Zone, 281 the site of which
was reserved by President Marcos under Proclamation No. 1811,
82
Series of 1979. Reserved lands are lands of the public domain set
aside for settlement or public use, and for specific public
purposes by virtue of a presidential proclamation. 282 Reserved
lands are inalienable and outside the commerce of man, 283 and
remain property of the Republic until withdrawn from public use
either by law or presidential proclamation. 284 Since no law or
presidential proclamation has been issued withdrawing the site
of the Mactan Economic Zone from public use, the property
remains reserved land.
As for the Bataan Economic Zone, the law consistently
characterized the property as a port. Under Republic Act No.
5490, Congress declared Mariveles, Bataan "a principal port of
entry" 285 to serve as site of a foreign trade zone where foreign
and domestic merchandise may be brought in without being
subject to customs and internal revenue laws and regulations of
the Philippines. 286 Section 4 of Republic Act No. 5490 provided
that the foreign trade zone in Mariveles, Bataan "shall at all times
remain to be owned by the Government": cAISTC
SEC. 4. Powers and Duties. — The Foreign Trade Zone Authority
shall have the following powers and duties:
a. To fix and delimit the site of the Zone which at all times remain
to be owned by the Government, and which shall have a
contiguous and adequate area with well defined and policed
boundaries, with adequate enclosures to segregate the Zone
from the customs territory for protection of revenues, together
with suitable provisions for ingress and egress of persons,
conveyance, vessels and merchandise sufficient for the purpose
of this Act[.] (Emphasis supplied)
The port in Mariveles, Bataan then became the Bataan Economic
Zone under the Special Economic Zone Act of 1995. 287 Republic
Act No. 9728 then converted the Bataan Economic Zone into the
Freeport Area of Bataan. 288
A port of entry, where imported goods are unloaded then
introduced in the market for public consumption, is considered
property for public use. Thus, Article 420 of the Civil Code
classifies a port as property of public dominion. The Freeport
Area of Bataan, where the government allows tax and duty-free
importation of goods, 289 is considered property of public
dominion. The Freeport Area of Bataan is owned by the state and
cannot be taxed under Section 234 (a) of the Local Government
Code. cTCaEA
Properties of public dominion, even if titled in the name of an
instrumentality as in this case, remain owned by the Republic of
the Philippines. If property registered in the name of an
instrumentality is conveyed to another person, the property is
considered conveyed on behalf of the Republic of the Philippines.
Book I, Chapter 12, Section 48 of the Administrative Code of
1987 provides:
SEC. 48. Official Authorized to Convey Real Property. — Whenever
real property of the government is authorized by law to be
conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
xxx xxx xxx
(2) For property belonging to the Republic of the Philippines, but
titled in the name of any political subdivision or of any corporate
agency or instrumentality, by the executive head of the agency or
instrumentality. (Emphasis supplied)
In Manila International Airport Authority, this court explained:
[The exemption under Section 234(a) of the Local Government
Code] should be read in relation with Section 133(o) of the same
Code, which prohibits local governments from imposing "[t]axes,
fees or charges of any kind on the National Government, its
agencies and instrumentalities . . . ." The real properties owned by
the Republic are titled either in the name of the Republic itself or in
the name of agencies or instrumentalities of the National
Government. The Administrative Code allows real property
owned by the Republic to be titled in the name of agencies or
instrumentalities of the national government. Such real
properties remained owned by the Republic of the Philippines
and continue to be exempt from real estate tax. aIcDCH
The Republic may grant the beneficial use of its real property to
an agency or instrumentality of the national government. This
happens when title of the real property is transferred to an
agency or instrumentality even as the Republic remains the
owner of the real property. Such arrangement does not result in
the loss of the tax exemption/Section 234(a) of the Local
Government Code states that real property owned by the
Republic loses its tax exemption only if the "beneficial use
83
thereof has been granted, for consideration or otherwise, to a
taxable person." 290 (Emphasis in the original; italics supplied)
Even the PEZA's lands and buildings whose beneficial use have
been granted to other persons may not be taxed with real
property taxes. The PEZA may only lease its lands and buildings
to PEZA-registered economic zone enterprises and entities. 291
These PEZA-registered enterprises and entities, which operate
within economic zones, are not subject to real property taxes.
Under Section 24 of the Special Economic Zone Act of 1995, no
taxes, whether local or national, shall be imposed on all business
establishments operating within the economic zones:
SEC. 24. Exemption from National and Local Taxes. — Except for
real property on land owned by developers, no taxes, local and
national, shall be imposed on business establishments operating
within the ECOZONE. In lieu thereof, five percent (5%) of the
gross income earned by all business enterprises within the
ECOZONE shall be paid and remitted as follows: DTcHaA
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the
business establishments to the treasurer's office of the
municipality or city where the enterprise is located. 292
(Emphasis supplied)
In lieu of revenues from real property taxes, the City of Lapu-
Lapu collects two-fifths of 5% final tax on gross income paid by
all business establishments operating within the Mactan
Economic Zone:
SEC. 24. Exemption from National and Local Taxes. — Except for
real property on land owned by developers, no taxes, local and
national, shall be imposed on business establishments operating
within the ECOZONE. In lieu thereof, five percent (5%) of the
gross income earned by all business enterprises within the
ECOZONE shall be paid and remitted as follows: CITaSA
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the
business establishments to the treasurer's office of the municipality
or city where the enterprise is located. 293 (Emphasis supplied)
For its part, the Province of Bataan collects a fifth of the 5% final
tax on gross income paid by all business establishments
operating within the Freeport Area of Bataan:
Section 6. Imposition of a Tax Rate of Five Percent (5%) on Gross
Income Earned. — No taxes, local and national, shall be imposed
on business establishments operating within the FAB. In lieu
thereof, said business establishments shall pay a five percent
(5%) final tax on their gross income earned in the following
percentages:
(a) One per centum (1%) to the National Government;
(b) One per centum (1%) to the Province of Bataan;
(c) One per centum (1%) to the treasurer's office of the
Municipality of Mariveles; and
(d) Two per centum (2%) to the Authority of the Freeport of
Area of Bataan. 294 (Emphasis supplied) ATcaEH
Petitioners, therefore, are not deprived of revenues from the
operations of economic zones within their respective territorial
jurisdictions. The national government ensured that local
government units comprising economic zones shall retain their
basic autonomy and identity. 295
All told, the PEZA is an instrumentality of the national
government. Furthermore, the lands owned by the PEZA are real
properties owned by the Republic of the Philippines. The City of
Lapu-Lapu and the Province of Bataan cannot collect real
property taxes from the PEZA.
WHEREFORE, the consolidated petitions are DENIED.
SO ORDERED.
Carpio, Del Castillo, Mendoza and Reyes, * JJ., concur.
||| (City of Lapu-Lapu v. Phil. Economic Zone Authority, G.R. Nos.
184203 & 187583, [November 26, 2014])
84
SECOND DIVISION
[G.R. No. 172457. December 24, 2008.]
CJH DEVELOPMENT CORPORATION, petitioner, vs. BUREAU
OF INTERNAL REVENUE, BUREAU OF CUSTOMS, DISTRICT
COLLECTOR OF CUSTOMS EDWARD O. BALTAZAR,
respondents.
DECISION
TINGA, J p:
Before us is a petition for review on certiorari 1 seeking the
reversal of the orders dated 14 October 2005 2 and 04 April
2006 3 of the Regional Trial Court (RTC) of Baguio City, Branch 5.
The RTC dismissed the petition for declaratory relief filed by
petitioner CJH Development Corporation (CJH). This petition was
brought directly to this Court since it involves a pure question of
law in accordance with Rule 50 of the 1997 Revised Rules of
Court. TIaEDC
Proclamation No. 420 (the Proclamation) was issued by then
President Fidel V. Ramos to create a Special Economic Zone
(SEZ) in a portion of Camp John Hay in Baguio City. Section 3 4 of
the Proclamation granted to the newly created SEZ the same
incentives then already enjoyed by the Subic SEZ. Among these
incentives are the exemption from the payment of taxes, both
local and national, for businesses located inside the SEZ, and the
operation of the SEZ as a special customs territory providing for
tax and duty free importations of raw materials, capital and
equipment. 5
In line with the Proclamation, the Bureau of Internal Revenue
(BIR) issued Revenue Regulations No. 12-97 6 while the Bureau
of Customs (BOC) issued Customs Administrative Order No. 2-98.
7 The two issuances provided the rules and regulations to be
implemented within the Camp John Hay SEZ. Subsequently,
however, Section 3 of the Proclamation was declared
unconstitutional in part by the Court en banc in John Hay Peoples
Alternative Coalition v. Lim, 8 when it ruled that: SEAHcT
WHEREORE, the second sentence of Section 3 of Proclamation
No. 420 is hereby declared NULL and VOID and is accordingly
declared of no legal force and effect. Public respondents are
hereby enjoined from implementing the aforesaid void provision.
Proclamation No. 420, without the invalidated portion, remains
valid and effective. 9
The decision attained finality when the Court en banc denied the
motion for reconsideration through a resolution dated 29 March
2005. 10
While the motion for reconsideration was pending with the
Court, on 16 January 2004 the Office of the City Treasurer of
Baguio sent a demand letter 11 which stated that:
In view of the Supreme Court decision dated October 24, 2003 on
G.R. No. 119775, declaring null and void Section 3 of
Proclamation 420 on applicable incentives of Special Economic
Zones, we are sending you updated statements of real property
taxes due on real estate properties declared under the names of
the Bases Conversion and Development Authority and Camp
John Hay Development Corporation totaling P101,935,634.17
inclusive of penalties, as of January 10, 2004.
May we request for the immediate settlement of the above
indebtedness, otherwise this office shall be constrained to hold
the processing of your business permit pursuant to Section 2 C
c.1 of Tax Ordinance 2000-001 of Baguio City. DIESaC
Five months later, on 26 May 2005, the BOC followed suit and
demanded 12 of CJH the payment of P71,983,753.00
representing the duties and taxes due on all the importations
made by CJH from 1998 to 2004. For its part, the BIR sent a letter
dated 23 May 2005 to CJH wherein it treated CJH as an ordinary
corporation subject to the regular corporate income tax as well
as to the Value Added Tax of 1997. 13
CJH questioned the retroactive application by the BOC of the
decision of this Court in G.R. No. 119775. It claimed that the
assessment was null and void because it violated the non-
retroactive principle under the Tariff and Customs Code. 14
The Office of the Solicitor General (OSG) filed a motion to
dismiss. 15 The OSG claimed that the remedy of declaratory
relief is inapplicable because an assessment is not a proper
subject of such petition. It further alleged that there are
administrative remedies which were available to CJH.
In an Order 16 dated 28 June 2005, the RTC dropped the City of
Baguio as a party to the case. The remaining parties were
required to submit their respective memoranda. On 14 October
2005, the RTC rendered its assailed order. 17 It held that the
85
decision in G.R. No. 119775 applies retroactively because the tax
exemption granted by Proclamation No. 420 is null and void
from the beginning. The RTC also ruled that the petition for
declaratory relief is not the appropriate remedy. A judgment of
the court cannot be the proper subject of a petition for
declaratory relief; the enumeration in Rule 64 is exclusive.
Moreover, the RTC held that Commonwealth Act No. 55 (CA No.
55) which proscribes the use of declaratory relief in cases where
a taxpayer questions his tax liability is still in force and effect.
THaCAI
CJH filed a motion for reconsideration but the RTC denied it. 18
Hence this petition, which, as earlier stated, was filed directly to
this Court, raising as it does only pure questions of law.
There are two issues raised in this petition, one procedural and
the other substantive. First, is the remedy of declaratory relief
proper in this case? Second, can the decision in G.R. No. 119775
be applied retroactively?
The requisites for a petition for declaratory relief to prosper are:
(1) there must be a justiciable controversy; (2) the controversy
must be between persons whose interests are adverse; (3) the
party seeking declaratory relief must have a legal interest in the
controversy; and (4) the issue involved must be ripe for judicial
determination. 19
CJH alleges that CA No. 55 20 has already been repealed by the
Rules of Court; thus, the remedy of declaratory relief against the
assessment made by the BOC is proper. It cited the
commentaries of Moran allegedly to the effect that declaratory
relief lies against assessments made by the BIR and BOC. Yet in
National Dental Supply Co. v. Meer, 21 this Court held that:
From the opinion of the former Chief Justice Moran may be
deduced that the failure to incorporate the above proviso [CA No.
55] in section 1, rule 66, [now Rule 64] is not due to an intention
to repeal it but rather to the desire to leave its application to the
sound discretion of the court, which is the sole arbiter to
determine whether a case is meritorious or not. And even if it be
desired to incorporate it in rule 66, it is doubted if it could be
done under the rule-making power of the Supreme Court
considering that the nature of said proviso is substantive and not
adjective, its purpose being to lay down a policy as to the right of
a taxpayer to contest the collection of taxes on the part of a
revenue officer or of the Government. With the adoption of said
proviso, our law-making body has asserted its policy on the
matter, which is to prohibit a taxpayer to question his liability for
the payment of any tax that may be collected by the Bureau of
Internal Revenue. As this Court well said, quoting from several
American cases, "The Government may fix the conditions upon
which it will consent to litigate the validity of its original taxes. .
." "The power of taxation being legislative, all incidents are
within the control of the Legislature." In other words, it is our
considered opinion that the proviso contained in Commonwealth
Act No. 55 is still in full force and effect and bars the plaintiff
from filing the present action. 22 (Emphasis supplied) (Citations
omitted.) DHATcE
As a substantive law that has not been repealed by another
statute, CA No. 55 is still in effect and holds sway. Precisely, it has
removed from the courts' jurisdiction over petitions for
declaratory relief involving tax assessments. The Court cannot
repeal, modify or alter an act of the Legislature.
Moreover, the proper subject matter of a declaratory relief is a
deed, will, contract, or other written instrument, or the
construction or validity of statute or ordinance. 23 CJH hinges its
petition on the demand letter or assessment sent to it by the
BOC. However, it is really not the demand letter which is the
subject matter of the petition. Ultimately, this Court is asked to
determine whether the decision of the Court en banc in G.R. No.
119775 has a retroactive effect. This approach cannot be
countenanced. A petition for declaratory relief cannot properly
have a court decision as its subject matter. In Tanda v. Aldaya, 24
we ruled that: SATDHE
. . . [A] court decision cannot be interpreted as included within
the purview of the words "other written instrument", as
contended by appellant, for the simple reason that the Rules of
Court already provide[s] for the ways by which an ambiguous or
doubtful decision may be corrected or clarified without need of
resorting to the expedient prescribed by Rule 66 [now Rule 64].
25
There are other remedies available to a party who is not
agreeable to a decision whether it be a question of law or fact. If
it involves a decision of an appellate court, the party may file a
motion for reconsideration or new trial in order that the defect
86
may be corrected. 26 In case of ambiguity of the decision, a party
may file a motion for a clarificatory judgment. 27 One of the
requisites of a declaratory relief is that the issue must be ripe for
judicial determination. This means that litigation is inevitable 28
or there is no adequate relief available in any other form or
proceeding. 29 TCacIE
However, CJH is not left without recourse. The Tariff and
Customs Code (TCC) provides for the administrative and judicial
remedies available to a taxpayer who is minded to contest an
assessment, subject of course to certain reglementary periods.
The TCC provides that a protest can be raised provided that
payment first be made of the amount due. 30 The decision of the
Collector can be reviewed by the Commissioner of Customs who
can approve, modify or reverse the decision or action of the
Collector. 31 If the party is not satisfied with the ruling of the
Commissioner, he may file the necessary appeal to the Court of
Tax Appeals. 32 Afterwards, the decision of the Court of Tax
Appeals can be appealed to this Court.
With the foregoing disquisition on the first issue, there is no need
to delve into the second issue at this juncture. It should be noted
though, as admitted by CJH in its Certificate of Non-Forum
Shopping, 33 that even before the filing of this petition, it already
had a pending petition for review with this Court, docketed as
G.R. No. 169234 34 and entitled, Camp John Hay Development
Corporation v. Central Board of Assessment Appeals, et al. That
case emanated from assessments made in 2002 for real estate
taxes on CJH by the City of Baguio. Said assessments were duly
challenged before the Local Board of Assessment Appeals, the
Central Board of Assessment Appeals and the Court of Tax
Appeals. The petition in G.R. No. 169234 was filed with this Court
in September 2005, or after our 2003 Decision in John Hay
Peoples Alternative Coalition had attained finality. CJH therein
raised the same question of law, as in this case, whether the
doctrine of operative fact applies to G.R. No. 119775. Clearly, the
Court in G.R. No. 169234 is better positioned to resolve that
question of law, there being no antecedent jurisdictional defects
that would preclude the Court from squarely deciding that
particular issue. CJH is free to reiterate this current point of
clarification as it litigates the petition in G.R. No. 169234. caTESD
WHEREFORE, the Petition is DENIED.
SO ORDERED.
Quisumbing, Carpio-Morales, Velasco, Jr. and Brion, JJ., concur.
||| (CJH Development Corporation v. Bureau of Internal Revenue,
G.R. No. 172457, [December 24, 2008], 595 PHIL 1051-1060)
THIRD DIVISION
[G.R. No. 126911. April 30, 2003.]
PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner,
vs. THE HONORABLE COURT OF APPEALS and JOSE ABAD,
LEONOR ABAD, SABINA ABAD, JOSEPHINE "JOSIE" BEATA
ABAD-ORLINA, CECILIA ABAD, PIO ABAD, DOMINIC ABAD,
TEODORA ABAD, respondents.
The Chief Legal Counsel for petitioner.
Dolores P. Abad and Leonora P. Abad for private respondents.
SYNOPSIS
Respondents filed claims with the Philippine Deposit Insurance
Corporation (PDIC) for the payment of the twenty insured golden
time deposits (GTDs) at the Manila Banking Corporation (MBC),
Iloilo Branch. PDIC paid respondents the value of three claims;
however, it withheld the payment of the seventeen remaining
claims. Subsequently, PDIC filed a petition for declaratory relief
against respondents for a judicial declaration of the insurability
of respondents' GTDs. The trial court declared the GTDs of
respondents to be deposit liabilities of MBC, hence, are liabilities
of PDIC as statutory insurer. The Court of Appeals (CA) affirmed
the decision of the trial court, except as to the award of legal
interest which it deleted. Hence, this petition.
In affirming the decision of the CA, the Supreme Court ruled that
PDIC is liable only for deposits received by a bank in the usual
course of business. That no actual money in bills and/or coins
was handed by respondents to MBC does not mean that the
transactions on the new GTDs did not involve money and that
there was no consideration therefor, for the outstanding balance
of respondents' 71 GTDs in MBC prior to May 26, 1987 was re-
deposited by respondents under 28 new GTDs, eight of which
were pre-terminated and withdrawn by respondent Abad. MBC
87
had cash on hand — more than double the outstanding balance
of respondents' 71 GTDs — at the start of the banking day on
May 25, 1987. Since respondent Abad was at MBC soon after it
opened at 9:00 a.m. of that day, petitioner should not presume
that MBC had no cash to cover the new GTDs of respondents and
conclude that there was no consideration for said GTDs.
Petitioner having failed to overcome the presumption that the
ordinary course of business was followed, the Court found that
the 28 new GTDs were deposited in the usual course of business
of MBC.
SYLLABUS
1. COMMERCIAL LAW; INSURANCE LAW; PHILIPPINE DEPOSIT
INSURANCE CORPORATION; LIABLE ONLY FOR DEPOSITS
RECEIVED BY A BANK IN THE USUAL COURSE OF BUSINESS;
CASE AT BAR. — Under its charter, PDIC (hereafter petitioner) is
liable only for deposits received by a bank "in the usual course of
business." . . . That no actual money in bills and/or coins was
handed by respondents to MBC does not mean that the
transactions on the new GTDs did not involve money and that
there was no consideration therefor. For the outstanding balance
of respondents' 71 GTDs in MBC prior to May 26, 1987 in the
amount of P1,115,889.15 as earlier mentioned was re-deposited
by respondents under 28 new GTDs. Admittedly, MBC had
P2,841,711.90 cash on hand — more than double the
outstanding balance of respondents' 71 GTDs — at the start of
the banking day on May 25, 1987. Since respondent Jose Abad
was at MBC soon after it opened at 9:00 a.m. of that day,
petitioner should not presume that MBC had no cash to cover the
new GTDs of respondents and conclude that there was no
consideration for said GTDs. Petitioner having failed to overcome
the presumption that the ordinary course of business was
followed, this Court finds that the 28 new GTDs were deposited
"in the usual course of business" of MBC. THCSEA
2. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; DECLARATORY
RELIEF; DOES NOT PROSCRIBE THE FILING OF COUNTERCLAIM
BASED ON THE SAME TRANSACTION, DEED OR CONTRACT
SUBJECT OF THE COMPLAINT. — [A] petition for declaratory
relief does not essentially entail an executory process. There is
nothing in its nature, however, that prohibits a counterclaim
from being set-up in the same action. "Now, there is nothing in
the nature of a special civil action for declaratory relief that
proscribes the filing of a counterclaim based on the same
transaction, deed or contract subject of the complaint. A special
civil action is after all not essentially different from an ordinary
civil action, which is generally governed by Rules 1 to 56 of the
Rules of Court, except that the former deals with a special subject
matter which makes necessary some special regulation. But the
identity between their fundamental nature is such that the same
rules governing ordinary civil suits may and do apply to special
civil actions if not inconsistent with or if they may serve to
supplement the provisions of the peculiar rules governing special
civil actions."
DECISION
CARPIO MORALES, J p:
The present petition for review assails the decision of the Court
of Appeals affirming that of the Regional Trial Court of Iloilo City,
Branch 30, finding petitioner Philippine Deposit Insurance
Corporation (PDIC) liable, as statutory insurer, for the value of
20 Golden Time Deposits belonging to respondents Jose Abad,
Leonor Abad, Sabina Abad, Josephine "Josie" Beata Abad-Orlina,
Cecilia Abad, Pio Abad, Dominic Abad, and Teodora Abad at the
Manila Banking Corporation (MBC), Iloilo Branch. cDCEIA
Prior to May 22, 1997, respondents had, individually or jointly
with each other, 71 certificates of time deposits denominated as
"Golden Time Deposits" (GTD) with an aggregate face value of
P1,115,889.96. 1
On May 22, 1987, a Friday, the Monetary Board (MB) of the
Central Bank of the Philippines, now Bangko Sentral ng Pilipinas,
issued Resolution 505 2 prohibiting MBC to do business in the
Philippines, and placing its assets and affairs under receivership.
The Resolution, however, was not served on MBC until Tuesday
the following week, or on May 26, 1987, when the designated
Receiver took over. 3
On May 25, 1987, the next banking day following the issuance of
the MB Resolution, respondent Jose Abad was at the MBC at 9:00
a.m. for the purpose of pre-terminating the 71 aforementioned
GTDs and re-depositing the fund represented thereby into 28
new GTDs in denominations of P40,000.00 or less under the
88
names of herein respondents individually or jointly with each
other. 4 Of the 28 new GTDs, Jose Abad pre-terminated 8 and
withdrew the value thereof in the total amount of P320,000.00. 5
Respondents thereafter filed their claims with the PDIC for the
payment of the remaining 20 insured GTDs. 6
On February 11, 1988, PDIC paid respondents the value of 3
claims in the total amount of P120,000.00. PDIC, however,
withheld payment of the 17 remaining claims after Washington
Solidum, Deputy Receiver of MBC-Iloilo, submitted a report to
the PDIC 7 that there was massive conversion and substitution of
trust and deposit accounts on May 25, 1987 at MBC-Iloilo. 8 The
pertinent portions of the report stated:
xxx xxx xxx
On May 25, 1987 (Monday) or a day prior to the official
announcement and take-over by CB of the assets and liabilities of
The Manila Banking Corporation, the Iloilo Branch was found to
have recorded an unusually heavy movements in terms of
volume and amount for all types of deposits and trust accounts.
It appears that the impending receivership of TMBC was
somehow already known to many depositors on account of the
massive withdrawals paid on this day which practically wiped
out the branch's entire cash position. . . .
xxx xxx xxx
. . . The intention was to maximize the availment of PDIC
coverage limited to P40,000 by spreading out big accounts to as
many certificates under various nominees. . . . 9
xxx xxx xxx
Because of the report, PDIC entertained serious reservation in
recognizing respondents' GTDs as deposit liabilities of MBC-
Iloilo. Thus, on August 30, 1991, it filed a petition for declaratory
relief against respondents with the Regional Trial Court (RTC) of
Iloilo City, for a judicial declaration determination of the
insurability of respondents' GTDs at MBC-Iloilo. 10
In their Answer filed on October 24, 1991 and Amended Answer
11 filed on January 9, 1992, respondents set up a counterclaim
against PDIC whereby they asked for payment of their insured
deposits. 12
In its Decision of February 22, 1994, 13 Branch 30 of the Iloilo
RTC declared the 20 GTDs of respondents to be deposit liabilities
of MBC, hence, are liabilities of PDIC as statutory insurer. It
accordingly disposed as follows:
WHEREFORE, premises considered, judgment is hereby
rendered:
1. Declaring the 28 GTDs of the Abads which were issued by the
TMBC-Iloilo on May 25, 1987 as deposits or deposit liabilities of
the bank as the term is defined under Section 3 (f) of R.A. No.
3591, as amended;
2. Declaring PDIC, being the statutory insurer of bank deposits,
liable to the Abads for the value of the remaining 20 GTDs, the
other 8 having been paid already by TMBC Iloilo on May
25,1987;
3. Ordering PDIC to pay the Abads the value of said 20 GTDs less
the value of 3 GTDs it paid on February 11, 1988, and the
amounts it may have paid the Abads pursuant to the Order of this
Court dated September 8, 1992;
4. Ordering PDIC to pay immediately the Abads the balance of its
admitted liability as contained in the aforesaid Order of
September 8, 1992, should there be any, subject to liquidation
when this case shall have been finally decide; and
5. Ordering PDIC to pay legal interest on the remaining insured
deposits of the Abads from February 11, 1988 until they are fully
paid.
SO ORDERED.
On appeal, the Court of Appeals, by the assailed Decision of
October 21, 1996, 14 affirmed the trial court's decision except as
to the award of legal interest which it deleted.
Hence, PDIC's present Petition for Review which sets forth this
lone assignment of error:
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING
THE HOLDING OF THE TRIAL COURT THAT THE AMOUNT
REPRESENTED IN THE FACES OF THE SO CALLED "GOLDEN
TIME DEPOSITS" WERE INSURED DEPOSITS EVEN AS THEY
WERE MERE DERIVATIVES OF RESPONDENTS' PREVIOUS
ACCOUNT BALANCES WHICH WERE PRE-
TERMINATED/TERMINATED AT THE TIME THE MANILA
BANKING CORPORATION WAS ALREADY IN SERIOUS
FINANCIAL DISTRESS.
In its supplement to the petition, PDIC adds the following
assignment of error:
89
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING
THE HOLDING OF THE TRIAL COURT ORDERING PETITIONER
TO PAY RESPONDENTS' CLAIMS FOR PAYMENT OF INSURED
DEPOSITS FOR THE REASON THAT AN ACTION FOR
DECLARATORY RELIEF DOES NOT ESSENTIALLY ENTAIL AN
EXECUTORY PROCESS AS THE ONLY RELIEF THAT SHOULD
HAVE BEEN GRANTED BY THE TRIAL COURT IS A
DECLARATION OF THE RIGHTS AND DUTIES OF PETITIONER
UNDER R.A. 3591, AS AMENDED, PARTICULARLY SECTION 3(F)
THEREOF AS CONSIDERED AGAINST THE SURROUNDING
CIRCUMSTANCES OF THE MATTER IN ISSUE SOUGHT TO BE
CONSTRUED WITHOUT PREJUDICE TO OTHER MATTERS THAT
NEED TO BE CONSIDERED BY PETITIONER IN THE PROCESSING
OF RESPONDENTS' CLAIMS. TcHDIA
Under its charter, 15 PDIC (hereafter petitioner) is liable only for
deposits received by a bank "in the usual course of business." 16
Being of the firm conviction that, as the reported May 25, 1987
bank transactions were so massive, hence, irregular, petitioner
essentially seeks a judicial declaration that such transactions
were not made "in the usual course of business" and, therefore, it
cannot be made liable for deposits subject thereof. 17
Petitioner points that as MBC was prohibited from doing further
business by MB Resolution 505 as of May 22, 1987, all
transactions subsequent to such date were not done "in the usual
course of business."
Petitioner further posits that there was no consideration for the
20 GTDs subject of respondents' claim. In support of this
submission, it states that prior to March 25, 1987, when the 20
GTDs were made, MBC had been experiencing liquidity
problems, e.g., at the start of banking operations on March 25,
1987, it had only P2,841,711.90 cash on hand and at the end of
the day it was left with P27,805.81 consisting mostly of
mutilated bills and coins. 18 Hence, even if respondents had
wanted to convert the face amounts of the GTDs to cash, MBC
could not have complied with it.
Petitioner theorizes that after MBC had exhausted its cash and
could no longer sustain further withdrawal transactions, it
instead issued new GTDs as "payment" for the pre-terminated
GTDs of respondents to make sure that all the newly-issued GTDs
have face amounts which are within the statutory coverage of
deposit insurance. DHATcE
Petitioner concludes that since no cash was given by
respondents and none was received by MBC when the new GTDs
were transacted, there was no consideration therefor and, thus,
they were not validly transacted "in the usual course of business"
and no liability for deposit insurance was created. 19
Petitioner's position does not persuade.
While the MB issued Resolution 505 on May 22, 1987, a copy
thereof was served on MBC only on May 26, 1987. MBC and its
clients could be given the benefit of the doubt that they were not
aware that the MB resolution had been passed, given the
necessity of confidentiality of placing a banking institution under
receivership. 20
The evident implication of the law, therefore, is that the
appointment of a receiver may be made by the Monetary Board
without notice and hearing but its action is subject to judicial
inquiry to insure the protection of the banking institution. Stated
otherwise, due process does not necessarily require a prior
hearing; a hearing or an opportunity to be heard may be
subsequent to the closure. One can just imagine the dire
consequences of a prior hearing: bank runs would be the order of
the day, resulting in panic and hysteria. In the process, fortunes
may be wiped out, and disillusionment will run the gamut of the
entire banking community. (Italics supplied). 21
Mere conjectures that MBC had actual knowledge of its
impending closure do not suffice. The MB resolution could not
thus have nullified respondents' transactions which occurred
prior to May 26, 1987.
That no actual money in bills and/or coins was handed by
respondents to MBC does not mean that the transactions on the
new GTDs did not involve money and that there was no
consideration therefor. For the outstanding balance of
respondents' 71 GTDs in MBC prior to May 26, 1987 22 in the
amount of P1,115,889.15 as earlier mentioned was re-deposited
by respondents under 28 new GTDs. Admittedly, MBC had
P2,841,711.90 cash on hand — more than double the
outstanding balance of respondent's 71 GTDs — at the start of
the banking day on May 25, 1987. Since respondent Jose Abad
was at MBC soon after it opened at 9:00 a.m. of that day,
90
petitioner should not presume that MBC had no cash to cover the
new GTDs of respondents and conclude that there was no
consideration for said GTDs.
Petitioner having failed to overcome the presumption that the
ordinary course of business was followed, 23 this Court finds
that the 28 new GTDs were deposited "in the usual course of
business" of MBC.
In its second assignment of error, petitioner posits that the trial
court erred in ordering it to pay the balance of the deposit
insurance to respondents, maintaining that the instant petition
stemmed from a petition for declaratory relief which does not
essentially entail an executory process, and the only relief that
should have been granted by the trial court is a declaration of the
parties' rights and duties. As such, petitioner continues, no order
of payment may arise from the case as this is beyond the office of
declaratory relief proceedings. 24
Without doubt, a petition for declaratory relief does not
essentially entail an executory process. There is nothing in its
nature, however, that prohibits a counterclaim from being set-up
in the same action. 25
Now, there is nothing in the nature of a special civil action for
declaratory relief that proscribes the filing of a counterclaim
based on the same transaction, deed or contract subject of the
complaint. A special civil action is after all not essentially
different from an ordinary civil action, which is generally
governed by Rules 1 to 56 of the Rules of Court, except that the
former deals with a special subject matter which makes
necessary some special regulation. But the identity between their
fundamental nature is such that the same rules governing
ordinary civil suits may and do apply to special civil actions if not
inconsistent with or if they may serve to supplement the
provisions of the peculiar rules governing special civil actions. 26
Petitioner additionally submits that the issue of determining the
amount of deposit insurance due respondents was never tried on
the merits since the trial dwelt only on the "determination of the
viability or validity of the deposits" and no evidence on record
sustains the holding that the amount of deposit due respondents
had been finally determined. 27 This issue was not raised in the
court a quo, however, hence, it cannot be raised for the first time
in the petition at bar. 28
Finally, petitioner faults respondents for availing of the statutory
limits of the PDIC law, presupposing that, based on the conduct
of respondent Jose Abad on March 25, 1987, he and his co-
respondents "somehow knew" of the impending closure of MBC.
Petitioner ascribes bad faith to respondent Jose Abad in
transacting the questioned deposits, and seeks to disqualify him
from availing the benefits under the law. 29
Good faith is presumed. This, petitioner failed to overcome since
it offered mere presumptions as evidence of bad faith.
WHEREFORE, the assailed decision of the Court of Appeals is
hereby AFFIRMED. HSaEAD
SO ORDERED.
Puno, Panganiban, Sandoval-Gutierrez and Corona, JJ., concur.
||| (Philippine Deposit Insurance Corp. v. Court of Appeals, G.R.
No. 126911, [April 30, 2003], 450 PHIL 233-243)
EN BANC
[G.R. No. 169466. May 9, 2007.]
DEPARTMENT OF BUDGET AND MANAGEMENT, represented
by SECRETARY ROMULO L. NERI, PHILIPPINE NATIONAL
POLICE, represented by POLICE DIRECTOR GENERAL
ARTURO L. LOMIBAO, NATIONAL POLICE COMMISSION,
represented by CHAIRMAN ANGELO T. REYES, AND CIVIL
SERVICE COMMISSION, represented by CHAIRPERSON
KARINA C. DAVID, petitioners, vs. MANILA'S FINEST
RETIREES ASSOCIATION, INC., represented by P/COL.
FELICISIMO G. LAZARO (RET.), AND ALL THE OTHER INP
RETIREES, respondents.
DECISION
GARCIA, J p:
Assailed and sought to be set aside in this petition for review on
certiorari under Rule 45 of the Rules of Court are the following
issuances of the Court of Appeals (CA) in CA-G.R. CV No. 78203, to
wit:
1. Decision 1 dated July 7, 2005 which affirmed in toto the
decision of the Regional Trial Court of Manila, Branch 32, in Civil
Case No. 02-103702, a suit for declaratory relief, declaring the
91
herein respondents entitled to the same retirement benefits
accorded upon retirees of the Philippine National Police (PNP)
under Republic Act (R.A.) No. 6975, as amended by R.A. No. 8551,
and ordering the herein petitioners to implement the proper
adjustments on respondents' retirement benefits; and
2. Resolution 2 dated August 24, 2005 which denied the
petitioners' motion for reconsideration.
The antecedent facts:
In 1975, Presidential Decree (P.D.) No. 765 was issued
constituting the Integrated National Police (INP) to be composed
of the Philippine Constabulary (PC) as the nucleus and the
integrated police forces as components thereof. Complementing
P.D. No. 765 was P.D. No. 1184 3 dated August 26, 1977 (INP
Law, hereinafter) issued to professionalize the INP and promote
career development therein.
On December 13, 1990, Republic Act (R.A.) No. 6975, entitled
"AN ACT ESTABLISHING THE PHILIPPINE NATIONAL POLICE
UNDER A REORGANIZED DEPARTMENT OF THE INTERIOR AND
LOCAL GOVERNMENT, AND FOR OTHER PURPOSES," hereinafter
referred to as PNP Law, was enacted. Under Section 23 of said
law, the Philippine National Police (PNP) would initially consist
of the members of the INP, created under P.D. No. 765, as well as
the officers and enlisted personnel of the PC. In part, Section 23
reads:
SEC. 23. Composition. — Subject to the limitation provided for in
this Act, the Philippine National Police, hereinafter referred to as
the PNP, is hereby established, initially consisting of the
members of the police forces who were integrated into the
Integrated National Police (INP) pursuant to Presidential Decree
No. 765, and the officers and enlisted personnel of the Philippine
Constabulary (PC). DaAISH
A little less than eight (8) years later, or on February 25, 1998,
R.A. No. 6975 was amended by R.A. No. 8551, otherwise known
as the "PHILIPPINE NATIONAL POLICE REFORM AND
REORGANIZATION ACT OF 1998." Among other things, the
amendatory law reengineered the retirement scheme in the
police organization. Relevantly, PNP personnel, under the new
law, stood to collect more retirement benefits than what INP
members of equivalent rank, who had retired under the INP Law,
received.
The INP retirees illustrated the resulting disparity in the
retirement benefits between them and the PNP retirees as
follows: 4
Retirement Rank Monthly Pension
INP PNP INP PNP
Corporal SPO3 P3,225.00 P11,310.00
Captain P. Sr. Insp. P5,248.00 P15,976.00
Brig. Gen. P. Chief Supt. P10,054.24 P18,088.00
Hence, on June 3, 2002, in the Regional Trial Court (RTC) of
Manila, all INP retirees, spearheaded by the Manila's Finest
Retirees Association, Inc., or the MFRAI (hereinafter collectively
referred to as the INP Retirees), filed a petition for declaratory
relief, 5 thereunder impleading, as respondents, the Department
of Budget and Management (DBM), the PNP, the National Police
Commission (NAPOLCOM), the Civil Service Commission (CSC)
and the Government Service Insurance System (GSIS). Docketed
in the RTC as Civil Case No. 02-103702, which was raffled to
Branch 22 thereof, the petition alleged in gist that INP retirees
were equally situated as the PNP retirees but whose retirement
benefits prior to the enactment of R.A. No. 6975, as amended by
R.A. No. 8551, were unconscionably and arbitrarily excepted
from the higher rates and adjusted benefits accorded to the PNP
retirees. Accordingly, in their petition, the petitioning INP
retirees pray that a —
DECLARATORY JUDGMENT be rendered in their favor,
DECLARING with certainty that they, as INP-retirees, are truly
absorbed and equally considered as PNP-retirees and thus,
entitled to enjoy the SAME or IDENTICAL retirement benefits
being bestowed to PNP-retirees by virtue of said PNP Law or
Republic Act No. 6975, as amended by Republic Act 8551, with the
corollary mandate for the respondents-government agencies to
effect the immediate adjustment on their previously received
disparate retirement benefits, retroactive to its effectivity, and
with due payment thereof.
The GSIS moved to dismiss the petition on grounds of lack of
jurisdiction and cause of action. On the other hand, the CSC, DBM,
NAPOLCOM and PNP, in their respective answers, asserted that
the petitioners could not claim the more generous retirement
benefits under R.A. No. 6975 because at no time did they become
PNP members, having retired prior to the enactment of said law.
92
DBM, NAPOLCOM and PNP afterwards filed their respective pre-
trial briefs.
The ensuing legal skirmish is not relevant to the disposition of
the instant case. The bottom line is that, on March 21, 2003, the
RTC came out with its decision 6 holding that R.A. No. 6975, as
amended, did not abolish the INP but merely provided for the
absorption of its police functions by the PNP, and accordingly
rendered judgment for the INP retirees, to wit:
WHEREFORE, this Court hereby renders JUDGMENT DECLARING
the INP Retirees entitled to the same or identical retirement
benefits and such other benefits being granted, accorded and
bestowed upon the PNP Retirees under the PNP Law (RA No.
6975, as amended).
The respondents Government Departments and Agencies shall
IMMEDIATELY EFFECT and IMPLEMENT the proper adjustments
on the INP Retirees' retirement and such other benefits,
RETROACTIVE to its date of effectivity, and RELEASE and PAY to
the INP Retirees the due payments of the amounts. cSaADC
SO ORDERED.
On April 2, 2003, the trial court issued what it denominated as
Supplement to the Decision whereunder it granted the GSIS'
motion to dismiss and thus considered the basic petition as
withdrawn with respect to the latter.
From the adverse decision of the trial court, the remaining
respondents, namely, DBM, PNP, NAPOLCOM and CSC,
interposed an appeal to the CA whereat their appellate recourse
was docketed as CA-G.R. CV No. 78203.
As stated at the threshold hereof, the CA, in its decision of July 7,
2005, 7 affirmed that of the trial court upholding the entitlement
of the INP retirees to the same or identical retirement benefits
accorded upon PNP retirees under R.A. No. 6975, as amended.
Their motion for reconsideration having been denied by the CA
in its equally assailed resolution of August 24, 2005, 8 herein
petitioners are now with this Court via the instant recourse on
their singular submission that —
THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN
LAW IN AFFIRMING THE DECISION OF THE TRIAL COURT
NOTWITHSTANDING THAT IT IS CONTRARY TO LAW AND
ESTABLISHED JURISPRUDENCE.
We DENY.
In the main, it is petitioners' posture that R.A. No. 6975 clearly
abolished the INP and created in its stead a new police force, the
PNP. Prescinding therefrom, petitioners contend that since the
PNP is an organization entirely different from the INP, it follows
that INP retirees never became PNP members. Ergo, they cannot
avail themselves of the retirement benefits accorded to PNP
members under R.A. No. 6975 and its amendatory law, R.A. No.
8551. HDIATS
A flashback at history is proper.
As may be recalled, R.A. No. 6975 was enacted into law on
December 13, 1990, or just about four (4) years after the 1986
Edsa Revolution toppled down the dictatorship regime. Egged on
by the current sentiment of the times generated by the long
period of martial rule during which the police force, the PC-INP,
had a military character, being then a major service of the Armed
Forces of the Philippines, and invariably moved by a fresh
constitutional mandate for the establishment of one police force
which should be national in scope and, most importantly, purely
civilian in character, 9 Congress enacted R.A. No. 6975
establishing the PNP and placing it under the Department of
Interior and Local Government. To underscore the civilian
character of the PNP, R.A. No. 6975 made it emphatically clear in
its declaration of policy the following:
Section 2. Declaration of policy — It is hereby declared to be the
policy of the State to promote peace and order, ensure public
safety and further strengthen local government capability aimed
towards the effective delivery of the basic services to the
citizenry through the establishment of a highly efficient and
competent police force that is national in scope and civilian in
character. . . . .
The police force shall be organized, trained and equipped
primarily for the performance of police functions. Its national
scope and civilian character shall be paramount. No element of
the police force shall be military nor shall any position thereof be
occupied by active members of the [AFP]. (Emphasis and word in
bracket supplied.)
Pursuant to Section 23, supra, of R.A. No. 6975, the PNP initially
consisted of the members of the police forces who were
integrated into the INP by virtue of P.D. No. 765, while Section 86
10 of the same law provides for the assumption by the PNP of the
93
police functions of the INP and its absorption by the former,
including its appropriations, funds, records, equipment, etc., as
well as its personnel. 11 And to govern the statute's
implementation, Section 85 of the Act spelled out the following
absorption phases: DACcIH
Phase I — Exercise of option by the uniformed members of the
[PC], the PC elements assigned with the Narcotics Command, CIS,
and the personnel of the technical services of the AFP assigned
with the PC to include the regular CIS investigating agents and
the operatives and agents of the NAPOLCOM Inspection.
Investigation and Intelligence Branch, and the personnel of the
absorbed National Action Committee on Anti-Hijacking (NACAH)
of the Department of National Defense to be completed within six
(6) months from the date of the effectivity of this Act. At the end
of this phase, all personnel from the INP, PC, AFP Technical
Services, NACAH, and NAPOLCOM Inspection, Investigation and
Intelligence Branch shall have been covered by official orders
assigning them to the PNP, Fire and Jail Forces by their
respective units.
Phase II — Approval of the table of organization and equipment
of all bureaus and offices created under this Act, preparation and
filling up of their staffing pattern, transfer of assets to the [DILG]
and organization of the Commission, to be completed within
twelve (12) months from the effectivity date hereof. At the end of
this phase, all personnel to be absorbed by the [DILG] shall have
been issued appointment papers, and the organized Commission
and the PNP shall be fully operational. DASEac
The PC officers and enlisted personnel who have not opted to
join the PNP shall be reassigned to the Army, Navy or Air Force,
or shall be allowed to retire under existing AFP rules and
regulations. Any PC-INP officer or enlisted personnel may, within
the twelve-month period from the effectivity of this Act, retire
and be paid retirement benefits corresponding to a position two
(2) ranks higher than his present grade, subject to the conditions
that at the time he applies for retirement, he has rendered at
least twenty (20) years of service and still has, at most, twenty-
four (24) months of service remaining before the compulsory
retirement age as provided by existing law for his office.
Phase III — Adjustment of ranks and establishment of one (1)
lineal roster of officers and another for non-officers, and the
rationalization of compensation and retirement systems; taking
into consideration the existing compensation schemes and
retirement and separation benefit systems of the different
components of the PNP, to ensure that no member of the PNP
shall suffer any diminution in basic longevity and incentive pays,
allowances and retirement benefits due them before the
creations of the PNP, to be completed within eighteen (18)
months from the effectivity of this Act. . . . .
Upon the effectivity of this Act, the [DILG] Secretary shall
exercise administrative supervision as well as operational
control over the transferred, merged and/or absorbed AFP and
INP units. The incumbent Director General of the PC-INP shall
continue to act as Director General of the PNP until . . . replaced . .
. . (Emphasis and words in brackets supplied.)
From the foregoing, it appears clear to us that the INP was never,
as posited by the petitioners, abolished or terminated out of
existence by R.A. No. 6975. For sure, nowhere in R.A. No. 6975
does the words "abolish" or "terminate" appear in reference to
the INP. Instead, what the law provides is for the "absorption,"
"transfer," and/or "merger" of the INP, as well as the other
offices comprising the PC-INP, with the PNP. To "abolish" is to do
away with, to annul, abrogate or destroy completely; 12 to
"absorb" is to assimilate, incorporate or to take in. 13 "Merge"
means to cause to combine or unite to become legally absorbed
or extinguished by merger 14 while "transfer" denotes
movement from one position to another. Clearly, "abolition"
cannot be equated with "absorption."
True it is that Section 90 15 of R.A. No. 6975 speaks of the INP
"[ceasing] to exist" upon the effectivity of the law. It ought to be
stressed, however, that such cessation is but the logical
consequence of the INP being absorbed by the PNP.
Far from being abolished then, the INP, at the most, was merely
transformed to become the PNP, minus of course its military
character and complexion.
Even the petitioners' effort at disclosing the legislative intent
behind the enactment of R.A. No. 6975 cannot support their
theory of abolition. Rather, the Senate and House deliberations
on the bill that eventually became R.A. No. 6975 reveal what has
correctly been held by the CA in its assailed decision: that the
PNP was precisely created to erase the stigma spawned by the
94
militarization of the police force under the PC-INP structure. The
rationale behind the passage of R.A. No. 6975 was adequately
articulated by no less than the sponsor 16 of the corresponding
House bill in his sponsorship speech, thus:
By removing the police force from under the control and
supervision of military officers, the bill seeks to restore and
underscore the civilian character of police work — an otherwise
universal concept that was muddled up by the martial law years.
Indeed, were the legislative intent was for the INP's abolition
such that nothing would be left of it, the word "abolish" or what
passes for it could have easily found its way into the very text of
the law itself, what with the abundant use of the word during the
legislative deliberations. But as can be gleaned from said
deliberations, the lawmakers' concern centered on the fact that if
the entire PC-INP corps join the PNP, then the PC-INP will
necessarily be abolished, for who then would be its members? Of
more consequence, the lawmakers were one in saying that there
should never be two national police agencies at the same time.
cIHSTC
With the conclusion herein reached that the INP was not in fact
abolished but was merely transformed to become the PNP,
members of the INP which include the herein respondents are,
therefore, not excluded from availing themselves of the
retirement benefits accorded to PNP retirees under Sections 74
17 and 75 18 of R.A. No. 6975, as amended by R.A. No. 8551. It
may be that respondents were no longer in the government
service at the time of the enactment of R.A. No. 6975. This fact,
however, without more, would not pose as an impediment to the
respondents' entitlement to the new retirement scheme set forth
under the aforecited sections. As correctly ratiocinated by the CA
to which we are in full accord:
For sure, R.A. No. 6975 was not a retroactive statute since it did
not impose a new obligation to pay the INP retirees the
difference between what they received when they retired and
what would now be due to them after R.A. No. 6975 was enacted.
Even so, that did not render the RTC's interpretation of R.A. No.
6975 any less valid. The [respondents'] retirement prior to the
passage of R.A. No. 6975 did not exclude them from the benefits
provided by R.A. No. 6975, as amended by R.A. No. 8551, since
their membership in the INP was an antecedent fact that
nonetheless allowed them to avail themselves of the benefits of
the subsequent laws. R.A. No. 6975 considered them as PNP
members, always referring to their membership and service in
the INP in providing for their retirement benefits. 19
Petitioners maintain, however, that NAPOLCOM Resolution No. 8,
20 particularly Section 11 21 thereof, bars the payment of any
differential in retirement pay to officers and non-officers who are
already retired prior to the effectivity of R.A. No. 6975. SAHIaD
The contention does not commend itself for concurrence.
Under the amendatory law (R.A. No. 8551), the application of
rationalized retirement benefits to PNP members who have
meanwhile retired before its (R.A. No. 8551) enactment was not
prohibited. In fact, its Section 38 22 explicitly states that the
rationalized retirement benefits schedule and program "shall
have retroactive effect in favor of PNP members and officers
retired or separated from the time specified in the law." To us, the
aforesaid provision should be made applicable to INP members
who had retired prior to the effectivity of R.A. No. 6975. For, as
afore-held, the INP was, in effect, merely absorbed by the PNP
and not abolished.
Indeed, to bar payment of retirement pay differential to INP
members who were already retired before R.A. No. 6975 became
effective would even run counter to the purpose of NAPOLCOM
Resolution No. 8 itself, as expressed in its preambulatory clause,
which is to rationalize the retirement system of the PNP taking
into consideration existing retirement and benefit systems
(including R.A. No. 6975 and P.D. No. 1184) of the different
components thereof "to ensure that no member of the PNP shall
suffer any diminution in the retirement benefits due them before
the creation of the PNP." 23
Most importantly, the perceived restriction could not plausibly
preclude the respondents from asserting their entitlement to
retirement benefits adjusted to the level when R.A. No. 6975 took
effect. Such adjustment hews with the constitutional warrant
that "the State shall, from time to time, review to upgrade the
pensions and other benefits due to retirees of both the
government and private sectors," 24 and the implementing
mandate under the Senior Citizen's Law 25 that "to the extent
practicable and feasible, retirement benefits . . . shall be
95
upgraded to be at par with the current scale enjoyed by those in
actual service." EcAISC
Certainly going for the respondents in their bid to enjoy the same
retirement benefits granted to PNP retirees, either under R.A. No.
6975 or R.A. No. 8551, is Section 34 of the latter law which
amended Section 75 of R.A. No. 6975 by adding thereto the
following proviso:
Section 75. Retirement benefits. . . . : Provided, finally, That
retirement pay of the officers/non-officers of the PNP shall be
subject to adjustments based on the prevailing scale of base pay of
police personnel in the active service.
Then, too, is the all familiar rule that:
Retirement laws should be liberally construed in favor of the
retiree because their intention is to provide for his sustenance
and hopefully, even comfort, when he no longer has the stamina
to continue earning his livelihood. The liberal approach aims to
achieve the humanitarian purposes of the law in order that
efficiency, security and well-being of government employees may
be enhanced. 26
The petitioners parlay the notion of prospective application of
statutes, noting in this regard that R.A. No. 6975, as amended,
cannot be applied retroactively, there being no provision to that
effect.
We are not persuaded.
As correctly found by the appellate court, R.A. No. 6975 itself
contextually provides for its retroactive application to cover
those who had retired prior to its effectivity. In this regard, we
invite attention to the three (3) phases of implementation under
Section 85 for the absorption and continuation in the service of,
among others, the INP members under the newly-established
PNP. IHEDAT
In a further bid to scuttle respondents' entitlement to the desired
retirement benefits, the petitioners fault the trial court for
ordering the immediate adjustments of the respondents'
retirement benefits when the basic petition filed before it was
one for declaratory relief. To the petitioners, such petition does
not essentially entail an executory process, the only relief proper
under that setting being a declaration of the parties' rights and
duties.
Petitioners' above posture is valid to a point. However, the
execution of judgments in a petition for declaratory relief is not
necessarily indefensible. In Philippine Deposit Insurance
Corporation[PDIC] v. Court of Appeals, 27 wherein the Court
affirmed the order for the petitioners therein to pay the balance
of the deposit insurance to the therein respondents, we
categorically ruled:
Now, there is nothing in the nature of a special civil action for
declaratory relief that proscribes the filing of a counterclaim
based on the same transaction, deed or contract subject of the
complaint. A special civil action is after all not essentially
different from an ordinary civil action, which is generally
governed by Rules 1 to 56 of the Rules of Court, except that the
former deals with a special subject matter which makes
necessary some special regulation. But the identity between their
fundamental nature is such that the same rules governing
ordinary civil suits may and do apply to special civil actions if not
inconsistent with or if they may serve to supplement the
provisions of the peculiar rules governing special civil actions. 28
IHEaAc
Similarly, in Matalin Coconut Co., Inc. v. Municipal Council of
Malabang, Lanao del Sur: 29 the Court upheld the lower court's
order for a party to refund the amounts paid by the adverse
party under the municipal ordinance therein questioned, stating:
. . . Under Sec. 6 of Rule 64, the action for declaratory relief may
be converted into an ordinary action and the parties allowed to
file such pleadings as may be necessary or proper, if before the
final termination of the case "a breach or violation of an . . .
ordinance, should take place." In the present case, no breach or
violation of the ordinance occurred. The petitioner decided to
pay "under protest" the fees imposed by the ordinance. Such
payment did not affect the case; the declaratory relief action was
still proper because the applicability of the ordinance to future
transactions still remained to be resolved, although the matter
could also be threshed out in an ordinary suit for the recovery of
taxes paid . . . In its petition for declaratory relief, petitioner-
appellee alleged that by reason of the enforcement of the
municipal ordinance by respondents it was forced to pay under
protest the fees imposed pursuant to the said ordinance, and
accordingly, one of the reliefs prayed for by the petitioner was
96
that the respondents be ordered to refund all the amounts it paid
to respondent Municipal Treasurer during the pendency of the
case. The inclusion of said allegation and prayer in the petition
was not objected to by the respondents in their answer. During
the trial, evidence of the payments made by the petitioner was
introduced. Respondents were thus fully aware of the
petitioner's claim for refund and of what would happen if the
ordinance were to be declared invalid by the court.
The Court sees no reason for treating this case differently from
PDIC and Matalin. This disposition becomes all the more
appropriate considering that the respondents, as petitioners in
the RTC, pleaded for the immediate adjustment of their
retirement benefits which, significantly, the herein petitioners, as
respondents in the same court, did not object to. Being aware of
said prayer, the petitioners then already knew the logical
consequence if, as it turned out, a declaratory judgment is
rendered in the respondents' favor.
At bottom then, the trial court's judgment forestalled multiplicity
of suits which, needless to stress, would only entail a long and
arduous process. Considering their obvious advanced years, the
respondents can hardly afford another protracted proceedings. It
is thus for this Court to already write finis to this case.
WHEREFORE, the instant petition is DENIED and the assailed
decision and resolution of the CA, respectively dated July 7, 2005
and August 24, 2005, are AFFIRMED. EcIDaA
No costs.
SO ORDERED.
Puno, C.J., Quisumbing, Ynares-Santiago, Sandoval-Gutierrez,
Carpio, Carpio-Morales, Azcuna, Tinga, Chico-Nazario and Velasco,
Jr., JJ., concur.
Austria-Martinez and Corona, JJ., are on leave.
Nachura, J., took no part, signed pleading as Solicitor General.
||| (Department of Budget and Management v. Manila's Finest
Retirees Association, Inc., G.R. No. 169466, [May 9, 2007], 551 PHIL
90-110)
EN BANC
[G.R. No. 20014. November 27, 1968.]
FRANCISCO CRISOLOGO AND CONSOLACION FLORENTINO
CRISOLOGO, petitioners and appellants, vs. ISAAC CENTENO
and ASUNCION AQUINO CENTENO, oppositors and appellees.
B. Martinez for petitioners-appellants.
Luis Bello, Jr. for oppositors-appellees.
SYLLABUS
1. CIVIL LAW; CONTRACTS; SALES; CONVENTIONAL
REDEMPTION; CONSOLIDATION OF OWNERSHIP OF REAL
PROPERTY; PROCEEDING UNDER ARTICLE 1607 OF CIVIL CODE
CONTENTIOUS; ORDER ALLOWING CONSOLIDATION WITHOUT
THE VENDOR BEING NAMED AS RESPONDENT IN THE
PETITION AND DULY SUMMONED AND HEARD, A PATENT
NULLITY. — Article 1607 of the Civil Code which provides that
the consolidation of ownership of real property in the vendee by
virtue of the vendor's failure to comply with the provisions of
Article 1616 shall not be recorded in the Registry of Property
without a judicial order, after the vendor has been duly heard,
contemplates a contentious proceeding wherein the vendor a
retro must be named respondent in the caption and title of the
petition for consolidation of ownership and duly summoned and
heard. An order granting the vendee's petition for consolidation
of ownership without the vendor a retro being named as
respondent, summoned and heard, is a patent nullity for want of
jurisdiction on the Part of the court over the person of the
vendor.
DECISION
CAPISTRANO, J p:
On January 18, 1955, the spouses Francisco Crisologo and
Consolacion Florentino filed in the Court of First Instance of
Ilocos Sur an ex parte petition for consolidation of ownership in
them as vendees a retro of two parcels of land situated at Barrio
97
Lapting, Lapog, Ilocos Sur, on the ground that the vendors, the
spouses Isaac Centeno and Asuncion Aquino, have failed to
exercise their right of repurchase within the periods stipulated in
the two contracts of sale with pacto de retro. On January 28,
1955, after hearing at which the petitioners presented evidence
in support of the petition, the court a quo, through Judge
Francisco Geronimo, granted the petition. On July 19, 1956, the
vendors filed a motion to set aside the Order of January 28, 1955,
and on July 27, 1956, the court a quo, through Judge Felix Q.
Antonio, granted the motion on the ground that the movants had
not been duly notified of the hearing. On motion by the
petitioners to set aside the Order of July 27, 1956, on the ground
that the vendors had been notified by registered mail of the
hearing, the lower court, by its Order of February 27, 1957,
granted the motion and set aside the Order of July 27, 1956. The
vendors appealed the Order of February 27, 1957, to the Court of
Appeals. On June 27, 1958, the Court of Appeals rendered
judgment in the appeal setting aside the lower court's Order of
February 27, 1957, after holding that the vendors had not been
legally notified of the petition and the hearing, and the Order of
January 28, 1955, was a patent nullity. The Court of Appeals
remanded the record to the lower court for reopening and for
further proceedings. Accordingly, after the vendors had been
duly summoned as respondents, they filed their answer alleging
that the two contracts of sale with pacto de retro were really
intended as equitable mortgages as securities for usurious loans.
After trial, the lower court rendered its decision on October 26,
1960, holding that respondents' allegation was substantiated by
their evidence. Judgment was rendered in favor of the
respondents as follows:
"WHEREFORE, in view of the foregoing, the Court hereby renders
judgment declaring that Exhibits 2 and 3 are actually intended by
the parties to be Deeds of Equitable Mortgage, and as such
respondents are entitled to redeem the lands described therein,
by paying to the petitioners whatever balance remains of the
principal and interest thereon at 12%, after deducting therefrom
the excess interest paid on November 11, 1952 and September
10, 1953, and the value of the produce taken from those
properties by petitioners in accordance with the above findings
from 1955 until the possession of these properties are returned
to respondents, and upon such settlement, the petitioners are
ordered to execute the corresponding release of mortgage.
"Petition for consolidation of title is therefore denied, with costs
against petitioners."
The petitioners appealed to the Supreme Court on questions of
law.
Appellants contend that the lower court erred in not finding that
the Order of January 28, 1955 was valid, final and executory, and
that all proceedings thereafter taken, including the vendors'
appeal to the Court of Appeals and its decision rendered in said
appeal setting aside the Order of February 27, 1957, and
remanding the case for reopening and further proceedings, as
well as the proceedings thereafter taken, including the decision
of October 26, 1960, are null and void. The contention is
untenable in view of the following considerations:
(1)Article 1607 of the Civil Code which provides that:
"In case of real property, the consolidations of ownership in the
vendee by virtue of the failure of the vendor to comply with the
provisions of Article 1616 shall not be recorded in the Registry of
Property without a judicial order, after the vendor has been duly
heard."
contemplates a contentious proceeding wherein the vendor a
retro must be named respondent in the caption and title of the
petition for consolidation of ownership and duly summoned and
heard.
In the instant case, the caption and title of the petition for
consolidation of ownership named the vendees as petitioners,
but did not name the vendors as respondents, the said vendors
were not duly summoned and heard. In view thereof, the Order
of January 28, 1955, was a patent nullity having been issued
contrary to the contentious proceeding contemplated in Article
1607 of the Civil Code, and the lower court not having acquired
jurisdiction over the persons of the vendors;
(2)The judgment of the Court of Appeals setting aside the Order
of February 27, 1957, and in consequence thereof the Order of
January 28, 1955, as a patent nullity on the ground that the lower
court did not acquire jurisdiction over the persons of the vendors
98
because they had not been summoned is res judicata on the
question of nullity of said orders; and
(3)After the remand to the court below, the proceedings further
taken wherein the vendors were named as respondents and duly
summoned and heard, after which on October 26, 1960, the
appealed judgment was rendered in favor of the respondents,
were valid, being in accordance with the contentious proceeding
provided for in Article 1607 of the Civil Code.
IN VIEW OF ALL THE FOREGOING, the judgment of the lower
court of October 26, 1960, is hereby affirmed in all its parts, with
costs against the petitioners-appellants.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar,
Sanchez, Ruiz Castro and Fernando, JJ., concur.
||| (Crisologo v. Centeno, G.R. No. 20014, [November 27, 1968],
135 PHIL 40-43)
EN BANC
[G.R. No. L-16108. October 31, 1961.]
In the matter of the petition for declaratory relief regarding
civil status, ELEUTERIA FELISETA TAN, petitioner-appellee,
vs. REPUBLIC OF THE PHILIPPINES, oppositor-appellant.
Valeriano S. Kaamino for petitioner-appellee.
Solicitor General for oppositor-appellant.
SYLLABUS
1.DECLARATORY RELIEF; WHEN IT MAY LIE. — Declaratory
relief is a special civic action which may lie only when "any
person interested under a deed, will, contract or other written
instrument, or whose rights are effected by statute or
ordinance," demands construction thereof for declaration of his
rights thereunder.
2.ID.; CITIZENSHIP; NO ACTION FOR JUDICIAL DECLARATION
OF CITIZENSHIP. — "Under our laws, there can be no action or
proceeding for the judicial declaration of the citizenship of an
individual. Courts of Justice exist for the settlement of justiciable
controversies, which imply a given right, legally demandable and
enforceable, an act or omission violative of said right, and a
remedy, granted or sanctioned by law, for said breach of right. As
an incident only of the adjudication of the rights of the parties to
a controversy, the court may pass upon, and make a
pronouncement relative to, their status. Otherwise, such a
pronouncement is beyond judicial power. Thus, for instance, no
action or proceeding may be instituted for a declaration to the
effect that plaintiff or petitioner is married, or single, or a
legitimate child, although a finding thereon may be made as a
necessary premise to justify a given relief available only to one
enjoying said status. At times, the law permits the acquisition of a
given status, such as naturalization, by judicial decree. But, there
is no similar legislation authorizing the institution of a judicial
proceeding to declare that a given person is part of our
citizenry." (Tan, vs. Republic, 107 Phil. 632; 57 Off. Gaz (90)
5401, reiterated in 58 Off. Gaz. (47) 7683).
3.ID.; ID.; CANCELLATION OF ALIEN CERTIFICATE OF
REGISTRATION; WHEN REMEDY MAY BE AVAILED OF. — The
remedy of cancellation of an alien certificate of registration can
only be had by virtue of a judgment of a competent court, in an
action where the citizenship of parties is a material matter in
issue, declaring the Filipino citizenship, and such declaration
cannot be obtained directly because there is no proceeding
provided by law or the rules for such purpose.
DECISION
LABRADOR, J p:
Appeal from a decision of the Court of First Instance of Misamis
Occidental, Hon. Patricio C. Ceniza, presiding, the dispositive part
of which reads as follows:
99
"WHEREFORE, premises considered, the court hereby renders
judgment declaring said Eleuteria Feliseta Tan a Filipino citizen;
that her registration as an alien has been a clear mistake on her
part and on the part of the City Treasurer of Ozamis City and
therefore, the Commissioner of Immigration is hereby ordered to
cancel the Alien Certificate of Registration the herein petitioner
as well as those of her children born out her relationship as
husband and wife without benefit of marriage with Tan King
Pock, namely; Loreta Tan, Nenita Tan, Lourdes Tan, Leonila Tan,
Tan King Pock, Jr., and William Tan." (ROA, pp: 29-30).
The case originated with the presentation of a petition to the
Court of First Instance of Misamis Occidental, alleging that
petitioner Eleuteria Feliseta Tan is the common-law wife of Tan
King Pock a Chinaman, and that nine minor children were born
to them out of wedlock; that she and her children are registered
as aliens; that she had asked the Commissioner of Immigration to
cancel her registration and that of her children as aliens, but that
the Commissioner refused to grant her petition. Therefore, she
prayed that the cancellation of the alien certificate of registration
of herself and her children be ordered.
The petition is dated September 8, 1958, and on September 17,
1958, the court issued an order suggesting that the petitioner
amend her petition into one for declaratory relief. The order
reads thus:
"After considering carefully the merits of the petition, the Court
finds and so holds that the same cannot be granted in view of the
decision rendered by the Supreme Court on February 5, 1954, in
G.R. No. L-5609, entitled Ty Kong Tin vs. Republic of the
Philippines.
"It is suggested, therefore, that the herein petitioner amends her
petition into that of declaratory relief within a period of fifteen
(15) days from receipt a copy of this order, otherwise this case
will be dismissed." (ROA, p. 5).
Pursuant to the suggestion, petitioner through counsel, amended
her original petition converting it into one for declaratory
judgment, alleging that petitioner is a Filipino citizen being the
illegitimate child of a Chinaman by the name of Sy Siwa and
Benita Feliseta, a Filipina, without benefit of marriage; that the
children mentioned in the petition are children of herself and
Tan King Pock and their registration as aliens has been a
mistake; that she had asked the Commissioner of Immigration
for the cancellation of their alien certificate of registration but
the Commissioner had denied her petition, so she prayed that
her alien certificate of registration be cancelled.
The Solicitor General presented an answer asking for the denial
of the petition because the petition is not based upon any of the
grounds required by the rules as a ground for declaratory
judgment; that there is no need for the present action for the
cancellation of their alien certificate of registration; and that the
petition is evidently one which seeks a judicial pronouncement
as to petitioner's claim for citizenship, which matter should be
threshed out in a proper action. The provincial fiscal also prayed
that the petition be denied, alleging that the petition is not in
order; that the children are not represented by a guardian, and
that the end sought in the petition should be threshed out in a
proper action. After hearing the petition and the arguments, the
court below entered the order already quoted above.
The judgment or order appealed from must be set aside.
Declaratory relief in this jurisdiction is a special civil action
which may lie only when "any person interested under a deed,
will, contract or other written instrument, or whose rights are
affected by statute or ordinance," demands construction thereof
for a declaration of his rights thereunder. None of the above
circumstances exists in the case under consideration. And this
Court has already held that there is no proceeding established by
law or the rules by which any person claiming to be a citizen may
get a declaration in a court of justice to that effect or in regard to
his citizenship.
"Under our laws, there can be no action or proceeding for the
judicial declaration of the citizenship of an individual. Courts of
justice exist for the settlement of justiciable controversies, which
100
imply a given right, legally demandable and enforceable, an act
or omission violative of said right, and a remedy, granted or
sanctioned by law, for said breach of right. As an incident only of
the adjudication of the rights of the parties to a controversy, the
court may pass upon, and make a pronouncement relative to,
their status. Otherwise, such a pronouncement is beyond judicial
power. Thus, for instance, no action or proceeding may be
instituted for a declaration to the effect that plaintiff or
petitioner is married, or single, or a legitimate child, although a
finding thereon may be made as a necessary premise to justify a
given relief available only to one enjoying said status. At times,
the law permits the acquisition of a given status, such as
naturalization, by judicial decree. But, there is no similar
legislation authorizing the institution of a judicial proceeding to
declare that a given person is part of our citizenry." (Tan vs.
Republic, G.R. No. L-14159, April 18, 1960, reiterated in G.R. No.
L-15775, April 29, 1961).
If the petition be considered as one for declaratory judgment, the
facts do not warrant the filing of the said special civil action. If
the petition seeks to compel the Commissioner of Immigration to
cancel her and her children's alien certificate of registration, this
petition would not lie because such a remedy of cancellation of
alien certificate of registration can only be had by virtue of a
judgment of a competent court, in an action where the
citizenship of parties is a material matter in issue, declaring the
Filipino citizenship of the petitioner and her children, and such
declaration cannot be obtained directly because there is no
proceeding at present provided by law or the rules for such
purpose.
WHEREFORE, the judgment appealed from should be, as it is
hereby, set aside, and the petition dismissed. With costs against
petitioner-appellee.
Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L.,
Paredes, Dizon, and De Leon, JJ., concur.
||| (In re: Tan v. Republic, G.R. No. L-16108, [October 31, 1961],
113 PHIL 391-395)
RULE 64: REVIEW ON JUDGMENTS AND FINAL
ORDERS
EN BANC
[G.R. No. L-16108. October 31, 1961.]
In the matter of the petition for declaratory relief regarding
civil status, ELEUTERIA FELISETA TAN, petitioner-appellee,
vs. REPUBLIC OF THE PHILIPPINES, oppositor-appellant.
Valeriano S. Kaamino for petitioner-appellee.
Solicitor General for oppositor-appellant.
SYLLABUS
1.DECLARATORY RELIEF; WHEN IT MAY LIE. — Declaratory
relief is a special civic action which may lie only when "any
person interested under a deed, will, contract or other written
instrument, or whose rights are effected by statute or
ordinance," demands construction thereof for declaration of his
rights thereunder.
2.ID.; CITIZENSHIP; NO ACTION FOR JUDICIAL DECLARATION
OF CITIZENSHIP. — "Under our laws, there can be no action or
proceeding for the judicial declaration of the citizenship of an
individual. Courts of Justice exist for the settlement of justiciable
controversies, which imply a given right, legally demandable and
enforceable, an act or omission violative of said right, and a
remedy, granted or sanctioned by law, for said breach of right. As
an incident only of the adjudication of the rights of the parties to
a controversy, the court may pass upon, and make a
pronouncement relative to, their status. Otherwise, such a
pronouncement is beyond judicial power. Thus, for instance, no
action or proceeding may be instituted for a declaration to the
effect that plaintiff or petitioner is married, or single, or a
legitimate child, although a finding thereon may be made as a
101
necessary premise to justify a given relief available only to one
enjoying said status. At times, the law permits the acquisition of a
given status, such as naturalization, by judicial decree. But, there
is no similar legislation authorizing the institution of a judicial
proceeding to declare that a given person is part of our
citizenry." (Tan, vs. Republic, 107 Phil. 632; 57 Off. Gaz (90)
5401, reiterated in 58 Off. Gaz. (47) 7683).
3.ID.; ID.; CANCELLATION OF ALIEN CERTIFICATE OF
REGISTRATION; WHEN REMEDY MAY BE AVAILED OF. — The
remedy of cancellation of an alien certificate of registration can
only be had by virtue of a judgment of a competent court, in an
action where the citizenship of parties is a material matter in
issue, declaring the Filipino citizenship, and such declaration
cannot be obtained directly because there is no proceeding
provided by law or the rules for such purpose.
DECISION
LABRADOR, J p:
Appeal from a decision of the Court of First Instance of Misamis
Occidental, Hon. Patricio C. Ceniza, presiding, the dispositive part
of which reads as follows:
"WHEREFORE, premises considered, the court hereby renders
judgment declaring said Eleuteria Feliseta Tan a Filipino citizen;
that her registration as an alien has been a clear mistake on her
part and on the part of the City Treasurer of Ozamis City and
therefore, the Commissioner of Immigration is hereby ordered to
cancel the Alien Certificate of Registration the herein petitioner
as well as those of her children born out her relationship as
husband and wife without benefit of marriage with Tan King
Pock, namely; Loreta Tan, Nenita Tan, Lourdes Tan, Leonila Tan,
Tan King Pock, Jr., and William Tan." (ROA, pp: 29-30).
The case originated with the presentation of a petition to the
Court of First Instance of Misamis Occidental, alleging that
petitioner Eleuteria Feliseta Tan is the common-law wife of Tan
King Pock a Chinaman, and that nine minor children were born
to them out of wedlock; that she and her children are registered
as aliens; that she had asked the Commissioner of Immigration to
cancel her registration and that of her children as aliens, but that
the Commissioner refused to grant her petition. Therefore, she
prayed that the cancellation of the alien certificate of registration
of herself and her children be ordered.
The petition is dated September 8, 1958, and on September 17,
1958, the court issued an order suggesting that the petitioner
amend her petition into one for declaratory relief. The order
reads thus:
"After considering carefully the merits of the petition, the Court
finds and so holds that the same cannot be granted in view of the
decision rendered by the Supreme Court on February 5, 1954, in
G.R. No. L-5609, entitled Ty Kong Tin vs. Republic of the
Philippines.
"It is suggested, therefore, that the herein petitioner amends her
petition into that of declaratory relief within a period of fifteen
(15) days from receipt a copy of this order, otherwise this case
will be dismissed." (ROA, p. 5).
Pursuant to the suggestion, petitioner through counsel, amended
her original petition converting it into one for declaratory
judgment, alleging that petitioner is a Filipino citizen being the
illegitimate child of a Chinaman by the name of Sy Siwa and
Benita Feliseta, a Filipina, without benefit of marriage; that the
children mentioned in the petition are children of herself and
Tan King Pock and their registration as aliens has been a
mistake; that she had asked the Commissioner of Immigration
for the cancellation of their alien certificate of registration but
the Commissioner had denied her petition, so she prayed that
her alien certificate of registration be cancelled.
The Solicitor General presented an answer asking for the denial
of the petition because the petition is not based upon any of the
grounds required by the rules as a ground for declaratory
judgment; that there is no need for the present action for the
cancellation of their alien certificate of registration; and that the
102
petition is evidently one which seeks a judicial pronouncement Republic, G.R. No. L-14159, April 18, 1960, reiterated in G.R. No.
as to petitioner's claim for citizenship, which matter should be L-15775, April 29, 1961).
threshed out in a proper action. The provincial fiscal also prayed
that the petition be denied, alleging that the petition is not in If the petition be considered as one for declaratory judgment, the
order; that the children are not represented by a guardian, and facts do not warrant the filing of the said special civil action. If
that the end sought in the petition should be threshed out in a the petition seeks to compel the Commissioner of Immigration to
proper action. After hearing the petition and the arguments, the cancel her and her children's alien certificate of registration, this
court below entered the order already quoted above. petition would not lie because such a remedy of cancellation of
alien certificate of registration can only be had by virtue of a
The judgment or order appealed from must be set aside. judgment of a competent court, in an action where the
citizenship of parties is a material matter in issue, declaring the
Declaratory relief in this jurisdiction is a special civil action Filipino citizenship of the petitioner and her children, and such
which may lie only when "any person interested under a deed, declaration cannot be obtained directly because there is no
will, contract or other written instrument, or whose rights are proceeding at present provided by law or the rules for such
affected by statute or ordinance," demands construction thereof purpose.
for a declaration of his rights thereunder. None of the above
circumstances exists in the case under consideration. And this WHEREFORE, the judgment appealed from should be, as it is
Court has already held that there is no proceeding established by hereby, set aside, and the petition dismissed. With costs against
law or the rules by which any person claiming to be a citizen may petitioner-appellee.
get a declaration in a court of justice to that effect or in regard to
his citizenship. Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L.,
Paredes, Dizon, and De Leon, JJ., concur.
"Under our laws, there can be no action or proceeding for the
judicial declaration of the citizenship of an individual. Courts of ||| (In re: Tan v. Republic, G.R. No. L-16108, [October 31, 1961],
justice exist for the settlement of justiciable controversies, which 113 PHIL 391-395)
imply a given right, legally demandable and enforceable, an act
or omission violative of said right, and a remedy, granted or
sanctioned by law, for said breach of right. As an incident only of
the adjudication of the rights of the parties to a controversy, the
court may pass upon, and make a pronouncement relative to,
their status. Otherwise, such a pronouncement is beyond judicial
power. Thus, for instance, no action or proceeding may be
instituted for a declaration to the effect that plaintiff or
petitioner is married, or single, or a legitimate child, although a
finding thereon may be made as a necessary premise to justify a
given relief available only to one enjoying said status. At times,
the law permits the acquisition of a given status, such as
naturalization, by judicial decree. But, there is no similar
legislation authorizing the institution of a judicial proceeding to
declare that a given person is part of our citizenry." (Tan vs.
103
RULE 64: REVIEW OF JUDGMENTS AND FINAL
ORDERS
EN BANC
[G.R. No. 184915. June 30, 2009.]
NILO T. PATES, petitioner, vs. COMMISSION ON ELECTIONS
and EMELITA B. ALMIRANTE, respondents.
RESOLUTION
BRION, J p:
Our Resolution of November 11, 2008 dismissed the petition in
caption pursuant to Section 3, Rule 64 of the Rules of Court
which provides:
SEC. 3. Time to file petition. — The petition shall be filed within
thirty (30) days from notice of the judgment or final order or
resolution sought to be reviewed. The filing of a motion for new
trial or reconsideration of said judgment or final order or
resolution, if allowed under the procedural rules of the
Commission concerned, shall interrupt the period herein fixed. If
the motion is denied, the aggrieved party may file the petition
within the remaining period, but which shall not be less than five
(5) days in any event, reckoned from notice of denial.
taking into account the following material antecedents:
a. February 1, 2008 — The COMELEC First Division issued its
Resolution (assailed in the petition);
b. February 4, 2008 — The counsel for petitioner Nilo T. Pates
(petitioner) received a copy of the February 1, 2008 Resolution;
TAEcSC
c. February 8, 2008 — The petitioner filed his motion for
reconsideration (MR) of the February 1, 2008 Resolution (4 days
from receipt of the February 1, 2008 Resolution)
d. September 18, 2008 — The COMELEC en banc issued a
Resolution denying the petitioner's MR (also assailed in the
petition).
e. September 22, 2008 — The petitioner received the COMELEC
en banc Resolution of September 18, 2008 AaITCH
Under this chronology, the last day for the filing of a petition for
certiorari, i.e., 30 days from notice of the final COMELEC
Resolution, fell on a Saturday (October 18, 2008), as the
petitioner only had the remaining period of 26 days to file his
petition, after using up 4 days in preparing and filing his Motion
for Reconsideration. Effectively, the last day for filing was
October 20, 2008 — the following Monday or the first working
day after October 18, 2008. The petitioner filed his petition with
us on October 22, 2008 or two days late; hence, our Resolution of
dismissal of November 11, 2008.
The Motion for Reconsideration
The petitioner asks us in his "Urgent Motion for Reconsideration
with Reiteration for the Issuance of a Temporary Restraining
Order" to reverse the dismissal of his petition, arguing that the
petition was seasonably filed under the fresh period rule
enunciated by the Supreme Court in a number of cases decided
beginning the year 2005. The "fresh period" refers to the original
period provided under the Rules of Court counted from notice of
the ruling on the motion for reconsideration by the tribunal
below, without deducting the period for the preparation and
filing of the motion for reconsideration. SIDTCa
He claims that, historically, the fresh period rule was the
prevailing rule in filing petitions for certiorari. This Court, he
continues, changed this rule when it promulgated the 1997 Rules
of Civil Procedure and Circular No. 39-98, which both provided
for the filing of petitions within the remainder of the original
period, the "remainder" being the original period less the days
used up in preparing and filing a motion for reconsideration. He
then points out that on September 1, 2000 or only three years
104
after, this Court promulgated A.M. No. 00-02-03-SC bringing back
the fresh period rule. According to the petitioner, the reason for
the change, which we supposedly articulated in Narzoles v.
National Labor Relations Commission, 1 was the tremendous
confusion generated by Circular No. 39-98.
The fresh period rule, the petitioner further asserts, was
subsequently applied by this Court in the following cases:
(1) Neypes v. Court of Appeals 2 which thenceforth applied the
fresh eriod rule to ordinary appeals of decisions of the Regional
Trial Court to the Court of Appeals; SDAcaT
(2) Spouses de los Santos v. Vda. de Mangubat 3 reiterating
Neypes;
(3) Active Realty and Development Corporation v. Fernandez 4
which, followingNeypes, applied the fresh period rule to ordinary
appeals from the decisions of the Municipal Trial Court to the
Regional Trial Court; and
(4) Romero v. Court of Appeals 5 which emphasized that A.M. No.
00-02-03-SC is a curative statute that may be applied
retroactively.
A reading of the ruling in these cases, the petitioner argues,
shows that this Court has consistently held that the order or
resolution denying the motion for reconsideration or new trial is
considered as the final order finally disposing of the case, and the
date of its receipt by a party is the correct reckoning point for
counting the period for appellate review. CADSHI
The Respondent's Comment
We asked the respondents to comment on the petitioner's
motion for reconsideration. The Office of the Solicitor General
(OSG), citing Section 5, Rule 65 of the Rules of Court and its
related cases, asked via a "Manifestation and Motion" that it be
excused from filing a separate comment. We granted the OSG's
manifestation and motion.
For her part, respondent Emelita B. Almirante (respondent
Almirante) filed a comment stating that: (1) we are absolutely
correct in concluding that the petition was filed out of time; and
(2) the petitioner's reliance on Section 4, Rule 65 of the Rules of
Court (as amended by A.M. No. 00-02-03-SC) is totally misplaced,
as Rule 64, not Rule 65, is the vehicle for review of judgments
and final orders or resolutions of the COMELEC. Respondent
Almirante points out that Rule 64 and Rule 65 are different; Rule
65 provides for a 60-day period for filing petitions for certiorari,
while Rule 64 provides for 30 days.
OUR RULING
We do not find the motion for reconsideration meritorious.
A. As a Matter of Law
Section 7, Article IX-A of the Constitution provides that unless
otherwise provided by the Constitution or by law, any decision,
order, or ruling of each Commission may be brought to the Court
on certiorari by the aggrieved party within 30 days from receipt
of a copy thereof. For this reason, the Rules of Court provide for a
separate rule (Rule 64) specifically applicable only to decisions
of the COMELEC and the Commission on Audit. This Rule
expressly refers to the application of Rule 65 in the filing of a
petition for certiorari, subject to the exception clause — "except
as hereinafter provided". 6 SaIACT
Even a superficial reading of the motion for reconsideration
shows that the petitioner has not challenged our conclusion that
his petition was filed outside the period required by Section 3,
Rule 64; he merely insists that the fresh period rule applicable to
a petition for certiorari under Rule 65 should likewise apply to
petitions for certiorari of COMELEC rulings filed under Rule 64.
Rule 64, however, cannot simply be equated to Rule 65 even if it
expressly refers to the latter rule. They exist as separate rules for
substantive reasons as discussed below. Procedurally, the most
patent difference between the two — i.e., the exception that
Section 2, Rule 64 refers to — is Section 3 which provides for a
special period for the filing of petitions for certiorari from
decisions or rulings of the COMELEC en banc. The period is 30
days from notice of the decision or ruling (instead of the 60 days
that Rule 65 provides), with the intervening period used for the
filing of any motion for reconsideration deductible from the
originally-granted 30 days (instead of the fresh period of 60 days
that Rule 65 provides). HICATc
Thus, as a matter of law, our ruling of November 11, 2008 to
dismiss the petition for late filing cannot but be correct. This
ruling is not without its precedent; we have previously ordered a
105
similar dismissal in the earlier case of Domingo v. Commission
on Elections. 7 The Court, too, has countless times in the past
stressed that the Rules of Court must be followed. Thus, we had
this to say in Fortich v. Corona: 8
Procedural rules, we must stress, should be treated with utmost
respect and due regard since they are designed to facilitate the
adjudication of cases to remedy the worsening problem of delay
in the resolution of rival claims and in the administration of
justice. The requirement is in pursuance to the bill of rights
inscribed in the Constitution which guarantees that "all persons
shall have a right to the speedy disposition of their before all
judicial, quasi-judicial and administrative bodies," the
adjudicatory bodies and the parties to a case are thus enjoined to
abide strictly by the rules. While it is true that a litigation is not a
game of technicalities, it is equally true that every case must be
prosecuted in accordance with the prescribed procedure to
ensure an orderly and speedy administration of justice. There
have been some instances wherein this Court allowed a
relaxation in the application of the rules, but this flexibility was
"never intended to forge a bastion for erring litigants to violate
the rules with impunity." A liberal interpretation and application
of the rules of procedure can be resorted to only in proper cases
and under justifiable causes and circumstances. (Emphasis
supplied) ISCDEA
As emphasized above, exceptional circumstances or compelling
reasons may have existed in the past when we either suspended
the operation of the Rules or exempted a particular case from
their application. 9 But, these instances were the exceptions
rather than the rule, and we invariably took this course of action
only upon a meritorious plea for the liberal construction of the
Rules of Court based on attendant exceptional circumstances.
These uncommon exceptions allowed us to maintain the stability
of our rulings, while allowing for the unusual cases when the
dictates of justice demand a correspondingly different treatment.
Under this unique nature of the exceptions, a party asking for the
suspension of the Rules of Court comes to us with the heavy
burden of proving that he deserves to be accorded exceptional
treatment. Every plea for a liberal construction of the Rules must
at least be accompanied by an explanation of why the party-
litigant failed to comply with the rules and by a justification for
the requested liberal construction. 10
Significantly, the petitioner presented no exceptional
circumstance or any compelling reason to warrant the non-
application of Section 3, Rule 64 to his petition. He failed to
explain why his filing was late. Other than his appeal to history,
uniformity, and convenience, he did not explain why we should
adopt and apply the fresh period rule to an election case. EHSADc
To us, the petitioner's omissions are fatal, as his motion does not
provide us any reason specific to his case why we should act as
he advocates.
B. As a Matter of Policy
In harking back to the history of the fresh period rule, what the
petitioner apparently wants — for reasons of uniformity and
convenience — is the simultaneous amendment of Section 3,
Rule 64 and the application of his proposed new rule to his case.
To state the obvious, any amendment of this provision is an
exercise in the power of this Court to promulgate rules on
practice and procedure as provided by Section 5 (5), Article VIII
of the Constitution. Our rulemaking, as every lawyer should
know, is different from our adjudicatory function. Rulemaking is
an act of legislation, directly assigned to us by the Constitution,
that requires the formulation of policies rather than the
determination of the legal rights and obligations of litigants
before us. As a rule, rulemaking requires that we consult with
our own constituencies, not necessarily with the parties directly
affected in their individual cases, in order to ensure that the rule
and the policy that it enunciates are the most reasonable that we
can promulgate under the circumstances, taking into account the
interests of everyone — not the least of which are the
constitutional parameters and guidelines for our actions. We
point these out as our adjudicatory powers should not be
confused with our rulemaking prerogative.
We acknowledge that the avoidance of confusion through the use
of uniform standards is not without its merits. We are not
unmindful, too, that no less than the Constitution requires that
"motions for reconsideration of [division] decisions shall be
decided by the Commission en banc." 11 Thus, the ruling of the
Commission en banc on reconsideration is effectively a new
106
ruling rendered separately and independently from that made by
a division. SEcITC
Counterbalanced against these reasons, however, are other
considerations no less weighty, the most significant of which is
the importance the Constitution and this Court, in obedience to
the Constitution, accord to elections and the prompt
determination of their results. Section 3, Article IX-C of the
Constitution expressly requires that the COMELEC's rules of
procedure should expedite the disposition of election cases. This
Court labors under the same command, as our proceedings are in
fact the constitutional extension of cases that start with the
COMELEC.
Based on these considerations, we do not find convenience and
uniformity to be reasons sufficiently compelling to modify the
required period for the filing of petitions for certiorari under
Rule 64. While the petitioner is correct in his historical data
about the Court's treatment of the periods for the filing of the
different modes of review, he misses out on the reason why the
period under Section 3, Rule 64 has been retained. The reason, as
made clear above, is constitutionally-based and is no less than
the importance our Constitution accords to the prompt
determination of election results. This reason far outweighs
convenience and uniformity. We significantly note that the
present petition itself, through its plea for the grant of a
restraining order, recognizes the need for haste in deciding
election cases.
C. Our Liberal Approach
Largely for the same reason and as discussed below, we are not
inclined to suspend the rules to come to the rescue of a litigant
whose counsel has blundered by reading the wrong applicable
provision. The Rules of Court are with us for the prompt and
orderly administration of justice; litigants cannot, after resorting
to a wrong remedy, simply cry for the liberal construction of
these rules. 12 Our ruling in Lapid v. Laurea 13 succinctly
emphasized this point when we said: cIECaS
Members of the bar are reminded that their first duty is to
comply with the rules of procedure, rather than seek exceptions
as loopholes. Technical rules of procedure are not designed to
frustrate the ends of justice. These are provided to effect the
prompt, proper and orderly disposition of cases and, thus,
effectively prevent the clogging of court dockets. Utter disregard
of these rules cannot justly be rationalized by harking on the
policy of liberal construction. [Emphasis supplied.]
We add that even for this Court, liberality does not signify an
unbridled exercise of discretion. It has its limits; to serve its
purpose and to preserve its true worth, it must be exercised only
in the most appropriate cases. 14
WHEREFORE, premises considered, we DENY the motion for
reconsideration for lack of merit. Our Resolution of November
11, 2008 is hereby declared FINAL. Let entry of judgment be
made in due course. EcTIDA
SO ORDERED.
Puno, C.J., Quisumbing, Ynares-Santiago, Carpio, Corona, Chico-
Nazario, Velasco, Jr., Nachura, Leonardo-de Castro, Peralta and
Bersamin, JJ., concur.
Carpio Morales, J., is on leave.
||| (Pates v. Commission on Elections, G.R. No. 184915
(Resolution), [June 30, 2009], 609 PHIL 260-270)
EN BANC
[G.R. No. 126560. December 4, 1997.]
ATTY. ALFONSO PAA, petitioner, vs. THE HONORABLE COURT
OF APPEALS, CIVIL SERVICE COMMISSION and DIRECTOR
BARTOLOME C. AMOGUIS, respondents.
Fernando T. Collantes for petitioner.
The Solicitor General for respondents
SYNOPSIS
Petitioner was the Administrative Officer of Regional Office No.
XI of the Department of Labor and Employment (DOLE). On
September 4, 1992, DOLE Secretary Confesor ordered
petitioner's dismissal from the service with forfeiture of leave
credits and retirement benefits and disqualification from
reemployment in the government service, for conduct grossly
107
prejudicial to the best interest of service, frequent absences from
duty during office hours, and violation of reasonable office rules
and regulations. Petitioner then appealed to the civil Service
Commission, but the said office affirmed the order and declared
petitioner guilty of being notoriously undesirable. Aggrieved,
petitioner filed with the Court of Appeals a motion for extension
of time to file petition for certiorari under Rule 45 of the Rules of
Court. In its decision, the Court of Appeals denied petitioner's
motion, being the wrong mode of appeal. Hence, this appeal.
The Supreme Court ruled against the petitioner. The Court of
Appeals committed no error in denying petitioner's motion for
extension of time to file petition for certiorari under Rule 45 of
the Rules of Court. Under the 1997 Rules of Civil Procedure, a
petition for review as a mode of appeal to the Court of Appeals
from decisions, final orders or resolutions of the Court of Tax
Appeals and quasi judicial bodies, including the Civil Service
Commission, is governed by Rule 43, thereof. Considering that
petitioner announced in his motion for extension that he would
be filing a petition for review under Rule 45, the Court of Appeals
cannot be faulted for peremptorily denying the motion. In view
thereof, the instant petition is dismissed.
SYLLABUS
1. REMEDIAL LAW; 1997 RULES OF CIVIL PROCEDURE; THE
MODE OF APPEAL FROM A DECISION OF THE CIVIL SERVICE
COMMISSION, TO BRING IT WITHIN THE APPELLATE
JURISDICTION OF THE COURT OF APPEALS, IS A PETITION FOR
REVIEW UNDER RULE 43. — Prior to the effectivity of R.A. No.
7902, a party aggrieved by any decision, final order or resolution
of the Civil Service Commission had only one remedy, namely, a
special civil action for certiorari under Rule 65 of the Rules of
Court to be filed with this Court pursuant to Section 7 of Article
IX-A of the Constitution. Conformably with its implied authority
in this Section, Congress passed R.A. No. 7902 vesting upon the
Court of Appeals appellate jurisdiction over cases decided or
resolved by the Civil Service Commission, but not the other two
Constitutional Commissions treated under Article IX. Pursuant to
Revised Administrative Circular No. l-95, the mode of appeal
from a decision of the Civil Service Commission, to bring it within
the appellate jurisdiction, of the Court of Appeals, is a petition for
review to be filed within the period therein fixed. this petition for
review is the same as that contemplated in Section 29 of the
Judiciary Act of 1948 (R.A. No. 269), as amended, and in Circular
No. 2-90, but not that treated in Rule 45 of the Rules of Court
which refers to petitions filed in the Supreme Court for the
review of decisions or final orders of the Court of Appeals "Under
the 1997 Rules of Civil Procedure, which took effect on July 1997,
a petition for review as a mode of appeal to the Court of Appeals
from decisions, final orders or resolutions of the Court of Tax
Appeals and quasi-judicial bodies, including the Civil Service
Commission, is governed by Rule 43 thereof.
2. ID.; ID.; DISTINCTIONS BETWEEN A PETITION FOR REVIEW
AS A MODE OF APPEAL AND A SPECIAL CIVIL ACTION FOR
CERTIORARI. — There are settled distinctions between a
petition for review as a mode of appeal and a special civil action
for certiorari, thus: (a). In appeal by certiorari, the petition is
based on questions of law which the appellant desires the
appellate court to resolve. In certiorari as an original action, the
petition raises the issue as to whether the lower court acted
without or in excess of jurisdiction or with grave abuse of
discretion; (b). Certiorari as a mode of appeal. involves the
review of the judgment, award or final order on the merits. The
original action, for certiorari may be directed against an,
interlocutory order of the court prior to appeal from the
judgment or where there is no appeal or any other plan, speedy
or adequate remedy; (c). Appeal by certiorari must be made
within the reglementary period for appeal. An original action for
certiorari may be filed not later than sixty (60) days from notice
of the judgment, order or resolution sought to be assailed; (d).
Appeal by Certiorari stays the judgment, award or order
appealed from. An original action for certiorari, .unless a writ of
preliminary injunction or a temporary restraining order shall
have been issued, does not stay the challenged proceeding; (e). In
appeal by certiorari, the petitioner and respondent are the
original parties to the action, and the lower court or quasi-
judicial agency is not to be impleaded. In certiorari as an original
action the parties are the aggrieved, party against the lower
court or quasi judicial agency and the prevailing parties who
thereby respectively become the petitioner and respondents; (f).
In certiorari for purposes of appeal, the prior filing of motion for
108
reconsideration is not required (Sec. 1., Rule 45); while in
certiorari as an original action. a motion for reconsideration is a
condition precedent (Villa-Rey Transit vs. Bello, L-18957, April 23,
1963), subject to certain exceptions; (g). In appeal, by certiorari,
the appellate court is in the exercise of its appellate jurisdiction
and power of review, while in certiorari as an original action the
higher court, exercises original jurisdiction under its power of
control and supervision over the proceedings of lower courts.
3. ID.; SPECIAL CIVIL ACTIONS; CERTIORARI; WILL NOT LIE AS A
SUBSTITUTE FOR THE LOST REMEDY OF APPEAL; CASE AT BAR.
— We are not however persuaded that petitioner initially
thought of filing a special civil action. All along. what he had in
mind was a petition for review, as evidenced by his express
reference in his motion to a petition for review under Rule 45
and his indication of the date he received a copy of the
resolution, viz., 29 March 1996, and the last day to file the
petition, viz., 13 April 1996 which coincided with the last day
prescribed under Rule 45. If petitioner then filed a special civil
action for certiorari on 10 May 1996. it was only because he had
lost his right to appeal by way of the intended petition for
review. The proffered justification then for his belated filing of a
special action for certiorari was nothing but a crude attempt to
circumvent standing rules of procedure, which we cannot
tolerate. It is settled that a special civil action for certiorari will
not lie as a substitute for the lost remedy of appeal, and we find
no special nor compelling reasons why we should make out an
exception here.
RESOLUTION
DAVIDE, JR., J p:
Petitioner urges us to set aside, on ground of grave abuse of
discretion, the resolution of respondent Court of Appeals of 30
April 1996 in CA-G.R. SP No. 40341 denying petitioner's "Motion
for Extension of Time to File Petition for Certiorari under Rule 45
of the Rules of Court," and its resolution of 19 September 1996
denying the motion for reconsideration.
Petitioner was the Administrative Officer of Regional Office No.
XI of the Department of Labor and Employment (DOLE). In an
Order dated 4 September 1992, then DOLE Secretary Ma. Nieves
R. Confesor ordered petitioner "DISMISSED from the service with
forfeiture of leave credits and retirement benefits and
disqualification for (sic) reemployment in the government
service," for conduct grossly prejudicial to the best interest of the
service, frequent absences from duty during office hours, and
violation of reasonable office rules and regulations. Unsuccessful
in his bid for reconsideration, petitioner appealed to the Civil
Service Commission. cdrep
In its Resolution No. 95-0230 of 12 January 1995, 1 the Civil
Service Commission "found [petitioner] guilty of being
Notoriously Undesirable" and imposed upon him "the penalty of
dismissal from the service with all its accessories." Petitioner
moved for reconsideration, which, however, was denied by the
Civil Service Commission in its Resolution No. 960987 of 13
February 1996. 2
On 12 April 1996, petitioner filed with the Court of Appeals a
Motion for Extension of Time to File Petition for Certiorari Under
Rule 45 of the Rules of Court, 3 docketed by the Court of Appeals
as CA-G.R. SP No. 40341. He alleged that he received a copy of the
13 February 1996 Civil Service Commission resolution on 29
March 1996 and he had then "until 13 April 1996 within which to
file a petition for review under Rule 45 of the Rules of Court as
amended;" and that he needed three (3) weeks to secure
"certified true copies of the resolutions and other pertinent
documents [from] the Civil Service Commission, Quezon City,"
which were to be attached to the petition. He thus asked for an
extension of 30 days from 13 April 1996 within which to file the
petition.
On 30 April 1996, the Court of Appeals promulgated a Resolution
4 denying petitioner's aforementioned Motion for Extension of
Time to File Petition, decreeing:
The instant "Motion for Extension of Time to File Petition for
Certiorari under Rule 45 of the Rules of Court" filed on 12 April
1996 is hereby DENIED it being the wrong mode of appeal.
It is to be noted that the questioned resolution was rendered by
the Civil Service Commission; that the Supreme Court Revised
Administrative Circular No. 1-95 (Revised Circular No. 1-91)
specifically provides that appeals from judgments or final orders
or resolutions of the quasi-judicial agencies (which includes the
Civil Service Commission) is Petition for Review. (Pars. 1 and 5,
supra.)
109
Since the Court of Appeals denied his motion for reconsideration
on 19 September 1996, 5 petitioner filed the instant petition,
designating it in both the caption and the body as one for
"certiorari under Rule 65 or Rule 45 of the Rules of Court as
amended." Petitioner alleges:
I DISCRETION OF THE CIVIL SERVICE COMMISSION IN DECIDING
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO MYOPIC OR SHORT
SIGHTEDNESS IN JUDGMENT IN ADHERING AND LIMITING
ITSELF ONLY TO APPEAL BY A PETITION FOR REVIEW UNDER
SUPREME COURT REVISED ADMINISTRATIVE CIRCULAR NO. 1-
95 (REVISED CIRCULAR NO. 1-91) GROSSLY IGNORING THAT
AUTHORITY/POWER TO ISSUE WRITS OF MANDAMUS,
PROHIBITION, CERTIORARI, HABEAS CORPUS AND QUO
WARRANTO AND AUXILIARY WRITS OR PROCESSES; WHETHER
OR NOT IN AID OF ITS APPELLATE JURISDICTION AS GRANTED
UNDER PAR. (1), SEC. 9 OF REPUBLIC ACT NO. 7902 IN CASES
WHERE THE QUASI-JUDICIAL BODY COMMITS ULTRAVIREZ
[sic] ACTS TANTAMOUNT TO GRAVE ABUSE OF DISCRETION OR
LACK/IN EXCESS OF JURISDICTION AS IN THE INSTANT CASE
WHERE THE CIVIL SERVICE COMMISSION FOR THE FIRST TIME
ON APPEAL CONSIDERED DOCUMENTS/EVIDENCE WHICH
WERE NEVER INTRODUCED/PRESENTED NOR ADMITTED
DURING THE FORMAL HEARING OF THE ADMINISTRATIVE
CASE.
II
A QUESTION OF LAW AS TO WHETHER DECISIONS OR
RESOLUTIONS OF THE CIVIL SERVICE COMMISSION ISSUED
WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
IN EXCESS OF JURISDICTION CAN NO LONGER BE REVIEWED BY
THE HONORABLE COURT OF APPEALS BY A PETITION FOR
REVIEW UNDER RULE 45 OR 65 OF THE NEW RULES OF COURT
AS AMENDED DESPITE THE PATENT GRAVE ABUSE OF
DISCRETION ON THE PART OF THE CIVIL SERVICE COMMISSION
IN DECIDING A CASE BASED ON DOCUMENTS/EVIDENCE
INTRODUCED FOR THE FIRST TIME ON APPEAL, ORDINARY
APPEAL BOT [sic] BEING THE PLAIN, SPEEDY AND ADEQUATE
REMEDY IN THE ORDINARY COURSE OF LAW.
III
A QUESTION OF LAW AS TO WHETHER A PETITION FOR
CERTIORARI UNDER RULE 45 OR 65 OF THE RULES OF COURT
AS AMENDED CAN BE CONSIDERED A MODE OF APPEAL AND IF
SO CONSIDERED AS A MODE OF APPEAL WHETHER IT IS THE
PROPER REMEDY TO CORRECT SUPER [sic] GRAVE ABUSE OF
A CASE BASED ON AN [sic] EVIDENCE NOT INTRODUCED
DURING THE FORMAL HEARING OF THE CASE IT APPEARING
UNDER SUCH CIRCUMSTANCE THERE IS NO APPEAL, NOR ANY
PLAIN, SPEEDY, AND ADEQUATE REMEDY IN THE ORDINARY
COURSE OF LAW THAT CAN BE MADE AVAILABLE TO THE
PETITIONER EXCEPT THE SAID PETITION FOR CERTIORARI
UNDER RULE 45 OR 65 OF THE RULES OF COURT AS AMENDED.
In its Comment, 6 the Office of the Solicitor General submits that
the Court of Appeals did not commit grave abuse of discretion as
the petition which petitioner actually filed with the Court of
Appeals in CA-G.R. SP No. 40341 on 10 May 1996 was one for
certiorari under Rule 65 of the Rules of Court, as clearly shown
by the grounds petitioner relied upon, to wit:
I.
THE HONORABLE PUBLIC RESPONDENT NIEVES CONFESSOR IN
HER CAPACITY AS SECRETARY OF LABOR AND EMPLOYMENT
AND REVIEWING OFFICER OF THE ADMINISTRATIVE
COMPLAINT AGAINST THE PETITIONER COMMITTED SUPER
[sic] GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICATION [sic] WHEN THE COMPLAINANTS IN
SAID ADMINISTRATIVE CASE MERELY PETITIONED FOR THE
DEMOTION OF PETITIONER IN POSITION FROM CHIEF OF THE
ADMINISTRATIVE SERVICES TO SUPERVISING OFFICER OF THE
INDUSTRIAL RELATIONS DIVISION OF THE SAME REGIONAL
OFFICE NO. XI, DAVAO CITY, DEPARTMENT OF LABOR AND
EMPLOYMENT BUT THE HONORABLE NIEVES CONFESSOR
CAPRICIOUSLY, WHIMSICALLY, ARROGANTLY, ULTRAVIREZLY
[sic] WITHOUT REGARD TO THE CARDINAL RULES OF
PROCEDURE AND EVIDENCE RULED AND DECREED IN ANNEX A
TO ANNEX "A-10" LIKE AN EMPRESS THAT PETITIONER
SHOULD BE DISMISSED FROM THE SERVICE WHERE THE SAID
PETITIONER SPENT THE BEST 23 YEARS OF HIS LIFE
HONESTLY, FAITHFULLY AND SINCERELY WITHOUT BEING
110
CHARGED OF [sic] ANY SINGLE CASE, ADMINISTRATIVE OR
OTHERWISE, EXCEPT THE PRESENT HARASSMENT CASE
UNLIKE THE AFOREMENTIONED NIEVES CONFESSOR WHO IN
HER SHORT STINT AS SECRETARY [OF] LABOR AND
EMPLOYMENT WAS CHARGED IN THE OFFICE OF THE
OMBUDSMAN OF [sic] SEVERAL CRIMINAL AND
ADMINISTRATIVE CASES RANGING FROM CORRUPTION TO ALL
SORTS OF CASES INCLUDING HER INEXCUSABLE NEGLIGENCE
OF [sic] THE FLOR CONTEMPLACION AND OTHER SIMILAR
CASES INVOLVING OVERSEAS CONTRACT WORKERS ABROAD.
II.
THE HONORABLE PUBLIC RESPONDENT NIEVES CONFESSOR
ACTED WITH SUPER [sic] GRAVE ABUSE OF DISCRETION
AMOUNTING TO FALSE NARRATION OF FACTS OR
UNTRUTHFUL STATEMENT IN THE NARRATION OF FACTS IN
VIOLATION OF ART. 171 OF THE REVISED PENAL CODE
TANTAMOUNT TO FALSIFICATION OF QUASI JUDICIAL PUBLIC
DOCUMENTS WHEN IN THE QUESTIONED ORDER (ANNEX "A"
TO "A-10") SHE ALTERED, SUBSTITUTED AND CHANGED THE
FINDINGS OF THE DEPARTMENT OF LABOR INVESTIGATOR
ATTY. JOEL MARTINEZ BY MAKING IT APPEAR THAT
PETITIONER WAS FOUND TO BE FREQUENTLY ABSENT, WAS
DRUNK OR SLEEPING DURING REGULAR OFFICE HOURS WHEN
THE AFOREMENTIONED INVESTIGATING OFFICER HAS [sic]
NOT MADE ANY OF THOSE FINDINGS.
III.
THE HONORABLE NIEVES CONFESSOR COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
JURISDICTION OR GROSS IGNORANCE OF THE LAW WHEN SHE
ISSUED THE SEPTEMBER 4, 1992 ORDER (ANNEX A TO ANNEX
A-10) WHEREIN SHE IMPOSED THE SUPREME PENALTY OF
DISMISSAL WITH FORFEITURE OF RETIREMENT BENEFITS AND
LEAVE CREDITS ON THE PETITIONER WHICH IS GROSSLY
DISPROPORTIONATE TO PETITIONER'S ALLEGED FINDINGS OF
GUILT FOR VIOLATION OF REASONABLE OFFICE RULES AND
REGULATIONS, FREQUENT ABSENCES FROM DUTY DURING
REGULAR OFFICE HOUSES [sic] AND CONDUCT PREJUDICIAL TO
THE BEST INTEREST OF THE SERVICE AND PETITIONER FOR
THE FIRST TIME IN HIS 23 YEARS OF SERVICE WITH THE
DEPARTMENT OF LABOR AND EMPLOYMENT WAS
CONFRONTED WITH AN ADMINISTRATIVE HARASSMENT CASE
IN A PLACE SEVERAL HUNDRED KILOMETERS FROM HIS
FAMILY WHEN UNDER THE CIVIL SERVICE LAW
(PRESIDENTIAL DECREE NO. 807) AND CODE OF CONDUCT OF
GOVERNMENT OFFICIALS AND EMPLOYEES (R.A. 6713) THE
MAXIMUM PENALTY FOR FREQUENT UNAUTHORIZED
ABSENCES WHICH IS CONSIDERED A GRAVE OFFENSE IS ONLY
SUSPENSION FROM THE SERVICE FOR SIX MONTHS AND ONE
DAY AND THE PENALTY FOR CONDUCT PREJUDICIAL TO THE
BEST INTEREST OF THE SERVICE IS SIX MONTHS AND ONE DAY
TO ONE YEAR WHILE THE PENALTY FOR VIOLATION OF
REASONABLE OFFICE RULES AND REGULATIONS WHICH IS A
LIGHT OFFENSE, IS ONLY A REPRIMAND.
IV.
THE HONORABLE NIEVES CONFESSOR COMMITTED GRAVE
ABUSE OF DISCRETION IN ISSUING THE SEPTEMBER 4, 1952
ORDER (ANNEX A TO ANNEX A-10) DISMISSING FROM THE
SERVICE THE HEREIN PETITIONER WITH FORFEITURE OF
RETIREMENT BENEFITS AND LEAVE CREDITS AMOUNTING TO
CAPRICIOUS, WHIMSICAL, ARROGANT AND ULTRAVIREZ [sic]
EXERCISE OF FUNCTIONS WHEN THE CHIEF OF THE LEGAL
SERVICES, THE ASSISTANT SECRETARY OF LABOR AND THE
UNDERSECRETARY OF LABOR HAVE ALREADY INDORSED TO
HER FOR HER APPROVAL THE ORDER DISMISSING THE
INSTANT ADMINISTRATIVE CASE AND AT THE SAME TIME
RECOMMENDED THE APPROVAL OF PETITIONER'S
APPLICATION FOR RETIREMENT.
V.
THE HONORABLE NIEVES CONFESSOR COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO VIOLATION OF
PARAGRAPH (c), SEC. 4 OF R.A. 6713 WHICH IS THE CODE OF
CONDUCT AND ETHICAL STANDARDS FOR PUBLIC OFFICIALS
AND EMPLOYEES CONSISTING OF HER DELIBERATE MALICIOUS
REFUSAL TO ACT WITH JUSTNESS AND SINCEREITY [sic]
TOWARDS PETITIONER WHEN UNDER FALSE PRETEPSES [sic]
SHE MISLEAD PETITIONER INTO FILING OF [sic] HIS
111
APPLICATION FOR RETIREMENT TO TAKE EFFECT ON APRIL
15, 1993 AND AFTER PETITIONER FILED SUCH APPLICATION
FOR RETIREMENT AND ACTUALLY STOPPED WORKING IN
[THE] OFFICE ON APRIL 15, 1993, THE SAID HONORABLE
NIEVES CONFESSOR DENIED PETITIONER'S MOTION FOR
RECONSIDERATION (ANNEXES F, F-1, F-2, F-3, F-4 AND F-S)
AND RETIREMENT APPLICATION.
VI.
PUBLIC RESPONDENT CIVIL SERVICE COMMISSION
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
LIKEWISE TO FALSIFICATION OF QUASI JUDICIAL PUBLIC
DOCUMENTS WHEN IT ISSUED RESOLUTION NO. 95-0230
(ANNEX "B" TO "B-8" DATED JANUARY 12, 1995) AFFIRMING
THE ORDER OF HONORABLE PUBLIC RESPONDENT NIEVES
CONFESSOR WHEN THE SAID CIVIL SERVICE COMMISSION
MADE IT APPEAR IN SAID RESOLUTION THAT CERTAIN
LETTERS AND MEMORANDA WERE PRESENTED DURING THE
FORMAL HEARING OF THE CASE SUCH AS THOSE LETTERS AND
MEMORANDA ENUMERATED FROM NO. 1 TO 19 OF PAGES 7
AND 8 OF THE QUESTIONED RESOLUTION NO. 95-0230 WHEN
NO SUCH LETTERS AND MEMORANDA WERE EVER PRESENTED
IN THE FORMAL HEARING OF THE ADMINISTRATIVE CASE AND
HOW THE SAID DOCUMENTS FOUND THEIR WAY INTO THE
RECORDS OF THE CASE AND FOR THE FIRST TIME CONSIDERED
ON APPEAL BY PUBLIC RESPONDENT CIVIL SERVICE
COMMISSION WHICH WAS THE BASIS OF AFFIRMING THE
QUESTIONED ORDER OF HON. NIEVES CONFESSOR (ANNEX "A
TO ANNEX "A-10") AS WELL AS IN DECLARING PETITIONER
NOTORIOUSLY UNDESIRABLE IS A "MIRACLE" WHICH HAS
NEVER BEEN DISCUSSED NOR EXPLAINED BY PUBLIC
RESPONDENT IN THE QUESTIONED RESOLUTION NO. 95-0230.
VII.
THE HONORABLE PUBLIC RESPONDENT CIVIL SERVICE
COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO FALSIFICATION PUNISHABLE UNDER ART. 171
OF THE REVISED PENAL CODE WHEN IT DENIED PETITIONER'S
MOTION FOR RECONSIDERATION BY ISSUING RESOLUTION NO.
96-0987 DATED FEBRUARY 13, 1996 WHEN IT CONSIDERED
FOR THE FIRST TIME ON APPEAL THE QUESTIONED LETTERS
AND MEMORANDA WHICH WERE NEVER INTRODUCED DURING
THE FORMAL HEARING OF THE INSTANT ADMINISTRATIVE
CASE.
VIII.
THE HONORABLE CIVIL SERVICE COMMISSION ACTED WITH
GRAVE ABUSE OF DISCRETION IN ISSUING RESOLUTION NO. 95-
0230 AND RESOLUTION NO. 96-0987 DECLARING PETITIONER
AS NOTORIOUSLY UNDESIRABLE ON THE BASIS OF
DOCUMENTS NOT ADMITTED IN EVIDENCE NOR PASSED UPON
IN THE FORMAL HEARING OF THE ADMINISTRATIVE CASE BUT
WHICH FOR THE FIRST TIME ON APPEAL WAS [sic]
MIRACULOUSLY INSERTED INTO THE RECORDS OF THE CASE
IN THE CIVIL SERVICE COMMISSION AND THESE CONSIST OF
THE LETTERS AND MEMORANDA MENTIONED IN PAGES 7 AND
8 OF THE QUESTIONED RESOLUTION NO. 95-0230
ENUMERATED AS NO. 1 TO 19.
IX.
THE HONORABLE CIVIL SERVICE COMMISSION COMMITTED
GRAVE ABUSE OF DISCRETION TANTAMOUNT TO KNOWINGLY
RENDERING [AN] UNJUST JUDGMENT WHEN INSTEAD OF
REVIEWING THE FINDINGS AND ORDER OF HONORABLE
NIEVES CONFESSOR (ANNEXES A TO A-10) DATED SEPTEMBER
4, 1992 IT PROCEEDED TO CONDUCT ITS OWN EX-PARTE
INFORMAL INQUIRY BY CONSIDERING DOCUMENTS OR
SCRAP[S] OF PAPERS [sic] MIRACULOUSLY INSERTED INTO THE
RECORDS OF THE CASE IN THE CIVIL SERVICE COMMISSION
WHICH WERE FOR THE FIRST TIME TREATED ON APPEAL
THEREBY ISSUING A NEW FINDING THAT THE PETITIONER
WAS NOTORIOUSLY UNDESIRABLE WHICH FINDING WAS
NEVER DREAMED NOR CONCEIVED OF BY ANY PARTY IN THE
FORMAL HEARING OF THE ADMINISTRATIVE CASE AND NOT
EVEN BY THE OVER ZEALOUS, OVER VIGILANT, OVER ACTING,
OVERSPEEDNG, OVER HONEST AND OVER INCORRUPTIBLE
PUBLIC RESPONDENT NIEVES CONFESSOR. 7
The Solicitor General then concluded that since under Revised
Administrative Circular No. 1-95 of this Court appeals from
112
judgments of quasi-judicial agencies such as the Civil Service
Commission should be by verified petition for review, and
considering further that Circular No. 2-90 of this Court provides
that appeals taken to either this Court or the Court of Appeals by
the wrong or inappropriate mode of appeal shall be dismissed,
then petitioner's motion for extension of time to file petition for
certiorari was correctly denied by the Court of Appeals. prcd
In its Comment 8 filed by its Office for Legal Affairs, respondent
Civil Service Commission claims as misplaced petitioner's
reliance on Section 9(1) of B.P. Blg. 129 which vests upon the
Court of Appeals exclusive original jurisdiction to issue writs of
mandamus, prohibition, certiorari, habeas corpus, and quo
warranto, whether or not in aid of its appellate jurisdiction.
Respondent Commission contends that the only mode of appeal
from its decisions is a petition for review, in accordance with
Revised Circular No. 1-95 of this Court and Section 9(3) of B.P.
Blg. 129, as amended by R.A. No. 7902. The latter provides:
Sec. 9 Jurisdiction. — The Court of Appeals shall exercise:
xxx xxx xxx
(3) Exclusive appellate jurisdiction over all final judgments,
decisions, resolutions, orders or awards of Regional Trial courts
and quasi-judicial agencies, instrumentalities, boards or
commissions, including the Securities, and Exchange
Commission, the Social Security Commission, the Employees
Compensation Commission and the Civil Service Commission,
except those falling within the appellate jurisdiction of the
Supreme Court in accordance with the Constitution, the Labor
Code of the Philippines under Presidential Decree No. 442, as
amended, the provisions of this Act, and of subparagraph (1) of
the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.
xxx xxx xxx
In his Consolidated Reply, 9 petitioner justified his filing a
petition for certiorari under Rule 65 of the Rules of Court in light
of the "super-grave abuse of discretion on the part of the . . . Civil
Service Commission" in issuing the challenged resolution, and
that an ordinary appeal was "not appropriate and sufficient to
seek reddress [sic] . . . for the reason that it would in effect
impliedly give credence to the unlawful acts of the Civil Service
Commission thus admitting its despotic, arrogant exercise of
authority . . ."
We rule against petitioner.
The Court of Appeals committed no error in denying petitioner's
"Motion for Extension of Time to File Petition for Certiorari
under Rule 45 of the Rules of Court."
Prior to the effectivity of R.A. No. 7902, a party aggrieved by any
decision, final order or resolution of the Civil Service
Commission had only one remedy, namely, a special civil action
for certiorari under Rule 65 of the Rules of Court 10 to be filed
with this Court pursuant to Section 7 of Article IX-A of the
Constitution, which reads, in part:
SEC. 7. . . . Unless otherwise provided by law this Constitution or
by law, any decision, order, or ruling of each Commission may be
brought to the Supreme Court on certiorari by the aggrieved
party within thirty days from receipt of a copy thereof.
Conformably with its implied authority in this Section, Congress
passed R.A. No. 7902 vesting upon the Court of Appeals appellate
jurisdiction over cases decided or resolved by the Civil Service
Commission, but not the other two Constitutional Commissions
treated under Article IX. pursuant to Revised Administrative
Circular No. 1-95, the mode of appeal from a decision of the Civil
Service Commission, to bring it within the appellate jurisdiction
of the Court of Appeals, is a petition for review to be filed within
the period therein fixed. This petition for review is the same as
that contemplated in Section 29 of the Judiciary Act of 1948 (R.A.
No. 269), as amended, and in Circular No. 2-90, but not that
treated in Rule 45 of the Rules of Court which refers to petitions
filed in the Supreme Court for the review of decisions or final
orders of the Court of Appeals.
Under the 1997 Rules of Civil Procedure, which took effect on 1
July 1997, a petition for review as a mode of appeal to the Court
of Appeals from decisions, final orders or resolutions of the Court
of Tax Appeals and quasi-judicial bodies, including the Civil
Service Commission, is governed by Rule 43 thereof.
Considering that petitioner announced in his motion for
extension of time that he would be filing a petition for review
under Rule 45 of the Rules of Court, the Court of Appeals cannot
be faulted for peremptorily denying the motion.
113
Petitioner claims, however, that a petition for review was not his
exclusive remedy, as he could also avail of a special civil action
for certiorari under Rule 65. There are, of course, settled
distinctions between a petition for review as a mode of appeal
and a special civil action for certiorari, thus:
a. In appeal by certiorari, the petition is based on questions of
law which the appellant desires the appellate court to resolve. In
certiorari as an original action, the petition raises the issue as to
whether the lower court acted without or in excess of
jurisdiction or with grave abuse of discretion.
b. Certiorari, as a mode of appeal, involves the review of the
judgment, award or final order on the merits. The original action
for certiorari may be directed against an interlocutory order of
the court prior to appeal from the judgment or where there is no
appeal or any other plain, speedy or adequate remedy.
c. Appeal by certiorari must be made within the reglementary
period for appeal. An original action for certiorari may be filed
not later than sixty (60) days from notice of the judgment, order
or resolution sought to be assailed.
d. Appeal by certiorari stays the judgment, award or order
appealed from. An original action for certiorari, unless a writ of
preliminary injunction or a temporary restraining order shall
have been issued, does not stay the challenged proceeding.
e. In appeal by certiorari, the petitioner and respondent are the
original parties to the action, and the lower court or quasi-
judicial agency is not to be impleaded. In certiorari as an original
action, the parties are the aggrieved party against the lower
court or quasi-judicial agency and the prevailing parties, who
thereby respectively become the petitioner and respondents.
f. In certiorari for purposes of appeal, the prior filing of a motion
for reconsideration is not required (Sec. 1, Rule 45); while in
certiorari as an original action, a motion for reconsideration is a
condition precedent (Villa-Rey Transit vs. Bello, L-18957, April 23,
1963), subject to certain exceptions.
g. In appeal by certiorari, the appellate court is in the exercise of
its appellate jurisdiction and power of review, while in certiorari
as an original action, the higher court exercises original
jurisdiction under its power of control and supervision over the
proceedings of lower courts. 11
The original jurisdiction of the Court of Appeals over special civil
actions for, inter alia, certiorari, is vested upon it in Section 9(1)
of B.P. Blg. 129. This jurisdiction is concurrent with the Supreme
Court 12 and the Regional Trial Court. 13
If, indeed, petitioner initially believed that he had the alternative
remedy of a special civil action for certiorari which would have
been more effective and adequate, then it was not necessary for
him to ask for an extension of time to file the petition. Under Rule
65 then, he had a reasonable period from receipt of a copy of the
Civil Service Commission resolution denying his motion for
reconsideration within which to file the petition. That reasonable
period has been interpreted to be ninety (90) days. 14 We are
not, however, persuaded that petitioner initially thought of filing
a special civil action. All along, what he had in mind was a
petition for review, as evidenced by his express reference in his
motion to a petition for review under Rule 45 and his indication
of the date he received a copy of the resolution, viz., 29 March
1996, and the last day to file the petition, viz., 13 April 1996,
which coincided with the last day prescribed under Rule 45.
If petitioner then filed a special civil action for certiorari on 10
May 1996, it was only because he had lost his right to appeal by
way of the intended petition for review. The proffered
justification then for his belated filing of a special action for
certiorari was nothing but a crude attempt to circumvent
standing rules of procedure, which we cannot tolerate.
It is settled that a special civil action for certiorari will not lie as a
substitute for the lost remedy of appeal, 15 and we find no
special nor compelling reasons why we should make out an
exception here.
In any case, even if we were to sympathize with petitioner and
permit his recourse under Rule 65, the end result would remain
unchanged since a perusal of the challenged resolutions of the
Civil Service Commission fails to disclose any grave abuse of
discretion on its part. LibLex
WHEREFORE, the instant petition is DISMISSED.
Costs against petitioner.
SO ORDERED.
Regalado, Romero, Bellosillo, Melo, Puno, Vitug, Kapunan,
Francisco and Panganiban, JJ ., concur.
114
Narvasa, C .J ., took no part; no participation in deliberation; on
official leave at the time.
Mendoza, J ., is on official leave.
Martinez, J ., took no part.
||| (Paa v. Court of Appeals, G.R. No. 126560 (Resolution),
[December 4, 1997], 347 PHIL 122-138)
EN BANC
[G.R. No. 213525. January 27, 2015.]
FORTUNE LIFE INSURANCE COMPANY, INC., petitioner, vs.
COMMISSION ON AUDIT (COA), PROPER; COA REGIONAL
OFFICE NO. VI-WESTERN VISAYAS; AUDIT GROUP LGS-B,
PROVINCE OF ANTIQUE; AND PROVINCIAL GOVERNMENT OF
ANTIQUE, respondents.
RESOLUTION
BERSAMIN, J p:
Petitioner Fortune Life Insurance Company, Inc. seeks the
reconsideration 1 of the resolution promulgated on August 19,
2014, 2 whereby the Court dismissed its petition for certiorari
under Rule 64 in relation to Rule 65 of the Rules of Court due to
its non-compliance with the provisions of Rule 64, particularly
for: (a) the late filing of the petition; (b) the non-submission of
the proof of service and verified declaration; and (c) the failure
to show grave abuse of discretion on the part of the respondents.
3 substantial compliance with the Efficient Use of Paper Rule 12 by
Antecedents
Respondent Provincial Government of Antique (LGU) and the
petitioner executed a memorandum of agreement concerning the
life insurance coverage of qualified barangay secretaries,
treasurers and tanod, the former obligating P4,393,593.60 for
the premium payment, and subsequently submitting the
corresponding disbursement voucher to COA-Antique for pre-
audit. 4 The latter office disallowed the payment for lack of legal
basis under Republic Act No. 7160 (Local Government Code).
Respondent LGU appealed but its appeal was denied.
Consequently, the petitioner filed its petition for money claim in
the COA. 5 On November 15, 2012, the COA issued its decision
denying the petition, 6 holding that under Section 447 and
Section 458 of the Local Government Code only municipal or city
governments are expressly vested with the power to secure
group insurance coverage for barangay workers; and noting the
LGU's failure to comply with the requirement of publication
under Section 21 of Republic Act No. 9184 (Government
Procurement Reform Act).
The petitioner received a copy of the COA decision on December
14, 2012, 7 and filed its motion for reconsideration on January
14, 2013. 8 However, the COA denied the motion, 9 the denial
being received by the petitioner on July 14, 2014. 10
Hence, the petitioner filed the petition for certiorari on August
12, 2014, but the petition for certiorari was dismissed as earlier
stated through the resolution promulgated on August 19, 2014
for (a) the late filing of the petition; (b) the non-submission of
the proof of service and verified declaration; and (c) the failure
to show grave abuse of discretion on the part of the respondents.
EHTSCD
Issues
In its motion for reconsideration, the petitioner submits that it
filed the petition for certiorari within the reglementary period
following the fresh period rule enunciated in Neypes v. Court of
Appeals; 11 and that the petition for certiorari included an
affidavit of service in compliance with Section 3, Rule 13 of the
Rules of Court. It admits having overlooked the submission of a
verified declaration; and prays that the declaration attached to
the motion for reconsideration be admitted by virtue of its
previously submitting a compact disc (CD) containing the
petition for certiorari and its annexes. It disagrees with the Court,
insisting that it showed and proved grave abuse of discretion on
the part of the COA in issuing the assailed decision.
Ruling
We deny the motion for reconsideration for being without merit.
I
Petitioner did not comply with
the rule on proof of service
The petitioner claims that the affidavit of service attached to the
petition for certiorari complied with the requirement on proof of
service.
115
The claim is unwarranted. The petitioner obviously ignores that
Section 13, Rule 13 of the Rules of Court concerns two types of
proof of service, namely: the affidavit and the registry receipt,
viz.:
Section 13. Proof of Service. — . . . . If service is made by
registered mail, proof shall be made by such affidavit and the
registry receipt issued by the mailing office. The registry return
card shall be filed immediately upon its receipt by the sender, or
in lieu thereof the unclaimed letter together with the certified or
sworn copy of the notice given by the postmaster to the
addressee.
Section 13 thus requires that if the service is done by registered
mail, proof of service shall consist of the affidavit of the person
effecting the mailing and the registry receipt, both of which must
be appended to the paper being served. A compliance with the
rule is mandatory, such that there is no proof of service if either
or both are not submitted. 13
Here, the petition for certiorari only carried the affidavit of
service executed by one Marcelino T. Pascua, Jr., who declared
that he had served copies of the petition by registered mail
"under Registry Receipt Nos. 70449, 70453, 70458, 70498 and
70524 attached to the appropriate spaces found on pages 64-65
of the petition." 14 The petition only bore, however, the cut print-
outs of what appeared to be the registry receipt numbers of the
registered matters, not the registry receipts themselves. The rule
requires to be appended the registry receipts, not their
reproductions. Hence, the cut print-outs did not substantially
comply with the rule. This was the reason why the Court held in
the resolution of August 19, 2014 that the petitioner did not
comply with the requirement of proof of service. 15 CTacSE
II
Fresh Period Rule under Neypes
did not apply to the petition for certiorari
under Rule 64 of the Rules of Court
The petitioner posits that the fresh period rule applies because its
Rule 64 petition is akin to a petition for review brought under
Rule 42 of the Rules of Court; hence, conformably with the fresh
period rule, the period to file a Rule 64 petition should also be
reckoned from the receipt of the order denying the motion for
reconsideration or the motion for new trial. 16
The petitioner's position cannot be sustained.
There is no parity between the petition for review under Rule 42
and the petition for certiorari under Rule 64.
As to the nature of the procedures, Rule 42 governs an appeal
from the judgment or final order rendered by the Regional Trial
Court in the exercise of its appellate jurisdiction. Such appeal is
on a question of fact, or of law, or of mixed question of fact and
law, and is given due course only upon a prima facie showing
that the Regional Trial Court committed an error of fact or law
warranting the reversal or modification of the challenged
judgment or final order. 17 In contrast, the petition for certiorari
under Rule 64 is similar to the petition for certiorari under Rule
65, and assails a judgment or final order of the Commission on
Elections (COMELEC), or the Commission on Audit (COA). The
petition is not designed to correct only errors of jurisdiction, not
errors of judgment. 18 Questions of fact cannot be raised except
to determine whether the COMELEC or the COA were guilty of
grave abuse of discretion amounting to lack or excess of
jurisdiction.
The reglementary periods under Rule 42 and Rule 64 are
different. In the former, the aggrieved party is allowed 15 days to
file the petition for review from receipt of the assailed decision
or final order, or from receipt of the denial of a motion for new
trial or reconsideration. 19 In the latter, the petition is filed
within 30 days from notice of the judgment or final order or
resolution sought to be reviewed. The filing of a motion for new
trial or reconsideration, if allowed under the procedural rules of
the Commission concerned, interrupts the period; hence, should
the motion be denied, the aggrieved party may file the petition
within the remaining period, which shall not be less than five
days in any event, reckoned from the notice of denial. 20
The petitioner filed its motion for reconsideration on January 14,
2013, which was 31 days after receiving the assailed decision of
the COA on December 14, 2012. 21 Pursuant to Section 3 of Rule
64, it had only five days from receipt of the denial of its motion
for reconsideration to file the petition. Considering that it
received the notice of the denial on July 14, 2014, it had only
until July 19, 2014 to file the petition. However, it filed the
petition on August 13, 2014, which was 25 days too late.
116
We ruled in Pates v. Commission on Elections 22 that the belated
filing of the petition for certiorari under Rule 64 on the belief that
the fresh period rule should apply was fatal to the recourse. As
such, the petitioner herein should suffer the same fate for having
wrongly assumed that the fresh period rule under Neypes 23
applied. Rules of procedure may be relaxed only to relieve a
litigant of an injustice that is not commensurate with the degree
of his thoughtlessness in not complying with the prescribed
procedure. 24 Absent this reason for liberality, the petition
cannot be allowed to prosper. AHDcCT
III
Petition for certiorari further lacked merit
The petition for certiorari is also dismissible for its lack of merit.
The petitioner insists on having fully shown that the COA
committed grave abuse of discretion, to wit: (1) the challenged
decision was rendered by a divided COA proper; (2) the COA
took almost a year before promulgating its decision, and more
than a year in resolving the motion for reconsideration, in
contravention of the express mandate of the Constitution; (3) the
resolution denying the motion for reconsideration was made up
of only two sentences; (4) the matter involved a novel issue that
called for an interpretation of the pertinent provisions of the
Local Government Code; and (5) in issuing the resolution, COA
Commissioners Grace Pulido-Tan and Heidi L. Mendoza made it
appear that they knew the Local Government Code better than
former Senator Aquilino Pimentel who offered an opinion on the
matter. 25
Grave abuse of discretion implies such capricious and whimsical
exercise of judgment as to be equivalent to lack or excess of
jurisdiction; in other words, power is exercised in an arbitrary or
despotic manner by reason of passion, prejudice, or personal
hostility; and such exercise is so patent or so gross as to amount
to an evasion of a positive duty or to a virtual refusal either to
perform the duty enjoined or to act at all in contemplation of law.
26
A close look indicates that the petition for certiorari did not
sufficiently disclose how the COA committed grave abuse of its
discretion. For sure, the bases cited by the petitioner did not
approximate grave abuse of discretion. To start with, the
supposed delays taken by the COA in deciding the appeal were
neither arbitrary nor whimsical on its part. Secondly, the mere
terseness of the denial of the motion for reconsideration was not
a factor in demonstrating an abuse of discretion. And, lastly, the
fact that Senator Pimentel, even if he had been the main
proponent of the Local Government Code in the Legislature,
expressed an opinion on the issues different from the COA
Commissioners' own did not matter, for it was the latter's
adjudication that had any value and decisiveness on the issues by
virtue of their being the Constitutionally officials entrusted with
the authority for that purpose.
It is equally relevant to note that the COA denied the money
claim of the petitioner for the further reason of lack of sufficient
publication as required by the Government Procurement Act. In
that light, the COA acted well within its authority in denying the
petitioner's claim.
IV
Petitioner and its counsel
exhibited harshness and disrespect
towards the Court and its Members
The petitioner contends that the Court erred in appreciating the
petitioner's non-compliance with the requirement of the proof of
service, alleging that even "a perfunctory scrutiny" of the petition
for certiorari and its annexes could have easily shown that it had
attached an affidavit of service to the petition. It goes on to make
the following statements, viz.:
25. Apparently, the staff of the Justice-in-charge failed to verify
the PETITION and its annexes up to its last page, thus, the
erroneous finding that there was non-submission of the proof of
service;
26. In turn, the same omission was hoisted upon the other
members of this Honorable Court who took the observation from
the office of the Justice-in-charge, to be the obtaining fact, when
in truth and in fact, it is not; 27 cHITCS
The petitioner and its counsel thereby exhibited their plain
inability to accept the ill consequences of their own
shortcomings, and instead showed an unabashed propensity to
readily lay blame on others like the Court and its Members. In
doing so, they employed harsh and disrespectful language that
accused the Court and its Members of ignorance and
recklessness in the performance of their function of adjudication.
117
We do not tolerate such harsh and disrespectful language being
uttered against the Court and its Members. We consider the
accusatory language particularly offensive because it was
unfounded and undeserved. As this resolution earlier clarifies,
the petition for certiorari did not contain a proper affidavit of
service. We do not need to rehash the clarification. Had the
petitioner and its counsel been humbler to accept their self-
inflicted situation and more contrite, they would have desisted
from their harshness and disrespect towards the Court and its
Members. Although we are not beyond error, we assure the
petitioner and its counsel that our resolutions and
determinations are arrived at or reached with much care and
caution, aware that the lives, properties and rights of the litigants
are always at stake. If there be errors, they would be unintended,
and would be the result of human oversight. But in this instance
the Court and its Members committed no error. The petition bore
only cut reproductions of the supposed registry receipts, which
even a mere "perfunctory scrutiny" would not pass as the
original registry receipts required by the Rules of Court.
Accordingly, the petitioner and its counsel, Atty. Eduardo S.
Fortaleza, should fully explain in writing why they should not be
punished for indirect contempt of court for their harsh and
disrespectful language towards the Court and its Members; and,
in his case, Atty. Fortaleza should further show cause why he
should not be disbarred.
WHEREFORE, the Court DENIES the Motion for Reconsideration
for its lack of merit; ORDERS the petitioner and its counsel, Atty.
Eduardo S. Fortaleza, to show cause in writing within ten (10)
days from notice why they should not be punished for indirect
contempt of court; and FURTHER DIRECTS Atty. Fortaleza to
show cause in the same period why he should not be disbarred.
SO ORDERED.
Carpio, ** Velasco, Jr., Leonardo-de Castro, Peralta, Del Castillo,
Villarama, Jr., Perez, Mendoza, Reyes, Perlas-Bernabe, Leonen and
Jardeleza, JJ., concur.
Sereno, C.J., is on leave.
Brion, J., is on official leave.
||| (Fortune Life Insurance Company, Inc. v. Commission on Audit,
G.R. No. 213525 (Resolution), [January 27, 2015])
EN BANC
[G.R. No. 188818. May 31, 2011.]
TOMAS R. OSMEÑA, in his personal capacity and in his
capacity as City Mayor of Cebu City, petitioner, vs. THE
COMMISSION ON AUDIT, respondent.
DECISION
BRION, J p:
Before the Court is the Petition for Certiorari 1 filed by Tomas R.
Osmeña, former mayor of the City of Cebu, under Rule 64 of the
Rules of Court. The petition seeks the reversal of the May 6, 2008
Decision 2 and the June 8, 2009 Resolution 3 of the respondent
Commission on Audit (COA), which disallowed the damages,
attorney's fees and litigation expenses awarded in favor of two
construction companies in the collection cases filed against the
City of Cebu, and made these charges the personal liability of
Osmeña for his failure to comply with the legal requirements for
the disbursement of public funds. HDacIT
BACKGROUND FACTS
The City of Cebu was to play host to the 1994 Palarong
Pambansa (Palaro). In preparation for the games, the City
engaged the services of WT Construction, Inc. (WTCI) and Dakay
Construction and Development Company (DCDC) to construct
and renovate the Cebu City Sports Complex. Osmeña, then city
mayor, was authorized by the Sangguniang Panlungsod
(Sanggunian) of Cebu to represent the City and to execute the
construction contracts.
While the construction was being undertaken, Osmeña issued a
total of 20 Change/Extra Work Orders to WTCI, amounting to
P35,418,142.42 (about 83% of the original contract price), and to
DCDC, amounting to P15,744,525.24 (about 31% of the original
contract price). These Change/Extra Work Orders were not
covered by any Supplemental Agreement, nor was there a prior
authorization from the Sanggunian. Nevertheless, the work
proceeded on account of the "extreme urgency and need to have
a suitable venue for the Palaro." 4 The Palaro was successfully
held at the Cebu City Sports Complex during the first six months
of 1994.
118
Thereafter, WTCI and DCDC demanded payment for the extra
work they performed in the construction and renovation of the
sports complex. A Sanggunian member, Councilor Augustus
Young, sponsored a resolution authorizing Osmeña to execute
the supplemental agreements with WTCI and DCDC to cover the
extra work performed, but the other Sanggunian members
refused to pass the resolution. Thus, the extra work completed
by WTCI and DCDC was not covered by the necessary
appropriation to effect payment, prompting them to file two
separate collection cases before the Regional Trial Court (RTC) of
Cebu City (Civil Case Nos. CEB-17004 5 and CEB-17155). 6 The
RTC found the claims meritorious, and ordered the City to pay
for the extra work performed. The RTC likewise awarded
damages, litigation expenses and attorney's fees in the amount of
P2,514,255.40 to WTCI 7 and P102,015.00 to DCDC. 8 The
decisions in favor of WTCI and DCDC were affirmed on appeal,
subject to certain modifications as to the amounts due, and have
become final. To satisfy the judgment debts, the Sanggunian
finally passed the required appropriation ordinances.
During post-audit, the City Auditor issued two notices
disallowing the payment of litigation expenses, damages, and
attorney's fees to WTCI and DCDC. 9 The City Auditor held
Osmeña, the members of the Sanggunian, and the City
Administrator liable for the P2,514,255.40 and P102,015.00
awarded to WTCI and DCDC, respectively, as damages, attorney's
fees, and interest charges. These amounts, the City Auditor
concluded, were unnecessary expenses for which the public
officers should be held liable in their personal capacities
pursuant to the law.
Osmeña and the members of the Sanggunian sought
reconsideration of the disallowance with the COA Regional
Office, which, through a 2nd Indorsement dated April 30, 2003,
10 modified the City Auditor's Decision by absolving the
members of the sanggunian from any liability. It declared that
the payment of the amounts awarded as damages and attorney's
fees should solely be Osmeña's liability, as it was him who
ordered the change or extra work orders without the
supplemental agreement required by law, or the prior
authorization from the Sanggunian. The Sanggunian members
cannot be held liable for refusing to enact the necessary
ordinance appropriating funds for the judgment award because
they are supposed to exercise their own judgment and discretion
in the performance of their functions; they cannot be mere
"rubber stamps" of the city mayor.
The COA Regional Office's Decision was sustained by the COA's
National Director for Legal and Adjudication (Local Sector) in a
Decision dated January 16, 2004. 11 Osmeña filed an appeal
against this Decision.
On May 6, 2008, the COA issued the assailed Decision which
affirmed the notices of disallowance. 12 Osmeña received a copy
of the Decision on May 23, 2008. Eighteen days after or on June
10, 2008, Osmeña filed a motion for reconsideration of the May
6, 2008 COA Decision.
The COA denied Osmeña's motion via a Resolution dated June 8,
2009. 13 The Office of the Mayor of Cebu City received the June 8,
2009 Resolution of the COA on June 29, 2009. A day before,
however, Osmeña left for the United States of America for his
check-up after his cancer surgery in April 2009 and returned to
his office only on July 15, 2009. Thus, it was only on July 27, 2009
that Osmeña filed the present petition for certiorari under Rule
64 to assail the COA's Decision of May 6, 2008 and Resolution of
June 8, 2009. cSCTID
THE PETITION
Rule 64 of the Rules of Court governs the procedure for the
review of judgments and final orders or resolutions of the
Commission on Elections and the COA. Section 3 of the same Rule
provides for a 30-day period, counted from the notice of the
judgment or final order or resolution sought to be reviewed, to
file the petition for certiorari. The Rule further states that the
filing of a motion for reconsideration of the said judgment or
final order or resolution interrupts the 30-day period.
Osmeña filed his motion for reconsideration, of the COA's May 6,
2008 Decision, 18 days from his receipt thereof, leaving him with
12 days to file a Rule 64 petition against the COA ruling. He
argues that the remaining period should be counted not from the
receipt of the COA's June 8, 2009 Resolution by the Office of the
Mayor of Cebu City on June 29, 2009, but from the time he
officially reported back to his office on July 15, 2009, after his
trip abroad. Since he is being made liable in his personal capacity,
he reasons that the remaining period should be counted from his
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actual knowledge of the denial of his motion for reconsideration.
Corollary, he needed time to hire a private counsel who would
review his case and prepare the petition.
Osmeña pleads that his petition be given due course for the
resolution of the important issues he raised. The damages and
interest charges were awarded on account of the delay in the
payment of the extra work done by WTCI and DCDC, which delay
Osmeña attributes to the refusal of the Sanggunian to
appropriate the necessary amounts. Although Osmeña
acknowledges the legal necessity for a supplemental agreement
for any extra work exceeding 25% of the original contract price,
he justifies the immediate execution of the extra work he
ordered (notwithstanding the lack of the supplemental
agreement) on the basis of the extreme urgency to have the
construction and repairs on the sports complex completed in
time for the holding of the Palaro. He claims that the contractors
themselves did not want to embarrass the City and, thus,
proceeded to perform the extra work even without the
supplemental agreement.
Osmeña also points out that the City was already adjudged liable
for the principal sum due for the extra work orders and had
already benefitted from the extra work orders by accepting and
using the sports complex for the Palaro. For these reasons, he
claims that all consequences of the liability imposed, including
the payment of damages and interest charges, should also be
shouldered by the City and not by him.
THE COURT'S RULING
Relaxation of procedural rules to
give effect to a party's right to appeal
Section 3, Rule 64 of the Rules of Court states:
SEC. 3. Time to file petition. — The petition shall be filed within
thirty (30) days from notice of the judgment or final order or
resolution sought to be reviewed. The filing of a motion for new
trial or reconsideration of said judgment or final order or
resolution, if allowed under the procedural rules of the
Commission concerned, shall interrupt the period herein fixed. If
the motion is denied, the aggrieved party may file the petition
within the remaining period, but which shall not be less than five
(5) days in any event, reckoned from notice of denial. [Emphasis
ours.]
Several times in the past, we emphasized that procedural rules
should be treated with utmost respect and due regard, since they
are designed to facilitate the adjudication of cases to remedy the
worsening problem of delay in the resolution of rival claims and
in the administration of justice. From time to time, however, we
have recognized exceptions to the Rules but only for the most
compelling reasons where stubborn obedience to the Rules would
defeat rather than serve the ends of justice. Every plea for a
liberal construction of the Rules must at least be accompanied by
an explanation of why the party-litigant failed to comply with the
Rules and by a justification for the requested liberal
construction. 14 Where strong considerations of substantive
justice are manifest in the petition, this Court may relax the strict
application of the rules of procedure in the exercise of its legal
jurisdiction. 15
Osmeña cites the mandatory medical check-ups he had to
undergo in Houston, Texas after his cancer surgery in April 2009
as reason for the delay in filing his petition for certiorari. Due to
his weakened state of health, he claims that he could not very
well be expected to be bothered by the affairs of his office and
had to focus only on his medical treatment. He could not require
his office to attend to the case as he was being charged in his
personal capacity. DSEaHT
We find Osmeña's reasons sufficient to justify a relaxation of the
Rules. Although the service of the June 8, 2009 Resolution of the
COA was validly made on June 29, 2009 through the notice sent
to the Office of the Mayor of Cebu City, 16 we consider July 15,
2009 — the date he reported back to office — as the effective
date when he was actually notified of the resolution, and the
reckoning date of the period to appeal. If we were to rule
otherwise, we would be denying Osmeña of his right to appeal
the Decision of the COA, despite the merits of his case.
Moreover, a certiorari petition filed under Rule 64 of the Rules of
Court must be verified, and a verification requires the petitioner
to state under oath before an authorized officer that he has read
the petition and that the allegations therein are true and correct
of his personal knowledge. Given that Osmeña was out of the
country to attend to his medical needs, he could not comply with
the requirements to perfect his appeal of the Decision of the COA.
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While the Court has accepted verifications executed by a
petitioner's counsel who personally knows the truth of the facts
alleged in the pleading, this was an alternative not available to
Osmeña, as he had yet to secure his own counsel. Osmeña could
not avail of the services of the City Attorney, as the latter is
authorized to represent city officials only in their official
capacity. 17 The COA pins liability for the amount of damages
paid to WTCI and DCDC on Osmeña in his personal capacity,
pursuant to Section 103 of Presidential Decree No. 1445 (PD
1445). 18
Thus, the reckoning date to count the remaining 12 days to file
his Rule 64 petition should be counted from July 15, 2009, the
date Osmeña had actual knowledge of the denial of his motion
for reconsideration of the Decision of the COA and given the
opportunity to competently file an appeal thereto before the
Court. The present petition, filed on July 27, 2009, was filed
within the reglementary period.
Personal liability for expenditures of
government fund when made in
violation of law
The Court's decision to adopt a liberal application of the rules
stems not only from humanitarian considerations discussed
earlier, but also on our finding of merit in the petition.
Section 103 of PD 1445 declares that "[e]xpenditures of
government funds or uses of government property in violation of
law or regulations shall be a personal liability of the official or
employee found to be directly responsible therefor." Notably, the
public official's personal liability arises only if the expenditure of
government funds was made in violation of law. In this case, the
damages were paid to WTCI and DCDC pursuant to final
judgments rendered against the City for its unreasonable delay in
paying its obligations. The COA, however, declared that the
judgments, in the first place, would not be rendered against the
City had it not been for the change and extra work orders that
Osmeña made which (a) it considered as unnecessary, (b) were
without the Sanggunian's approval, and (c) were not covered by
a supplemental agreement.
The term "unnecessary," when used in reference to expenditure
of funds or uses of property, is relative. In Dr. Teresita L. Salva,
etc. v. Guillermo N. Carague, etc., et al., 19 we ruled that
"[c]ircumstances of time and place, behavioural and ecological
factors, as well as political, social and economic conditions,
would influence any such determination. . . . [T]ransactions
under audit are to be judged on the basis of not only the
standards of legality but also those of regularity, necessity,
reasonableness and moderation." The 10-page letter of City
Administrator Juan Saul F. Montecillo to the Sanggunian
explained in detail the reasons for each change and extra work
order; most of which were made to address security and safety
concerns that may arise not only during the holding of the
Palaro, but also in other events and activities that may later be
held in the sports complex. Comparing this with the COA's
general and unsubstantiated declarations that the expenses were
"not essential" 20 and not "dictated by the demands of good
government," 21 we find that the expenses incurred for change
and extra work orders were necessary and justified.
The COA considers the change and extra work orders illegal, as
these failed to comply with Section III, C1 of the Implementing
Rules and Regulations of Presidential Decree No. 1594, 22 which
states that:
5. Change Orders or Extra Work Orders may be issued on a
contract upon the approval of competent authorities provided
that the cumulative amount of such Change Orders or Extra
Work Orders does not exceed the limits of the former's authority
to approve original contracts. HECaTD
6. A separate Supplemental Agreement may be entered into for
all Change Orders and Extra Work Orders if the aggregate
amount exceeds 25% of the escalated original contract price. All
change orders/extra work orders beyond 100% of the escalated
original contract cost shall be subject to public bidding except
where the works involved are inseparable from the original
scope of the project in which case negotiation with the
incumbent contractor may be allowed, subject to approval by the
appropriate authorities. [Emphases ours.]
Reviewing the facts of the case, we find that the prevailing
circumstances at the time the change and extra work orders
were executed and completed indicate that the City of Cebu
tacitly approved these orders, rendering a supplemental
agreement or authorization from the Sanggunian unnecessary.
The Pre-Qualification, Bids and Awards Committee (PBAC), upon
the recommendation of the Technical Committee and after a
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careful deliberation, approved the change and extra work orders. ill-motivated, or that [the petitioner] had personally profited or
It bears pointing out that two members of the PBAC were sought to profit from the transactions, or that the disbursements
members of the Sanggunian as well — Rodolfo Cabrera have been made for personal or selfish ends." 28 All in all, the
(Chairman, Committee on Finance) and Ronald Cuenco (Minority circumstances showed that Osmeña issued the change and extra
Floor Leader). A COA representative was also present during the work orders for the City's successful hosting of the Palaro, and
deliberations of the PBAC. None of these officials voiced any not for any other "nefarious endeavour." 29
objection to the lack of a prior authorization from the WHEREFORE, in light of the foregoing, we hereby GRANT the
Sanggunian or a supplemental agreement. The RTC Decision in petitioner's Petition for Certiorari filed under Rule 64 of the
fact mentioned that the Project Post Completion Report and Rules of Court. The respondent's Decision of May 6, 2008 and
Acceptance was approved by an authorized representative of the Resolution of June 8, 2009 are SET ASIDE. ScEaAD
City of Cebu on September 21, 1994. 23 "[a]s the projects had SO ORDERED.
been completed, accepted and used by the [City of Cebu]," the Corona, C.J., Carpio, Carpio Morales, Velasco, Jr., Nachura,
RTC ruled that there is "no necessity of [executing] a Leonardo-de Castro, Peralta, Bersamin, Abad, Villarama, Jr., Perez,
supplemental agreement." 24 Indeed, as we declared in Mario R. Mendoza and Sereno, JJ., concur.
Melchor v. COA, 25 a supplemental agreement to cover change or Del Castillo, JJ., is on official leave.
extra work orders is not always mandatory, since the law adopts ||| (Osmeña v. Commission on Audit, G.R. No. 188818, [May 31,
the permissive word "may." Despite its initial refusal, the 2011], 665 PHIL 116-130)
Sanggunian was eventually compelled to enact the appropriation
ordinance in order to satisfy the RTC judgments. Belated as it
may be, the enactment of the appropriation ordinance,
nonetheless, constitutes as sufficient compliance with the
requirements of the law. It serves as a confirmatory act
signifying the Sanggunian's ratification of all the change and
extra work orders issued by Osmeña. In National Power
Corporation (NPC) v. Hon. Rose Marie Alonzo-Legasto, etc., et al.,
26 the Court considered the compromise agreement between the
NPC and the construction company as a ratification of the extra
work performed, without prior approval from the NPC's Board of
Directors.
As in Melchor, 27 we find it "unjust to order the petitioner to
shoulder the expenditure when the government had already
received and accepted benefits from the utilization of the [sports
complex]," especially considering that the City incurred no
substantial loss in paying for the additional work and the
damages awarded. Apparently, the City placed in a time deposit
the entire funds allotted for the construction and renovation of
the sports complex. The interest that the deposits earned
amounted to P12,835,683.15, more than enough to cover the
damages awarded to WTCI (P2,514,255.40) and the DCDC
(P102,015.00). There was "no showing that [the] petitioner was
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