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Bacani and Matoto vs. Natl. Coconut Corp., et al., 100 Phil. 468, No.

L-9657
November 29, 1956

1.POLITICAL LAW; TERM “GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES"


CONSTRUED.—The term “Government of the Republic of the Philippines” used in section 2 of the
Revised Administrative Code refers to that government entity through which the functions of the
government are exercised as an attribute of sovereignty, and in this are included those arms through
which political authority is made effective whether they be provincial, municipal or other ex orm of
local government. These are what we call municipal corporations. They do not include government
entitles which are given a corporate personality separate and distinct from the government and which
are governed by the Corporation Law, such as the National Coconut Corporation. Their powers, duties
and liabilities have to be determined in the light of that law and of their corporate charters. They do not
therefore come within the exemption clause prescribed in section 16, Rule 130 of our Rules of Court.
2.STENOGRAPHERS; TRANSCRIPT FEES; PAYMENT OF FEES BEYOND THE LIMIT
PRESCRIBED BY THE RULES OF COURT, VALID.—It is true that in section 8, Rule 130,
stenographers may only charge as fees P0.30 for each page of transcript of not less than 200 words
before the appeal is taken and P0.15 for each page after the filing of the appeal, but where, as in the
case at bar, the party has agreed and in fact has paid P1 per page for the services rendered by the
stenographers and has not raised any objection to the amount paid until its propriety was disputed by
the Auditor General, the payment of the fees became contractual and as such is valid even if it goes
beyond the limit prescribed by the Rules of Court. Bacani and Matoto vs. Natl. Coconut Corp., et al.,
100 Phil. 468, No. L-9657 November 29, 1956

Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First
Instance of Manila. During the pendency of Civil Case No. 2293 of said court,
entitled Francisco Sycip vs. National Coconut Corporation, Assistant Corporate
Counsel Federico Alikpala, counsel for Defendant, requested said stenographers
for copies of the transcript of the stenographic notes taken by them during the
hearing. Plaintiffs complied with the request by delivering to Counsel Alikpala the
needed transcript containing 714 pages and thereafter submitted to him their bills
for the payment of their fees. The National Coconut Corporation paid the amount
of P564 to Leopoldo T. Bacani and P150 to Mateo A. Matoto for said transcript at
the rate of P1 per page.
Upon inspecting the books of this corporation, the Auditor General disallowed the
payment of these fees and sought the recovery of the amounts paid. On January
19, 1953, the Auditor General required the Plaintiffs to reimburse said amounts on
the strength of a circular of the Department of Justice wherein the opinion was
expressed that the National Coconut Corporation, being a government entity, was
exempt from the payment of the fees in question. On February 6, 1954, the
Auditor General issued an order directing the Cashier of the Department of Justice
to deduct from the salary of Leopoldo T. Bacani the amount of P25 every payday
and from the salary of Mateo A. Matoto the amount of P10 every payday
beginning March 30, 1954. To prevent deduction of these fees from their salaries
and secure a judicial ruling that the National Coconut Corporation is not a
government entity within the purview of section 16, Rule 130 of the Rules of
Court, this action was instituted in the Court of First Instance of Manila.
Defendants set up as a defense that the National Coconut Corporation is a
government entity within the purview of section 2 of the Revised Administrative
Code of 1917 and, hence, it is exempt from paying the stenographers’ fees under
Rule 130 of the Rules of Court. After trial, the court found for
the Plaintiffs declaring (1) “that Defendant National Coconut Corporation is not a
government entity within the purview of section 16, Rule 130 of the Rules of
Court; (2) that the payments already made by said Defendant to Plaintiffs herein
and received by the latter from the former in the total amount of P714, for copies
of the stenographic transcripts in question, are valid, just and legal; and (3)
that Plaintiffs are under no obligation whatsoever to make a refund of these
payments already received by them.” This is an appeal from said decision.
Under section 16, Rule 130 of the Rules of Court, the Government of the
Philippines is exempt from paying the legal fees provided for therein, and among
these fees are those which stenographers may charge for the transcript of notes
taken by them that may be requested by any interested person (section 8). The
fees in question are for the transcript of notes taken during the hearing of a case
in which the National Coconut Corporation is interested, and the transcript was
requested by its assistant corporate counsel for the use of said corporation.
On the other hand, section 2 of the Revised Administrative Code defines the scope
of the term “Government of the Republic of the Philippines” as follows:
“‘The Government of the Philippine Islands’ is a term which refers to the corporate
governmental entity through which the functions of government are exercised
throughout the Philippine Islands, including, save as the contrary appears from
the context, the various arms through which political authority is made effective
in said Islands, whether pertaining to the central Government or to the provincial
or municipal branches or other form of local government.”
The question now to be determined is whether the National Coconut Corporation
may be considered as included in the term “Government of the Republic of the
Philippines” for the purposes of the exemption of the legal fees provided for in
Rule 130 of the Rules of Court.
As may be noted, the term “Government of the Republic of the Philippines” refers
to a government entity through which the functions of government are exercised,
including the various arms through which political authority is made effective in
the Philippines, whether pertaining to the central government or to the provincial
or municipal branches or other form of local government. This requires a little
digression on the nature and functions of our government as instituted in our
Constitution.
To begin with, we state that the term “Government” may be defined as “that
institution or aggregate of institutions by which an independent society makes
and carries out those rules of action which are necessary to enable men to live in
a social state, or which are imposed upon the people forming that society by
those who possess the power or authority of prescribing them” (U.S. vs. Dorr, 2
Phil., 332). This institution, when referring to the national government, has
reference to what our Constitution has established composed of three great
departments, the legislative, executive, and the judicial, through which the
powers and functions of government are exercised. These functions are
twofold: constitute and ministrant. The former are those which constitute the very
bonds of society and are compulsory in nature; the latter are those that are
undertaken only by way of advancing the general interests of society, and are
merely optional. President Wilson enumerates the constituent functions as follows:
“‘(1) The keeping of order and providing for the protection of persons and
property from violence and robbery.
‘(2) The fixing of the legal relations between man and wife and between parents
and children.
‘(3) The regulation of the holding, transmission, and interchange of property, and
the determination of its liabilities for debt or for crime.
‘(4) The determination of contract rights between individuals.
‘(5) The definition and punishment of crime.
‘(6) The administration of justice in civil cases.
‘(7) The determination of the political duties, privileges, and relations of citizens.
‘(8) Dealings of the state with foreign powers: the preservation of the state from
external danger or encroachment and the advancement of its international
interests.’“ (Malcolm, The Government of the Philippine Islands, p. 19.)
The most important of the ministrant functions are: public works, public
education, public charity, health and safety regulations, and regulations of trade
and industry. The principles deter mining whether or not a government shall
exercise certain of these optional functions are: (1) that a government should do
for the public welfare those things which private capital would not naturally
undertake and (2) that a government should do these things which by its very
nature it is better equipped to administer for the public welfare than is any private
individual or group of individuals. (Malcolm, The Government of the Philippine
Islands, pp. 19-20.)
From the above we may infer that, strictly speaking, there are functions which our
government is required to exercise to promote its objectives as expressed in our
Constitution and which are exercised by it as an attribute of sovereignty, and
those which it may exercise to promote merely the welfare, progress and
prosperity of the people. To this latter class belongs the organization of those
corporations owned or controlled by the government to promote certain aspects
of the economic life of our people such as the National Coconut Corporation.
These are what we call government-owned or controlled corporations which may
take on the form of a private enterprise or one organized with powers and formal
characteristics of a private corporations under the Corporation Law.
The question that now arises is: Does the fact that these corporation perform
certain functions of government make them a part of the Government of the
Philippines?
The answer is simple: they do not acquire that status for the simple reason that
they do not come under the classification of municipal or public corporation. Take
for instance the National Coconut Corporation. While it was organized with the
purpose of “adjusting the coconut industry to a position independent of trade
preferences in the United States” and of providing “Facilities for the better curing
of copra products and the proper utilization of coconut by-products”, a function
which our government has chosen to exercise to promote the coconut industry,
however, it was given a corporate power separate and distinct from our
government, for it was made subject to the provisions of our Corporation Law in
so far as its corporate existence and the powers that it may exercise are
concerned (sections 2 and 4, Commonwealth Act No. 518). It may sue and be
sued in the same manner as any other private corporations, and in this sense it is
an entity different from our government. As this Court has aptly said, “The mere
fact that the Government happens to be a majority stockholder does not make it a
public corporation” (National Coal Co. vs. Collector of Internal Revenue, 46 Phil.,
586-587). “By becoming a stockholder in the National Coal Company, the
Government divested itself of its sovereign character so far as respects the
transactions of the corporation. Unlike the Government, the corporation may be
sued without its consent, and is subject to taxation. Yet the National Coal
Company remains an agency or instrumentality of government.” (Government of
the Philippine Islands vs. Springer, 50 Phil., 288.)
To recapitulate, we may mention that the term “Government of the Republic of the
Philippines” used in section 2 of the Revised Administrative Code refers only to
that government entity through which the functions of the government are
exercised as an attribute of sovereignty, and in this are included those arms
through which political authority is made effective whether they be provincial,
municipal or other form of local government. These are what we call municipal
corporations. They do not include government entities which are given a
corporate personality separate and distinct from the government and which are
governed by the Corporation Law. Their powers, duties and liabilities have to be
determined in the light of that law and of their corporate charters. They do not
therefore come within the exemption clause prescribed in section 16, Rule 130 of
our Rules of Court.
“Public corporations are those formed or organized for the government of a
portion of the State.” (Section 3, Republic Act No. 1459, Corporation Law).
“‘The generally accepted definition of a municipal corporation would only include
organized cities and towns, and like organizations, with political and legislative
powers for the local, civil government and police regulations of the inhabitants of
the particular district included in the boundaries of the corporation.’ Heller vs.
Stremmel, 52 Mo. 309, 312.”
“In its more general sense the phrase ‘municipal corporation’ may include both
towns and counties, and other public corporations created by government for
political purposes. In its more common and limited signification, it embraces only
incorporated villages, towns and cities. Dunn vs. Court of County Revenues, 85
Ala. 144, 146, 4 So. 661.” (McQuillin, Municipal Corporations, 2nd ed., Vol. 1, p.
385.)
“We may, therefore, define a municipal corporation in its historical and strict
sense to be the incorporation, by the authority of the government, of the
inhabitants of a particular place or district, and authorizing them in their
corporate capacity to exercise subordinate specified powers of legislation and
regulation with respect to their local and internal concerns. This power of local
government is the distinctive purpose and the distinguishing feature of a
municipal corporation proper.” (Dillon, Municipal Corporations, 5th ed., Vol. I, p.
59.)
It is true that under section 8, Rule 130, stenographers may only charge as fees
P0.30 for each page of transcript of not less than 200 words before the appeal is
taken and P0.15 for each page after the filing of the appeal, but in this case the
National Coconut Corporation has agreed and in fact has paid P1.00 per page for
the services rendered by the Plaintiffs and has not raised any objection to the
amount paid until its propriety was disputed by the Auditor General. The payment
of the fees in question became therefore contractual and as such is valid even if it
goes beyond the limit prescribed in section 8, Rule 130 of the Rules of Court.
As regards the question of procedure raised by Appellants, suffice it to say that
the same is insubstantial, considering that this case refers not to a money claim
disapproved by the Auditor General but to an action of prohibition the purpose of
which is to restrain the officials concerned from deducting from Plaintiffs’ salaries
the amount paid to them as stenographers’ fees. This case does not come under
section 1, Rule 45 of the Rules of Court relative to appeals from a decision of the
Auditor General.
WHEREFORE, the decision appealed from is AFFIRMED, without pronouncement
as to costs.

Central Bank of the Phil. vs. Court of Appeals, 63 SCRA 431,


No. L-33022 April 22, 1975

Appeals; A defense not pleaded in the answer may not be raised far the first time
on appeal.—Under its first assigned error, petitioner devotes the major part of its
effort to the discussion of its proposition that there could be no perfected contract
in this case because there is no showing of compliance, and in fact, there has
been no compliance with the requirement that there must be a certification of the
availability of funds by the Auditor General pursuant to Section 607 of the Revised
Administrative Code. x x x. The contention is without merit. x x x It is a familiar
rule in procedure that defenses not pleaded in the answer may not be raised for
the first time on appeal x x x. Indeed, in the Court of Appeals, petitioner could
only bring up such questions as are related to the issues ma de by the parties in
their pleadings, particularly where factual matters may be involved, because to
permit a party to change his theory on appeal would be unfair to the adverse
party.

Central Bank; Contracts; Administrative law; Words and Phrases; The term
“National Government” in Section 607 of the Revised Administrative Code does
not include the Central Bank of the Philippines.—It is Our considered view that
contracts entered into by petitioner Central Bank are not within the contemplation
of Sections 607 specifically refers to “ex penditure(s) of the National Government”
and that the term “National Government” may not be deemed to include the
Central Bank. Under the Administrative Code itself, the term “National
Government” refers only to the central government, consisting of the legislative,
executive and judicial departments of the government, as distinguished from local
governments and other government entities and is not sy nony mous, therefore,
with the terms “The Government of the Republic of the Philippines” or “Philippine
Government”, which are the expressions broad enough to include not only the
central government but also the provincial and municipal governments, chartered
cities and other government-controlled corporations or agencies, like the Central
Bank. To be sure the Central Bank is a government instrumentality . But it was
created as an autonomous body corporate to be governed by the provisions of its
charter, Republic Act 265, “to admi nister the monetary and banking sy stem of
the Republic.” (Sec. 1). As such, it is authorized “to adopt, lter, and use a
corporate seal which shall be judicially noticed; to make contracts; to lease or own
real and personal property ; to sell or otherwise dispose of the same; to sue and
be sued; and otherwise to do and perform any and all things that may be
necessary or proper to carry out the purposes of this Act. The Central Bank may
acquire and hold such assets and incur such liabilities as result directly from
operations authorized by the provisions of this Act, or as are essential to the
proper conduct of such operations.” (Sec. 4). It has a capital of its own and
operates under a budget prepared by its own Monetary Board and otherwise
appropriates money for its operations and other expenditures independently of
the national budget. It does not depend on the National Government for the
financing of its operations; it is the National Government that occasional resorts to
it for needed budgetary accommodations. Under Section 14 of the Bank’s charter,
the Monetary Board may authorize such expenditures by the Central Bank as are
in the interest of the effective administration and operation of the Bank’ Its
prerogati ve to incur such liabilities and expenditures is not subject to any
prerequisite found in any statute or regulation not expressly applicable to it.
Relevantly to the issues in this case, it is not subject, like the Social Security
Commission, to Section 1901 and related provisions of the Revised Administrative
Code which require national government constructions to be done by or under the
supervision of the Bureau of Public Works. For these reasons, the provisions of the
Revised Administrative Code invoked by the Bank do not apply to it.

Same; Same; Same; The Central Bank as a chartered entity may enter into
contracts with private persons without need of prior certification of availability of
funds under Section 607 of Revised Administrative Code.—We perceive no valid
reason why the Court should not follow the same view now in respect to the first
paragraph of the Section (607) by confirming its application only to the offices
comprised within the term National Government as above defined, particularly
insofar as government-owned or created corporations or entities having powers to
make expenditures and to incur liability by virtue of their own corporate authority
independently of the national or local legislative bodies, as in the case of the
petitioner herein, are concerned. Whenever necessary , the Monetary Board, like
any other corporate board, makes all required appropriations directly from the
funds of the Bank and does not need any official statement of availability from its
treasurer or auditor and without submitting any papers to, much less securing the
approval of the Auditor General or any outside authority before doing so.

Same; Same; Central Bank’s acceptance of the bid to construct a building effects
an actionable agreement between it and contractor notwithstanding provision in
instruction to bidders that “acceptance of a Proposal shall bind the successful
bidder to execute the Contract”.—The other main contention of petitioner is that
the purported or alleged contract being relied upon by respondent never reached
the stage of perfection which would make it binding upon the parties and entitle
either of them to sue for specific performance in case of breach thereof. In this
connection, since the transaction herein involved arose from the a ward of a
construction contract by a government corporation and the attempt on its part to
discontinue with the construction several months after such award had been
accepted by the contractor and after the latter had already commenced the work
without any objection on the part of the corporation, so much so that entry into
the side for the purpose was upon express permission from it, but be fore any
written contract has been executed, it is preferable that certain pertinent points
be clarified for the proper guidance of all who might be similarly situated, x x x
We are not persuaded that petitioner’s posture conforms with law and equity .
Accord ing to Paragraph IB 114.1 of the Instructions to Bidders, Ablaza was
“required to appear in the office of the Owner (the Bank) in person, or, if a firm or
corporation, a duly authorized representative (thereof), and to execute the
contract within five (5) day s after notice that the contract has been awarded to
him. Failure or neglect to do so shall constitute a breach of agreement effected by
the acceptance of the Proposal.” There can be no other meaning of this provision
than that the Bank’s acceptance of the bid of respondent Ablaza effected an
actionable agreement between them. We cannot read in it the unilateral sense
suggested by petitioner that it bound only the contractor, without any
corresponding responsibility or obligation at all on the part of the Bank. An
agreement presupposes a meeting of minds and when that point is reached in the
negotiations between two parties intending to enter into a contract, the purported
contract is deemed perfected and none of them may thereafter disengage himself
therefrom without being liable to the other in an action for specific performance.

Same; Same; Same; Central Bank cannot avoid effect of its acceptance of a bid in
the absence of justifiable reasons.—The unfairness of such a view is too evident to
be justified by the invocation of the principle that every party to a contract who is
sui juris and who has entered into it voluntarily and with full knowledge of its
unfavorable provisions may not subsequently complain about them when they are
being enforced, if only because there are other portions of the Instruction to
Bidders which indicate the contrary . Certainly , We cannot sanction that in the
absence of unavoidable just reasons, the Bank could simply refuse to execute the
contract and thereby avoid it. Even a government-owned corporation may not
disregard contractual commitments to the prejudice of the other party .
Otherwise, the door would be wide open to abuses and anomalies more
detrimental to public interest, x x x Thus, after the Proposal of respondent was
accepted by the Bank thru its telegram and letter both dated December 10, 1965
and respondent in turn accepted the award by its letter of December 15, 1965 ,
both parties became bound to proceed with the subsequent steps needed to
formalize and consummate their agreement. Failure on the part of either of them
to do so, entitles the other to compensation for the resulting damages. To such
effect was the ruling of this Court in Valencia vs. RFC, 103 Phil. 444.

Same; Same; Same; Requirement of Treasurer’s certification of availability of


funds waivable.—Considering all these facts, it is quite obvious that the Bank’s
insistence now regarding the need for the execution of the formal contract
becomes a little too late to be believable. Even assuming arguendo that the
Revised Manual of Instructions to Treasurers were applicable to the Central Bank,
which is doubted, considering that under the provisions of its charter already
referred to earlier, disbursements and expenditures of the Bank are supposed to
be governed by rules and regulations promulgated by the Monetary Board, in this
particular case, the attitude and actuations then of the Bank in relation to the
work being done by Ablaza prior to May 20, 1966 clearly indicate that both parties
assumed that the actual execution of the written contract is a mere formality
which could not materially affect their respective contractual rights and
obligations. In legal effect, therefore, the Bank must be considered as having
waived such requirement.

Same; Same; Same; Constitutional law; Impairment of contracts; A government


circular calling for economic restraint may not be enforced in such a manner as to
re sult in impairment of obligations of contract.—Petitioner contends next that its
withdrawal from the contract is justified by the policy of economic restraint
ordained by Memorandum Circular No. 1. We do not see it that way . Inasmuch as
the contract here in question was perfected before the issuance of said
Memorandum Circular, it is elementary that the same may not be enforced in
such a manner as to result in the impairment of the obligations of the contract, for
that is not constitutionally permissible. Not even by means of a statute, which is
much more weighty than a mere declaration of policy, may the government issue
any regulation relieving itself or any person from the binding effects of a contract.

Same; Same; Same; Damages; A party who fails to perform its

contractual duty is liable for actual damages and for unrealized profits.—Upon the
other hand, the legal question of whether or not the Bank is liable for unrealized
profits presents no difficulty . In Arrieta vs. Naris, G. R. No. L-15645, January 31,
1964, 10 SCRA 79, this Court sustained as a matter of law the award of damages
in the amount of U. S. $286,000, pay able in Philippine Currency , measured in the
rate of exchange prevailing at the time the obligation was incurred comprising of
unrealized profits of the plaintiff.

Attorneys; A fee of 10% of the award is reasonable.—With respect to the award for
attorney ’s fees, We believe that in line with the amount fixed in Llanga, supra, an
award of ten per centum (10%) of the amount of the total recovery should be
enough.

Petition of the Central Bank of the Philippines for review of the decision of the Court of Appeals in
CA-G.R. No. 43638-R affirming the judgment of the Court of First Instance of Rizal in Civil Case No.
Q-10919 sentenced petitioner to pay respondent Ablaza Construction and Finance Corporation
damages for breach contract in that after having formally and officially awarded, pursuant to the results
of the usual bidding to Ablaza in December 1965 the "contract" for the construction of its San
Fernando, La Union branch building and allowed said contractor to commence the work up to about
May, 1966, albeit without any written formal contract having been executed, the Bank failed and
refused to proceed with the project, unless the plans were revised and a lower price were agreed to by
Ablaza, the Bank claiming that its action was pursuant to the policy of fiscal restraint announced by the
then new President of the Philippines on December 30, 1965 and the Memorandum Circular No. 1
dated December 31, 1965 of the same President.
The factual background of this case is related in the following portions of the decision of the trial court,
which the Court of Appeals affirmed without modification: têñ.£îhqwâ£
Sometime in 1965, defendant Central Bank of the Philippines issued Invitations to Bid
and Instructions to Bidders for the purpose of receiving sealed proposals for the general
construction of its various proposed regional offices, including the Central Bank regional
office building in San Fernando, La Union.
In response to the aforesaid Invitations to Bid, the plaintiff Ablaza Construction and
Finance Corporation, which was one of the qualified bidders, submitted a bid proposal
for the general construction of defendant's proposed regional office building in San
Fernando, La Union at the public bidding held on November 3, 1965. The said proposal
was, as required by the defendant accompanied by a cash bidder's bond in the sum of
P275,000.00.
On December 7, 1965, the Monetary Board of the defendant Central Bank of the
Philippines, after evaluating all the bid proposals submitted during the above-mentioned
bidding, unanimously voted and approved the award to the plaintiff of the contract for
the general construction of defendant's proposed regional office building in San
Fernando, La Union, for the sum of P3,749,000.00 under plaintiff's Proposal Item No. 2.
Pursuant thereto, on December 10, 1965, Mr. Rizalino L. Mendoza, Assistant to the
Governor and concurrently the Chairman of the Management Building Committee of the
defendant Central Bank of the Philippines, set a telegram to the plaintiff, informing the
latter that the contract for the general construction of defendant's proposed regional
office building in San Fernando, La Union, had been awarded to the plaintiff. The said
telegram was followed by a formal letter, also dated December 10, 1965, duly signed by
said Mr. Rizalino L. Mendoza, confirming the approval of the award of the above-stated
contract under plaintiff's Proposal Item No. 2 in the amount of P3,749,000.00.
Upon receipt of the aforementioned letter, plaintiff immediately accepted the said award
by means of a letter dated December 15, 1965, whereby plaintiff also requested
permission for its workmen to enter the site of the project, build a temporary shelter and
enclosure, and do some clearing job thereat. Accordingly, said permission was granted
by the defendant as embodied in its letter dated January 4, 1966, addressed to the
plaintiff..
Within five (5) days from receipt by the plaintiff of the said notice of award, and several
times thereafter Mr. Nicomedes C. Ablaza, an officer of the plaintiff corporation, went
personally to see Mr. Rizalino L. Mendoza at the latter's Central Bank office to follow
up the signing of the corresponding contract. A performance bond in the total amount of
P962,250.00 (P275,000.00 of which was in cash and P687,250.00 in the form of a surety
bond) was subsequently posted by the plaintiff in compliance with the above-stated
Instructions to Bidders, which bond was duly accepted by the defendant.
Pursuant to the permission granted by the defendant, as aforesaid, plaintiff commenced
actual construction work on the project about the middle of January, 1966. On February
8, 1966, by means of a formal letter, defendant requested the plaintiff to submit a
schedule of deliveries of materials which, according to plaintiff's accepted proposal,
shall be furnished by the defendant. In compliance therewith, on February 16, 1966,
plaintiff submitted to the defendant the schedule of deliveries requested for.
During the period when the actual construction work on the project was in progress, Mr.
Nicomedes G. Ablaza had several meetings with Mr. Rizalino L. Mendoza at the latter's
office in the Central Bank. During those meetings, they discussed the progress of the
construction work being then undertaken by the plaintiff of the projects of the defendant
in San Fernando, La Union, including the progress of the excavation work.
Sometime during the early part of March, 1966, Mr. Rizalino L. Mendoza was at the
construction site of the said project. While he was there, he admitted having seen pile of
soil in the premises. At that time, the excavation work being undertaken by the plaintiff
was about 20% complete. On March 22, 1966, defendant again wrote the plaintiff,
requesting the latter to submit the name of its representative authorized to sign the
building contract with the defendant. In compliance with the said request, plaintiff
submitted to the defendant the name of its duly authorized representative by means of a
letter dated March 24, 1966.
A meeting called by the defendant was held at the conference room of the Central Bank
on May 20, 1966. At the said meeting, the defendant, thru Finance Secretary Eduardo
Romualdez, announced, among other things, the reduction of the appropriations for the
construction of the defendant's various proposed regional offices, including that of the
proposed San Fernando, La Union regional office building, the construction of which
had already been started by the plaintiff. He also stated that the Central Bank Associated
Architects would be asked to prepare new plans and designs based on such reduced
appropriations. The defendant, during that same meeting, also advised the plaintiff, thru
Messrs. Nicomedes G. Ablaza and Alfredo G. Ablaza (who represented the plaintiff
corporation at the said meeting), to stop its construction work on the Central Bank
Regional office building in San Fernando, La Union. This was immediately complied
with by the plaintiff, although its various construction equipment remained in the jobsite.
The defendant likewise presented certain offer and proposals to the plaintiff, among
which were: (a) the immediate return of plaintiff's cash bidder's bond of P275,000.00;
(b) the payment of interest on said bidder's bond at 12% per annum; (c) the
reimbursement to the plaintiff of the value of all the work accomplished at the site; (d)
the entering into a negotiated contract with the plaintiff on the basis of the reduced
appropriation for the project in question; and (e) the reimbursement of the premium on
plaintiff's performance bond. Not one of these offers and proposals of the defendant,
however, was accepted by the plaintiff during that meeting of May 20, 1966.
On June 3, 1966, plaintiff, thru counsel, wrote the defendant, demanding for the formal
execution of the corresponding contract, without prejudice to its claim for damages. The
defendant, thru its Deputy Governor, Mr. Amado R. Brinas, on June 15, 1966, replied to
the said letter of the plaintiff, whereby the defendant claimed that an agreement was
reached between the plaintiff and the defendant during the meeting held on May 20,
1966. On the following day, however, in its letter dated June 16, 1966, the plaintiff, thru
counsel, vehemently denied that said parties concluded any agreement during the
meeting in question.
On July 5, 1966, defendant again offered to return plaintiff's cash bidder's bond in the
amount of P275,000.00. The plaintiff, thru counsel, on July 6, 1966, agreed to accept the
return of the said cash bond, without prejudice, however, to its claims as contained in its
letters to the defendant dated June 3, June 10, and June 16, 1966, and with further
reservation regarding payment of the corresponding interest thereon. On July 7, 1966,
the said sum of P275,000.00 was returned by the defendant to the plaintiff.
On January 30, 1967, in accordance with the letter of the plaintiff, thru counsel, dated
January 26, 1967, the construction equipment of the plaintiff were pulled out from the
construction site, for which the plaintiff incurred hauling expenses.
The negotiations of the parties for the settlement of plaintiff's claims out of court proved
to be futile; hence, the present action was instituted by plaintiff against the defendant."
(Pp. 249-256, Rec. on Appeal).
It may be added that the Instructions to Bidders on the basis of which the bid and award in question
were submitted and made contained, among others, the following provisions: têñ.£îhqwâ£
IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner
and no other act of the Owner shall constitute the acceptance of the Proposal. The
acceptance of a Proposal shall bind the successful bidder to execute the Contract and to
be responsible for liquidated damages as herein provided. The rights and obligations
provided for in the Contract shall become effective and binding upon the parties only
with its formal execution.
xxx xxx xxx
IB 114.1 The bidder whose proposal is accepted will be required to appear at the Office
of the Owner in person, or, if a firm or corporation, a duly authorized representative
shall so appear, and to execute that contract within five (5) days after notice that the
contract has been awarded to him. Failure or neglect to do so shall constitute a breach of
agreement effected by the acceptance of the Proposal.
xxx xxx xxx
IB 118.1 The Contractor shall commence the work within ten (10) calendar days from
the date he receives a copy of the fully executed Contract, and he shall complete the
work within the time specified." (Pp. 18-19 & 58-59, Petitioner-Appellant's Brief.)
In the light of these facts, petitioner has made the following assignment of errors: têñ.£îhqwâ£
I. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS A
PERFECTED CONTRACT BETWEEN PETITIONER CENTRAL BANK OF THE
PHILIPPINES AND RESPONDENT ABLAZA CONSTRUCTION & FINANCE
CORPORATION FOR THE GENERAL CONSTRUCTION WORK OF
PETITIONER'S REGIONAL OFFICE BUILDING AT SAN FERNANDO, LA UNION.
II. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS
COMMITTED A BREACH OF CONTRACT.
III. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD
GIVEN ITS APPROVAL TO THE WORK DONE BY RESPONDENT ABLAZA
CONSTRUCTION & FINANCE CORPORATION.
IV. THE COURT OF APPEALS ERRED IN HOLDING THAT THE AWARD OF
ACTUAL AND COMPENSATORY DAMAGES, ATTORNEY'S FEES AND
RETAINING FEE IS FAIR AND REASONABLE, AND IN HOLDING THAT
PETITIONER IS LIABLE FOR COSTS." (Pp. A & B, Petitioner-Appellant's Brief.)
Under the first assigned error, petitioner denotes the major part of its effort to the discussion of its
proposition that there could be no perfected contract in this case, (contrary to the conclusion of the
courts below) because there is no showing of compliance, and in fact, there has been no compliance
with the requirement that there must be a certification of the availability of funds by the Auditor
General pursuant to Section 607 of the Revised Administrative Code which provides thus: têñ.£îhqwâ£
Section 607. Certificate showing appropriation to meet contract. — Except in the case of
a contract for personal service or for supplies to be carried in stock, no contract
involving an expenditure by the National Government of three thousand pesos or more
shall be entered into or authorized until the Auditor General shall have certified to the
officer entering into such obligation that funds have been duly appropriated for such
purpose and that the amount necessary to cover the proposed contract is available for
expenditure on account thereof. When application is made to the Auditor General for the
certificate herein required, a copy of the proposed contract or agreement shall be
submitted to him accompanied by a statement in writing from the officer making the
application showing all obligations not yet presented for audit which have been incurred
against the appropriation to which the contract in question would be chargeable; and
such certificate, when signed by the Auditor, shall be attached to and become a part of
the proposed contract, and the sum so certified shall not thereafter be available for
expenditure for any other purposes until the Government is discharged from the contract
in question.
Except in the case of a contract for supplies to be carried in stock, no contract involving
the expenditure by any province, municipality, chartered city, or municipal district of
two thousand pesos or more shall be entered into or authorized until the treasurer of the
political division concerned shall have certified to the officer entering into such contract
that funds have been duly appropriated for such purpose and that the amount necessary
to cover the proposed contract is available for expenditure on account thereof. Such
certificate, when signed by the said treasurer, shall be attached to and become part of the
proposed contract and the sum so certified shall not thereafter be available for
expenditure for any other purpose until the contract in question is lawfully abrogated or
discharged.
For the purpose of making the certificate hereinabove required ninety per centum of the
estimated revenues and receipts which should accrue during the current fiscal year but
which are yet uncollected, shall be deemed to be in the treasury of the particular branch
of the Government against which the obligation in question would create a charge." (Pp.
23-25, Petitioner-Appellant's Brief.)
It is contended that in view of such omission and considering the provisions of Section 608 of the same
code to the effect that "a purported contract entered into contrary to the requirements of the next
preceding section hereof shall be wholly void", "no contract between the petitioner and respondent
Ablaza Construction and Finance Corporation for the general construction of the proposed regional
office building of the Central Bank in San Fernando, La Union, was ever perfected because only the
first stage, that is the award of the contract to the lowest responsible bidder, respondent Ablaza
Construction and Finance Corporation, was completed." (p. 29, Petitioner-Appellant's Brief.) And in
support of this pose, petitioner relies heavily on Tan C. Tee & Co. vs. Wright thus: têñ.£îhqwâ£
The aforesaid requirements of the Revised Administrative Code for the perfection of
government contracts have been upheld by this Honorable Court in the case of Tan C.
Tee Co. vs. Wright, 53 Phil. 172, in which case it was held that the award of the contract
to the lowest bidder does not amount to entering into the contract because of the
requirement of Section 607 of the Revised Administrative Code that a copy of the
proposed contract shall be submitted to the Auditor General together with a request for
the availability of funds to cover the proposed contract. Thus, this Honorable Court
held: têñ.£îhqwâ£
'To award the contract to the lowest responsible bidder is not the
equivalent of entering into the contract. Section 607 of the Administrative
Code requires that a copy of the proposed contract shall be submitted
along with the request for the certificate of availability of funds, but there
could be no proposed contract to be submitted until after the award was
made.'
And to guide government authorities in the letting of government contracts, this
Honorable Court, in said case of Tan C. Tee vs. Wright, supra, laid down the procedure
which should be followed, as follows: têñ.£îhqwâ£
`PROCEDURE WHICH SHOULD BE FOLLOWED IN THE LETTING
OF CONTRACTS FOR INSULAR WORKS. — The procedure which
should be followed in the letting of contracts for Insular works is the
following: First, there is an award of the contract by the Director of
Public Works to the lowest responsible bidder. Second, there is a
certificate of availability of funds to be obtained from the Insular Auditor,
and in some cases from the Insular Treasurer, to cover the proposed
contract. And third, there is a contract to be executed on behalf of the
Government by the Director of Public Works with the approval of the
department head.'" (Pp. 27-28, Petitioner-Appellant's Brief.)
The contention is without merit. To start with, the record reveals that it is more of an afterthought.
Respondent never raised this question whether in its pleadings or at the hearings in the trial court. We
have also read its brief in the appellate court and no mention is made therein of this point. Not even in
its memorandum submitted to that court in lieu of oral argument is there any discussion thereof, even as
it appears that emphasis was given therein to various portions of the Revised Manual of Instructions to
Treasurers regarding the perfection and constitution of public contracts. In fact, reference was made
therein to Administrative Order No. 290 of the President of the Philippines, dated February 5, 1959,
requiring "all contracts of whatever nature involving P10,000 or more to be entered into by all bureaus
and offices, ... including the ... Central Bank ... shall be submitted to the Auditor General for
examination and review before the same are perfected and/or consummated, etc.", without mentioning,
however, that said administrative order was no longer in force, the same having been revoked on
January 17, 1964 by President Macapagal under Administrative Order No. 81, s. 1964.
Hence, if only for the reason that it is a familiar rule in procedure that defenses not pleaded in the
answer may not be raised for the first time on appeal, petitioner's position cannot be sustained. Indeed,
in the Court of Appeals, petitioner could only bring up such questions as are related to the issues made
by the parties in their pleadings, particularly where factual matters may be involved, because to permit
a party to change his theory on appeal "would be unfair to the adverse party." (II, Moran, Rules of
Court, p. 505, 1970 ed.) Furthermore, under Section 7 of Rule 51, the appellate court cannot consider
any error of the lower court "unless stated in the assignment of errors and properly argued in the brief."
Even prescinding from this consideration of belatedness, however, it is Our considered view that
contracts entered into by petitioner Central Bank are not within the contemplation of Sections 607 and
608 cited by it. Immediately to be noted, Section 607 specifically refers to "expenditure(s) of the
National Government" and that the term "National Government" may not be deemed to include the
Central Bank. Under the Administrative Code itself, the term "National Government" refers only to the
central government, consisting of the legislative, executive and judicial departments of the government,
as distinguished from local governments and other governmental entities and is not synonymous,
therefore, with the terms "The Government of the Republic of the Philippines" or "Philippine
Government", which are the expressions broad enough to include not only the central government but
also the provincial and municipal governments, chartered cities and other government-controlled
corporations or agencies, like the Central Bank. (I, Martin, Administrative Code, p. 15.)
To be sure the Central Bank is a government instrumentality. But it was created as an autonomous body
corporate to be governed by the provisions of its charter, Republic Act 265, "to administer the monetary
and banking system of the Republic." (Sec. 1) As such, it is authorized "to adopt, alter and use a
corporate seal which shall be judicially noticed; to make contracts; to lease or own real and personal
property, and to sell or otherwise dispose of the same; to sue and be sued; and otherwise to do and
perform any and all things that may be necessary or proper to carry out the purposes of this Act. The
Central Bank may acquire and hold such assets and incur such liabilities as result directly from
operations authorized by the provisions of this Act, or as are essential to the proper conduct of such
operations." (Sec. 4) It has capital of its own and operates under a budget prepared by its own
Monetary Board and otherwise appropriates money for its operations and other expenditures
independently of the national budget. It does not depend on the National Government for the financing
of its operations; it is the National Government that occasionally resorts to it for needed budgetary
accommodations. Under Section 14 of the Bank's charter, the Monetary Board may authorize such
expenditures by the Central Bank as are in the interest of the effective administration and operation of
the Bank." Its prerogative to incur such liabilities and expenditures is not subject to any prerequisite
found in any statute or regulation not expressly applicable to it. Relevantly to the issues in this case, it
is not subject, like the Social Security Commission, to Section 1901 and related provisions of the
Revised Administrative Code which require national government constructions to be done by or under
the supervision of the Bureau of Public Works. (Op. of the Sec. of Justice No. 92, Series of 1960) For
these reasons, the provisions of the Revised Administrative Code invoked by the Bank do not apply to
it. To Our knowledge, in no other instance has the Bank ever considered itself subject thereto.
In Zobel vs. City of Manila, 47 Phil. 169, this Court adopted a restrictive construction of Section 607 of
the Administrative Code thus:
The second question to be considered has reference to the applicability of section 607 of the
Administrative Code to contracts made by the City of Manila. In the second paragraph of said section it
is declared that no contract involving the expenditure by any province, municipality, township, or
settlement of two thousand pesos or more shall be entered into or authorized until the treasurer of the
political division concerned shall have certified to the officer entering into such contract that funds
have been duly appropriated for such purpose and that the amount necessary to cover the proposed
contract is available for expenditure on account thereof. It is admitted that no such certificate was made
by the treasurer of Manila at the time the contract now in question was made. We are of the opinion that
the provision cited has no application to contracts of a chartered city, such as the City of Manila. Upon
examining said provision (sec. 607) it will be found that the term chartered city, or other similar
expression, such as would include the City of Manila, is not used; and it is quite manifest from the
careful use of terms in said section that chartered cities were intended to be excluded. In this
connection the definitions of "province," "municipality," and "chartered city," given in section 2 of the
Administrative Code are instructive. The circumstance that for certain purposes the City of Manila has
the status both of a province and a municipality (as is true in the distribution of revenue) is not
inconsistent with this conclusion."1
We perceive no valid reason why the Court should not follow the same view now in respect to the first
paragraph of the section by confirming its application only to the offices comprised within the term
National Government as above defined, particularly insofar as government-owned or created
corporations or entities having powers to make expenditures and to incur liabilities by virtue of their
own corporate authority independently of the national or local legislative bodies, as in the case of the
petitioner herein, are concerned. Whenever necessary, the Monetary Board, like any other corporate
board, makes all required appropriations directly from the funds of the Bank and does not need any
official statement of availability from its treasurer or auditor and without submitting any papers to,
much less securing the approval of the Auditor General or any outside authority before doing so.
Indeed, this is readily to be inferred from the repeal already mentioned earlier of Administrative Order
No. 290, s. 1959, which petitioner tried to invoke, overlooking perhaps such repeal. In other words, by
that repeal, the requirement that the Central Bank should submit to the Auditor General for examination
and review before contracts involving P10,000 or more to be entered into by it "before the same are
perfected and/or consummated" had already been eliminated at the time the transaction herein involved
took place. Consequently, the point of invalidity pressed, belatedly at that, by petitioner has no leg to
stand on.
The other main contention of petitioner is that the purported or alleged contract being relied upon by
respondent never reached the stage of perfection which would make it binding upon the parties and
entitle either of them to sue for specific performance in case of breach thereof. In this connection, since
the transaction herein involved arose from the award of a construction contract2 by a government
corporation and the attempt on its part to discontinue with the construction several months after such
award had been accepted by the contractor and after the latter had already commenced the work
without any objection on the part of the corporation, so much so that entry into the site for the purpose
was upon express permission from it, but before any written contract has been executed, it is preferable
that certain pertinent points be clarified for the proper resolution of the issue between the parties here
and the general guidance of all who might be similarly situated.
Petitioner buttresses its position in regard to this issue on the provisions earlier quoted in this opinion
of the Instruction to Bidders: têñ.£îhqwâ£
IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner
and no other act of the Owner shall constitute the acceptance of the Proposal. The
acceptance of a Proposal shall bind the successful bidder to execute the Contract and to
be responsible for liquidated damages as herein provided. The rights and obligations
provided for in the Contract shall become effective and binding upon the parties only
with its formal execution.
xxx xxx xxx
IB 118.1 The Contractor shall commence the work within ten (10) calendar days from
the date he receives a copy of the fully executed Contract, and he shall complete the
work within the time specified." (Pp. 18-19, Petitioner-Appellant's Brief.)
Petitioner insists that under these provisions, the rights and obligations of the Bank and Ablaza could
become effective and binding only upon the execution of the formal contract, and since admittedly no
formal contract has yet been signed by the parties herein, there is yet no perfected contract to speak of
and respondent has, therefore, no cause of action against the Bank. And in refutation of respondent's
argument that it had already started the work with some clearing job and foundation excavations, which
has never been stopped by petitioner who had previously given express permission to respondent to
enter the jobsite, build a temporary shelter and enclosures thereon, petitioner counters that under the
above instructions, respondent is supposed to commence the work "within ten (10) calendar days from
the date he receives a copy of the fully executed Contract," and for said respondent to have started
actual construction work before any contract has been signed was unauthorized and was consequently
undertaken at his own risk, all the above circumstances indicative of estoppel notwithstanding.
We are not persuaded that petitioner's posture conforms with law and equity. According to Paragraph
IB 114.1 of the Instructions to Bidders, Ablaza was "required to appear in the office of the Owner (the
Bank) in person, or, if a firm or corporation, a duly authorized representative (thereof), and to execute
the contract within five (5) days after notice that the contract has been awarded to him. Failure or
neglect to do so shall constitute a breach of agreement effected by the acceptance of the Proposal."
There can be no other meaning of this provision than that the Bank's acceptance of the bid of
respondent Ablaza effected an actionable agreement between them. We cannot read it in the unilateral
sense suggested by petitioner that it bound only the contractor, without any corresponding
responsibility or obligation at all on the part of the Bank. An agreement presupposes a meeting of
minds and when that point is reached in the negotiations between two parties intending to enter into a
contract, the purported contract is deemed perfected and none of them may thereafter disengage
himself therefrom without being liable to the other in an action for specific performance.
The rather ambiguous terms of Paragraph IB 113.4 of the Instructions to Bidders relied upon by
petitioner have to be reconciled with the other paragraphs thereof to avoid lack of mutuality in the
relation between the parties. This invoked paragraph stipulates that "the acceptance of (respondent's)
Proposal shall bind said respondent to execute the Contract and to be responsible for liquidated
damages as herein provided." And yet, even if the contractor is ready and willing to execute the formal
contract within the five (5) day period given to him, petitioner now claims that under the invoked
provision, it could refuse to execute such contract and still be absolutely free from any liability to the
contractor who, in the meantime, has to make necessary arrangements and incur expenditures in order
to be able to commence work "within ten (10) days from the date he receives a copy of the fully
executed Contract," or be responsible for damages for delay. The unfairness of such a view is too
evident to be justified by the invocation of the principle that every party to a contract who is sui
juris and who has entered into it voluntarily and with full knowledge of its unfavorable provisions may
not subsequently complain about them when they are being enforced, if only because there are other
portions of the Instruction to Bidders which indicate the contrary. Certainly, We cannot sanction that in
the absence of unavoidable just reasons, the Bank could simply refuse to execute the contract and
thereby avoid it entirely. Even a government owned corporation may not under the guise of protecting
the public interest unceremoniously disregard contractual commitments to the prejudice of the other
party. Otherwise, the door would be wide open to abuses and anomalies more detrimental to public
interest. If there could be instances wherein a government corporation may justifiably withdraw from a
commitment as a consequence of more paramount considerations, the case at bar is not, for the reasons
already given, one of them.
As We see it then, contrary to the contention of the Bank, the provision it is citing may not be
considered as determinative of the perfection of the contract here in question. Said provision only
means that as regards the violation of any particular term or condition to be contained in the formal
contract, the corresponding action therefor cannot arise until after the writing has been fully executed.
Thus, after the Proposal of respondent was accepted by the Bank thru its telegram and letter both dated
December 10, 1965 and respondent in turn accepted the award by its letter of December 15, 1965, both
parties became bound to proceed with the subsequent steps needed to formalize and consummate their
agreement. Failure on the part of either of them to do so, entities the other to compensation for the
resulting damages. To such effect was the ruling of this Court in Valencia vs. RFC 103 Phil. 444. We
held therein that the award of a contract to a bidder constitutes an acceptance of said bidder's proposal
and that "the effect of said acceptance was to perfect a contract, upon notice of the award to (the
bidder)". (at p. 450) We further held therein that the bidder's "failure to (sign the corresponding
contract) do not relieve him of the obligation arising from the unqualified acceptance of his offer. Much
less did it affect the existence of a contract between him and respondent". (at p. 452)
It is neither just nor equitable that Valencia should be construed to have sanctioned a one-sided view of
the perfection of contracts in the sense that the acceptance of a bid by a duly authorized official of a
government-owned corporation, financially and otherwise autonomous both from the National
Government and the Bureau of Public Works, insofar as its construction contracts are concerned, binds
only the bidder and not the corporation until the formal execution of the corresponding written contract.
Such unfairness and inequity would even be more evident in the case at bar, if We were to uphold
petitioner's pose. Pertinently to the point under consideration, the trial court found as follows:
To determine the amount of damages recoverable from the defendant, plaintiff's claim for actual
damages in the sum of P298,433.35, as hereinabove stated, and the recommendation of Messrs.
Ambrosio R. Flores and Ricardo Y. Mayuga, as contained in their separate reports (Exhs. "13" and
"15"), in the amounts of P154,075.00 and P147,500.00, respectively, should be taken into account.
There is evidence on record showing that plaintiff incurred the sum of P48,770.30 for the preparation
of the jobsite, construction of bodegas, fences field offices, working sheds, and workmen's quarters;
that the value of the excavation work accomplished by the plaintiff at the site was P113,800.00; that the
rental of the various construction equipment of the plaintiff from the stoppage of work until the
removal thereof from the jobsite would amount to P78,540.00 (Exhs. "K" - "K-l"); that the interest on
the cash bond of P275,000.00 from November 3, 1965 to July 7, 1966 at 12% per annum would be
P22,000.00; that for removing said construction equipment from the jobsite to Manila, plaintiff paid a
hauling fee of P700.00 (Exhs. "L" - "L-1" ); that for the performance bond that the plaintiff posted as
required under its contract with the defendant, the former was obliged to pay a premium of P2,216.55;
and that the plaintiff was likewise made to incur the sum of P32,406.50, representing the 3%
contractor's tax (Exhs. "AA" - "A-l"). The itemized list of all these expenditures, totalling P298,433.35
is attached to the records of this case (Annex "B", Complaint) and forms part of the evidence of the
plaintiff. Mr. Nicomedes G. Ablaza, the witness for the plaintiff, properly identified said document and
affirmed the contents thereof when he testified during the hearing. The same witness likewise explained
in detail the various figures contained therein, and identified the corresponding supporting papers.
It is noteworthy, in this connection, that there is nothing in the records that would show that the
defendant assailed the accuracy and/or reasonableness of the figures presented by the plaintiff; neither
does it appear that the defendant offered any evidence to refute said figures.
While it is claimed by the defendant that the plaintiff incurred a total expense of only P154,075.00
according to the report of Mr. Ambrosio R. Flores, or P147,500.00, according to the report of Mr.
Ricardo Y. Mayuga, the Court finds said estimates to be inaccurate. To cite only an instance, in
estimating, the value of the excavation work, the defendant merely measured the depth, length and
width of the excavated, area which was submerged in water, without ascertaining the volume of rock
and the volume of earth actually excavated as was done by the plaintiff who prepared a detailed plan
showing the profile of the excavation work performed in the site (Exh. "B"). Likewise, the unit
measure adopted by the defendant was in cubic meter while it should be in cubic yard. Also the unit
price used by the defendant was only P8.75 for rock excavation while it should be P10.00 per cubic
yard; and only P4.95 for earth excavation while it should be P5.50 per cubic yard as clearly indicated in
plaintiff's proposal (Annex "A", Complaint; same as Annex "1", Answer). The Court, therefore, can not
give credence to defendant's, aforementioned estimates in view of their evident inaccuracies.
The Court finds from the evidence adduced that Plaintiff claim for actual damages in the sum of
P298,433.35 is meritorious.
The Bulk of plaintiffs claims consists of expected profit which it failed to realize due to the breach of
the contract in question by the defendant. As previously stated, the plaintiff seeks to recover the amount
of P814,190.00 by way of unrealized expected profit. This figure represents 18% of P4,523,275.00
which is the estimated direct cost of the subject project.
As it has been established by the evidence that the defendant in fact was guilty of breach of contract
and, therefore, liable for damages (Art. 1170, New Civil Code), the Court finds that the plaintiff is
entitled to recover from the defendant unrealized expected profit as part of the actual or compensatory
damages. Indemnification for damages shall comprehend not only the value of the loss suffered, but
also that of the profits which the obligee failed to obtain (Art. 2200, New Civil Code).
Where a party is guilty of breach of contract, the other party is entitled to recover the profit which the
latter would have been able to make had the contract been performed (Paz P. Arrieta, et al., plaintiffs-
appellees, vs. National Rice Corporation defendant-appellant, G.R. No. L-15645, promulgated on
January 31, 1964; Vivencio Cerrano, plaintiff-appellee, vs. Tan Chuco, defendant-appellant, 38 Phil.
392).
Regarding the expected profit, a number of questions will have to be answered: Is the 18% unrealized
expected profit being claimed by the plaintiff reasonable? Would the plaintiff be entitled to the whole
amount of said expected profit although there was only partial performance of the contract? Would the
18% expected profit be based on the estimated direct cost of the subject in the amount of
P4,523,275.00, or on plaintiff's bid proposal of P3,749,000.00?
On the question of reasonableness of the 18% expected profit, the Court noted that according to
defendant's own expert witness, Mr. Ambrosio R. Flores, 25% contractor's profit for a project similar in
magnitude as the one involved in the present case would be ample and reasonable. Plaintiff's witness,
Mr. Nicomedes G. Ablaza, an experienced civil engineer who has been actively engaged in the
construction business, testified that 15% to 20% contractor's profit would be in accordance with the
standard engineering practice. Considering the type of the project involved in this case, he stated, the
contractor's profit was placed at 18%. Taking into consideration the fact that this percentage of profit is
even lower than what defendant's witness considered to be ample and reasonable, the Court believes
that the reasonable percentage should be 18% inasmuch as the actual work was not done completely
and the plaintiff has not invested the whole amount of money called for by the project." (Pp. 263-268,
Record on Appeal.)
These findings have not been shown to Us to be erroneous. And additional and clarificatory details,
which We find to be adequately supported by the record, are stated in Respondents' brief thus: têñ.
£îhqwâ£
23. In a letter dated January 4, 1966, petitioner Central Bank, through the same Mr.
Mendoza, to this request of respondent Ablaza. (Annex "D-1" to the Partial Stipulation
of Facts, R.A., p. 146).
24. Acting upon this written permission, respondent Ablaza immediately brought its men
and equipment from Manila to the construction site in San Fernando, La Union, and
promptly commenced construction work thereat. This work, consisted of the setting up
of an enclosure around the site, the building of temporary shelter for its workmen, and
the making of the necessary excavation works. (Commissioner's Report, R.A., p. 181).
25. Following the commencement of such construction work, petitioner Central Bank,
through a letter dated February 8, 1966, formally requested respondent Ablaza to submit
to petitioner the following:têñ.£îhqwâ£
(a) A schedule of deliveries of material which, under the terms of
respondent Ablaza's approved proposal, were to be furnished by
petitioner.
(b) A time-table for the accomplishment of the construction work.
In short, as early as February 8, 1966, or more than three months prior to
petitioner's repudiation of the contract in question the latter (petitioner)
already took the above positive steps it compliance with its own
obligations under the contract.
26. Acting upon petitioner's above letter of February 8, 1966, on February 16, 1966,
respondent Ablaza submitted the schedule of deliveries requested by petitioner.
(Commissioner's Report, R.A., p. 182; Decision id., 252; also Exhs. "D" to "D-7",
inclusive.)
27. During the period of actual construction, respondent Ablaza, on several occasions,
actually discussed the progress of the work with Mr. Mendoza. In addition, in March
1966, the latter (Mr. Mendoza) personally visited the construction site. There he saw the
work which respondent had by that time already accomplished which consisted of the
completion of approximately 20% of the necessary excavation works. (Commissioner's
Report, R.A., p. 182; Decision, id., p. 252).
28. Following Mr. Mendoza's visit at the construction site, or more specifically on
March 22, 1966, the latter (Mendoza) wrote to respondent Ablaza, instructing the latter
to formally designate the person to represent the corporation at the signing of the formal
construction contract. (Exh. "H"; also t.s.n., pp. 119-121, December 18, 1967).
29. By a letter dated March 24, 1966, respondent Ablaza promptly complied with the
above request. (Exh. "I"; also t.s.n., pp 121-123, December 18, 1967).
30. Subsequently, respondent Ablaza posted the required performance guaranty bond in
the total amount of P962,250.00, consisting of (a) a cash bond in the amount of
P275,000.00, and (b) a surety bond, PSIC Bond No. B-252-ML, dated May 19, 1966, in
the amount of P687,250.00. In this connection, it is important to note that the specific
purpose of this bond was to guarantee "the faithful Performance of the Contract" by
respondent Ablaza. (Partial Stipulation of Facts, par. 6, R.A., p. 141). This performance
guaranty bond was duly accepted by petitioner.(Id.)
31. However, on May 20, 1966, petitioner Central Bank called for a meeting with
representatives of respondent Ablaza and another contractor. This meeting was held at
the Conference Room of the Central Bank Building. At this meeting, then Finance
Secretary Eduardo Romualdez, who acted as the representative of petitioner, announced
that the Monetary Board had decided to reduce the appropriations for the various
proposed Central Bank regional office buildings, including the one for San Fernando,
La Union.
32. In view of this decision, Secretary Romualdez informed respondent Ablaza that new
plans and designs for the proposed regional office building in San Fernando would have
to be drawn up to take account of the reduction in appropriation. Secretary Romualdez
then advised respondent to suspendwork at the construction site in San Fernando in the
meanwhile. (Decision, R.A., pp. 253-254).
33. After making the above announcements, Secretary Romualdez proposed that all
existing contracts previously entered into between petitioner Central Bank and the
several winning contractors (among them being respondent Ablaza) be considered set
aside.
34. Obviously to induce acceptance of the above proposal, Secretary Romualdez offered
the following concessions to respondent Ablaza: têñ.£îhqwâ£
(a) That its cash bond in the amount of P275,000.00 be released
immediately, and that interest be paid thereon at the rate of 12% per
annum.
(b) That respondent Ablaza be reimbursed for expenses incurred for the
premiums on the performance bond which it posted, and which petitioner
had already accepted. (Decision, R.A., pp. 253-254).
35. In addition, Secretary Romualdez also proposed the conclusion of a new contract
with respondent Ablaza for the construction of a more modest regional office building at
San Fernando, La Union, on a negotiated basis. However, the sincerity and feasibility of
this proposal was rendered dubious by a caveat attached to it, as follows: têñ.£îhqwâ£
'4. Where auditing regulations would permit, the Central Bank would
enter into a negotiated contract with the said corporation (Ablaza) for the
construction work on the building on the basis of the revised estimates.'
(Annex "8" to Answer, R.A., p. 95).
36. The revised cost fixed for this proposed alternative regional office building was fixed
at a maximum of P3,000,000.00 (compared to P3,749,000.00 under the contract
originally awarded to respondent). (Annex "6-A" to Answer, R.A., p. 87).
37. Needless perhaps to state, respondent Ablaza rejected the above proposals (pars. 34
and 35, supra.), and on June 3, 1966, through counsel, wrote to petitioner demanding the
formal execution of the contract previously awarded to it, or in the alternative, to pay
"all damages and expenses suffered by (it) in the total amount of P1,181,950.00 ...
"(Annex "7" to Answer, R.A., pp. 89-91; Decision, id., p. 254).
38. In a letter dated June 15, 1966, petitioner Central Bank, through Deputy Governor
Amado R. Brinas, replied to respondent Ablaza's demand denying any liability on the
basis of the following claim: têñ.£îhqwâ£
`(That, allegedly) in line with the agreement ... reached between the
Central Bank and Ablaza Construction and Finance Corporation at a
meeting held ... on May 20, 1966,' "whatever agreements might have been
previously agreed upon between (petitioner and respondent) would be
considered set aside." (Decision, R.A., p. 255; Annex "8" to Answer, id.,
pp. 93-96.)
39. The above claim was, however, promptly and peremptorily denied by respondent
Ablaza, through counsel, in a letter dated June 16, 1966. (Partial Stipulation of Facts,
par. 9, R.A., p. 142, also Annex "G" thereof; Commissioner's Report, R.A., p.
185; Decision, id., p. 255.)" (Appellee's Brief, pars. 23 to 39, pp. 14-19.)
None of these facts is seriously or in any event sufficiently denied in petitioner's reply brief.
Considering all these facts, it is quite obvious that the Bank's insistence now regarding the need for the
execution of the formal contract comes a little too late to be believable. Even assuming arguendo that
the Revised Manual of Instructions to Treasurers were applicable to the Central Bank, which is
doubtful, considering that under the provisions of its charter already referred to earlier, disbursements
and expenditures of the Bank are supposed to be governed by rules and regulations promulgated by the
Monetary Board, in this particular case, the attitude and actuations then of the Bank in relation to the
work being done by Ablaza prior to May 20, 1966 clearly indicate that both parties assumed that the
actual execution of the written contract is a mere formality which could not materially affect their
respective contractual rights and obligations. In legal effect, therefore, the Bank must be considered as
having waived such requirement.
To be more concrete, from December 15, 1965, when Ablaza accepted the award of the contract in
question, both parties were supposed to have seen to it that the formal contract were duly signed. Under
the Instructions to Bidders, Ablaza was under obligation to sign the same within five (5) days from
notice of the award, and so, he called on the Bank at various times for that purpose. The Bank never
indicated until May, 1966 that it would not comply. On the contrary, on February 8, 1966, Ablaza was
requested to submit a "schedule of deliveries of materials" which under the terms of the bid were to be
furnished by the Bank. On March 22, 1966, Ablaza received a letter from the Bank inquiring as to who
would be Ablaza's representative to sign the formal contract. In the meanwhile, no less than Mr.
Rizalino Mendoza, the Chairman of the Management Building Committee of the Central Bank who had
been signing for the Bank all the communications regarding the project at issue, had visited the
construction site in March, 1966, just before he wrote the request abovementioned of the 22nd of that
month for the nomination of the representative to sign the formal contract, and actually saw the
progress of the work and that it was being continued, but he never protested or had it stopped. All these
despite the fact that the Memorandum Circular being invoked by the Bank was issued way back on
December 31, 1965 yet. And when finally on May 20, 1966 the Bank met with the representatives of
Ablaza regarding the idea of changing the plans to more economical ones, there was no mention of the
non-execution of the contract as entitling the Bank to back out of it unconditionally. Rather, the talk,
according to the findings of the lower courts, was about the possibility of setting aside whatever
agreement there was already. Under these circumstances, it appears that respondent has been made to
believe up to the time the Bank decided definitely not to honor any agreement at all that its execution
was not indispensable to a contract to be considered as already operating and respondent could
therefore proceed with the work, while the contract could be formalized later.
Petitioner contends next that its withdrawal from the contract is justified by the policy of economic
restraint ordained by Memorandum Circular No. 1. We do not see it that way. Inasmuch as the contract
here in question was perfected before the issuance of said Memorandum Circular, it is elementary that
the same may not be enforced in such a manner as to result in the impairment of the obligations of the
contract, for that is not constitutionally permissible. Not even by means of a statute, which is much
more weighty than a mere declaration of policy, may the government issue any regulation relieving
itself or any person from the binding effects of a contract. (Section 1 (10), Article III, Philippine
Constitution of 1953 and Section 11, Article IV, 1973 Constitution of the Philippines.) Specially in the
case of the Central Bank, perhaps, it might not have been really imperative that it should have revised
its plans, considering that it has its own resources independent of those of the national government and
that the funds of the Central Bank are derived from its own operations, not from taxes. In any event, if
the memorandum circular had to be implemented, the corresponding action in that direction should
have been taken without loss of time and before the contract in question had taken deeper roots. It is
thus clear that in unjustifiably failing to honor its contract with respondent, petitioner has to suffer the
consequences of its action.
The last issue submitted for Our resolution refers to the amount of damages awarded to Ablaza by the
trial court and found by the Court of Appeals to be "fair and reasonable." Again, after a review of the
record, We do not find sufficient ground to disturb the appealed judgment even in this respect, except
as to attorney's fees.
There are three principal items of damages awarded by the courts below, namely: (1) compensation for
actual work done in the amount of P298,433.35, (2) unrealized profits equivalent to 18% of the contract
price of P3,749,000 or P674,820.00 and (3) 15% of the total recovery as attorney's fees in addition to
the P5,000 already paid as retaining fee. All of these items were the subject of evidence presented by
the parties. According to the Court of Appeals: têñ.£îhqwâ£
As regard the accuracy and reasonableness of the award for damages, both actual and
compensatory, it is to be noted that the trial court subjected the Commissioner's report
and the evidence adduced therein to a careful scrutiny. Thus, when the appellant called
the trial court's attention to the fact that the P814,190.00 unrealized expected profit being
claimed by appellee represented 18% of P4,523,275.00 which was the estimated cost of
the project, while the contract awarded to appellee was only in the amount of
P3,749,000.00 as per its bid proposal, the Court made the necessary modification. It is
further to be noted that the amount of 18% of the estimated cost considered in the said
award is much less than that given by appellant's own expert witness, Ambrosio R.
Flores. He testified that 25% as contractor's profit "would be fair, ample and
reasonable." (T.s.n, p. 557, Batalla.)" (p. 17 A, Appellant's brief.)
Basically, these are factual conclusions which We are not generally at liberty to disregard. And We have
not been shown that they are devoid of reasonable basis.
There can be no dispute as to the legal obligation of petitioner to pay respondent the actual expenses it
has incurred in performing its part of the contract.
Upon the other hand, the legal question of whether or not the Bank is liable for unrealized profits
presents no difficulty. In Arrieta vs. Naric G.R. No. L-15645, Jan. 31, 1964, 10 SCRA 79, this Court
sustained as a matter of law the award of damages n the amount of U.S. $286,000, payable in
Philippine Currency, measured in the rate of exchange prevailing at the time the obligation was
incurred (August, 1952), comprising of unrealized profits of the plaintiff, Mrs. Paz Arrieta, in a case
where a government-owned corporation, the Naric failed to proceed with the purchase of imported rice
after having accepted and approved the bid of Arrieta and after she had already closed her contract with
her foreign sellers.
Actually, the law on the matter is unequivocally expressed in Articles 2200 and 2201 of the Civil Code
thus: têñ.£îhqwâ£
ART. 2200. Identification for damages shall comprehend not only the value of the loss
suffered, but also that of the profits, which the obligee failed to obtain..
ART. 2201. In contracts and quasi-contracts, the damages for which the obligor who
acted in good faith is liable shall be those that are the natural and probable consequences
of the breach of the obligation, and which the parties have forseen or could have
reasonably foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for
all damages which may be reasonably attributed to the non- performance of the
obligation.
Construing these provisions, the following is what this Court held in Cerrano vs. Tan Chuco, 38 Phil.
392: têñ.£îhqwâ£
.... Article 1106 (now 2200) of the Civil Code establishes the rule that prospective profits
may be recovered as damages, while article 1107 (now 2201) of the same Code provides
that the damages recoverable for the breach of obligations not originating in fraud (dolo)
are those which were or might have been foreseen at the time the contract was entered
into. Applying these principles to the facts in this case, we think that it is unquestionable
that defendant must be deemed to have foreseen at the time he made the contract that in
the event of his failure to perform it, the plaintiff would be damaged by the loss of the
profit he might reasonably have expected to derive from its use.
When the existence of a loss is established, absolute certainty as to its amount is not
required. The benefit to be derived from a contract which one of the parties has
absolutely failed to perform is of necessity to some extent, a matter of speculation, but
the injured party is not to be denied all remedy for that reason alone. He must produce
the best evidence of which his case is susceptible and if that evidence warrants the
inference that he has been damaged by the loss of profits which he might with
reasonable certainty have anticipated but for the defendant's wrongful act, he is entitled
to recover. As stated in Sedgwick on Damages (Ninth Ed., par. 177):
The general rule is, then, that a plaintiff may recover compensation for any gain which
he can make it appear with reasonable certainty the defendant's wrongful act prevented
him from acquiring, ...'. (See also Algarra vs. Sandejas, 27 Phil. Rep., 284, 289; Hicks
vs. Manila Hotel Co., 28 Phil. Rep., 325.) (At pp. 398-399.)
Later, in General Enterprises, Inc. vs. Lianga Bay Logging Co. Inc., 11 SCRA 733, Article 2200 of the
Civil Code was again applied as follows: têñ.£îhqwâ£
Regarding the actual damages awarded to appellee, appellant contends that they are
unwarranted inasmuch as appellee has failed to adduce any evidence to substantiate
them even assuming arguendo that appellant has failed to supply the additional monthly
2,000,000 board feet for the remainder of the period agreed upon in the contract Exhibit
A. Appellant maintains that for appellee to be entitled to demand payment of sales that
were not effected it should have proved (1) that there are actual sales made of appellee's
logs which were not fulfilled, (2) that it had obtained the best price for such sales, (3)
that there are buyers ready to buy at such price stating the volume they are ready to buy,
and (4) appellee could not cover the sales from the logs of other suppliers. Since these
facts were not proven, appellee's right to unearned commissions must fail.
This argument must be overruled in the light of the law and evidence on the matter.
Under Article 2200 of the Civil Code, indemnification for damages comprehends not
only the value of the loss suffered but also that of the profits which the creditor fails to
obtain. In other words, lucrum cessans is also a basis for indemnification. The question
then that arises is: Has appellee failed to make profits because of appellant's breach of
contract, and in the affirmative, is there here basis for determining with reasonable
certainty such unearned profits?
Appellant's memorandum (p. 9) shows that appellee has sold to Korea under the contract
in question the following board feet of logs, Breareton Scale: têñ.£îhqwâ£
Months Board Feet
From June to August 1959 3,007,435
September, 1959 none
October, 1959 2,299,805
November, 1959 801,021
December, 1959 1,297,510

Total 7,405,861
The above figures tally with those of Exhibit N. In its brief (p. 141) appellant claims that
in less than six months' time appellee received by way of commission the amount of
P117,859.54, while in its memorandum, appellant makes the following statement:
`11. The invoice F.O.B. price of the sale through plaintiff General is P767,798.82 but the
agreed F.O.B. price was P799,319.00, the commission at 13% (F.O.B.) is P117,859.54.
But, as there were always two prices — Invoice F.O.B price and F.O.B. price as per
contract, because of the sales difference amounting to P31,920.18, and the same was
deducted from the commission, actually paid to plaintiff General is only P79,580.82.' " It
appears, therefore, that during the period of June to December, 1959, in spite of the short
delivery incurred by appellant, appellee had been earning its commission whenever logs
were delivered to it. But from January, 1960, appellee had ceased to earn any
commission because appellant failed to deliver any log in violation of their agreement.
Had appellant continued to deliver the logs as it was bound to pursuant to the agreement
it is reasonable to expect that it would have continued earning its commission in much
the same manner as it used to in connection with the previous shipments of logs, which
clearly indicates that it failed to earn the commissions it should earn during this period
of time. And this commission is not difficult to estimate. Thus, during the seventeen
remaining months of the contract, at the rate of at least 2,000,000 board feet, appellant
should have delivered thirty-four million board feet. If we take the number of board feet
delivered during the months prior to the interruption, namely, 7,405,861 board feet, and
the commission received by appellee thereon, which amounts to P79,580.82, we would
have that appellee received a commission of P.0107456 per board feet. Multiplying 34
million board feet by P.0107456, the product is P365,350.40, which represents
the lucrum cessans that should accrue to appellee. The award therefore, made by the
court a quo of the amount of P400,000.00 as compensatory damages is not speculative,
but based on reasonable estimate.
In the light of these considerations, We cannot say that the Court of Appeals erred in making the
aforementioned award of damages for unrealized profits to respondent Ablaza.
With respect to the award for attorney's fees, We believe that in line with the amount fixed in Lianga,
supra., an award of ten per centum (10%) of the amount of the total recovery should be enough.
PREMISES CONSIDERED, the decision of the Court of Appeals in this case is affirmed, with the
modification that the award for attorney's fees made therein is hereby reduced to ten per centum (10%)
of the total recovery of respondent Ablaza.
Costs against petitioner.
Manila International Airport Authority vs. Court of Appeals, 495 SCRA 591, G.R.
No. 155650 July 20, 2006
Manila International Airport Authority; Taxation; MIAA’s Airport Lands and Buildings are exempt
from real estate tax imposed by local governments.—We rule that MIAA’s Airport Lands and Buildings
are exempt from real estate tax imposed by local governments. First, MIAA is not a government-owned
or controlled corporation but an instrumentality of the National Government and thus exempt from
local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and
thus exempt from real estate tax.

Same; Same; While there is no dispute that a government-owned or controlled corporation is not
exempt from real estate tax, MIAA is not a government-owned or controlled corporation; A
government-owned or controlled corporation must be “organized as a stock or non-stock corporation,”
of which MIAA is neither; MIAA is not a stock corporation because it has no capital stock divided into
shares.—There is no dispute that a government-owned or controlled corporation is not exempt from
real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of
the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or
controlled corporation as follows: SEC. 2. General Terms Defined.—x x x x (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) percent of its capital stock: x x x.
(Emphasis supplied) A government-owned or controlled corporation must be “organized as a stock or
non-stock corporation.” MIAA is not organized as a stock or non-stock corporation. MIAA is not a
stock corporation because it has no capital stock divided into shares. Same; Same; Manila International
Airport Authority (MIAA) is not a non-stock corporation because it has no members; Section 11 of the
MIAA Charter which mandates MIAA to remit 20% of its annual gross operating income to the
National Treasury prevents it from qualifying as a non-stock corporation.—MIAA is also not a non-
stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock
corporation as “one where no part of its income is distributable as dividends to its members, trustees or
officers.” A non-stock corporation must have members. Even if we assume that the Government is
considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock
corporations cannot distribute any part of their income to their members. Section 11 of the MIAA
Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury.
This prevents MIAA from qualifying as a non-stock corporation.

Administrative Law; Manila International Airport Authority (MIAA) is a government instrumentality


vested with corporate powers to perform efficiently its governmental functions.—Since MIAA is
neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or
controlled corporation. What then is the legal status of MIAA within the National Government? MIAA
is a government instrumentality vested with corporate powers to perform efficiently its governmental
functions. MIAA is like any other government instrumentality, the only difference is that MIAA is
vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code
defines a government “instrumentality” as follows: SEC. 2. General Terms Defined.––x x x x (10)
Instrumentality refers to 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. x x
x (Emphasis supplied)

Same; When the law vests in a government instrumentality corporate powers, the instrumentality does
not become a corporation—unless the government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not only governmental but also
corporate powers.—When the law vests in a government instrumentality corporate powers, the
instrumentality does not become a corporation. Unless the government instrumentality is organized as a
stock or non-stock corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent
domain, police authority and the levying of fees and charges. At the same time, MIAA exercises “all
the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent
with the provisions of this Executive Order.”

Same; When the law makes a government instrumentality operationally autonomous, the
instrumentality remains part of the National Government machinery although not integrated with the
department framework.—Likewise, when the law makes a government instrumentality operationally
autonomous, the instrumentality remains part of the National Government machinery although not
integrated with the department framework. The MIAA Charter expressly states that transforming
MIAA into a “separate and autonomous body” will make its operation more “financially viable.”

Same; Manila International Airport Authority; Taxation; Local Government Code; A government
instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which provision
recognizes the basic principle that local governments cannot tax the national government.—A
government instrumentality like MIAA falls under Section 133(o) of the Local Government Code,
which states: SEC. 133. Common Limitations on the Taxing Powers of Local Government Units.—
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following: x x x x (o) Taxes, fees or charges of any
kind on the National Government, its agencies and instrumentalities and local government units.
(Emphasis and italics supplied) Section 133(o) recognizes the basic principle that local governments
cannot tax the national government, which historically merely delegated to local governments the
power to tax. While the 1987 Constitution now includes taxation as one of the powers of local
governments, local governments may only exercise such power “subject to such guidelines and
limitations as the Congress may provide.”

Taxation; Local Government Code; Statutory Construction; When local governments invoke the power
to tax on national government instrumentalities, such power is construed strictly against local
governments, and when Congress grants an exemption to a national government instrumentality from
local taxation, such exemption is construed liberally in favor of the national government
instrumentality.—Section 133(o) recognizes the basic principle that local governments cannot tax the
national government, which historically merely delegated to local governments the power to tax. While
the 1987 Constitution now includes taxation as one of the powers of local governments, local
governments may only exercise such power “subject to such guidelines and limitations as the Congress
may provide.” When local governments invoke the power to tax on national government
instrumentalities, such power is construed strictly against local governments. The rule is that a tax is
never presumed and there must be clear language in the law imposing the tax. Any doubt whether a
person, article or activity is taxable is resolved against taxation. This rule applies with greater force
when local governments seek to tax national government instrumentalities. Another rule is that a tax
exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress
grants an exemption to a national government instrumentality from local taxation, such exemption is
construed liberally in favor of the national government instrumentality. As this Court declared in
Maceda v. Macaraig, Jr.: The reason for the rule does not apply in the case of exemptions running to the
benefit of the government itself or its agencies. In such case the practical effect of an exemption is
merely to reduce the amount of money that has to be handled by government in the course of its
operations. For these reasons, provisions granting exemptions to government agencies may be
construed liberally, in favor of non tax-liability of such agencies. There is, moreover, no point in
national and local governments taxing each other, unless a sound and compelling policy requires such
transfer of public funds from one government pocket to another.

Same; Same; Taxation; Local Government Code; There is also no reason for local governments to tax
national government instrumentalities for rendering essential public services to inhabitants of local
governments, the only exception being when the legislature clearly intended to tax government
instrumentalities for the delivery of essential services for sound and compelling policy considerations.
—There is also no reason for local governments to tax national government instrumentalities for
rendering essential public services to inhabitants of local governments. The only exception is when the
legislature clearly intended to tax government instrumentalities for the delivery of essential public
services for sound and compelling policy considerations. 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.

Manila International Airport Authority; The Airport Lands and Buildings of the MIAA are property of
public dominion and therefore owned by the State or the Republic of the Philippines.—The Airport
Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the
Republic of the Philippines. The Civil Code provides: ARTICLE 419. Property is either of public
dominion or of private ownership. ARTICLE 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; (2) Those which
belong to the State, without being for public use, and are intended for some public service or for the
development of the national wealth. (Emphasis supplied) ARTICLE 421. All other property of the
State, which is not of the character stated in the preceding article, is patrimonial property. ARTICLE
422. Property of public dominion, when no longer intended for public use or for public service, shall
form part of the patrimonial property of the State.

Same; Words and Phrases; The term “ports” in Article 420 (1) of the Civil Code includes seaports and
airports—the MIAA Airport Lands and Buildings constitute a “port” constructed by the State.—No one
can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like “roads,
canals, rivers, torrents, ports and bridges constructed by the State,” are owned by the State. The term
“ports” includes seaports and airports. The MIAA Airport Lands and Buildings constitute a “port”
constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings
are properties of public dominion and thus owned by the State or the Republic of the Philippines.

Same; Same; The Airport Lands and Buildings are devoted to public use because they are used by the
public for international and domestic travel and transportation; The charging of fees to the public does
not determine the character of the property whether it is of public dominion or not.—The Airport Lands
and Buildings are devoted to public use because they are used by the public for international and
domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges
from the public does not remove the character of the Airport Lands and Buildings as properties for
public use. The operation by the government of a tollway does not change the character of the road as
one for public use. Someone must pay for the maintenance of the road, either the public indirectly
through the taxes they pay the government, or only those among the public who actually use the road
through the toll fees they pay upon using the road. The tollway system is even a more efficient and
equitable manner of taxing the public for the maintenance of public roads. The charging of fees to the
public does not determine the character of the property whether it is of public dominion or not. Article
420 of the Civil Code defines property of public dominion as one “intended for public use.” Even if the
government collects toll fees, the road is still “intended for public use” if anyone can use the road under
the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind
of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do
not affect the public character of the road.

Same; Taxation; User’s Tax; Words and Phrases; The terminal fees MIAA charges passengers, as well
as the landing fees MIAA charges airlines, are often termed user’s tax; A user’s tax is more equitable—
a principle of taxation mandated by the 1987 Constitution.—The terminal fees MIAA charges to
passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that
maintains the operations of MIAA. The collection of such fees does not change the character of MIAA
as an airport for public use. Such fees are often termed user’s tax. This means taxing those among the
public who actually use a public facility instead of taxing all the public including those who never use
the particular public facility. A user’s tax is more equitable—a principle of taxation mandated in the
1987 Constitution.

Same; The Airport Lands and Buildings of MIAA, as properties of public dominion, are outside the
commerce of man.—The Airport Lands and Buildings of MIAA are devoted to public use and thus are
properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are
outside the commerce of man. The Court has ruled repeatedly that properties of public dominion are
outside the commerce of man. As early as 1915, this Court already ruled in Municipality of Cavite v.
Rojas that properties devoted to public use are outside the commerce of man, thus: According to article
344 of the Civil Code: “Property for public use in provinces and in towns comprises the provincial and
town roads, the squares, streets, fountains, and public waters, the promenades, and public works of
general service supported by said towns or provinces.”

Same; Public Auctions; Property of public dominion, being outside the commerce of man, cannot be
the subject of an auction sale; Any encumbrance, levy on execution or auction sale of any property of
public dominion is void for being contrary to public policy.—Again in Espiritu v. Municipal Council,
the Court declared that properties of public dominion are outside the commerce of man: x x x Town
plazas are properties of public dominion, to be devoted to public use and to be made available to the
public in general. They are outside the commerce of man and cannot be disposed of or even leased by
the municipality to private parties. While in case of war or during an emergency, town plazas may be
occupied temporarily by private individuals, as was done and as was tolerated by the Municipality of
Pozorrubio, when the emergency has ceased, said temporary occupation or use must also cease, and the
town officials should see to it that the town plazas should ever be keptopen to the public and free from
encumbrances or illegal private constructions. (Emphasis supplied) The Court has also ruled that
property of public dominion, being outside the commerce of man, cannot be the subject of an auction
sale. 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. This
will happen if the City of Parañaque can foreclose and compel the auction sale of the 600-hectare
runway of the MIAA for non-payment of real estate tax.
Same; Unless the President issues a proclamation withdrawing the Airport Lands and Buildings from
public use, these properties remain properties of public dominion and are inalienable.—Before MIAA
can encumber the Airport Lands and Buildings, the President must first withdraw from public use the
Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No.
141, which “remains to this day the existing general law governing the classification and disposition of
lands of the public domain other than timber and mineral lands,” provide: x x x Thus, unless the
President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these
properties remain properties of public dominion and are inalienable. Since the Airport Lands and
Buildings are inalienable in their present status as properties of public dominion, they are not subject to
levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for
public use, their ownership remains with the State or the Republic of the Philippines.

Same; Trusts; MIAA is merely holding title to the Airport Lands and Buildings in trust for the
Republic.—MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic.
Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold
title to real properties owned by the Republic.

Same; The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA
was not meant to transfer beneficial ownership of these assets from the Republic to MIAA—the
Republic remains the beneficial owner of the Airport Lands and Buildings.—The transfer of the Airport
Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer
beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to
reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The
Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely
by the Republic. No party claims any ownership rights over MIAA’s assets adverse to the Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings “shall not be disposed
through sale or through any other mode unless specifically approved by the President of the
Philippines.” This only means that the Republic retained the beneficial ownership of the Airport Lands
and Buildings because under Article 428 of the Civil Code, only the “owner has the right to x x x
dispose of a thing.” Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not
own the Airport Lands and Buildings. At any time, the President can transfer back to the Republic title
to the Airport Lands and Buildings without the Republic paying MIAA any consideration. Under
Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or disposition
of the Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to
the Republic.

Taxation; Local Government Code; Section 234(a) of the Local Government Code exempts from real
estate tax any “real property owned by the Republic of the Philippines.”—Section 234(a) of the Local
Government Code exempts from real estate tax any “[r]eal property owned by the Republic of the
Philippines.” Section 234(a) provides: SEC. 234. Exemptions from Real Property Tax.—The following
are exempted from payment of the 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; x x x. (Emphasis supplied) This exemption 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 x x x.” 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 remain owned by the Republic and
continue to be exempt from real estate tax.

Manila International Airport Authority; Local Government Code; The Republic may grant the
beneficial use of its real property to an agency or instrumentality of the national government, an
arrangement which does not result in the loss of the tax exemption; MIAA, as a government
instrumentality, is not a taxable person under Section 133(o) of the Local Government Code.—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 thereof has been granted, for
consideration or otherwise, to a taxable person.” MIAA, as a government instrumentality, is not a
taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume that the
Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not
make these real properties subject to real estate tax.

Same; Same; Taxation; Portions of the Airport Lands and Buildings that MIAA leases to private entities
are not exempt from real estate tax.—Portions of the Airport Lands and Buildings that MIAA leases to
private entities are not exempt from real estate tax. For example, the land area occupied by hangars that
MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the
beneficial use of such land area for a consideration to a taxable person and therefore such land area is
subject to real estate tax. In Lung Center of the Philippines v. Quezon City, 433 SCRA 119, 138 (2004),
the Court ruled: Accordingly, we hold that the portions of the land leased to private entities as well as
those parts of the hospital leased to private individuals are not exempt from such taxes. On the other
hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients,
whether paying or non-paying, are exempt from real property taxes.

Same; Taxation; By express mandate of the Local Government Code, local governments cannot impose
any kind of tax on national government instrumentalities like the MIAA.—By express mandate of the
Local Government Code, local governments cannot impose any kind of tax on national government
instrumentalities like the MIAA. Local governments are devoid of power to tax the national
government, its agencies and instrumentalities. The taxing powers of local governments do not extend
to the national government, its agencies and instrumentalities, “[u]nless otherwise provided in this
Code” as stated in the saving clause of Section 133. The saving clause refers to Section 234(a) on the
exception to the exemption from real estate tax of real property owned by the Republic Same; Same;
The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a juridical
person, but whether it is a national government instrumentality under Section 133(o) of the Local
Government Code.—The minority’s theory violates Section 133(o) of the Local Government Code
which expressly prohibits local governments from imposing any kind of tax on national government
instrumentalities. Section 133(o) does not distinguish between national government instrumentalities
with or without juridical personalities. Where the law does not distinguish, courts should not
distinguish. Thus, Section 133(o) applies to all national government instrumentalities, with or without
juridical personalities. The determinative test whether MIAA is exempt from local taxation is not
whether MIAA is a juridical person, but whether it is a national government instrumentality under
Section 133(o) of the Local Government Code. Section 133(o) is the specific provision of law
prohibiting local governments from imposing any kind of tax on the national government, its agencies
and instrumentalities.

Taxation; The saving clause in Section 133 of the Local Government Code refers to the exception to the
exemption in Section 234(a) of the Code, which makes the national government subject to real estate
tax when it gives the beneficial use of its real properties to a taxable entity; The exception to the
exemption in Section 234(a) is the only instance when the national government, its agencies and
instrumentalities are subject to any kind of tax by local governments.—The saving clause in Section
133 refers to the exception to the exemption in Section 234(a) of the Code, which makes the national
government subject to real estate tax when it gives the beneficial use of its real properties to a taxable
entity. Section 234(a) of the Local Government Code provides: SEC. 234. Exemptions from Real
Property Tax.—The following are exempted from payment of the 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. x x x. (Emphasis
supplied) Under Section 234(a), real property owned by the Republic is exempt from real estate tax.
The exception to this exemption is when the government gives the beneficial use of the real property to
a taxable entity. The exception to the exemption in Section 234(a) is the only instance when the
national government, its agencies and instrumentalities are subject to any kind of tax by local
governments. The exception to the exemption applies only to real estate tax and not to any other tax.
The justification for the exception to the exemption is that the real property, although owned by the
Republic, is not devoted to public use or public service but devoted to the private gain of a taxable
person. Same; Statutory Construction; When a provision of law grants a power but withholds such
power on certain matters, there is no conflict between the grant of power and the withholding of power.
—There is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly admits
its subordination to other provisions of the Code when Section 193 states “[u]nless otherwise provided
in this Code.” By its own words, Section 193 admits the superiority of other provisions of the Local
Government Code that limit the exercise of the taxing power in Section 193. When a provision of law
grants a power but withholds such power on certain matters, there is no conflict between the grant of
power and the withholding of power. The grantee of the power simply cannot exercise the power on
matters withheld from its power.

Same; Words and Phrases; By their very meaning and purpose, the “common limitations” on the taxing
power prevail over the grant or exercise of the taxing power.—Since Section 133 prescribes the
“common limitations” on the taxing powers of local governments, Section 133 logically prevails over
Section 193 which grants local governments such taxing powers. By their very meaning and purpose,
the “common limitations” on the taxing power prevail over the grant or exercise of the taxing power. If
the taxing power of local governments in Section 193 prevails over the limitations on such taxing
power in Section 133, then local governments can impose any kind of tax on the national government,
its agencies and instrumentalities—a gross absurdity.

Administrative Law; The Administrative Law is the governing law defining the status and relationship
of government departments, bureaus, offices, agencies and instrumentalities.—The third whereas
clause of the Administrative Code states that the Code “incorporates in a unified document the major
structural, functional and procedural principles and rules of governance.” Thus, the Administrative
Code is the governing law defining the status and relationship of government departments, bureaus,
offices, agencies and instrumentalities. Unless a statute expressly provides for a different status and
relationship for a specific government unit or entity, the provisions of the Administrative Code prevail.

Same; The government-owned or controlled corporations created through special charters are those that
meet the two conditions prescribed in Section 16, Article XII of the Constitution, regarding their
creation in the interest of common good and their being subject to the test of economic viability.—The
government-owned or controlled corporations created through special charters are those that meet the
two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the
government-owned or controlled corporation must be established for the common good. The second
condition is that the government-owned or controlled corporation must meet the test of economic
viability. Section 16, Article XII of the 1987 Constitution provides: SEC. 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.

Same; The test of economic viability applies only to government-owned or controlled corporations that
perform economic or commercial activities and need to compete in the market place—government
instrumentalities vested with corporate powers and performing governmental or public functions need
not meet the test of economic viability.—The Constitution expressly authorizes the legislature to create
“government-owned or controlled corporations” through special charters only if these entities are
required to meet the twin conditions of common good and economic viability. In other words, Congress
has no power to create government-owned or controlled corporations with special charters unless they
are made to comply with the two conditions of common good and economic viability. The test of
economic viability applies only to government-owned or controlled corporations that perform
economic or commercial activities and need to compete in the market place. Being essentially
economic vehicles of the State for the common good—meaning for economic development purposes—
these government-owned or controlled corporations with special charters are usually organized as stock
corporations just like ordinary private corporations. 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.

Manila International Airport Authority; Administrative Law; The MIAA need not meet the test of
economic viability because the legislature did not create MIAA to compete in the market place.—The
MIAA need not meet the test of economic viability because the legislature did not create MIAA to
compete in the market place. MIAA does not compete in the market place because there is no
competing international airport operated by the private sector. MIAA performs an essential public
service as the primary domestic and international airport of the Philippines.

Same; Words and Phrases; The terminal fees that MIAA charges every passenger are regulatory or
administrative fees and not income from commercial transactions.—MIAA performs an essential public
service that every modern State must provide its citizens. MIAA derives its revenues principally from
the mandatory fees and charges MIAA imposes on passengers and airlines. The terminal fees that
MIAA charges every passenger are regulatory or administrative fees and not income from commercial
transactions.

TINGA, J., DISSENTING OPINION:

Courts; Supreme Court; Judgments; Decisions of the Supreme Court are expected to provide clarity to
the parties and to students of jurisprudence, as to what the law of the case is, especially when the
doctrines of long standing are modified or clarified.—The icing on this inedible cake is the strained and
purposely vague rationale used to justify the majority opinion. Decisions of the Supreme Court are
expected to provide clarity to the parties and to students of jurisprudence, as to what the law of the case
is, especially when the doctrines of long standing are modified or clarified. With all due respect, the
decision in this case is plainly so, so wrong on many levels. More egregious, in the majority’s resolve
to spare the Manila International Airport Authority (MIAA) from liability for real estate taxes, no clear-
cut rule emerges on the important question of the power of local government units (LGUs) to tax
government corporations, instrumentalities or agencies. The majority would overturn sub silencio,
among others, at least one dozen precedents.

Same; Same; Same; Only children should be permitted to subscribe to the theory that something bad
will go away if you pretend hard enough that it does not exist.—There are certainly many other
precedents affected, perhaps all previous jurisprudence regarding local government taxation vis-a-vis
government entities, as well as any previous definitions of GOCCs, and previous distinctions between
the exercise of governmental and proprietary functions (a distinction laid down by this Court as far
back as 1916). What is the reason offered by the majority for overturning or modifying all these
precedents and doctrines? None is given, for the majority takes comfort instead in the pretense that
these precedents never existed. Only children should be permitted to subscribe to the theory that
something bad will go away if you pretend hard enough that it does not exist.

Same; Judgments; If Mactan-Cebu International Airport v. Marcos, 330 Phil. 392 (1996), truly deserves
to be discarded as precedent, it deserves a more honorable end than death by amnesia or ignominous
disregard—the majority could have devoted its discussion in explaining why it thinks Mactan is wrong,
instead of pretending that Mactan never existed at all.—Before I dwell upon the numerous flaws of the
majority, a brief comment is necessitated on the majority’s studied murkiness vis-à-vis the Mactan
precedent. The majority is obviously inconsistent with Mactan and there is no way these two rulings
can stand together. Following basic principles in statutory construction, Mactan will be deemed as
giving way to this new ruling. However, the majority does not bother to explain why Mactan is wrong.
The interpretation in Mactan of the relevant provisions of the Local Government Code is elegant and
rational, yet the majority refuses to explain why this reasoning of the Court in Mactan is erroneous. In
fact, the majority does not even engage Mactan in any meaningful way. If the majority believes that
Mactan may still stand despite this ruling, it remains silent as to the viable distinctions between these
two cases. The majority’s silence on Mactan is baffling, considering how different this new ruling is
with the ostensible precedent. Perhaps the majority does not simply know how to dispense with the
ruling in Mactan. If Mactan truly deserves to be discarded as precedent, it deserves a more honorable
end than death by amnesia or ignonominous disregard. The majority could have devoted its discussion
in explaining why it thinks Mactan is wrong, instead of pretending that Mactan never existed at all.
Such an approach might not have won the votes of the minority, but at least it would provide some
degree of intellectual clarity for the parties, LGUs and the national government, students of
jurisprudence and practitioners. A more meaningful debate on the matter would have been possible,
enriching the study of law and the intellectual dynamic of this Court.

Manila International Airport Authority; Administrative Law; Based on the Administrative Code, a
GOCC may be an instrumentality or an agency of the National Government.—Based on the
Administrative Code, a GOCC may be an instrumentality or an agency of the National Government.
Thus, there actually is no point in the majority’s assertion that MIAA is not a GOCC, since based on
the majority’s premise of Section 133 as the key provision, the material question is whether MIAA is
either an instrumentality, an agency, or the National Government itself. The very provisions of the
Administrative Code provide that a GOCC can be either an instrumentality or an agency, so why even
bother to extensively discuss whether or not MIAA is a GOCC? Same; Same; The majority effectively
declassifies many entities created and recognized as GOCCs and would give primacy to the
Administrative Code of 1987 rather than their respective charters as to the definition of these entities.—
The inconsequential verbiage stewing in judicial opinions deserve little rebuttal. However, the entire
discussion of the majority on the definition of a GOCC, obiter as it may ultimately be, deserves
emphatic refutation. The views of the majority on this matter are very dangerous, and would lead to
absurdities, perhaps unforeseen by the majority. For in fact, the majority effectively declassifies many
entities created and recognized as GOCCs and would give primacy to the Administrative Code of 1987
rather than their respective charters as to the definition of these entities.

Taxation; It is sad, but not surprising that the majority is not willing to consider or even discuss the
general rule, but only the exemptions under Section 133 and Section 234 of the Local Government
Code—after all, if the majority is dead set in ruling for MIAA no matter what the law says, why bother
citing what the law does say.—The majority abjectly refuses to engage Section 232 of the Local
Government Code although it provides the indubitable general rule that LGUs “may levy an annual ad
valorem tax on real property such as land, building, machinery, and other improvements not hereafter
specifically exempted.” The specific exemptions are provided by Section 234. Section 232 comes
sequentially after Section 133(o), and even if the sequencing is irrelevant, Section 232 would fall under
the qualifying phrase of Section 133, “Unless otherwise provided herein.” It is sad, but not surprising
that the majority is not willing to consider or even discuss the general rule, but only the exemptions
under Section 133 and Section 234. After all, if the majority is dead set in ruling for MIAA no matter
what the law says, why bother citing what the law does say.

Manila International Airport Authority; If the distinction is to be blurred, as the majority does, between
the State/Republic/Government and a body corporate such as the MIAA, then the MIAA charter
showcases the remarkable absurdity of an entity transferring property to itself.—It is the MIAA, and
not either the State, the Republic of the Philippines or the national government that asserts legal title
over the Airport Lands and Buildings. There was an express transfer of ownership between the MIAA
and the national government. If the distinction is to be blurred, as the majority does, between the
State/Republic/Government and a body corporate such as the MIAA, then the MIAA charter showcases
the remarkable absurdity of an entity transferring property to itself. Nothing in the Civil Code or the
Constitution prohibits the State from transferring ownership over property of public dominion to an
entity that it similarly owns. It is just like a family transferring ownership over the properties its
members own into a family corporation. The family exercises effective control over the administration
and disposition of these properties. Yet for several purposes under the law, such as taxation, it is the
corporation that is deemed to own those properties. A similar situation obtains with MIAA, the State,
and the Airport Lands and Buildings.

Same; The operation of an airport facility by the State may be imbued with public interest, but it is by
no means indispensable or obligatory on the national government.—The simple truth is that, based on
these accepted doctrinal tests, MIAA performs proprietary functions. The operation of an airport
facility by the State may be imbued with public interest, but it is by no means indispensable or
obligatory on the national government. In fact, as demonstrated in other countries, it makes a lot of
economic sense to leave the operation of airports to the private sector.

Same; International airlines take into account the quality and conditions of various international
airports in determining the number of flights it would assign to a particular airport, or even in choosing
a hub through which destinations necessitating connecting flights would pass through.—The majority
tries to becloud this issue by pointing out that the MIAA does not compete in the marketplace as there
is no competing international airport operated by the private sector; and that MIAA performs an
essential public service as the primary domestic and international airport of the Philippines. This
premise is false, for one. On a local scale, MIAA competes with other international airports situated in
the Philippines, such as Davao International Airport and MCIAA. More pertinently, MIAA also
competes with other international airports in Asia, at least. International airlines take into account the
quality and conditions of various international airports in determining the number of flights it would
assign to a particular airport, or even in choosing a hub through which destinations necessitating
connecting flights would pass through.

Same; Public Utilities; If the determinative point in distinguishing between sovereign functions and
proprietary functions is the vitality of the public service being performed, then it should be noted that
there is no more important public service performed than that engaged in by public utilities.—If the
determinative point in distinguishing between sovereign functions and proprietary functions is the
vitality of the public service being performed, then it should be noted that there is no more important
public service performed than that engaged in by public utilities. But notably, the Constitution itself
authorizes private persons to exercise these functions as it allows them to operate public utilities in this
country. If indeed such functions are actually sovereign and belonging properly to the government,
shouldn’t it follow that the exercise of these tasks remain within the exclusive preserve of the State?

Same; Taxation; Administrative Law; There really is no prohibition against the government taxing
itself, and nothing obscene with allowing government entities exercising proprietary functions to be
taxed for the purpose of raising the coffers of LGUs.—There really is no prohibition against the
government taxing itself, and nothing obscene with allowing government entities exercising proprietary
functions to be taxed for the purpose of raising the coffers of LGUs. On the other hand, it would be an
even more noxious proposition that the government or the instrumentalities that it owns are above the
law and may refuse to pay a validly imposed tax. MIAA, or any similar entity engaged in the exercise
of proprietary, and not sovereign functions, cannot avoid the adverse-effects of tax evasion simply on
the claim that it is imbued with some of the attributes of government.

Same; Same; Local Governent Code; While the Local Government Code withdrew all previous local
tax exemptions of the MIAA and other natural and juridical persons, it did not similarly withdraw any
previously enacted prohibitions on properties owned by GOCCs, agencies or instrumentalities.—
Despite the fact that the City of Parañaque ineluctably has the power to impose real property taxes over
the MIAA, there is an equally relevant statutory limitation on this power that must be fully upheld.
Section 3 of the MIAA charter states that “[a]ny portion [of the [lands transferred, conveyed and
assigned to the ownership and administration of the MIAA] shall not be disposed through sale or
through any other mode unless specifically approved by the President of the Philippines.” Nothing in
the Local Government Code, even with its wide grant of powers to LGUs, can be deemed as repealing
this prohibition under Section 3, even if it effectively forecloses one possible remedy of the LGU in the
collection of delinquent real property taxes. While the Local Government Code withdrew all previous
local tax exemptions of the MIAA and other natural and juridical persons, it did not similarly withdraw
any previously enacted prohibitions on properties owned by GOCCs, agencies or instrumentalities.
Moreover, the resulting legal effect, subjecting on one hand the MIAA to local taxes but on the other
hand shielding its properties from any form of sale or disposition, is not contradictory or paradoxical,
onerous as its effect may be on the LGU. It simply means that the LGU has to find another way to
collect the taxes due from MIAA, thus paving the way for a mutually acceptable negotiated solution.

Same; Same; The prohibition in Section 3 of the MIAA Charter against the sale or disposition of MIAA
properties without the consent of the President prevents the peremptory closure of the MIAA or the
hampering of its operations on account of the demands of its creditors—the airport is important enough
to be sheltered by legislation from ordinary legal processes.—There are several other reasons this
statutory limitation should be upheld and applied to this case. It is at this juncture that the importance
of the Manila Airport to our national life and commerce may be accorded proper consideration. The
closure of the airport, even by reason of MIAA’s legal omission to pay its taxes, will have an injurious
effect to our national economy, which is ever reliant on air travel and traffic. The same effect would
obtain if ownership and administration of the airport were to be transferred to an LGU or some other
entity which were not specifically chartered or tasked to perform such vital function. It is for this
reason that the MIAA charter specifically forbids the sale or disposition of MIAA properties without
the consent of the President. The prohibition prevents the peremptory closure of the MIAA or the
hampering of its operations on account of the demands of its creditors. The airport is important enough
to be sheltered by legislation from ordinary legal processes.

Same; Same; Had this petition been denied instead with Mactan as basis, but with the caveat that the
MIAA properties could not be subject of execution sale without the consent of the President, I suspect
that the parties would feel little distress—unfortunately, the majority will cause precisely the opposite
result of unremitting hostility, not only to the City of Parañaque, but to the thousands of LGUs in the
country.—Had this petition been denied instead with Mactan as basis, but with the caveat that the
MIAA properties could not be subject of execution sale without the consent of the President, I suspect
that the parties would feel little distress. Through such action, both the Local Government Code and the
MIAA charter would have been upheld. The prerogatives of LGUs in real property taxation, as
guaranteed by the Local Government Code, would have been preserved, yet the concerns about the
ruinous effects of having to close the Manila International Airport would have been averted. The parties
would then be compelled to try harder at working out a compromise, a task, if I might add, they are all
too willing to engage in. Unfortunately, the majority will cause precisely the opposite result of
unremitting hostility, not only to the City of Parañaque, but to the thousands of LGUs in the country.
Local Government Code; Taxation; Bangko Sentral ng Pilipinas; If the BSP is already preternaturally
exempt from local taxation owing to its personality as a “government instrumentality,” why then the
need to make a new grant of exemption, which if the majority is to be believed, is actually a
redundancy.—The New Central Bank Act was promulgated after the Local Government Code if the
BSP is already preternaturally exempt from local taxation owing to its personality as an “government
instrumentality,” why then the need to make a new grant of exemption, which if the majority is to be
believed, is actually a redundancy. But even more tellingly, does not this provision evince a clear intent
that after the lapse of five (5) years, that the Bangko Sentral will be liable for provincial, municipal and
city taxes? This is the clear congressional intent, and it is Congress, not this Court which dictates which
entities are subject to taxation and which are exempt.

Courts; Supreme Court; Judgments; One might say, certainly a decision of the Supreme Court cannot
be construed to promote an absurdity, but precisely the majority, and the faulty reasoning it utilizes,
opens itself up to all sorts of mischief, and certainly, a tax-exempt massage parlor is one of the lesser
evils that could arise from the majority ruling.—Consider further the example of the Philippine
Institute of Traditional and Alternative Health Care (PITAHC), created by Republic Act No. 8243 in
1997. It has similar characteristics as MIAA in that it is established as a body corporate, and
empowered with the attributes of a corporation, including the power to purchase or acquire real
properties. However the PITAHC has no capital stock and no members, thus following the majority, it
is not a GOCC. The state policy that guides PITAHC is the development of traditional and alternative
health care, and its objectives include the promotion and advocacy of alternative, preventive and
curative health care modalities that have been proven safe, effective and cost effective. “Alternative
health care modalities” include “other forms of non-allophatic, occasionally non-indigenous or
imported healing methods” which include, among others “reflexology, acupuncture, massage,
acupressure” and chiropractics. Given these premises, there is no impediment for the PITAHC to
purchase land and construct thereupon a massage parlor that would provide a cheaper alternative to the
opulent spas that have proliferated around the metropolis. Such activity is in line with the purpose of
the PITAHC and with state policy. Is such massage parlor exempt from realty taxes? For the majority, it
is, for PITAHC is an instrumentality or agency exempt from local government taxation, which does not
fall under the exceptions under Section 234 of the Local Government Code. Hence, this massage parlor
would not just be a shelter for frazzled nerves, but for taxes as well. Ridiculous? One might say,
certainly a decision of the Supreme Court cannot be construed to promote an absurdity. But precisely
the majority, and the faulty reasoning it utilizes, opens itself up to all sorts of mischief, and certainly, a
tax-exempt massage parlor is one of the lesser evils that could arise from the majority ruling. This is
indeed a very strange and very wrong decision.

Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino
International Airport (NAIA) Complex in Parañaque City under Executive Order No. 903,
otherwise known as the Revised Charter of the Manila International Airport Authority ("MIAA
Charter"). Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand
E. Marcos. Subsequently, Executive Order Nos. 9091 and 2982 amended the MIAA Charter.
As operator of the international airport, MIAA administers the land, improvements and equipment
within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of
land,3 including the runways and buildings ("Airport Lands and Buildings") then under the Bureau of
Air Transportation.4 The MIAA Charter further provides that no portion of the land transferred to
MIAA shall be disposed of through sale or any other mode unless specifically approved by the
President of the Philippines.5
On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061.
The OGCC opined that the Local Government Code of 1991 withdrew the exemption from real estate
tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent
City of Parañaque to pay the real estate tax imposed by the City. MIAA then paid some of the real
estate tax already due.
On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of
Parañaque for the taxable years 1992 to 2001. MIAA's real estate tax delinquency is broken down as
follows:
TAX TAXABLE
TAX DUE PENALTY TOTAL
DECLARATION YEAR

E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20

E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49

E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00

E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00

E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24

E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99


E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00

E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00

*E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50

*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00

*E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00

GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42

1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75
#9476101 for P28,676,480.00
#9476103 for P49,115.006
On 17 July 2001, the City of Parañaque, through its City Treasurer, issued notices of levy and warrants
of levy on the Airport Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at
public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency.
MIAA thus sought a clarification of OGCC Opinion No. 061.
On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC
pointed out that Section 206 of the Local Government Code requires persons exempt from real estate
tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the proof
that MIAA is exempt from real estate tax.
On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and
injunction, with prayer for preliminary injunction or temporary restraining order. The petition sought to
restrain the City of Parañaque from imposing real estate tax on, levying against, and auctioning for
public sale the Airport Lands and Buildings. The petition was docketed as CA-G.R. SP No. 66878.
On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-
day reglementary period. The Court of Appeals also denied on 27 September 2002 MIAA's motion for
reconsideration and supplemental motion for reconsideration. Hence, MIAA filed on 5 December 2002
the present petition for review.7
Meanwhile, in January 2003, the City of Parañaque posted notices of auction sale at the Barangay Halls
of Barangays Vitalez, Sto. Niño, and Tambo, Parañaque City; in the public market of Barangay La
Huerta; and in the main lobby of the Parañaque City Hall. The City of Parañaque published the notices
in the 3 and 10 January 2003 issues of the Philippine Daily Inquirer, a newspaper of general circulation
in the Philippines. The notices announced the public auction sale of the Airport Lands and Buildings to
the highest bidder on 7 February 2003, 10:00 a.m., at the Legislative Session Hall Building of
Parañaque City.
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an
Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The
motion sought to restrain respondents — the City of Parañaque, City Mayor of
Parañaque, Sangguniang Panglungsod ng Parañaque, City Treasurer of Parañaque, and the City
Assessor of Parañaque ("respondents") — from auctioning the Airport Lands and Buildings.
On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The
Court ordered respondents to cease and desist from selling at public auction the Airport Lands and
Buildings. Respondents received the TRO on the same day that the Court issued it. However,
respondents received the TRO only at 1:25 p.m. or three hours after the conclusion of the public
auction.
On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.
On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive
issued during the hearing, MIAA, respondent City of Parañaque, and the Solicitor General
subsequently submitted their respective Memoranda.
MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the
name of MIAA. However, MIAA points out that it cannot claim ownership over these properties since
the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA
Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the general
public. Since the Airport Lands and Buildings are devoted to public use and public service, the
ownership of these properties remains with the State. The Airport Lands and Buildings are thus
inalienable and are not subject to real estate tax by local governments.
MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the
payment of real estate tax. MIAA insists that it is also exempt from real estate tax under Section 234 of
the Local Government Code because the Airport Lands and Buildings are owned by the Republic. To
justify the exemption, MIAA invokes the principle that the government cannot tax itself. MIAA points
out that the reason for tax exemption of public property is that its taxation would not inure to any
public advantage, since in such a case the tax debtor is also the tax creditor.
Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax
exemption privileges of "government-owned and-controlled corporations" upon the effectivity of
the Local Government Code. Respondents also argue that a basic rule of statutory construction is that
the express mention of one person, thing, or act excludes all others. An international airport is not
among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents
assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax.
Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos8 where we
held that the Local Government Code has withdrawn the exemption from real estate tax granted to
international airports. Respondents further argue that since MIAA has already paid some of the real
estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings are
exempt from real estate tax.
The Issue
This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are
exempt from real estate tax under existing laws. If so exempt, then the real estate tax assessments
issued by the City of Parañaque, and all proceedings taken pursuant to such assessments, are void. In
such event, the other issues raised in this petition become moot.
The Court's Ruling
We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local
governments.
First, MIAA is not a government-owned or controlled corporation but an instrumentality of the
National Government and thus exempt from local taxation. Second, the real properties of MIAA
are owned by the Republic of the Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt
from real estate tax. Respondents claim that the deletion of the phrase "any government-owned or
controlled so exempt by its charter" in Section 234(e) of the Local Government Code withdrew the real
estate tax exemption of government-owned or controlled corporations. The deleted phrase appeared in
Section 40(a) of the 1974 Real Property Tax Code enumerating the entities exempt from real estate tax.
There is no dispute that a government-owned or controlled corporation is not exempt from real estate
tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the
Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled
corporation as follows:
SEC. 2. General Terms Defined. – x x x x
(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) percent of its capital stock: x x x. (Emphasis supplied)
A government-owned or controlled corporation must be "organized as a stock or non-stock
corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock
corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting
shares. Section 10 of the MIAA Charter9 provides:
SECTION 10. Capital. — The capital of the Authority to be contributed by the National
Government shall be increased from Two and One-half Billion (P2,500,000,000.00) Pesos to
Ten Billion (P10,000,000,000.00) Pesos to consist of:
(a) The value of fixed assets including airport facilities, runways and equipment and such other
properties, movable and immovable[,] which may be contributed by the National Government
or transferred by it from any of its agencies, the valuation of which shall be determined jointly
with the Department of Budget and Management and the Commission on Audit on the date of
such contribution or transfer after making due allowances for depreciation and other deductions
taking into account the loans and other liabilities of the Authority at the time of the takeover of
the assets and other properties;
(b) That the amount of P605 million as of December 31, 1986 representing about seventy
percentum (70%) of the unremitted share of the National Government from 1983 to 1986 to be
remitted to the National Treasury as provided for in Section 11 of E. O. No. 903 as amended,
shall be converted into the equity of the National Government in the Authority. Thereafter, the
Government contribution to the capital of the Authority shall be provided in the General
Appropriations Act.
Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.
Section 3 of the Corporation Code10 defines a stock corporation as one whose "capital stock is
divided into shares and x x x authorized to distribute to the holders of such shares dividends x x
x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting
shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation
Code defines a non-stock corporation as "one where no part of its income is distributable as dividends
to its members, trustees or officers." A non-stock corporation must have members. Even if we assume
that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock
corporation. Non-stock corporations cannot distribute any part of their income to their members.
Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to
the National Treasury.11 This prevents MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable,
religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil
service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized
for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic
airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-
owned or controlled corporation. What then is the legal status of MIAA within the National
Government?
MIAA is a government instrumentality vested with corporate powers to perform efficiently its
governmental functions. MIAA is like any other government instrumentality, the only difference is that
MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government "instrumentality" as follows:
SEC. 2. General Terms Defined. –– x x x x
(10) Instrumentality refers to 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. x x x (Emphasis supplied)
When the law vests in a government instrumentality corporate powers, the instrumentality does not
become a corporation. Unless the government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not only governmental but also
corporate powers. Thus, MIAA exercises the governmental powers of eminent domain,12 police
authority13 and the levying of fees and charges.14 At the same time, MIAA exercises "all the powers
of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the
provisions of this Executive Order."15
Likewise, when the law makes a government instrumentality operationally autonomous, the
instrumentality remains part of the National Government machinery although not integrated with the
department framework. The MIAA Charter expressly states that transforming MIAA into a "separate
and autonomous body"16 will make its operation more "financially viable."17
Many government instrumentalities are vested with corporate powers but they do not become stock or
non-stock corporations, which is a necessary condition before an agency or instrumentality is deemed a
government-owned or controlled corporation. Examples are the Mactan International Airport Authority,
the Philippine Ports Authority, the University of the Philippines and Bangko Sentral ng Pilipinas. All
these government instrumentalities exercise corporate powers but they are not organized as stock or
non-stock corporations as required by Section 2(13) of the Introductory Provisions of the
Administrative Code. These government instrumentalities are sometimes loosely called government
corporate entities. However, they are not government-owned or controlled corporations in the strict
sense as understood under the Administrative Code, which is the governing law defining the legal
relationship and status of government entities.
A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code,
which states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalitiesand local government units.(Emphasis and underscoring supplied)
Section 133(o) recognizes the basic principle that local governments cannot tax the national
government, which historically merely delegated to local governments the power to tax. While the
1987 Constitution now includes taxation as one of the powers of local governments, local governments
may only exercise such power "subject to such guidelines and limitations as the Congress may
provide."18
When local governments invoke the power to tax on national government instrumentalities, such power
is construed strictly against local governments. The rule is that a tax is never presumed and there must
be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable
is resolved against taxation. This rule applies with greater force when local governments seek to tax
national government instrumentalities.
Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption.
However, when Congress grants an exemption to a national government instrumentality from local
taxation, such exemption is construed liberally in favor of the national government instrumentality. As
this Court declared in Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of exemptions running to the benefit of the
government itself or its agencies. In such case the practical effect of an exemption is merely to
reduce the amount of money that has to be handled by government in the course of its
operations. For these reasons, provisions granting exemptions to government agencies may be
construed liberally, in favor of non tax-liability of such agencies.19
There is, moreover, no point in national and local governments taxing each other, unless a sound and
compelling policy requires such transfer of public funds from one government pocket to another.
There is also no reason for local governments to tax national government instrumentalities for
rendering essential public services to inhabitants of local governments. The only exception is when
the legislature clearly intended to tax government instrumentalities for the delivery of essential
public services for sound and compelling policy considerations. 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.
Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code,
local governments cannot tax national government instrumentalities. As this Court held in Basco v.
Philippine Amusements and Gaming Corporation:
The states have no power by taxation or otherwise, to retard, impede, burden or in any
manner control the operation of constitutional laws enacted by Congress to carry into
execution the powers vested in the federal government. (MC Culloch v. Maryland, 4
Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local
governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence
of power on the part of the States to touch, in that way (taxation) at least, the
instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be
agreed that no state or political subdivision can regulate a federal instrumentality in
such a way as to prevent it from consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them." (Antieau, Modern Constitutional
Law, Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination of what
local authorities may perceive to be undesirable activities or enterprise using the power to tax as
"a tool for regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v.
Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity
which has the inherent power to wield it. 20
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by
the State or the Republic of the Philippines. The Civil Code provides:
ARTICLE 419. Property is either of public dominion or of private ownership.
ARTICLE 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;
(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the character stated in the
preceding article, is patrimonial property.
ARTICLE 422. Property of public dominion, when no longer intended for public use or for
public service, shall form part of the patrimonial property of the State.
No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like
"roads, canals, rivers, torrents, ports and bridges constructed by the State," are owned by the
State. The term "ports" includes seaports and airports. The MIAA Airport Lands and Buildings
constitute a "port" constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport
Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of
the Philippines.
The Airport Lands and Buildings are devoted to public use because they are used by the public for
international and domestic travel and transportation. The fact that the MIAA collects terminal fees
and other charges from the public does not remove the character of the Airport Lands and Buildings as
properties for public use. The operation by the government of a tollway does not change the character
of the road as one for public use. Someone must pay for the maintenance of the road, either the public
indirectly through the taxes they pay the government, or only those among the public who actually use
the road through the toll fees they pay upon using the road. The tollway system is even a more efficient
and equitable manner of taxing the public for the maintenance of public roads.
The charging of fees to the public does not determine the character of the property whether it is of
public dominion or not. Article 420 of the Civil Code defines property of public dominion as one
"intended for public use." Even if the government collects toll fees, the road is still "intended for public
use" if anyone can use the road under the same terms and conditions as the rest of the public. The
charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and
other conditions for the use of the road do not affect the public character of the road.
The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines,
constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees
does not change the character of MIAA as an airport for public use. Such fees are often termed user's
tax. This means taxing those among the public who actually use a public facility instead of taxing all
the public including those who never use the particular public facility. A user's tax is more equitable —
a principle of taxation mandated in the 1987 Constitution.21
The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the
Philippines for both international and domestic air traffic,"22 are properties of public dominion because
they are intended for public use. As properties of public dominion, they indisputably belong to the
State or the Republic of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public
dominion. As properties of public dominion, the Airport Lands and Buildings are outside the
commerce of man. The Court has ruled repeatedly that properties of public dominion are outside the
commerce of man. As early as 1915, this Court already ruled in Municipality of Cavite v. Rojas that
properties devoted to public use are outside the commerce of man, thus:
According to article 344 of the Civil Code: "Property for public use in provinces and in towns
comprises the provincial and town roads, the squares, streets, fountains, and public waters, the
promenades, and public works of general service supported by said towns or provinces."
The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could
not in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the
sole benefit of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to
the defendant for private use the plaintiff municipality exceeded its authority in the exercise of
its powers by executing a contract over a thing of which it could not dispose, nor is it
empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside the commerce of
man may be the object of a contract, and plazas and streets are outside of this commerce, as
was decided by the supreme court of Spain in its decision of February 12, 1895, which says:
"Communal things that cannot be sold because they are by their very nature outside of
commerce are those for public use, such as the plazas, streets, common lands, rivers,
fountains, etc." (Emphasis supplied) 23
Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are
outside the commerce of man:
xxx Town plazas are properties of public dominion, to be devoted to public use and to be
made available to the public in general. They are outside the commerce of man and cannot be
disposed of or even leased by the municipality to private parties. While in case of war or during
an emergency, town plazas may be occupied temporarily by private individuals, as was done
and as was tolerated by the Municipality of Pozorrubio, when the emergency has ceased, said
temporary occupation or use must also cease, and the town officials should see to it that the
town plazas should ever be kept open to the public and free from encumbrances or illegal
private constructions.24 (Emphasis supplied)
The Court has also ruled that property of public dominion, being outside the commerce of man, cannot
be the subject of an auction sale.25
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. This will
happen if the City of Parañaque can foreclose and compel the auction sale of the 600-hectare runway of
the MIAA for non-payment of real estate tax.
Before MIAA can encumber26 the Airport Lands and Buildings, the President must first withdraw
from public usethe Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or
Commonwealth Act No. 141, which "remains to this day the existing general law governing the
classification and disposition of lands of the public domain other than timber and mineral
lands,"27 provide:
SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural
Resources, the President may designate by proclamation any tract or tracts of land of the public
domain as reservations for the use of the Republic of the Philippines or of any of its branches,
or of the inhabitants thereof, in accordance with regulations prescribed for this purposes, or for
quasi-public uses or purposes when the public interest requires it, including reservations for
highways, rights of way for railroads, hydraulic power sites, irrigation systems, communal
pastures or lequas communales, public parks, public quarries, public fishponds, working men's
village and other improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-
three shall be non-alienable and shall not be subject to occupation, entry, sale, lease, or
other disposition until again declared alienable under the provisions of this Act or by
proclamation of the President. (Emphasis and underscoring supplied)
Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from
public use, these properties remain properties of public dominion and are inalienable. Since the Airport
Lands and Buildings are inalienable in their present status as properties of public dominion, they are
not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are
reserved for public use, their ownership remains with the State or the Republic of the Philippines.
The authority of the President to reserve lands of the public domain for public use, and to withdraw
such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of
1987, which states:
SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government. —
(1) The President shall have the power to reserve for settlement or public use, and for
specific public purposes, any of the lands of the public domain, the use of which is not
otherwise directed by law. The reserved land shall thereafter remain subject to the specific
public purpose indicated until otherwise provided by law or proclamation;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or
presidential proclamation from public use, they are properties of public dominion, owned by the
Republic and outside the commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48,
Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to
real properties owned by the Republic, thus:
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:
(1) For property belonging to and titled in the name of the Republic of the Philippines, by the
President, unless the authority therefor is expressly vested by law in another officer.
(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 MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even
its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of
the Republic can sign such deed of conveyance.28
d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings
from the Bureau of Air Transportation of the Department of Transportation and Communications. The
MIAA Charter provides:
SECTION 3. Creation of the Manila International Airport Authority. — x x x x
The land where the Airport is presently located as well as the surrounding land area of
approximately six hundred hectares, are hereby transferred, conveyed and assigned to the
ownership and administration of the Authority, subject to existing rights, if any. The
Bureau of Lands and other appropriate government agencies shall undertake an actual survey of
the area transferred within one year from the promulgation of this Executive Order and the
corresponding title to be issued in the name of the Authority. Any portion thereof shall not be
disposed through sale or through any other mode unless specifically approved by the
President of the Philippines. (Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and Intangible Assets. — All existing public
airport facilities, runways, lands, buildings and other property, movable or immovable,
belonging to the Airport, and all assets, powers, rights, interests and privileges belonging to the
Bureau of Air Transportation relating to airport works or air operations, including all
equipment which are necessary for the operation of crash fire and rescue facilities, are hereby
transferred to the Authority. (Emphasis supplied)
SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air
Transportation and Transitory Provisions. — The Manila International Airport including the
Manila Domestic Airport as a division under the Bureau of Air Transportation is hereby
abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic
receiving cash, promissory notes or even stock since MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands
and Buildings to MIAA, thus:
WHEREAS, the Manila International Airport as the principal airport of the Philippines for both
international and domestic air traffic, is required to provide standards of airport accommodation
and service comparable with the best airports in the world;
WHEREAS, domestic and other terminals, general aviation and other facilities, have to be
upgraded to meet the current and future air traffic and other demands of aviation in Metro
Manila;
WHEREAS, a management and organization study has indicated that the objectives of
providing high standards of accommodation and service within the context of a financially
viable operation, will best be achieved by a separate and autonomous body; and
WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772,
the President of the Philippines is given continuing authority to reorganize the National
Government, which authority includes the creation of new entities, agencies and
instrumentalities of the Government[.] (Emphasis supplied)
The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was
not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose
was merely to reorganize a division in the Bureau of Air Transportation into a separate and
autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings.
MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAA's assets
adverse to the Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed
through sale or through any other mode unless specifically approved by the President of the
Philippines." This only means that the Republic retained the beneficial ownership of the Airport Lands
and Buildings because under Article 428 of the Civil Code, only the "owner has the right to x x x
dispose of a thing." Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not
own the Airport Lands and Buildings.
At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings
without the Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the
President is the only one who can authorize the sale or disposition of the Airport Lands and Buildings.
This only confirms that the Airport Lands and Buildings belong to the Republic.
e. Real Property Owned by the Republic is Not Taxable
Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned
by the Republic of the Philippines." Section 234(a) provides:
SEC. 234. Exemptions from Real Property Tax. — The following are exempted from payment
of the 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;
x x x. (Emphasis supplied)
This exemption 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 instrumentalitiesx x x." 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 remain owned by the
Republic and continue to be exempt from real estate tax.
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 thereof has been
granted, for consideration or otherwise, to a taxable person." MIAA, as a government instrumentality,
is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume
that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact
does not make these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not
exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to
private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of
such land area for a consideration to a taxable person and therefore such land area is subject to real
estate tax. In Lung Center of the Philippines v. Quezon City, the Court ruled:
Accordingly, we hold that the portions of the land leased to private entities as well as those parts
of the hospital leased to private individuals are not exempt from such taxes. On the other hand,
the portions of the land occupied by the hospital and portions of the hospital used for its
patients, whether paying or non-paying, are exempt from real property taxes.29
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local
Government Code of 1991 withdrew the tax exemption of "all persons, whether natural or juridical"
upon the effectivity of the Code. Section 193 provides:
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. No. 6938, non-stock and non-profit hospitals
and educational institutions are hereby withdrawn upon effectivity of this Code. (Emphasis
supplied)
The minority states that MIAA is indisputably a juridical person. The minority argues that since the
Local Government Code withdrew the tax exemption of all juridical persons, then MIAA is not
exempt from real estate tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local Government Code that the
withdrawn exemptions from realty tax cover not just GOCCs, but all persons. To repeat,
the provisions lay down the explicit proposition that the withdrawal of realty tax exemption
applies to all persons. The reference to or the inclusion of GOCCs is only clarificatory or
illustrative of the explicit provision.
The term "All persons" encompasses the two classes of persons recognized under our
laws, natural and juridical persons. Obviously, MIAA is not a natural person. Thus, the
determinative test is not just whether MIAA is a GOCC, but whether MIAA is a juridical
person at all. (Emphasis and underscoring in the original)
The minority posits that the "determinative test" whether MIAA is exempt from local taxation is its
status — whether MIAA is a juridical person or not. The minority also insists that "Sections 193 and
234 may be examined in isolation from Section 133(o) to ascertain MIAA's claim of exemption."
The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly
withdrew the tax exemption of all juridical persons "[u]nless otherwise provided in this Code." Now,
Section 133(o) of the Local Government Code expressly provides otherwise,
specifically prohibiting local governments from imposing any kind of tax on national government
instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kinds on the National Government, its agencies and
instrumentalities, and local government units. (Emphasis and underscoring supplied)
By express mandate of the Local Government Code, local governments cannot impose any kind of tax
on national government instrumentalities like the MIAA. Local governments are devoid of power to tax
the national government, its agencies and instrumentalities. The taxing powers of local governments do
not extend to the national government, its agencies and instrumentalities, "[u]nless otherwise provided
in this Code" as stated in the saving clause of Section 133. The saving clause refers to Section 234(a)
on the exception to the exemption from real estate tax of real property owned by the Republic.
The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons are
subject to tax by local governments. The minority insists that the juridical persons exempt from local
taxation are limited to the three classes of entities specifically enumerated as exempt in Section 193.
Thus, the minority states:
x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives
duly registered under Republic Act No. 6938; and (c) non-stock and non-profit hospitals and
educational institutions. It would be belaboring the obvious why the MIAA does not fall within
any of the exempt entities under Section 193. (Emphasis supplied)
The minority's theory directly contradicts and completely negates Section 133(o) of the Local
Government Code. This theory will result in gross absurdities. It will make the national government,
which itself is a juridical person, subject to tax by local governments since the national government is
not included in the enumeration of exempt entities in Section 193. Under this theory, local governments
can impose any kind of local tax, and not only real estate tax, on the national government.
Under the minority's theory, many national government instrumentalities with juridical personalities
will also be subject to any kind of local tax, and not only real estate tax. Some of the national
government instrumentalities vested by law with juridical personalities are: Bangko Sentral ng
Pilipinas,30 Philippine Rice Research Institute,31Laguna Lake
Development Authority,32 Fisheries Development Authority,33 Bases Conversion Development
Authority,34Philippine Ports Authority,35 Cagayan de Oro Port Authority,36 San Fernando Port
Authority,37 Cebu Port Authority,38 and Philippine National Railways.39
The minority's theory violates Section 133(o) of the Local Government Code which expressly prohibits
local governments from imposing any kind of tax on national government instrumentalities. Section
133(o) does not distinguish between national government instrumentalities with or without juridical
personalities. Where the law does not distinguish, courts should not distinguish. Thus, Section 133(o)
applies to all national government instrumentalities, with or without juridical personalities. The
determinative test whether MIAA is exempt from local taxation is not whether MIAA is a juridical
person, but whether it is a national government instrumentality under Section 133(o) of the Local
Government Code. Section 133(o) is the specific provision of law prohibiting local governments from
imposing any kind of tax on the national government, its agencies and instrumentalities.
Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise provided
in this Code." This means that unless the Local Government Code grants an express authorization, local
governments have no power to tax the national government, its agencies and instrumentalities. Clearly,
the rule is local governments have no power to tax the national government, its agencies and
instrumentalities. As an exception to this rule, local governments may tax the national government, its
agencies and instrumentalities only if the Local Government Code expressly so provides.
The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the
Code, which makes the national government subject to real estate tax when it gives the beneficial use
of its real properties to a taxable entity. Section 234(a) of the Local Government Code provides:
SEC. 234. Exemptions from Real Property Tax – The following are exempted from payment of
the 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.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The
exception to this exemption is when the government gives the beneficial use of the real property to a
taxable entity.
The exception to the exemption in Section 234(a) is the only instance when the national government,
its agencies and instrumentalities are subject to any kind of tax by local governments. The exception to
the exemption applies only to real estate tax and not to any other tax. The justification for the exception
to the exemption is that the real property, although owned by the Republic, is not devoted to public use
or public service but devoted to the private gain of a taxable person.
The minority also argues that since Section 133 precedes Section 193 and 234 of the Local Government
Code, the later provisions prevail over Section 133. Thus, the minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an
accepted rule of construction, in case of conflict the subsequent provisions should prevail.
Therefore, MIAA, as a juridical person, is subject to real property taxes, the general exemptions
attaching to instrumentalities under Section 133(o) of the Local Government Code being
qualified by Sections 193 and 234 of the same law. (Emphasis supplied)
The minority assumes that there is an irreconcilable conflict between Section 133 on one hand, and
Sections 193 and 234 on the other. No one has urged that there is such a conflict, much less has any one
presenteda persuasive argument that there is such a conflict. The minority's assumption of an
irreconcilable conflict in the statutory provisions is an egregious error for two reasons.
First, there is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly
admits its subordination to other provisions of the Code when Section 193 states "[u]nless otherwise
provided in this Code." By its own words, Section 193 admits the superiority of other provisions of the
Local Government Code that limit the exercise of the taxing power in Section 193. When a provision of
law grants a power but withholds such power on certain matters, there is no conflict between the grant
of power and the withholding of power. The grantee of the power simply cannot exercise the power on
matters withheld from its power.
Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local Government
Units." Section 133 limits the grant to local governments of the power to tax, and not merely the
exercise of a delegated power to tax. Section 133 states that the taxing powers of local governments
"shall not extend to the levy" of any kind of tax on the national government, its agencies and
instrumentalities. There is no clearer limitation on the taxing power than this.
Since Section 133 prescribes the "common limitations" on the taxing powers of local governments,
Section 133 logically prevails over Section 193 which grants local governments such taxing powers.
By their very meaning and purpose, the "common limitations" on the taxing power prevail over the
grant or exercise of the taxing power. If the taxing power of local governments in Section 193 prevails
over the limitations on such taxing power in Section 133, then local governments can impose any kind
of tax on the national government, its agencies and instrumentalities — a gross absurdity.
Local governments have no power to tax the national government, its agencies and instrumentalities,
except as otherwise provided in the Local Government Code pursuant to the saving clause in Section
133 stating "[u]nless otherwise provided in this Code." This exception — which is an exception to the
exemption of the Republic from real estate tax imposed by local governments — refers to Section
234(a) of the Code. The exception to the exemption in Section 234(a) subjects real property owned by
the Republic, whether titled in the name of the national government, its agencies or instrumentalities, to
real estate tax if the beneficial use of such property is given to a taxable entity.
The minority also claims that the definition in the Administrative Code of the phrase "government-
owned or controlled corporation" is not controlling. The minority points out that Section 2 of the
Introductory Provisions of the Administrative Code admits that its definitions are not controlling when
it provides:
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:
xxxx
The minority then concludes that reliance on the Administrative Code definition is "flawed."
The minority's argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that a
statute may require a different meaning than that defined in the Administrative Code. However, this
does not automatically mean that the definition in the Administrative Code does not apply to the Local
Government Code. Section 2 of the Administrative Code clearly states that "unless the specific words x
x x of a particular statute shall require a different meaning," the definition in Section 2 of the
Administrative Code shall apply. Thus, unless there is specific language in the Local Government Code
defining the phrase "government-owned or controlled corporation" differently from the definition in the
Administrative Code, the definition in the Administrative Code prevails.
The minority does not point to any provision in the Local Government Code defining the phrase
"government-owned or controlled corporation" differently from the definition in the Administrative
Code. Indeed, there is none. The Local Government Code is silent on the definition of the phrase
"government-owned or controlled corporation." The Administrative Code, however, expressly defines
the phrase "government-owned or controlled corporation." The inescapable conclusion is that the
Administrative Code definition of the phrase "government-owned or controlled corporation" applies to
the Local Government Code.
The third whereas clause of the Administrative Code states that the Code "incorporates in a unified
document the major structural, functional and procedural principles and rules of governance." Thus, the
Administrative Code is the governing law defining the status and relationship of government
departments, bureaus, offices, agencies and instrumentalities. Unless a statute expressly provides for a
different status and relationship for a specific government unit or entity, the provisions of the
Administrative Code prevail.
The minority also contends that the phrase "government-owned or controlled corporation" should apply
only to corporations organized under the Corporation Code, the general incorporation law, and not to
corporations created by special charters. The minority sees no reason why government corporations
with special charters should have a capital stock. Thus, the minority declares:
I submit that the definition of "government-owned or controlled corporations" under the
Administrative Code refer to those corporations owned by the government or its
instrumentalities which are created not by legislative enactment, but formed and organized
under the Corporation Code through registration with the Securities and Exchange Commission.
In short, these are GOCCs without original charters.
xxxx
It might as well be worth pointing out that there is no point in requiring a capital structure for
GOCCs whose full ownership is limited by its charter to the State or Republic. Such GOCCs are
not empowered to declare dividends or alienate their capital shares.
The contention of the minority is seriously flawed. It is not in accord with the Constitution and existing
legislations. It will also result in gross absurdities.
First, the Administrative Code definition of the phrase "government-owned or controlled corporation"
does not distinguish between one incorporated under the Corporation Code or under a special charter.
Where the law does not distinguish, courts should not distinguish.
Second, Congress has created through special charters several government-owned corporations
organized as stock corporations. Prime examples are the Land Bank of the Philippines and the
Development Bank of the Philippines. The special charter40 of the Land Bank of the Philippines
provides:
SECTION 81. Capital. — The authorized capital stock of the Bank shall be nine billion pesos,
divided into seven hundred and eighty million common shares with a par value of ten pesos
each, which shall be fully subscribed by the Government, and one hundred and twenty million
preferred shares with a par value of ten pesos each, which shall be issued in accordance with the
provisions of Sections seventy-seven and eighty-three of this Code. (Emphasis supplied)
Likewise, the special charter41 of the Development Bank of the Philippines provides:
SECTION 7. Authorized Capital Stock – Par value. — The capital stock of the Bank shall be
Five Billion Pesos to be divided into Fifty Million common shares with par value of P100 per
share. These shares are available for subscription by the National Government. Upon the
effectivity of this Charter, the National Government shall subscribe to Twenty-Five Million
common shares of stock worth Two Billion Five Hundred Million which shall be deemed paid
for by the Government with the net asset values of the Bank remaining after the transfer of
assets and liabilities as provided in Section 30 hereof. (Emphasis supplied)
Other government-owned corporations organized as stock corporations under their special charters are
the Philippine Crop Insurance Corporation,42 Philippine International Trading Corporation,43 and the
Philippine National Bank44 before it was reorganized as a stock corporation under the Corporation
Code. All these government-owned corporations organized under special charters as stock corporations
are subject to real estate tax on real properties owned by them. To rule that they are not government-
owned or controlled corporations because they are not registered with the Securities and Exchange
Commission would remove them from the reach of Section 234 of the Local Government Code, thus
exempting them from real estate tax.
Third, the government-owned or controlled corporations created through special charters are those that
meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is
that the government-owned or controlled corporation must be established for the common good. The
second condition is that the government-owned or controlled corporation must meet the test of
economic viability. Section 16, Article XII of the 1987 Constitution provides:
SEC. 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. (Emphasis and underscoring supplied)
The Constitution expressly authorizes the legislature to create "government-owned or controlled
corporations" through special charters only if these entities are required to meet the twin conditions of
common good and economic viability. In other words, Congress has no power to create government-
owned or controlled corporations with special charters unless they are made to comply with the two
conditions of common good and economic viability. The test of economic viability applies only to
government-owned or controlled corporations that perform economic or commercial activities and need
to compete in the market place. Being essentially economic vehicles of the State for the common good
— meaning for economic development purposes — these government-owned or controlled
corporations with special charters are usually organized as stock corporations just like ordinary private
corporations.
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.
This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines
and similar government-owned or controlled corporations, which derive their income to meet operating
expenses solely from commercial transactions in competition with the private sector. The intent of the
Constitution is to prevent the creation of government-owned or controlled corporations that cannot
survive on their own in the market place and thus merely drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional
Commission the purpose of this test, as follows:
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.45
Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his
textbook The 1987 Constitution of the Republic of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission. The significant
addition, however, is the phrase "in the interest of the common good and subject to the test of
economic viability." The addition includes the ideas that they must show capacity to function
efficiently in business and that they should not go into activities which the private sector can do
better. Moreover, economic viability is more than financial viability but also includes capability
to make profit and generate benefits not quantifiable in financial terms.46(Emphasis supplied)
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.
However, government-owned or controlled corporations with special charters, organized essentially for
economic or commercial objectives, must meet the test of economic viability. These are the
government-owned or controlled corporations that are usually organized under their special charters as
stock corporations, like the Land Bank of the Philippines and the Development Bank of the Philippines.
These are the government-owned or controlled corporations, along with government-owned or
controlled corporations organized under the Corporation Code, that fall under the definition of
"government-owned or controlled corporations" in Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability because the legislature did not create MIAA to
compete in the market place. MIAA does not compete in the market place because there is no
competing international airport operated by the private sector. MIAA performs an essential public
service as the primary domestic and international airport of the Philippines. The operation of an
international airport requires the presence of personnel from the following government agencies:
1. The Bureau of Immigration and Deportation, to document the arrival and departure of
passengers, screening out those without visas or travel documents, or those with hold departure
orders;
2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited
importations;
3. The quarantine office of the Department of Health, to enforce health measures against the
spread of infectious diseases into the country;
4. The Department of Agriculture, to enforce measures against the spread of plant and animal
diseases into the country;
5. The Aviation Security Command of the Philippine National Police, to prevent the entry of
terrorists and the escape of criminals, as well as to secure the airport premises from terrorist
attack or seizure;
6. The Air Traffic Office of the Department of Transportation and Communications, to authorize
aircraft to enter or leave Philippine airspace, as well as to land on, or take off from, the airport;
and
7. The MIAA, to provide the proper premises — such as runway and buildings — for the
government personnel, passengers, and airlines, and to manage the airport operations.
All these agencies of government perform government functions essential to the operation of an
international airport.
MIAA performs an essential public service that every modern State must provide its citizens. MIAA
derives its revenues principally from the mandatory fees and charges MIAA imposes on passengers and
airlines. The terminal fees that MIAA charges every passenger are regulatory or administrative
fees47 and not income from commercial transactions.
MIAA falls under the definition of a government instrumentality under Section 2(10) of the
Introductory Provisions of the Administrative Code, which provides:
SEC. 2. General Terms Defined. – x x x x
(10) Instrumentality refers to 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. x x x (Emphasis supplied)
The fact alone that MIAA is endowed with corporate powers does not make MIAA a government-
owned or controlled corporation. Without a change in its capital structure, MIAA remains a government
instrumentality under Section 2(10) of the Introductory Provisions of the Administrative Code. More
importantly, as long as MIAA renders essential public services, it need not comply with the test of
economic viability. Thus, MIAA is outside the scope of the phrase "government-owned or controlled
corporations" under Section 16, Article XII of the 1987 Constitution.
The minority belittles the use in the Local Government Code of the phrase "government-owned or
controlled corporation" as merely "clarificatory or illustrative." This is fatal. The 1987 Constitution
prescribes explicit conditions for the creation of "government-owned or controlled corporations." The
Administrative Code defines what constitutes a "government-owned or controlled corporation." To
belittle this phrase as "clarificatory or illustrative" is grave error.
To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the
Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock
corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article
XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability.
MIAA is a government instrumentality vested with corporate powers and performing essential public
services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a
government instrumentality, MIAA is not subject to any kind of tax by local governments under
Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does
not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such
exception applies only if the beneficial use of real property owned by the Republic is given to a taxable
entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are
properties of public dominion. Properties of public dominion are owned by the State or the Republic.
Article 420 of the Civil Code provides:
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;
(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth. (Emphasis supplied)
The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and
Buildings of MIAA are intended for public use, and at the very least intended for public service.
Whether intended for public use or public service, the Airport Lands and Buildings are properties of
public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the
Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs
the legal relation and status of government units, agencies and offices within the entire government
machinery, MIAA is a government instrumentality and not a government-owned or controlled
corporation. Under Section 133(o) of the Local Government Code, MIAA as a government
instrumentality is not a taxable person because it is not subject to "[t]axes, fees or charges of any kind"
by local governments. The only exception is when MIAA leases its real property to a "taxable person"
as provided in Section 234(a) of the Local Government Code, in which case the specific real property
leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased
to taxable persons like private parties are subject to real estate tax by the City of Parañaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to
public use, are properties of public dominion and thus owned by the State or the Republic of the
Philippines. Article 420 specifically mentions "ports x x x constructed by the State," which includes
public airports and seaports, as properties of public dominion and owned by the Republic. As properties
of public dominion owned by the Republic, there is no doubt whatsoever that the Airport Lands and
Buildings are expressly exempt from real estate tax under Section 234(a) of the Local Government
Code. This Court has also repeatedly ruled that properties of public dominion are not subject to
execution or foreclosure sale.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of
Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the
Airport Lands and Buildings of the Manila International Airport Authority EXEMPT from the real
estate tax imposed by the City of Parañaque. We declare VOID all the real estate tax assessments,
including the final notices of real estate tax delinquencies, issued by the City of Parañaque on the
Airport Lands and Buildings of the Manila International Airport Authority, except for the portions that
the Manila International Airport Authority has leased to private parties. We also declare VOID the
assailed auction sale, and all its effects, of the Airport Lands and Buildings of the Manila International
Airport Authority.
No costs.
SO ORDERED.

Iron and Steel Authority vs. Court of Appeals 249 SCRA 538 ,
October 25, 1995
Actions; Parties; Pleadings and Practice; Those who can be parties to a civil action may be
broadly categorized into two (2) groups—i.e., persons, whether natural or juridical, and, entities
authorized by law.—Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil
action: “Section 1. Who May Be Parties.—Only natural or juridical persons or entities
authorized by law may be parties in a civil action.” Under the above quoted provision, it will be
seen that those who can be parties to a civil action may be broadly categorized into two (2)
groups: (a) those who are recognized as persons under the law whether natural, i.e., biological
persons, on the one hand, or juridical persons such as corporations, on the other hand; and (b)
entities authorized by law to institute actions. Iron and Steel Authority vs. Court of Appeals, 249
SCRA 538, G.R. No. 102976 October 25, 1995
Administrative Law; Government Owned and Controlled Corporations; Government Agencies
and Instrumentalities; The Iron and Steel Authority (ISA) appears to be a non-incorporated
agency or instrumentality of the Republic of the Philippines, or more precisely of the
Government of the Republic of the Philippines.—Clearly, ISA was vested with some of the
powers or attributes normally associated with juridical personality. There is, however, no
provision in P.D. No. 272 recognizing ISA as possessing general or comprehensive juridical
personality separate and distinct from that of the Government. The ISA in fact appears to the
Court to be a non-incorporated agency or instrumentality of the Republic of the Philippines, or
more precisely of the Government of the Republic of the Philippines. It is common knowledge
that other agencies or instrumentalities of the Government of the Republic are cast in corporate
form, that is to say, are incorporated agencies or instrumentalities, sometimes with and at other
times without capital stock, and accordingly vested with a juridical personality distinct from the
personality of the Republic.

Same; Same; Same; Words and Phrases; The term “Authority” has been used to designate both
incorporated and non-incorporated agencies or instrumentalities of the Government.—It is
worth noting that the term “Authority” has been used to designate both incorporated and non-
incorporated agencies or instrumentalities of the Government. Same; Same; Same; Agency; The
ISA is an agent or delegate of the Republic, while the Republic itself is a body corporate and
juridical person vested with the full panoply of powers and attributes which are compendiously
described as “legal personality.”—We consider that the ISA is properly regarded as an agent or
delegate of the Republic of the Philippines. The Republic itself is a body corporate and juridical
person vested with the full panoply of powers and attributes which are compendiously described
as “legal personality.”

Same; Same; Same; Same; When the statutory term of a non-incorporated agency expires, the
powers, duties and functions as well as the assets and liabilities of that agency revert back to, and
are reassumed by, the Republic of the Philippines, in the absence of special provisions of law
specifying some other disposition thereof.—When the statutory term of a non-incorporated
agency expires, the powers, duties and functions as well as the assets and liabilities of that agency
revert back to, and are re-assumed by, the Republic of the Philippines, in the absence of special
provisions of law specifying some other disposition thereof such as e.g., devolution or
transmission of such powers, duties, functions, etc to some other identified successor agency or
instrumen- tality of the Republic of the Philippines. When the expiring agency is an incorporated
one, the consequences of such expiry must be looked for, in the first instance, in the charter of
that agency and, by way of supplementation, in the provisions of the Corporation Code. Since, in
the instant case, ISA is a non-incorporated agency or instrumentality of the Republic, its powers,
duties, functions, assets and liabilities are properly regarded as folded back into the Government
of the Republic of the Philippines and hence assumed once again by the Republic, no special
statutory provision having been shown to have mandated succession thereto by some other entity
or agency of the Republic.

Actions; Parties; Eminent Domain; The expiration of ISA’s statutory term did not by itself
require or justify the dismissal of the eminent domain proceedings.—From the foregoing
premises, it follows that the Republic of the Philippines is entitled to be substituted in the
expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term of ISA having
expired. Put a little differently, the expiration of ISA’s statutory term did not by itself require or
justify the dismissal of the eminent domain proceedings.

Same; Same; Same; Pleadings and Practice; The non-joinder of the Republic which occurred
upon the expiration of ISA’s statutory term was not a ground for dismissal of the expropriation
proceedings.—It is also relevant to note that the non-joinder of the Republic which occurred
upon the expiration of ISA’s statutory term, was not a ground for dismissal of such proceedings
since a party may be dropped or added by order of the court, on motion of any party or on the
court’s own initiative at any stage of the action and on such terms as are just. In the instant case,
the Republic has precisely moved to take over the proceedings as party-plaintiff.

Same; Same; Same; Administrative Law; The Republic may initiate or participate in actions
involving its agents.—In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court,
the Court recognized that the Republic may initiate or participate in actions involving its agents.
There the Republic of the Philippines was held to be a proper party to sue for recovery of
possession of property although the “real” or registered owner of the property was the Philippine
Ports Authority, a government agency vested with a separate juridical personality. The Court
said: “It can be said that in suing for the recovery of the rentals, the Republic of the Philippines
acted as principal of the Philippine Ports Authority, directly exercising the commission it had
earlier conferred on the latter as its agent. x x x”

tality of the Republic of the Philippines. When the expiring agency is an incorporated one, the
consequences of such expiry must be looked for, in the first instance, in the charter of that agency
and, by way of supplementation, in the provisions of the Corporation Code. Since, in the instant
case, ISA is a non-incorporated agency or instrumentality of the Republic, its powers, duties,
functions, assets and liabilities are properly regarded as folded back into the Government of the
Republic of the Philippines and hence assumed once again by the Republic, no special statutory
provision having been shown to have mandated succession thereto by some other entity or agency
of the Republic.
Actions; Parties; Eminent Domain; The expiration of ISA’s statutory term did not by itself
require or justify the dismissal of the eminent domain proceedings.—From the foregoing
premises, it follows that the Republic of the Philippines is entitled to be substituted in the
expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term of ISA having
expired. Put a little differently, the expiration of ISA’s statutory term did not by itself require or
justify the dismissal of the eminent domain proceedings.

Same; Same; Same; Pleadings and Practice; The non-joinder of the Republic which occurred
upon the expiration of ISA’s statutory term was not a ground for dismissal of the expropriation
proceedings.—It is also relevant to note that the non-joinder of the Republic which occurred
upon the expiration of ISA’s statutory term, was not a ground for dismissal of such proceedings
since a party may be dropped or added by order of the court, on motion of any party or on the
court’s own initiative at any stage of the action and on such terms as are just. In the instant case,
the Republic has precisely moved to take over the proceedings as party-plaintiff.

Same; Same; Same; Administrative Law; The Republic may initiate or participate in actions
involving its agents.—In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court,
the Court recognized that the Republic may initiate or participate in actions involving its agents.
There the Republic of the Philippines was held to be a proper party to sue for recovery of
possession of property although the “real” or registered owner of the property was the Philippine
Ports Authority, a government agency vested with a separate juridical personality. The Court
said: “It can be said that in suing for the recovery of the rentals, the Republic of the Philippines
acted as principal of the Philippine Ports Authority, directly exercising the commission it had
earlier conferred on the latter as its agent. x x x”

Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272 dated 9
August 1973 in order, generally, to develop and promote the iron and steel industry in the Philippines.
The objectives of the ISA are spelled out in the following terms:
Sec. 2. Objectives — The Authority shall have the following objectives:
(a) to strengthen the iron and steel industry of the Philippines and to expand the
domestic and export markets for the products of the industry;
(b) to promote the consolidation, integration and rationalization of the industry in order
to increase industry capability and viability to service the domestic market and to
compete in international markets;
(c) to rationalize the marketing and distribution of steel products in order to achieve a
balance between demand and supply of iron and steel products for the country and to
ensure that industry prices and profits are at levels that provide a fair balance between
the interests of investors, consumers suppliers, and the public at large;
(d) to promote full utilization of the existing capacity of the industry, to discourage
investment in excess capacity, and in coordination, with appropriate government
agencies to encourage capital investment in priority areas of the industry;
(e) to assist the industry in securing adequate and low-cost supplies of raw materials and
to reduce the excessive dependence of the country on imports of iron and steel.
The list of powers and functions of the ISA included the following:
Sec. 4. Powers and Functions. — The authority shall have the following powers and
functions:
xxx xxx xxx
(j) to initiate expropriation of land required for basic iron and steel facilities for
subsequent resale and/or lease to the companies involved if it is shown that such use of
the State's power is necessary to implement the construction of capacity which is needed
for the attainment of the objectives of the Authority;
xxx xxx xxx
(Emphasis supplied)
P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August
1973.1 When ISA's original term expired on 10 October 1978, its term was extended for another ten
(10) years by Executive Order No. 555 dated 31 August 1979.
The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National Development
Corporation which is itself an entity wholly owned by the National Government, embarked on an
expansion program embracing, among other things, the construction of an integrated steel mill in Iligan
City. The construction of such a steel mill was considered a priority and major industrial project of the
Government. Pursuant to the expansion program of the NSC, Proclamation No. 2239 was issued by the
President of the Philippines on 16 November 1982 withdrawing from sale or settlement a large tract of
public land (totalling about 30.25 hectares in area) located in Iligan City, and reserving that land for the
use and immediate occupancy of NSC.
Since certain portions of the public land subject matter Proclamation No. 2239 were occupied by a non-
operational chemical fertilizer plant and related facilities owned by private respondent Maria Cristina
Fertilizer Corporation ("MCFC"), Letter of Instruction (LOI), No. 1277, also dated 16 November 1982,
was issued directing the NSC to "negotiate with the owners of MCFC, for and on behalf of the
Government, for the compensation of MCFC's present occupancy rights on the subject land." LOI No.
1277 also directed that should NSC and private respondent MCFC fail to reach an agreement within a
period of sixty (60) days from the date of LOI No. 1277, petitioner ISA was to exercise its power of
eminent domain under P.D. No. 272 and to initiate expropriation proceedings in respect of occupancy
rights of private respondent MCFC relating to the subject public land as well as the plant itself and
related facilities and to cede the same to the NSC.2
Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August 1983,
petitioner ISA commenced eminent domain proceedings against private respondent MCFC in the
Regional Trial Court, Branch 1, of Iligan City, praying that it (ISA) be places in possession of the
property involved upon depositing in court the amount of P1,760,789.69 representing ten percent
(10%) of the declared market values of that property. The Philippine National Bank, as mortgagee of
the plant facilities and improvements involved in the expropriation proceedings, was also impleaded as
party-defendant.
On 17 September 1983, a writ of possession was issued by the trial court in favor of ISA. ISA in turn
placed NSC in possession and control of the land occupied by MCFC's fertilizer plant installation.
The case proceeded to trial. While the trial was ongoing, however, the statutory existence of petitioner
ISA expired on 11 August 1988. MCFC then filed a motion to dismiss, contending that no valid
judgment could be rendered against ISA which had ceased to be a juridical person. Petitioner ISA filed
its opposition to this motion.
In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did dismiss
the case. The dismissal was anchored on the provision of the Rules of Court stating that "only natural
or juridical persons or entities authorized by law may be parties in a civil case."3 The trial court also
referred to non-compliance by petitioner ISA with the requirements of Section 16, Rule 3 of the Rules
of Court.4
Petitioner ISA moved for reconsideration of the trial court's Order, contending that despite the
expiration of its term, its juridical existence continued until the winding up of its affairs could be
completed. In the alternative, petitioner ISA urged that the Republic of the Philippines, being the real
party-in-interest, should be allowed to be substituted for petitioner ISA. In this connection, ISA referred
to a letter from the Office of the President dated 28 September 1988 which especially directed the
Solicitor General to continue the expropriation case.
The trial court denied the motion for reconsideration, stating, among other things that:
The property to be expropriated is not for public use or benefit [__] but for the use and
benefit [__] of NSC, a government controlled private corporation engaged in private
business and for profit, specially now that the government, according to newspaper
reports, is offering for sale to the public its [shares of stock] in the National Steel
Corporation in line with the pronounced policy of the present administration to
disengage the government from its private business ventures.5 (Brackets supplied)
Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the Court of
Appeals affirmed the order of dismissal of the trial court. The Court of Appeals held that petitioner
ISA, "a government regulatory agency exercising sovereign functions," did not have the same rights as
an ordinary corporation and that the ISA, unlike corporations organized under the Corporation Code,
was not entitled to a period for winding up its affairs after expiration of its legally mandated term, with
the result that upon expiration of its term on 11 August 1987, ISA was "abolished and [had] no more
legal authority to perform governmental functions." The Court of Appeals went on to say that the action
for expropriation could not prosper because the basis for the proceedings, the ISA's exercise of its
delegated authority to expropriate, had become ineffective as a result of the delegate's dissolution, and
could not be continued in the name of Republic of the Philippines, represented by the Solicitor General:
It is our considered opinion that under the law, the complaint cannot prosper, and
therefore, has to be dismissed without prejudice to the refiling of a new complaint for
expropriation if the Congress sees it fit." (Emphases supplied)
At the same time, however, the Court of Appeals held that it was premature for the trial court to
have ruled that the expropriation suit was not for a public purpose, considering that the parties
had not yet rested their respective cases.
In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted the
action for expropriation in its capacity as agent of the Republic of the Philippines, the Republic, as
principal of ISA, is entitled to be substituted and to be made a party-plaintiff after the agent ISA's term
had expired.
Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a law
further extending the term of ISA after 11 August 1988 evinced a "clear legislative intent to terminate
the juridical existence of ISA," and that the authorization issued by the Office of the President to the
Solicitor General for continued prosecution of the expropriation suit could not prevail over such
negative intent. It is also contended that the exercise of the eminent domain by ISA or the Republic is
improper, since that power would be exercised "not on behalf of the National Government but for the
benefit of NSC."
The principal issue which we must address in this case is whether or not the Republic of the Philippines
is entitled to be substituted for ISA in view of the expiration of ISA's term. As will be made clear
below, this is really the only issue which we must resolve at this time.
Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action:
Sec. 1. Who May Be Parties. — Only natural or juridical persons or entities authorized
by law may be parties in a civil action.
Under the above quoted provision, it will be seen that those who can be parties to a civil action
may be broadly categorized into two (2) groups:
(a) those who are recognized as persons under the law whether natural, i.e., biological
persons, on the one hand, or juridical person such as corporations, on the other hand; and
(b) entities authorized by law to institute actions.
Examination of the statute which created petitioner ISA shows that ISA falls under category (b) above.
P.D. No. 272, as already noted, contains express authorization to ISA to commence expropriation
proceedings like those here involved:
Sec. 4. Powers and Functions. — The Authority shall have the following powers and
functions:
xxx xxx xxx
(j) to initiate expropriation of land required for basic iron and steel facilities for
subsequent resale and/or lease to the companies involved if it is shown that such use of
the State's power is necessary to implement the construction of capacity which is needed
for the attainment of the objectives of the Authority;
xxx xxx xxx
(Emphasis supplied)
It should also be noted that the enabling statute of ISA expressly authorized it to enter into
certain kinds of contracts "for and in behalf of the Government" in the following terms:
xxx xxx xxx
(i) to negotiate, and when necessary, to enter into contracts for and in behalf of the
government, for the bulk purchase of materials, supplies or services for any sectors in the
industry, and to maintain inventories of such materials in order to insure a continuous
and adequate supply thereof and thereby reduce operating costs of such sector;
xxx xxx xxx
(Emphasis supplied)
Clearly, ISA was vested with some of the powers or attributes normally associated with juridical
personality. There is, however, no provision in P.D. No. 272 recognizing ISA as possessing general or
comprehensive juridical personality separate and distinct from that of the Government. The ISA in fact
appears to the Court to be a non-incorporated agency or instrumentality of the Republic of the
Philippines, or more precisely of the Government of the Republic of the Philippines. It is common
knowledge that other agencies or instrumentalities of the Government of the Republic are cast
in corporate form, that is to say, are incorporated agencies or instrumentalities, sometimes with and at
other times without capital stock, and accordingly vested with a juridical personality distinct from the
personality of the Republic. Among such incorporated agencies or instrumentalities are: National
Power Corporation;6 Philippine Ports Authority;7 National Housing Authority;8 Philippine National
Oil Company;9 Philippine National Railways; 10 Public Estates Authority; 11 Philippine Virginia
Tobacco Administration,12 and so forth. It is worth noting that the term "Authority" has been used to
designate both incorporated and non-incorporated agencies or instrumentalities of the Government.
We consider that the ISA is properly regarded as an agent or delegate of the Republic of the
Philippines. The Republic itself is a body corporate and juridical person vested with the full panoply of
powers and attributes which are compendiously described as "legal personality." The relevant
definitions are found in the Administrative Code of 1987:
Sec. 2. General Terms Defined. — Unless the specific words of the text, or the context
as a whole, or a particular statute, require a different meaning:
(1) Government of the Republic of the Philippines refers to the corporate governmental
entity through which the functions of government are exercised throughout the
Philippines, including, save as the contrary appears from the context, the various arms
through which political authority is made effective in the Philippines, whether pertaining
to the autonomous regions, the provincial, city, municipal or barangay subdivisions or
other forms of local government.
xxx xxx xxx
(4) Agency of the Government refers to any of the various units of the Government,
including a department, bureau, office, instrumentality, or government-owned or
controlled corporation, or a local government or a distinct unit therein.
xxx xxx xxx
(10) Instrumentality refers to 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. This term includes regulatory
agencies, chartered institutions and government-owned or controlled corporations.
xxx xxx xxx
(Emphases supplied)
When the statutory term of a non-incorporated agency expires, the powers, duties and functions as well
as the assets and liabilities of that agency revert back to, and are re-assumed by, the Republic of the
Philippines, in the absence of special provisions of law specifying some other disposition thereof such
as, e.g., devolution or transmission of such powers, duties, functions, etc. to some other identified
successor agency or instrumentality of the Republic of the Philippines. When the expiring agency is
an incorporated one, the consequences of such expiry must be looked for, in the first instance, in the
charter of that agency and, by way of supplementation, in the provisions of the Corporation Code.
Since, in the instant case, ISA is a non-incorporated agency or instrumentality of the Republic, its
powers, duties, functions, assets and liabilities are properly regarded as folded back into the
Government of the Republic of the Philippines and hence assumed once again by the Republic, no
special statutory provision having been shown to have mandated succession thereto by some other
entity or agency of the Republic.
The procedural implications of the relationship between an agent or delegate of the Republic of the
Philippines and the Republic itself are, at least in part, spelled out in the Rules of Court. The general
rule is, of course, that an action must be prosecuted and defended in the name of the real party in
interest. (Rule 3, Section 2) Petitioner ISA was, at the commencement of the expropriation proceedings,
a real party in interest, having been explicitly authorized by its enabling statute to institute
expropriation proceedings. The Rules of Court at the same time expressly recognize the role of
representative parties:
Sec. 3. Representative Parties. — A trustee of an expressed trust, a guardian, an executor
or administrator, or a party authorized by statute may sue or be sued without joining the
party for whose benefit the action is presented or defended; but the court may, at any
stage of the proceedings, order such beneficiary to be made a party. . . . . (Emphasis
supplied)
In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or delegate
or representative of the Republic of the Philippines pursuant to its authority under P.D. No. 272. The
present expropriation suit was brought on behalf of and for the benefit of the Republic as the principal
of ISA. Paragraph 7 of the complaint stated:
7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land for
the construction and installation of iron and steel manufacturing facilities that are
indispensable to the integration of the iron and steel making industry which is vital to the
promotion of public interest and welfare. (Emphasis supplied)
The principal or the real party in interest is thus the Republic of the Philippines and not the
National Steel Corporation, even though the latter may be an ultimate user of the properties
involved should the condemnation suit be eventually successful.
From the foregoing premises, it follows that the Republic of the Philippines is entitled to be substituted
in the expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term of ISA having
expired. Put a little differently, the expiration of ISA's statutory term did not by itself require or justify
the dismissal of the eminent domain proceedings.
It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration of
ISA's statutory term, was not a ground for dismissal of such proceedings since a party may be dropped
or added by order of the court, on motion of any party or on the court's own initiative at any stage of
the action and on such terms as are just. 13 In the instant case, the Republic has precisely moved to
take over the proceedings as party-plaintiff.
In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court, 14 the Court recognized that
the Republic may initiate or participate in actions involving its agents. There the Republic of the
Philippines was held to be a proper party to sue for recovery of possession of property although the
"real" or registered owner of the property was the Philippine Ports Authority, a government agency
vested with a separate juridical personality. The Court said:
It can be said that in suing for the recovery of the rentals, the Republic of the
Philippines acted as principal of the Philippine Ports Authority, directly exercising the
commission it had earlier conferred on the latter as its agent. . . .15 (Emphasis supplied)
In E.B. Marcha, the Court also stressed that to require the Republic to commence all over again
another proceeding, as the trial court and Court of Appeals had required, was to generate
unwarranted delay and create needless repetition of proceedings:
More importantly, as we see it, dismissing the complaint on the ground that the Republic
of the Philippines is not the proper party would result in needless delay in the settlement
of this matter and also in derogation of the policy against multiplicity of suits. Such a
decision would require the Philippine Ports Authority to refile the very same complaint
already proved by the Republic of the Philippines and bring back as it were to square
one.16 (Emphasis supplied)
As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the
Philippines for the ISA upon the ground that the action for expropriation could not prosper because the
basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had become
legally ineffective by reason of the expiration of the statutory term of the agent or delegated i.e., ISA.
Since, as we have held above, the powers and functions of ISA have reverted to the Republic of the
Philippines upon the termination of the statutory term of ISA, the question should be addressed whether
fresh legislative authority is necessary before the Republic of the Philippines may continue the
expropriation proceedings initiated by its own delegate or agent.
While the power of eminent domain is, in principle, vested primarily in the legislative department of
the government, we believe and so hold that no new legislative act is necessary should the Republic
decide, upon being substituted for ISA, in fact to continue to prosecute the expropriation proceedings.
For the legislative authority, a long time ago, enacted a continuing or standing delegation of authority
to the President of the Philippines to exercise, or cause the exercise of, the power of eminent domain on
behalf of the Government of the Republic of the Philippines. The 1917 Revised Administrative Code,
which was in effect at the time of the commencement of the present expropriation proceedings before
the Iligan Regional Trial Court, provided that:
Sec. 64. Particular powers and duties of the President of the Philippines. — In addition
to his general supervisory authority, the President of the Philippines shall have such
other specific powers and duties as are expressly conferred or imposed on him by law,
and also, in particular, the powers and duties set forth in this Chapter.
Among such special powers and duties shall be:
xxx xxx xxx
(h) To determine when it is necessary or advantageous to exercise the right of eminent
domain in behalf of the Government of the Philippines; and to direct the Secretary of
Justice, where such act is deemed advisable, to cause the condemnation proceedings to
be begun in the court having proper jurisdiction. (Emphasis supplied)
The Revised Administrative Code of 1987 currently in force has substantially reproduced the
foregoing provision in the following terms:
Sec. 12. Power of eminent domain. — The President shall determine when it is
necessary or advantageous to exercise the power of eminent domain in behalf of the
National Government, and direct the Solicitor General, whenever he deems the action
advisable, to institute expopriation proceedings in the proper court. (Emphasis supplied)
In the present case, the President, exercising the power duly delegated under both the 1917 and
1987 Revised Administrative Codes in effect made a determination that it was necessary and
advantageous to exercise the power of eminent domain in behalf of the Government of the
Republic and accordingly directed the Solicitor General to proceed with the suit. 17
It is argued by private respondent MCFC that, because Congress after becoming once more the
depository of primary legislative power, had not enacted a statute extending the term of ISA, such non-
enactment must be deemed a manifestation of a legislative design to discontinue or abort the present
expropriation suit. We find this argument much too speculative; it rests too much upon simple silence
on the part of Congress and casually disregards the existence of Section 12 of the 1987 Administrative
Code already quoted above.
Other contentions are made by private respondent MCFC, such as, that the constitutional requirement
of "public use" or "public purpose" is not present in the instant case, and that the indispensable element
of just compensation is also absent. We agree with the Court of Appeals in this connection that these
contentions, which were adopted and set out by the Regional Trial Court in its order of dismissal, are
premature and are appropriately addressed in the proceedings before the trial court. Those proceedings
have yet to produce a decision on the merits, since trial was still on going at the time the Regional Trial
Court precipitously dismissed the expropriation proceedings. Moreover, as a pragmatic matter, the
Republic is, by such substitution as party-plaintiff, accorded an opportunity to determine whether or
not, or to what extent, the proceedings should be continued in view of all the subsequent developments
in the iron and steel sector of the country including, though not limited to, the partial privatization of
the NSC.
WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991 to the
extent that it affirmed the trial court's order dismissing the expropriation proceedings, is hereby
REVERSED and SET ASIDE and the case is REMANDED to the court a quo which shall allow the
substitution of the Republic of the Philippines for petitioner Iron and Steel Authority and for further
proceedings consistent with this Decision. No pronouncement as to costs.
SO ORDERED

Fontanilla vs. Maliaman 194 SCRA 486 , February 27, 1991

Political Law; Functions of government has been classified into governmental or constituent and
proprietary or ministrant.—It may not be amiss to state at this point that the functions of government
have been classified into governmental or constituent and proprietary or ministrant. The former
involves the exercise of sovereignty and considered as compulsory; the latter connotes merely the
exercise of proprietary functions and thus considered as optional.

Same; Same; The NAWASA is not an agency performing governmental functions, rather it performs
proprietary functions.—Of equal importance is the case of National Waterworks and Sewerage
Authority (NAWASA) vs. NWSA Consolidated Unions, 11 SCRA 766, which propounds the thesis that
“the NAWASA is not an agency performing governmental functions; rather it performs proprietary
functions x x x.” The functions of providing water supply and sewerage service are regarded as mere
optional functions of government even though the service rendered caters to the community as a whole
and the goal is for the general interest of society. The business of furnishing water supply and sewerage
service, as held in the case of Metropolitan Water District vs. Court of Industrial Relations, et al., 91
Phil. 840, “may for all practical purposes be likened to an industry engaged in by coal companies, gas
companies, power plants, ice plants, and the like.” Withal, it has been enunciated that “although the
State may regulate the service and rates of water plants owned and operated by municipalities, such
property is not employed for governmental purposes and in the ownership and operation thereof the
municipality acts in its proprietary capacity, free from legislative interference.”

Same; Same; While it may be true that the NIA was essentially a service agency of the government
aimed at promoting public interest and public welfare, such fact does not make the NIA essentially and
purely a “government-function” corporation.—Like the NAWASA, the National Irrigation
Administration was not created for purposes of local government. While it may be true that the NIA
was essentially a service agency of the government aimed at promoting public interest and public
welfare, such fact does not make the NIA essentially and purely a “government-function” corporation.
NIA was created for the purpose of “constructing, improving, rehabilitating, and administering all
national irrigation systems in the Philippines, including all communal and pump irrigation projects.”
Certainly, the state and the community as a whole are largely benefited by the services the agency
renders, but these functions are only incidental to the principal aim of the agency, which is the
irrigation of lands.

Same; Same; Same; The NIA is a government agency with a juridical personality separate and distinct
from the government.—On the basis of the foregoing considerations, We conclude that the National
Irrigation Administration is a government agency with a juridical personality separate and distinct from
the government. It is not a mere agency of the government but a corporate body performing proprietary
functions. Therefore, it may be held liable for the damages caused by the negligent act of its driver who
was not its special agent.
FELICIANO, J., Concurring Opinion:

NIA is not part of the “state” or of the “Government of the Republic of the Philippines.” Since the NIA
has been vested with all the powers of a corporate person, it seems only reasonable to believe that it is
at the same time subjected to all the ordinary liabilities of a corporate person.

In G.R. No. L-55963, the petition for review on certiorari seeks the affirmance of the decision
dated March 20, 1980 of the then Court of First Instance of Nueva Ecija, Branch VIII, at San
Jose City and its modification with respect to the denial of petitioner's claim for moral and
exemplary damages and attorneys fees.
In G.R. No. 61045, respondent National Irrigation Administration seeks the reversal of the aforesaid
decision of the lower court. The original appeal of this case before the Court of Appeals was certified to
this Court and in the resolution of July 7, 1982, it was docketed with the aforecited number. And in the
resolution of April 3, this case was consolidated with G.R. No. 55963.
It appears that on August 21, 1976 at about 6:30 P.M., a pickup owned and operated by respondent
National Irrigation Administration, a government agency bearing Plate No. IN-651, then driven
officially by Hugo Garcia, an employee of said agency as its regular driver, bumped a bicycle ridden by
Francisco Fontanilla, son of herein petitioners, and Restituto Deligo, at Maasin, San Jose City along the
Maharlika Highway. As a result of the impact, Francisco Fontanilla and Restituto Deligo were injured
and brought to the San Jose City Emergency Hospital for treatment. Fontanilla was later transferred to
the Cabanatuan Provincial Hospital where he died.
Garcia was then a regular driver of respondent National Irrigation Administration who, at the time of
the accident, was a licensed professional driver and who qualified for employment as such regular
driver of respondent after having passed the written and oral examinations on traffic rules and
maintenance of vehicles given by National Irrigation Administration authorities.
The within petition is thus an off-shot of the action (Civil Case No. SJC-56) instituted by petitioners-
spouses on April 17, 1978 against respondent NIA before the then Court of First Instance of Nueva
Ecija, Branch VIII at San Jose City, for damages in connection with the death of their son resulting
from the aforestated accident.
After trial, the trial court rendered judgment on March 20, 1980 which directed respondent National
Irrigation Administration to pay damages (death benefits) and actual expenses to petitioners. The
dispositive portion of the decision reads thus:
. . . . . Judgment is here rendered ordering the defendant National Irrigation
Administration to pay to the heirs of the deceased P12,000.00 for the death of Francisco
Fontanilla; P3,389.00 which the parents of the deceased had spent for the hospitalization
and burial of the deceased Francisco Fontanilla; and to pay the costs. (Brief for the
petitioners spouses Fontanilla, p. 4; Rollo, p. 132)
Respondent National Irrigation Administration filed on April 21, 1980, its motion for reconsideration of
the aforesaid decision which respondent trial court denied in its Order of June 13, 1980. Respondent
National Irrigation Administration thus appealed said decision to the Court of Appeals (C.A.-G.R. No.
67237- R) where it filed its brief for appellant in support of its position.
Instead of filing the required brief in the aforecited Court of Appeals case, petitioners filed the instant
petition with this Court.
The sole issue for the resolution of the Court is: Whether or not the award of moral damages,
exemplary damages and attorney's fees is legally proper in a complaint for damages based on quasi-
delict which resulted in the death of the son of herein petitioners.
Petitioners allege:
1. The award of moral damages is specifically allowable. under paragraph 3 of Article
2206 of the New Civil Code which provides that the spouse, legitimate and illegitimate
descendants and ascendants of the deceased may demand moral damages for mental
anguish by reason of the death of the deceased. Should moral damages be granted, the
award should be made to each of petitioners-spouses individually and in varying
amounts depending upon proof of mental and depth of intensity of the same, which
should not be less than P50,000.00 for each of them.
2. The decision of the trial court had made an impression that respondent National
Irrigation Administration acted with gross negligence because of the accident and the
subsequent failure of the National Irrigation Administration personnel including the
driver to stop in order to give assistance to the, victims. Thus, by reason of the gross
negligence of respondent, petitioners become entitled to exemplary damages under Arts.
2231 and 2229 of the New Civil Code.
3. Petitioners are entitled to an award of attorney's fees, the amount of which (20%) had
been sufficiently established in the hearing of May 23, 1979.
4. This petition has been filed only for the purpose of reviewing the findings of the lower
court upon which the disallowance of moral damages, exemplary damages and attorney's
fees was based and not for the purpose of disturbing the other findings of fact and
conclusions of law.
The Solicitor General, taking up the cudgels for public respondent National Irrigation Administration,
contends thus:
1. The filing of the instant petition is rot proper in view of the appeal taken by
respondent National Irrigation Administration to the Court of Appeals against the
judgment sought to be reviewed. The focal issue raised in respondent's appeal to the
Court of Appeals involves the question as to whether or not the driver of the vehicle that
bumped the victims was negligent in his operation of said vehicle. It thus becomes
necessary that before petitioners' claim for moral and exemplary damages could be
resolved, there should first be a finding of negligence on the part of respondent's
employee-driver. In this regard, the Solicitor General alleges that the trial court decision
does not categorically contain such finding.
2. The filing of the "Appearance and Urgent Motion For Leave to File Plaintiff-
Appellee's Brief" dated December 28, 1981 by petitioners in the appeal (CA-G.R. No.
67237-R; and G. R. No.61045) of the respondent National Irrigation Administration
before the Court of Appeals, is an explicit admission of said petitioners that the herein
petition, is not proper. Inconsistent procedures are manifest because while petitioners
question the findings of fact in the Court of Appeals, they present only the questions of
law before this Court which posture confirms their admission of the facts.
3. The fact that the parties failed to agree on whether or not negligence caused the
vehicular accident involves a question of fact which petitioners should have brought to
the Court of Appeals within the reglementary period. Hence, the decision of the trial
court has become final as to the petitioners and for this reason alone, the petition should
be dismissed.
4. Respondent Judge acted within his jurisdiction, sound discretion and in conformity
with the law.
5. Respondents do not assail petitioners' claim to moral and exemplary damages by
reason of the shock and subsequent illness they suffered because of the death of their
son. Respondent National Irrigation Administration, however, avers that it cannot be
held liable for the damages because it is an agency of the State performing governmental
functions and driver Hugo Garcia was a regular driver of the vehicle, not a special agent
who was performing a job or act foreign to his usual duties. Hence, the liability for the
tortious act should. not be borne by respondent government agency but by driver Garcia
who should answer for the consequences of his act.
6. Even as the trial court touched on the failure or laxity of respondent National
Irrigation Administration in exercising due diligence in the selection and supervision of
its employee, the matter of due diligence is not an issue in this case since driver Garcia
was not its special agent but a regular driver of the vehicle.
The sole legal question on whether or not petitioners may be entitled to an award of moral and
exemplary damages and attorney's fees can very well be answered with the application of Arts. 2176
and 2180 of theNew Civil Code.
Art. 2176 thus provides:
Whoever by act omission causes damage to another, there being fault or negligence, is
obliged to pay for damage done. Such fault or negligence, if there is no pre-existing
cotractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter
Paragraphs 5 and 6 of Art. 21 80 read as follows:
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even the though the former are
not engaged in any business or industry.
The State is responsible in like manner when it acts through a special agent.; but not
when the damage has been caused by the official to whom the task done properly
pertains, in which case what is provided in Art. 2176 shall be applicable.
The liability of the State has two aspects. namely:
1. Its public or governmental aspects where it is liable for the tortious acts of special
agents only.
2. Its private or business aspects (as when it engages in private enterprises) where it
becomes liable as an ordinary employer. (p. 961, Civil Code of the Philippines;
Annotated, Paras; 1986 Ed. ).
In this jurisdiction, the State assumes a limited liability for the damage caused by the tortious acts or
conduct of its special agent.
Under the aforequoted paragrah 6 of Art. 2180, the State has voluntarily assumed liability for acts done
through special agents. The State's agent, if a public official, must not only be specially commissioned
to do a particular task but that such task must be foreign to said official's usual governmental functions.
If the State's agent is not a public official, and is commissioned to perform non-governmental
functions, then the State assumes the role of an ordinary employer and will be held liable as such for its
agent's tort. Where the government commissions a private individual for a special governmental task, it
is acting through a special agent within the meaning of the provision. (Torts and Damages, Sangco, p.
347, 1984 Ed.)
Certain functions and activities, which can be performed only by the government, are more or less
generally agreed to be "governmental" in character, and so the State is immune from tort liability. On
the other hand, a service which might as well be provided by a private corporation, and particularly
when it collects revenues from it, the function is considered a "proprietary" one, as to which there may
be liability for the torts of agents within the scope of their employment.
The National Irrigation Administration is an agency of the government exercising proprietary
functions, by express provision of Rep. Act No. 3601. Section 1 of said Act provides:
Section 1. Name and domicile.-A body corporate is hereby created which shall be
known as the National Irrigation Administration, hereinafter called the NIA for short,
which shall be organized immediately after the approval of this Act. It shall have its
principal seat of business in the City of Manila and shall have representatives in all
provinces for the proper conduct of its business.
Section 2 of said law spells out some of the NIA's proprietary functions. Thus-
Sec. 2. Powers and objectives.-The NIA shall have the following powers and objectives:
(a) x x x x x x x x x x x x x x x x x x
(b) x x x x x x x x x x x x x x x x x x
(c) To collect from the users of each irrigation system constructed by it such fees as may
be necessary to finance the continuous operation of the system and reimburse within a
certain period not less than twenty-five years cost of construction thereof; and
(d) To do all such other tthings and to transact all such business as are directly or
indirectly necessary, incidental or conducive to the attainment of the above objectives.
Indubitably, the NIA is a government corporation with juridical personality and not a mere agency of
the government. Since it is a corporate body performing non-governmental functions, it now becomes
liable for the damage caused by the accident resulting from the tortious act of its driver-employee. In
this particular case, the NIA assumes the responsibility of an ordinary employer and as such, it becomes
answerable for damages.
This assumption of liability, however, is predicated upon the existence of negligence on the part of
respondent NIA. The negligence referred to here is the negligence of supervision.
At this juncture, the matter of due diligence on the part of respondent NIA becomes a crucial issue in
determining its liability since it has been established that respondent is a government agency
performing proprietary functions and as such, it assumes the posture of an ordinary employer which,
under Par. 5 of Art. 2180, is responsible for the damages caused by its employees provided that it has
failed to observe or exercise due diligence in the selection and supervision of the driver.
It will be noted from the assailed decision of the trial court that "as a result of the impact, Francisco
Fontanilla was thrown to a distance 50 meters away from the point of impact while Restituto Deligo
was thrown a little bit further away. The impact took place almost at the edge of the cemented portion
of the road." (Emphasis supplied,) [page 26, Rollo]
The lower court further declared that "a speeding vehicle coming in contact with a person causes force
and impact upon the vehicle that anyone in the vehicle cannot fail to notice. As a matter of fact, the
impact was so strong as shown by the fact that the vehicle suffered dents on the right side of the
radiator guard, the hood, the fender and a crack on the radiator as shown by the investigation
report (Exhibit "E"). (Emphasis supplied) [page 29, Rollo]
It should be emphasized that the accident happened along the Maharlika National Road within the city
limits of San Jose City, an urban area. Considering the fact that the victim was thrown 50 meters away
from the point of impact, there is a strong indication that driver Garcia was driving at a high speed.
This is confirmed by the fact that the pick-up suffered substantial and heavy damage as above-
described and the fact that the NIA group was then "in a hurry to reach the campsite as early as
possible", as shown by their not stopping to find out what they bumped as would have been their
normal and initial reaction.
Evidently, there was negligence in the supervision of the driver for the reason that they were travelling
at a high speed within the city limits and yet the supervisor of the group, Ely Salonga, failed to caution
and make the driver observe the proper and allowed speed limit within the city. Under the situation,
such negligence is further aggravated by their desire to reach their destination without even checking
whether or not the vehicle suffered damage from the object it bumped, thus showing imprudence and
reckelessness on the part of both the driver and the supervisor in the group.
Significantly, this Court has ruled that even if the employer can prove the diligence in the selection and
supervision (the latter aspect has not been established herein) of the employee, still if he ratifies the
wrongful acts, or take no step to avert further damage, the employer would still be liable. (Maxion vs.
Manila Railroad Co., 44 Phil. 597).
Thus, too, in the case of Vda. de Bonifacio vs. B.L.T. Bus Co. (L-26810, August 31, 1970, 34 SCRA
618), this Court held that a driver should be especially watchful in anticipation of others who may be
using the highway, and his failure to keep a proper look out for reasons and objects in the line to be
traversed constitutes negligence.
Considering the foregoing, respondent NIA is hereby directed to pay herein petitioners-spouses the
amounts of P12,000.00 for the death of Francisco Fontanilla; P3,389.00 for hospitalization and burial
expenses of the aforenamed deceased; P30,000.00 as moral damages; P8,000.00 as exemplary damages
and attorney's fees of 20% of the total award.
SO ORDERED.

DOCTRINE OF PRIMARY JURISDICTION


Under the doctrine of primary jurisdiction, courts cannot and will not determine a controversy
involving a question which is within the jurisdiction of an administrative tribunal, especially where the
question demands the exercise of sound administrative discretion requiring the special knowledge,
experience and services of the administrative tribunal to determine technical and intricate matters of
fact and where a uniformity of ruling is essential to comply with the purposes of the regulatory statute
which is to be administered.

The doctrine applies where a claim is originally cognizable in courts, and comes into play
whenever enforcement of a claim requires the resolution of issues which, under a regulatory scheme
have been placed within the special competence of an administrative body; in such case, the judicial
process is suspended pending referral of such issues to the administrative body for its view.

It applies when there is concurrence of authority between the court and administrative
tribunal. Where the law has given expertise to an agency on a certain matter/area, whatever issues or
controversies arising therefrom should not be brought before the court but rather before the
administrative tribunal vested with such expertise.

The doctrine does not apply when there is concurrence of authorities between two
administrative tribunals. Example: you have a complaint for a barangay captain, where will you file?
Sangunian or Ombudsman. It is a case applying the doctrine of concurrent jurisdiction. The doctrine of
primary jurisdiction is not applicable in this situation. It also does not apply when the law itself may
provide.

The purpose of the doctrine is not only to give the administrative agency the opportunity to
decide the controversy by itself correctly, but also to prevent unnecessary and premature resort to
courts.

Ex: exercise of power of the Bureau of Immigration. The Bureau may even look into the issue of
citizenship as an incident thereto.

Board of Commissioners (CID) vs. Dela Rosa, 197 SCRA 853, G.R. Nos. 95122-23, G.R.
Nos. 95612-13 May 31, 1991

Courts; Appeals; Administrative Law; Bureau of Immigration; The Bureau of Immigration is not of
equal rank as the RTC, hence, its decisions may be appealable to, and may be reviewed through a
special civil action for certiorari by, the RTC.—B.P. Blg. 129 did not intend to raise all quasi-judicial
bodies to the same level or rank of the RTC except those specifically provided for under the law as
aforestated. As the Bureau of Immigration is not of equal rank as the RTC, its decisions may be
appealable to, and may be reviewed through a special civil action for certiorari by, the RTC (Sec. 21
(1), BP 129).

Same; Same; Same; Same; The Bureau of Immigration has the exclusive authority and jurisdiction to
try and hear cases against an alleged alien, and in the process, determine also their citizenship.—True,
it is beyond cavil that the Bureau of Immigration has the exclusive authority and jurisdiction to try and
hear cases against an alleged alien, and in the process, determine also their citizenship (Lao Gi vs.
Court of Appeals, 180 SCRA 756 [1989]. And a mere claim of citizenship cannot operate to divest the
Board of Commissioners of its jurisdiction in deportation proceedings (Miranda vs. Deportation Board,
94 Phil. 531 [1954]).

Political Law; Citizenship; Bureau of Immigration; Jurisdiction; The primary jurisdiction of the Bureau
of Immigration over deportation proceedings, admits of exception i.e. judicial intervention may be
resorted to in cases where the claim of citizenship is so substantial that there are reasonable grounds to
believe that the claim is correct.—However, the rule enunciated in the above-cases admits of an
exception, at least insofar as deportation proceedings are concerned. Thus, what if the claim to
citizenship of the alleged deportee is satisfactory? Should the deportation proceedings be allowed to
continue or should the question of citizenship be ventilated in a judicial proceeding? In Chua Hiong vs.
Deportation Board (96 Phil. 665 [1955]), this Court answered the question in the affirmative, and We
quote: “When the evidence submitted by a respondent is conclusive of his citizenship, the right to
immediate review should also be recognized and the courts should promptly enjoin the deportation
proceedings. A citizen is entitled to live in peace, without molestation from any official or authority,
and if he is disturbed by a deportation proceeding, he has the unquestionable right to resort to the courts
for his protection, either by a writ of habeas corpus or of prohibition, on the legal ground that the Board
lacks jurisdiction. If he is a citizen and evidence thereof is satisfactory, there is no sense nor justice in
allowing the deportation proceedings to continue, granting him the remedy only after the Board has
finished its investigation of his undesirability. “x x x. And if the right (to peace) is precious and
valuable at all, it must also be protected on time, to prevent undue harassment at the hands of
illmeaning or misinformed administrative officials. Of what use is this much boasted right to peace and
liberty if it can be availed of only after the Deportation Board has unjustly trampled upon it,
besmirching the citizen’s name before the bar of public opinion?” (Italics supplied) The doctrine of
primary jurisdiction of petitioners Board of Commissioners over deportation proceedings is, therefore,
not without exception (Calacday vs. Vivo, 33 SCRA 413 [1970]; Vivo vs. Montesa, 24 SCRA 155
[1967]). Judicial intervention, however, should be granted only in cases where the “claim of citizenship
is so substantial that there are reasonable grounds to believe that the claim is correct. In other words,
the remedy should be allowed only on sound discretion of a competent court in a proper proceeding
(Chua Hiong vs. Deportation Board, supra; Co vs. Deportation Board, 78 SCRA 107 [1977]). It
appearing from the records that respondent’s claim of citizenship is substantial, as We shall show later,
judicial intervention should be allowed.

Same; Same; Judgments; Res Judicata; The doctrine of res judicata does not apply to questions of
citizenship.—Neither can it be argued that the Board of Commissioners’ decision (dated July 6, 1962)
finding respondent’s claim to Philippine citizenship not satisfactorily proved, constitute res judicata.
For one thing, said decision did not make any categorical statement that respondent Gatchalian is a
Chinese. Secondly, the doctrine of res judicata does not apply to questions of citizenship (Labo vs.
Commission on Elections ( supra ); citing Soria vs. Commissioner of Immigration, 37 SCRA 213; Lee
vs. Commissioner of Immigration, 42 SCRA 561 [1971]; Sia Reyes vs. Deportation Board, 122 SCRA
478 [1983]) In Moy Ya Lim vs. Commissioner of Immigration (41 SCRA 292 [1971]) and in Lee vs.
Commissioner of Immigration, supra), this Court declared that: “(e)verytime the citizenship of a person
is material or indispensable in a judicial or administrative case, whatever the corresponding court or
administrative authority decides therein as to such citizenship is generally not considered as res
judicata, hence it has to be threshed out again and again as the occasion may demand.” Same; Same;
Same; Same; Same; Res Judicata may be applied in cases of citizenship only if the following requisites
are present; 1) a person’s citizenship must be raised as a material issue in a controversy where said
person is a party; 2) the Solicitor General took active part in the resolution thereof; and 3) the finding
of citizenship is affirmed by this Court.—An exception to the above rule was laid by this Court in
Burca vs. Republic (51 SCRA 248 [1973]), viz: “We declare it to be a sound rule that where the
citizenship of a party in a case is definitively resolved by a court or by an administrative agency, as a
material issue in the controversy, after a full-blown hearing with the active participation of the Solicitor
General or his authorized representative, and this finding or the citizenship of the party is affirmed by
this Court, the decision on the matter shall constitute conclusive proof of such party’s citizenship in any
other case or proceeding. But it is made clear that in no instance will a decision on the question of
citizenship in such cases be considered conclusive or binding in any other case or proceeding, unless
obtained in accordance with the procedure herein stated.” Thus, in order that the doctrine of res judicata
may be applied in cases of citizenship, the following must be present: (1) a person’s citizenship must be
raised as a material issue in a controversy where said person is a party; 2) the Solicitor General or his
authorized representative took active part in the resolution thereof; and 3) the finding or citizenship is
affirmed by this Court. Gauged by the foregoing, We find the pre-conditions set forth in Burca
inexistent in the Arocha and Vivo cases relied upon by petitioners. Indeed, respondent William
Gatchalian was not even a party in said cases.

Same; Same; Immigration Laws; Bureau of Immigration; Arrests; A warrant of arrest issued by the
Commissioner of Immigration for purposes of investigation only, as in the case at bar, is null and void
for being unconstitutional.—Coming now to the contention of petitioners that the arrest of respondent
follows as a matter of consequence based on the warrant of exclusion issued on July 6, 1962, coupled
with the Arocha and Vivo cases (Rollo, pp. 33), the Court finds the same devoid of merit. Sec. 37 (a) of
Commonwealth Act No. 613, as amended, otherwise known as the Immigration Act of 1940, reads:
“Sec. 37. (a) The following aliens shall be arrested upon the warrant of the Commissioner of
Immigration or of any other officer designated by him for the purpose and deported upon the warrant of
the Commissioner of Immigration after a determination by the Board of Commissioner of the existence
of the ground for deportation as charged against the alien.” (Italics supplied) From a perusal of the
above provision, it is clear that in matters of implementing the Immigration Act insofar as deportation
of aliens are concerned, the may issue warrants of arrest only after a determination by the Board of
Commissioners of the existence of the ground for deportation as charged against the alien. In other
words, a warrant of arrest issued by the Commissioner of Immigration, to be valid, must be for the sole
purpose of executing a final order of deportation. A warrant of arrest issued by the Commissioner of
Immigration for purposes of investigation only, as in the case at bar, is null and void for being
unconstitutional (Ang Ngo Chiong vs. Galang, 67 SCRA 338 [1975] citing Po Siok Pin vs. Vivo, 62
SCRA 363 [1975]; Vivo vs. Montesa; 24 SCRA 155; Morano vs. Vivo, 20 SCRA 562; Qua Chee Gan
vs. Deportation Board, 9 SCRA 27 [1963]; Ng Hua To vs. Galang, 10 SCRA 411; see also Santos vs.
Commissioner of Immigration, 74 SCRA 96 [1976]).

Same; Same; Same; Same; Same; Deportation; Deportation shall not be effected unless the arrest in the
deportation proceedings is made within five (5) years after the cause of deportation arises.—
Furthermore, petitioners’ position is not enhanced by the fact that respondent’s arrest came twenty-
eight (28) years after the alleged cause of deportation arose. Section 37 (b) of the Immigration Act
states that deportation “shall not be effected x x x unless the arrest in the deportation proceedings is
made within five (5) years after the cause of deportation arises.” In Lam Shee vs. Bengzon (93 Phil.
1065 [1953]), We laid down the consequences of such inaction, thus: “There is however an important
circumstance which places this case beyond the reach of the resultant consequence of the fraudulent act
committed by the mother of the minor when she admitted that she gained entrance into the Philippines
by making use of the name of a Chinese resident merchant other than that of her lawful husband, and
that is, that the mother can no longer be the subject of deportation proceedings for the simple reason
that more than 5 years had elapsed from the date of her admission. Note that the above irregularity was
divulged by the mother herself, who in a gesture of sincerity, made an spontaneous admission before
the immigration officials in the investigation conducted in connection with the landing of the minor on
September 24, 1947, and not through any effort on the part of the immigration authorities. And
considering this frank admission, plus the fact that the mother was found to be married to another
Chinese resident merchant, now deceased, who owned a restaurant in the Philippines valued at P15,000
and which gives a net profit of P500 a month, the immigration officials then must have considered the
irregularity not serious enough when, inspite of that finding, they decided to land said minor “as a
properly documented preference quota immigrant” (Exhibit D). We cannot therefore but wonder why
two years later the immigration officials would reverse their attitude and would take steps to institute
deportation proceedings against the minor. “Under the circumstances obtaining in this case, we believe
that much as the attitude of the mother would be condemned for having made use of an improper
means to gain entrance into the Philippines and acquire permanent residence there, it is now too late,
not to say unchristian, to deport the minor after having allowed the mother to remain even illegally to
the extent of validating her residence by inaction, thus allowing the period of prescription to set in and
to elapse in her favor. To permit his deportation at this late hour would be to condemn him to live
separately from his mother through no fault of his thereby leaving him to a life of insecurity resulting
from lack of support and protection of his family. This inaction or oversight on the part of immigration
officials has created an anomalous situation which, for reasons of equity, should be resolved in favor of
the minor herein involved.” (Italics supplied) In the case at bar, petitioners’ alleged cause of action and
deportation against herein respondent arose in 1962. However, the warrant of arrest of respondent was
issued by Commissioner Domingo only on August 15, 1990—28 long years after. It is clear that
petitioners’ cause of action has already prescribed and by their inaction could not now be validly
enforced by petitioners against respondent William Gatchalian. Furthermore, the warrant of exclusion
dated July 6, 1962 was already recalled and the identification certificate of respondent, among others,
was revalidated on March 15, 1973 by the then Acting Commissioner Nituda.

Same; Same; Same; Same; Same; Prescription; No prosecution and consequent deportation for
violation of the offenses enumerated in the Immigration Act can be initiated beyond the eight-year
prescriptive period, the Immigration Act, being a special legislation.—It must be noted, however, that
under Sec. 1, Act No. 3326 [1926], as amended, (Prescription for Violations Penalized by Special Acts
and Municipal Ordinances), “violations penalized by special acts shall, unless otherwise provided in
such acts, prescribe in accordance with the following rules: xxx; (c) after eight years for those punished
by imprisonment for two years or more, but less than six years; xxx.” Consequently, no prosecution and
consequent deportation for violation of the offenses enumerated in the Immigration Act can be initiated
beyond the eight-year prescriptive period, the Immigration Act being a special legislation. The Court,
therefore, holds that the period of effecting deportation of an alien after entry or a warrant of exclusion
based on a final order of the BSI or BOC are not imprescriptible. The law itself provides for a period of
prescription. Prescription of the crime is forfeiture or loss of the rights of the State to prosecute the
offender after the lapse of a certain time, while prescription of the penalty is the loss or forfeiture by the
government of the right to execute the final sentence after the lapse of a certain time (Padilla, Criminal
Law, Vol. 1, 1974, at p. 855).

Same; Same; Same; Same; Same; Same; The power to deport an alien is a police measure against
undesirable aliens whose presence in the country is found to be injurious to the public good and
domestic tranquility of the people.—"The power to deport an alien is an act of the State. It is an act by
or under the authority of the sovereign power. It is a police measure against undesirable aliens whose
presence in the country is found to be injurious to the public good and domestic tranquility of the
people.” (Lao Gi vs. Court of Appeals, supra). How could one who has helped the economy of the
country by providing employment to some 4,000 people be considered undesirable and be summarily
deported when the government, in its concerted drive to attract foreign investors, grants Special
Resident Visa to any alien who invest at least US $50,000.00 in the country? Even assuming arguendo
that respondent is an alien, his deportation under the circumstances is unjust and unfair, if not
downright illegal. The action taken by petitioners in the case at bar is diametrically opposed to settled
government policy.

Conflicts of Law; Foreign Laws; Marriages; There being no proof of Chinese law relating to marriage,
there arises a presumption that it is the same as that of Philippine law.—Petitioners, on the other hand,
claim that respondent is an alien. In support of their position, petitioners point out that Santiago
Gatchalian’s marriage with Chu Gim Tee in China as well as the marriage of Francisco (father of
William) Gatchalian to Ong Chiu Kiok, likewise in China, were not supported by any evidence other
than their own self-serving testimony nor was there any showing what the laws of China were. It is the
postulate advanced by petitioners that for the said marriages to be valid in this country, it should have
been shown that they were valid by the laws of China wherein the same were contracted. There being
none, petitioners conclude that the aforesaid marriages cannot be considered valid. Hence, Santiago’s
children, including Francisco, followed the citizenship of their mother, having been born outside of a
valid marriage. Similarly, the validity of the Francisco’s marriage not having been demonstrated,
William and Johnson followed the citizenship of their mother, a Chinese national. After a careful
consideration of petitioners’ argument, We find that it cannot be sustained. In Miciano vs. Brimo (50
Phil. 867 [1924]; Lim and Lim vs. Collector of Customs, 36 Phil. 472; Yam Ka Lim vs. Collector of
Customs, 30 Phil. 46 [1915]), this Court held that in the absence of evidence to the contrary, foreign
laws on a particular subject are presumed to be the same as those of the Philippines. In the case at bar,
there being no proof of Chinese law relating to marriage, there arises the presumption that it is the same
as that of Philippine law. The lack of proof of Chinese law on the matter cannot be blamed on Santiago
Gatchalian much more on respondent William Gatchalian who was then a twelve-year old minor. The
fact is, as records indicate, Santiago was not pressed by the Citizenship Investigation Board to prove
the laws of China relating to marriage, having been content with the testimony of Santiago that the
Marriage Certificate was lost or destroyed during the Japanese occupation of China.

Same; Same; Same; Political Law; Citizenship; William Gatchalian follows the citizenship of his father
Francisco, a Filipino, as a legitimate child of the latter.—Having declared the assailed marriages as
valid, respondent William Gatchalian follows the citizenship of his father Francisco, a Filipino, as a
legitimate child of the latter. Francisco, in turn, is likewise a Filipino being the legitimate child of
Santiago Gatchalian who (the latter) is admittedly a Filipino citizen whose Philippine citizenship was
recognized by the Bureau of Immigration in an order dated July 12, 1960. Finally, respondent William
Gatchalian belongs to the class of Filipino citizens contemplated under Sec. 1, Article IV of the
Constitution, which provides: “Section 1. the following are citizens of the Philippines: “(1) Those who
are citizens of the Philippines at the time of the adoption of this Constitution. xxx” This forecloses any
further question about the Philippine citizenship of respondent William Gatchalian.

FELICIANO, J., Dissenting:

Political Law; Citizenship; In upholding the validity and legal effect of the July 6, 1962 BOC decision
that the Gatchalian applicants had not substantiated their claim to Philippine Citizenship, the Supreme
Court, in effect, ruled that the Gatchalian applicants were not Philippine citizens.—In its Decision in
Arocha vs. Vivo, the Supreme Court upheld the validity and legal effect of the 6 July 1962 Decision of
the BOC and the Warrant of Exclusion not only against Pedro Gatchalian, the particular Gatchalian
who was taken into custody by immigration authorities in 1965, but also against Pedro’s co- applicants,
which include respondent William Gatchalian. The validity of the claim to Philippine citizenship by
Pedro Gatchalian, as a supposed descendant of Santiago Gatchalian, allegedly a natural born citizen of
the Philippines, was directly placed in issue in the 1961-1962 proceedings before the BSI and the BOC,
and by the Solicitor General and Pedro Gatchalian in Arocha vs. Vivo (supra). In upholding the validity
and legal effect of the 6 July 1962 BOC Decision that the Gatchalian applicants had not substantiated
their claim to Philippine citizenship, this Court in effect ruled that the Gatchalian applicants were not
Philippine citizens, whatever their true nationality might be.

Same; Same; Deportation; Exclusion of persons found not to be entitled to admission as Philippine
citizens, must be distinguished from the deportation of aliens, who, after having been initially, lawfully
admitted into the Philippines, committed acts which rendered them liable to deportation.—What was
involved in 1961 when the supposed children and grandchildren of Santiago Gatchalian first descended
upon the Philippines, was the right of a person claiming to be a Philippine citizen to enter for the first
time and reside in the Philippines. On the part of the Government, what was at stake was the right to
exclude from the country persons who had claimed the right to enter the country as Philippine citizens
but who had failed to substantiate such claimed status. Aliens seeking entry into the Philippines do not
acquire the right to be admitted into the country by the simple passage of time. Exclusion of persons
found not to be entitled to admission as Philippine citizens, must be distinguished from the deportation
of aliens, who, after having been initially lawfully admitted into the Philippines, committed acts which
rendered them liable to deportation. Normally, aliens excluded are immediately sent back to their
country of origin. This is so in cases where the alien has not yet gained a foothold into the country and
is still seeking physical admittance. However, when the alien had already physically gained entry but
such entry is later found unlawful or devoid of legal basis, the alien can be excluded any time after it is
found that he was not lawfully admissible at the time of his entry. Technically, the alien in this case is
being excluded; however, the rules on deportation can be made to apply to him in view of the fact that
the cause for his exclusion is discovered only after he had gained physical entry.

Same; Same; Same; Immigration Laws; The Immigration Act e x pressly authorizes deportation “at any
time after entry,” of “any alien who enters the Philippines after the effective date of said act, who was
not lawfully admissible at the time of entry.—My distinguished brother, Bidin, J., finally invokes Act
No. 3326, and on the basis of Section 1 thereof, would hold that where the arrest for purpose of
deportation is made more than five (5) years after the cause for deportation arose, the prescriptive
period of eight (8) years should be applied. Act No. 3326 which took effect on 4 December 1926,
establishes prescriptive periods in respect of criminal prosecutions for violations penalized notby the
Revised Penal Code but rather by special acts which do not otherwise establish a period of prescription.
In other words, Act No. 3326 establishes a statute of limitations for the institution of criminal
proceedings. It is, however, quite settled that deportation proceedings cannot be assimilated to criminal
prosecutions for violation either of the Revised Penal Code or of special statutes. Moreover, Act No.
3326 purports to be applicable only where the special act itself has not established an applicable statute
of limitations for criminal proceedings. It cannot, however, be said that Article 37 (b) of the
Immigration Act (quoted earlier) has not established an applicable statute of limitations. For, precisely,
Section 37 (b) of the Immigration Act states that deportation may be effected under certain clauses of
Section 37 (a) “at any time after entry.” One of those instances is, precisely, deportation upon the
ground specified in Clause (2) of 37 (a) which relates to “any alien who enters the Philippines after the
effective date of this act, who was not lawfully admissible at the time of entry.” Thus, the Immigration
Act, far from failing to specify a prescriptive period for deportation under Section 37 (a) (2), expressly
authorizes deportation under such ground “at any time after entry.” It is, thus, very difficult to see how
Act No. 3326 could apply at all to the instant case.
Same; Same; Same; Same; Respondent William Gatchalian’s claim to Philippine citizenship rests upon
a fragile web constructed out of self-serving oral testimony, a total lack of official documentation, of
negative facts and of invocation of presumptions without proof of essential factual premises.—I turn to
an examination of the underlying facts which make up the basis of the claim of William Gatchalian to
Philippine citizenship. The most striking feature of this claim to Philippine citizenship is that it rests
upon a fragile web constructed out of self-serving oral testimony, a total lack of official documentation
whether Philippine or foreign, of negative facts and of invocation of presumptions without proof of ess
ential factual premises. Put in summary terms, the claim of William Gatchalian to Philippine
citizenship rests upon three (3) premises, to wit: a. that Santiago Gatchalian was a Philippine citizen; b.
the supposed filiation of Francisco Gatchalian as a legitimate son of Santiago Gatchalian, which leads
to the intermediate conclusion that Francisco was a Philippine citizen; and c. the supposed filiation of
William Gatchalian as a legitimate son of Francisco Gatchalian leading to the final conclusion that
William Gatchalian is a Philippine citizen. I respectfully submit that a careful examination of the facts
made of record will show that the correctness and factual nature of each of these layered premises are
open to very serious doubt, doubts which can only lead to the same conclusion which the BOC reached
on 6 July 1962 when it reversed theBSI, that is, that there was failure to prove the Philippine
citizenship of William Gatchalian and of his eight (8) alleged uncles, aunts and brother in 1961 when
they first arrived in the Philippines.

Same; Same; Same; Same; The administrative determination by the Bureau of Immigration as of July
20, 1960 does not constitute res judicata that forecloses the Supreme Court from examining the
supposed Philippine Citizenship of Santiago Gatchalian upon which private respondent William
Gatchalian seeks to rely.—It is suggested in the majority opinion that the question of citizenship of
Santiago Gatchalian is a closed matter which cannot be reviewed by this Court; that per the records of
the Bureau of Immigration, as of 20 July 1960, Santiago Gatchalian had been declared to be a Filipino
citizen and that this forecloses re-opening of that question thirty (30) years later. I must, with respect,
disagree with this suggestion. The administrative determination by the Bureau of Immigration as of 20
July 1960 certainly does not constitute res judicata that forecloses this Court from examining the
supposed Philippine citizenship of Santiago Gatchalian upon which private respondent William
Gatchalian seeks to rely. The Court cannot avoid examining the Philippine nationality claimed by
Santiago Gatchalian or, more accurately, claimed on his behalf by William Gatchalian, considering that
one of the central issues here is the tenability or untenability of the claim of William Gatchalian to
Philippine citizenship and hence to entry or admission to the Philippines as such citizen.

Conflicts of Law; Marriages; The rule that a foreign marriage valid in accordance with the law of the
place where it was performed shall be valid also in the Philippines, cannot begin to operate until after
the marriage performed abroad and its compliance with the requirements for validity under the
marriage law of the place where performed are first shown as factual matters.—It is firmly settled in
our jurisdiction that he who asserts and relies upon the existence of a valid foreign marriage must prove
not only the foreign law on marriage and the fact of compliance with the requisites of such law, but also
the fact o f the marriage itself. In Yao Kee vs. Sy-Gonzales, the issue before the Court was whether the
marriage of petitioner Yao Kee to the deceased Sy Kiat in accordance with Chinese law and custom had
been adequately proven. In rendering a negative answer, this Court, speaking through Cortez, J. , said:
“These evidence may very well prove the fact of marriage between Yao Kee and Sy Kiat. However, the
same do not suffice to establish the validity of said marriage in accordance with Chinese law and
custom. Custom is defined as ‘a rule of conduct formed by repetition of acts, uniformly observed
(practiced) as a social rule, legally binding and obligatory.’ The law requires that ‘a custom must be
proved as a fact, according to the rules of evidence’ [Article 12, Civil Code]. On this score the Court
had occasion to state that ‘a local custom as a source of right can not be considered by a court of justice
unless such custom is properly established by competent evidence like any other fact’ [Patriarca vs.
Orato, 7 Phil. 390, 395 (1907)]. The same evidence, if not one of a higher degree, should be required of
a foreign custom. The law on foreign marriages is provided by Article 71 of the Civil Code which
states that: Art. 71. All marriages performed outside the Philippines in accordance with the laws in
force in the country where they were performed, and valid there as such, shall also be valid in this
country, except bigamous, polygamous, or incestuous marriages, as determined by Philippine Law.
Construing this provision of law the Court has held that to establish a valid foreign marriage two things
must be proven, namely: (1) the existence of the foreign law as a question of fact; and (2) the alleged
foreign marriage by convincing evidence [Adong vs. Cheong Seng Gee, 43 Phil. 43, 49 (1922)]. (Italics
supplied) In the instant case, there was absolutely no proof other than Santiago’s bare assertion that a
marriage ceremony between Santiago and Chua Gim Tee had taken place in China in accordance with
Chinese law. The contents of the relevant Chinese law on marriage at the time of the supposed
marriage, was similarly not shown. Should it be assumed simply that the requirements of the 1926
Chinese law on marriage are identical with the requirements of the Philippine law on marriage, it must
be pointed out that neither Santiago nor Francisco Gatchalian submitted proof that any of the
requirements of a valid marriage under Philippine law had been complied with. I respectfully urge,
therefore, that the reliance in the majority opinion upon our conflicts rule on marriage embodied in
Article 71 of the Civil Code (now Article 26 of the Family Code; then Section 19 of Act No. 3630) is
unwarranted. The rule that a foreign marriage valid in accordance with the law of the place where it
was performed shall be valid also in the Philippines, cannot begin to operate until after the marriage
performed abroad and its compliance with the requirements for validity under the marriage law of the
place where performed, are first shown as factual matters. There is, in other words, no factual basis for
a presumption that a lawful marriage under Chinese law had taken place in 1926 in China between
Santiago Gatchalian and Chua Gim Tee.

Same; Same; Same; No presumption of a lawful marriage between Francisco Gatchalian and his
alleged Chinese wife can be invoked by William Gatchalian, consequently, the latter cannot invoke any
presumption of legitimacy in his own favor.—Francisco Gatchalian stated that he had married a
Chinese woman, Ong Siu Kiok, in Amoy in 1947 according to Chinese custom. Once again, we must
note that there was no proof submitted that a marriage ceremony satisfying the requirements of
“Chinese custom” had ever taken place in China between Francisco and Ong Siu Kiok; neither was
there any proof that a marriage “according to Chinese custom” was valid and lawful under Chinese law
in 1947 and of factual compliance with the requirements of the law and custom in China concerning
marriage.20 Ong Siu Kiok was alleged to have died in Macau and never came to the Philippines. It
must then follow, once again, that no presumption of a lawful marriage between Francisco Gatchalian
and his alleged Chinese wife can be invoked by William Gatchalian. It follows still further that William
Gatchalian cannot invoke any presumption of legitimacy in his own favor. As in the case of his putative
father Francisco, William could as well have followed the nationality of his concededly Chinese
mother.

DAVIDE, JR., J., Concurring-Dissenting Opinion:

Jurisdiction; Immigration Laws; The case of William Gatchalian should not be treated as an exception
to the rule that the primary jurisdiction to try and hear cases against alleged aliens rests in the Bureau of
Immigration.—I can easily agree with the summary of antecedent facts in the ponencia of Mr. Justice
Bidin and the reiteration therein of the established doctrine that the Bureau of Immigration has the
exclusive authority and jurisdiction to try and hear cases against alleged aliens, and in the process,
determine also their citizenship, and that “a mere claim of citizenship cannot operate to divest the
Board of Commissioners of its jurisdiction in deportation proceedings.” I also agree with the
conclusion that the petitioners in G.R. No. 95122-23, the Board of Commissioners and Board of
Special Inquiry, hereinafter referred to as the Boards, are quasi-judicial bodies. However, I cannot go
along with the view that the case of William Gatchalian should be treated as an exception to that
doctrine and, above all, to the law which vests upon the Court of Appeals exclusive appellate
jurisdiction over the Boards. Neither can I have solidarity with his opinion that this Court should, in
this instance, rule on the citizenship of Mr. Gatchalian instead of remanding the case to the Regional
Trial Court. To grant him these benefits would do violence to the law, liberally stretch the limits of the
exceptions or misapply the exceptionary rule, and to unduly pollute the settled doctrine. No fact or
circumstances exists to justify the application of the exceptions for the benefit of Mr. Gatchalian. On
the contrary, substantial facts exist to render immutable the unqualified application of the law and the
doctrine. Same; Courts; Appeals; The Gatchalians should have invoked the exclusive appellate
jurisdiction of the Court of Appeals for appropriate redress instead of filing petition for certiorari and
prohibition with injunction before the RTC of Manila and the RTC of Valenzuela.—Cone-quently,
pursuant to paragraph 3 of Section 9 of Batas Pambansa Blg. 129, and Our resoltuions of 15 September
1987 and 2 April 1990 in G.R. No. 79635 (Commissioner of Customs vs. Court of Tax Appeals, et al.)
and G.R. No. 80320 (Commissioner of Internal Revenue vs. Court of Tax Appeals, et al.), respectively,
and Our decisions of 16 March 1989, 22 December 1989, and 6 June 1990 in G.R. No. 83578
(Presidential Anti-Dollar Salting Task Force vs. Court of Appeals, et al.), 171 SCRA 348, G.R. No.
86625 (Development Bank of the Philippines vs. Court of Tax Appeals, et al.), 180 SCRA 609, 617,
and in G.R. No. L-48113 (Yang vs. Court of Appeals, et al.), respectively, the Gatchalians should have
invoked the exclusive appellate jurisdiction of the Court of Appeals for appropriate redress instead of
filing petitions for certiorari and prohibition with injunction before the Regional Trial Court of Manila
(Civil Case No. 90-54214) and before the Regional Trial Court of Valenzuela, Metro Manila (Civil
Case No. 3431-V-90). The trial courts should have dismissed the cases. In issuing the questioned
orders, respondents Judge Dela Rosa and Judge Capulong clearly acted without jurisdiction or with
grave abuse of discretion.

Same; Same; Forum-Shopping; A party should not be allowed to pursue simultaneous remedies in two
different forums.—As to why William Gatchalian filed his petition before the former court and his wife
and minor children filed a separate complaint before the latter has not been explained. It is to be noted
that he is a registered voter of Valenzuela, Metro Manila where he has long resided and exercised his
right of suffrage (Annex 12, Counter-Petition). Therefore, he should have filed his petition with the
Regional Trial Court of Valenzuela. His wife and minor children are not parties to the case before the
Comm i ssion on Immigration and Deportation. Their causes of action are based mainly on their claim
that the acts of the Boards against William tend to deprive plaintiff mother consortium and connubium
and the plaintiffs minors protection and support. At once, the viability of their causes of action is
doubtful; however, if indeed they have valid causes of action, they could have been joined as co-
plaintiffs in the case filed by William. It appears then that their filing of a separate complaint before
another court was part of a strategy to frustrate the proceedings before the Board. As correctly
maintained by the petitioning Boards, we have here a clear case of forum-shopping, especially
considering the fact that on September 4, 1990, or two days before the filing of the case before the
Valenzuela court the government filed a motion to dismiss the case before the Manila court. Forum-
shopping has long been condemned and proscribed. In People vs. Court of Appeals, et al. (101 SCRA
450, 463), promulgated on 28 November 1980, this Court held that a party “should not be allowed to
pursue simultaneous remedies in two different forums.”

This is a petition for certiorari and prohibition filed by the Solicitor General seeking 1) to set
aside the Resolution/Temporary Restraining Order dated September 7, 1990, issued by
respondent Judge de la Rosa in Civil Case No. 90-54214 which denied petitioners' motion to
dismiss and restrained petitioners from commencing or continuing with any of the
proceedings which would lead to the deportation of respondent William Gatchalian, docketed
as D.C. No. 90-523, as well as the Order of respondent Judge Capulong dated September 6,
1990 in Civil Case No. 3431-V-90 which likewise enjoined petitioners from proceeding with
the deportation charges against respondent Gatchalian, and 2) to prohibit respondent judges
from further acting in the aforesaid civil cases.
On October 23, 1990, respondent Gatchalian filed his Comment with Counter-Petition, docketed as
G.R. Nos. 96512-13, alleging lack of jurisdiction on the part of respondent Board of Commissioners, et
al., over his person with prayer that he be declared a Filipino citizen, or in the alternative, to remand the
case to the trial court for further proceedings.
On December 13, 1990, petitioners filed their comment to respondent Gatchalian's counter-petition.
The Court considers the comment filed by respondent Gatchalian as answer to the petition and
petitioners' comment as answer to the counter-petition and gives due course to the petitions.
There is no dispute as to the following facts:
On July 12, 1960, Santiago Gatchalian, grandfather of William Gatchalian, was recognized by the
Bureau of Immigration as a native born Filipino citizen following the citizenship of his natural mother,
Marciana Gatchalian (Annex "1", counter-petition). Before the Citizenship Evaluation Board, Santiago
Gatchalian testified that he has five (5) children with his wife Chu Gim Tee, namely: Jose Gatchalian,
Gloria Gatchalian, Francisco Gatchalian, Elena Gatchalian and Benjamin Gatchalian (Annex "2",
counter-petition).
On June 27, 1961, William Gatchalian, then a twelve-year old minor, arrived in Manila from Hongkong
together with Gloria, Francisco, and Johnson, all surnamed Gatchalian. They had with them
Certificates of Registration and Identity issued by the Philippine Consulate in Hongkong based on a
cablegram bearing the signature of the then Secretary of Foreign Affairs, Felixberto Serrano, and
sought admission as Filipino citizens. Gloria and Francisco are the daughter and son, respectively, of
Santiago Gatchalian; while William and Johnson are the sons of Francisco.
After investigation, the Board of Special Inquiry No. 1 rendered a decision dated July 6, 1961,
admitting William Gatchalian and his companions as Filipino citizens (Annex "C", petition). As a
consequence thereof, William Gatchalian was issued Identification Certificate No. 16135 by the
immigration authorities on August 16, 1961 (Annex "D", petition).
On January 24, 1962, the then Secretary of Justice issued Memorandum No. 9 setting aside all
decisions purporting to have been rendered by the Board of Commissioners on appeal or on
review motu proprio of decisions of the Board of Special Inquiry. The same memorandum directed the
Board of Commissioners to review all cases where entry was allowed on the ground that the entrant
was a Philippine citizen. Among those cases was that of William and others.
On July 6, 1962, the new Board of Commissioners, after a review motu proprio of the proceedings had
in the Board of Special Inquiry, reversed the decision of the latter and ordered the exclusion of, among
others, respondent Gatchalian (Annex "E", petition). A warrant of exclusion also dated July 6,
1962 was issued alleging that "the decision of the Board of Commissioners dated July 6, 1962 . . . has
now become final and executory (Annex "F", petition).
The actual date of rendition of said decision by the Board of Commissioners (whether on July 6, 1962
or July 20, 1962) became the subject of controversy in the 1967 case of Arocha vs. Vivo (21 SCRA 532)
wherein this Court sustained the validity of the decision of the new Board of Commissioners having
been promulgated on July 6, 1962, or within the reglementary period for review.
Sometime in 1973, respondent Gatchalian, as well as the others covered by the July 6, 1962 warrant of
exclusion, filed a motion for re-hearing with the Board of Special Inquiry where the deportion case
against them was assigned.
On March 14, 1973, the Board of Special Inquiry recommended to the then Acting Commissioner
Victor Nituda the reversal of the July 6, 1962 decision of the then Board of Commissioners and the
recall of the warrants of arrest issued therein (Annex "5", counter-petition).
On March 15, 1973, Acting Commissioner Nituda issued an order reaffirming the July 6, 1961 decision
of the Board of Special Inquiry thereby admitting respondent Gatchalian as a Filipino citizen and
recalled the warrant of arrest issued against him (Annex "6", counter-petition).
On June 7, 1990, the acting director of the National Bureau of Investigation wrote the Secretary of
Justice recommending that respondent Gatchalian along with the other applicants covered by the
warrant of exclusion dated July 6, 1962 be charged with violation of Sec. 37 (a), pars. 1 and 2, in
relation to Secs. 45 (c), and (d) and (e) of Commonwealth Act No. 613, as amended, also known as the
Immigration Act of 1940 (Annex "G", petition).
On August 1, 1990, the Secretary of Justice indorsed the recommendation of the NBI to the
Commissioner of Immigration for investigation and immediate action (Annex "20", counter-petition).
On August 15, 1990, petitioner Commissioner Domingo of the Commission of Immigration and
Deportation * issued a mission order commanding the arrest of respondent William Gatchalian (Annex
"18", counter-petition). The latter appeared before Commissioner Domingo on August 20, 1990 and
was released on the same day upon posting P200,000.00 cash bond.
On August 29, 1990, William Gatchalian filed a petition for certiorari and prohibition with injunction
before the Regional Trial Court of Manila, Br. 29, presided by respondent Judge dela Rosa, docketed as
Civil Case No. 90-54214.
On September 4, 1990, petitioners filed a motion to dismiss Civil Case No. 90-54214 alleging that
respondent judge has no jurisdiction over the Board of Commissioners and/or the Board of Special
Inquiry. Nonetheless, respondent judge dela Rosa issued the assailed order dated September 7, 1990,
denying the motion to dismiss.
Meanwhile, on September 6, 1990, respondent Gatchalian's wife and minor children filed before the
Regional Trial Court of Valenzuela, Metro Manila, Br. 172, presided by respondent judge Capulong
Civil Case No. 3431-V-90 for injunction with writ of preliminary injunction. The complaint alleged,
among others, that petitioners acted without or in excess of jurisdiction in the institution of deportation
proceedings against William. On the same day, respondent Capulong issued the questioned temporary
restraining order restraining petitioners from continuing with the deportation proceedings against
William Gatchalian.
The petition is anchored on the following propositions: 1) respondent judges have no jurisdiction over
petitioners (Board of Commissioners, et al.,) and the subject matter of the case, appellate jurisdiction
being vested by BP 129 with the Court of Appeals; 2) assuming respondent judges have jurisdiction,
they acted with grave abuse of discretion in preempting petitioners in the exercise of the authority and
jurisdiction to hear and determine the deportation case against respondent Gatchalian, and in the
process determine also his citizenship; 3) respondent judge dela Rosa gravely abused his discretion in
ruling that the issues raised in the deportation proceedings are beyond the competence and jurisdiction
of petitioners, thereby disregarding the cases of Arocha vs. Vivo and Vivo vs. Arca (supra), which put
finality to the July 6, 1962 decision of the Board of Commissioners that respondent Gatchalian is a
Chinese citizen; and 4) respondent judge Capulong should have dismissed Civil Case No. 3431-V-90
for forum-shopping.
In his counter-petition, William Gatchalian alleges among others that: 1) assuming that the evidence on
record is not sufficient to declare him a Filipino citizen, petitioners have no jurisdiction to proceed with
the deportation case until the courts shall have finally resolved the question of his citizenship; 2)
petitioners can no longer judiciously and fairly resolve the question of respondent's citizenship in the
deportation case because of their bias, pre-judgment and prejudice against him; and 3) the ground for
which he is sought to be deported has already prescribed.
For purposes of uniformity, the parties herein will be referred to in the order the petitions were filed.
Petitioners argue that under Sec. 9 (3) of BP 129, it is the Court of Appeals which has exclusive
appellate jurisdiction over all final judgments or orders of quasi-judicial agencies, boards or
commissions, such as the Board of Commissioners and the Board of Special Inquiry.
Respondent, on the other hand, contends that petitioners are not quasi-judicial agencies and are not in
equal rank with Regional Trial Courts.
Under Sec. 21 (1) of Batas Pambansa Blg. 129, the Regional Trial Courts have concurrent jurisdiction
with this Court and the Court of Appeals to issue "writs of certiorari, prohibition, mandamus, quo
warranto, habeas corpusand injunction which may be enforced in any part of their respective regions, .
. ." Thus, the RTCs are vested with the power to determine whether or not there has been a grave abuse
of discretion on the part of any branch or instrumentality of the government.
It is true that under Sec. 9 (3) of Batas Pambansa Blg. 129, the Court of Appeals is vested with —
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, order, or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, board or
commission, except those falling within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the provisions of this Act, and of sub-paragraph (1) of the
third paragraph of and sub-paragraph (4) of the fourth paragraph of Section 17 of the Judiciary
Act of 1948.
It does not provide, however, that said exclusive appellate jurisdiction of the Court of Appeals extends
to all quasi-judicial agencies. The quasi-judicial bodies whose decisions are exclusively appealable to
the Court of Appeals are those which under the law, Republic Act No. 5434, or their enabling acts, are
specifically appealable to the Court of Appeals (Presidential Anti-Dollar Salting Task Force vs. Court
of Appeals, 171 SCRA 348 [1989]; Lupangco vs. Court of Appeals, 160 SCRA 848 [1988]). Thus,
under Republic Act No. 5434, it is specifically provided that the decisions of the Land Registration
Commission (LRC), the Social Security Commission (SSC), Civil Aeronautics Board (CAB), the
Patent Office and the Agricultural Invention Board are appealable to the Court of Appeals.
In the Presidential Anti-Dollar Salting Task Force (supra), this Court clarified the matter when We
ruled:
Under our Resolution dated January 11, 1983:
. . . The appeals to the Intermediate Appellate Court (now Court of Appeals) from quasi-
judicial bodies shall continue to be governed by the provisions of Republic Act No. 5434
insofar as the same is not inconsistent with the provisions of B.P. Blg. 129.
The pertinent provisions of Republic Act No. 5434 are as follows:
Sec. 1. Appeals from specified agencies.— Any provision of existing law or Rules of
Court to the contrary notwithstanding, parties aggrieved by a final ruling, award, order,
or decision, or judgment of the Court of Agrarian Relations; the Secretary of Labor
under Section 7 of Republic Act Numbered Six hundred and two, also known as the
"Minimum Wage Law"; the Department of Labor under Section 23 of Republic Act
Numbered Eight hundred seventy-five, also known as the "Industrial Peace Act"; the
Land Registration Commission; the Social Security Commission; the Civil Aeronautics
Board; the Patent Office and the Agricultural Inventions Board, may appeal therefrom to
the Court of Appeals, within the period and in the manner herein provided, whether the
appeal involves questions of fact, mixed questions of fact and law, or questions of law,
or all three kinds of questions. From final judgments or decisions of the Court of
Appeals, the aggrieved party may appeal by certiorari to the Supreme Court as provided
under Rule 45 of the Rules of Court.
Because of subsequent amendments, including the abolition of various special courts,
jurisdiction over quasi-judicial bodies has to be, consequently, determined by the corresponding
amendatory statutes. Under the Labor Code, decisions and awards of the National Labor
Relations Commission are final and executory, but, nevertheless, reviewable by this Court
through a petition for certiorari and not by way of appeal.
Under the Property Registration Decree, decision of the Commission of Land Registration, en
consulta, are appealable to the Court of Appeals.
The decisions of the Securities and Exchange Commission are likewise appealable to the
Appellate Court, and so are decisions of the Social Security Commission.
As a rule, where legislation provides for an appeal from decisions of certain administrative
bodies to the Court of Appeals, it means that such bodies are co-equal with the Regional Trial
Courts, in terms of rank and stature, and logically, beyond the control of the latter. (Emphasis
supplied)
There are quasi-judicial agencies, as the National Labor Relations Commissions, whose decisions are
directly appealable to this Court. It is only when a specific law, as Republic Act No. 5434, provides
appeal from certain bodies or commissions to the Court of Appeals as the Land Registration
Commission (LRC), Securities and Exchange Commission (SEC) and others, that the said commissions
or boards may be considered co-equal with the RTCs in terms of rank, stature and are logically beyond
the control of the latter.
However, the Bureau of Immigration (or CID) is not among those quasi-judicial agencies specified by
law whose decisions, orders, and resolutions are directly appealable to the Court of Appeals. In fact, its
decisions are subject to judicial review in accordance with Sec. 25, Chapter 4, Book VII of the 1987
Administrative Code, which provides as follows:
Sec. 25. Judicial Review.—(1) Agency decisions shall be subject to judicial review in
accordance with this chapter and applicable laws.
xxx xxx xxx
(6) The review proceeding shall be filed in the court specified in the statute or, in the absence
thereof, in any court of competent jurisdiction in accordance with the provisions on venue of the
Rules of Court.
Said provision of the Administrative Code, which is subsequent to B.P. Blg. 129 and which thus
modifies the latter, provides that the decision of an agency like the Bureau of Immigration should be
subject to review by the court specified by the statute or in the absence thereof, it is subject to review
by any court of competent jurisdiction in accordance with the provisions on venue of the Rules of
Court.
B.P. Blg. 129 did not intend to raise all quasi-judicial bodies to the same level or rank of the RTC
except those specifically provided for under the law as aforestated. As the Bureau of Immigration is not
of equal rank as the RTC, its decisions may be appealable to, and may be reviewed through a special
civil action for certiorari by, the RTC (Sec. 21, (1) BP 129).
True, it is beyond cavil that the Bureau of Immigration has the exclusive authority and jurisdiction to
try and hear cases against an alleged alien, and in the process, determine also their citizenship (Lao Gi
vs. Court of Appeals, 180 SCRA 756 [1989]). And a mere claim of citizenship cannot operate to divest
the Board of Commissioners of its jurisdiction in deportation proceedings (Miranda vs. Deportation
Board, 94 Phil. 531 [1954]).
However, the rule enunciated in the above-cases admits of an exception, at least insofar as deportation
proceedings are concerned. Thus, what if the claim to citizenship of the alleged deportee is
satisfactory? Should the deportation proceedings be allowed to continue or should the question of
citizenship be ventilated in a judicial proceeding? In Chua Hiong vs. Deportation Board (96 Phil. 665
[1955]), this Court answered the question in the affirmative, and We quote:
When the evidence submitted by a respondent is conclusive of his citizenship, the right to
immediate review should also be recognized and the courts should promptly enjoin the
deportation proceedings. A citizen is entitled to live in peace, without molestation from any
official or authority, and if he is disturbed by a deportation proceeding, he has the
unquestionable right to resort to the courts for his protection, either by a writ of habeas corpus
or of prohibition, on the legal ground that the Board lacks jurisdiction. If he is a citizen and
evidence thereof is satisfactory, there is no sense nor justice in allowing the deportation
proceedings to continue, granting him the remedy only after the Board has finished its
investigation of his undesirability.
. . . And if the right (to peace) is precious and valuable at all, it must also be protected on time,
to prevent undue harassment at the hands of ill-meaning or misinformed administrative
officials. Of what use is this much boasted right to peace and liberty if it can be availed of only
after the Deportation Board has unjustly trampled upon it, besmirching the citizen's name
before the bar of public opinion? (Emphasis supplied)
The doctrine of primary jurisdiction of petitioners Board of Commissioners over deportation
proceedings is, therefore, not without exception (Calacday vs. Vivo, 33 SCRA 413 [1970]; Vivo vs.
Montesa, 24 SCRA 155 [1967]). Judicial intervention, however, should be granted only in cases where
the "claim of citizenship is so substantial that there are reasonable grounds to believe that the claim is
correct. In other words, the remedy should be allowed only on sound discretion of a competent court in
a proper proceeding (Chua Hiong vs. Deportation Board, supra; Co. vs. Deportation Board, 78 SCRA
107 [1977]). It appearing from the records that respondent's claim of citizenship is substantial, as We
shall show later, judicial intervention should be allowed.
In the case at bar, the competent court which could properly take cognizance of the proceedings
instituted by respondent Gatchalian would nonetheless be the Regional Trial Court and not the Court of
Appeals in view of Sec. 21 (1), BP 129, which confers upon the former jurisdiction over actions for
prohibition concurrently with the Court of Appeals and the Supreme Court and in line with the
pronouncements of this Court in Chua Hiong and Co cases.
Ordinarily, the case would then be remanded to the Regional Trial Court. But not in the case at
bar.1âwphi1 Considering the voluminous pleadings submitted by the parties and the evidence
presented, We deem it proper to decide the controversy right at this instance. And this course of action
is not without precedent for "it is a cherished rule of procedure for this Court to always strive to settle
the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future
litigation. No useful purpose will be served if this case is remanded to the trial court only to have its
decision raised again to the Court of Appeals and from there to this Court" (Marquez vs. Marquez, 73
Phil. 74; Keramic Industries, Inc. vs. Guerrero, 61 SCRA 265 [1974]) Alger Electric, Inc. vs. Court of
Appeals (135 SCRA 37 [1985]), citing Gayos vs. Gayos (67 SCRA 146 [1975]).
In Lianga Bay Logging Co., Inc. vs. Court of Appeals (157 SCRA 357 [1988]), We also stated:
Remand of the case to the lower court for further reception of evidence is not necessary where
the court is in a position to resolve the dispute based on the records before it. On many
occasions, the Court, in the public interest and the expeditious administration of justice, has
resolved actions on the merits instead of remanding them to the trial court for further
proceedings, such as where the ends of justice would not be subserved by the remand of the
case or when public interest demands an early disposition of the case or where the trial court
had already received all the evidence of the parties (Quisumbing vs. CA, 112 SCRA 703;
Francisco, et al., vs. The City of Davao, et al., supra; Republic vs. Security Credit &
Acceptance Corp., et al., 19 SCRA 58; Samal vs. CA, supra; Republic vs. Central Surety &
Insurance Co., 25 SCRA 641).
Likewise in Tejones vs. Gironella (159 SCRA 100 [1988]), We said:
Sound practice seeks to accommodate the theory which avoids waste of time, effort and
expense, both to the parties and the government, not to speak of delay in the disposal of the case
(cf. Fernandez vs. Garcia, 92 Phil. 592, 297). A marked characterstic of our judicial set-up is
that where the dictates of justice so demand . . . the Supreme Court should act, and act with
finality (Li Siu Liat vs. Republic, 21 SCRA 1039, 1046, citingSamal vs. CA, 99 Phil. 230 and
US vs. Gimenez, 34 Phil. 74.) (Beautifont, Inc. vs. Court of appeals, et al., Jan. 29, 1988; See
also Labo vs. Commission on Elections, 176 SCRA 1 [1989]).
Respondent Gatchalian has adduced evidence not only before the Regional Trial Court but also before
Us in the form of public documents attached to his pleadings. On the other hand, Special Prosecutor
Renato Mabolo in his Manifestation (dated September 6, 1990; Rollo, p. 298, counter-petition) before
the Bureau of Immigration already stated that there is no longer a need to adduce evidence in support of
the deportation charges against respondent. In addition, petitioners invoke that this Court's decision
in Arocha vs. Vivo and Vivo vs. Arca (supra), has already settled respondent's alienage. Hence, the need
for a judicial determination of respondent's citizenship specially so where the latter is not seeking
admission, but is already in the Philippines (for the past thirty [30] years) and is being expelled (Chua
Hiong vs. Deportation Board, supra).
According to petitioners, respondent's alienage has been conclusively settled by this Court in
the Arocha and Vivocases, We disagree. It must be noted that in said cases, the sole issue resolved
therein was the actual date of rendition of the July 6, 1962 decision of the then board of
Commissioners, i.e., whether the decision was rendered on July 6, 1962 or on July 20, 1962 it
appearing that the figure (date) "20" was erased and over it was superimposed the figure "6" thereby
making the decision fall within the one-year reglementary period from July 6, 1961 within which the
decision may be reviewed. This Court did not squarely pass upon any question of citizenship, much
less that of respondent's who was not a party in the aforesaid cases. The said cases originated from a
petition for a writ of habeas corpus filed on July 21, 1965 by Macario Arocha in behalf of Pedro
Gatchalian. Well settled is the rule that a person not party to a case cannot be bound by a decision
rendered therein.
Neither can it be argued that the Board of Commissioners' decision (dated July 6, 1962) finding
respondent's claim to Philippine citizenship not satisfactorily proved, constitute res judicata. For one
thing, said decision did not make any categorical statement that respondent Gatchalian is a Chinese.
Secondly, the doctrine of res judicata does not apply to questions of citizenship (Labo vs. Commission
on Elections (supra); citing Soria vs. Commissioner of Immigration, 37 SCRA 213; Lee vs.
Commissioner of Immigration, 42 SCRA 561 [1971]; Sia Reyes vs. Deportation Board, 122 SCRA 478
[1983]).
In Moy Ya Lim vs. Commissioner of Immigration (41 SCRA 292 [1971]) and in Lee vs. Commissioner
of Immigration (supra), this Court declared that:
(e)verytime the citizenship of a person is material or indispensable in a judicial or
administrative case, whatever the corresponding court or administrative authority decides
therein as to such citizenship is generally not considered as res adjudicata, hence it has to be
threshed out again and again as the occasion may demand.
An exception to the above rule was laid by this Court in Burca vs. Republic (51 SCRA 248 [1973]), viz:
We declare it to be a sound rule that where the citizenship of a party in a case is definitely
resolved by a court or by an administrative agency, as a material issue in the controversy, after a
full-blown hearing with the active participation of the Solicitor General or his authorized
representative, and this finding or the citizenship of the party is affirmed by this Court, the
decision on the matter shall constitute conclusive proof of such party's citizenship in any other
case or proceeding. But it is made clear that in no instance will a decision on the question of
citizenship in such cases be considered conclusive or binding in any other case or proceeding,
unless obtained in accordance with the procedure herein stated.
Thus, in order that the doctrine of res judicata may be applied in cases of citizenship, the following
must be present: 1) a person's citizenship must be raised as a material issue in a controversy where said
person is a party; 2) the Solicitor General or his authorized representative took active part in the
resolution thereof, and 3) the finding or citizenship is affirmed by this Court.
Gauged by the foregoing, We find the pre-conditions set forth in Burca inexistent in
the Arocha and Vivo cases relied upon by petitioners. Indeed, respondent William Gatchalian was not
even a party in said cases.
Coming now to the contention of petitioners that the arrest of respondent follows as a matter of
consequence based on the warrant of exclusion issued on July 6, 1962, coupled with
the Arocha and Vivo cases (Rollo, pp. 33), the Court finds the same devoid of merit.
Sec. 37 (a) of Commonwealth Act No. 613, as amended, otherwise known as the Immigration Act of
1940, reads:
Sec. 37. (a) The following aliens shall be arrested upon the warrant of the Commissioner of
Immigration or of any other officer designated by him for the purpose and deported upon the
warrant of the Commissioner of Immigration after a determination by the Board of
Commissioner of the existence of the ground for deportation as charged against the alien.
(Emphasis supplied)
From a perusal of the above provision, it is clear that in matters of implementing the Immigration Act
insofar as deportation of aliens are concerned, the Commissioner of Immigration may issue warrants of
arrest only after a determination by the Board of Commissioners of the existence of the ground for
deportation as charged against the alien. In other words, a warrant of arrest issued by the Commissioner
of Immigration, to be valid, must be for the sole purpose of executing a final order of deportation. A
warrant of arrest issued by the Commissioner of Immigration for purposes of investigation only, as in
the case at bar, is null and void for being unconstitutional (Ang Ngo Chiong vs. Galang, 67 SCRA 338
[1975] citing Po Siok Pin vs. Vivo, 62 SCRA 363 [1975]; Vivo vs. Montesa, 24 SCRA 155; Morano vs.
Vivo, 20 SCRA 562; Qua Chee Gan vs. Deportation Board, 9 SCRA 27 [1963]; Ng Hua To vs. Galang,
10 SCRA 411; see also Santos vs. Commissioner of Immigration, 74 SCRA 96 [1976]).
As We held in Qua Chee Gan vs. Deportation Board (supra), "(t)he constitution does not distinguish
warrants between a criminal case and administrative proceedings. And if one suspected of having
committed a crime is entitled to a determination of the probable cause against him, by a judge, why
should one suspected of a violation of an administrative nature deserve less guarantee?" It is not
indispensable that the alleged alien be arrested for purposes of investigation. If the purpose of the
issuance of the warrant of arrest is to determine the existence of probable cause, surely, it cannot pass
the test of constitutionality for only judges can issue the same (Sec. 2, Art. III, Constitution).
A reading of the mission order/warrant of arrest (dated August 15, 1990; Rollo, p. 183, counter-
petition) issued by the Commissioner of Immigration, clearly indicates that the same was issued only
for purposes of investigation of the suspects, William Gatchalian included. Paragraphs 1 and 3 of the
mission order directs the Intelligence Agents/Officers to:
xxx xxx xxx
1. Make a warrantless arrest under the Rules of Criminal Procedure, Rule 113, Sec. 5, for
violation of the Immigration Act, Sec. 37, para. a; Secs. 45 and 46 Administrative Code;
xxx xxx xxx
3. Deliver the suspect to the Intelligence Division and immediately conduct custodial
interrogation, after warning the suspect that he has a right to remain silent and a right to
counsel; . . .
Hence, petitioners' argument that the arrest of respondent was based, ostensibly, on the July 6, 1962
warrant of exclusion has obviously no leg to stand on. The mission order/warrant of arrest made no
mention that the same was issued pursuant to a final order of deportation or warrant of exclusion.
But there is one more thing that militates against petitioners' cause. As records indicate, which
petitioners conveniently omitted to state either in their petition or comment to the counter-petition of
respondent, respondent Gatchalian, along with others previously covered by the 1962 warrant of
exclusion, filed a motion for re-hearing before the Board of Special Inquiry (BSI) sometime in 1973.
On March 14, 1973, the Board of Special Inquiry, after giving due course to the motion for re-hearing,
submitted a memorandum to the then Acting Commissioner Victor Nituda (Annex "5", counter-
petition) recommending 1 the reconsideration of the July 6, 1962 decision of the then Board of
Commissioners which reversed the July 6, 1961 decision of the then Board of Special Inquiry No. 1
and 2 the lifting of the warrants of arrest issued against applicants. The memorandum inferred that the
"very basis of the Board of Commissioners in reversing the decision of the Board of Special Inquiry
was due to a forged cablegram by the then Secretary of Foreign Affairs, . . ., which was dispatched to
the Philippine Consulate in Hong Kong authorizing the registration of applicants as P.I. citizens." The
Board of Special Inquiry concluded that "(i)f at all, the cablegram only led to the issuance of their
Certificate(s) of Identity which took the place of a passport for their authorized travel to the
Philippines. It being so, even if the applicants could have entered illegally, the mere fact that they are
citizens of the Philippines entitles them to remain in the country."
On March 15, 1973, then Acting Commissioner Nituda issued an Order (Annex "6", counter-petition)
which affirmed the Board of Special Inquiry No. 1 decision dated July 6, 1961 admitting respondent
Gatchalian and others as Filipino citizens; recalled the July 6, 1962 warrant of arrest and revalidated
their Identification Certificates.
The above order admitting respondent as a Filipino citizen is the last official act of the government on
the basis of which respondent William Gatchalian continually exercised the rights of a Filipino citizen
to the present. Consequently, the presumption of citizenship lies in favor of respondent William
Gatchalian.
There should be no question that Santiago Gatchalian, grandfather of William Gatchalian, is a Filipino
citizen. As a matter of fact, in the very order of the BOC of July 6, 1962, which reversed the July 6,
1961 BSI order, it is an accepted fact that Santiago Gatchalian is a Filipino. The opening paragraph of
said order states:
The claim to Filipino citizenship of abovenamed applicants is based on the citizenship of one
Santiago Gatchalian whose Philippine citizenship was recognized by the Bureau of Immigration
in an Order dated July 12, 1960. (Annex "37", Comment with Counter-Petition).
Nonetheless, in said order it was found that the applicants therein have not satisfactorily proven that
they are the children and/or grandchildren of Santiago Gatchalian. The status of Santiago Gatchalian as
a Filipino was reiterated in Arocha and Arca (supra) where advertence is made to the "applicants being
the descendants of one Santiago Gatchalian, a Filipino." (at p. 539).
In the sworn statement of Santiago Gatchalian before the Philippine Consul in Hongkong in 1961
(Annex "1" to the Comment of petitioners to Counter-Petition), he reiterated his status as a Philippine
citizen being the illegitimate child of Pablo Pacheco and Marciana Gatchalian, the latter being a
Filipino; that he was born in Manila on July 25, 1905; and that he was issued Philippine Passport No.
28160 (PA-No. A91196) on November 18, 1960 by the Department of Foreign Affairs in Manila. In his
affidavit of January 23, 1961 (Annex "5", counter-petition), Santiago reiterated his claim of Philippine
citizenship as a consequence of his petition for cancellation of his alien registry which was granted on
February 18, 1960 in C.E.B. No. 3660-L; and that on July 20, 1960, he was recognized by the Bureau
of Immigration as a Filipino and was issued Certificate No. 1-2123.
The dissenting opinions of my esteemed brethrens, Messrs. Justices F.P. Feliciano and H.G. Davide, Jr.,
proposing to re-open the question of citizenship of Santiago Gatchalian at this stage of the case, where
it is not even put in issue, is quite much to late. As stated above, the records of the Bureau of
Immigration show that as of July 20, 1960, Santiago Gatchalian had been declared to be a Filipino
citizen. It is a final decision that forecloses a re-opening of the same 30 years later. Petitioners do not
even question Santiago Gatchalian's Philippine citizenship. It is the citizenship of respondent William
Gatchalian that is in issue and addressed for determination of the Court in this case.
Furthermore, petitioners' position is not enhanced by the fact that respondent's arrest came twenty-eight
(28) years after the alleged cause of deportation arose. Section 37 (b) of the Immigration Act states that
deportation "shall not be effected . . . unless the arrest in the deportation proceedings is made within
five (5) years after the cause of deportation arises." In Lam Shee vs. Bengzon (93 Phil. 1065 [1953]),
We laid down the consequences of such inaction, thus:
There is however an important circumstance which places this case beyond the reach of the
resultant consequence of the fraudulent act committed by the mother of the minor when she
admitted that she gained entrance into the Philippines by making use of the name of a Chinese
resident merchant other than that of her lawful husband, and that is, that the mother can no
longer be the subject of deportation proceedings for the simple reason that more than 5 years
had elapsed from the date of her admission. Note that the above irregularity was divulged by the
mother herself, who in a gesture of sincerity, made an spontaneous admission before the
immigration officials in the investigation conducted in connection with the landing of the minor
on September 24, 1947, and not through any effort on the part of the immigration authorities.
And considering this frank admission, plus the fact that the mother was found to be married to
another Chinese resident merchant, now deceased, who owned a restaurant in the Philippines
valued at P15,000 and which gives a net profit of P500 a month, the immigration officials then
must have considered the irregularity not serious enough when, inspire of that finding, they
decided to land said minor "as a properly documented preference quota immigrant" (Exhibit D).
We cannot therefore but wonder why two years later the immigration officials would reverse
their attitude and would take steps to institute deportation proceedings against the minor.
Under the circumstances obtaining in this case, we believe that much as the attitude of the
mother would be condemned for having made use of an improper means to gain entrance into
the Philippines and acquire permanent residence there, it is now too late, not to say unchristian,
to deport the minor after having allowed the mother to remain even illegally to the extent of
validating her residence by inaction, thus allowing the period of prescription to set in and to
elapse in her favor. To permit his deportation at this late hour would be to condemn him to live
separately from his mother through no fault of his thereby leaving him to a life of insecurity
resulting from lack of support and protection of his family. This inaction or oversight on the part
of immigration officials has created an anomalous situation which, for reasons of equity, should
be resolved in favor of the minor herein involved. (Emphasis supplied)
In the case at bar, petitioners' alleged cause of action and deportation against herein respondent arose in
1962. However, the warrant of arrest of respondent was issued by Commissioner Domingo only on
August 15, 1990 — 28 long years after. It is clear that petitioners' cause of action has already
prescribed and by their inaction could not now be validly enforced by petitioners against respondent
William Gatchalian. Furthermore, the warrant of exclusion dated July 6, 1962 was already recalled and
the Identification certificate of respondent, among others, was revalidated on March 15, 1973 by the
then Acting Commissioner Nituda.
It is also proposed in the dissenting opinions of Messrs. Justices Feliciano and Davide, Jr., that the
BOC decision dated July 6, 1962 and the warrant of exclusion which was found to be valid
in Arocha should be applicable to respondent William Gatchalian even if the latter was not a party to
said case. They also opined that under Sec. 37 (b) of the Immigration Act, the five (5) years limitation
is applicable only where the deportation is sought to be effected under clauses of Sec. 37 (b) other than
clauses 2, 7, 8, 11 and 12 and that no period of limitation is applicable in deportations under clauses 2,
7, 8, 11 and 12.
The Court disagrees. Under Sec. 39 of the Immigration Act, it is reiterated that such deportation
proceedings should be instituted within five (5) years. Section 45 of the same Act provides penal
sanctions for violations of the offenses therein enumerated with a fine of "not more than P1,000.00 and
imprisonment for not more than two (2) years and deportation if he is an alien." Thus:
Penal Provisions
Sec. 45. Any individual who—
(a) When applying for an immigration document personates another individual, or falsely
appears in the name of deceased individual, or evades the immigration laws by appearing under
an assumed name; fictitious name; or
(b) Issues or otherwise disposes of an immigration document, to any person not authorized by
law to receive such document; or
(c) Obtains, accepts or uses any immigration document, knowing it to be false; or
(d) Being an alien, enters the Philippines without inspection and admission by the immigration
officials, or obtains entry into the Philippines by wilful, false, or misleading representation or
wilful concealment of a material fact; or
(e) Being an alien shall for any fraudulent purpose represent himself to be a Philippine citizen in
order to evade any requirement of the immigration laws; or
(f) In any immigration matter shall knowingly make under oath any false statement or
representations; or
(g) Being an alien, shall depart from the Philippines without first securing an immigration
clearance certificates required by section twenty-two of this Act; or
(h) Attempts or conspires with another to commit any of the foregoing acts, shall be guilty of an
offense, and upon conviction thereof, shall be fined not more than one thousand pesos, and
imprisoned for not more than two years, and deported if he is an alien. (Emphasis supplied)
Such offenses punishable by correctional penalty prescribe in 10 years (Art. 90, Revised Penal Code);
correctional penalties also prescribe in 10 years (Art. 92, Revised Penal Code).
It must be noted, however, that under Sec. 1, Act No. 3326 [1926], as amended, (Prescription for
Violations Penalized by Special Acts and Municipal Ordinances) "violations penalized by special acts
shall, unless otherwise provided in such acts, prescribe in accordance with the following rules: . . .c)
after eight years for those punished by imprisonment for two years or more, but less than six
years; . . ."
Consequently, no prosecution and consequent deportation for violation of the offenses enumerated in
the Immigration Act can be initiated beyond the eight-year prescriptive period, the Immigration Act
being a special legislation.
The Court, therefore, holds that the period of effecting deportation of an alien after entry or a warrant
of exclusion based on a final order of the BSI or BOC are not imprescriptible. The law itself provides
for a period of prescription. Prescription of the crime is forfeiture or loss of the rights of the State to
prosecute the offender after the lapse of a certain time, while prescription of the penalty is the loss or
forfeiture by the government of the right to execute the final sentence after the lapse of a certain time
(Padilla, Criminal Law, Vol. 1, 1974, at p. 855).
"Although a deportation proceeding does not partake of the nature of a criminal action, however,
considering that it is a harsh and extraordinary administrative proceeding affecting the freedom and
liberty of a person, the constitutional right of such person to due process should not be denied. Thus,
the provisions of the Rules of Court of the Philippines particularly on criminal procedure are applicable
to deportation proceedings." (Lao Gi vs. Court of Appeals, supra). Under Sec. 6, Rule 39 of the Rules
of Court, a final judgment may not be executed after the lapse of five (5) years from the date of its
entry or from the date it becomes final and executory. Thereafter, it may be enforced only by a separate
action subject to the statute of limitations. Under Art. 1144 (3) of the Civil Code, an action based on
judgment must be brought within 10 years from the time the right of action accrues.
In relation to Sec. 37 (b) of the Immigration Act, the rule, therefore, is:
1. Deportation or exclusion proceedings should be initiated within five (5) years after the cause of
deportation or exclusion arises when effected under any other clauses other than clauses 2, 7, 8, 11 and
12 and of paragraph (a) of Sec. 37 of the Immigration Act; and
2. When deportation or exclusion is effected under clauses 2, 7, 8, 11 and 12 of paragraph (a) of Sec.
37, the prescriptive period of the deportation or exclusion proceedings is eight (8) years.
In the case at bar, it took petitioners 28 years since the BOC decision was rendered on July 6, 1962
before they commenced deportation or exclusion proceedings against respondent William Gatchalian in
1990. Undoubtedly, petitioners' cause of action has already prescribed. Neither may an action to revive
and/or enforce the decision dated July 6, 1962 be instituted after ten (10) years (Art. 1144 [3], Civil
Code).
Since his admission as a Filipino citizen in 1961, respondent William Gatchalian has continuously
resided in the Philippines. He married Ting Dee Hua on July 1, 1973 (Annex "8", counter-petition) with
whom he has four (4) minor children. The marriage contract shows that said respondent is a Filipino
(Annex "8"). He holds passports and earlier passports as a Filipino (Annexes "9", "10" & "11", counter-
petition). He is a registered voter of Valenzuela, Metro Manila where he has long resided and exercised
his right of suffrage (Annex 12, counter-petition). He engaged in business in the Philippines since 1973
and is the director/officer of the International Polymer Corp. and Ropeman International Corp. as a
Filipino (Annexes, "13" & "14", counter-petition). He is a taxpayer. Respondent claims that the
companies he runs and in which he has a controlling investment provides livelihood to 4,000
employees and approximately 25,000 dependents. He continuously enjoyed the status of Filipino
citizenship and discharged his responsibility as such until petitioners initiated the deportation
proceedings against him.
"The power to deport an alien is an act of the State. It is an act by or under the authority of the
sovereign power. It is a police measure against undesirable aliens whose presence in the country is
found to be injurious to the public good and domestic tranquility of the people" (Lao Gi vs. Court of
Appeals, supra). How could one who has helped the economy of the country by providing employment
to some 4,000 people be considered undesirable and be summarily deported when the government, in
its concerted drive to attract foreign investors, grants Special Resident Visa to any alien who invest at
least US$50,000.00 in the country? Even assuming arguendo that respondent is an alien, his
deportation under the circumstances is unjust and unfair, if not downright illegal. The action taken by
petitioners in the case at bar is diametrically opposed to settled government policy.
Petitioners, on the other hand, claim that respondent is an alien. In support of their position, petitioners
point out that Santiago Gatchalian's marriage with Chu Gim Tee in China as well as the marriage of
Francisco (father of William) Gatchalian to Ong Chiu Kiok, likewise in China, were not supported by
any evidence other than their own self-serving testimony nor was there any showing what the laws of
China were. It is the postulate advanced by petitioners that for the said marriages to be valid in this
country, it should have been shown that they were valid by the laws of China wherein the same were
contracted. There being none, petitioners conclude that the aforesaid marriages cannot be considered
valid. Hence, Santiago's children, including Francisco, followed the citizenship of their mother, having
been born outside of a valid marriage. Similarly, the validity of the Francisco's marriage not having
been demonstrated, William and Johnson followed the citizenship of their mother, a Chinese national.
After a careful consideration of petitioner's argument, We find that it cannot be sustained.
In Miciano vs. Brimo (50 Phil. 867 [1924]; Lim and Lim vs. Collector of Customs, 36 Phil. 472; Yam
Ka Lim vs. Collector of Customs, 30 Phil. 46 [1915]), this Court held that in the absence of evidence to
the contrary, foreign laws on a particular subject are presumed to be the same as those of the
Philippines. In the case at bar, there being no proof of Chinese law relating to marriage, there arises the
presumption that it is the same as that of Philippine law.
The lack of proof of Chinese law on the matter cannot be blamed on Santiago Gatchalian much more
on respondent William Gatchalian who was then a twelve-year old minor. The fact is, as records
indicate, Santiago was not pressed by the Citizenship Investigation Board to prove the laws of China
relating to marriage, having been content with the testimony of Santiago that the Marriage Certificate
was lost or destroyed during the Japanese occupation of China. Neither was Francisco Gatchalian's
testimony subjected to the same scrutiny by the Board of Special Inquiry. Nevertheless, the testimonies
of Santiago Gatchalian and Francisco Gatchalian before the Philippine consular and immigration
authorities regarding their marriages, birth and relationship to each other are not self-serving but are
admissible in evidence as statements or declarations regarding family reputation or tradition in matters
of pedigree (Sec. 34, Rule 130). Furtheremore, this salutary rule of evidence finds support in
substantive law. Thus, Art. 267 of the Civil Code provides:
Art. 267. In the absence of a record of birth, authentic document, final judgment or possession
of status, legitimate filiation may be proved by any other means allowed by the Rules of Court
and special laws. (See also Art. 172 of the Family Code)
Consequently, the testimonies/affidavits of Santiago Gatchalian and Francisco Gatchalian
aforementioned are not self-serving but are competent proof of filiation (Art. 172 [2], Family Code).
Philippine law, following the lex loci celebrationis, adheres to the rule that a marriage formally valid
where celebrated is valid everywhere. Referring to marriages contracted abroad, Art. 71 of the Civil
Code (now Art. 26 of the Family Code) provides that "(a)ll marriages performed outside of the
Philippines in accordance with the laws in force in the country where they were performed, and valid
there as such, shall also be valid in this country . . ." And any doubt as to the validity of the matrimonial
unity and the extent as to how far the validity of such marriage may be extended to the consequences of
the coverture is answered by Art. 220 of the Civil Code in this manner: "In case of doubt, all
presumptions favor the solidarity of the family. Thus, every intendment of law or facts leans toward the
validity of marriage, the indissolubility of the marriage bonds, the legitimacy of children, the
community of property during marriage, the authority of parents over their children, and the validity of
defense for any member of the family in case of unlawful aggression." (Emphasis supplied). Bearing in
mind the "processual presumption" enunciated in Miciano and other cases, he who asserts that the
marriage is not valid under our law bears the burden of proof to present the foreign law.
Having declared the assailed marriages as valid, respondent William Gatchalian follows the citizenship
of his father Francisco, a Filipino, as a legitimate child of the latter. Francisco, in turn is likewise a
Filipino being the legitimate child of Santiago Gatchalian who (the latter) is admittedly a Filipino
citizen whose Philippine citizenship was recognized by the Bureau of Immigration in an order dated
July 12, 1960.
Finally, respondent William Gatchalian belongs to the class of Filipino citizens contemplated under
Sec. 1, Article IV of the Constitution, which provides:
Sec. 1. The following are citizens of the Philippines:
(1) Those who are citizens of the Philippines at the time of the adoption of this Constitution. . . .
This forecloses any further question about the Philippine citizenship of respondent William Gatchalian.
The Court is not unaware of Woong Woo Yiu vs. Vivo (13 SCRA 552 [1965]) relied upon by petitioners.
The ruling arrived thereat, however, cannot apply in the case at bar for the simple reason that the
parties therein testified to have been married in China by a village leader, which undoubtedly is not
among those authorized to solemnize marriage as provided in Art. 56 of the Civil Code (now Art. 7,
Family Code).
Premises considered, the Court deems it unnecessary to resolve the other issues raised by the parties.
WHEREFORE, G.R. Nos. 95122-23 is DISMISSED for lack of merit; G.R. Nos. 95612-13 is hereby
GRANTED and respondent William Gatchalian is declared a Filipino citizen. Petitioners are hereby
permanently enjoined from continuing with the deportation proceedings docketed as DC No. 90-523
for lack of jurisdiction over respondent Gatchalian, he being a Filipino citizen; Civil Cases No. 90-
54214 and 3431-V-90 pending before respondent judges are likewise DISMISSED. Without
pronouncement as to costs.
SO ORDERED.
Gutierrez, Jr., Gancayco, Sarmiento, Griño-Aquino and Medialdea, JJ., concur.
Fernan, C.J., and Narvasa, J., concur in the result.

Separate Opinions
DAVIDE, JR., J., concurring-dissenting:
I can easily agree with the summary of antecedent facts in the ponencia of Mr. Justice Bidin and the
reiteration therein of the established doctrine that the Bureau of Immigration has the exclusive authority
and jurisdiction to try and hear cases against alleged aliens, and in the process, determine also their
citizenship, and that "a mere claim of citizenship cannot operate to divest the Board of Commissioners
of its jurisdiction in deportation proceedings." I also agree with the conclusion that the petitioners in
G.R. No. 95122-23, the Board of Commissioners and Board of Special Inquiry, hereinafter referred to
as the Boards, are quasi-judicial bodies.
However, I cannot go along with the view that the case of William Gatchalian should be treated as an
exception to that doctrine and, above all, to the law which vests upon the Court of Appeals exclusive
appellate jurisdiction over the Boards. Neither can I have solidarity with his opinion that this Court
should, in this instance, rule on the citizenship of Mr. Gatchalian instead of remanding the case to the
Regional Trial Court. To grant him these benefits would do violence to the law, liberally stretch the
limits of the exceptions or misapply the exceptionary rule, and to unduly pollute the settled doctrine.
No fact or circumstance exists to justify the application of the exceptions for the benefit of Mr.
Gatchalian. On the contrary, substantial facts exist to render immutable the unqualified application of
the law and the doctrine.
To my mind, the questioned acts of the Boards were done absolutely within their quasi-judicial
functions. Therefore, the rule laid down in Filipinas Engineering and Machine Shop vs. Ferrer (135
SCRA 25) and Lupangco vs. Court of Appeals (160 SCRA 848) does not apply.
Consequently, pursuant to paragraph 3 of Section 9 of Batas Pambansa Blg. 129, and Our resolutions of
15 September 1987 and 2 April 1990 in G.R. No. 79635 (Commissioner of Customs vs. Court of Tax
Appeals, et al.) and G.R. No. 80320 (Commissioner of Internal Revenue vs. Court of Tax Appeals, et
al.), respectively, and Our decisions of 16 March 1989, 22 December 1989, and 6 June 1990 in G.R.
No. 83578 (Presidential Anti-Dollar Salting Task Force vs. Court of Appeals, et al.), 171 SCRA 348,
G.R. No. 86625 (Development Bank of the Philippines vs. Court of Tax Appeals, et al.), 180 SCRA
609, 617, and in G.R. No. L-48113 (Yang vs. Court of Appeals, et al.), respectively, the Gatchalians
should have invoked the exclusive appellate jurisdiction of the Court of Appeals for appropriate redress
instead of filing petitions for certiorari and prohibition with injunction before the Regional Trial Court
of Manila (Civil Case No. 90-54214) and before the Regional Trial Court of Valenzuela, Metro Manila
(Civil Case No. 3431-V-90). The trial courts should have dismissed the cases. In issuing the questioned
orders, respondents Judge Dela Rosa and Judge Capulong clearly acted without jurisdiction or with
grave abuse of discretion.
As to why William Gatchalian filed his petition before the former court and his wife and minor children
filed a separate complaint before the latter has not been explained. It is to be noted that he is a
registered voter of Valenzuela, Metro Manila where he has long resided and exercised his right of
suffrage (Annex 12, Counter-Petition). Therefore, he should have filed his petition with the Regional
Trial Court of Valenzuela. His wife and minor children are not parties to the case before the
Commission on Immigration and Deportation. Their causes of action are based mainly on their claim
that the acts of the Boards against William tend to deprive plaintiff mother consortium and connubium
and the plaintiffs minors protection and support. At once, the viability of their causes of action is
doubtful; however, if indeed they have valid causes of action, they could have been joined as co-
plaintiffs in the case filed by William. It appears then that their filing of a separate complaint before
another court was part of a strategy to frustrate the proceedings before the Boards. As correctly
maintained by the petitioning Boards, we have here a clear case of forum-shopping, especially
considering the fact that on September 4, 1990, or two days before the filing of the case before the
Valenzuela court the government filed a motion to dismiss the case before the Manila court. Forum-
shopping has long been condemned and proscribed. In People vs. Court of Appeals, et al. (101 SCRA
450, 463), promulgated on 28 November 1980, this Court held that a party "should not be allowed to
pursue simultaneous remedies in two different forums." In the Resolution of 31 July 1986 in E. Razon
Inc., et al. vs. Philippine Port Authority, et al., G.R. No. 75197, this Court held:
The acts of petitioners constitute a clear case of forum-shopping, an act of malpractice that is
proscribed and condemned as trifling with the courts and abusing their processes. It is improper
conduct that tends to degrade the administration of justice. (See also Buan vs. Lopez, Jr., 145
SCRA 34; Palm Avenue Realty Development Corp. vs. PCGG, 153 SCRA 591; Minister of
Natural Resources, et al. vs. Heirs of Orval Hughes, et al., 155 SCRA 566; Limpin vs. IAC, 161
SCRA 98; Collado vs. Hernando, 161 SCRA 639; Villanueva, et al. vs. Adre, et al., 172 SCRA
877; Danville Maritime, Inc. vs. COA, 175 SCRA 717; Crisostomo vs. SEC, 179 SCRA 154;
Adlawan vs. Tomol, 179 SCRA 42; and Alonto vs. Memoracion, 185 SCRA 73).
William Gatchalian did not stop in his forum-shopping in the regional trial courts. Under the guise of a
counter-petition, he is now before this Court in an active offensive role. This is a very clever, albeit
subtle, ploy to bang directly to this Court the issue of his deportation and to divest the Boards of their
original jurisdiction thereon. He could have done this at the first instance; he did not. He and his wife
and minor children deliberately chose, instead, to separately go to the wrong court, evidently to delay
the proceedings before the Boards, which they accomplished when the two judges separately issued
orders restraining said Boards from commencing or continuing with any of the proceedings which
would lead to the deportation of William Gatchalian (Civil Case No. 90-54214) and from proceeding
with the deportation charges against William Gatchalian (Civil Case No. 3431-V-90).
Chua Hiong vs. Deportation Board (96 Phil. 665) cited in the ponencia as another authority which
allows William Gatchalian to enjoy the protective mantle of the exceptionary rule affecting the
exclusive power of the Commission on Immigration and Deportation to try and hear cases against
aliens and in the process also determine their citizenship is either not applicable or is mis-applied. This
case laid down the principle that "when the evidence submitted by a respondent is conclusive of his
citizenship, the right to immediate review should also be recognized and the courts should promptly
enjoin the deportation proceedings. . . . If he is a citizen and evidence thereof is satisfactory, there is no
sense nor justice in allowing the deportation proceedings to continue, granting him the remedy only
after the Board has finished its investigation of his undesirability. . . ." (emphasis supplied). The
word courts should not now be interpreted to mean or to include the regional trial courts because, as
stated above, said courts do not have any appellate jurisdiction over the Commission on Immigration
and Deportation, the Board of Commissioners and the Board of Special Inquiry. This case was decided
in 1955 yet, or twenty-six years before the effectivity of Batas Pambansa Blg. 129.
The condition sine qua non then to an authorized judicial intervention is that the evidence submitted by
a respondent is conclusive of his citizenship, or as stated in Co vs. Deportation Board, (78 SCRA 104,
107), the claim of citizenship is so substantial that there are no reasonable grounds for the belief that
the claim is correct.
The facts before this Court do not constitute, or even show, a conclusive or substantial evidence that
William Gatchalian is a Filipino citizen. On the contrary, very serious doubts surround such a claim
from the beginning. His initial entry into the Philippines was made possible through a Certificate of
Identity (as Filipino) which was issued on the basis of a forged cablegram by the then Secretary of
Foreign Affairs. Then on 6 July 1962 the then new Board of Commissioners promulgated a written
decision in I.C. Cases Nos. 61-2108-C to 61-2116-C inclusive (Application for admission as Philippine
citizens of Jose, Elena, Benjamin, Juan, Pedro, Gloria, Francisco, William and Johnson, all surnamed
Gatchalian) reversing the decision of the Board of Special Inquiry No. 1 of 6 July 1961 and ordering
the exclusion of William Gatchalian and the others as aliens not properly documented. Accordingly, a
warrant of exclusion, also dated 6 July 1962, was issued by the Commissioners commanding the
deportation officer to exclude William Gatchalian, and others, and to cause their removal from the
country on the first available transportation in accordance with law to the port of the country of which
they were nationals. The pertinent portion of the Decision reads as follows:
The claim to Philippine citizenship of above-named applicants is based on the citizenship of one
Santiago Gatchalian whose Philippine citizenship was recognized by the Bureau of Immigration
in an Order, dated July 12, 1960. It is alleged that applicants JOSE GATCHALIAN,
FRANCISCO GATCHALIAN, ELENA GATCHALIAN and BENJAMIN GATCHALIAN are
the legitimate children of Santiago Gatchalian with one Chiu Gim Tee. Except for the self-
serving testimonies of Santiago Gatchalian and his alleged children, there has not been
submitted any evidence of Santiago Gatchalian's marriage to Chiu Gim Tee and the birth of the
alleged children of the couple. The personal records of Santiago Gatchalian on file with this
office do not reflect the names of applicants as his children, and while two names listed in his
Form 1 (ACR application), Jose and Elena, bear the same name as two of herein applicants, the
difference in the ages of said applicants, casts serious doubt on their identity. Apropos, the
applicants JOSE GATCHALIAN, GLORIA GATCHALIAN, FRANCISCO GATCHALIAN,
ELENA GATCHALIAN and BENJAMIN GATCHALIAN, not having satisfactorily proved as
the children of Santiago Gatchalian, determination of the citizenship of the other applicants,
JUAN GATCHALIAN, PEDRO GATCHALIAN and JOHNSON GATCHALIAN, whose right
to Filipino citizenship are merely drawn from their fathers, Jose Gatchalian and Francisco
Gatchalian, is unnecessary. (Decision, Annex "E" of Petition).
Looking back to the case of Santiago, William's alleged grandfather, I cannot find sufficient credible
evidence to support his claim of Filipino citizenship. For a long time before 20 July 1960 he considered
himself a Chinese citizen. The "conclusion" of the Bureau of Immigration that Santiago is a Filipino
citizen is based on totally questionable and insufficient evidence which cannot inspire belief. The Order
itself, signed by Associate Commissioner Felix Talabis, supports this conclusion. It reads in full as
follows:
This is a petition for the cancellation of an alien registry of SANTIAGO GATCHALIAN,
registered as Chinese and holder of ACR No. A-219003 issued at Manila on 13 February 1951
and ICR No. 7501 dated 3 May 1946. He is alleged to be the son of Filipino parents who were
not lawfully married.
It is alleged that the petitioner was born in Binondo, Manila, on 25 July 1905, to Pablo Pacheco
and Marciana Gatchalian. It is noted that in his application for alien registration filed with this
Office on 13 January 1951, Santiago Gatchalian stated that his deceased parents were Pablo
Pacheco and Marciana. He was identified by his only brother, Joaquin Pacheco, who insisted
that he and petitioner are illegitimate. It is true that, on record, there is a certificate signed on 26
October 1902 by Maxima Gatchalian, their maternal grandmother, giving consent to the
marriage of Marciana Gatchalian to Pablo Pacheco (Exh. B), but Joaquin said that his parents
did not actually get married. In proof of this, the baptismal record of the petitioner expressly
states that Santiago Gatchalian was born on 25 July 1905 and baptized on 6 October 1905,
being the son of Marciana Gatchalian, "filipina", and an unknown father (verbatim copy dated
22 June 1907, Parish Priest of Binondo, Manila).
The petitioner, apparently not completely certain about his civil status, has been interchangeably
using his paternal and maternal surnames. In school he was known as Santiago Pacheco (Class
card for 1920-21, Meisic, Manila; Certificates of completion of third and fourth grades, Meisic
Primary School); but in his residence certificate dated 17 September 1937, and in Tax Clearance
Certificate issued on 2 October 1937, he is referred to as Santiago Gatchalian; and in a
communication dated 6 June 1941, he was addressed to as Santiago Pacheco by the Philippine
Charity Sweepstakes office.
Considering, however, the positive assertion by his elder brother who is better informed about
their origin, the incontestable entry in his baptismal record that he is illegitimate and the entry in
the marriage contract of his elder brother wherein the father's name is omitted and the mother,
Marciana Gatchalian, is described as Filipina (marriage contract dated 29 November 1936)
there is sufficient evidence to establish that Santiago Gatchalian is really Filipino at birth, being
the legitimate child of a Filipino woman.
WHEREFORE, the herein petition to cancel his alien registration is granted, petitioner shall
henceforth be shown in the records of this office as a citizen of the Philippines and the issuance
to him of the appropriate Identification certificate showing his correct status is hereby
authorized. (Order of 12 July 1960, Annex "1" of Comment with Counter-Petition).
As to his alleged marriage to Chu Gim Tee, and their five children, we only have his self-selling oral
testimony, thus:
Q What is the name of your wife?
A Her name is Chu Gim Tee.
Q Is she still alive?
A No, she died in 1951, in Amoy.
Q Do you have children with her, if so, mention their names, ages and sexes?
A Yes. I have five children, all of them alive and they are as follows:
Jose Gatchalian, born on Jan. 2, 1927 in Amoy; Gloria Gatchalian, born February 20, 1929 in
Amoy; Francisco Gatchalian, born on March 3, 1931 in Amoy; Elena Gatchalian, born on April
4, 1933 in Amoy; Benjamin Gatchalian, born on 31 March 1942 in Amoy.
Q Where are they living now?
A All of them are now living in Macao, with my sister-in-law by the name of Chu Lam Tee. (p.
4, Transcript of the proceedings before the Citizen Evaluation Board on 12 February 1960,
Annex "2" of Comment with Counter-Petition).
If indeed Santiago's parents, Pablo Pacheco and Marciana Gatchalian, were married, what was his
reason for insisting, through his brother Joaquin, that he, is an illegitimate son? The only possible
reason is that Pablo Pacheco is a Chinese citizen, in which case Santiago would follow the citizenship
of Marciana, a "filipina." But to give full faith and credit to the oral insistence of illegitimacy is to do
violence to the presumptions of validity of marriage, the indissolubility of the marriage bonds and the
legitimacy of children. (Art. 220, Civil Code). These are among the presumptions which
the ponencia precisely applied when it rejected the petitioners' claim that Santiago failed to establish
his claimed marriage to Chu Gim Tee and Francisco's (father of William) claimed marriage to Ong
Chiu Kiok, both of which were allegedly celebrated abroad. I cannot find any valid justification why
these presumptions should be liberally applied in favor of claimed marriages allegedly celebrated
abroad but denied to purported marriages celebrated in the Philippines.
Interestingly, Santiago used the surname Pacheco during such proceedings and when he testified, he
gave his name as Santiago Gatchalian Pacheco. This is an incontrovertible proof that he recognized the
legitimate union of his father and mother.
On 18 February 1960, Santiago was recalled to be confronted re his claim as to the number of his
children; he testified thus:
Q In your testimony on February 12, this year, you named as your children the following: Jose,
Gloria, Francisco, Elena and Benjamin, all born in Amoy, arranged according to the order of
their ages. However, in your Form 1 when you secured your ACR in 1951, you mentioned only
Jose Gatchalian and Elena Gatchalian. Why, what is the reason why in this form that you filled
up in 1951, you mentioned only Jose and Elena?
A That form I am not the one who filled it because that is not my handwriting. It is the
handwriting of my broker or the clerk of my broker. However, when they prepared that I
mentioned my children named Jose, Gloria, Francisco, Elena in a piece of paper which I gave to
him, except Benjamin.
Q Why did you not mention Benjamin in the list?
A Because he was not yet baptized then. (Transcript, p. 7, Annex "2" of Comment with Counter-
Petition).
The explanation is very flimsy and does not deserve the respect of a passing glance.
There is no showing that Gatchalian took any immediate definite positive step against the 6 July 1962
decision and the warrant of exclusion.
It was only sometime in 1973, or eleven years after, that he and others covered by the warrant of
expulsion filed a motion for re-hearing with the Board of Special Inquiry. There has been no
explanation for the unreasonable delay in the filing of the motion. It may be surmised that it was due to
his minority, considering that he was allegedly only twelve years old when he arrived in Manila from
Hongkong on 27 June 1961. But, such minority was no obstacle to the filing of any remedial action for
and in his behalf.
The action taken by and the recommendation of the Board of Special Inquiry of 14 March 1973 to the
then Acting Commissioner Victor Nituda for the reversal of the July 6, 1962 decision of the Board of
Commissioners were not only highly anomalous, irregular and improper, it was done without any
semblance of authority. The Board of Special Inquiry did not have the power to review, modify or
reverse a Decision of the Board of Commissioners rendered about eleven years earlier. Then Acting
Commissioner Victor Nituda, acting alone, did not likewise have the power or authority to approve the
recommendation of said Board, to revive and/or reaffirm the July 6, 1961 decision of the Board of
Special Inquiry, to reverse, and nullify, the Decision of 6 July 1962 of the Board of Commissioners,
and to order the admission of William Gatchalian as a Filipino citizen. Pursuant to Sec. 26 (b) of C.A.
No. 613, as amended (The Philippine Immigration Act of 1940), only the Board of Commissioners can
act on the recommendation, if at all it was legally and validly done. The Board of Commissioners is
composed of the Commissioner of Immigration and the two Deputy Commissioners. In the absence of
any member of the Board, the Department Head shall designate an officer or employee in the Bureau of
Immigration to serve as member thereof. In any case coming before it, the decision of any two
members shall prevail. (Sec. 8, C.A. No. 613 as amended). The Department Head referred to is the
Secretary of Justice since the Commission is, for administrative purposes, under the supervision and
control of the Department of Justice.
The decision then of Acting Commissioner Nituda was void and invalid ab initio. In view thereof, the
rationalization in the ponencia that the issue could be re-opened since the decision of the Board of
Commissioners of 6 July 1962 did not constitute res judicata is irrelevant. But even if it is to be
conceded that the 6 July 1962 decision did not constitute res judicata, I find it both strange and illogical
to give full faith and credit to the unilateral action of Mr. Nituda and to use it to bar the Boards from
exercising its power and jurisdiction over William Gatchalian.
Assuming that indeed William is the grandson of Santiago, I find it rather strange why Santiago did not
mention him in his testimony before the Citizenship Evaluation Board. At that time William was
already eleven years old. It is logical to presume that the proceeding initiated by Santiago was
principally for the benefit of his alleged children and grandchildren. It was, as subsequent events
proved, intended to prepare the legal basis for their entry into the country as Filipino citizens. Thus,
eleven months after he obtained a favorable decision from the Board, and on two successive dates, his
alleged children and grandchildren entered the country. On 25 June 1961 his alleged children Jose,
Elena, Benjamin, and his alleged grandchildren Pedro and Juan arrived from Hongkong. On 27 June
1961, his alleged daughter Gloria and son Francisco with his alleged children William and Johnson also
arrived from Hongkong. (pp. 4-5, Petition).
That he has continuously resided in the Philippines since 1961; he is married to Ting Dee Hua on July
1, 1973, and his marriage contract shows that he is a Filipino citizen; he holds passports and earlier
passports as a Filipino; he is a registered voter of Valenzuela, Metro Manila where he has long resided
and exercised his right of suffrage; he is engaged in business in the Philippines since 1973, and is a
director/officer of the International Polymer Corp. and Ropeman International Corp. as a Filipino, and
that the companies he runs and in which he has a controlling investment provided a livelihood to 4,000
employees and approximately 25,000 dependents; he is a taxpayer; and he has continuously enjoyed
the status of Filipino citizenship, discharged his responsibility as such until petitioning Boards initiated
the deportation proceedings against him, are not of any help to William Gatchalian. For, they neither
confer nor strengthen his claim of Filipino citizenship since they are all rooted on the illegal and void
decision of then Acting Commissioner Victor Nituda of 15 March 1973. A decision which is void and
invalid ab initio cannot be a source of valid acts. Neither can such substantive infirmity be cured by
salutary acts that tend to confirm the status conferred by the void decision.
In the light of the foregoing, it follows that the warrant of exclusion issued against William Gatchalian
pursuant to and by virtue of the 6 July 1962 Decision of the Board of Commissioners subsists and
remains valid and enforceable.
I disagree with the view advanced in the ponencia that the State can no longer enforce the warrant of
exclusion because it is already barred by prescription considering that Section 37 (b) of the
Immigration Act states that deportation "shall not be effected . . . unless the arrest in the deportation
proceedings is made within five (5) years after the cause of deportation arises."
Said paragraph (b) of Section 37 reads in full as follows:
(b) Deportation may be effected under clauses 2, 7, 8, 11 and 12 paragraph (a) of this section at
any time after entry, but shall not be effected under any other clause unless the arrest in the
deportation proceedings is made within five years after the cause of deportation arises.
Deportation under clauses 3 and 4 shall not be effected if the court or judge thereof, when
sentencing the alien, shall recommend to the Commissioner of Immigration that the alien be not
deported. (As amended by Sec. 13, R.A. No. 503). (Emphasis supplied).
Note that the five-year period applies only to clauses other than 2, 7, 8, 11 and 12 of paragraph (a) of
the Section. In respect to clauses 2, 7, 8, 11 and 12, the limitation does not apply. These clauses read as
follows:
(2) Any alien who enters the Philippines after the effective date of this Act, who was not
lawfully admissible at the time of entry;
xxx xxx xxx
(7) Any alien who remains in the Philippines in violation of any limitation or condition under
which he was admitted as a non- immigrant;
(8) Any alien who believes in, advises, advocates or teaches the overthrow by force and
violence of the Government of the Philippines, or of constituted law and authority, or who
disbelieves in or is opposed to organized government, or who advises, advocates, or teaches the
assault or assassination of public officials because of their office, or who advises, advocates, or
teaches the unlawful destruction of property, or who is a member of or affiliated with any
organization entertaining, advocating or teaching such doctrines, or who in any manner
whatsoever lends assistance, financial or otherwise, to the dissemination of such doctrines;
xxx xxx xxx
(11) Any alien who engages in profiteering, hoarding, or black-marketing, independent of any
criminal action which may be brought against him;
(12) Any alien who is convicted of any offense penalized under Commonwealth Act Numbered
Four Hundred and Seventy-Three, otherwise known as the Revised Naturalization Laws of the
Philippines, or any law relating to acquisition of Philippine citizenship;
xxx xxx xxx
Mr. Gatchalian is covered by clause (2); besides, the warrant for his exclusion was issued within a
period of five years following his entry.
Lam Shee vs. Bengzon (93 Phil. 1065) is not applicable to Mr. Gatchalian. In issue in that case was the
deportation of a minor whose mother fraudulently entered the Philippines by using the name of a
resident Chinese merchant who is not her lawful husband but against whom no deportation proceedings
was initiated within five years following her entry. Said mother did in fact acquire permanent residence
status. Furthermore, the minor's mother never claimed to be a Filipino citizen.
IN VIEW OF ALL THE FOREGOING, I vote to GRANT the petition in G.R. Nos. 95122-23, SET
ASIDE the questioned orders of respondents Judge Joselito Dela Rosa and Judge Teresita Dizon
Capulong as having been issued beyond their jurisdiction, ORDER the DISMISSAL of Civil Case Nos.
90-54214 of the Regional Trial Court of Manila and 3431-V-90 of the Regional Trial Court of
Valenzuela, Metro Manila and to DISMISS for lack of merit the COUNTER-PETITION.

FELICIANO, J., dissenting:


I regret I am unable to join the opinion written by my distinguished brother in the Court, Mr. Justice
A.A. Bidin, and I, therefore, undertake to submit this separate opinion.
For convenience, the following is a precis of the matters discussed in detail below.
1. I agree that the Warrant of Arrest dated 14 August 1990 is defective in its language. The surrounding
facts, however, make quite clear that an amended warrant of arrest or mission order, or a new one
correctly worded, may be issued by Immigration Commissioner Domingo for the purpose of carrying
out an existing and valid Warrant of Exclusion covering respondent William Gatchalian and his co-
applicants for admission.
2. The 6 July 1962 Decision of the Board of Commissioners ("BOC") and Warrant of Exclusion remain
valid and effective and enforceable against respondent William Gatchalian, and his co-applicants for
that matter. That Decision reversed a 6 July 1961 decision of the Board of Special Inquiry ("BSI") and
held that respondent William Gatchalian and his co-applicants failed to subtantiate and prove their
claim to Philippine citizenship in 1961. Respondent William Gatchalian does not claim Philippine
citizenship by any mode of entitlement subsequent to his application for entry as a citizen of the
Philippines in 1961, i.e., by any act or circumstance subsequent to his birth and supposed filiation as a
legitimate son of Francisco Gatchalian, also a supposed citizen of the Philippines.
3. In its Decision in Arocha vs. Vivo,1 the Supreme Court upheld the validity and legal effect of the 6
July 1962 Decision of the BOC and the Warrant of Exclusion not only against Pedro Gatchalian, the
particular Gatchalian who was taken into custody by immigration authorities in 1965, but also against
Pedro's co-applicants, which include respondent William Gatchalian. The validity of the claim to
Philippine citizenship by Pedro Gatchalian, as a supposed descendant of Santiago Gatchalian, allegedly
a natural born citizen of the Philippines, was directly placed in issue in the 1961-1962 proceedings
before the BSI and the BOC, and by the Solicitor General and Pedro Gatchalian in Arocha vs.
Vivo (supra). In upholding the validity and legal effect of the 6 July 1962 BOC Decision that the
Gatchalian applicants had not substantiated their claim to Philippine citizenship, this Court in effect
ruled that the Gatchalian applicants were not Philippine citizens, whatever their true nationality might
be.
4. Should this Court now determine to examine once more the claim to Philippine citizenship of
respondent William Gatchalian, a detailed examination of the facts, including the supposed status of
Santiago Gatchalian as a natural born Philippine citizenship, shows that those claims to Philippine
citizenship were indeed not proven by respondent William Gatchalian and his co-applicants. Since
respondent William Gatchalian does not claim to have been naturalized as a Philippine citizen after
rendition of the 6 July 1962 BOC Decision, he must accordingly be held to be not a Philippine citizen.
5. Should the legal results thus reached seem harsh to some, I respectfully submit that the remedy lies
not with this Court which is charged with the application of the law as it is in fact written, but with the
political branches of the Government. It is those departments of Government which must consider the
desirability and wisdom of enacting legislation providing for the legalization of the entry and stay of
aliens who may be in the same situation as respondent William Gatchalian and his co-applicants.
I
1. Petitioner argues that respondent William Gatchalian's arrest follows as a matter of "consequence" of
the Warrant of Exclusion issued by the BOC on 6 July 1962. This is opposed by respondent Gatchalian
upon the ground that the Mission Order or Warrant of Arrest does not mention that it is issued pursuant
to a final order of deportation or Warrant of Exclusion.
The Mission Order or Warrant of Arrest dated 14 August 1990 issued by petitioner Commissioner
Domingo, CID, reads in part as follows:
Intelligence Officers/Agents: All Teams
Team No.
Subject: William, Juan, Francisco, Jose, Benjamin, Jonathan, Pedro, Gloria, Elena, all surnamed
Gatchalian
Address: Bgy. Canumay, Valenzuela, M.M.
xxx xxx xxx
1. Make a warrantless arrest under the Rules of Criminal Procedure, Rule 113, Section 5, for
violation of the Immigration Act, Section 37, para. a; Secs. 45 and 46 Administrative Code;
2. Make a warrantless search as an incident to a lawful arrest under Rule 125, Section 12.
3. Deliver the suspect to the Intelligence Division and immediately conduct custodial
interrogation, after warning the suspect that he has a right to remain silent and a right to
counsel;
4. Prepare and file an affidavit of arrest with the Special Prosecutor's Office and, in case of a
search, prepare and file an inventory of the properties seized, verified under oath following
Office Memorandum Order No. 45
xxx xxx xxx
The above Mission Order merely referred to Section 37 (a) of the Immigration Act, as amended, and to
Sections 45 and 46 of the Administrative Code (should be Immigration Law), and that its wording
suggests that the arrest is sought to be carried out for the purpose of carrying out a preliminary
investigation or custodial interrogation rather than for the purpose of enforcing a final order of
deportation or warrant of exclusion. More specifically, the Mission Order failed to mention the 6 July
1962 BOC Decision and Warrant of Exclusion. At the same time, there is no gainsaying the fact that the
6 July 1962 BOC Decision and Warrant of Exclusion do exist and became final and, as discussed in
detail below, remain valid and effective.
It should be noted also that by 6 September 1990, Special Prosecutor Mabolo had filed a Manifestation
or Motion before the Bureau of Immigration explicitly referring to the Warrant of Exclusion issued
against respondent William Gatchalian and his original co-applicants for admission in 1961, which had
been passed upon in Arocha vs. Vivo(supra), and argued that there was, therefore, no longer any need to
adduce evidence in support of the charges against respondent William Gatchalian.
Thus it appears to me that the Warrant of Arrest or Mission Order dated 15 August 1990, ineptly
worded as it is, may be amended so as to refer explicitly to the mentioned Warrant of Exclusion, or a
new warrant of arrest or mission order issued similarly explicitly referring to the Warrant of Exclusion.
2. It is indispensably necessary to refer to the Warrant of Exclusion of 6 July 1962 which read as
follows:
WHEREAS, upon review, motu proprio of the proceedings had on the application for admission
as Philippine citizens of JOSE GATCHALIAN, ELENA GATCHALIAN, BENJAMIN
GATCHALIAN, JUAN GATCHALIAN, PEDRO GATCHALIAN, GLORIA GATCHALIAN,
FRANCISCO GATCHALIAN, WILLIAM GATCHALIAN, and JOHNSON GATCHALIAN, the
Board of Commissioners found them not entitled to admission as Filipinos in a Decision, dated
July 6, 1962, and ordered their exclusion as persons not properly documented;
AND WHEREAS, the Decision of the Board of Commissioners, dated 6 July 1962, ordering the
exclusion of above-named applicants, has now become final and executory.
NOW THEREFORE, by virtue of the authority vested in the undersigned by law, you are
hereby ordered to exclude the aforenamed individuals and cause their removal from this country
to the port where they came or to the port of the country of which they are nationals, on the first
available transportation, in accordance with law. (Emphasis supplied)
It should be noted that respondent William Gatchalian was a party to the 1961-1962 proceedings before
the Bureau of Immigration which proceedings culminated in the 6 July 1962 Decision of the BOC and
the aforequoted Warrant of Exclusion.
It is, however, insisted by respondent William Gatchalian that the Warrant of Exclusion may no longer
be executed or implemented as against him in view of the passage of approximately twenty-eight (28)
years since the issuance of such Warrant. Respondent Gatchalian here relies upon Section 37 (b) of the
Immigration Act which states that:
Sec. 37 (b). Deportation may be effected under clauses 2, 3, 7, 8, 11 and 12 of the Par. (a) of this
Section at any time after entry, but shall not be effected under any other clauses unless the arrest
in the deportation proceedings is made within five (5) years after the cause for deportation
arises . . . (Emphasis supplied)
Examination of the above quoted Section 37 (b) shows that the five (5) year-limitation is
applicable only where deportation is sought to be effected under clauses of Section 37 (a) other
than clauses 2, 7, 8, 11 and 12; that where deportation or exclusion is sought to be effected under
clauses 2, 7, 8 11 and 12 of Section 37 (a), no period of limitation is applicable; and that, to the
contrary, deportation or exclusion may be effected "at any time after entry."
Examination of contemporaneous facts shows that the Government has sought to effect the exclusion
and deportation of respondent William Gatchalian upon the ground that he had entered the country as a
citizen of the Philippines when he was not lawfully admissible as such at the time of entry under
Section 37 (a) (2), since the BOC had held him and the other Gatchalians there involved as not properly
documented for admission, under Section 29 (a) (17) of the Immigration Act, as amended. On 7 July
1990, the Acting Director of the National Bureau of Investigation ("NBI") initiated the proceedings
immediately before us by writing to the Secretary of Justice recommending that respondent William
Gatchalian, and his co-applicants covered by the Warrant of Exclusion dated 6 July 1962, be charged
with: "Violation of Section 37 (a), paragraphs 1 and 2, in relation to Section 45 (c), (d) and (e) of
Commonwealth Act 613 as amended, also known as the Immigration Act of 1940." The Secretary of
Justice endorsed this recommendation to Immigration Commissioner Domingo for investigation and
immediate action. On 20 August 1990, Special Prosecutor Mabolo filed a charge sheet against
respondent William Gatchalian which specified the following charges:
The respondent is an alien national who unlawfully gained entry into the Philippines without
valid travel document in violation of the Immigration Act; Sec. 37 par. a, sub pars. (1) and (2);
That respondent being an alien misrepresented himself as Philippine Citizen by false statements
and fraudulent documents in violation of the Immigration Act, Sec. 45, par. (c), (d) and (e).
That respondent being an alien national is an undocumented person classified as excludable
under the Immigration Act, Sec. 29 (a) sub par. (17).
xxx xxx xxx
(Emphasis supplied)
Section 37 (a) (1) and (2), of Commonwealth Act No. 613, as amended, provides as follows:
Sec. 37 (a). The following aliens shall be arrested upon the warrant of the Commissioner of
Immigration or of any other officer designated by him for the purpose and deported upon the
warrant of the Commissioner of Immigration after a determination by the Board of
Commissioners of the existence of the ground for deportation as charged against the alien.
(1) Any alien who enters the Philippines after the effective date of this act by means of false and
misleading statements or without inspection and admission by the Immigration authorities at a
designated port of entry or at any place other than at a designated port of entry; (As amended by
Republic Act No. 503).
(2) An alien who enters the Philippines after the effective date of this act, who was not lawfully
admissible at the time of entry.
xxx xxx xxx
(Emphasis supplied)
Section 37 (a) (2), quoted above, relates back to Section 29 (a) of the Immigration Act, as amended,
which lists the classes of alien excluded from entry in the Philippines, as follows:
Sec. 29. (a). The following classes of aliens shall be excluded from entry into the Philippines;
xxx xxx xxx
(17) Persons not properly documented for admission as may be required under the provisions of
this act. (Emphasis supplied)
Thus, in the instant case, the net result is that no time limitation is applicable in respect of the carrying
out of the Warrant of Exclusion issued in 1962.
A little reflection suffices to show why this must be so. What was involved in 1961 when the supposed
children and grandchildren of Santiago Gatchalian first descended upon the Philippines, was the right
of a person claiming to be a Philippine citizen to enter for the first time and reside in the Philippines.
On the part of the Government, what was at stake was the right to exclude from the country persons
who had claimed the right to enter the country as Philippine citizens but who had failed to substantiate
such claimed status. Aliens seeking entry into the Philippines do not acquire the right to be admitted
into the country by the simple passage of time. Exclusion of persons found not to be entitled to
admission as Philippine citizens, must be distinguished from the deportation of aliens, who, after
having been initially lawfully admitted into the Philippines, committed acts which rendered them liable
to deportation.
Normally, aliens excluded are immediately sent back to their country of origin.2 This is so in cases
where the alien has not yet gained a foothold into the country and is still seeking physical admittance.
However, when the alien had already physically gained entry but such entry is later found unlawful or
devoid of legal basis, the alien can be excluded any time after it is found that he was not lawfully
admissible at the time of his entry. Technically, the alien in this case is being excluded; however, the
rules on deportation can be made to apply to him in view of the fact that the cause for his exclusion is
discovered only after he had gained physical entry.
It is worth noting at this point that in Arocha vs. Vivo (supra), this Court upheld the 6 July 1962 Order
of the BOC and the application of the Warrant of Exclusion, in respect of Pedro Gatchalian, even
though more than five (5) years had elapsed by the time the Court's Decision was promulgated on 26
October 1967.
Though respondent William Gatchalian is physically inside the country, it is the government's basic
position that he was never lawfully admitted into the country, having failed to prove his claim of
Philippine citizenship, and hence the Warrant of Exclusion of 6 July 1962, or a new Warrant of
Exclusion for that matter, may be executed "at any time" under Section 37 (b). It is the correctness of
that basic position which must be ascertained and in that ascertainment, the mere passage of time is
quite peripheral in relevance considering the express language of Section 37 (b).
My distinguished brother, Bidin, J., finally invokes Act No. 3326, and on the basis of Section 1 thereof,
would hold that where the arrest for purpose of deportation is made more than five (5) years after the
cause for deportation arose, the prescriptive period of eight (8) years should be applied. Act No. 3326
which took effect on 4 December 1926, establishes prescriptive periods in respect of criminal
prosecutions for violations penalized not by the Revised Penal Code but rather by special acts which
do not otherwise establish a period of prescription. In other words, Act No. 3326 establishes a statute of
limitations for the institution of criminal proceedings. It is, however, quite settled that deportation
proceedings cannot be assimilated to criminal prosecutions for violation either of the Revised Penal
Code or of special statutes.3 Moreover, Act No. 3326 purports to be applicable only where the special
act itself has not established an applicable statute of limitations for criminal proceedings. It cannot,
however, be said that Article 37 (b) of the Immigration Act (quoted earlier) has not established an
applicable statute of limitations. For, precisely, Section 37 (b) of the Immigration Act states that
deportation may be effected under certain clauses of Section 37 (a) "at any time after entry." One of
those instances is, precisely, deportation upon the ground specified in Clause (2) of 37 (a) which relates
to "any alien who enters the Philippines after the effective date of this act, who was not lawfully
admissible at the time of entry." Thus, the Immigration Act, far from failing to specify a prescriptive
period for deportation under Section 37 (a) (2), expressly authorizes deportation under such ground "at
any time after entry." It is, thus, very difficult to see how Act No. 3326 could apply at all to the instant
case.
Finally, we must recall once more that what is actually involved in the case at bar is exclusion,
not deportation.
3. It is urged by the government that Arocha vs. Vivo (supra) has already resolved the claim to
Philippine citizenship of respondent William Gatchalian adversely to him and that such ruling
constitutes res judicata. Upon the other hand, respondent William Gatchalian vehemently argues that
neither the 6 July 1962 BOC's Decision nor Arochadefinitely settled the question of his citizenship.
My respectful submission is that respondent William Gatchalian's argument constitutes a highly
selective reading of both the BOC Decision and the Decision in Arocha Written by J.B.L. Reyes, J. for
a unanimous court. The 6 July 1962 Decision of the BOC, in its dispositive portion, reads as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, this Board finds and hereby holds
that the applicants[Jose Gatchalian, Elena Gatchalian, Benjamin Gatchalian, Juan Gatchalian,
Pedro Gatchalian, Gloria Gatchalian, Francisco Gatchalian, William Gatchalian and Johnson
Gatchalian] herein have not satisfactorily proved their claim to Philippine citizenship and
therefore the Decision of the Board of Special Inquiry, dated July 6, 1961 admitting them as
Filipinos is hereby reversed, and said applicants should be, as they are hereby ordered excluded
as persons not properly documented.
SO ORDERED. (Emphasis supplied)
Since respondent William Gatchalian and his co-applicants in 1961 claimed the right to enter the
country as Philippine citizens, determination of their right to enter the Philippines thus indispensably
involved the resolution of their claim to Philippine citizenship. In other words, the determination of that
citizenship in the instant case was not a mere incident of the case; it was rather the central and indeed
the only issue that had to be resolved by the BOC. Review of the 1961 proceedings before the BSI
shows that the sole issue before it was the supposed Philippine citizenship of the applicants. Thus, the
very same issue of claimed Philippine citizenship was resolved by the BOC when it reversed the 6 July
1961 decision of the BSI. This case may be distinguished from other types of cases, e.g., applications
for public utility franchises, petitions for change of name, applications for registration as voter, filing of
certificates of candidacy for an elective position, etc., where the central issue is not citizenship although
resolution of that issue requires a determination of the citizenship of the applicant, candidate or
petitioner.
The ruling of the BOC that respondent William Gatchalian and his co-applicants for admission as
Philippine citizens had not satisfactorily proved their claim to Philippine citizenship, can only be
reasonably read as a holding that respondent William Gatchalian and his co-applicants
were not Philippine citizens, whatever their true nationality or nationalities might be. Thus, it appears
to be merely semantic play to argue, as respondent William Gatchalian argues, that the 1962 BOC
Decision did not categorically hold him to be an "alien" and that the BOC had merely held him and his
co-applicants as "not properly documented." The phrase "not properly documented" was strictly and
technically correct. For William Gatchalian and his co-applicants had presented themselves as
Philippine citizens and as such entitled to admission into the country. Since the BOC rejected their
claims to Philippine citizenship, William Gatchalian and his co-applicants were non-Filipinos "not
properly documented for admission" under Section 29 (a) (17), Immigration Act as amended.
4. In Arocha vs. Vivo (supra), the Supreme Court had before it the following items:
1. The 6 July 1961 Decision of the BSI which allowed the entry of respondent Gatchalian and
his co-applicants as citizens of the Philippines;
2. A split BOC Decision approving the 6 July 1961 BSI decision, which had been "noted" by
two (2) Commissioners but rejected by Commissioner Galang on 14 and 26 July 1961 and 21
August 1961, respectively;
3. The 6 July 1962 Decision of the BOC in which the BOC had reviewed motu proprio the
Gatchalian proceedings before the BSI and reversed the BSI decision of 6 July 1961;
4. The Warrant of Exclusion dated 6 July 1962 issued pursuant to the 6 July 1962 Decision of
the BOC; and
5. A decision of the Manila Court of First Instance dated 31 July 1965, rendered in a habeas
corpusproceeding brought to effect the release of Pedro Gatchalian who had been taken into
custody by immigration officials pursuant to the 6 July 1962 Warrant of Exclusion.
The Court of First Instance ("CFI") decision ordered Pedro Gatchalian's release upon the ground that
the 6 July 1962 BOC Decision had been issued beyond the one (1) year period for review of the BSI
decision of 6 July 1961. The CFI decision was reversed and nullified by the Supreme Court.
The Supreme Court held that the BOC Decision of 6 July 1962 had not been antedated and that it was
valid and effective to reverse and nullify the BSI order granting admission to the Gatchalians as
citizens of the Philippines.
The Court also held that the split BOC decision of July-August 1961 did not operate to confirm and
render final the BSI decision of 6 July 1961, the split decision being null and void because it had not
been rendered by the BOC as a body.
The Court further rejected Pedro Gatchalian's argument that he was not bound by the 6 July 1962 BOC
Decision:
It is argued for the appellee that the minutes in Exh. 5-A refer only to the cases of Gloria,
Francisco and Benjamin Gatchalian. But the designation of the case is "Gloria Gatchalian, et
al." No reason is shown why the case of these three should be considered and voted upon
separately, considering that the claims to citizenship and entry of all were based on the same
circumstances, applicants being the descendants of one Santiago Gatchalian, a Filipino and that
all their applications for entry were in fact jointly resolved by the Board of Inquiry in one single
decision (Annex 1, petition, G.R. No. L-24844).4
I respectfully submit that the above-quoted ruling in Arocha disposes of the contention here being made
by respondent William Gatchalian that he is not bound by the Decision in Arocha vs. Vivo, Arocha held
that the 1962 BOC Decision was valid and effective and William was certainly one of the applicants for
admission in the proceedings which began in 1961 before the BSI.
Respondent William Gatchalian contends that the Court in Arocha did not find him nor any of his co-
applicants to be aliens and that all the Court did was to hold that the 6 July 1962 Board of
Commissioners decision had not been antedated. This contention cannot be taken seriously. As has
already been pointed out several times, the 1962 Board of Commissioners decision held that William
Gatchalian and his eight (8) other co-applicants for admission had not proved their claim to Philippine
citizenship; not being Filipinos, they must have been aliens, to be excluded as persons not properly
documented. Moreover, a review of the Rollo in Arocha vs. Vivo shows that the parties there had
expressly raised the issue of the citizenship of Pedro Gatchalian in their pleadings. The Solicitor
General, in his fifth assignment of error, argued that the Court of First Instance had erred in declaring
Pedro Gatchalian a Filipino, and simultaneously urged that the 6 July 1962 decision of the Board of
Commissioners was quite correct. Pedro Gatchalian, upon the other hand, contended that precisely
because he was a Filipino, the Bureau of Immigration had no jurisdiction to exclude him.5
The Court also said in Arocha:
Finally, it is well to note that appellee did not traverse the allegation of appellant
Commissioners in their return to the writ of Habeas Corpus that appellee Pedro Gatchalian
gained entry on the strength of a forged cablegram, purportedly signed by the former Secretary
of Foreign Affairs Felixberto Serrano, and apparently authorizing appellee's documentation as a
Filipino (par. 3[a] of Return, C.F.I. Rec., pp. 15-16). Such failure to deny imports admission of
its truth by the appellee, establishes that his entry was irregular. Neither has he appealed the
decision of the Commissioners of Immigration to the Department Head.6
Since the physical entry of Pedro Gatchalian was effected simultaneously with that of Francisco and
William Gatchalian, on exactly the same basis and on the strength of the same forged cablegram
allegedly from then Secretary of Foreign Affairs Felixberto Serrano, it must follow that the entry of
Francisco and William Gatchalian was similarly irregular. The applications for admission of the nine
(9) Gatchalians were all jointly resolved by the BSI on 6 July 1961 on the identical basis that they were
all descendants of Santiago Gatchalian, a supposed natural born Philippine citizen.
5. The purported reversal of the 1962 BOC Decision by Commissioner Nituda in 1973, cannot be given
any effect. A close examination of the same reveals that such purported reversal was highly irregular.
Respondent William Gatchalian alleges that Mr. Nituda, being in 1973 Acting Commissioner of
Immigration, had the authority to reverse the BOC Decision of 6 July 1962, since he (Nituda) had
immediate control, direction and supervision of all officers, clerks and employees of the Bureau of
Immigration. Control means, respondent Gatchalian continues, the power to alter or modify or nullify
or set aside what a subordinate officer had done in the performance of his duties and to substitute the
judgment of the former for that of the latter.7
Respondent Gatchalian's view is obviously flawed. The Commissioner's power of control over the
officers and employees of the Bureau of Immigration cannot be compared to the power of control and
supervision vested by the Constitution in the President of the Philippines (which was what Ham was all
about), for the Commissioner's general power of control cannot be said to include the power to review
and set aside the prior final decision reached by the BOC. The Commissioner of Immigration, acting
alone, cannot be regarded as an authority higher than the BOC itself (constituted by the Commissioner
and the two [2] Associate Commissioners), in respect of matters vested by the governing statute in such
Board itself. One of these matters is precisely the hearing and deciding of appeals from decisions of the
BSI, and the motu proprio review of the entire proceedings of a case within one (1) year from the
promulgation of a decision by the BSI.8
Respondent Gatchalian points to Section 29 (b) of the Immigration Act as amended, as empowering
Nituda to reverse the 1962 BOC Decision. Section 29 (b) reads as follows:
Section 29. . . .
xxx xxx xxx
(b) Notwithstanding the provisions of this section, the Commissioner of Immigration, in his
discretion, may permit to enter (sic) any alien properly documented, who is subject to exclusion
under this section, but who is —
(1) an alien lawfully resident in the Philippines who is returning from a temporary visit
abroad;
(2) an alien applying for temporary admission.
It is difficult to understand respondent's argument. For one thing, Section 29 (b) relates to an
"alien properly documented" while respondent Gatchalian precisely claims to be a citizen of the
Philippines rather than a resident alien returning from a temporary visit abroad or an alien
applying for temporary admission.
It should be recalled that Nituda's 1973 Decision approved a ruling rendered by a Board of
Special Inquiry in 1973 that respondent Gatchalian was properly documented, a ruling which
was precipitated by a "Petition for Rehearing" filed by respondent Gatchalian and his co-
applicants in 8 March 1972 before the BSI. There are a number of obvious defects in the action
of the BSI. Firstly, the motion for rehearing was filed way out of time.Rule 3, B 22 of the
Immigration Rules and Regulations of 1 January 1941 provides as follows:
At any time before the alien is deported, but not later than seven days from the date he
receives notice of the decision on appeal of the Board of Commissioners, the applicant or
his attorney or counsel may file a petition for rehearing only on the ground of newly
discovered evidence. Such petition shall be in writing and shall set forth the nature of the
evidence discovered and the reason or reasons why it was not produced before. . . .
(Emphasis supplied)
Respondent Gatchalian's and his co-applicants' motion for rehearing was filed, not seven (7)
days but rather ten (10) years after notice of the 1962 BOC Decision had been received by them.
Secondly, Rule 3, B 25 of the Immigration Rules and Regulations prescribed that any motion
for rehearing shall be filed only with the Board of Commissioners; the Gatchalians' motion for
rehearing was filed with the BSI which then purported to reopen the case "without first securing
the consent in writing of the Commissioner of Immigration" as required by Rule 2, D 20.
Furthermore, the purported reversal of the 1962 BOC Decision was made not by the duly
constituted BOC in 1973, but only by its Chairman, then Acting Commissioner Nituda. Mr.
Nituda's action flew in the face of Rule 3, B 22 of the Immigration Rules and Regulation, which
mandates that the decision of any two (2) members of the BOC shall prevail. It thus appears that
Mr. Nituda purported to act as if he were the entire BOC. Indeed, even the BOC itself in 1973
could not have lawfully reversed a final decision rendered by the BOC ten (10) years ago.9
We must, finally, not lose sight of the ruling in Arocha vs. Vivo (supra) where the Supreme Court
expressly outlined the procedure to be followed by the BOC in resolving cases before them. This court
was very explicit in holding that individual actions of members of the BOC are legally ineffective:
. . . [T]he former Immigration Commissioners appeared to have acted individually in this
particular instance and not as a Board. It is shown by the different dates affixed to their
signatures that they did not actually meet to discuss and vote on the case. This was officially
made to record by the Secretary of Justice in his Memorandum Order No. 9, on January 24,
1962, wherein he stated.
that for the past several years, the Board of Commissioners of Immigration has not met
collectively to discuss and deliberate in the cases coming before it. [Citation omitted]
Individual action by members of a board plainly renders nugatory the purpose of its
constitution as a Board. The Legislature organized the Board of Commissioners precisely in
order that they should deliberate collectively and in order that their views and Ideas should be
exchanged and examined before reaching a conclusion (See Ryan vs. Humphrise, LRA 1915F
1047). This process is of the essence of a board's action, save where otherwise provided by law,
and the salutary effects of the rule would be lost were the members to act individually, without
benefit of discussion.
The powers and duties of boards and commissions may not be exercised by the
individual members separately. Their acts are official only when done by the members
convened in sessions, upon a concurrence of at least a majority and with at least
a quorum present. [Citation omitted]
Where the action needed is not of the individuals composing a board but of the official
body, the members must be together and act in their official capacity, and the action
should appear on the records of the board. [Citation omitted]
Where a duty is entrusted to a board, composed of different individuals, that board can
act officially only as such, in convened sessions, with the members, or a quorum thereof,
present. [Citation omitted]10 (Emphasis supplied)
The act of Mr. Nituda of reversing the 1962 Decision of the BOC could not hence be considered
as the act of the BOC itself.
The pretended act of reversal 0of Mr. Nituda must, therefore, be stricken down and disregarded
for having been made in excess of his lawful authority. The 1973 order of Nituda was
ineffective to vest any right upon respondent Gatchalian who, it is worth nothing, did not
pretend to submit any newly discovered evidence to support their claim to Philippine citizenship
already rejected by the 1962 BOC. In essence, Mr. Nituda purported not merely to set aside the
1962 BOC Decision but also the 1967 Decision of this Court in Arocha vs. Vivo.
II
I turn to an examination of the underlying facts which make up the basis of the claim of William
Gatchalian to Philippine citizenship. The most striking feature of this claim to Philippine
citizenship is that it rests upon a fragile web constructed out of self-serving oral testimony, a
total lack of official documentation whether Philippine or foreign, of negative facts and of
invocation of presumptions without proof of essential factual premises. Put in summary terms,
the claim of William Gatchalian to Philippine citizenship rests upon three (3) premises, to wit:
a. that Santiago Gatchalian was a Philippine citizen;
b. the supposed filiation of Francisco Gatchalian as a legitimate son of Santiago
Gatchalian, which leads to the intermediate conclusion that Francisco was a Philippine
citizen; and
c. the supposed filiation of William Gatchalian as a legitimate son of Francisco
Gatchalian leading to the final conclusion that William Gatchalian is a Philippine citizen.
I respectfully submit that a careful examination of the facts made of record will show that the
correctness and factual nature of each of these layered premises are open to very serious doubt,
doubts which can only lead to the same conclusion which the BOC reached on 6 July 1962
when it reversed the BSI, that is, that there was failure to prove the Philippine citizenship of
William Gatchalian and of his eight (8) alleged uncles, aunts and brother in 1961 when they first
arrived in the Philippines.
1. The supposed Philippine citizenship of Santiago Gatchalian must be considered first.
Santiago was allegedly born in Binondo, Manila, on 25 July 1905 to Pablo Pacheco and
Marciana Gatchalian. The records do not disclose anything about Pablo Pacheco but everyone,
including William Gatchalian, assumes that Pablo Pacheco was a Chinese subject and never
became a citizen of the Philippine Islands. The basic claim of Santiago was that his mother
Marciana Gatchalian was a Philippine citizen and that Marciana was not lawfully married to
Pablo Pacheco and that consequently, he (Santiago) was an illegitimate son of Marciana
Gatchalian.
The first point that should be made in respect of Santiago's claim was that he had always
regarded himself as a Chinese citizen until around 1958 or 1960, that is, when he reached the
age of 53 or 55 years. Santiago, by his own testimony, lived the bulk of his adult life in China
where he went in 1924 at age 19 and where he stayed for about 13 years returning to the
Philippines for the first time in 1937. He returned in the same year to China, stayed there for
another nine (9) years, and then came back to the Philippines again in 1946. He once more left
the Philippines for China on 14 April 1947 and returned on 14 June 1947. Upon his second
return to the Philippines in 1946, he documented himself as a Chinese national: he was holder
of ICR No. 7501 dated 3 May 1946. He continued to be documented as such, the record
showing that he was also holder of an ACR No. A-219003 dated 13 January 1951. Santiago,
again by his own statement, married in China a Chinese woman. This Chinese wife, however,
Santiago never brought or attempted to bring to the Philippines and she allegedly died in China
in 1951, or four (4) years after Santiago had permanently returned to the Philippines.
In 1958, when he was 53 years of age, Santiago obtained a residence certificate where for the
first time he described himself as a Filipino. It was also only in 1960, that is, when Santiago was
55 years of age, that he filed a petition for cancellation of his ACR obviously upon the theory
that he had always been a Philippine citizen. It was at the hearing of his petition for cancellation
of his ACR that Santiago made his oral statements concerning the supposed circumstances of
his birth, parentage and marriage. Santiago's petition to cancel his ACR was apparently made in
preparation for efforts to bring in, the succeeding year, a whole group of persons as his
supposed descendants.
The second point that needs to be made in respect of Santiago's claim of citizenship resting on
his supposed status as an illegitimate son of a Filipina woman, is that no birth certificate bearing
the name of Santiago Gatchalian was ever presented.
Instead, a baptismal certificate bearing the name Santiago Gatchalian was presented showing
the name of Marciana Gatchalian, Filipina, as mother, with the name of the father unknown.
There was also presented a marriage certificate dated 1936 of Joaquin Pacheco, alleged brother
of Santiago Gatchalian, also showing Marciana Gatchalian as mother with the name of the
father similarly left blank. These two (2) pieces of paper, together with Santiago's own
statements to the Citizenship Evaluation Board as well as the statements of Joaquin Pacheco to
the same Board, constituted the sum total of the evidence supporting Santiago's claim to
Philippine citizenship and on the basis of which an Order dated 12 July 1960, signed by Felix S.
Talabis, Associate Commissioner, granted the petition to cancel Santiago's alien registry.
In so issuing his Order granting cancellation of Santiago's ACR, Commissioner Talabis
disregarded Santiago's failure to present a birth certificate, in obvious violation of rules of the
Bureau of Immigration which expressly require the submission of a birth certificate, or a
certified true copy thereof, in proceedings brought for cancellation of an ACR upon the ground
that the petitioner is an illegitimate son of a Filipina mother.11 It is well-settled that a baptismal
certificate is proof only of the administration of baptism to the person named therein, and that
such certificate is not proof of anything else and certainly not proof of parentage nor of
the status of legitimacy or illegitimacy.12
That Order also casually disregarded a number of other things, one of which was a document
dated 1902 signed by Maxima Gatchalian, the mother of Marciana Gatchalian, stating that
Maxima —
. . . residing in the City of Manila, mother of Marciana Gatchalian, unmarried, of 18
years of age, her father being dead, do hereby freely consent to her marriage with Pablo
C. Pacheco, of Manila, and that I know of no legal impediment to such marriage.
(Emphasis supplied)
Such parental consent indicated that a marriage ceremony would have taken place shortly
thereafter as a matter of course; otherwise, the consent would have been totally pointless. Even
more importantly, Commissioner Talabis' Order disregarded the testimony of Santiago
Gatchalian himself in the same cancellation proceedings that he (Santiago) believed that his
parents had been married by the Justice of the Peace of Pasig, Rizal.13 In his Order,
Commissioner Talabis referred to the fact that Santiago Gatchalian had been "interchangeably
using his parental and maternal surnames. In school, he was known as Santiago Pacheco (Class
Card for 1920-1921, Meisic Manila; Certificates of Completion of Third and Fourth Grades,
Meisic Primary School). But in his Special Cedula Certificate No. 676812 dated 17 September
1937, and in tax clearance certificate issued on 2 October 1937, he is referred to as Santiago
Gatchalian; and in a Communication dated 6 June 1941, he was addressed to as Santiago
Pacheco by the Philippine Charity Sweepstakes Office." At the very least, such use of both
paternal and maternal surnames indicated that Santiago was uncertain as to his supposed
illegitimacy. In our case law, moreover, the use of a paternal surname may be regarded as an
indication of possession of the status of a legitimate or acknowledged natural child.14
Perhaps the most important aspect of Commissioner Talabis Order granting cancellation of
Santiago's ACR, is that such Order failed to give any weight to the presumption in law in favor
of marriage, a presumption significantly reinforced by the parental consent given by Maxima
Gatchalian to the marriage of her daughter Marciana Gatchalian to one Pablo C. Pacheco. A
related presumption is that in favor of the legitimacy of offspring born of a man and woman
comporting themselves as husband and wife.15 I respectfully submit that these presumptions
cannot be successfully overthrown by the simple self-serving testimony of Santiago and of his
alleged brother Joaquin Pacheco and by the two (2) pieces of paper (the baptismal certificate of
Santiago and the marriage certificate of Joaquin Pacheco). It seems relevant to point out that
Joaquin Pacheco, too, was unable to present any birth certificate to prove his supposed common
parentage with Santiago Gatchalian; Joaquin was allegedly born in 1902, the same year that
Maxima Gatchalian gave her consent to the marriage of Marciana Gatchalian and Pablo C.
Pacheco.
The third point that needs to be underscored is that Santiago Gatchalian did nothing to try to
bring into the Philippines his supposed sons and daughters and grandchildren since 1947, when
he returned permanently to the Philippines, and until 1960. The story given by the nine (9)
supposed descendants of Santiago when they first arrived in the Philippines was that they had
left the People's Republic of China and had gone to Macao in 1952 and there they stayed until
they moved to Hongkong in 1958. It should also be noted that the youngest supposed child of
Santiago, Benjamin Gatchalian, was said to have been born in China in 1942 and was
consequently only five (5) years old when Santiago returned permanently to the Philippines in
1947. In other words, Santiago Gatchalian behaved as if the nine (9) supposed descendants did
not exist until 1960 when Commissioner Talabis' Order cancelling Santiago's ACR was issued.
It may also be noted that Santiago's 1951 ACR application mentioned only two (2) children of
Santiago: Jose and Elena. In 1961, however, Santiago stated before the immigration investigator
that he had a total of five (5) children: Jose, Elena, Francisco, Gloria and Benjamin. Santiago's
explanation strongly echoes a common lawyer's excuse for failure to seasonably file some
pleading, and, it is respectfully submitted, is equally contrived and unpersuasive; that he had his
clerk fill up the ACR; that he gave his clerk four (4) names (not five [5]); that the clerk had
simply failed to fill up the ACR correctly. In its 6 July 1962 Decision, the BOC noted that
"while the two (2) names listed in [Santiago's] [ACR application] Jose and Elena, bear the same
names as two of the [9] applicants, the difference in the ages of said persons compared to the
said applicants, casts serious doubts on their Identity."16
It is suggested in the majority opinion that the question of citizenship of Santiago Gatchalian is
a closed matter which cannot be reviewed by this Court; that per the records of the Bureau of
Immigration, as of 20 July 1960, Santiago Gatchalian had been declared to be a Filipino citizen
and that this forecloses re-opening of that question thirty (30) years later. I must, with respect,
disagree with this suggestion. The administrative determination by the Bureau of Immigration
as of 20 July 1960 certainly does not constitute res adjudicatathat forecloses this Court from
examining the supposed Philippine citizenship of Santiago Gatchalian upon which private
respondent William Gatchalian seeks to rely. The Court cannot avoid examining the Philippine
nationality claimed by Santiago Gatchalian or, more accurately, claimed on his behalf by
William Gatchalian, considering that one of the central issues here is the tanability or
untenability of the claim of William Gatchalian to Philippine citizenship and hence to entry or
admission to the Philippines as such citizen.
2. The second of the three (3) premises noted in the beginning of this section is: that Francisco
Gatchalian was the legitimate son of Santiago Gatchalian and therefore followed the supposed
Philippine citizenship of Santiago. This premise has in fact two (2) parts: (a) the physical
filiation of Francisco Gatchalian as the son of Santiago Gatchalian; and (b) that Santiago
Gatchalian was lawfully married to the Chinese mother of Francisco Gatchalian. This premise is
remarkable for the total absence of documentary support for either of its two (2) parts. Francisco
was born in Amoy, China in 1931, according to Santiago. The sum total of the evidence on this
premise consists of Francisco Gatchalian's own statement and that of Santiago. No birth
certificate or certified true copy thereof, or comparable documentation under Chinese law, was
submitted by either Santiago or by Francisco. No secondary evidence of any kind was
submitted. No testimony of a disinterested person was offered.
Santiago Gatchalian claimed to have been married in China in 1926 to a Chinese woman, Chua
Gim Tee, out of which marriage Francisco was allegedly born. No documentary proof of such
marriage in China, whether primary or secondary, was ever submitted. Neither was there ever
presented any proof of the contents of the Chinese law on marriage in 1926 and of compliance
with its requirements.
It is firmly settled in our jurisdiction that he who asserts and relies upon the existence of a valid
foreign marriage must prove not only the foreign law on marriage and the fact of compliance
with the requisites of such law, but also the fact of the marriage itself. In Yao Kee vs. Sy-
Gonzales,17 the issue before the Court was whether the marriage of petitioner Yao Kee to the
deceased Sy Kiat in accordance with Chinese law and custom had been adequately proven. In
rendering a negative answer, this Court, speaking through Cortes, J., said:
These evidence may very well prove the fact of marriage between Yao Kee and Sy Kiat.
However, the same do not suffice to establish the validity of said marriage in
accordance with Chinese law and custom.
Custom is defined as "a rule of conduct formed by repetition of acts, uniformly observed
(practiced) as a social rule, legally binding and obligatory." The law requires that "a
custom must be proved as a fact, according to the rules of evidence" [Article 12, Civil
Code]. On this score the Court had occasion to state that "a local custom as a source of
right can not be considered by a court of justice unless such custom is properly
established by competent evidence like any other fact" [Patriarca vs. Orato, 7 Phil. 390,
395 (1907)]. The same evidence, if not one of a higher degree, should be required of a
foreign custom.
The law on foreign marriages is provided by Article 71 of the Civil Code which states
that:
Art. 71. All marriages performed outside the Philippines in accordance with the
laws in force in the country where they were performed, and valid there as such,
shall also be valid in this country, except bigamous, polygamous, or incestuous
marriages, as determined by Philippine law.
Construing this provision of law the Court has held that to establish a valid foreign
marriage two things must be proven, namely: (1) the existence of the foreign law as a
question of fact; and (2) the alleged foreign marriage by convincing evidence [Adong vs.
Cheong Seng Gee, 43 Phil. 43, 49 (1922).18(Emphasis supplied)
In the instant case, there was absolutely no proof other than Santiago's bare assertion that a marriage
ceremony between Santiago and Chua Gim Tee had taken place in China in accordance with Chinese
law. The contents of the relevant Chinese law on marriage at the time of the supposed marriage, was
similarly not shown. Should it be assumed simply that the requirements of the 1926 Chinese law on
marriage are identical with the requirements of the Philippine law on marriage, it must be pointed out
that neither Santiago nor Francisco Gatchalian submitted proof that any of the requirements of a valid
marriage under Philippine law had been complied with.
I respectfully urge, therefore, that the reliance in the majority opinion upon our conflicts rule on
marriage embodied in Article 71 of the Civil Code (now Article 26 of the Family Code; then Section 19
of Act No. 3630) is unwarranted. The rule that a foreign marriage valid in accordance with the law of
the place where it was performed shall be valid also in the Philippines, cannot begin to operate until
after the marriage performed abroad and its compliane with the requirements for validity under the
marriage law of the place where performed, are first shown as factual matters. There is, in other words,
no factual basis for a presumption that a lawful marriage under Chinese law had taken place in 1926 in
China between Santiago Gatchalian and Chua Gim Tee.
It must follow also that Francisco Gatchalian cannot simply rely upon a presumption of legitimacy of
offspring of a valid marriage.1âwphi1 As far as the record here is concerned, there could well have
been no marriage at all in China between Santiago Gatchalian and Chua Gim Tee (just as Santiago had
insisted that his father and mother had never married each other) and that consequently Francisco
Gatchalian could just as well have followed the nationality of his admittedly Chinese mother.
3. The last premise noted earlier is the supposed filiation of William Gatchalian as a legitimate son of
Francisco which resulted in William's following the supposed Philippine citizenship of Francisco
Gatchalian. William was, according to Santiago Gatchalian, born in Amoy, China in 1949. Here again,
just in the case of Francisco Gatchalian, there is a complete absence of contemporaneous documentary
evidence of the supposed filiation of William Gatchalian as a legitimate son of Francisco
Gatchalian.19 The only support ever presented for such alleged filiation consisted of the oral
statements of Santiago Gatchalian, Francisco Gatchalian and William Gatchalian. It is difficult to resist
the impression that there took place here a pyramiding of oral statements, each resting upon another
oral statement and all going back to the supposed bastardy of Santiago, a status suddenly discovered or
asserted by Santiago in his 55th year in life. No birth certificate, or comparable documentation under
Chinese law, exhibiting the name of William Gatchalian was submitted.
Francisco Gatchalian stated that he had married a Chinese woman, Ong Siu Kiok, in Amoy in 1947
according to Chinese custom. Once again, we must note that there was no proof submitted that a
marriage ceremony satisfying the requirements of "Chinese custom" had ever taken place in China
between Francisco and Ong Siu Kiok; neither was there any proof that a marriage "according to
Chinese custom" was valid and lawful under Chinese law in 1947 and of factual compliance with the
requirements of the law and custom in China concerning marriage.20 Ong Siu Kiok was alleged to
have died in Macau and never came to the Philippines. It must then follow, once again, that no
presumption of a lawful marriage between Francisco Gatchalian and his alleged Chinese wife can be
invoked by William Gatchalian. It follows still further that William Gatchalian cannot invoke any
presumption of legitimacy in his own favor. As in the case of his putative father Francisco, William
could as well have followed the nationality of his concededly Chinese mother.
One final note: it might be thought that the result I have reached is unduly harsh considering the
prolonged physical stay of William Gatchalian in the country. But this Court must apply the law as it is
in fact written. I respectfully submit that the appropriate recourse of respondent William Gatchalian,
should he feel that he has some humanitarian claim to a right to stay in the Philippines, is to the
political departments of Government. Those departments of Government may then consider the
wisdom and desirability, in the light of the interests of the country, of legislation permitting the
legalization of the entry and stay in the Philippines of respondent William Gatchalian and those
similarly situated. Unless and until such legislation is enacted, this Court really has no choice save to
apply and enforce our immigration law and regulations and our law on citizenship.
Accordingly, I vote to GRANT the Petition for Certiorari and Prohibition in G.R. Nos. 95122-23, and
to SET ASIDE the Resolution/Temporary Restraining Order dated 7 September 1990 issued by
respondent Judge Dela Rosa in Civil Case No. 90-5214, as well as the Order of respondent Judge
Capulong dated 6 September 1990 in Civil Case No. 3431-V-90; and to RE-AFFIRM that respondent
William Gatchalian is not a Philippine citizen.
Melencio-Herrera, Cruz, Paras, Padilla, Regalado, JJ., concur
QUALITRANS , 179 SCRA 569, G.R. No. 79886, G.R. No. 79887 November 22,
1989

Administrative Law; Land Transportation Commission; Due Process; In administrative cases, notice is
not indispensable, but the deprivation of opportunity to be heard.—Of course, the Commission’s
action must have been preceded by due notice and hearing, and precisely, it is Qualitrans’
complaint that it had been deprived of due process for failure of the transportation body to give it
notice and hearing (in particular, of Royal Class’ motion to lift cease and desist order). The , records
show, however, that the decision of the Board is founded on substantial evidence. Moreover, in
administrative cases, “notice” is not indispensable, but the deprivation of opportunity to be heard.
That is not the case here. The reality is that on October 1, 1986, Qualitrans opposed Royal Class’
application for “declaratory relief.” It can not therefore be heard to say that the Commission had
acted without giving the petitioner an avenue to air its side of the story.

Same; Same; Same; Certificate of Public Convenience; The primary consideration in the grant or
refusal of a certificate of public convenience is the interest of the public.—That Royal Class had,
itself, admitted that its franchise covered tha NAIA-hotel route alone, does not weaken the
Commission’s ruling. The yardstick, so Monserrat tells us, is that: x x x In the granting or refusal of a
certificate of public convenience, all things considered, the question is what is for the best interests
of the public. Like Monserrat, the Court finds it “hard to conceive how it would be for the best
interests of the public” to have one line only, “and how the public would be injured by the granting
of the certificate in question, for it must be conceded that two companies in the field would
stimulate the business . . .”

Same; Same; Jurisdiction; The increasing pattern of legal development is to entrust “special cases”
to “special bodies” rather than the courts.—In addition, there is a need to square the functioning of
administrative bodies vis-a-vis contemporary realities. As we have observed, the increasing pattern
of law and legal development has been to entrust “special cases” to “special bodies” rather than the
courts. As we have also held, the shift of emphasis is attributed to the need to slacken the
encumbered dockets of the judiciary and so also, to leave “special cases” to specialists and persons
trained therefor. ,

These two petitions, in the nature of appeals by certiorari, from a joint judgment of the Court of
Appeals, were brought by QualitransLimousine Service, Inc., grantee of a certificate of public
convenience issued by the defunct Board of Transportation to operate a "garage (tourist) air-
conditioned service"[1] in Manila to any point in the island of Luzon. By our Resolution of
September 7, 1988, we consolidated the twin cases. We also gave due course thereto.
The facts, never disputed, are stated in the decision of the Court of Appeals. We quote:
xxx xxx xxx

On June 22, 1982, the then Board of Transportation, now the Land Transportation
Commission, rendered a Decision granting petitioner a certificate of public convenience to
operate a garage (tourist) air-conditioned service within the City of Manila and from said
place to any point in Luzon, and vice-versa (Annex A, CA-G.R. SP No. 10049).
On June 25, 1982, said Decision was amended by converting petitioner's certificate of
public convenience for garage service into one for limousine tourist service for the
transportation of all outgoing passengers of the Manila International Airport (Annex B,
CA-G.R. SP No. 10049).

On October 14, 1985, a Deed of Absolute Sale (Annex 1 of both Records) was executed by
private respondent with Transcare Inc., a duly licensed limousine service operator and
likewise, a holder of a certificate of public convenience (Annex 2 of both Records). By
virtue of said sale, the franchise granted to Transcare, Inc. for the use of 40 units of tourist
cars was sold to private respondent.

On December 27, 1985, upon application filed for the approval of aforementioned sale, an
Order was issued by the Land Transportation Commission granting a provisional permit in
favor of private respondent (Annexes C and 3, CA-G.R. SP No. 10049); Annexes B and 3,
CA-G.R. No. 10370-SP). The prefatory portion thereof states:

"The application filed in this case is for the approval of sale made by TRANSCARE, INC., in favor of
ROYAL CLASS LIMOUSINE SERVICE of the Certificate of Public Convenience issued in Case Nos.
81-4405 and 82-415 authorizing the operation of a TOURIST CAR (AIR-CONDITIONED)
SERVICE within the New Manila International Airport and from said place to any point in the
Island of Luzon accessible to motor vehicle traffic and vice-versa, involving the right to operate
forty (40) units authorized therein. x x x" (Emphasis supplied).
On June 17, 1986, petitioner filed a motion for reconsideration before the Land
Transportation Commission to correct the route specified in the prefatory portion of its
December 27, 1986 Order (Annex 4 of both Records). Petitioner argues that the application
filed by private respondent was for the route from the "New Manila International Airport to
hotels and from said hotels to any point in Luzon accessible to vehicular traffic and vice-
versa", and not from the "New Manila International Airport x x x to any point in
theIsland of Luzon x x x" (ibidem). Petitioner claims that respondent has been soliciting
passengers from the New Manila InternationalAirport to transport them to any point
in Luzon to the prejudice of petitioner's business.

On September 1, 1986, petitioner filed Civil Case No. 4275-P before the Pasay City
Regional Trial Court for damages with prayer for issuance of a writ of mandatory
injunction against private respondent (Annex D, CA-G.R. SP No. 10049; Annex 5, CA-
G.R. SP No. 10370).

On same date, Hon. Fermin A. Martin, Jr., Vice-Executive Judge of the Pasay City
Regional Trial Court, issued a Restraining Order directing private respondent to desist from
ferrying passengers from the New Manila International Airport to their residences (Annex
E, CA-G.R. SP No. 10049; Annex 6, CA-G.R. SP No. 10370). The petition for preliminary
injunction was set for hearing on September 5, 1986.

On September 3, 1986, private respondent, defendant in Civil Case No. 4275, filed an
Urgent Motion to Dissolve/Lift Restraining Order issued by Hon. Fermin A. Martin, Jr.
(Annex F, CA-G.R. SP No. 10049). Thereafter, same respondent filed an Opposition to
petitioner's application for a writ of preliminary mandatory injunction (Annex G, CA-G.R.
SP No. 10049).
In the hearing of September 5, 1986, respondent Hon. Perpetua D. Coloma, in whose
Branch the civil case was raffled, gave petitioner up to September 8, 1986 within which to
file an opposition, if any, to respondent's urgent motion.

On September 8, 1986, petitioner filed the required opposition (Annex I, CA-G.R. SP No.
10049). On that same date, respondent Judge ruled on said urgent motion and petitioner's
earlier prayer for the issuance of a preliminary mandatory injunction. Pertinent portions of
respondent Judge's Order read as follows:

"After a careful examination of the arguments of both parties to support their respective claims, this
Court believes that the defendant's contention finds justification under the doctrine of exhaustion of
Administrative remedies.
xxx xxx xxx
"Further, this Court doesn't have jurisdiction over this case under Sec. 19 BP Blg. 129.
RTC shall have Exclusive jurisdiction. - SEC. 19, BP Blg. 129.
6. In all cases not within the exclusive jurisdiction of any Court, Tribunal, person or body exercising
judicial or quasi-judicial functions.
IN VIEW OF ALL THE FOREGOING, this Court is constrained to Lift as it does lift the Restraining
Order dated September 1, 1986 and hereby denies the issuance of Preliminary
Mandatory." (Sic) (Annex H, CA-G.R. SP No. 10049; Annex 8, CA-G.R. SP No. 10370).
On September 16, 1986, petitioner filed a Motion for Reconsideration (Annex J, CA-G.R.
SP No. 10049) which was denied byrespondent Court on September 19, 1986.

In the meantime, private respondent filed in respondent Commission a Petition for


Declaratory Relief (sic) requestioning the latter to declare the extent of its rights under its
provisional authority (Annex C, CA-G.R. SP No. 10370).

On September 17, 1986, petitioner was able to secure from respondent Commission an
Order directing private respondent "to immediately cease and desist from operating its units
from the New Manila International Airport to any point in Luzon" (Annexes D and 9, CA-
G.R. SP No. 10370). Two days later, however, this Order was lifted by respondent
Commission upon motion of private respondent (Annex 5, CA-G.R. SP No. 10049;
Annexes 10 and 11, CA-G.R. SP No. 10370).

On September 23, 1986, petitioner filed before this Court CA-G.R. SP No. 10049 praying,
among others, that a Restraining Order issue to prevent implementation of the September 8,
and 19, 1986 Orders of respondent Court and to direct said Court to grant the injunction
prayed for therein.

On October 1, 1986, petitioner filed its Opposition to private respondent's Petition for
Declaratory Relief pending before respondent Commission (Annex F, CA-G.R. SP No.
10370).

On October 9, 1986, respondent Commission acted on private respondent's Petition for


Declaratory Relief ruling that the provisional authority granted to private respondent was
"to transport passengers from the New Manila International Airport and from said place to
any point in the Island of Luzon x x x." (Annex G, CA-G.R. SP No. 10370).

On October 15, 1986, petitioner filed a motion for respondent Commission to reconsider its
Order of October 9, 1986 (Annex H, CA-G.R. SP No. 10370). This was denied by said
Commission in its Order dated October 17, 1986 (Annex I, CA-G.R. SP No. 10370).[2]

xxx xxx xxx

The Court of Appeals dismissed both of Qualitrans' petitions and directed it to respect the issuance of a
certificate of public convenience (CPC) in favor of Royal Class Limousine Service. The
petitioner now holds the Appellate Court to be in error, in these respects:
I
THE COURT OF APPEALS ERRED IN RULING THAT THE LAND
TRANSPORTATION COMMISSION HAS JURISDICTION OVER PETITIONS FOR
DECLARATORY RELIEF.

II
THE COURT OF APPEALS ERRED IN RULING THAT THE PETITION FOR
DECLARATORY RELIEF OF PRIVATE RESPONDENT WAS PROPER.

III
THE COURT OF APPEALS ERRED IN NOT RULING THAT THE DECISIONS OF
THE LAND TRANSPORTATION COMMISSION IN CASES NOS. 81-4405 AND 82-416
ARE VOID FOR BEING CONTRARY TO MINISTRY ORDER NO. 81-054.

IV
THE COURT OF APPEALS ERRED IN NOT RULING THAT THE LAND
TRANSPORTATION COMMISSION DENIED PETITIONER DUE PROCESS OF LAW,
BECAUSE IT ADVANCED THE TIME OF THE HEARING WITHOUT NOTICE TO
PETITIONER.

V
THE COURT OF APPEALS ERRED IN RULING THAT THE ORDERS OF OCTOBER 9
AND 17, 1986 OF THE LAND TRANSPORTATION COMMISSION WAS SUPPORTED
BY THE EVIDENCE, WHEN NONE WAS EVER ADDUCED.

VI
THE COURT OF APPEALS ERRED IN NOT RULING THAT PRIVATE RESPONDENT
IS NOT AUTHORIZED TO TRANSPORT PASSENGERS DIRECTLY FROM THE
MANILA INTERNATIONAL AIRPORT TO DESTINATIONS OTHER THAN HOTELS.
[3]

Anent the said Appellate Court's affirmance of the Regional Trial Court's
Order[4] dismissing Qualitrans' complaint for injunction and damages, Qualitrans assigns the following
errors:
I
THE REGIONAL TRIAL COURT HAS JURISDICTION OVER CIVIL CASE NO. 4275-
P.

II
THE DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES IS NOT
APPLICABLE TO THIS CASE.

III
PETITIONER IS ENTITLED TO THE ISSUANCE OF A WRIT OF PRELIMINARY
INJUNCTION.[5]

We sustain the Court of Appeals in both cases.


I (G.R. No. 79886)
1. As to claims that the Land Transportation Commission can not entertain suits for declaratory relief,
there is merit in the ruling under question to the effect that the Commission, under its
enabling law, Executive Order No. 1011, has ample powers to modify certificates of public
convenience, including the grant of latitudinarian franchises in favor of public utilities. We quote:
x x x The (Land Transportation) Commission shall have, among others, the following
powers and functions:

(a) Quasi-judicial powers and functions which require notice and hearing -

xxx xxx xxx

(2) To issue, amend, revise, suspend or cancel Certificates of Public Convenience or


permits authorizing the operation of public land transportation services provided by
motorized vehicles, and to prescribe the appropriate terms and conditions therefore;[6]

xxx xxx xxx

Royal Class' application is, quintessentially, a petition for an expanded route, over which the Board
exercises jurisdiction under its charter. If it seemed like an "action for declaratory relief", it is only a
coincidence, for the nature of an action is to be determined by what the petition alleges and not by the
appellation the parties have attached to their pleadings.[7] Whether it is a petition for declaratory relief
or for revision or grant or cancellation of an existing CPC, the authority of the Commission to act is
justified, so long as it has been properly invoked.
The fact that Qualitrans had, meanwhile, commenced suit in the Regional Trial Court (RTC) does not
oust the Commission of its jurisdiction. The Commission had a primacy of authority to take
cognizance of Royal Class' inquiry. It is to be noted, indeed, that the very trial court, by its order of
September 8, 1986,[8] denied the issuance of preliminary injunctive relief sought by Qualitrans, in
deference, precisely, to the Board's primal and preferential jurisdiction.
2. Of course, the Commission's action must have been preceded by due notice and hearing,[9] and
precisely, it is Qualitrans' complaint that it had been deprived of due process for failure of the
transportation body to give it notice and hearing (in particular, of Royal Class' motion to lift cease and
desist order). The records show, however, that the decision of the Board is founded on substantial
evidence.[10]Moreover, in administrative cases, "notice" is not indispensable, but the deprivation of
opportunity to be heard. That is not the case here. The reality is that on October 1,
1986, Qualitrans opposed Royal Class' application for "declaratory relief."[11] It can not therefore be
heard to say that the Commission had acted without giving the petitioner an avenue to air its side of the
story.
3. Anent charges that the Commission issued the questioned certificate of public convenience without
evidence, suffice it to say that:
xxx xxx xxx

". . . the courts cannot or will not determine a controversy involving a question which is
within the jurisdiction of an administrative tribunal prior to the decision of that question by
the administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the special knowledge, experience, and services of the
administrative tribunal to determine technical and intricate matters of fact, and a uniformity
of ruling is essential to comply with the purposes of the regulatory statute administered."
Recently, this Court speaking thru Mr. Chief Justice Claudio Teehankee said:

"In this era of clogged court dockets, the need for specialized administrative boards or
commissions with the special knowledge, experience, and capability to hear and determine
promptly disputes on technical matters or essentially factual matters, subject to judicial
review in case of grave abuse of discretion, has become well nigh indispensable."[12]

The records also reveal that there were sound reasons for the lifting of the Commission's cease
and desist order, to wit:
xxx xxx xxx

1. Complaint's (sic) Motion for Reconsideration of the order dated December 27, 1985, in
Case No. 85-9619 filed on June 17, 1986, has not yet been resolved by this Commission;

2. Respondent's Petition for Declaratory Relief filed on September 15, 1986, is still
pending resolution by this Commission;

3. Considerable losses and irreparable injury will be sustained by respondent, not to


mention the loss of income of its drivers/employees whose only source of livelihood is
dependent on the present and continuous operation of respondent; and

4. Above all, public interest and convenience will surfer and be prejudiced if respondent is
restrained from ferrying passengers from the New MIA directly to their
respective residences;

5. Likewise, a restraining order should be granted only where there is a clear showing that
there is indeed a flagrant violation on (sic) the property right of another. Absence of which
or in case of ambiguity, a restraining order is unavailing. And in the present case there is
really that ambiguity, attendant to the issues involved, which this Commission shall have to
resolve on the merits so as not to prejudice either party.[13]
3. As to charges that the certificate of public convenience of the private respondent had allowed it to
transport clients from the NinoyAquino International Airport only to hotels but not to any other
destination, the Court is agreed that the controlling jurisprudence is Carmelo and Oriol v. Monserrat,
[14] in which we held:
xxx xxx xxx

Everything else being equal, the real, primary question involved is whether it is better and
more convenient for the travelling public in the City of Manila to have two taxicab
companies in operation than it is to have one, and whether in truth and in fact the granting
of another similar license to the petitioners would operate as a real injury to Monserrat. He
is the first in the field and so long as he maintains good and efficient service and meets the
demand of the public, it is fair to assume that he will hold his present customers and would
have nothing to fear from the granting of a license to the petitioners, and if for any reason
he does not give the required kind of service or satisfy the needs of the public, then he
would have no right to complain.

xxx xxx xxx

That is to say, taxies are not operated on any schedule or over any certain route or between
certain points or in any direction, and that the certificate granted to Monserrat is in the
nature of a blanket franchise to operate a taxicab service over any and all of the streets and
alleys of the city, in any direction, from any place, and at any time, subject to the call
and wish of the customer only both as to time, place, and route of travel. That is to say, it is
in the sole discretion of the person desiring to travel whether he shall call a taxi or an auto
garage car, and as to when he shall call it, and where he shall go, and in the operation of an
autobus line, the operator must maintain a fixed schedule over a specified route between
certain points, and must make his trips with or without passengers.[15]

The abovestated doctrine applies with equal force to the case under consideration. For
although Monserrat involved a fleet of taxicabs, the taxicab business is no different, fundamentally,
from a limousine service because both have very broad destinations.
That Royal Class had, itself, admitted that its franchise covered the NAIA-hotel route alone, does not
weaken the Commission's ruling. The yardstick, so Monserrat tells us, is that:
xxx xxx xxx

In the granting or refusal of a certificate of public convenience, all things considered, the
question is what is for the best interests of the public.[16]

Like Monserrat, the Court finds it "hard to conceive how it would be for the best interests of the
public"[17] to have one line only, "and how the public would be injured by the granting of the
certificate in question, for it must be conceded that two companies in the field would stimulate the
business..."[18]
It is simply bellyaching to say that Royal Class had transcended the bounds of the certificate of public
convenience granted to it. What Qualitrans is plainly carping about is the threat the Royal Class'
certificate of public convenience poses on its foothold in the "limo" service business. This
is monopolism, plainly and simply, and we can not tolerate it. The constitutional mandate is for "a
more equitable distribution of opportunities, income, and wealth"[19] and for the State to regulate or
prohibit monopolies."[20]
As we have held furthermore, a provisional authority is given on showing of public need.[21] Thus, it
may be issued ex-parte.
II (G.R. No. 79887)
1. For the same reasons, the above appeal must also fail. The Regional Trial Court (RTC) had acted
correctly in dismissing Qualitrans' damage suit.
Ramos v. Court of First Instance of Tayabas,[22] in which we sustained the jurisdiction of the CFI
(now, RTC) at the expense of Public Service Commission (now, the Land Transportation Commission),
has no application. In that case, the aggrieved party had denounced his adversary's action before the
PSC. The latter, however, had failed to act. We stamped our imprimatur on the CFI's jurisdiction
because of temporal constraints. ("Damages pile up day by day as infringement continues. The Public
Service Commission has been afforded an opportunity to give relief and has not done so."[23])
In addition, there is a need to square the functioning of administrative bodies vis-a-vis contemporary
realities. As we have observed, the increasing pattern of law and legal development has been to entrust
"special cases" to "special bodies" rather than the courts. As we have also held, the shift of emphasis is
attributed to the need to slacken the encumbered dockets of the judiciary and so also, to leave "special
cases" to specialists and persons trained therefor.
There is no merit in the claims that Royal Class has been guilty of unfair competition. For starters, its
CPC has been duly issued. It (CPC) can not therefore be said to have been acquired through duress or
deceit to warrant such a charge.
2. Failure to exhaust administrative remedies is arrayed against Qualitrans. Hence, it can not validly
revoke our ruling in Arrow Transportation Corp. v. Board of Transportation.[24] That case was
impelled by urgent need, which the courts could address more swiftly. It is not the case here. Not
much is at stake in the "limo" business. We hold that the Commission should have better been left
alone to discharge its duty without court interference.
3. We are not impressed that Qualitrans has successfully shown that it is entitled to the injunctive
writ. Its appeal to "ruinous competition"[25] is not well-taken. Under the Constitution, the national
economy stands for, "competi[tion] in both domestic and foreign markets."[26] Obviously, not every
kind of competition is "ruinous competition". All things considered and all things equal, competition is
a healthy thing. Besides, there is no showing that Qualitrans stood to lose its capital investment with
the approval of Royal Class' franchise.[27] Our considered opinion is that Qualitrans should improve
its services as a counterbalance to Royal Class' own toehold in the market. And let that be its
challenge.
WHEREFORE, the petitions are DENIED. The decision appealed from is AFFIRMED in toto. No
costs.
SO ORDERED.

Marina Properties Corporation vs. Court of Appeals, 294 SCRA 273, G.R. No.
125447, G.R. No. 125475 August 14, 1998

Actions; Pleadings and Practice; Judgments; Appeals; Motions for Reconsideration; Pro Forma
Motions; A party adversely affected by a decision of a trial court may move for reconsideration
thereof on the following grounds: (a) the damages awarded are excessive; (b) the evidence is
insufficient to justify the decision; or (c) the decision is contrary to law.—Under our rules of
procedure, a party adversely affected by a decision of a trial court may move for reconsideration
thereof on the following grounds: (a) the damages awarded are excessive; (b) the evidence is
insufficient to justify the decision; or (c) the decision is contrary to law. A motion for
reconsideration interrupts the running of the period to appeal, unless the motion is pro forma.
This is now expressly set forth in the last paragraph of Section 2, Rule 37, 1997 Rules of Civil
Procedure.

Same; Same; Same; Same; Same; Same; Although a motion for reconsideration may merely
reiterate issues already passed upon by the court, that by itself does not make it pro forma and is
immaterial because what is essential is compliance with the requisites of the Rules.—A motion for
reconsideration based on the foregoing grounds is deemed pro forma if the same does not specify
the findings or conclusions in the judgment which are not supported by the evidence or contrary
to law, making express reference to the pertinent evidence or legal provisions. It is settled that
although a motion for reconsideration may merely reiterate issues already passed upon by the
court, that by itself does not make it pro forma and is immaterial because what is essential is
compliance with the requisites of the Rules. Thus, in Guerra Enterprises Co., Inc. v. CFI of
Lanao del Sur, we ruled: Among the ends to which a motion for reconsideration is addressed, one
is precisely to convince the court that its ruling is erroneous and improper, contrary to the law or
the evidence; and in doing so, the movant has to dwell of necessity upon the issues passed upon by
the court. If a motion for reconsideration may not discuss these issues, the consequence would be
that after a decision is rendered, the losing party would be confined to filing only motions for
reopening and new trial. We find in the Rules of Court no warrant for ruling to that effect, a
ruling that would, in effect eliminate subsection (c) of Section 1 of Rule 37.

Same; Same; Same; Same; Same; Same; An aggrieved party is allowed one motion for
reconsideration of the assailed decision or final order before he may file a petition for review with
the Court of Appeals.—It may be pointed out that under Supreme Court Circular No. 1-91 dated
27 February 1991 and Revised Administrative Circular No. 1-95 dated 16 May 1995, which took
effect on 1 June 1995, an aggrieved party is allowed one motion for reconsideration of the
assailed decision or final order before he may file a petition for review with the Court of Appeals.
All told, MARINA’s motion for reconsideration was but proper under the adjective rules extant
in this jurisdiction. Damages; Actual damages, to be recoverable, must not only be capable of
proof, but must actually be proved with a reasonable degree of certainty—courts cannot simply
rely on speculation, conjecture or guesswork in determining the fact and amount of damages.—
We agree with the conclusion of the Court of Appeals that the award of P30,000.00 as actual
damages for unearned monthly rental income starting from March 1990 until the delivery of the
property to H.L. CARLOS was arbitrary. Article 2199 of the Civil Code provides that one is
entitled to adequate compensation only for such pecuniary loss suffered by him as is duly proved.
Actual damages, to be recoverable, must not only be capable of proof, but must actually be
proved with a reasonable degree of certainty. Courts cannot simply rely on speculation,
conjecture or guesswork in determining the fact and amount of damages. As the Court of Appeals
correctly found here that no proof was submitted by H.L. CARLOS to substantiate the recovery
of actual damages in the form of monthly rentals, the deletion of such award was but
appropriate.

Actions; Pleadings and Practice; Forum-Shopping; Words and Phrases; “Forum-Shopping,”


Explained; There is no forum shopping where a party sues another before the HLURB to enforce
their Contract to Purchase and to Sell and files another suit in court to collect sum of money
corresponding to unpaid billings from their Construction Contract.—The issue of forum
shopping raised by MARINA deserves scant consideration. H.L. CARLOS was not guilty of
forum shopping when it sued MARINA before the HLURB to enforce their Contract To Purchase
and To Sell. Forum shopping is the act of a party against whom an adverse judgment has been
rendered in one forum, of seeking another (and possibly favorable) opinion in another forum
other than by appeal or the special civil action of certiorari, or the institution of two (2) or more
actions or proceedings grounded on the same cause on the supposition that one or the other court
might look with favor upon the party. Contrary to MARINA’s assertion, H.L. CARLOS’
complaint was hardly a duplication of Civil Case No. 89-5870 which was filed to collect the sum
of money corresponding to unpaid billings from their Construction Contract. The cause of action
in the civil case was, therefore, totally distinct from the cause of action in the complaint before
the HLURB. For this reason, neither could there have been splitting of a cause of action.

Same; Subdivisions; Republic Act No. 6552 (Maceda Law); Rescission; Among the requirements
of R.A. No. 6552, in order to effect the cancellation of a contract, a notarial cancellation must
first be had.—As to the governing law, Section 24 of P.D. 957 provides: SEC. 24. Failure to pay
installments.—The rights of the buyer in the event of his failure to pay the installments due for
reasons other than failure of the owner or developer to develop the project shall be governed by
Republic Act No. 6552. Then among the requirements of R.A. No. 6552, in order to effect the
cancellation of a contract, a notarial cancellation must first be had. Therefore, absent this,
MARINA’s cancellation of its contract with H.L. CARLOS was void.

Same; Same; Administrative Law; Jurisdiction; Housing and Land Use Regulatory Board; Cases
involving specific performance of contractual and statutory obligations, filed by buyers of
subdivision lots or condominium units against the owner, developer, dealer, broker or salesman
fall under the jurisdiction of the HLURB.—In conclusion, cases involving specific performance of
contractual and statutory obligations, filed by buyers of subdivision lots or condominium units
against the owner, developer, dealer, broker or salesman fall under the jurisdiction of the
HLURB. It is incumbent upon said administrative agency, in the exercise of its powers and
functions, to interpret and apply contracts, determine the rights of the parties under these
contracts, and award damages whenever appropriate.

Marina Properties Corporation vs. Court of Appeals, 294 SCRA 273, G.R. No. 125447, G.R. No.
125475 August 14, 1998

We resolve here two (2) separate appeals from the decision[1] of the Court of Appeals of 27
June 1996 in CA-G.R. SP No. 37927, which affirmed with modification the 15 March 1995
Order[2] of the Office of the President in O.P. Case No. 5462 which, in turn, affirmed in
toto the 14 June 1993 decision[3] of the Housing and Land Use Regulatory Board (HLURB) in
the case filed by H.L. Carlos Construction, Inc. (hereafter H.L. CARLOS) against MARINA
Properties Corporation (hereafter MARINA) for Specific Performance with Damages and
docketed as REM-A-1179.[4]

The factual antecedents, as summarized by the Court of Appeals, are as follows:


Petitioner Marina Properties Corporation (MARINA for short) is a domestic corporation
engaged in the business of real estate development. Among its projects is a condominium
complex project, known as the MARINA BAYHOMES CONDOMINIUM PROJECT consisting
of 10 building clusters with 31 housing units to be built on a parcel of land at Asiaworld City,
Coastal Road in Paranaque, Metro Manila. The area is covered by T.C.T. No. (121211) 42201
of the Registry of Deeds of the same municipality.
The construction of the project commenced sometime in 1988, with respondent H.L. Carlos
Construction, Inc. (H.L. CARLOS for brevity) as the principal contractor, particularly of Phase
III.
As an incentive to complete the construction of Phase III, MARINA allowed H.L. CARLOS to
purchase a condominium unit therein known as Unit B-121. Thus, on October 9, 1988, the
parties entered into a Contract to Purchase and to Sell covering Unit B-121
for P3,614,000.00. H.L. CARLOS paid P1,034,200.00 as downpayment, P50,000.00 as cash
deposit and P67,024.22 equivalent to 13 monthly amortizations.
After paying P1,810,330.70, which was more than half of the contract price, H.L. CARLOS
demanded for the delivery of the unit, but MARINA refused. This prompted H.L. CARLOS to
file with the Regional Trial Court of Makati, Branch 61 a complaint for damages against
MARINA, docketed as Civil Case No. 89-5870.
Meanwhile, on April 20, 1990, MARINA wrote H.L. CARLOS that it was exercising its option
under their Contract to Purchase and to Sell to take over the completion of the project due to
its (H.L. CARLOS) abandonment of the construction of the Phase III project.
In a letter dated March 15, 1991, H.L. CARLOS inquired from MARINA about the turn-over
status of the condominium unit. MARINA replied that it was cancelling the Contract to
Purchase and Sell due to H.L. CARLOS abandonment of the construction of the Phase III
Project and its filing of baseless and harassment suits against MARINA and its officers.
Forthwith, H.L. CARLOS filed the instant complaint for specific performance with damages
against MARINA with the Housing and Land Use Regulatory Board (HLURB), alleging among
others, that it has substantially complied with the terms and conditions of the Contract to
Purchase and Sell, having paid more than 50% of the contract price of the condominium unit;
and that MARINAs act of cancelling the contract was done with malice and bad faith. H.L.
CARLOS prays that MARINA be ordered to deliver to it the subject unit, accept the monthly
amortizations on the remaining balance, execute the final deed of sale and deliver the title of
the unit upon full payment of the contract price. Also, H.L. CARLOS prays for the award of
actual and exemplary damages as well as attorneys fees.
In its answer, MARINA claimed that its cancellation of the Contract to Purchase and Sell is
justified since H.L. CARLOS has failed to pay its monthly installment since October 1989 or
for a period of almost two (2) years; that H.L. CARLOS abandoned its work on the project as
of December 1989; and that the instant case should have been suspended in view of the
pendency of Civil Case No. 89-5870 for damages in the Makati RTC involving the same
issues.
On February 21, 1992, the HLURB, through Atty. Abraham N. Vermudez, Arbiter, rendered a
decision, the dispositive portion of which reads:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered declaring the
cancellation of the subject Contract to Sell as null and void and ordering respondent Marina
Properties Corporation as follows:
1. To turn over the subject condominium unit to herein complainant, accept monthly
amortization[s] on the remaining balance and to execute the final deed of sale and deliver
title/ownership of the subject property to the complainant upon full payment of the contract
price.
2. To pay complainant actual damages of P30,000.00 per month commencing from March
1990 until the delivery of the subject property and the amount of P50,000.00 as exemplary
damages.
3. To pay complainant the amount of P50,000.00 as and by way of attorneys fees.
4. To pay to this Board the amount of P5,000.00 as [an] administrative fine.
IT IS SO ORDERED.
In ruling for H.L. CARLOS, the HLURB Arbiter held:

x x x.
Respondents position that the case is a complex one is more imaginary than real. Clearly, the
cancellation of the subject Contract to Purchase and to Sell was in violation of Republic Act
No. 6552, otherwise known as the Realty Installment Buyers Protection Act, which prescribes
the procedure for cancellation of installment contracts for the purchase of subdivision lots
and/or condominium units.
In the case at bar, the complainant had already paid P1,810,330.70 or more than 50% of the
contract price of P3,614,000.00 and more than the total of two years (24 months) installments
computed at the monthly installment of P67,024.22, inclusive of the downpayment, which is
more than 24 installments. Under R.A. 6552, notarial cancellation of the installment contract
becomes effective only upon payment of the cash surrender value to the purchaser, which
however respondent did not do.
Respondents cancellation of the subject contract was clearly illegal, void and cannot be
sanctioned.
Neither can this Office find merit in respondents contention that this case should be
suspended because of the pending civil case between the parties, said pending case, Civil
Case No. 89-5870 in the Regional Trial Court, Branch 61, Makati, Metro Manila, was filed by
the same complainant herein against the same respondent for collection of unpaid billings in
the amount of about P10,000,000.00.
On the other hand, this Office finds that respondents act in cancelling the subject installment
sales contract without following the provisions of R.A. 6552 is an unsound real estate
business practice for which respondent is fined the sum of P5,000.00.
As to damages and attorneys fees claimed by complainant and borne out by the records, this
Office finds that respondent should be held liable for unearned rental income of P30,000.00
per month, commencing from March 1990 when the condominium unit should have been
delivered until actual delivery thereof, and attorneys fees of P50,000.00, both amounts to be
deducted from the unpaid balance due on the subject condominium unit.
Likewise, for its wanton breach of the subject contract, respondent is ordered to pay
exemplary damages in the amount of P50,000.00 as an example for the public good,
deductible from the balance due on the subject condominium unit.
x x x.
Whereupon, MARINA interposed an appeal to the Board of Commissioners of HLURB (First
Division) which affirmed the assailed decision.
On further appeal to the Office of the President, the decision of the Board of Commissioners
(First Division) was affirmed.
MARINA filed a motion for reconsideration but was denied.[5]

MARINA filed a petition for review with the Court of Appeals ascribing the following errors
to the Office of the President:

(1) In sustaining the award of actual damages for unrealized profits in favor of private
respondent H.L. CARLOS which were unliquidated, speculative and patently
unreasonable;

(2) In declaring the motion for reconsideration filed by MARINA pro-forma and
depriving it of the right of appeal; and

(3) In not dismissing the case on the grounds of litis pendentia, forum-shopping and
splitting a single cause of action.[6]

The Court of Appeals sustained MARINA as regards the award of actual damages, finding
that no evidence was presented to prove the P30,000.00 award as monthly rental for the
condominium unit. However, as to the pronouncement of the Office of the President that
MARINAs motion for reconsideration was merely pro-forma, the Court of Appeals noted that
MARINA did not raise any new issue in its motion for reconsideration. In the same vein,
respondent court ruled that MARINA was not deprived of its right to appeal.

The Court of Appeals likewise brushed aside MARINAs assertion that the complaint
should have been dismissed on the ground of litis pendentia thus:
The requisites of lis pendens as a ground for dismissal of a complaint are: (1) identity of
parties or at least such representing the same interest in both actions; (2) identity of rights
asserted as prayed for, the reliefs being founded on the same facts; and (3) identity in both
cases is such that the judgment that may be rendered in the pending case, regardless of
which party is successful, would amount to res judicata to the other case.
There is no dispute that the case at bench and Civil Case No. 89-5870 for damages at the
Makati RTC involves the same parties although in the civil case, the officers of MARINA have
been impleaded as co-defendants. While the first requisite obtains in this case, the last two
are conspicuously absent.
It will be observed that the two cases involve distinct and separate causes of action or rights
asserted. Civil Case No. 89-5870 is for the collection of sums of money corresponding to
unpaid billings and labor costs incurred by H.L. CARLOS in the construction of the project
under the Construction Contract agreed upon by the parties. Upon the other hand, the case at
bench is for specific performance (delivery of the condominium unit) and damages arising
from the unilateral cancellation of the Contract to Purchase and to Sell by MARINA.
Moreover, the reliefs sought are also different. In the civil case, H.L. CARLOS prays for the
award of P7,065,885.03 representing unpaid labor costs, change orders and price escalations
including the sum of P2,000,000.00 as additional compensatory damages. In the instant case,
H.L. CARLOS seeks not only the awa[r]d of actual and exemplary damages but also the
delivery of the condominium unit upon MARINAs acceptance of the monthly amortization on
the remaining balance, the execution of a final deed of sale and the delivery of the title to the
said private respondent.
MARINAs claim that the present complaint should be dismissed on the ground of splitting a
cause of action, deserves scant consideration. The two complaints did not arise from a single
cause of action but from two separate causes of action. It bears emphasis that H.L. CARLOS
cause of action in the civil case stemmed from the breach by MARINA of its contractual
obligation under the Construction Contract, while in the case at bench, H.L. CARLOS cause
of action is premised on the unilateral cancellation of the Contract to Purchase and Sell by
MARINA.[7]

Accordingly, the Court of Appeals affirmed the Order of the Office of the President but
deleted the award of actual damages. As such, the parties sought redress from this Court by
way of separate petitions.

In G.R. No. 125447, MARINA asserts that the Court of Appeals erred: (1) in finding that
petitioner should turn over the subject condominium unit to H.L. CARLOS and accept monthly
amortizations on the remaining balance; and (2) in not ordering the dismissal of the case on
the grounds of litis pendentia, forum-shopping and splitting of a single cause of action.

On the other hand, in G.R. No. 125475, H.L. CARLOS contends that the Court of Appeals
gravely erred in: (1) finding that the award of actual damages equivalent to P30,000.00 in
unearned monthly rentals was not sustained by evidence; (2) in not declaring that the petition
for review was filed out of time and fatally defective for lack of verification and certification by
MARINA Properties, and in not declaring the decision of the Office of the President final and
executory; and 3) in not dismissing MARINAs appeal as without merit.

MARINAs motion to consolidate both cases was granted in a resolution dated 27 January
1997.[8]

We first address the lone procedural issue of the timeliness of the petition for review filed
by MARINA with the Court of Appeals and the supposed lack of verification and certification.

We find without merit the allegation that MARINAs petition for review before the Court of
Appeals was filed out of time as MARINAs motion for reconsideration (of the order of the
Office of the President) was found to be pro forma and, therefore, did not stop the running of
its period to appeal.

MARINA filed its Motion for Reconsideration[9] on the last day of its period to appeal,
specifically, on 3 May 1995. However, the motion was found by the Office of the President to
be pro forma as the issues of litis pendentia, forum-shopping and splitting of a cause of action
as well as the issue of unliquidated, speculative and unreasonable damages raised therein
were basically the same issues raised and discussed extensively in the Appeal Memorandum
and which were already weighed, discussed and considered by this Office in its Order dated
March 15, 1995.[10] As a consequence, the Office of the President declared its decision final
and executory.

Under our rules of procedure, a party adversely affected by a decision of a trial court may
move for reconsideration thereof on the following grounds: (a) the damages awarded are
excessive; (b) the evidence is insufficient to justify the decision; or (c) the decision is contrary
to law.[11] A motion for reconsideration interrupts the running of the period to appeal, unless
the motion is pro forma.[12] This is now expressly set forth in the last paragraph of Section 2,
Rule 37, 1997 Rules of Civil Procedure.

A motion for reconsideration based on the foregoing grounds is deemed pro forma if the
same does not specify the findings or conclusions in the judgment which are not supported by
the evidence or contrary to law, making express reference to the pertinent evidence or legal
provisions.[13] It is settled that although a motion for reconsideration may merely reiterate
issues already passed upon by the court, that by itself does not make it pro forma and is
immaterial because what is essential is ompliance with the requisites of the Rules.[14] Thus,
in Guerra Enterprises, Co. Inc. v. CFI of Lanao del Sur,[15] we ruled:
Among the ends to which a motion for reconsideration is addressed, one is precisely to
convince the court that its ruling is erroneous and improper, contrary to the law or the
evidence; and in doing so, the movant has to dwell of necessity upon the issues passed upon
by the court. If a motion for reconsideration may not discuss these issues, the consequence
would be that after a decision is rendered, the losing party would be confined to filing only
motions for reopening and new trial. We find in the Rules of Court no warrant for ruling to that
effect, a ruling that would, in effect eliminate subsection (c) of Section 1 of Rule 37.

On this note, it has also been fittingly observed that:


Where the circumstances of a case do not show an intent on the part of the pleader to merely
delay the proceedings, and his motion reveals a bona fide effort to present additional matters
or to reiterate his arguments in a different light, the courts should be slow to declare the same
outright as pro forma. The doctrine relating to pro forma motions has a direct bearing upon
the movants valuable right to appeal. It would be in the interest of justice to accord the
appellate court the opportunity to review the decision of the trial court on the merits than to
abort the appeal by declaring the motion pro forma, such that the period to appeal was not
interrupted and had consequently lapsed.[16]

We are thus unable to hold that MARINAs motion for reconsideration was
merely pro forma. Our review of the records reveals that said motion adequately pointed out
the conclusions MARINA regarded as erroneous and contrary to law, and even referred to
findings not supported by evidence as well as jurisprudence to sustain MARINAs claims. As
to the justification proffered by the Office of the President that it had already passed upon the
issues raised by MARINA in its motion, plainly, the authorities cited above readily refute such
a position.

It may be pointed out that under Supreme Court Circular No. 1-91 dated 27 February
1991 and Revised Administrative Circular No. 1-95 dated 16 May 1995, which took effect on 1
June 1995, an aggrieved party is allowed one motion for reconsideration of the assailed
decision or final order before he may file a petition for review with the Court of Appeals. All
told, MARINAs motion for reconsideration was but proper under the adjective rules extant in
this jurisdiction.

The charge of a lack of verification or certification in MARINAs petition before the Court of
Appeals is baseless. Even the most cursory of reviews will disclose that such may be found
on pages 30 and 31 of the Petition.[17]

We agree with the conclusion of the Court of Appeals that the award of P30,000.00 as
actual damages for unearned monthly rental income starting from March 1990 until the
delivery of the property to H.L. CARLOS was arbitrary. Article 2199 of the Civil Code provides
that one is entitled to adequate compensation only for such pecuniary loss suffered by him as
is duly proved.[18] Actual damages, to be recoverable, must not only be capable of proof, but
must actually be proved with a reasonable degree of certainty.[19] Courts cannot simply rely
on speculation, conjecture or guesswork in determining the fact and amount of damages.
[20] As the Court of Appeals correctly found here that no proof was submitted by H.L.
CARLOS to substantiate the recovery of actual damages in the form of monthly rentals, the
deletion of such award was but appropriate.

The issue of forum shopping raised by MARINA deserves scant consideration. H.L.
CARLOS was not guilty of forum shopping when it sued MARINA before the HLURB to
enforce their Contract To Purchase and To Sell. Forum shopping is the act of a party against
whom an adverse judgment has been rendered in one forum, of seeking another (and
possibly favorable) opinion in another forum other than by appeal or the special civil action
of certiorari, or the institution of two (2) or more actions or proceedings grounded on the same
cause on the supposition that one or the other court might look with favor upon the party.
[21] Contrary to MARINAs assertion, H.L. CARLOS complaint was hardly a duplication of Civil
Case No. 89-5870 which was filed to collect the sum of money corresponding to unpaid
billings from their Construction Contract. The cause of action in the civil case was, therefore,
totally distinct from the cause of action in the complaint before the HLURB. For this reason,
neither could there have been splitting of a cause of action.

Anent the absence of litis pendentia, the Court of Appeals meticulous analysis of this
issue leaves no room for improvement and we adopt it as our own.

We likewise uphold the finding that MARINAs cancellation of the Contract To Buy and To
Sell was clearly illegal. Prior to MARINAs unilateral act of rescission, H.L. CARLOS had
already paid P1,810,330.70, or more than 50% of the contract price
of P3,614,000.00. Moreover, the sum H.L. CARLOS had disbursed amounted to more than
the total of 24 installments, i.e., two years worth of installments computed at a monthly
installment rate of P67,024.22, inclusive of the downpayment.

As to the governing law, Section 24 of P.D. 957[22] provides:


SEC.24. Failure to pay installments. -- The rights of the buyer in the event of his failure to pay
the installments due for reasons other than failure of the owner or developer to develop the
project shall be governed by Republic Act No. 6552.
Then among the requirements of R.A. No. 6552,[23] in order to effect the cancellation of a
contract, a notarial cancellation must first be had.[24] Therefore, absent this, MARINAs
cancellation of its contract with H.L. CARLOS was void.

In conclusion, cases involving specific performance of contractual and statutory


obligations, filed by buyers of subdivision lots or condominium units against the owner,
developer, dealer, broker or salesman fall under the jurisdiction of the HLURB.[25] It is
incumbent upon said administrative agency, in the exercise of its powers and functions, to
interpret and apply contracts, determine the rights of the parties under these contracts, and
award damages whenever appropriate.[26]

WHEREFORE, the petitions in these consolidated cases, G.R. No. 125447 and G.R. No.
125475 are DENIED and the assailed decision of respondent Court of Appeals of 27 June
1996 is hereby AFFIRMED.

Costs against petitioner in each case.

SO ORDERED.

Arranza vs. B.F. Homes, Inc., 333 SCRA 799, G.R. No. 131683 June 19, 2000

Jurisdiction; Words and Phrases; Jurisdiction is the authority to hear and determine a cause—a
right to act in a case; Jurisdiction is conferred by law and not by mere administrative policy of
any court or tribunal.—Jurisdiction is the authority to hear and determine a cause—the right to
act in a case. It is conferred by law and not by mere administrative policy of any court or
tribunal. It is determined by the averments of the complaint and not by the defense contained in
the answer. Hence, the jurisdictional issue involved here shall be determined upon an
examination of the applicable laws and the allegations of petitioners’ complaint before the
HLURB.

Same; Subdivisions; Housing and Land Use Regulatory Board (HLURB); Actions; Specific
Performance; The Housing and Land Use Regulatory Board has the jurisdiction over complaints
for specific performance to enforce the rights of purchasers of subdivision lots as regards rights
of way, water, open spaces, road and perimeter wall repairs and security.—In the case at bar,
petitioners’ complaint is for specific performance to enforce their rights as purchasers of
subdivision lots as regards rights of way, water, open spaces, road and perimeter wall repairs,
and security. Indisputably then, the HLURB has jurisdiction over the complaint.

Same; Same; Same; Same; Securities and Exchange Commission; Receiverships; Words and
Phrases; The fact that a subdivision developer is under receivership does not divest the Housing
and Land Use Regulatory Board of that jurisdiction; A receiver is a person appointed by the
court, or by a quasi-judicial administrative agency, in behalf of all the parties for the purpose of
preserving and conserving the property and preventing its possible destruction or dissipation, if it
were left in the possession of any of the parties; Receivership is aimed at the preservation of, and
at making more secure, existing rights—it cannot be used as an instrument for the destruction of
those rights.—The fact that respondent is under receivership does not divest the HLURB of that
jurisdiction. A receiver is a person appointed by the court, or in this instance, by a quasi-judicial
administrative agency, in behalf of all the parties for the purpose of preserving and conserving
the property and preventing its possible destruction or dissipation, if it were left in the possession
of any of the parties. It is the duty of the receiver to administer the assets of the receivership
estate; and in the management and disposition of the property committed to his possession, he
acts in a fiduciary capacity and with impartiality towards all interested persons. The
appointment of a receiver does not dissolve a corporation, nor does it interfere with the exercise
of its corporate rights. In this case where there appears to be no restraints imposed upon
respondent as it undergoes rehabilitation receivership, respondent continues to exist as a
corporation and hence, continues or should continue to perform its contractual and statutory
responsibilities to petitioners as homeowners. Receivership is aimed at the preservation of, and at
making more secure, existing rights; it cannot be used as an instrument for the destruction of
those rights.

Same; Same; Same; Same; Same; Same; Claims for the enforcement of a subdivision developer’s
obligations as such are basically not pecuniary in nature although they could incidentally involve
monetary considerations, and neither could the same be considered as “claims” within the
context of Section 6 (c) of Presidential Decree No. 902-A to warrant suspension of the Housing
and Land Use Regulatory Board proceedings.—No violation of the SEC order suspending
payments to creditors would result as far as petitioners’ complaint before the HLURB is
concerned. To reiterate, what petitioners seek to enforce are respondent’s obligations as a
subdivision developer. Such claims are basically not pecuniary in nature although it could
incidentally involve monetary considerations. All that petitioners’ claims entail is the exercise of
proper subdivision management on the part of the SEC-appointed Board of Receivers towards
the end that homeowners shall enjoy the ideal community living that respondent portrayed they
would have when they bought real estate from it. Neither may petitioners be considered as having
“claims” against respondent within the context of the following proviso of Section 6 (c) of P.D.
No. 902-A, as amended by P.D. Nos. 1653, 1758 and 1799, to warrant suspension of the HLURB
proceedings: [U]pon appointment of a management committee, rehabilitation receiver, board or
body, pursuant to this Decree, all actions for claims against corporations, partnerships or
associations under management or receivership pending before any court, tribunal, board or
body shall be suspended accordingly.

Same; Same; Same; Same; Same; Same; Words and Phrases; The word “claim” as used in
Section 6 [c] of Presidential Decree 902-A refers to debts or demands of a pecuniary nature—it
means the assertion of a right to have money paid.—In Finasia Investments and Finance
Corporation v. Court of Appeals, this Court defined and explained the term “claim” in Section 6
(c) of P.D. No. 902-A, as amended, as follows: We agree with the public respondent that the word
“claim” as used in Sec 6 (c) of P.D. 902-A, as amended, refers to debts or demands of a pecuniary
nature. It means “the assertion of a right to have money paid. It is used in special proceedings
like those before administrative courts, on insolvency.”

Same; Same; Same; Same; Same; Same; The Housing and Land Use Regulatory Board, not the
Securities and Exchange Commission, is equipped with the expertise to deal with a complaint
against a subdivision developer for specific performance where the petitioners do not aim to
enforce a pecuniary demand.—In this case, under the complaint for specific performance before
the HLURB, petitioners do not aim to enforce a pecuniary demand. Their claim for
reimbursement should be viewed in the light of respondent’s alleged failure to observe its
statutory and contractual obligations to provide petitioners a “decent human settlement” and
“ample opportunities for improving their quality of life.” The HLURB, not the SEC, is equipped
with the expertise to deal with that matter.

Same; Same; Same; Same; Same; Same; For the Securities and Exchange Commission to acquire
jurisdiction, two elements must be considered: (1) the status or relationship of the parties; and (2)
the nature of the question that is the subject of their controversy; Lot buyers and homeowners in
a subdivision are not stockholders, members or associates of the subdivision developer.—For the
SEC to acquire jurisdiction over any controversy under these provisions, two elements must be
considered: (1) the status or relationship of the parties; and (2) the nature of the question that is
the subject of their controversy. The first element requires that the controversy must arise “out of
intra-corporate or partnership relations between and among stockholders, members or
associates; between any or all of them and the corporation, partnership or association of which
they are stockholders, members or associates, respectively; and between such corporation,
partnership or association and the State in so far as it concerns their individual franchises.”
Petitioners are not stockholders, members or associates of respondent. They are lot buyers and
now homeowners in the subdivision developed by the respondent.

Same; Same; Same; Securities and Exchange Commission; The Securities and Exchange
Commission has authority over the operation of all kinds of corporations, partnerships or
associations with the end in view of protecting the interests of the investing public and creditors,
while the Housing and Land Use Regulatory Board has jurisdiction over matters relating to
observance of laws governing corporations engaged in the specific business of development of
subdivisions and condominiums; The Housing and Land Use Regulatory Board and the
Securities and Exchange Commission being bestowed with distinct powers and functions, the
exercise of those functions by one shall not abate the performance by the other of its own
functions.—It should be stressed that the main concern in this case is the issue of jurisdiction
over petitioners’ complaint against respondent for specific performance. P.D. No. 902-A, as
amended, defines the jurisdiction of the SEC; while P.D. No. 957, as amended, delineates that of
the HLURB. These two quasi-judicial agencies exercise functions that are distinct from each
other. The SEC has authority over the operation of all kinds of corporations, partnerships or
associations with the end in view of protecting the interests of the investing public and creditors.
On the other hand, the HLURB has jurisdiction over matters relating to observance of laws
governing corporations engaged in the specific business of development of subdivisions and
condominiums. The HLURB and the SEC being bestowed with distinct powers and functions, the
exercise of those functions by one shall not abate the performance by the other of its own
functions. As respondent puts it, “there is no contradiction between P.D. No. 902-A and P.D. No.
957.”

Same; Same; Same; Same; Receiverships; The power to overrule or revoke the previous acts of
the management or Board of Directors of the entity under receivership is within the receiver’s
authority; The business of developing subdivisions and corporations being imbued with public
interest and welfare, any question arising from the exercise of that prerogative should be brought
to the proper agency that has technical know-how on the matter.—In Figueroa v. SEC, this Court
has declared that the power to overrule or revoke the previous acts of the management or Board
of Directors of the entity under receivership is within a receiver’s authority, as provided for by
Section 6 (d) (2) of P.D. No. 902-A. Indeed, when the acts of a previous receiver or management
committee prove disadvantageous or inimical to the rehabilitation of a distressed corporation, the
succeeding receiver or management committee may abrogate or cast aside such acts. However,
that prerogative is not absolute. It should be exercised upon due consideration of all pertinent
and relevant laws when public interest and welfare are involved. The business of developing
subdivisions and corporations being imbued with public interest and welfare, any question
arising from the exercise of that prerogative should be brought to the proper agency that has
technical know-how on the matter.

Same; Same; Same; Same; Statutes; Presidential Decree Nos. 902-A and 957, as far as both are
concerned with corporations, are laws in pari materia—the former relates to all corporations,
while the latter pertains to corporations engaged in the particular business of developing
subdivisions and condominiums.—P.D. No. 957 was promulgated to encompass all questions
regarding subdivisions and condominiums. It is aimed at providing for an appropriate
government agency, the HLURB, to which all parties aggrieved in the implementation of its
provisions and the enforcement of contractual rights with respect to said category of real estate
may take recourse. Nonetheless, the powers of the HLURB may not in any way be deemed as in
derogation of the SEC’s authority. P.D. Nos. 902-A and 957, as far as both are concerned with
corporations, are laws in pari materia. P.D. No. 902-A relates to all corporations, while P.D. No.
957 pertains to corporations engaged in the particular business of developing subdivisions and
condominiums. Although the provisions of these decrees on the issue of jurisdiction appear to
collide when a corporation engaged in developing subdivisions and condominiums is under
receivership, the same decrees should be construed as far as reasonably possible to be in harmony
with each other to attain the purpose of an expressed national policy. Same; Same; Same; The
Housing and Land Use Regulatory Board should view the issue of whether the Board of
Receivers correctly revoked the agreements entered into between the previous receiver and the
subdivision lot buyers from the perspective of the homeowner’s interests which Presidential
Decree No. 957 aims to protect.—The HLURB should take jurisdiction over petitioners’
complaint because it pertains to matters within the HLURB’s competence and expertise. The
HLURB should view the issue of whether the Board of Receivers correctly revoked the
agreements entered into between the previous receiver and the petitioners from the perspective of
the homeowners’ interests, which P.D. No. 957 aims to protect. Whatever monetary awards the
HLURB may impose upon respondent are incidental matters that should be addressed to the
sound discretion of the Board of Receivers charged with maintaining the viability of respondent
as a corporation. Any controversy that may arise in that regard should then be addressed to the
SEC.

Same; Same; Same; Securities and Exchange Commission; Receiverships; Notwithstanding that
the subdivision developer is under receivership, the proceedings at the Housing and Land Use
Regulatory Board should not be suspended and should continue until such time that the Housing
and Land Use Regulatory Board shall have resolved the controversy, and if the claims of the lot
owners be established and granted, the same should be referred to the Securities and Exchange
Commission.—It is worth noting that the parties agreed at the 1 July 1998 hearing that should
the HLURB establish and grant petitioners’ claims, the same should be referred to the SEC.
Thus, the proceedings at the HLURB should not be suspended notwithstanding that respondent
is still under receivership. The TRO that this Court has issued should accordingly continue until
such time as the HLURB shall have resolved the controversy. The present members of the Board
of Receivers should be reminded of their duties and responsibilities as an impartial Board that
should serve the interests of both the homeowners and respondent’s creditors. Their interests,
financial or otherwise, as members of respondent’s Board of Directors should be circumscribed
by judicious and unbiased performance of their duties and responsibilities as members of the
Board of Receivers. Otherwise, respondent’s full rehabilitation may face a bleak future. Both
parties should never give full rein to acts that could prove detrimental to the interests of the
homeowners and eventually jeopardize respondent’s rehabilitation.

For resolution in this petition is the issue of whether it is the Securities and Exchange
Commission (SEC) or the Housing and Land Use Regulatory Board (HLURB) that has
jurisdiction over a complaint filed by subdivision homeowners against a subdivision developer
that is under receivership for specific performance regarding basic homeowners needs such
as water, security and open spaces.
Respondent BF Homes, Inc. (BFHI), is a domestic corporation engaged in developing
subdivisions and selling residential lots. One of the subdivisions that respondent developed
was the BF Homes Paraaque Subdivision, which now sprawls across not only a portion of the
City of Paraaque but also those of the adjoining cities of Las Pias and Muntinlupa.
When the Central Bank ordered the closure of Banco Filipino, which had substantial
investments in respondent BFHI, respondent filed with the SEC a petition for rehabilitation
and a declaration that it was in a state of suspension of payments. On 18 March 1985, the
SEC placed respondent under a management committee. Upon that committees dissolution
on 2 February 1988, the SEC appointed Atty. Florencio B. Orendain as a Receiver, and
approved a Revised Rehabilitation Plan.
As a Receiver, Orendain instituted a central security system and unified the sixty~five
homeowners associations into an umbrella homeowners association called United BF
Homeowners Associations, Inc. (UBFHAI), which was thereafter incorporated with the Home
Insurance and Guaranty Corporation (HIGC).[1]
In 1989, respondent, through Orendain, turned over to UBFHAI control and administration of
security in the subdivision, the Clubhouse and the open spaces along Concha Cruz Drive.
Through the Philippine Waterworks and Construction Corporation (PWCC), respondents
managing company for waterworks in the various BF Homes subdivisions, respondent
entered into an agreement with UBFHAI for the annual collection of community assessment
fund and for the purchase of eight new pumps to replace the over~capacitated pumps in the
old wells.
On 7 November 1994, Orendain was relieved by the SEC of his duties as a Receiver, and a
new Board of Receivers consisting of eleven members of respondents Board of Directors was
appointed for the implementation of Phases II and III of respondents rehabilitation.[2] The new
Board, through its Chairman, Albert C. Aguirre, revoked the authority given by Orendain to
use the open spaces at Concha Cruz Drive and to collect community assessment funds;
deferred the purchase of new pumps; recognized BF Paraaque Homeowners Association,
Inc., (BFPHAI) as the representative of all homeowners in the subdivision; took over the
management of the Clubhouse; and deployed its own security guards in the subdivision.
Consequently, on 5 July 1995, herein petitioners filed with the HLURB a class suit "for and in
behalf of the more than 7,000 homeowners in the subdivision" against respondent BFHI, BF
Citiland Corporation, PWCC and A.C. Aguirre Management Corporation "to enforce the rights
of purchasers of lots" in BF Homes Paraaque.[3] They alleged that:
1......The forty (40) wells, mostly located at different elevations in Phases 3 and
4 of the subdivision and with only twenty~seven (27) productive, are the sources
of the inter~connected water system in the 765~hectare subdivision;
2......There is only one drainage and sewer system;
3......There is one network of roads;
4......There are eight (8) entry and exit points to the subdivision and from three
(3) municipalities (now cities), a situation obtaining in this subdivision only and
nowhere else;
5......There was no security force for the entire subdivision until 1988;
6......There are not enough open spaces in the subdivision in relation to the total
land area developed; and whatever open spaces are available have been left
unkempt, undeveloped and neglected;
7......There are no zoning guidelines which resulted in unregulated constructions
of structures and the proliferation of business establishments in residential
areas; and
8......The BFPHAI became "moribund" sometime in 1980 on account of its
failure to cope with the delivery of basic services except for garbage collection.
Petitioners raised "issues" on the following basic needs of the homeowners: rights~of~way;
water; open spaces; road and perimeter wall repairs; security; and the interlocking
corporations that allegedly made it convenient for respondent "to compartmentalize its
obligations as general developer, even if all of these are hooked into the water, roads,
drainage and sewer systems of the subdivision."[4] Thus, petitioners prayed that:
A. A cease~and~desist order from selling any of the properties within the
subdivision be issued against respondent BFHI, BF Citi, ACAMC, and/or any
and all corporations acting as surrogates/alter~egos, sister companies of BFHI
and/or its stockholders until the warranties, facilities and infrastructures shall
have been complied with or put up (and) the advances of UBFHAI reimbursed,
otherwise, to cease and desist from rescinding valid agreements or contracts for
the benefit of complainants, or committing acts diminishing, diluting or otherwise
depriving complainants of their rights under the law as homeowners;
B. .....After proper proceedings the bond or deposit put up by respondent BF
Homes, Inc. be forfeited in favor of petitioners;
C. .....Respondent BFHI be ordered to immediately turnover the roads, open
spaces, and other facilities built or put up for the benefit of lot
buyers/homeowners in the subdivision to complainant UBFHAI as
representative of all homeowners in BF Homes Paraaque, free from all liens,
encumbrances, and taxes in arrears;
D. If the open spaces in the subdivision are not sufficient as required by law, to
impose said penalties/sanctions against BFHI or the persons responsible
therefor;
E. .....Order the reimbursement of advances made by UBFHAI;
F. .....Turn over all amounts which may have been collected from users fees of
the strip of open space at Concha Cruz Drive;
G. .....Order PWCC to effect and restore 24~hour water supply to all residents
by adding new wells replacing over~capacitated pumps and otherwise
improving water distribution facilities;
H. Order PWCC to continue collecting the Community Development Fund and
remit all amounts collected to UBFHAI;
I......Order BFHI to immediately withdraw the guards at the clubhouse and the 8
entry and exit points to the subdivision, this being an act of usurpation and
blatant display of brute force;
J. .....The appropriate penalties/sanctions be imposed against BF Citi, ACAMC
or any other interlocking corporation of BFHI or any of its principal stockholders
in respect of the diminution/encroaching/violation on the rights of the residents
of the subdivision to enjoy/avail of the facilities/services due them; and
K......Respondents be made to pay attorneys fees and the costs of this suit.[5]
In its answer, respondent claimed that (a) it had complied with its contractual obligations
relative to the subdivisions development; (b) respondent could not be compelled to abide by
agreements resulting from Orendains ultra vires acts; and (c) petitioners were precluded from
instituting the instant action on account of Section 6(c) of P.D. No. 902~A providing for the
suspension of all actions for claims against a corporation under receivership. Respondent
interposed counterclaims and prayed for the dismissal of the complaint.[6]
Petitioners thereafter filed an urgent motion for a cease~and~desist/status quo order. Acting
on this motion, HLURB Arbiter Charito M. Bunagan issued a 20~day temporary restraining
order to avoid rendering nugatory and ineffectual any judgment that could be issued in the
case;[7] and subsequently, an Order granting petitioners prayer for preliminary injunction was
issued
enjoining and restraining respondent BF Homes, Incorporated, its agents and all
persons acting for and in its behalf from taking over/administering the Concha
Garden Row, from issuing stickers to residents and non-residents alike for free
or with fees, from preventing necessary improvements and repairs of
infrastructures within the authority and administration of complainant UBFHAI,
and from directly and indirectly taking over security in the eight (8) exit points of
the subdivision or in any manner interfering with the processing and vehicle
control in subject gates and otherwise to remove its guards from the gates upon
posting of a bond of One Hundred Thousand Pesos (P100,000.00) which bond
shall answer for whatever damages respondents may sustain by reason of the
issuance of the writ of preliminary injunction if it turns out that complainant is not
entitled thereto.[8]
Respondent thus filed with the Court of Appeals a petition for certiorari and prohibition
docketed as CA~G.R. SP No. 39685. It contended in the main that the HLURB acted
"completely without jurisdiction" in issuing the Order granting the writ of preliminary injunction
considering that inasmuch as respondent is under receivership, the "subject matter of the
case is one exclusively within the jurisdiction of the SEC."[9]
On 28 November 1997, the Court of Appeals rendered a decision[10] annulling and setting
aside the writ of preliminary injunction issued by the HLURB. It ruled that private respondents
action may properly be regarded as a "claim" within the contemplation of PD No. 902~A which
should be placed on equal footing with those of petitioners other creditor or creditors and
which should be filed with the Committee of Receivers. In any event, pursuant to Section 6(c)
of P.D. No. 902~A and SECs Order of 18 March 1985, petitioners action against respondent,
which is under receivership, should be suspended.
Hence, petitioners filed the instant petition for review on certiorari. On 26 January 1998, the
Court issued a temporary restraining order (TRO) enjoining respondent, its officers,
representatives and persons acting upon its orders from
(a) taking over/administering the Concha Garden Row; (b) issuing stickers to
residents and non~residents alike for free or with fees; (c) preventing necessary
improvements and repairs of infrastructures within the authority and
administration of complainant United BF Homeowners Association, Inc.
(UBFHAI); (d) directly and indirectly taking over security in the eight (8) exit
points of all of BF Homes Paraaque Subdivision or in any manner interfering
with the processing and vehicle control in the subject gates; and (e) otherwise to
remove its guards from the gates.[11]
Respondents motion to lift the TRO was denied.
At the hearing on 1 July 1998, the primary issue in this case was defined as "which body has
jurisdiction over petitioners claims, the Housing and Land Use Regulatory Board (HLURB) or
the Securities and Exchange Commission (SEC)?" The collateral issue to be addressed is
"assuming that the HLURB has jurisdiction, may the proceedings therein be suspended
pending the outcome of the receivership before the SEC?"
For their part, petitioners argue that the complaint referring to rights of way, water, open
spaces, road and perimeter wall repairs, security and respondents interlocking corporations
that facilitated circumvention of its obligation involves unsound real estate practices. The
action is for specific performance of a real estate developers obligations under P.D. No. 957,
and the relief sought is revocation of the subdivision projects registration certificate and
license to sell. These issues are within the jurisdiction of the HLURB. Even if respondent is
under receivership, its obligations as a real estate developer under P.D. No. 957 are not
suspended. Section 6(c) of P.D. No. 902~A, as amended by P.D. No. 957, on "suspension of
all actions for claims against corporations" refers solely to monetary claims which are but
incidental to petitioners complaints against BFHI, and if filed elsewhere than the HLURB, it
would result to splitting causes of action. Once determined in the HLURB, however, the
monetary awards should be submitted to the SEC as established claims. Lastly, the acts
enjoined by the HLURB are not related to the disposition of BFHIs assets as a corporation
undergoing its final phase of rehabilitation.
On the other hand, respondent asserts that the SEC, not the HLURB, has jurisdiction over
petitioners complaint based on the contracts entered into by the former receiver. The SEC,
being the appointing authority, should be the one to take cognizance of controversies arising
from the performance of the receivers duties. Since respondents properties are under the
SECs custodia legis, they are exempt from any court process.
Jurisdiction is the authority to hear and determine a cause the right to act in a case.[12] It is
conferred by law and not by mere administrative policy of any court or tribunal.[13] It is
determined by the averments of the complaint and not by the defense contained in the
answer.[14] Hence, the jurisdictional issue involved here shall be determined upon an
examination of the applicable laws and the allegations of petitioners complaint before the
HLURB.
Presidential Decree No. 957 (The Subdivision and Condominium Buyers Protective Decree)
was issued on 12 July 1976 in answer to the popular call for correction of pernicious practices
of subdivision owners and/or developers that adversely affected the interests of subdivision
lot buyers. Thus, one of the "whereas clauses" of P.D. No. 957 states:
WHEREAS, numerous reports reveal that many real estate subdivision owners,
developers, operators, and/or sellers have reneged on their representations and
obligations to provide and maintain properly subdivision roads, drainage,
sewerage, water systems, lighting systems, and other similar basic
requirements, thus endangering the health and safety of home and lot buyers.
Section 3 of P.D. No. 957 empowered the National Housing Authority (NHA) with the
"exclusive jurisdiction to regulate the real estate trade and business." On 2 April 1978, P.D.
No. 1344 was issued to expand the jurisdiction of the NHA to include the following:
SECTION 1. In the exercise of its functions to regulate the real estate trade and
business and in addition to its powers provided for in Presidential Decree No.
957, the National Housing Authority shall have exclusive jurisdiction to hear and
decide cases of the following nature:
A......Unsound real estate business practices;
B......Claims involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner, developer, dealer, broker or
salesman; and
C......Cases involving specific performance of contractual and statutory
obligations filed by buyers of subdivision lot or condominium unit against the
owner, developer, dealer, broker or salesman. (Italics supplied.)
Thereafter, the regulatory and quasi~judicial functions of the NHA were transferred to the
Human Settlements Regulatory Commission (HSRC) by virtue of Executive Order No. 648
dated 7 February 1981. Section 8 thereof specifies the functions of the NHA that were
transferred to the HSRC including the authority to hear and decide "cases on unsound real
estate business practices; claims involving refund filed against project owners, developers,
dealers, brokers or salesmen and cases of specific performance." Executive Order No. 90
dated 17 December 1986 renamed the HSRC as the Housing and Land Use Regulatory
Board (HLURB).[15]
The boom in the real estate business all over the country resulted in more litigation between
subdivision owners/developers and lot buyers with the issue of the jurisdiction of the NHA or
the HLURB over such controversies as against that of regular courts. In the cases [16] that
reached this Court, the ruling has consistently been that the NHA or the HLURB has
jurisdiction over complaints arising from contracts between the subdivision developer and the
lot buyer or those aimed at compelling the subdivision developer to comply with its contractual
and statutory obligations to make the subdivision a better place to live in.
Notably, in Antipolo Realty Corporation v. National Housing Authority,[17] one of the issues
raised by the homeowners was the failure of Antipolo Realty to develop the subdivision in
accordance with its undertakings under the contract to sell. Such undertakings include
providing the subdivision with concrete curbs and gutters, underground drainage system,
asphalt paved roads, independent water system, electrical installation with concrete posts,
landscaping and concrete sidewalks, developed park or amphitheater and 24~hour security
guard service. The Court held that the complaint filed by the homeowners was within the
jurisdiction of the NHA.
Similarly, in Alcasid v. Court of Appeals,[18] the Court ruled that the HLURB, not the RTC, has
jurisdiction over the complaint of lot buyers for specific performance of alleged contractual
and statutory obligations of the defendants, to wit, the execution of contracts of sale in favor
of the plaintiffs and the introduction in the disputed property of the necessary facilities such as
asphalting and street lights.
In the case at bar, petitioners complaint is for specific performance to enforce their rights as
purchasers of subdivision lots as regards rights of way, water, open spaces, road and
perimeter wall repairs, and security. Indisputably then, the HLURB has jurisdiction over the
complaint.
The fact that respondent is under receivership does not divest the HLURB of that jurisdiction.
A receiver is a person appointed by the court, or in this instance, by a quasi~judicial
administrative agency, in behalf of all the parties for the purpose of preserving and conserving
the property and preventing its possible destruction or dissipation, if it were left in the
possession of any of the parties.[19] It is the duty of the receiver to administer the assets of
the receivership estate; and in the management and disposition of the property committed to
his possession, he acts in a fiduciary capacity and with impartiality towards all interested
persons.[20] The appointment of a receiver does not dissolve a corporation, nor does it
interfere with the exercise of its corporate rights.[21] In this case where there appears to be
no restraints imposed upon respondent as it undergoes rehabilitation receivership,
[22] respondent continues to exist as a corporation and hence, continues or should continue
to perform its contractual and statutory responsibilities to petitioners as homeowners.
Receivership is aimed at the preservation of, and at making more secure, existing rights; it
cannot be used as an instrument for the destruction of those rights.[23]
No violation of the SEC order suspending payments to creditors would result as far as
petitioners complaint before the HLURB is concerned. To reiterate, what petitioners seek to
enforce are respondents obligations as a subdivision developer. Such claims are basically not
pecuniary in nature although it could incidentally involve monetary considerations. All that
petitioners claims entail is the exercise of proper subdivision management on the part of the
SEC~appointed Board of Receivers towards the end that homeowners shall enjoy the ideal
community living that respondent portrayed they would have when they bought real estate
from it.
Neither may petitioners be considered as having "claims" against respondent within the
context of the following proviso of Section 6 (c) of P.D. No. 902~A, as amended by P.D. Nos.
1653, 1758 and 1799, to warrant suspension of the HLURB proceedings:
[U]pon appointment of a management committee, rehabilitation receiver, board
or body, pursuant to this Decree, all actions for claims against corporations,
partnerships or associations under management or receivership pending before
any court, tribunal, board or body shall be suspended accordingly. (Italics
supplied.)
In Finasia Investments and Finance Corporation v. Court of Appeals,[24] this Court defined
and explained the term "claim" in Section 6 (c) of P.D. No. 902~A, as amended, as follows:
We agree with the public respondent that the word "claim" as used in Sec. 6 (c)
of P.D. 902~A, as amended, refers to debts or demands of a pecuniary
nature. It means "the assertion of a right to have money paid. It is used in
special proceedings like those before administrative court, on insolvency."
(Emphasis supplied.)
Hence, in Finasia Investments, the Court held that a civil case to nullify a special power of
attorney because the principals signature was forged should not be suspended upon the
appointment of a receiver of the mortgagee to whom a person mortgaged the property owned
by such principal. The Court ruled that the cause of action in that civil case "does not consist
of demand for payment of debt or enforcement of pecuniary liability." It added:
It has nothing to do with the purpose of Section 6 (c) of P.D. 902~A, as
amended, which is to prevent a creditor from obtaining an advantage or
preference over another with respect to action against corporation, partnership,
association under management or receivership and to protect and preserve the
rights of party litigants as well as the interest of the investing public or creditors.
Moreover, a final verdict on the question of whether the special power of
attorney in question is a forgery or not will not amount to any preference or
advantage to Castro who was not shown to be a creditor of FINASIA.[25]
In this case, under the complaint for specific performance before the HLURB, petitioners do
not aim to enforce a pecuniary demand. Their claim for reimbursement should be viewed in
the light of respondents alleged failure to observe its statutory and contractual obligations to
provide petitioners a "decent human settlement" and "ample opportunities for improving their
quality of life."[26] The HLURB, not the SEC, is equipped with the expertise to deal with that
matter.
On the other hand, the jurisdiction of the SEC is defined by P.D. No. 902~A, as amended, as
follows:
SEC. 5. In addition to the regulatory and adjudicative functions of the Securities
and Exchange Commission over corporations, partnerships and other forms of
associations registered with it as expressly granted under existing laws and
decrees, it shall have original and exclusive jurisdiction to hear and decide
cases involving:
a).....Devices or schemes employed by or any act of the board of directors,
business associates, its officers or partners, amounting to fraud and
misrepresentation which may be detrimental to the interest of the public and/or
of the stockholders, partners, members of associations or organizations
registered with the Commission;
b).....Controversies arising out of intra~corporate or partnership relations,
between and among stockholders, members of associates; between any or all
of them and the corporation, partnership or association of which they are
stockholders, members, or associates, respectively; and between such
corporation, partnership or association and the State insofar as it concerns their
individual franchise or right to exist as such entity; [and]
c).....Controversies in the election or appointments of directors, trustees,
officers, or managers of such corporation, partnerships or associations.
For the SEC to acquire jurisdiction over any controversy under these provisions, two elements
must be considered: (1) the status or relationship of the parties; and (2) the nature of the
question that is the subject of their controversy.[27] The first element requires that the
controversy must arise "out of intra~corporate or partnership relations between and among
stockholders, members or associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members or associates,
respectively; and between such corporation, partnership or association and the State in so far
as it concerns their individual franchises."[28] Petitioners are not stockholders, members or
associates of respondent. They are lot buyers and now homeowners in the subdivision
developed by the respondent.
The second element requires that the dispute among the parties be intrinsically connected
with the regulation or the internal affairs of the corporation, partnership or association.[29] The
controversy in this case is remotely related to the "regulation" of respondent corporation or to
respondents "internal affairs."
It should be stressed that the main concern in this case is the issue of jurisdiction over
petitioners complaint against respondent for specific performance. P.D. No. 902~A, as
amended, defines the jurisdiction of the SEC; while P.D. No. 957, as amended, delineates
that of the HLURB. These two quasi~judicial agencies exercise functions that are distinct from
each other. The SEC has authority over the operation of all kinds of corporations,
partnerships or associations with the end in view of protecting the interests of the investing
public and creditors. On the other hand, the HLURB has jurisdiction over matters relating to
observance of laws governing corporations engaged in the specific business of development
of subdivisions and condominiums. The HLURB and the SEC being bestowed with distinct
powers and functions, the exercise of those functions by one shall not abate the performance
by the other of its own functions. As respondent puts it, "there is no contradiction between
P.D. No. 902~A and P.D. No. 957."[30]
What complicated the jurisdictional issue in this case is the fact that petitioners are primarily
praying for the retention of respondents obligations under the Memorandum of Agreement
that Receiver Orendain had entered into with them but which the present Board of Receivers
had revoked.
In Figueroa v. SEC,[31] this Court has declared that the power to overrule or revoke the
previous acts of the management or Board of Directors of the entity under receivership is
within a receivers authority, as provided for by Section 6 (d) (2) of P.D. No. 902~A. Indeed,
when the acts of a previous receiver or management committee prove disadvantageous or
inimical to the rehabilitation of a distressed corporation, the succeeding receiver or
management committee may abrogate or cast aside such acts. However, that prerogative is
not absolute. It should be exercised upon due consideration of all pertinent and relevant laws
when public interest and welfare are involved. The business of developing subdivisions and
corporations being imbued with public interest and welfare, any question arising from the
exercise of that prerogative should be brought to the proper agency that has technical
know~how on the matter.
P.D. No. 957 was promulgated to encompass all questions regarding subdivisions and
condominiums. It is aimed at providing for an appropriate government agency, the HLURB, to
which all parties aggrieved in the implementation of its provisions and the enforcement of
contractual rights with respect to said category of real estate may take recourse. Nonetheless,
the powers of the HLURB may not in any way be deemed as in derogation of the SECs
authority. P.D. Nos. 902~A and 957, as far as both are concerned with corporations, are laws
in pari materia. P.D. No. 902~A relates to all corporations, while P.D. No. 957 pertains to
corporations engaged in the particular business of developing subdivisions and
condominiums. Although the provisions of these decrees on the issue of jurisdiction appear to
collide when a corporation engaged in developing subdivisions and condominiums is under
receivership, the same decrees should be construed as far as reasonably possible to be in
harmony with each other to attain the purpose of an expressed national policy.[32]
Hence, the HLURB should take jurisdiction over petitioners complaint because it pertains to
matters within the HLURBs competence and expertise. The HLURB should view the issue of
whether the Board of Receivers correctly revoked the agreements entered into between the
previous receiver and the petitioners from the perspective of the homeowners interests, which
P.D. No. 957 aims to protect. Whatever monetary awards the HLURB may impose upon
respondent are incidental matters that should be addressed to the sound discretion of the
Board of Receivers charged with maintaining the viability of respondent as a corporation. Any
controversy that may arise in that regard should then be addressed to the SEC.
It is worth noting that the parties agreed at the 1 July 1998 hearing that should the HLURB
establish and grant petitioners claims, the same should be referred to the SEC. Thus, the
proceedings at the HLURB should not be suspended notwithstanding that respondent is still
under receivership. The TRO that this Court has issued should accordingly continue until such
time as the HLURB shall have resolved the controversy. The present members of the Board
of Receivers should be reminded of their duties and responsibilities as an impartial Board that
should serve the interests of both the homeowners and respondents creditors. Their interests,
financial or otherwise, as members of respondents Board of Directors should be
circumscribed by judicious and unbiased performance of their duties and responsibilities as
members of the Board of Receivers. Otherwise, respondents full rehabilitation may face a
bleak future. Both parties should never give full rein to acts that could prove detrimental to the
interests of the homeowners and eventually jeopardize respondents rehabilitation.
WHEREFORE, the questioned Decision of the Court of Appeals is hereby REVERSED and
SET ASIDE. This case is REMANDED to the Housing and Land Use Regulatory Board for
continuation of proceedings with dispatch as the Securities and Exchange Commission
proceeds with the rehabilitation of respondent BF Homes, Inc., through the Board of
Receivers. Thereafter, any and all monetary claims duly established before the HLURB shall
be referred to the Board of Receivers for proper disposition and thereafter, to the SEC, if
necessary. No costs.
SO ORDERED.

Solid Homes, Inc. vs. Payawal, 177 SCRA 72, G.R. No. 84811 August 29, 1989

Statutory Construction; General Law and Special Law; In case of conflict between a general law
and a special law, the latter must prevail as an exception to the former, regardless of the dates of
their enactment.—This construction must yield to the familiar canon that in case of conflict
between a general law and a special law, the latter must prevail regardless of the dates of their
enactment. Thus, it has been held that—The fact that one law is special and the other general
creates a presumption that the special act is to be considered as remaining an exception of the
general act, one as a general law of the land and the other as the law of the particular case. x x x
The circumstance that the special law is passed before or after the general act does not change
the principle. Where the special law is later, it will be regarded as an exception to, or a
qualification of, the prior general act; and where the general act is later, the special statute will be
construed as remaining an exception to its terms, unless repealed expressly or by necessary
implication.

Same; Administrative Law; Administrative Agencies; Statutes conferring powers on


administrative agencies must be liberally construed to enable them to discharge their duties in
accordance with the legislative purpose.—Statutes conferring powers on their administrative
agencies must be liberally construed to enable them to discharge their assigned duties in
accordance with the legislative purpose. Fol-lowing this policy in Antipolo Realty Corporation v.
National Housing Authority, the Court sustained the competence of the respondent
administrative body, in the exercise of the exclusive jurisdiction vested in it by PD No. 957 and
PD No. 1344, to determine the rights of the parties under a contract to sell a subdivision lot.

Civil Procedure; Decisions; A decision rendered without jurisdiction is a total nullity and may be
struck down even on appeal except when the party raising the issue is barred by estoppel.—It is
settled that any decision rendered without jurisdiction is a total nullity and may be struck down
at any time, even on appeal before this Court. The only exception is where the party raising the
issue is barred by estoppel, which does not appear in the case before us. On the contrary, the
issue was raised as early as in the motion to dismiss filed in the trial court by the petitioner, which
continued to plead it in its answer and, later, on appeal to the respondent court. We have no
choice, therefore, notwithstanding the delay this decision will entail, to nullify the proceedings in
the trial court for lack of jurisdiction.

Same; Jurisdiction; Administrative Law; National Housing Authority; Presidential Decree No.
957; Housing and Land Use Regulatory Board; The Housing and Land Use Regulatory Board
has exclusive jurisdiction over cases involving real estate business and practices under Sec. 1, of
PD 957.—The applicable law is PD No. 957, as amended by PD No. 1344, entitled “Empowering
the National Housing Authority to Issue Writs of Execution in the Enforcement of Its Decisions
Under Presidential Decree No. 957.” Section 1 of the latter decree provides as follows: SECTION
1. In the exercise of its function to regulate the real estate trade and business and in addition to
its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have
exclusive jurisdiction to hear and decide cases of the following nature: A. Unsound real estate
business practices;B. Claims involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner, developer, dealer, broker or salesman; and C.
Cases involving specific performance of contractual and statutory obligations filed by buyers of
subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman.
(Italics supplied.) The language of this section, especially the italicized portions, leaves no room
for doubt that “exclusive jurisdiction” over the case between the petitioner and the private
respondent is vested not in the Regional Trial Court but in the National Housing Authority.

Same; Same; Same; Same; Same; The Housing and Land Use Regulatory Board can award
damages as part of its exclusive power to hear and decide claims involving refund and other
claims filed by subdivision lot and condominium unit buyers.—On the competence of the Board
to award damages, we find that this is part of the exclusive power conferred upon it by PD No.
1344 to hear and decide “claims involving refund and any other claims filed by subdivision lot or
condominium unit buyers against the project owner, developer, dealer, broker or salesman.” x x x
Besides, a strict construction of the subject provisions of PD No. 1344 which would deny the
HSRC the authority to adjudicate claims for damages and for damages and for attorney’s fees
would result in multiplicity of suits in that the subdivision/condominium buyer who wins a case
in the HSRC and who is thereby deemed entitled to claim damages and attorney’s fees, would be
forced to litigate in the regular courts for the purpose, a situation which is obviously not in the
contemplation of the law. (Italics supplied.)
We are asked to reverse a decision of the Court of Appeals sustaining the jurisdiction of the
Regional Trial Court of Quezon City over a complaint filed by a buyer, the herein private
respondent, against the petitioner, for delivery of title to a subdivision lot. The position of the
petitioner, the defendant in that action, is that the decision of the trial court is null and void ab
initio because the case should have been heard and decided by what is now called the
Housing and Land Use Regulatory Board.
The complaint was filed on August 31, 1982, by Teresita Payawal against Solid Homes, Inc. before the
Regional Trial Court of Quezon City and docketed as Civil Case No. Q-36119. The plaintiff alleged
that the defendant contracted to sell to her a subdivision lot in Marikina on June 9, 1975, for the agreed
price of P 28,080.00, and that by September 10, 1981, she had already paid the defendant the total
amount of P 38,949.87 in monthly installments and interests. Solid Homes subsequently executed a
deed of sale over the land but failed to deliver the corresponding certificate of title despite her repeated
demands because, as it appeared later, the defendant had mortgaged the property in bad faith to a
financing company. The plaintiff asked for delivery of the title to the lot or, alternatively, the return of
all the amounts paid by her plus interest. She also claimed moral and exemplary damages, attorney's
fees and the costs of the suit.
Solid Homes moved to dismiss the complaint on the ground that the court had no jurisdiction, this
being vested in the National Housing Authority under PD No. 957. The motion was denied. The
defendant repleaded the objection in its answer, citing Section 3 of the said decree providing that "the
National Housing Authority shall have exclusive jurisdiction to regulate the real estate trade and
business in accordance with the provisions of this Decree." After trial, judgment was rendered in favor
of the plaintiff and the defendant was ordered to deliver to her the title to the land or, failing this, to
refund to her the sum of P 38,949.87 plus interest from 1975 and until the full amount was paid. She
was also awarded P 5,000.00 moral damages, P 5,000.00 exemplary damages, P 10,000.00 attorney's
fees, and the costs of the suit.1
Solid Homes appealed but the decision was affirmed by the respondent court, 2 which also berated the
appellant for its obvious efforts to evade a legitimate obligation, including its dilatory tactics during the
trial. The petitioner was also reproved for its "gall" in collecting the further amount of P 1,238.47 from
the plaintiff purportedly for realty taxes and registration expenses despite its inability to deliver the title
to the land.
In holding that the trial court had jurisdiction, the respondent court referred to Section 41 of PD No.
957 itself providing that:
SEC. 41. Other remedies.-The rights and remedies provided in this Decree shall be in
addition to any and all other rights and remedies that may be available under existing
laws.
and declared that "its clear and unambiguous tenor undermine(d) the (petitioner's) pretension that the
court a quowas bereft of jurisdiction." The decision also dismissed the contrary opinion of the
Secretary of Justice as impinging on the authority of the courts of justice. While we are disturbed by
the findings of fact of the trial court and the respondent court on the dubious conduct of the petitioner,
we nevertheless must sustain it on the jurisdictional issue.
The applicable law is PD No. 957, as amended by PD No. 1344, entitled "Empowering the National
Housing Authority to Issue Writs of Execution in the Enforcement of Its Decisions Under Presidential
Decree No. 957." Section 1 of the latter decree provides as follows:
SECTION 1. In the exercise of its function to regulate the real estate trade and business
and in addition to its powers provided for in Presidential Decree No. 957, the National
Housing Authority shall haveexclusive jurisdiction to hear and decide cases of the
following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner, developer, dealer, broker or
salesman; and
C. Cases involving specific performance of contractuala statutory obligations filed by
buyers of subdivision lot or condominium unit against the owner, developer, dealer,
broker or salesman. (Emphasis supplied.)
The language of this section, especially the italicized portions, leaves no room for doubt that "exclusive
jurisdiction" over the case between the petitioner and the private respondent is vested not in the
Regional Trial Court but in the National Housing Authority. 3
The private respondent contends that the applicable law is BP No. 129, which confers on regional trial
courts jurisdiction to hear and decide cases mentioned in its Section 19, reading in part as follows:
SEC. 19. Jurisdiction in civil cases.-Regional Trial Courts shall exercise exclusive
original jurisdiction:
(1) In all civil actions in which the subject of the litigation is incapable of pecuniary
estimation;
(2) In all civil actions which involve the title to, or possession of, real property, or any
interest therein, except actions for forcible entry into and unlawful detainer of lands or
buildings, original jurisdiction over which is conferred upon Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts;
xxx xxx xxx

(8) In all other cases in which the demand, exclusive of interest and cost or the value of
the property in controversy, amounts to more than twenty thousand pesos (P 20,000.00).
It stresses, additionally, that BP No. 129 should control as the later enactment, having been
promulgated in 1981, after PD No. 957 was issued in 1975 and PD No. 1344 in 1978.
This construction must yield to the familiar canon that in case of conflict between a general law and a
special law, the latter must prevail regardless of the dates of their enactment. Thus, it has been held
that-
The fact that one law is special and the other general creates a presumption that the
special act is to be considered as remaining an exception of the general act, one as a
general law of the land and the other as the law of the particular case. 4
xxx xxx xxx
The circumstance that the special law is passed before or after the general act does not
change the principle. Where the special law is later, it will be regarded as an exception
to, or a qualification of, the prior general act; and where the general act is later, the
special statute will be construed as remaining an exception to its terms, unless repealed
expressly or by necessary implication. 5
It is obvious that the general law in this case is BP No. 129 and PD No. 1344 the special law.
The argument that the trial court could also assume jurisdiction because of Section 41 of PD No. 957,
earlier quoted, is also unacceptable. We do not read that provision as vesting concurrent jurisdiction on
the Regional Trial Court and the Board over the complaint mentioned in PD No. 1344 if only because
grants of power are not to be lightly inferred or merely implied. The only purpose of this section, as we
see it, is to reserve. to the aggrieved party such other remedies as may be provided by existing law, like
a prosecution for the act complained of under the Revised Penal Code. 6
On the competence of the Board to award damages, we find that this is part of the exclusive power
conferred upon it by PD No. 1344 to hear and decide "claims involving refund and any other
claims filed by subdivision lot or condominium unit buyers against the project owner, developer,
dealer, broker or salesman." It was therefore erroneous for the respondent to brush aside the well-taken
opinion of the Secretary of Justice that-
Such claim for damages which the subdivision/condominium buyer may have against
the owner, developer, dealer or salesman, being a necessary consequence of an
adjudication of liability for non-performance of contractual or statutory obligation, may
be deemed necessarily included in the phrase "claims involving refund and any other
claims" used in the aforequoted subparagraph C of Section 1 of PD No. 1344. The
phrase "any other claims" is, we believe, sufficiently broad to include any and all claims
which are incidental to or a necessary consequence of the claims/cases specifically
included in the grant of jurisdiction to the National Housing Authority under the subject
provisions.
The same may be said with respect to claims for attorney's fees which are recoverable
either by agreement of the parties or pursuant to Art. 2208 of the Civil Code (1) when
exemplary damages are awarded and (2) where the defendant acted in gross and evident
bad faith in refusing to satisfy the plaintiff 's plainly valid, just and demandable claim.
xxx xxx xxx
Besides, a strict construction of the subject provisions of PD No. 1344 which would
deny the HSRC the authority to adjudicate claims for damages and for damages and for
attorney's fees would result in multiplicity of suits in that the subdivision condominium
buyer who wins a case in the HSRC and who is thereby deemed entitled to claim
damages and attorney's fees would be forced to litigate in the regular courts for the
purpose, a situation which is obviously not in the contemplation of the law. (Emphasis
supplied.)7
As a result of the growing complexity of the modern society, it has become necessary to create more
and more administrative bodies to help in the regulation of its ramified activities. Specialized in the
particular fields assigned to them, they can deal with the problems thereof with more expertise and
dispatch than can be expected from the legislature or the courts of justice. This is the reason for the
increasing vesture of quasi-legislative and quasi-judicial powers in what is now not unreasonably called
the fourth department of the government.
Statutes conferring powers on their administrative agencies must be liberally construed to enable them
to discharge their assigned duties in accordance with the legislative purpose. 8 Following this policy in
Antipolo Realty Corporation v. National Housing Authority, 9 the Court sustained the competence of
the respondent administrative body, in the exercise of the exclusive jurisdiction vested in it by PD No.
957 and PD No. 1344, to determine the rights of the parties under a contract to sell a subdivision lot.
It remains to state that, contrary to the contention of the petitioner, the case of Tropical Homes v.
National Housing Authority 10 is not in point. We upheld in that case the constitutionality of the
procedure for appeal provided for in PD No. 1344, but we did not rule there that the National Housing
Authority and not the Regional Trial Court had exclusive jurisdiction over the cases enumerated in
Section I of the said decree. That is what we are doing now.
It is settled that any decision rendered without jurisdiction is a total nullity and may be struck down at
any time, even on appeal before this Court. 11 The only exception is where the party raising the issue is
barred by estoppel, 12 which does not appear in the case before us. On the contrary, the issue was
raised as early as in the motion to dismiss filed in the trial court by the petitioner, which continued to
plead it in its answer and, later, on appeal to the respondent court. We have no choice, therefore,
notwithstanding the delay this decision will entail, to nullify the proceedings in the trial court for lack
of jurisdiction.
WHEREFORE, the challenged decision of the respondent court is REVERSED and the decision of the
Regional Trial Court of Quezon City in Civil Case No. Q-36119 is SET ASIDE, without prejudice to
the filing of the appropriate complaint before the Housing and Land Use Regulatory Board. No costs.
SO ORDERED.
Torres Enterprises, Inc. vs. Hibionada, 191 SCRA 268, G.R. No. 80916 November 9,
1990
Civil Procedure; Jurisdiction; P.D. No. 957 otherwise known as “The Subdivision and
Condominium Buyers’ Protective Decree” provides that the National Housing Authority shall
have exclusive authority to regulate the real estate trade and business.—P.D. No. 957,
promulgated July 12, 1976 and otherwise known as “The Subdivision and Condominium Buyers’
Protective Decree,” provides that the National Housing Authority shall have exclusive authority
to regulate the real estate trade and business.

Same; Same; Same; Regulatory functions conferred on the National Housing Authority under
P.D. Nos. 957, 1344 and other related laws transferred to the Human Settlements Regulatory
Commission which was renamed Housing and Land Use Regulatory Board by E.O. No. 90.—
Under E.O. No. 648 dated February 7, 1981, the regulatory functions conferred on the National
Housing Authority under P.D. Nos. 957, 1344 and other related laws were transferred to the
Human Settlements Regulatory Commission, which was renamed Housing and Land Use
Regulatory Board by E.O. No. 90 dated December 17, 1986. Same; Same; Same; The complaint
for specific performance with damages filed by Diongon with the Regional Trial Court of Negros
Occidental comes under the jurisdiction of the Housing and Land Use Regulatory Board.—It is
clear from Section 1(c) of the above quoted PD No. 1344 that the complaint for specific
performance with damages filed by Diongon with the Regional Trial Court of Negros Occidental
comes under the jurisdiction of the Housing and Land Use Regulatory Board. Diongon is a buyer
of a subdivision lot seeking specific performance of the seller’s obligation to deliver to him the
corresponding certificate of title.

Same; Same; Same; Same; Argument that only courts of justice can adjudicate claims resoluble
under the provisions of the Civil Code is out of step with the fast-changing times.—The argument
that only courts of justice can adjudicate claims resoluble under the provisions of the Civil Code
is out of step with the fast-changing times. There are hundreds of administrative bodies now
performing this function by virtue of a valid authorization from the legislature. This quasi-
judicial function, as it is called, is exercised by them as an incident of the principal power
entrusted to them of regulating certain activities falling under their particular expertise.
Same; Same; Same; Same; Competence of the Housing and Land Use Regulatory Board to
award damages although this is an essentially judicial power exercisable ordinarily only by the
courts of justice affirmed in the Solid Homes case.—In the Solid Homes case for example the
Court affirmed the competence of the Housing and Land Use Regulatory Board to award
damages although this is an essentially judicial power exercisable ordinarily only by the courts of
justice. This departure from the traditional allocation of governmental powers is justified by
expediency, or the need of the government to respond swiftly and competently to the pressing
problems of the modern world.

The same issue of jurisdiction that was raised in Solid Homes v. Payawal 1 is
raised in the case at bar. The same ruling laid down in that earlier case must be
applied in the present controversy.

The petitioner as agent of private respondent Pleasantville Development


Corporation sold a subdivision lot on installment to private respondent Efren
Diongon. The installment payments having been completed, Diongon demanded
the delivery of the certificate of title to the subject land. When neither the
petitioner nor Pleasantville complied, he filed a complaint against them for
specific performance and damages in the Regional Trial Court of Negros
Occidental. This was docketed as Civil Case No. 3514. The two defendants each
filed an answer with cross-claim and counterclaim. The plaintiff filed a reply and
answered the counterclaims. Pre-trial was scheduled and heard and trial briefs
were submitted by Pleasantville and Diongon. The case was set for initial hearing.
It was then that C.T. Torres Enterprises filed a motion to dismiss for lack of
jurisdiction, contending that the competent body to hear and decide the case was
the Housing and Land Use Regulatory Board. The motion was heard and Diongon
later filed an opposition. On September 17, 1987, the trial court 2 denied the
motion to dismiss in an order reading as follows:

Before this Court for resolution is the Motion to Dismiss filed by defendant C.T.
Torres Enterprises, Inc. alleging among other things, that this Court has no
jurisdiction over the subject matter considering that the present action falls within
the jurisdiction of the Housing and Land Use Regulatory Board by virtue of
Executive Order No. 90 dated December 17, 1986.

Plaintiff filed an opposition to the said motion to dismiss traversing the allegations
therein stated. A perusal of both pleadings and the complaint filed by plaintiff, the
issue to be determined are basically governed by the provisions of the New Civil
Code, particularly on contracts. The complaint is one for specific performance with
damages which is a justiciable issue under the Civil Code and jurisdiction to hear
the said issue is conferred on the regular Courts pursuant to Batas Pambansa Blg.
129.

It is, therefore, the finding of this Court that jurisdiction as conferred by law is
vested in the regular courts and not in the Housing and Land Use Regulatory
Board. The Motion to Dismiss is, therefore, DENIED for lack of merit.
SO ORDERED.

The petitioner is now before this Court on certiorari to question this order.

In holding that the complaint for specific performance with damages was
justiciable under the Civil Code and so came under the jurisdiction of the regular
courts under B.P. 129, the trial court failed to consider the express provisions of
P.D. No. 1344 and related decrees. It also erred in supposing that only the
regular courts can interpret and apply the provisions of the Civil Code, to the
exclusion of the quasi-judicial bodies.

P.D. No. 957, promulgated July 12, 1976 and otherwise known as "The
Subdivision and Condominium Buyers’ Protective Decree," provides that the
National Housing Authority shall have exclusive authority to regulate the real
estate trade and business.

The scope of the regulatory authority lodged in the National Housing Authority is
indicated in the second and third paragraphs of the preamble, thus:

WHEREAS, the numerous reports reveal that many real estate subdivision
owners, developers, operators, and/or sellers have reneged on their
representations and obligations to provide and maintain properly subdivision
roads, drainage, sewerage, water systems, lighting systems and other similar
basic requirements, thus endangering the health and safety of home and lot
buyers;

WHEREAS, reports of alarming magnitude also show cases of swindling and


fraudulent manipulations perpetrated by unscrupulous subdivision and
condominium sellers and operators, such as failure to deliver titles to the buyers
or titles free from liens and encumbrances, and to pay real estate taxes and
fraudulent sales of the same subdivision lots to different innocent purchasers for
value (Emphasis supplied)

P.D. No. 1344, which was promulgated April 2, 1978, and empowered the
National Housing Authority to issue writs of execution in the enforcement of its
decisions under P.D. No. 957, specified the quasi-judicial jurisdiction of the
agency as follows

SECTION 1. In the exercise of its functions to regulate the real estate trade and
business and in addition to its powers provided for in Presidential Decree No. 957,
the National Housing Authority shall have exclusive jurisdiction to hear and decide
cases of the following nature

A. Unsound real estate business practices;

B. Claims involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner developer, dealer, broker or
salesman; and

C. Cases involving specific performance of contractual and statutory obligations


filed by buyers of subdivision lots or condominium units against the owner,
developer, dealer, broker or salesman. (Emphasis supplied)

Under E.O. No. 648 dated February 7, 1981, the regulatory functions conferred
on the National Housing Authority under P.D. Nos. 957, 1344 and other related
laws were transferred to the Human Settlements Regulatory Commission, which
was renamed Housing and Land Use Regulatory Board by E.O. No. 90 dated
December 17, 1986.

It is clear from Section 1(c) of the above quoted PD No. 1344 that the complaint
for specific performance with damages filed by Diongon with the Regional Trial
Court of Negros Occidental comes under the jurisdiction of the Housing and Land
Use Regulatory Board. Diongon is a buyer of a subdivision lot seeking specific
performance of the seller’s obligation to deliver to him the corresponding
certificate of title.

The argument that only courts of justice can adjudicate claims resoluble under
the provisions of the Civil Code is out of step with the fast-changing times. There
are hundreds of administrative bodies now performing this function by virtue of a
valid authorization from the legislature. This quasi-judicial function, as it is called,
is exercised by them as an incident of the principal power entrusted to them of
regulating certain activities falling under their particular expertise.

In the Solid Homes case for example the Court affirmed the competence of the
Housing and Land Use Regulatory Board to award damages although this is an
essentially judicial power exercisable ordinarily only by the courts of justice. This
departure from the traditional allocation of governmental powers is justified by
expediency, or the need of the government to respond swiftly and competently to
the pressing problems of the modern world.

Thus we have held

It is by now commonplace learning that many administrative agencies exercise


and perform adjudicatory powers and functions, though to a limited extent only.
Limited delegation of judicial or quasi-judicial authority to administrative agencies
(e.g. the Securities and Exchange Commission and the National Labor Relations
Commission) is well recognized in our jurisdiction, basically because the need for
special competence and experience has been recognized as essential in the
resolution of questions of complex or specialized character and because of a
companion recognition that the dockets of our regular courts have remained
crowded and clogged. 3
x x x
As a result of the growing complexity of the modern society, it has become
necessary to create more and more administrative bodies to help in the
regulation of its ramified activities. Specialized in the particular fields assigned to
them, they can deal with the problems thereof with more expertise and dispatch
than can be expected from the legislature or the courts of justice. This is the
reason for the increasing vesture of quasi-legislative and quasi-judicial powers in
what is now not unreasonably called the fourth department of the government. 4

x x x

There is no question that a statute may vest exclusive original jurisdiction in an


administrative agency over certain disputes and controversies falling within the
agency’s special expertise. The very definition of an administrative agency
includes its being vested with quasi-judicial powers. The ever increasing variety of
powers and functions given to administrative agencies recognizes the need for the
active intervention of administrative agencies in matters calling for technical
knowledge and speed in countless controversies which cannot possibly be handled
by regular courts. 5

The argument of the private respondents that the petition is premature because
no motion for reconsideration of the questioned order of trial court had been filed
stresses the rule but disregards the exception. It is settled that the motion for
reconsideration may be dispensed with if the issue raised is a question of law, 6
as in the case at bar. The issue pleaded here is lack of jurisdiction. It could
therefore be raised directly and immediately with this Court without the necessity
of an antecedent motion for reconsideration.

We hold, in sum, that the complaint for specific performance and damages was
improperly filed with the respondent court, jurisdiction over the case being
exclusively vested in the Housing and Land Use Regulatory Board. We also hold
that the order denying the motion to dismiss was subject to immediate challenge
before this Court as the filing (and denial) of a motion for reconsideration was not
an indispensable requirement.

WHEREFORE, the petition is GRANTED. The questioned Order of September 17,


1987, is SET ASIDE and Civil Case No. 3514 in the Regional Trial Court of Negros
Occidental is hereby DISMISSED, without prejudice to the filing of the proper
complaint with the Housing and Land Use Regulatory Board if so desired. No
costs.

SO ORDERED.