G.R. Nos.

75109-10 June 28, 1989 On the following day, October 5, 1954, Gabina went back to Ang and
demanded the reformation of the aforesaid instrument. Franklin Ang, instead
BIENVENIDA MACHOCA ARCADIO VDA. DE CRUZO, ELENA of reforming the instrument, prepared a deed of agreements 3 which, by
MACHOCA ARCADIO VDA. DE PINTON, INOCENTA MACHOCA reason of its importance, is herein quoted in full:
ARCADIO VDA. DE PLIEGO, ISIDORA MACHOCA ARCADIO DE PLIEGO
(Deceased) represented by daughter Natividad Pliego de Ceballos and City of Ozamiz
ARISTON "RICARDO" MACHOCA ARCADIO (Deceased) represented by
daughter Virginia Arcadio de Evangelista: Represented by INOCENTA
MACHOCA ARCADIO VDA. DE PLIEGO, petitioners,
vs.
HON. GLICERIO V. CARRIAGA, JR., FRANKLIN ANG and MELECIO
SUAREZ (Deceased) represented by the surviving spouse, Pilar de los
Reyes, respondents.

Placidtrank B. Osorio for petitioners.

Donatilo C. Macamay for respondents.

REGALADO, J.:
This is an appeal from the order 1 of respondent Judge Glicerio V. Carriaga,
Jr., dated February 26, 1986, dismissing petitioners' complaint in Special
Civil Action No. OZ-0751 of the Regional Trial Court, Branch XV, Ozamiz
City, on the ground of res judicata.
Lot No. 1131 of the Misamis Cadastre, subject matter of this case, was
originally registered in the name of Gabina Machoca, as her paraphernal
property, under Original Certificate of Title No. 682. 2 Petitioners herein are
the children of the late spouses Leonardo Arcadio and said Gabina Machoca.
On February 4, 1954, Gabina Machoca mortgaged Lot No. 1131 for P 425.00
to private respondent Franklin Ang and delivered to him her aforesaid
certificate of title in connection therewith.
On October 4, 1954, Gabina again borrowed an additional sum of P 175.00
from Ang as a result of which her total obligation to the latter was in the sum
of P 600.00. Petitioners claim that on the same date, Ang caused the
preparation of a deed of sale over the subject lot to which document Gabina
Machoca, being illiterate, affixed her thumb-mark in the belief that this
second instrument was similar to the deed of mortgage executed by her on
February 4, 1954. When Gabina went home, her children, herein petitioners,
informed her that the second document was not a deed of mortgage but a
contract of sale.
DEED OF AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
That I, FRANKLIN ANG, of legal age, married and with
residence and postal address at Gango, City of Ozamiz,
Philippines, VENDEE in the Deed of Sale executed by the
Vendor, GAVINA MACHOCA, as recorded by Notary Public
Manuel C. Manago in Doc. No. 284, Page No. 58, Book No.
1, Series of 1954, hereby grants and obligates himself (sic)
to resell the property therein sold within a period of three (3)
years from and after the date of the said instrument, for the
same price of SIX HUNDRED PESOS ( P 600.00 ),
Philippine Currency, to the said VENDOR: PROVIDED,
however, That if the Vendor shall fail to exercise her right to
redeem as herein granted within the stipulated period, then
this conveyance shall be deemed to be absolute and
irrevocable.
IN WITNESS WHEREOF, the party herein hereto have (sic)
set his hands (sic) at Ozamiz City, Philippines, on this 5th
day of October, 1954.

Pursuant to the provisions of said deed of agreement, Gabina's right to
repurchase the property was to expire on October 4, 1957, that is, three
years from October 4, 1954 when the deed of sale was executed.
As early as June 10, 1955, however, Ang caused the registration of the deed
of sale, resulting in the subsequent cancellation of Original Certificate of Title
No. 682 and the consequent issuance of Transfer Certificate of Title No. T-
161 for the same property in the name of Franklin Ang. 4
On June 24, 1963, no redemption having been made, Ang sold said Lot No.
1131 to herein private respondent Melecio Suarez who then obtained
Transfer Certificate of Title No. T-945 therefore in his name. 5 Gabina
Machoca died on April 21, 1966 leaving herein petitioners as her only heirs.
It appears that petitioners remained in possession of the disputed land until
March 14, 1977 when herein private respondents Melecio Suarez and Pilar
de los Reyes filed an action against Pedro, Inocenta and Lazaro, all
surnamed Pliego before the City Court of the City of Ozamiz, docketed as
Civil Case No. C-1 6 thereof, for unlawful detainer with damages. On July 21,
1978, the city court rendered a decision 7 declaring the plaintiffs therein to be
the real owners of Lot No. 1131 and ordering the defendants to vacate the
premises and pay the costs. 8 The appeal from said decision by the
defendants therein to the Court of Appeals in CA-G.R. No. 66511-R was
dismissed, which dismissal became final and executory, hence judgment was
entered by the Court of Appeals on July 10, 1981. 9Consequently, a writ of
execution and an order of demolition 10 were issued by the city court on
September 17, 1981 and October 12, 1983, respectively, in Civil Case No. C-
1
Disgressing backward in time from the foregoing ( incidents, the records reveal
that during the pendency of the aforesaid unlawful
S detainer case (Civil Case
No. C-1), herein petitioners filed on September G 6, 1977 a petition for
prohibition, Civil Case No. OZ-665 of the erstwhile
D Court of First Instance of
Mizamis Occidental, Branch II, Ozamiz City, against
) City Court Judge
Ceferino Ong and herein private respondentsFto restrain Judge Ong from
further proceeding with the trial in Civil Case R
No. C-1 for alleged lack of
jurisdiction. The petition was dismissed on March
A 15, 1978 and no appeal
was taken by said petitioners. 11 N
K
L
It further appears that likewise during the pendency of Civil Case No. C-1,
I
petitioners filed a complaint, dated June 7, 1977, with the same Court of First
Instance, Branch II, at Ozamiz City, involvingNLot No. 1131 and docketed as
Civil Case No. OZ-648, against Franklin Ang,ABonifacio Longayan, Melecio
Suarez and Pilar de los Reyes, for "removal of N clouds of title and declaring
G or reconveyance and
title of defendants as null and void or cancelled,
damages." 12 On December 18, 1984, the complaint was dismissed for failure
to prosecute. 13 Petitioners moved for the reconsideration of the order but the
motion was denied. A second motion for reconsideration was likewise
denied. 14No appeal having been made, the order of dismissal became final.
Finally, on December 14, 1985, the same petitioners filed Special Civil Case
No. OZ-0751 with the Regional Trial Court, Branch XV, Ozamiz City, for
conventional redemption and damages against herein private respondents
over the same subject lot. Upon motion of the defendants therein, 15 the
complaint was dismissed by the court on February 26, 1986 on the ground of
res judicata. 16
Hence, this petition assailing said dismissal order.
The main substantive issue posed for resolution is whether or not the
petitioners can still exercise the right to redeem Lot No. 1131. A corollary
issue is whether or not the private deed of agreement has converted the
deed of sale into an equitable mortgage.
Petitioners submit that the deed of sale, in relation to the deed of agreement
executed on October 4, 1954, should be considered as an equitable
mortgage because (a) the petitioners have been in continuous possession of
the subject lot up to the present time; and (b) the price of P 600.00 is
unusually inadequate considering that the land is along the road going to the
airport of Ozamiz City, is only about three kilometers from the center of the
city, and has an area of 3,408 square meters. It is likewise contended that
petitioners have the right to redeem the property, there have been no
foreclosure proceedings as yet, aside from the fact that private respondent
Ang acted in evident bad faith and with fraud when he obtained title to the lot
in his name prior to the expiration of the stipulated redemption period.
On the other hand, private respondents maintain that the action for
conventional redemption (Civil Case No. OZ-0751) is already barred by the
order of dismissal rendered in the action for removal of clouds on the title
(Civil Case No. OZ-648), since both cases involved the same subject matter
and raised the same issues between the same parties; and, further, that
petitioners may no longer redeem the property for failure to exercise the right
within the stipulated period.
We shall first resolve the procedural objections, which auspiciously present
the necessity to clarify the doctrine of res judicata 17 and its implications.
The principle of res judicata in actions in personam is found in Section 49 (b)
and (c), Rule 39 of the Rules of Court which provides:
Sec. 49. Effect of judgments. The effect of a judgment or
final order rendered by a court or judge of the Philippines,
having jurisdiction to pronounce the judgment or order, may
be as follows:
xxx
(b) In other cases the judgment or order is, with respect to
the matter directly adjudged or as to any other matter that
could have been raised in relation thereto, conclusive
between the parties and their successors in interest by title
subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same
title and in the same capacity;
(c) In any other litigation between the same parties or their
successors in interest, that only is deemed to have been
adjudged in a former judgment which appears upon its face
to have been so adjudged, or which was actually and
necessarily included therein or necessary thereto.
The doctrine of res judicata thus lays down two main rules which may be
stated as follows: (1) The judgment or decree of a court of competent
jurisdiction on the merits concludes the parties and their privies to the
litigation and constitutes a bar to a new action or suit involving the same
cause of action either before the same or any other tribunal; and (2) Any
right, fact, or matter in issue directly adjudicated or necessarily involved in
the determination of an action before a competent court in which a judgment
or decree is rendered on the merits is conclusively settled by the judgment
therein and cannot again be litigated between the parties and their privies
whether or not the claim or demand, purpose, or subject matter of the two
suits is the same. These two main rules mark the distinction between the
principles governing the two typical cases in which a judgment may operate
as evidence. In speaking of these cases, the first general rule above stated,
and which corresponds to the aforequoted paragraph (b) of Section 49, is
referred to as "bar by former judgment" while the second general rule, which
is embodied in paragraph (c) of the same section, is known as
"conclusiveness of judgment. 18
Stated otherwise, when we speak of resjudicata in its concept as a "bar by
former judgment," the judgment rendered in the first case is an absolute bar
to the subsequent action since said judgment is conclusive not only as to the
matters offered and received to sustain that judgment but also as to any
other matter which might have been offered for that purpose and which could
have been adjudged therein. This is the concept in which the term res
judicata is more commonly and generally used and in which it is understood
as the bar by prior judgment constituting a ground for a motion to dismiss in
civil cases. 19
On the other hand, the less familiar concept or less terminological usage
of res judicata as a rule on conclusiveness of judgment refers to the situation
where the judgment in the prior action operates as an estoppel only as to the
matters actually determined therein or which were necessarily included
therein. Consequently, since other admissible and relevant matters which the
parties in the second action could properly offer are not concluded by the
said judgment, the same is not a bar to or a ground for dismissal of the
second action.
At bottom, the other elements being virtually the same, the fundamental
difference between the rule of res judicataas a bar by former judgment and
as merely a rule on the conclusiveness of judgment is that, in the first, there
is an identity in the cause of action in both cases involved whereas, in the
second, the cause of action in the first case is different from that in the
second case.
The diversity in results, in the instances where there is identity of cause of
action in the two cases and those wherein there is no such identity, is not a
caprice of mere mechanistic considerations or taxonomic niceties. In the
latter situation, where the second case is based on a cause of action different
from the first, the constituent elements of the second cause of action, the
specie of proof necessary to establish the same, and the relief which may be
granted in such second action are consequently at variance with those
obtaining or sought in the first action. As a logical and rational consequence,
therefore, only the findings in the first judgment are conclusive and deemed
established if raised in and for purposes of the second action which,
therefore, may proceed independently of the anterior case. However, where
the same cause of action is involved in both cases, the foregoing
considerations cannot apply since discrete facts and results would not
generally arise from the same procedural and evidentiary foundations which
inhere in the same cause of action. Even if diverse reliefs should be awarded
due to contingencies in the results of proof, the judgment in the first action
bars the second since the defendant admittedly committed one and the same
wrong for which he should not be twice tried under the time-honored rule
of non bis in idem.
Now, it has been a consistent rule, to cite just a few representative
cases, 20 that the following requisites must concur in order that a prior
judgment may bar a subsequent action, viz: (1) the former judgment or order
must be final; (2) it must be a judgment or order on the merits, that is, it was
rendered after a consideration of the evidence or stipulations submitted by
the parties at the trial of the case; (3) it must have been rendered by a court
having jurisdiction over the subject matter and the parties; and (4) there must
be, between the first and second actions, identity of parties, of subject matter
and of cause of action.
There is no question that the order of dismissal rendered in the prior action,
Civil Case No. OZ-648, had become final for failure of herein petitioners to
appeal the same after their motions for reconsideration were denied.
Furthermore, while the dismissal was for failure to prosecute, it had the effect
of an adjudication on the merits, and operates as res judicata, 21 since the
court did not direct that the dismissal was without prejudice. 22
The fact remains that Civil Case No. OZ-648 for removal of clouds on title
has, as parties, the same set of plaintiffs and defendants as Special Civil
Case No. OZ-0751 for conventional redemption and damages, and both
cases involve Lot No. 1131 only.
Petitioners submit, however, that res judicata will nevertheless not apply
since there is no identity of causes of action. It is their theory that since the
issue of redemption was not raised in Civil Case No. OZ-648, it is paragraph
(c) of Section 49, Rule 39 that applies, that is, the rule on conclusiveness of
judgment, hence the dismissal of said former action does not constitute res
judicata to bar Special Civil Case No. OZ-0751. We find no merit in such
submission.
Petitioners appear to labor under an erroneous conceptualization of what
constitutes a cause of action. They postulate that the causes of action in the
cases involved are not identical, thus: "In Civil Case C-1, the cause of action
is physical possession. In Civil Case OZ-648, the cause of action is removal
of clouds of title. In Civil Case OZ-0751, the cause of action is conventional
redemption ...." 23
It is elementary that, in adjective law, a cause of action is the delict or the
wrongful act or omission committed by the defendant in violation of the
primary rights of the plaintiff. 24 In all these cases, petitioners have imputed to
private respondents and their predecessor in interest the same alleged
wrongful act, that is, acts of evident bad faith and fraud which supposedly
divested petitioner's mother of her rights and title to the property in dispute.
There is, consequently, an identical cause of action claimed by petitioners in
these cases.
A well-entrenched rule declares that a party cannot, by varying the form of
action or adopting a different method of presenting his case, escape the
operation of the principle that one and the same cause of action shall not be
twice litigated. 25 In fact, authorities tend to widen rather than to restrict the
doctrine of res judicata on the ground that public interest, as well as private
interest, demand the ending of suits by requiring the parties to sue once and
for all in the same case all the special proceedings and remedies to which
they are entitled. 26
In determining whether causes of action are identical so as to warrant
application of the rule of res judicata, the test most commonly stated is to
ascertain whether the same evidence which is necessary to sustain the
second action would have been sufficient to authorize a recovery in the
first, 27 even if the forms or nature of the two actions be different. 28 If the
same facts or evidence would sustain both, the two actions are considered
the same within the rule that the judgment in the former is a bar to the
subsequent action; otherwise it is not. It has been said that this method is the
best and most accurate test as to whether a former judgment is a bar in
subsequent proceedings between the same parties, and it has even been
designated as infallible. 29
In their motion to dismiss filed in Special Civil Case No. OZ-0751, private
respondents made a comparative analysis of the reliefs prayed for therein
and those in Civil Case No. OZ-648 which became the criterion in the court's
order of dismissal. A perusal thereof reveals that both actions seek to have
the deed of agreement of October 5, 1954 considered as a mere equitable
mortgage and to have the titles issued in the name of private respondents
declared null and void on the ground of fraud. Although ostensibly of different
forms, the inescapable conclusion is that the parties are in effect litigating for
the same thing and seeking the same relief, that is, to recover possession
and ownership of Lot No. 1131. It is of no moment that the later remedy is for
conventional redemption while the former case was for removal of clouds on
the title, since both actions are anchored on exactly the same cause of
action, are based on identical facts, and even claim the same relief. The
present petition is, therefore, although presented in a different form, barred
by the former decision in the case for removal of clouds on the title.
We do not intend, however, to have the adjudication of this case go off purely
on procedural points. Even assuming that res judicata would not bar Special
Civil Case No. OZ-0751, the instant petition will nevertheless not prosper.
It must be remembered that after the execution of the deed of sale on
October 4, 1954, a second document was made wherein Franklin Ang
undertook to resell the property, if Gabina Machoca elects to redeem the
same, within three years from the date of the deed of sale. With respect,
therefore, to the last transaction entered into by the parties, there were two
documents involved, one of which is the deed of sale and the other, the right
to repurchase. However, We find and so hold that there is no pacto de
retro sale in this case, within the contemplation of the Civil Code which
provides:
Art. 1601. Conventional redemption shall take place when
the vendor reserves the right to repurchase the thing sold,
with the obligation to comply with the provisions of Article
1616 and other stipulations which may been agreed upon.
In Villarica, et al. vs. The Court of appeals, et al., 30 We had the occasion to
interpret this provision of law, to wit:
The right of repurchase is not a right granted the vendor by
the vendee in a subsequent instrument, but is a right
reserved by the vendor in the same instrument of sale as
one of the stipulations of the contract. Once the instrument
of absolute sale is executed, the vendor can no longer
reserve the right to repurchase, and any right thereafter
granted the vendor by the vendee in a separate instrument
cannot be a right of repurchase but some other right like the
option to buy in the instant case.
We have similarly held in a prior case that an agreement to repurchase
becomes a promise to sell when made after an absolute sale because where
the sale is made without such an agreement, the purchaser acquires the
thing sold absolutely. 31
Clearly, therefore, an option to buy or a promise to sell is different and
distinct from the right of repurchase which must be reserved by the vendor,
by stipulation to that effect, in the contract of sale.
Hence, there having been an absolute sale of the land, respondent Ang was
acting well within the ambit of his now inviolable right to register the land in
his own name, notwithstanding the unexpired stipulated period of redemption
in the deed of agreement.
Granting, for the sake of argument, that the transaction actually involves a
pacto de retro sale. petitioners failure to exercise their right of redemption
within the stipulated period dictates that the instant petition must necessarily
fail. The averment that petitioners were forestalled by respondent Ang from
redeeming the property appears to be a frivolous afterthought since the
former were not without recourse. There were several legal remedies
available to them which, if duly resorted to, could have worked favorably for
their cause. As it is, their silent acquiescence for an inexplicable length of
time worked greatly to their disadvantage. Not only did petitioners fail to
repurchase the property within the stipulated period but they continued to
sleep on their rights even beyond the allowable statutory period for the
enforcement of such right of redemption. They are now barred by laches.
Laches, in a general sense, is failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence,
could or should have been done earlier; it is negligence or omission to assert
a right within a reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it. 32
Petitioners' feigned ignorance regarding the registration of the property in the
name of respondent spouses, even disregarding the constructive notice
thereof to them under the law, is belied by the fact that petitioner Inocenta
Pliego and Pedro Pliego signed a written commitment that "if Pilar Suarez
will use their land for the construction of their house, we are ready and
agreed (sic) to transfer our house to another place." 33 This instrument was
never refuted, aside from the categorical admission of the petitioners during
the trial of the ejectment case that private respondents were already enjoying
the fruits of the land since 1963. 34 If petitioners were not disturbed in their
possession until the ejectment case was filed, it could only have been out of
sheer generosity and tolerance of private respondent spouses.
Treading on the same supposition that there existed such a right to
repurchase, petitioners insist that the pacto de retro sale is, for all intents and
purposes, an equitable mortage on the pretext that they have been in
continuous possession of the land from the time of the execution of the
document. This again is a result of the distorted notion that petitioners'
possession is in the concept of that of an owner. Petitioners cannot be
credited with good faith in insinuating that their mother, Gabina Machoca,
was deceived into believing that the deed of agreement was a mortgage
contract similar to the first document she executed. As earlier explained, after
the second deed was executed and Gabina Machoca showed the same to
herein petitioners, it was the latter who advised her that the contract be
reformed, as a consequence of which the separate deed of agreement of
October 5, 1954 was executed. It would be safe to conclude then that
petitioners had approved of and consented to the provisions of both
contracts. It will readily be noted that the deed of agreement specifically
provided: "That if the Vendor shall fail to exercise her right to redeem as
herein granted within the stipulated period, then this conveyance shall be
deemed to be absolute and irrevocable." The contract, not being contrary to
law, morals and public policy, is binding and enforceable against Gabina
Machoca and her successors in interest. Petitioners cannot now be heard to
claim otherwise after having been remiss in their obligations. They are further
estopped from asserting that the parties intended differently, contrary to what
the written contracts provide, in violation of the parol evidence rule.

Furthermore, the inadequacy of the price does not on that account alone
support the conclusion that the land was not sold to private respondent Ang,
since the parties entered into a conventional, and not a forced, sale of the
property and both parties were in a position to form an independent judgment
of the transaction. 35 From the legal viewpoint, even if the property was sold
for a comparatively low price, but the seller did nothing about it for a number
of years, the contract of sale is not invalid. 36 Besides, in a contract of sale
with right of repurchase, the price is usually less than in absolute sales since
in the former the vendor expects to reacquire or redeem the property
sold, 37 hence the inadequacy of the price is not an overriding determinant to
set aside the sale.38 The same rationale obtains where, as in this case, there
was a separate agreement to resell the property to the original vendor.

Anent the imputation of evident bad faith and fraud to respondent Ang for
obtaining title to the land in his own name prior to the expiration of the agreed
period, the records do not yield the requisite proof that he was so motivated
or had deliberately resorted to fraudulent deception. In the absence of
concrete evidence of bad faith or fraud, neither of which can be presumed,
We cannot hold otherwise. Besides, it is of essence of a contract of sale
with pacto de retro that the vendee shall immediately acquire title to and
possession of the land sold, subject only to the vendor's right of redemption.
With much more reason does this hold true where a deed of absolute sale
was merely complemented by a subsequently executed and separate
agreement of resale.

WHEREFORE, the order appealed from is hereby AFFIRMED. The

temporary restraining order issued pursuant to the resolution of August 3,
1987 is hereby LIFTED and SET ASIDE.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 100156 June 27, 1994
ISIDORA SALUD, petitioner,
vs.
THE COURT OF APPEALS and MELANIA GUERRERO, respondents.
Ray Anthony F. Fajarito for petitioner.
Bayani L. Bernardo Law Office for private respondent.
PUNO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court
assails the unjust application of the doctrine of res judicata to a non-party to
a case. As the stringent, mechanical application of res judicata to the case at
bench will work injustice, we grant the petition.
The facts in brief:
Petitioner Isidora Guerrero Salud and her late husband, Eusebio B. Salud,
are the registered owners of an undivided one-half (½) share in certain
parcels of land situated in Bacoor, Cavite. They are referred to as the
Poblacion and Habay properties and the San Nicolas property, respectively
covered by TCT No. RT-9269 and TCT No. RT-9268 of the Cavite City
Register of Deeds. 1 To be exact, these properties are registered in the name
of "Isidora Guerrero . . . married to Eusebio Salud, and Clemente Guerrero . .
. married to Melania Andico." Petitioner Isidora Guerrero Salud and
Clemente Guerrero are sister and brother. The latter is the deceased
husband of private respondent.
On October 20, 1967, petitioner and her late husband, executed a deed
wherein they sold their one-half (1/2) share in the Poblacion property to their
daughter Maripol Guerrero for TWO THOUSAND PESOS (P2,000.00), while
the Habay property was sold to their children Norma Salud Vianzon and
Eusebio G. Salud, Jr., for FIVE THOUSAND PESOS (P5,000.00). 2
On November 3, 1967, petitioner and her late husband, also sold their one-
half (½) share in the San Nicolas property in favor of their children Eusebio
Salud, Jr., and Teodoro G. Salud for THREE THOUSAND PESOS
(P3,000.00). 3
After the execution of the deeds, it is alleged that petitioner and her late
husband changed their minds. They did not register the deeds of sale.
Instead, they continued in possession of the properties, and exercised other
acts of ownership, including the mortgaging of the lots subject of the deeds.
The relationship between the Salud and Guerrero families soured. On June
4, 1980, the late Clemente Guerrero, husband of private respondent, filed
with the Court of First Instance (CFI), now Regional Trial Court (RTC) of
Cavite, two (2) complaints docketed as Civil Cases No. 3022 and 3023. In
Civil Case No. 3022, he sued Eusebio Salud, Jr., the spouses Norma Salud
and Artemio Vianzon and Maripol Guerrero. In Civil Case No. 3023, he sued
Eusebio Salud, Jr., and Teodoro G. Salud. He sought to exercise his right of
redemption as a co-owner of the controverted properties.
In Civil Case No. 3022, defendants were declared in default. Petitioner
claims that said defendants were then in the United States and were unable
to answer the Complaint. On February 19, 1982, the then CFI of Cavite
rendered a decision granting the late Guerrero the right to redeem the
properties in question. The Court of Appeals affirmed the decision which
became final and executory on July 31, 1986. Efforts of petitioner to
intervene in the appellate court were in vain.
On the other hand, the Complaint in Civil Case No. 3023 was tried on its
merit. Teodoro G. Salud was able to answer Guerrero's Complaint. After trial,
the trial court dismissed the Complaint on January 10, 1982. It held that the
late Guerrero had no right to redeem the litigated property as its sale "is not
in esse." The Court of Appeals, in G.R. No. CV-2529, also affirmed this
Decision.
The controversy between the parties did not die down. To frustrate the right
of redemption granted to the deceased Clemente Guerrero in Civil Case No.
3022, petitioner Isidora Salud initiated Civil Case No. BCV-86-60, dubbed an
Action to Quiet Title/Remove Cloud from Title, Declaratory Relief plus
Damages before the RTC of Imus, Cavite. Sued was Clemente's widow,
private respondent Melania Guerrero. The latter moved to dismiss the
complaint on ground, among others, of res judicata.
In an Order 4 dated March 19, 1987, the trial court granted the motion to
dismiss. Petitioner appealed to the respondent Court of Appeals which,
however, rendered an affirmance.
Hence, this petition.
The rules of res judicata are of common law origin and they initially evolved
from court decisions. It is now considered a principle of universal
jurisprudence forming a part of the legal system of all civilized nations. 5 In
our jurisdiction, the principle of res judicata was incorporated as part of our
statutory law. The principle was enacted as sections 306 and 307 of Act No.
190. 6 Later, it became sections 44 and 45 of former Rules 39. 7 Under the
present Rules of Court, it appears in section 49 of Rule 39, viz:
Sec. 49. Effect of judgments. — The effect of a judgment or
final order rendered by a court or judge of the Philippines,
having jurisdiction to pronounce the judgment or order, may
be as follows:
xxx xxx xxx
(b) In other cases the judgment or order is, with respect to
the matter directly adjudged or as to any other mater that
could have been raised in relation thereto, conclusive
between the parties and their successors-in-interest by title
subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same
title and in the same capacity;
(c) In any other litigation between the same parties or their
successors-in-interest, that only is deemed to have been
adjudged in a former judgment which appears upon its face
to have been so adjudged, or which was actually and
necessarily included therein or necessary thereto.
The above rule expresses the two (2) aspects of res judicata. As
pointed out by Moran, the first aspect is the effect of a judgment as a
bar to the prosecution of a second action upon the same claim,
demand or cause of action. The second aspect precludes the
relitigation of a particular fact of issue in another action between the
same parties on a different claim or cause of action. 8 The first
aspect is known in traditional terminology as merger or bar; in
modern terminology, it is called claim preclusion. The second aspect
is traditionally known as collateral estoppel; in modern terminology, it
is called issue preclusion. 9
There is universal agreement on the principles underlying res judicata, 10 viz:
. . . . Two maxims of the English common law best
summarize the general policies underlying this doctrine.
They are: first, that no person should be twice vexed by the
same claim; and second, that it is in the interest of the state
that there be an end to litigation. Thus, principles of res
judicata serve both private and public interests.
The interest of the judicial system in preventing relitigation of
the same dispute recognizes that judicial resources are finite
and the number of cases that can be heard by the court is
limited. Every dispute that is reheard means that another will
be delayed. In modern times when court dockets are filled to
overflowing, this concern is of critical importance. Res
judicata thus conserves scarce judicial resources and
promotes efficiency in the interest of the public at large.
Once a final judgment has been rendered, the prevailing
party also has an interest in the stability of that judgment.
Parties come to the courts in order to resolve controversies;
a judgment would be of little use in resolving disputes if the
parties were free to ignore it and to litigate the same claims
again and again. Although judicial determinations are not
infallible, judicial error should be corrected through appeals
procedures, not through repeated suits on the same claim.
Further, to allow relitigation creates the risk of inconsistent
results and presents the embarrassing problem of
determining which of two conflicting decisions is to be
preferred. Since there is no reason to suppose that the
second or third determination of a claim necessarily is more
accurate than the first, the first should be left undisturbed.
In some cases the public at large also has an interest in
seeing that rights and liabilities once established remain
fixed. If a court quiets title to land, for example, everyone
should be able to rely on the finality of that determination.
Otherwise, many business transactions would be clouded by
uncertainty. Thus, the most important purpose of res
judicata is to provide repose for both the party litigants and
the public. As the Supreme Court has observed, "res
judicata thus encourages reliance on judicial decision, bars
vexatious litigation, and frees the courts to resolve other
disputes."
In our age, where courts are harassed by crowded dockets and complaints
against slow foot justice, frequent technical reliance on the preclusive
breadth of res judicata is understandable. The importance of judicial
economy and avoidance of repetitive suits are strong norms in a society in
need of swift justice. Be that as it may, there should not be a mechanical and
uncaring reliance on res judicata where more important societal values
deserve protection. So we held in Suarez vs. Court of Appeals, et al., 11
Assuming in gratia argumenti that the prior judgment of
dismissal with prejudice was validly rendered within the
lawful discretion of the court and could be considered as an
adjudication on the merits, nonetheless, the principle of res
judicata should be disregarded if its application would
involve the sacrifice of justice to technicality (Republic v. De
los Angeles, No. L-30240, March 25, 1988, 1159 SCRA
264). The application of the said principle, under the
particular facts obtaining, would amount to denial of justice
and/or bar to a vindication of a legitimate grievance
(Ronquillo v. Marasigan, No. L-11621, May 31, 1962, 5
SCRA 304). It is worth stating here that the controversy in
the instant case is not just an ordinary suit between parties
over a trivial matter but a litigation initiated by then natural
mother over the welfare and custody of her child, in which
the State has a paramount interest. The fundamental policy
of the State as embodied in the Constitution in promoting
and protecting the welfare of children shall not be
disregarded by the courts by mere technicality in resolving
disputes which involve the family and the youth.
The case at bench presents an exceptional instance where an inflexible
application of the doctrine of res judicatawill not serve our constitutional
policy favoring fairness, the heart of due process. Petitioner was not a party
in Civil Case No. 3022 and was not given any chance to contest the claim of
Guerrero. Her children, then in the United States, were the ones sued. They
failed to answer, and were declared in default. Thus, the late Clemente
Guerrero, husband of private respondent, obtained a favorable judgment by
default from the trial court pursuant to which he was given the right of
preemption over the contested lots. Petitioner attempted to intervene in the
case but unfortunately, her motion for intervention was denied. The late
Guerrero, therefore, prevailed primarily because his claim was not disputed.
In contrast was the result in Civil Case No. 3023 where Guerrero claimed the
same right of preemption against the other children of petitioner. In this case,
however, one of the children of petitioner sued by Guerrero, was in the
Philippines and he answered the Complaint. The case was tried on its merit
and the trial court dismissed the Complaint of Guerrero. It found that the right
of preemption of Guerrero was not yet in esse.
The difference in the results of Civil Cases No. 3022 and 3023 accentuates
the necessity not to give res judicataeffect to the default judgment in Civil
Case No. 3022 where petitioner was a non-party. The demands of due
process present a weightier consideration than the need to bring an end to
the parties' litigation. For more important than the need to write finis to
litigation is to finish it justly, and there can be no justice that satisfies unless
the litigants are given the opportunity to be heard. The constitutional right to
due process of petitioner cannot be defeated by the argument that petitioner
is a privy of her children in Civil Case No. 3022, and hence is bound by its
judgment. Case law, both here and in the United States, recognizes privity of
interest under the following situation: 12
The historic and most common situation in which privity is
upheld exists when a person acquires an interest in the
subject matter of the suit after it was filed or decided.
Successors-in-interest, whether they obtain their interests by
virtue of an assignment, by inheritance or by law are bound
along with their predecessors by the rules of res judicata and
collateral estoppel. This is necessary in order to preserve the
finality of judgments; otherwise a person confronted with an
adverse decision might subject the winning party to the
prospect of continual litigation simply by transferring his
interest in the subject matter of the suit to another who could
begin the suit anew.
A second well-defined privity relationship arises when legal
appointed representative parties, such as trustees and
executors, are involved; those individuals are deemed in
privity with those whom they represent. Since parties
litigating in representative capacity have no interests of their
own, but either sued or are sued on behalf of the
beneficiaries whom they serve.
Privity also has been universally recognized when it is
determined that the newly named party in the second suit
actually controlled or participated in litigating the first action.
Although the non-party will not be bound by res
judicata because different claims are involved, identical
issues that were necessarily and actually litigated will be
precluded. Having received one opportunity to defend or
prosecute those issues, he may not be allowed another.
Petitioner does not fall in any of the above categories. She is not a
successor-in-interest of her children in Civil Case No. 3022. Petitioner's
children were not sued in Civil Case No. 3022 in a representative capacity. It
is also clear that petitioner did not control or participate in Civil Case No.
3022 for her motion to intervene was denied. Petitioner's interest, therefore,
was not at all represented in Civil Case No. 3022 where judgment was
obtained by default. The doctrine of res judicata is a rule of justice and
cannot be rigidly applied where it will result in injustice. 13

IN VIEW WHEREOF, the Decision dated May 23, 1991 of the respondent
court is REVERSED and SET ASIDE. Civil Case No. BCV-86-90 is
remanded to its court of origin for further proceedings. No costs.

SO ORDERED.
G.R. No. 91670 February 7, 1991
ALBERT NABUS, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and MARIANO
LIM, respondents.
Benjamin C. Reyes for petitioner.
Aventino B. Vlaveria & David Allaga for private respondent.
REGALADO, J.:
This petition for review by certiorari seeks the reversal of the decision1 of
respondent Court of Appeals in CA-G.R. CV No. 15846 which affirmed the
order of the trial court dismissing herein petitioner's complaint for rescission
with damages on the ground of res judicata.
The records show that on June 22, 1970, herein petitioner Albert Nabus
brought an action for reconveyance of a parcel of land against herein private
respondent Mariano Lim in the then Court of First Instance of Baguio and
Benguet, La Trinidad, Benguet, which was docketed as Civil Case No. 2159
(24), alleging inter alia:
2. That on June 23, 1965, plaintiff sold to defendant one (1) parcel of
land, situated in the Barrio of Ambiong, Municipality of La Trinidad,
Province of Benguet, . . . as evidenced by a deed of absolute sale, . .
.;
3. That the said property is a portion of a bigger parcel of land, with
an area of 15 hectares, 05 ares and 17 centares, covered by and
embraced in Original Certificate of Title No. P-136 (Free Patent No.
V48737) issued in the name of plaintiff, on July 5, 1956, . . . ;
4. That although the purchase price of the . . . property in the amount
of P258,000.00 was amortized . . ., title to the same was transferred
to the defendant under TCT No. 2814, . . ., and was later subdivided
by said defendant into four (4) lots . . . ;
5. That as of the date thereof, defendant has still an unpaid balance
of P75,000.00;
6. That on June 8, 1970 (or 4 years, 11 months and 15 days from
June 23, 1965); plaintiff through counsel offered to repurchase the
above-described parcel of land, pursuant to Sec. 119 of the Public
Land Law (C.A. No. 141, as amended), as evidenced by a letter of
the undersigned counsel to defendant, . . .; and which was confirmed
by the plaintiff in his letter to defendant, dated June 12, 1970, . . . .
7. That notwithstanding the written offers . . . and subsequent verbal
offers of plaintiff to repurchase the above-described property
according to law, the defendant refused and denied, and still refuses
and denies, the said offer;
8. That plaintiff is ready and willing to repurchase the said property
and to pay defendant the sum of P183,000.00, the difference
between the stipulated purchase price of P258,000.00 and the
unpaid balance thereof in the amount of P75,000.00 referred to in
paragraph 5 hereof.2
xxx xxx xxx
On December 11, 1971, after Nabus had rested his case, Lim moved to
dismiss the complaint in Civil Case No. 2159(24) on the grounds of lack of
cause of action, there being no tender of the repurchase price of the parcel of
land in question, and of prescription. This was denied by the trial court.
Thereafter, Lim filed a motion for reconsideration of the order denying his
motion to dismiss, to which on February 3, 1972 Nabus filed an opposition on
the ground that tender of the repurchase price of the parcel of land in
question was allegedly not a requirement under the Public Land Act, unlike
the provisions of the Civil Code, the repurchase of the said lot being a
substantive right coupled with public interest.
On February 5, 1980, the trial court, upon motion of Lim, ordered Nabus to
deposit the repurchase pace of the said lot in the amount of P183,000.00. On
November 13,1980, Lim filed a motion to dismiss Civil Case No. 2159(24) for
failure of Nabus to deposit in court the required amount. On December 1,
1980, Nabus, by counsel, filed a motion for extension of time within which to
file an opposition to Lim's motion to dismiss. On March 13, 1981, no
opposition having been filed to the motion to dismiss because of the death of
Nabus' counsel, the trial court dismissed with prejudice Civil Case No.
2159(24) for his failure to deposit the required amount, evincing lack of
interest to repurchase the parcel of land in question. 3
On May 14, 1981, Nabus filed, through a new counsel, a motion for
reconsideration of the order dismissing Civil Case No. 2159(24). On January
26, 1982, the trial court denied Nabus' motion for reconsideration. 4
No appeal was taken from said order of dismissal.
On March 15, 1982, Nabus filed Civil Case No. 4293 in the same Court of
First Instance of Baguio and Benguet for the annulment of the order of
dismissal in Civil Case No. 2159(24), claiming that the failure of Atty.
Florendo, his former counsel, to file an opposition to Lim's motion to dismiss
was due to his serious illness; that the dismissal of his complaint therein,
without Nabus being able to file an opposition to Lim's motion to dismiss,
deprived him of the opportunity to be heard amounting to denial of due
process; and that the denial of his motion for reconsideration constituted
grave abuse of discretion tantamount to lack of jurisdiction on the part of the
trial court.
Civil Case No. 4293 was subsequently amended to allege grounds for
rescission and damages as additional causes of action. These second and
third causes of action added in the amended compliant aver that:
SECOND CAUSE OF ACTION
xxx xxx xxx
21. That as appearing in the Deed of Absolute Sale Annex "A" of
Civil Case No. 2159, . . . defendant was to pay the purchase price of
P258,000.00 in installment; however, defendant failed to pay the
total amount of P258,000.00 having paid only the sum of
P183,000.00 and leaving an unpaid balance of P75,000.00 which
defendant failed and refused to pay in spite of repeated demands;
22. That due to the foregoing, plaintiff is left with no other alternative
but to seek for a rescission (sic) of the contract of Sale aforesaid . . .
;
23. That plaintiff is ready and willing to return the sum of
P183,000.00 he has received from defendant minus of course such
damages as the Court may adjudge against defendant;
24. That the said properties covered by said Deed of Absolute Sale
have not been transferred to third persons acting in good faith;
THIRD CAUSE OF ACTION
25. That due to the gross and evident bad faith of defendant in
committing the foregoing acts and in failing and refusing to comply
with his obligations to the plaintiff, the latter has suffered damages to
wit: –– attorneys fee –– 15% of the total value of the lots subject
matter of the aforesaid Deed of Absolute Sale; expenses and losses
incident to litigation –– P500,000.00; moral and other damages ––
one hundred thousand pesos (P100,000.00).5
On August 8, 1986, Lim filed a motion to dismiss the complaint in Civil Case
No. 4293 on the ground that it was barred by prior judgment or res
judicata and that the action had already prescribed. On October 7, 1986,
Nabus filed an opposition to the motion to dismiss. A reply to the opposition
and a supplement to his motion to dismiss was filed by Lim, to which Nabus
filed a rejoinder. On July 22, 1987, the trial court dismissed the complaint in
Civil Case No. 4293 on both grounds invoked in the motion to dismiss.6
On appeal to respondent court, Nabus claimed that the trial court erred in
holding that all the causes of action in the case are barred by res
judicata and that the action for rescission and damages has prescribed. The
annulment of the dismissal order issued in Civil Case No. 2159(24) was no
longer pursued or raised on appeal.
As earlier stated, respondent court sustained the said order of dismissal on
the ground of res judicata, the relevant portion of its decision reading as
follows:
It is within the power of the trial court to dismiss the appellant's
complaint in Civil Case No. 2159(24) for failure to comply with its
order to deposit the repurchase price of the parcel of land in
question. And such dismissal, rightly or wrongly, has the effect of an
adjudication upon the merits, it not having been provided otherwise
(Section 3, Rule 17. Revised Rules of Court). Dismissal on a
technicality is no different in effect and consequences from a
dismissal on the merits under the cited provision of the Rules
(General Offset Press, Inc. vs. Anatalio, 17 SCRA 688, 691). So too
is the order of dismissal, with prejudice, res judicata upon finality
under Section 49, Rule 39, of the Revised Rules of Court, . . . .
Respondent court, however, found no necessity to rule on the matter of
prescription.
Hence, the instant petition reiterating substantially the same issues raised on
appeal with respondent court, that is, whether or not (1) the complaint for
rescission and damages is barred by the order of dismissal of petitioner's
action for reconveyance under the principle of res judicata; (2) petitioner's
action for rescission has prescribed; and (3) it is equitable to deny petitioner
his day in court, considering that admittedly private respondent has not paid
the last three installments of the contract of sale amounting to P75,000.00.
I. Res judicata is a rule of universal law pervading every well regulated
system of jurisprudence, and is put on two grounds, embodied in various
maxims of the common law; the one, public policy and necessity, which
makes it the interest of the state that there should be an end to litigation
— interest reipublicae ut sit finis litium; the other, the hardship on the
individual that he should be vexed twice for the same cause — nemo debet
bis vexari pro una et eadem causa.7 The doctrine applies and treats the final
determination of the action as speaking the infallible truth as to the rights of
the parties as to the entire subject of the controversy, and such controversy
and every part of it must stand irrevocably closed by such determination. The
sum and substance of the whole doctrine is that a matter once judicially
decided is finally decided.8
The foundation principle upon which the doctrine of res judicata rests is that
parties ought not to be permitted to litigate the same issue more than once;
that, when a right or fact has been judicially tried and determined by a court
of competent jurisdiction, or an opportunity for such trial has been given, the
judgment of the court, so long as it remains unreversed, should be
conclusive upon the parties and those in privity with them in law or estate.9
Section 49, Rule 39 of the Rules of Court which embodies the principle of res
judicata pertinent to this case provides:
xxx xxx xxx
(b) In other cases the judgment or order is, with respect to the matter
directly adjudged or as to any other matter that could have been
raised in relation thereto, conclusive between the parties and their
successors in interest by title subsequent to the commencement of
the action or special proceeding, litigating for the same thing and
under the same title and in the same capacity;
(c) In any other litigation between the same parties or their
successors in interest, that only is deemed to have been adjudged in
a former judgment which appears upon its face to have been so
adjudged, or which was actually and necessarily included therein or
necessary thereto.
The principle of res judicata actually embraces two different concepts: (1) bar
by former judgment and (2) conclusiveness of judgment. There is "bar by
former judgment" when, between the first case where the judgment was
rendered, and the second case where such judgment is invoked, there is
identity of parties, subject matter and cause of action. When the three
identities are present, the judgment on the merits rendered in the first
constitutes an absolute bar to the subsequent action. It is final as to the claim
or demand in controversy, including the parties and those in privity with them,
not only as to every matter which was offered and received to sustain or
defeat the claim or demand, but as to any other admissible matter which
might have been offered for that purpose. But where between the first case
wherein judgment is rendered and the second case wherein such judgment
is invoked, there is identity of parties, but there is no identity of cause of
action, the judgment is conclusive in the second case, only as to those
matters actually and directly controverted and determined, and not as to
matters merely involved therein. This is what is termed conclusiveness of the
judgment.10
A. A case is said to be barred by a former judgment when the following
requisites concur: (1) the presence of a final former judgment; (2) the former
judgment was rendered by a court having jurisdiction over the subject matter
and the parties; (3) the former judgment is a judgment on the merits; and, (4)
there is, between the first and the second actions, identity of parties, subject
matter, and causes of action.11 There is no dispute as to the existence of and
compliance with the first two elements of res judicata in the case at bar. In
issue are the alleged absence of a judgment on the merits in the first case
and the identity of causes of action in both cases.
1. Elemental is the rule that in order that a judgment may operate as a bar to
a subsequent suit on the same cause of action it must have been based on
the merits of the case. And a judgment is on the merits when it determines
the rights and liabilities of the parties based on the disclosed facts,
irrespective of formal, technical, or dilatory objections. It is not necessary,
however, that there should have been a trial. If the judgment is general, and
not based on any technical defect or objection, and the parties had a full
legal opportunity to be heard on their respective claims and contentions, it is
on the merits although there was no actual hearing or arguments on the facts
of the case.12 Such is one of the situations contemplated in Section 3, Rule
17 of the Rules of Court, where a complaint is dismissed for failure of the
plaintiff to comply with a lawful order of the court which dismissal, as
correctly argued by private respondent, has the effect of an adjudication
upon the merits.
In the present case, petitioner labors upon the erroneous conceptualization
that the order of dismissal issued in Civil Case No. 2159(24) was based
merely on a preliminary matter, that is, failure to deposit the repurchase price
which allegedly is not the matter in controversy, hence it is not an
adjudication on the merits. While we do not discount the rule that a judgment
dismissing a suit because of a purely technical defect, irregularity, or
informality is not strictly on the merits and is, therefore, no bar to subsequent
actions,13 this is however, not applicable to the present case. Under the
circumstances obtaining herein, we have to consequently reject petitioner's
ratiocination.
Firstly, it will be remembered that the order dismissing petitioner's complaint
in Civil Case No. 2159(24) is specified to be with prejudice. Our law reports
are replete with jurisprudence declaring that a dismissal with prejudice is an
adjudication on the merits which finally disposes of the controversy and,
unless reversed, constitutes a bar to a future action.14
Secondly, the aforesaid order of dismissal is not a dismissal on sheer
technicality but actually goes into the very substance of the relief sought
therein by petitioner, that is, for the reconveyance of the subject property
which was denied in said case, and must thus be regarded as an
adjudication on the merits. It is the dismissal premised on such technical
grounds as a mis-joinder, non-joinder, misnomer or defect of parties; or that
plaintiff has no sufficient title or authority to bring the suit, or want of legal
capacity to sue on his part; or formal defects in the pleadings; or a dismissal
of the action for failure of the complaint to state a cause of action which is not
a bar to a new action on a good complaint wherein the defects and omissions
in the first complaint are corrected and supplied by the second complaint.
Also, a failure to allege a matter essential to the jurisdiction of the court is no
bar to a second complaint wherein such defect is cured or obviated by further
and sufficient allegations.15
The aforesaid instances are deemed to have no bearing on the merits of the
case and will thus not bar a subsequent suit on the same cause of action.
The order of dismissal issued in Civil Case No. 2159(24) definitely does not
fall within any of the above-mentioned exceptions and is considered in our
procedural rules as an adjudication on the merits.16 It would not be amiss to
state that a "dismissal of an action with prejudice" by court order is to be
considered no less than a "judgment."17
It must be noted, however, that while the first order of dismissal is an
adjudication on the merits, this does not necessarily mean that it is a bar to
the filing of petitioner's second complaint for rescission, for, as hereinunder
discussed, there is no identity of causes of action whereby the first action
would constitute res judicata to the second.
2. Petitioner next submits that there can be no identity of causes of action
between the first and second cases since the former involves the right of
petitioner to redeem the subject property under Section 119 of the Public
Land Act within five years from the date of sale, whereas the latter arose
from the failure of private respondent to pay the balance of the purchase
price thereby authorizing the rescission of the contract of sale pursuant to
Article 1191 of the Civil Code. More importantly, it is argued that the same
evidence does not support and establish the causes of action in both cases.
On the other hand, private respondent theorizes that there is identity of
causes of action between the previous and subsequent cases in that: (1) the
allegations contained and the facts which form the bases of the two
complaints are essentially and substantially the same; (2) the pivotal issue
raised in both cases involves non-payment of the last three installments of
the purchase price; (3) the crux of the prayer of the two cases are exactly the
same, that is, the reconveyance of the subject lot; (4) both actions originated
from the same deed of sale; and, (5) the documentary evidence presented,
as well as the testimony given by the petitioner, in Civil Case No. 2159(24)
can also be used to sustain the prosecution of Civil Case No. 4293.
We find for petitioner on this score.
In determining whether causes of action are identical so as to warrant
application of the rule of res judicata, the test most commonly stated is to
ascertain whether the same evidence which is necessary to sustain the
second action would have been sufficient to authorize a recovery in the first,
even if the forms or nature of the two actions be different. If the same facts or
evidence would sustain both, the two actions are considered the same within
the rule that the judgment in the former is a bar to the subsequent action;
otherwise it is not. It has been said that this method is the best and most
accurate test as to whether a former judgment is a bar in subsequent
proceedings between the same parties, and it has even been designated as
infallible.18
It will be observed that Civil Case No. 2159(24) is based on petitioner's light
to repurchase the subject property under Section 119 of the Public Land Act,
while Civil Case No. 4293 involves the rescission of the contract of sale by
reason of the failure of private respondent to pay in full the value of the
property, pursuant to Article 1191 of the Civil Code. The former, in order to
prosper, requires proof that the land was granted under a free patent, that
the land was sold within five years from the grant thereof, and that the action
for reconveyance was filed within five years from the execution of the deed of
sale. In the second case, proof of the unpaid installments is the only
evidence necessary to sustain the action for rescission. It is thus apparent
that a different set of evidence is necessary to sustain and establish the
variant causes of action in the two cases.
In addition, causes of action which are distinct and independent, although
arising out of the same contract, transaction, or state of facts, may be sued
on separately, recovery on one being no bar to subsequent actions on
others.19 Also, the mere fact that the same relief is sought in the subsequent
action will not render the judgment in the prior action operative as res
judicata,20
such as where the two actions are brought on different statutes,21 as in the
case at bar.
Under the circumstances, therefore, the doctrine of res judicata will not apply.
To repeat, for emphasis, the cause of action asserted by petitioner in the
former suit was anchored upon his right to repurchase the subject lot. The
cause of action sought to be enforced in the present action is predicated
upon the failure of private respondent to pay the last three installments of the
purchase price. It is a cause of action which is wholly independent of, and
entirely separate and discrete from, the alleged cause of action asserted by
petitioner in the former suit. Since petitioner seeks relief in the instant case
upon a cause of action different from the one asserted by him in the former
suit, the judgment in the former suit is conclusive only as to such points or
questions as were actually in issue or adjudicated therein. And this brings us
to the rule on conclusiveness of judgment.
B. Private respondent avers that granting arguendo that there is no identity of
cause of action, considering that the issue on the unpaid installments has
been raised, considered, and passed upon in Civil Case No. 2159(24), such
issue can no longer be relitigated anew in Civil Case No. 4293, invoking
thereby the doctrine of conclusiveness of judgment.
The doctrine states that a fact or question which was in issue in a former suit,
and was there judicially passed on and determined by a court of competent
jurisdiction, is conclusively settled by the judgment therein, as far as
concerns the parties to that action and persons in privity with them, and
cannot be again litigated in any future action between such parties or their
privies, in the same court or any other court of concurrent jurisdiction on
either the same or a different cause of action, while the judgment remains
unreversed or unvacated by proper authority.22 The only identities thus
required for the operation of the judgment as an estoppel, in contrast to the
judgment as a bar, are identity of parties and identity of issues. 23
It has been held that in order that a judgment in one action can be conclusive
as to a particular matter in another action between the same parties or their
privies, it is essential that the issues be identical. If a particular point or
question is in issue in the second action, and the judgment will depend on
the determination of that particular point or question, a former judgment
between the same parties will be final and conclusive in the second if that
same point or question was in issue and adjudicated in the first suit; but the
adjudication of an issue in the first case is not conclusive of an entirely
different and distinct issue arising in the second. In order that this rule may
be applied, it must clearly and positively appear, either from the record itself
or by the aid of competent extrinsic evidence that the precise point or
question in issue in the second suit was involved and decided in the first. And
in determining whether a given question was an issue in the prior action, it is
proper to look behind the judgment to ascertain whether the evidence
necessary to sustain a judgment in the second action would have authorized
a judgment for the same party in the first action.24
Applying these rules to, the case at bar, it becomes crystal clear that the
doctrine of res judicata will still not apply even under the rule on
conclusiveness of judgment. To begin with, the fact that there was an unpaid
balance equivalent to three installments was never put in issue in Civil Case
No. 2159(24). The same was considered or assumed only for purposes of
determining the amount of the redemption price It was never directly
admitted, controverted nor litigated therein, it being merely incidental or
peripheral to the main issue of whether petitioner could still exercise his right
to repurchase the subject lot by reason of the breach of the prohibition
imposed by law. On the other hand, the issue of non-payment of the
installments is the primary and sole controversy presented in the subsequent
case for rescission. It is thus evident that the two cases involve two different
issues. Hence, it would be safe to conclude that neither a "bar by prior
judgment" nor "conclusiveness of judgment" would operate upon or
adversely affect the second action for rescission.
C. Private respondent insists that petitioner should have included and alleged
rescission of contract as a second cause of action in Civil Case No. 2159(24)
considering that at the time the first complaint was filed, the breach of the
contract of sale was already total, hence the ground for rescission was
available and in existence. This very argument, significantly, is in line with
petitioner's own assertion that, being based on different causes of action, the
action for rescission under Article 1191 of the Civil Code is distinct from the
action for reconveyance under Section 119 of the Public Land Act.
Accordingly, said action for rescission could have been brought
independently of the action for reconveyance since Section 5, Rule 2 of the
Rules of Court merely provides:
Sec. 5. Joinder of causes of action. –– Subject to rules regarding
jurisdiction, venue and joinder of parties, a party may in one pleading
state, in the alternative or otherwise, as many causes of action as he
may have against an opposing party (a) if the said causes of action
arise out of the same contract, transaction or relation between the
parties, or (b) if the causes of action are for demands for money, or
are of the same nature and character.
xxx xxx xxx
The rule is clearly permissive. It does not constitute an obligatory rule, as
there is no positive provision of law or any rule of jurisprudence which
compels a party to join all his causes of action and bring them at one and the thereto. Since the ten-year period had started to run on July 2, 1970,
same time.25 petitioner should have filed the action before July 2, 1980 when the
prescriptive period expired. Considering that the amended complaint in Civil
Under the present rules, the provision is still that the plaintiff may, and not Case No. 4293, invoking petitioner's right to rescind the contract, was filed
that he must, unite several causes of action although they may be included in only on May 3, 1985, the action therefor has obviously and ineluctably
one of the classes specified. This, therefore, leaves it to the plaintiffs option prescribed.
whether the causes of action shall be joined in the same action, and no
unfavorable inference may be drawn from his failure or refusal to do so. He ACCORDINGLY, the instant petition for review on certiorari is hereby
may always file another action based on the remaining cause or causes of DENIED.
action within the prescriptive period therefor.
SO ORDERED.
II. We, however, find and so hold that in the controversy now before us the
action for rescission has prescribed and should consequently be dismissed
on said ground. There can be no dispute that actions based on written
contracts prescribe after ten years from the time the right of the action
accrues.26 It is elementary that the computation of the period of prescription
of any cause of action, which is the same as saying prescription of the action,
should start from the date when the cause of action accrues or from the day
the right of the plaintiff is violated. This is as it should be.

A cause of action has three elements, namely: (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is created:
(2) an obligation on the part of the named defendant to respect or not to
violate such right; and, (3) an act or omission on the part of such defendant
violative of the right of the plaintiff or constituting a breach of the obligation of
the defendant to the plaintiff. It is only when the last element occurs or takes
place that it can be said in law that a cause of action has arisen. Translated
in terms of a hypothetical situation regarding a written contract, no cause of
action arises until there is a breach or violation thereof by either party. 27

Conversely, upon the occurrence of a breach, a cause of action exists and

the concomitant right of action may then be enforced.

In the present case, petitioner's position is that the last three installments
which he claims were not paid by private respondent, allegedly fell due on
July 1, 1968, July 1, 1969, and July 1,1970, respectively. 28 Indulging
petitioner in his own submissions, therefore, the breach committed by private
respondent occurred, at the earliest, on July 1, 1968 or, at the latest, on July
1, 1970.

Now, even taking the non-payment of the last installment as the basis, an
actionable breach of the contract was already committed on said date,
hence, as of that time there arose and existed a cause of action for petitioner
to file a case for rescission. This remedy could already have been availed of
by petitioner for, as earlier discussed, there has been no legal obstacle
G.R. No. L-56294 May 20, 1991
SMITH BELL AND COMPANY (PHILIPPINES), INC. and TOKYO MARINE
AND FIRE INSURANCE CO., INC.,petitioners,
vs.
THE COURT OF APPEALS and CARLOS A. GO THONG AND
CO., respondents.
Bito, Misa & Lozada for petitioners.
Rodriguez, Relova & Associates for private respondent.
FELICIANO, J.:
In the early morning of 3 May 1970—at exactly 0350 hours, on the
approaches to the port of Manila near Caballo Island, a collision took place
between the M/V "Don Carlos," an inter-island vessel owned and operated by
private respondent Carlos A. Go Thong and Company ("Go Thong"), and the
M/S "Yotai Maru," a merchant vessel of Japanese registry. The "Don Carlos"
was then sailing south bound leaving the port of Manila for Cebu, while the
"Yotai Maru" was approaching the port of Manila, coming in from Kobe,
Japan. The bow of the "Don Carlos" rammed the portside (left side) of the
"Yotai Maru" inflicting a three (3) cm. gaping hole on her portside near Hatch
No. 3, through which seawater rushed in and flooded that hatch and her
bottom tanks, damaging all the cargo stowed therein.
The consignees of the damaged cargo got paid by their insurance
companies. The insurance companies in turn, having been subrogated to the
interests of the consignees of the damaged cargo, commenced actions
against private respondent Go Thong for damages sustained by the various
shipments in the then Court of First Instance of Manila.
Two (2) cases were filed in the Court of First Instance of Manila. The first
case, Civil Case No. 82567, was commenced on 13 March 1971 by petitioner
Smith Bell and Company (Philippines), Inc. and Sumitomo Marine and Fire
Insurance Company Ltd., against private respondent Go Thong, in Branch 3,
which was presided over by Judge Bernardo P. Fernandez. The second
case, Civil Case No. 82556, was filed on 15 March 1971 by petitioners Smith
Bell and Company (Philippines), Inc. and Tokyo Marine and Fire Insurance
Company, Inc. against private respondent Go Thong in Branch 4, which was
presided over by then Judge, later Associate Justice of this Court, Serafin R.
Cuevas.
Civil Cases Nos. 82567 (Judge Fernandez) and 82556 (Judge Cuevas) were
tried under the same issues and evidence relating to the collision between
the "Don Carlos" and the "Yotai Maru" the parties in both cases having
agreed that the evidence on the collision presented in one case would be
simply adopted in the other. In both cases, the Manila Court of First Instance
held that the officers and crew of the "Don Carlos" had been negligent that
such negligence was the proximate cause of the collision and accordingly
held respondent Go Thong liable for damages to the plaintiff insurance
companies. Judge Fernandez awarded the insurance companies P19,889.79
with legal interest plus P3,000.00 as attorney's fees; while Judge Cuevas
awarded the plaintiff insurance companies on two (2) claims US $ 68,640.00
or its equivalent in Philippine currency plus attorney's fees of P30,000.00,
and P19,163.02 plus P5,000.00 as attorney's fees, respectively.
The decision of Judge Fernandez in Civil Case No. 82567 was appealed by
respondent Go Thong to the Court of Appeals, and the appeal was there
docketed as C.A.-G.R. No. 61320-R. The decision of Judge Cuevas in Civil
Case No. 82556 was also appealed by Go Thong to the Court of Appeals,
the appeal being docketed as C.A.-G.R. No. 61206-R. Substantially identical
assignments of errors were made by Go Thong in the two (2) appealed
cases before the Court of Appeals.
In C.A.-G.R. No. 61320-R, the Court of Appeals through Reyes, L.B., J.,
rendered a Decision on 8 August 1978 affirming the Decision of Judge
Fernandez. Private respondent Go Thong moved for reconsideration, without
success. Go Thong then went to the Supreme Court on Petition for Review,
the Petition being docketed as G.R. No. L-48839 ("Carlos A. Go Thong and
Company v. Smith Bell and Company [Philippines], Inc., et al."). In its
Resolution dated 6 December 1978, this Court, having considered "the
allegations, issues and arguments adduced in the Petition for Review
on Certiorari, of the Decision of the Court of Appeals as well as respondent's
comment", denied the Petition for lack of merit. Go Thong filed a Motion for
Reconsideration; the Motion was denied by this Court on 24 January 1979.
In the other (Cuevas) case, C.A.-G.R. No. 61206-R, the Court of Appeals, on
26 November 1980 (or almost two [2] years after the Decision of Reyes,
L.B., J., in C.A.-G.R. No. 61320-R, had been affirmed by the Supreme Court
on Petition for Review) through Sison, P.V., J., reversed the Cuevas Decision
and held the officers of the "Yotai Maru" at fault in the collision with the "Don
Carlos," and dismissed the insurance companies' complaint. Herein
petitioners asked for reconsideration, to no avail.
The insurance companies are now before us on Petition for Review
on Certiorari, assailing the Decision of Sison, P.V., J., in C.A.-G.R. No.
61206-R. Petitioners' principal contentions are:
 a. that the Sison Decision had disregarded the rule of res judicata;
b. that Sison P.V., J., was in serious and reversible error in accepting
Go Thong's defense that the question of fault on the part of the
"Yotai Maru" had been settled by the compromise agreement
between the owner of the "Yotai Maru" and Go Thong as owner of
the "Don Carlos;" and
c. that Sison, P. V. J., was in serious and reversible error in holding
that the "Yotai Maru" had been negligent and at fault in the collision
with the "Don Carlos."
I
The first contention of petitioners is that Sison, P. V. J. in rendering his
questioned Decision, failed to apply the rule of res judicata. Petitioners
maintain that the Resolution of the Supreme Court dated 6 December 1978
in G.R. No. 48839 which dismissed Go Thong's Petition for Review of the
Decision of Reyes, L.B., J., in C.A.-G.R. No. 61320-R, had effectively settled
the question of liability on the part of the "Don Carlos." Under the doctrine
of res judicata, petitioners contend, Sison, P. V. J. should have followed the
Reyes, L.B., J. Decision since the latter had been affirmed by the Supreme
Court and had become final and executory long before the Sison Decision
was rendered.
Private respondent Go Thong, upon the other hand, argues that the Supreme
Court, in rendering its minute Resolution in G.R. No. L- 48839, had merely
dismissed Go Thong's Petition for Review of the Reyes, L.B., J. Decision for
lack of merit but had not affirmed in toto that Decision. Private respondent, in
other words, purports to distinguish between denial of a Petition for Review
for lack of merit and affirmance of the Court of Appeals' Decision. Thus, Go
Thong concludes, this Court did not hold that the "Don Carlos" had been
negligent in the collision.
Private respondent's argument must be rejected. That this Court denied Go
Thong's Petition for Review in a minute Resolution did not in any way
diminish the legal significance of the denial so decreed by this Court. The
Supreme Court is not compelled to adopt a definite and stringent rule on how
its judgment shall be framed.1 It has long been settled that this Court has
discretion to decide whether a "minute resolution" should be used in lieu of a
full-blown decision in any particular case and that a minute Resolution of
dismissal of a Petition for Review on certiorariconstitutes an adjudication on
the merits of the controversy or subject matter of the Petition.2 It has been
stressed by the Court that the grant of due course to a Petition for Review is
"not a matter of right, but of sound judicial discretion; and so there is no need
to fully explain the Court's denial. For one thing, the facts and law are already
mentioned in the Court of Appeals' opinion."3 A minute Resolution denying a
Petition for Review of a Decision of the Court of Appeals can only mean that
the Supreme Court agrees with or adopts the findings and conclusions of the
Court of Appeals, in other words, that the Decision sought to be reviewed
and set aside is correct.4
Private respondent Go Thong argues also that the rule of res judicata cannot
be invoked in the instant case whether in respect of the Decision of Reyes,
L.B., J. or in respect of the Resolution of the Supreme Court in G.R. No. L-
48839, for the reason that there was no identity of parties and no identity of
cause of action between C.A.-G.R. No. 61206-R and C.A.-G.R. No. 61320-R.
The parties in C.A.-G.R. No. 61320-R Where the decision of Judge
Fernandez was affirmed, involved Smith Bell and Company (Philippines),
Inc., and Sumitomo Marine and Fire Insurance Co., Ltd. while the petitioners
in the instant case (plaintiffs below) are Smith Bell and Co. (Philippines), Inc.
and Tokyo Marine and Fire Insurance Co., Ltd. In other words, there was a
common petitioner in the two (2) cases, although the co-petitioner in one was
an insurance company different from the insurance company co-petitioner in
the other case. It should be noted, moreover, that the co-petitioner in both
cases was an insurance company arid that both petitioners in the two (2)
cases represented the same interest, i.e., the cargo owner's interest as
against the hull interest or the interest of the shipowner. More importantly,
both cases had been brought against the same defendant, private
respondent Go Thong, the owner of the vessel "Don Carlos." In sum, C.A.-
G.R. No. 61320R and C.A-G.R. No. 61206-R exhibited substantial identity of
parties.
It is conceded by petitioners that the subject matters of the two (2) suits were
not identical, in the sense that the cargo which had been damaged in the one
case and for which indemnity was sought, was not the very same cargo
which had been damaged in the other case indemnity for which was also
sought. The cause of action was, however, the same in the two (2)
cases, i.e., the same right of the cargo owners to the safety and integrity of
their cargo had been violated by the same casualty, the ramming of the
"Yotai Maru" by the "Don Carlos." The judgments in both cases were final
judgments on the merits rendered by the two (2) divisions of the Court of
Appeals and by the Supreme Court, the jurisdiction of which has not been
questioned.
Under the circumstances, we believe that the absence of identity of subject
matter, there being substantial identity of parties and identity of cause of
action, will not preclude the application of res judicata.5
In Tingson v. Court of Appeals,6 the Court distinguished one from the other
the two (2) concepts embraced in the principle of res judicata, i.e., "bar by
former judgment" and "conclusiveness of judgment:"
There is no question that where as between the first case Where the
judgment is rendered and the second case where such judgment is
invoked, there is identity of parties, subject-matter and cause of
action, the judgment on the merits in the first case constitutes an
absolute bar to the subsequent action not only as to every matter
which was offered and received to sustain or defeat the claim or
demand, but also as to any other admissible matter which might
have been offered for that purpose and to all matters that could have
been adjudged in that case. This is designated as "bar by former
judgment."
But where the second action between the same parties is upon a
different claim or demand, the judgment in the prior action operates
as an estoppel only as to those matters in issue or points
controverted, upon the determination of which the finding or
judgment was rendered. In fine, the previous judgment is conclusive
in the second case, only as those matters actually and directly
controverted and determined and not as to matters merely involved
therein. This is the rule on 'conclusiveness of judgment' embodied in
subdivision (c) of Section 49 of Rule 39 of the Revised Rules of'
Court.7 (Citations omitted) (Emphases supplied)
In Lopez v. Reyes,8 the Court elaborated further the distinction between bar
by former judgment which bars the prosecution of a second action upon the
same claim, demand or cause of action, and conclusiveness of judgment
which bars the relitigation of particular facts or issues in another litigation
between the same parties on a different claim or cause of action:
The doctrine of res judicata has two aspects. The first is the effect of
a judgment as a bar to the prosecution of a second action upon the
same claim, demand or cause of action. The second aspect is that it
precludes the relitigation of a particular fact or issues in another
action between the same parties on a different claim or cause of
action.
The general rule precluding the relitigation of material facts or
questions which were in issue and adjudicated in former action are
commonly applied to all matters essentially connected with the
subject matter of the litigation. Thus, it extends
to questions "necessarily involved in an issue, and necessarily
adjudicated, or necessarily implied in the final judgment, although no
specific finding may have been made in reference thereto, and
although such matters were directly referred to in the pleadings and
were not actually or formally presented. Under this rule, if the record
of the former trial shows that the judgment could not have been
rendered without deciding the particular matter it will be considered
as having settled that matter as to all future actions between the
parties, and if a judgment necessarily presupposes certain premises,
they are as conclusive as the judgment itself. Reasons for the rule
are that a judgment is an adjudication on all the matters which are
essential to support it, and that every proposition assumed or
decided by the court leading up to the final conclusion and upon
which such conclusion is based is as effectually passed upon as the
ultimate question which is finally solved.9 (Citations omitted)
(Emphases supplied)
In the case at bar, the issue of which vessel ("Don Carlos" or "Yotai Maru")
had been negligent, or so negligent as to have proximately caused the
collision between them, was an issue that was actually, directly and
expressly raised, controverted and litigated in C.A.-G.R. No. 61320-R.
Reyes, L.B., J., resolved that issue in his Decision and held the "Don
Carlos" to have been negligent rather than the "Yotai Maru" and, as already
noted, that Decision was affirmed by this Court in G.R. No. L-48839 in a
Resolution dated 6 December 1978. The Reyes Decision thus became final
and executory approximately two (2) years before the Sison Decision, which
is assailed in the case at bar, was promulgated. Applying the rule of
conclusiveness of judgment, the question of which vessel had been negligent
in the collision between the two (2) vessels, had long been settled by this
Court and could no longer be relitigated in C.A.-G.R. No. 61206- R. Private
respondent Go Thong was certainly bound by the ruling or judgment of
Reyes, L.B., J. and that of this Court. The Court of Appeals fell into clear and
reversible error When it disregarded the Decision of this Court affirming the
Reyes Decision.10
Private respondent Go Thong also argues that a compromise agreement
entered into between Sanyo Shipping Company as owner of the "Yotai
Maru" and Go Thong as owner of the "Don Carlos," under which the former
paid P268,000.00 to the latter, effectively settled that the "Yotai Maru" had
been at fault. This argument is wanting in both factual basis and legal
substance. True it is that by virtue of the compromise agreement, the owner
of the "Yotai Maru" paid a sum of money to the owner of the "Don Carlos."
Nowhere, however, in the compromise agreement did the owner of the "Yotai
Maru " admit or concede that the "Yotai Maru" had been at fault in the
collision. The familiar rule is that "an offer of compromise is not an admission
that anything is due, and is not admissible in evidence against the person
making the offer."11 A compromise is an agreement between two (2) or more
persons who, in order to forestall or put an end to a law suit, adjust their
differences by mutual consent, an adjustment which everyone of them
prefers to the hope of gaining more, balanced by the danger of losing
more.12 An offer to compromise does not, in legal contemplation, involve an
admission on the part of a defendant that he is legally liable, nor on the part
of a plaintiff that his claim or demand is groundless or even doubtful, since
the compromise is arrived at precisely with a view to avoiding further
controversy and saving the expenses of litigation. 13 It is of the very nature of
an offer of compromise that it is made tentatively, hypothetically and in
contemplation of mutual concessions.14 The above rule on compromises is
anchored on public policy of the most insistent and basic kind; that the
incidence of litigation should be reduced and its duration shortened to the
maximum extent feasible.
The collision between the "Yotai Maru" and the "Don Carlos" spawned not
only sets of litigations but also administrative proceedings before the Board
of Marine Inquiry ("BMI"). The collision was the subject matter of an
investigation by the BMI in BMI Case No. 228. On 12 July 1971, the BMI
through Commodore Leovegildo L. Gantioki, found both vessels to have
been negligent in the collision.
Both parties moved for reconsideration of the BMI's decision. The Motions for
Reconsideration were resolved by the Philippine Coast Guard ("PCG") nine
(9) years later, in an order dated 19 May 1980 issued by PCG Commandant,
Commodore Simeon M. Alejandro. The dispositive portion of the PCG
decision read as follows:
Premises considered, the Decision dated July 12, 1971 is hereby
reconsidered and amended absolving the officers of "YOTAI MARU"
from responsibility for the collision. This Headquarters finds no
reason to modify the penalties imposed upon the officers of Don
Carlos. (Annex "C", Reply, September 5, 1981).15
Go Thong filed a second Motion for Reconsideration; this was denied by the
PCG in an order dated September 1980.
Go Thong sought to appeal to the then Ministry of National Defense from the
orders of the PCG by filing with the PCG on 6 January 1981 a motion for a
30-day extension from 7 January 1981 within which to submit its record on
appeal. On 4 February 1981, Go Thong filed a second urgent motion for
another extension of thirty (30) days from 7 February 1981. On 12 March
1981, Go Thong filed a motion for a final extension of time and filed its record
on appeal on 17 March 1981. The PCG noted that Go Thong's record on
appeal was filed late, that is, seven (7) days after the last extension granted
by the PCG had expired. Nevertheless, on 1 July 1981 (after the Petition for
Review on Certiorari in the case at bar had been filed with this Court), the
Ministry of Defense rendered a decision reversing and setting aside the 19
May 1980 decision of the PCG
The owners of the "Yotai Maru" then filed with the Office of the President a
Motion for Reconsideration of the Defense Ministry's decision. The Office of
the President rendered a decision dated 17 April 1986 denying the Motion for
Reconsideration. The decision of the Office of the President correctly
recognized that Go Thong had failed to appeal in a seasonable manner:
MV "DON CARLOS" filed her Notice of Appeal on January 5, 1981.
However, the records also show beyond peradventure of doubt that
the PCG Commandant's decision of May 19, 1980, had already
become final and executory When MV "DON CARLOS" filed her
Record on Appeal on March 17, 1981, and When the motion for third
extension was filed after the expiry date.
Under Paragraphs (c), (d), (e) and (f), Chapter XVI, of the Philippine
Merchant Marine Rules and Regulations, decisions of the PCG
Commandant shall be final unless, within thirty (30) days after receipt
of a copy thereof, an appeal to the Minister of National Defense is
filed and perfected by the filing of a notice of appeal and a record on
appeal. Such administrative regulation has the force and effect of
law, and the failure of MV "DON CARLOS" to comply therewith
rendered the PCG Commandant's decision on May 19, 1980, as final
and executory, (Antique Sawmills, Inc. vs. Zayco, 17 SCRA 316;
Deslata vs. Executive Secretary, 19 SCRA 487; Macailing vs.
Andrada, 31 SCRA 126.) (Annex "A", Go Thong's Manifestation and
Motion for Early Resolution, November 24, 1986).16 (Emphases
supplied)
Nonetheless, acting under the misapprehension that certain "supervening"
events had taken place, the Office of the President held that the Minister of
National Defense could validly modify or alter the PCG Commandant's
decision:
However, the records likewise show that, on November 26, 1980, the
Court of Appeals rendered a decision in CA-G.R. No. 61206-R
(Smith Bell & Co., Inc., et al. vs. Carlos A. Go Thong & Co.) holding
that the proximate cause of the collision between MV "DON
CARLOS" AND MS "YOTAI MARU" was the negligence, failure and
error of judgment of the officers of MS "YOTAI MARU". Earlier, or on
February 27, 1976, the Court of First Instance of Cebu rendered a
decision in Civil Case No. R-11973 (Carlos A. Go Thong vs. San-yo
Marine Co.) holding that MS "YOTAI MARU" was solely responsible
for the collision, which decision was upheld by the Court of Appeals.
 The foregoing judicial pronouncements rendered after the finality of
the PCG Commandant's decision of May 19, 1980, were
supervening causes or reasons that rendered the PCG
Commandant's decision as no longer enforceable and entitled
MV "DON CARLOS" to request the Minister of National Defense to
modify or alter the questioned decision to harmonize the same with
justice and tile facts. (De la Costa vs. Cleofas, 67 Phil. 686; City of
Bututan vs. Ortiz, 3 SCRA 659; Candelario vs. Canizares, 4 SCRA
738; Abellana vs. Dosdos, 13 SCRA 244). Under such precise
circumstances, the Minister of National Defense may validly modify
or alter the PCG commandant's decision. (Sec. 37, Act 4007; Secs.
79(c) and 550, Revised Administrative Code; Province of
Pangasinan vs. Secretary of Public Works and Communications, 30
SCRA 134; Estrelia vs. Orendain, 37 SCRA 640).17 (Emphasis
supplied)
The multiple misapprehensions under which the Office of the President
labored, were the following:
It took account of the Decision of Sison, P.V., J. in C.A.-G.R. No. 61206-R,
the very decision that is the subject of review in the Petition at bar and
therefore not final. At the same time, the Office of the President either
ignored or was unaware of the Reyes, L.B., J., Decision in C.A.-G.R. No
61320-R finding the "Don Carlos" solely liable for the collision, and of the fact
that that Decision had been affirmed by the Supreme Court and had long ago
become final and executory. A third misapprehension of the Office of the
President related to a decision in a Cebu Court of First Instance litigation
which had been settled by the compromise agreement between the Sanyo
Marine Company and Go Thong. The Office of the President mistakenly
believed that the Cebu Court of First Instance had rendered a decision
holding the "Yotai Maru" solely responsible for the collision, When in truth the
Cebu court had rendered a judgment of dismissal on the basis of the
compromise agreement. The Cebu decision was not, of course, appealed to
the Court of Appeals.
It thus appears that the decision of the Office of the President upholding the
belated reversal by the Ministry of National Defense of the PCG'S decision
holding the "Don Carlos" solely liable for the collision, is so deeply flawed as
not to warrant any further examination. Upon the other hand, the basic
decision of the PCG holding the "Don Carlos" solely negligent in the collision
remains in effect.
II
In their Petition for Review, petitioners assail the finding and conclusion of
the Sison Decision, that the "Yotai Maru" was negligent and at fault in the
collision, rather than the "Don Carlos." In view of the conclusions reached in
Part I above, it may not be strictly necessary to deal with the issue of the
correctness of the Sison Decision in this respect. The Court considers,
nonetheless, that in view of the conflicting conclusions reached by Reyes,
L.B., J., on the one hand, and Sison, P.V., J., on the other, and since in
affirming the Reyes Decision, the Court did not engage in a detailed written
examination of the question of which vessel had been negligent, and in view
of the importance of the issues of admiralty law involved, the Court should
undertake a careful review of the record of the case at bar and discuss those
issues in extenso.
The decision of Judge Cuevas in Civil Case No. 82556 is marked by careful
analysis of the evidence concerning the collision. It is worth underscoring that
the findings of fact of Judge Fernandez in Civil Case No. 82567 (which was
affirmed by the Court of Appeals in the Reyes Decision and by this Court in
G.R. No. L-48839) are just about identical with the findings of Judge Cuevas.
Examining the facts as found by Judge Cuevas, the Court believes that there
are three (3) principal factors which are constitutive of negligence on the part
of the "Don Carlos," which negligence was the proximate cause of the
collision.
The first of these factors was the failure of the "Don Carlos" to comply with
the requirements of Rule 18 (a) of the International Rules of the Road
("Rules")," which provides as follows
(a) When two power-driven vessels are meeting end on, or nearly
end on, so as to involve risk of collision, each shall alter her course
to starboard, so that each may pass on the port side of the other.
This Rule only applies to cases where vessels are meeting end on or
nearly end on, in such a manner as to involve risk of collision, and
does not apply to two vessels which must, if both keep on their
respective course, pass clear of each other. The only cases to which
it does apply are when each of two vessels is end on, or nearly end
on, to the other; in other words, to cases in which, by day, each
vessel sees the masts of the other in a line or nearly in a line with her
own; and by night to cases in which each vessel is in such a position
as to see both the sidelights of the other. It does not apply, by day, to
cases in which a vessel sees another ahead crossing her own
course; or, by night, to cases where the red light of one vessel is
opposed to the red light of the other or where the green light of one
vessel is opposed to the green light of the other or where a red light
without a green light or a green light without a red light is seen
ahead, or Where both green and red lights are seen anywhere but
ahead. (Emphasis supplied)
The evidence on this factor was summarized by Judge Cuevas in the
following manner:
Plaintiff's and defendant's evidence seem to agree that each vessel
made a visual sighting of each other ten minute before the collision
which occurred at 0350. German's version of the incident that
followed, was that "Don Carlos" was proceeding directly to [a]
meeting [on an] "end-on or nearly end-on situation" (Exh. S, page 8).
He also testified that "Yotai Maru's' headlights were "nearly in line at
0340 A.M." (t.s.n., June 6, 1974) clearly indicating that both vessels
were sailing on exactly opposite paths (t.s.n. June 6, 1974, page 56).
Rule 18 (a) of the International Rules of the Road provides as
follows:
xxx xxx xxx
And yet German altered "Don Carlos" course by five degrees to the left at
0343 hours instead of to the right (t.s.n. June 6, 1974, pages 4445) which
maneuver was the error that caused the collision in question. Why German
did so is likewise explained by the evidence on record. "Don Carlos" was
overtaking another vessel, the "Don Francisco",and was then at the
starboard (right side) of the aforesaid vessel at 3:40 a.m. It was in the
process of overtaking"Don Francisco" that "Don Carlos' was finally brought
into a situation where he was meeting end-on or nearly end-on "Yotai Maru,
thus involving risk of collision. Hence, German in his testimony before the
Board of Marine inquiry stated:
Atty. Chung:
You said in answer to the cross-examination that you took a change
of course to the left. Why did you not take a course to the right
instead?
German:
I did not take any course to the right because the other vessel was in
my mind at the starboard side following me. Besides, I don't want to
get risk of the Caballo Island (Exh. 2, pages 209 and
210).19 (Emphasis supplied)
For her part, the "Yotai Maru" did comply with its obligations under Rule 18
(a). As the "Yotai Maru" found herself on an "end-on" or a "nearly end-on"
situation vis-a-vis the "Don Carlos, " and as the distance between them was
rapidly shrinking, the "Yotai Maru" turned starboard (to its right) and at the
same time gave the required signal consisting of one short horn blast. The
"Don Carlos" turned to portside (to its left), instead of turning to starboard as
demanded by Rule 18 (a). The "Don Carlos" also violated Rule 28 (c) for it
failed to give the required signal of two (2) short horn blasts meaning "I am
altering my course to port." When the "Yotai Maru" saw that the "Don Carlos"
was turning to port, the master of the "Yotai Maru" ordered the vessel turned
"hard starboard" at 3:45 a.m. and stopped her engines; at about 3:46 a.m.
the "Yotai Maru" went "full astern engine."20 The collision occurred at exactly
3:50 a.m.
The second circumstance constitutive of negligence on the part of the "Don
Carlos" was its failure to have on board that night a "proper look-out" as
required by Rule I (B) Under Rule 29 of the same set of Rules, all
consequences arising from the failure of the "Don Carlos" to keep a "proper
look-out" must be borne by the "Don Carlos." Judge Cuevas' summary of the
evidence said:
The evidence on record likewise discloses very convincingly that
"Don Carlos" did not have "look-out" whose sole and only duty is
only to act as Such. . . .21
A "proper look-out" is one who has been trained as such and who is given no
other duty save to act as a look-out and who is stationed where he can see
and hear best and maintain good communication with the officer in charge of
the vessel, and who must, of course, be vigilant. Judge Cuevas wrote:
The "look-out" should have no other duty to perform. (Chamberlain v.
Ward, 21, N.O.W. 62, U.S. 548, 571). He has only one duty, that
which its name implies—to keep "look-out". So a deckhand who has
other duties, is not a proper "look-out" (Brooklyn Perry Co. v. U.S.,
122, Fed. 696). The navigating officer is not a sufficient"look-out"
(Larcen B. Myrtle, 44 Fed. 779)—Griffin on Collision, pages 277-
278). Neither the captain nor the [helmsman] in the pilothouse can
be considered to be a "look-out" within the meaning of the maritime
law. Nor should he be stationed in the bridge. He should be as near
as practicable to the surface of the water so as to be able to see low-
lying lights (Griffin on Collision, page 273).
On the strength of the foregoing authorities, which do not appear to
be disputed even by the defendant, it is hardly probable that neither
German or Leo Enriquez may qualify as "look-out" in the real sense
of the word.22(Emphasis supplied)
In the case at bar, the failure of the "Don Carlos" to recognize in a timely
manner the risk of collision with the "Yotai Maru" coming in from the opposite
direction, was at least in part due to the failure of the "Don Carlos" to
maintain a proper look-out.
The third factor constitutive of negligence on the part of the "Don
Carlos" relates to the fact that Second Mate Benito German was,
immediately before and during the collision, in command of the "Don
Carlos." Judge Cuevas summed up the evidence on this point in the
following manner:
The evidence on record clearly discloses that "Don Carlos" was, at
the time of the collision and immediately prior thereto, under the
command of Benito German, a second mate although its captain,
Captain Rivera, was very much in the said vessel at the time. The
defendant's evidence appears bereft of any explanation as to why
second mate German was at the helm of the aforesaid vessel when
Captain Rivera did not appear to be under any disability at the time.
In this connection, Article [633] of the Code of Commerce provides:
Art. [633] — The second mate shall take command of the
vessel in case of the inability or disqualification of the captain
and sailing mate, assuming, in such case, their powers and
liability.
The fact that second mate German was allowed to be in command of
"Don Carlos" and not the chief or the sailing mate in the absence of
Captain Rivera, gives rise to no other conclusion except that said
vessel [had] no chief mate. Otherwise, the defense evidence should
have at least explained why it was German, only a second mate,
who was at the helm of the vessel "Don Carlos" at the time of the
fatal collision.
But that is not all. Worst still, aside from German's being only a
second mate, is his apparent lack of sufficient knowledge of the
basic and generally established rules of navigation. For instance, he
appeared unaware of the necessity of employing a "look- out" (t.s.n.
June 6, 1974, page 27) which is manifest even in his testimony
before the Board of Marine Inquiry on the same subject (Exh. 2,
page 209). There is, therefore, every reasonable ground to believe
that his inability to grasp actual situation and the implication brought
about by inadequacy of experience and technical know-how was
mainly responsible and decidedly accounted for the collision of the
vessels involved in this case.. . .23 (Emphasis supplied)
Second Mate German simply did not have the level of experience, judgment
and skill essential for recognizing and coping with the risk of collision as it
presented itself that early morning when the "Don Carlos," running at
maximum speed and having just overtaken the "Don Francisco" then
approximately one mile behind to the starboard side of the "Don
Carlos," found itself head-on or nearly head on vis-a-vis the "Yotai Maru. " It
is essential to point out that this situation was created by the "Don
Carlos" itself.
The Court of Appeals in C.A.-G.R. No. 61206-R did not make any findings of
fact which contradicted the findings of fact made by Judge Cuevas. What
Sison, P.V., J. actually did was to disregard all the facts found by Judge
Cuevas, and discussed above and, astonishingly, found a duty on the "Yotai
Maru" alone to avoid collision with and to give way to the "Don Carlos ".
Sison, P.V., J., wrote:
At a distance of eight (8) miles and with ten (10) minutes before the
impact, [Katoh] and Chonabayashi had ample time to adopt effective
precautionary measures to steer away from the Philippine vessel,
particularly because both [Katoh] and Chonabayashi also deposed
that at the time they had first eyesight of the "Don Carlos" there was
still "no danger at all" of a collision.1âwphi1 Having sighted the "Don
Carlos" at a comparatively safe distance—"no danger at all" of a
collision—the Japanese ship should have observed with the highest
diligence the course and movements of the Philippine interisland
vessel as to enable the former to adopt such precautions as will
necessarily present a collision, or give way, and in case of a
collision, the former is prima facie at fault. In G. Urrutia & Co. vs.
Baco River Plantation Co., 26 Phil. 632, the Supreme Court held:
Nautical rules require that where a steamship and sailing
vessel are approaching each other from opposite directions,
or on intersecting lines, the steamship, from the moment the
sailing vessel is seen, shall watch with the highest diligence
her course and movements so as to enable it to adopt
such timely means of precaution as will necessarily prevent
the two boats from coming in contact.' (Underscoring in the
original)
At 3:44 p.m., or 4 minutes after first sighting the "Don Carlos", or 6
minutes before contact time, Chonabayashi revealed that the "Yotai
Maru" gave a one-blast whistle to inform the Philippine vessel that
the Japanese ship was turning to starboard or to the right and that
there was no blast or a proper signal from the "Don Carlos" (pp. 67-
68. Deposition of Chonabayashi, List of Exhibits). The absence of a
reply signal from the"Don Carlos" placed the "Yotai Maru" in a
situation of doubt as to the course the "Don Carlos" would take. Such
being the case, it was the duty of the Japanese officers "to stop,
 reverse or come to a standstill until the course of the "Don
Carlos" has been determined and the risk of a collision
removed (The Sabine, 21 F (2d) 121, 124, cited in Standard
Vacuum, etc. vs. Cebu Stevedoring, etc., 5 C.A.R. 2d 853, 861-
862).. . . .24(Emphasis supplied)

The Court is unable to agree with the view thus taken by Sison, P.V., J. By
imposing an exclusive obligation upon one of the vessels, the "Yotai Maru, "
to avoid the collision, the Court of Appeals not only chose to overlook all the
above facts constitutive of negligence on the part of the "Don Carlos;" it also
in effect used the very negligence on the part of the "Don Carlos" to absolve
it from responsibility and to shift that responsibility exclusively onto the "Yotai
Maru" the vessel which had observed carefully the mandate of Rule 18 (a).
Moreover, G. Urrutia and Company v. Baco River Plantation
Company25 invoked by the Court of Appeals seems simply inappropriate and
inapplicable. For the collision in the Urrutia case was between
a sailing vessel, on the one hand, and a power-driven vessel, on the other;
the Rules, of course, imposed a special duty on the power-driven vessel to
watch the movements of a sailing vessel, the latter being necessarily much
slower and much less maneuverable than the power-driven one. In the case
at bar, both the "Don Carlos" and the "Yotai Maru" were power-driven and
both were equipped with radar; the maximum speed of the "Yotai Maru" was
thirteen (13) knots while that of the "Don Carlos" was eleven (11) knots.
Moreover, as already noted, the "Yotai Maru" precisely took last minute
measures to avert collision as it saw the "Don Carlos" turning to portside: the
"Yotai Maru" turned "hard starboard" and stopped its engines and then put its
engines "full astern."

Thus, the Court agrees with Judge Cuevas (just as it had agreed with Reyes,
L.B., J.), with Judge Fernandez and Nocon, J.,26 that the "Don Carlos" had
been negligent and that its negligence was the sole proximate cause of the
collision and of the resulting damages.

FOR ALL THE FOREGOING, the Decision of the Court of Appeals dated 26
November 1980 in C.A.-G.R. No. 61206-R is hereby REVERSED and SET
ASIDE. The decision of the trial court dated 22 September 1975 is hereby
REINSTATED and AFFIRMED in its entirety. Costs against private
respondent.

SO ORDERED.
G.R. No. 113375 May 5, 1994
KILOSBAYAN, INCORPORATED, JOVITO R. SALONGA, CIRILO A.
RIGOS, ERME CAMBA, EMILIO C. CAPULONG, JR., JOSE T. APOLO,
EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE ABCEDE,
CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G. FERNANDO, RAOUL V.
VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, SEN. FREDDIE
WEBB, SEN. WIGBERTO TAÑADA, and REP. JOKER P.
ARROYO, petitioners,
vs.
TEOFISTO GUINGONA, JR., in his capacity as Executive Secretary,
Office of the President; RENATO CORONA, in his capacity as Assistant
Executive Secretary and Chairman of the Presidential review
Committee on the Lotto, Office of the President; PHILIPPINE CHARITY
SWEEPSTAKES OFFICE; and PHILIPPINE GAMING MANAGEMENT
CORPORATION, respondents.
Jovito R. Salonga, Fernando Santiago, Emilio C. Capulong, Jr. and Felipe L.
Gozon for petitioners.
Renato L. Cayetano and Eleazar B. Reyes for PGMC.
Gamaliel G. Bongco, Oscar Karaan and Jedideoh Sincero for intervenors.
DAVIDE, JR., J.:
This is a special civil action for prohibition and injunction, with a prayer for a
temporary restraining order and preliminary injunction, which seeks to
prohibit and restrain the implementation of the "Contract of Lease" executed
by the Philippine Charity Sweepstakes Office (PCSO) and the Philippine
Gaming Management Corporation (PGMC) in connection with the on- line
lottery system, also known as "lotto."
Petitioner Kilosbayan, Incorporated (KILOSBAYAN) avers that it is a non-
stock domestic corporation composed of civic-spirited citizens, pastors,
priests, nuns, and lay leaders who are committed to the cause of truth,
justice, and national renewal. The rest of the petitioners, except Senators
Freddie Webb and Wigberto Tañada and Representative Joker P. Arroyo,
are suing in their capacities as members of the Board of Trustees of
KILOSBAYAN and as taxpayers and concerned citizens. Senators Webb and
Tañada and Representative Arroyo are suing in their capacities as members
of Congress and as taxpayers and concerned citizens of the Philippines.
The pleadings of the parties disclose the factual antecedents which triggered
off the filing of this petition.
Pursuant to Section 1 of the charter of the PCSO (R.A. No. 1169, as
amended by B.P. Blg. 42) which grants it the authority to hold and conduct
"charity sweepstakes races, lotteries and other similar activities," the PCSO
decided to establish an on- line lottery system for the purpose of increasing
its revenue base and diversifying its sources of funds. Sometime before
March 1993, after learning that the PCSO was interested in operating an on-
line lottery system, the Berjaya Group Berhad, "a multinational company and
one of the ten largest public companies in Malaysia," long "engaged in,
among others, successful lottery operations in Asia, running both Lotto and
Digit games, thru its subsidiary, Sports Toto Malaysia," with its "affiliate, the
International Totalizator Systems, Inc., . . . an American public company
engaged in the international sale or provision of computer systems,
softwares, terminals, training and other technical services to the gaming
industry," "became interested to offer its services and resources to PCSO."
As an initial step, Berjaya Group Berhad (through its individual nominees)
organized with some Filipino investors in March 1993 a Philippine
corporation known as the Philippine Gaming Management Corporation
(PGMC), which "was intended to be the medium through which the technical
and management services required for the project would be offered and
delivered to PCSO." 1
Before August 1993, the PCSO formally issued a Request for Proposal
(RFP) for the Lease Contract of an on-line lottery system for the
PCSO. 2 Relevant provisions of the RFP are the following:
1. EXECUTIVE SUMMARY
xxx xxx xxx
1.2. PCSO is seeking a suitable contractor which shall build,
at its own expense, all the facilities ('Facilities') needed to
operate and maintain a nationwide on-line lottery system.
PCSO shall lease the Facilities for a fixed percentage
ofquarterly gross receipts. All receipts from ticket sales shall
be turned over directly to PCSO. All capital, operating
expenses and expansion expenses and risks shall be for the
exclusive account of the Lessor.
xxx xxx xxx
1.4. The lease shall be for a period not exceeding fifteen (15)
years.
1.5. The Lessor is expected to submit a comprehensive
nationwide lottery development plan ("Development Plan")
which will include the game, the marketing of the games,
and the logistics to introduce the games to all the cities and
municipalities of the country within five (5) years.
xxx xxx xxx
1.7. The Lessor shall be selected based on its technical
expertise, hardware and software capability, maintenance
support, and financial resources. The Development Plan
shall have a substantial bearing on the choice of the Lessor.
The Lessor shall be a domestic corporation, with at least
sixty percent (60%) of its shares owned by Filipino
shareholders.
xxx xxx xxx
The Office of the President, the National Disaster Control
Coordinating Council, the Philippine National Police, and the
National Bureau of Investigation shall be authorized to use
the nationwide telecommunications system of the Facilities
Free of Charge.
1.8. Upon expiration of the lease, the Facilities shall be
owned by PCSO without any additional consideration. 3
xxx xxx xxx
2.2. OBJECTIVES
The objectives of PCSO in leasing the Facilities from a
private entity are as follows:
xxx xxx xxx
2.2.2. Enable PCSO to operate a nationwide on-line Lottery
system at no expense or risk to the government.
xxx xxx xxx
2.4. DUTIES AND RESPONSIBILITIES OF THE LESSOR
xxx xxx xxx
2.4.2. THE LESSOR
The Proponent is expected to furnish and maintain the
Facilities, including the personnel needed to operate the
computers, the communications network and sales offices
under a build-lease basis. The printing of tickets shall be
undertaken under the supervision and control of PCSO. The
Facilities shall enable PCSO to computerize the entire
gaming system.
The Proponent is expected to formulate and design
consumer-oriented Master Games Plan suited to the
marketplace, especially geared to Filipino gaming habits and
preferences. In addition, the Master Games Plan is expected
to include a Product Plan for each game and explain how
each will be introduced into the market. This will be an
integral part of the Development Plan which PCSO will
require from the Proponent.
xxx xxx xxx
The Proponent is expected to provide upgrades to
modernize the entire gaming system over the life ofthe lease
contract.
The Proponent is expected to provide technology transfer to
PCSO technical personnel. 4
7. GENERAL GUIDELINES FOR PROPONENTS
xxx xxx xxx
Finally, the Proponent must be able to stand the acid test of
proving that it is an entity able to take on the role of
responsible maintainer of the on-line lottery system, and able
to achieve PSCO's goal of formalizing an on-line lottery
system to achieve its mandated objective. 5
xxx xxx xxx
16. DEFINITION OF TERMS
Facilities: All capital equipment, computers, terminals,
software, nationwide telecommunication network, ticket
 sales offices, furnishings, and fixtures; printing costs; cost of
salaries and wages; advertising and promotion expenses;
maintenance costs; expansion and replacement costs;
security and insurance, and all other related expenses
needed to operate nationwide on-line lottery system.6
Considering the above citizenship requirement, the PGMC claims that the
Berjaya Group "undertook to reduce its equity stakes in PGMC to 40%," by
selling 35% out of the original 75% foreign stockholdings to local investors.
On 15 August 1993, PGMC submitted its bid to the PCSO.7
The bids were evaluated by the Special Pre-Qualification Bids and Awards
Committee (SPBAC) for the on-line lottery and its Bid Report was thereafter
submitted to the Office of the President. 8 The submission was preceded by
complaints by the Committee's Chairperson, Dr. Mita Pardo de Tavera. 9
On 21 October 1993, the Office of the President announced that it had given
the respondent PGMC the go-signal to operate the country's on-line lottery
system and that the corresponding implementing contract would be
submitted not later than 8 November 1993 "for final clearance and approval
by the Chief Executive." 10 This announcement was published in the Manila
Standard, Philippine Daily Inquirer, and the Manila Times on 29 October
1993. 11
On 4 November 1993, KILOSBAYAN sent an open letter to Presidential Fidel
V. Ramos strongly opposing the setting up to the on-line lottery system on
the basis of serious moral and ethical considerations. 12
At the meeting of the Committee on Games and Amusements of the Senate
on 12 November 1993, KILOSBAYAN reiterated its vigorous opposition to
the on-line lottery on account of its immorality and illegality. 13
On 19 November 1993, the media reported that despite the opposition,
"Malacañang will push through with the operation of an on-line lottery system
nationwide" and that it is actually the respondent PCSO which will operate
the lottery while the winning corporate bidders are merely "lessors." 14
On 1 December 1993, KILOSBAYAN requested copies of all documents
pertaining to the lottery award from Executive Secretary Teofisto Guingona,
Jr. In his answer of 17 December 1993, the Executive Secretary informed
KILOSBAYAN that the requested documents would be duly transmitted
before the end of the month. 15. However, on that same date, an agreement
denominated as "Contract of Lease" was finally executed by respondent
PCSO and respondent PGMC. 16 The President, per the press statement
issued by the Office of the President, approved it on 20 December 1993.17
In view of their materiality and relevance, we quote the following salient
provisions of the Contract of Lease:
1. DEFINITIONS
The following words and terms shall have the following
respective meanings:
1.1 Rental Fee — Amount to be paid by PCSO to the
LESSOR as compensation for the fulfillment of the
obligations of the LESSOR under this Contract, including,
but not limited to the lease of the Facilities.
xxx xxx xxx
1.3 Facilities — All capital equipment, computers, terminals,
software (including source codes for the On-Line Lottery
application software for the terminals, telecommunications
and central systems), technology, intellectual property rights,
telecommunications network, and furnishings and fixtures.
1.4 Maintenance and Other Costs — All costs and expenses
relating to printing, manpower, salaries and wages,
advertising and promotion, maintenance, expansion and
replacement, security and insurance, and all other related
expenses needed to operate an On-Line Lottery System,
which shall be for the account of the LESSOR. All expenses
relating to the setting-up, operation and maintenance of
ticket sales offices of dealers and retailers shall be borne by
PCSO's dealers and retailers.
1.5 Development Plan — The detailed plan of all games, the
marketing thereof, number of players, value of winnings and
the logistics required to introduce the games, including the
Master Games Plan as approved by PCSO, attached hereto
as Annex "A", modified as necessary by the provisions of
this Contract.
xxx xxx xxx
1.8 Escrow Deposit — The proposal deposit in the sum of
Three Hundred Million Pesos (P300,000,000.00) submitted
by the LESSOR to PCSO pursuant to the requirements of
the Request for Proposals.
2. SUBJECT MATTER OF THE LEASE
The LESSOR shall build, furnish and maintain at its own
expense and risk the Facilities for the On-Line Lottery
System of PCSO in the Territory on an exclusive basis. The
LESSOR shall bear all Maintenance and Other Costs as
defined herein.
xxx xxx xxx
3. RENTAL FEE
For and in consideration of the performance by the LESSOR
of its obligations herein, PCSO shall pay LESSOR a fixed
Rental Fee equal to four point nine percent (4.9%) of gross
receipts from ticket sales, payable net of taxes required by
law to be withheld, on a semi-monthly basis. Goodwill,
franchise and similar fees shall belong to PCSO.
4. LEASE PERIOD
The period of the lease shall commence ninety (90) days
from the date of effectivity of this Contract and shall run for a
period of eight (8) years thereafter, unless sooner terminated
in accordance with this Contract.
5. RIGHTS AND OBLIGATIONS OF PCSO AS OPERATOR
OF THE ON-LINE LOTTERY SYSTEM
PCSO shall be the sole and individual operator of the On-
Line Lottery System. Consequently:
5.1 PCSO shall have sole responsibility to decide whether to
implement, fully or partially, the Master Games Plan of the
LESSOR. PCSO shall have the sole responsibility to
determine the time for introducing new games to the market.
The Master Games Plan included in Annex "A" hereof is
hereby approved by PCSO.
5.2 PCSO shall have control over revenues and receipts of
whatever nature from the On-Line Lottery System. After
paying the Rental Fee to the LESSOR, PCSO shall have
exclusive responsibility to determine the Revenue Allocation
Plan; Provided, that the same shall be consistent with the
requirement of R.A. No. 1169, as amended, which fixes a
prize fund of fifty five percent (55%) on the average.
5.3 PCSO shall have exclusive control over the printing of
tickets, including but not limited to the design, text, and
contents thereof.
5.4 PCSO shall have sole responsibility over the
appointment of dealers or retailers throughout the country.
PCSO shall appoint the dealers and retailers in a timely
manner with due regard to the implementation timetable of
the On-Line Lottery System. Nothing herein shall preclude
the LESSOR from recommending dealers or retailers for
appointment by PCSO, which shall act on said
recommendation within forty-eight (48) hours.
5.5 PCSO shall designate the necessary personnel to
monitor and audit the daily performance of the On-Line
Lottery System. For this purpose, PCSO designees shall be
given, free of charge, suitable and adequate space, furniture
and fixtures, in all offices of the LESSOR, including but not
limited to its headquarters, alternate site, regional and area
offices.
5.6 PCSO shall have the responsibility to resolve, and
exclusive jurisdiction over, all matters involving the operation
of the On-Line Lottery System not otherwise provided in this
Contract.
5.7 PCSO shall promulgate procedural and coordinating
rules governing all activities relating to the On-Line Lottery
System.
5.8 PCSO will be responsible for the payment of prize
monies, commissions to agents and dealers, and taxes and
levies (if any) chargeable to the operator of the On-Line
Lottery System. The LESSOR will bear all other
Maintenance and Other Costs, except as provided in Section
1.4.
5.9 PCSO shall assist the LESSOR in the following:
5.9.1 Work permits for the LESSOR's staff;
5.9.2 Approvals for importation of the
Facilities;
5.9.3 Approvals and consents for the On-
Line Lottery System; and
5.9.4 Business and premises licenses for all
offices of the LESSOR and licenses for the
telecommunications network.
5.10 In the event that PCSO shall pre-terminate this Contract
or suspend the operation of the On-Line Lottery System, in
breach of this Contract and through no fault of the LESSOR,
PCSO shall promptly, and in any event not later than sixty
(60) days, reimburse the LESSOR the amount of its total
investment cost associated with the On-Line Lottery System,
including but not limited to the cost of the Facilities, and
further compensate the LESSOR for loss of expected net
profit after tax, computed over the unexpired term of the
lease.
6. DUTIES AND RESPONSIBILITIES OF THE LESSOR
The LESSOR is one of not more than three (3) lessors of
similar facilities for the nationwide On-Line Lottery System of
PCSO. It is understood that the rights of the LESSOR are
primarily those of a lessor of the Facilities, and
consequently, all rights involving the business aspects of the
use of the Facilities are within the jurisdiction of PCSO.
During the term of the lease, the LESSOR shall.
6.1 Maintain and preserve its corporate existence, rights and
privileges, and conduct its business in an orderly, efficient,
and customary manner.
6.2 Maintain insurance coverage with insurers acceptable to
PCSO on all Facilities.
6.3 Comply with all laws, statues, rules and regulations,
orders and directives, obligations and duties by which it is
legally bound.
6.4 Duly pay and discharge all taxes, assessments and
government charges now and hereafter imposed of whatever
nature that may be legally levied upon it.
6.5 Keep all the Facilities in fail safe condition and, if
necessary, upgrade, replace and improve the Facilities from
time to time as new technology develops, in order to make
the On-Line Lottery System more cost-effective and/or
competitive, and as may be required by PCSO shall not
impose such requirements unreasonably nor arbitrarily.
6.6 Provide PCSO with management terminals which will
allow real-time monitoring of the On-Line Lottery System.
6.7 Upon effectivity of this Contract, commence the training
of PCSO and other local personnel and the transfer of
technology and expertise, such that at the end of the term of
this Contract, PCSO will be able to effectively take-over the
Facilities and efficiently operate the On-Line Lottery System.
6.8 Undertake a positive advertising and promotions
campaign for both institutional and product lines without
engaging in negative advertising against other lessors.
6.9 Bear all expenses and risks relating to the Facilities
including, but not limited to, Maintenance and Other Costs
and:
xxx xxx xxx
6.10 Bear all risks if the revenues from ticket sales, on an
annualized basis, are insufficient to pay the entire prize
money.
6.11 Be, and is hereby, authorized to collect and retain for its
own account, a security deposit from dealers and retailers, in
an amount determined with the approval of PCSO, in respect
of equipment supplied by the LESSOR. PCSO's approval
shall not be unreasonably withheld.
 xxx xxx xxx
6.12 Comply with procedural and coordinating rules issued
by PCSO.
7. REPRESENTATIONS AND WARRANTIES
The LESSOR represents and warrants that:
7.1 The LESSOR is corporation duly organized and existing
under the laws of the Republic of the Philippines, at least
sixty percent (60%) of the outstanding capital stock of which
is owned by Filipino shareholders. The minimum required
Filipino equity participation shall not be impaired through
voluntary or involuntary transfer, disposition, or sale of
shares of stock by the present stockholders.
7.2 The LESSOR and its Affiliates have the full corporate
and legal power and authority to own and operate their
properties and to carry on their business in the place where
such properties are now or may be conducted. . . .
7.3 The LESSOR has or has access to all the financing and
funding requirements to promptly and effectively carry out
the terms of this Contract. . . .
7.4 The LESSOR has or has access to all the managerial
and technical expertise to promptly and effectively carry out
the terms of this Contract. . . .
xxx xxx xxx
10. TELECOMMUNICATIONS NETWORK
The LESSOR shall establish a telecommunications network
that will connect all municipalities and cities in the Territory in
accordance with, at the LESSOR's option, either of the
LESSOR's proposals (or a combinations of both such
proposals) attached hereto as Annex "B," and under the
following PCSO schedule:
xxx xxx xxx
PCSO may, at its option, require the LESSOR to establish
the telecommunications network in accordance with the
above Timetable in provinces where the LESSOR has not
yet installed terminals. Provided, that such provinces have
existing nodes. Once a municipality or city is serviced by
land lines of a licensed public telephone company, and such
lines are connected to Metro Manila, then the obligation of
the LESSOR to connect such municipality or city through a
telecommunications network shall cease with respect to
such municipality or city. The voice facility will cover the four
offices of the Office of the President, National Disaster
Control Coordinating Council, Philippine National Police and
the National Bureau of Investigation, and each city and
municipality in the Territory except Metro Manila, and those
cities and municipalities which have easy telephone access
from these four offices. Voice calls from the four offices shall
be transmitted via radio or VSAT to the remote municipalities
which will be connected to this voice facility through wired
network or by radio. The facility shall be designed to handle
four private conversations at any one time.
xxx xxx xxx
13. STOCK DISPERSAL PLAN
Within two (2) years from the effectivity of this Contract, the
LESSOR shall cause itself to be listed in the local stock
exchange and offer at least twenty five percent (25%) of its
equity to the public.
14. NON-COMPETITION
The LESSOR shall not, directly or indirectly, undertake any
activity or business in competition with or adverse to the On-
Line Lottery System of PCSO unless it obtains the latter's
prior written consent thereto.
15. HOLD HARMLESS CLAUSE
15.1 The LESSOR shall at all times protect and defend, at its
cost and expense, PCSO from and against any and all
liabilities and claims for damages and/or suits for or by
reason of any deaths of, or any injury or injuries to any
person or persons, or damages to property of any kind
whatsoever, caused by the LESSOR, its subcontractors, its
authorized agents or employees, from any cause or causes
whatsoever.
15.2 The LESSOR hereby covenants and agrees to
indemnify and hold PCSO harmless from all liabilities,
charges, expenses (including reasonable counsel fees) and
costs on account of or by reason of any such death or
deaths, injury or injuries, liabilities, claims, suits or losses
caused by the LESSOR's fault or negligence.
15.3 The LESSOR shall at all times protect and defend, at its
own cost and expense, its title to the facilities and PCSO's
interest therein from and against any and all claims for the
duration of the Contract until transfer to PCSO of ownership
of the serviceable Facilities.
16. SECURITY
16.1 To ensure faithful compliance by the LESSOR with the
terms of the Contract, the LESSOR shall secure a
Performance Bond from a reputable insurance company or
companies acceptable to PCSO.
16.2 The Performance Bond shall be in the initial amount of
Three Hundred Million Pesos (P300,000,000.00), to its U.S.
dollar equivalent, and shall be renewed to cover the duration
of the Contract. However, the Performance Bond shall be
reduced proportionately to the percentage of unencumbered
terminals installed; Provided, that the Performance Bond
shall in no case be less than One Hundred Fifty Million
Pesos (P150,000,000.00).
16.3 The LESSOR may at its option maintain its Escrow
Deposit as the Performance Bond. . . .
17. PENALTIES
17.1 Except as may be provided in Section 17.2, should the
LESSOR fail to take remedial measures within seven (7)
days, and rectify the breach within thirty (30) days, from
written notice by PCSO of any wilfull or grossly negligent
violation of the material terms and conditions of this
Contract, all unencumbered Facilities shall automatically
become the property of PCSO without consideration and
without need for further notice or demand by PCSO. The
Performance Bond shall likewise be forfeited in favor of
PCSO.
17.2 Should the LESSOR fail to comply with the terms of the
Timetables provided in Section 9 and 10, it shall be subject
to an initial Penalty of Twenty Thousand Pesos
(P20,000.00), per city or municipality per every month of
delay; Provided, that the Penalty shall increase, every ninety
(90) days, by the amount of Twenty Thousand Pesos
(P20,000.00) per city or municipality per month, whilst shall
failure to comply persists. The penalty shall be deducted by
PCSO from the rental fee.
xxx xxx xxx
20. OWNERSHIP OF THE FACILITIES
After expiration of the term of the lease as provided in
Section 4, the Facilities directly required for the On-Line
Lottery System mentioned in Section 1.3 shall automatically
belong in full ownership to PCSO without any further
consideration other than the Rental Fees already paid during
the effectivity of the lease.
21. TERMINATION OF THE LEASE
PCSO may terminate this Contract for any breach of the
material provisions of this Contract, including the following:
21.1 The LESSOR is insolvent or bankrupt or unable to pay
its debts, stops or suspends or threatens to stop or suspend
payment of all or a material part of its debts, or proposes or
makes a general assignment or an arrangement or
compositions with or for the benefit of its creditors; or
21.2 An order is made or an effective resolution passed for
the winding up or dissolution of the LESSOR or when it
ceases or threatens to cease to carry on all or a material part
of its operations or business; or
21.3 Any material statement, representation or warranty
made or furnished by the LESSOR proved to be materially
false or misleading;
 said termination to take effect upon receipt
of written notice of termination by the
LESSOR and failure to take remedial action
within seven (7) days and cure or remedy
the same within thirty (30) days from notice.
Any suspension, cancellation or termination
of this Contract shall not relieve the
LESSOR of any liability that may have
already accrued hereunder.
xxx xxx xxx
Considering the denial by the Office of the President of its protest and the
statement of Assistant Executive Secretary Renato Corona that "only a court
injunction can stop Malacañang," and the imminent implementation of the
Contract of Lease in February 1994, KILOSBAYAN, with its co-petitioners,
filed on 28 January 1994 this petition.
In support of the petition, the petitioners claim that:
. . . X X THE OFFICE OF THE PRESIDENT,
ACTING THROUGH RESPONDENTS
EXECUTIVE SECRETARY AND/OR
ASSISTANT EXECUTIVE SECRETARY
FOR LEGAL AFFAIRS, AND THE PCSO
GRAVELY ABUSE[D] THEIR DISCRETION
AND/OR FUNCTIONS TANTAMOUNT TO
LACK OF JURISDICTION AND/OR
AUTHORITY IN RESPECTIVELY: (A)
APPROVING THE AWARD OF THE
CONTRACT TO, AND (B) ENTERING INTO
THE SO-CALLED "CONTRACT OF LEASE"
WITH, RESPONDENT PGMC FOR THE
INSTALLATION, ESTABLISHMENT AND
OPERATION OF THE ON-LINE LOTTERY
AND TELECOMMUNICATION SYSTEMS
REQUIRED AND/OR AUTHORIZED
UNDER THE SAID CONTRACT,
CONSIDERING THAT:
a) Under Section 1 of the Charter of the PCSO, the PCSO is
prohibited from holding and conducting lotteries "in
collaboration, association or joint venture with any person,
association, company or entity";
b) Under Act No. 3846 and established jurisprudence, a
Congressional franchise is required before any person may
be allowed to establish and operate said telecommunications
system;
c) Under Section 11, Article XII of the Constitution, a less
than 60% Filipino-owned and/or controlled corporation, like
the PGMC, is disqualified from operating a public service,
like the said telecommunications system; and
d) Respondent PGMC is not authorized by its charter and
under the Foreign Investment Act (R.A. No. 7042) to install,
establish and operate the on-line lotto and
telecommunications systems.18
Petitioners submit that the PCSO cannot validly enter into the assailed
Contract of Lease with the PGMC because it is an arrangement wherein the
PCSO would hold and conduct the on-line lottery system in "collaboration" or
"association" with the PGMC, in violation of Section 1(B) of R.A. No. 1169, as
amended by B.P. Blg. 42, which prohibits the PCSO from holding and
conducting charity sweepstakes races, lotteries, and other similar activities
"in collaboration, association or joint venture with any person, association,
company or entity, foreign or domestic." Even granting arguendo that a lease
of facilities is not within the contemplation of "collaboration" or "association,"
an analysis, however, of the Contract of Lease clearly shows that there is a
"collaboration, association, or joint venture between respondents PCSO and
PGMC in the holding of the On-Line Lottery System," and that there are
terms and conditions of the Contract "showing that respondent PGMC is the
actual lotto operator and not respondent PCSO."19
The petitioners also point out that paragraph 10 of the Contract of Lease
requires or authorizes PGMC to establish a telecommunications network that
will connect all the municipalities and cities in the territory. However, PGMC
cannot do that because it has no franchise from Congress to construct,
install, establish, or operate the network pursuant to Section 1 of Act No.
3846, as amended. Moreover, PGMC is a 75% foreign-owned or controlled
corporation and cannot, therefore, be granted a franchise for that purpose
because of Section 11, Article XII of the 1987 Constitution. Furthermore,
since "the subscribed foreign capital" of the PGMC "comes to about 75%, as
shown by paragraph EIGHT of its Articles of Incorporation," it cannot lawfully
enter into the contract in question because all forms of gambling — and
lottery is one of them — are included in the so-called foreign investments
negative list under the Foreign Investments Act (R.A. No. 7042) where only
up to 40% foreign capital is allowed. 20
Finally, the petitioners insist that the Articles of Incorporation of PGMC do not
authorize it to establish and operate an on-line lottery and
telecommunications systems.21
Accordingly, the petitioners pray that we issue a temporary restraining order
and a writ of preliminary injunction commanding the respondents or any
person acting in their places or upon their instructions to cease and desist
from implementing the challenged Contract of Lease and, after hearing the
merits of the petition, that we render judgment declaring the Contract of
Lease void and without effect and making the injunction permanent. 22
We required the respondents to comment on the petition.
In its Comment filed on 1 March 1994, private respondent PGMC asserts that
"(1) [it] is merely an independent contractor for a piece of work, (i.e., the
building and maintenance of a lottery system to be used by PCSO in the
operation of its lottery franchise); and (2) as such independent contractor,
PGMC is not a co-operator of the lottery franchise with PCSO, nor is PCSO
sharing its franchise, 'in collaboration, association or joint venture' with
PGMC — as such statutory limitation is viewed from the context, intent, and
spirit of Republic Act 1169, as amended by Batas Pambansa 42." It further
claims that as an independent contractor for a piece of work, it is neither
engaged in "gambling" nor in "public service" relative to the
telecommunications network, which the petitioners even consider as an
"indispensable requirement" of an on-line lottery system. Finally, it states that
the execution and implementation of the contract does not violate the
Constitution and the laws; that the issue on the "morality" of the lottery
franchise granted to the PCSO is political and not judicial or legal, which
should be ventilated in another forum; and that the "petitioners do not appear
to have the legal standing or real interest in the subject contract and in
obtaining the reliefs sought." 23
In their Comment filed by the Office of the Solicitor General, public
respondents Executive Secretary Teofisto Guingona, Jr., Assistant Executive
Secretary Renato Corona, and the PCSO maintain that the contract of lease
in question does not violate Section 1 of R.A. No. 1169, as amended by B.P.
Blg. 42, and that the petitioner's interpretation of the phrase "in collaboration,
association or joint venture" in Section 1 is "much too narrow, strained and
utterly devoid of logic" for it "ignores the reality that PCSO, as a corporate
entity, is vested with the basic and essential prerogative to enter into all kinds
of transactions or contracts as may be necessary for the attainment of its
purposes and objectives." What the PCSO charter "seeks to prohibit is that
arrangement akin to a "joint venture" or partnership where there is
"community of interest in the business, sharing of profits and losses, and a
mutual right of control," a characteristic which does not obtain in a contract of
lease." With respect to the challenged Contract of Lease, the "role of PGMC
is limited to that of a lessor of the facilities" for the on-line lottery system; in
"strict technical and legal sense," said contract "can be categorized as a
contract for a piece of work as defined in Articles 1467, 1713 and 1644 of the
Civil Code."
They further claim that the establishment of the telecommunications system
stipulated in the Contract of Lease does not require a congressional
franchise because PGMC will not operate a public utility; moreover, PGMC's
"establishment of a telecommunications system is not intended to establish a
telecommunications business," and it has been held that where the facilities
are operated "not for business purposes but for its own use," a legislative
franchise is not required before a certificate of public convenience can be
granted. 24 Even granting arguendo that PGMC is a public utility, pursuant
to Albano S.
Reyes, 25 "it can establish a telecommunications system even without a
legislative franchise because not every public utility is required to secure a
legislative franchise before it could establish, maintain, and operate the
service"; and, in any case, "PGMC's establishment of the
telecommunications system stipulated in its contract of lease with PCSO falls
within the exceptions under Section 1 of Act No. 3846 where a legislative
franchise is not necessary for the establishment of radio stations."
They also argue that the contract does not violate the Foreign Investment Act
of 1991; that the Articles of Incorporation of PGMC authorize it to enter into
the Contract of Lease; and that the issues of "wisdom, morality and propriety
of acts of the executive department are beyond the ambit of judicial review."
Finally, the public respondents allege that the petitioners have no standing to
maintain the instant suit, citing our resolution in Valmonte vs. Philippine
Charity Sweepstakes Office. 26
Several parties filed motions to intervene as petitioners in this case, 27 but
only the motion of Senators Alberto Romulo, Arturo Tolentino, Francisco
Tatad, Gloria Macapagal-Arroyo, Vicente Sotto III, John Osmeña, Ramon
Revilla, and Jose Lina 28 was granted, and the respondents were required to
comment on their petition in intervention, which the public respondents and
PGMC did.
In the meantime, the petitioners filed with the Securities and Exchange
Commission on 29 March 1994 a petition against PGMC for the nullification
of the latter's General Information Sheets. That case, however, has no
bearing in this petition.
On 11 April 1994, we heard the parties in oral arguments. Thereafter, we
resolved to consider the matter submitted for resolution and pending
resolution of the major issues in this case, to issue a temporary restraining
order commanding the respondents or any person acting in their place or
upon their instructions to cease and desist from implementing the challenged
Contract of Lease.
In the deliberation on this case on 26 April 1994, we resolved to consider
only these issues: (a) the locus standi of the petitioners, and (b) the legality
and validity of the Contract of Lease in the light of Section 1 of R.A. No.
1169, as amended by B.P. Blg. 42, which prohibits the PCSO from holding
and conducting lotteries "in collaboration, association or joint venture with
any person, association, company or entity, whether domestic or foreign." On
the first issue, seven Justices voted to sustain the locus standi of the
petitioners, while six voted not to. On the second issue, the seven Justices
were of the opinion that the Contract of Lease violates the exception to
Section 1(B) of R.A. No. 1169, as amended by B.P. Blg. 42, and is, therefore,
invalid and contrary to law. The six Justices stated that they wished to
express no opinion thereon in view of their stand on the first issue. The Chief
Justice took no part because one of the Directors of the PCSO is his brother-
in-law.
This case was then assigned to this ponente for the writing of the opinion of
the Court.
The preliminary issue on the locus standi of the petitioners should, indeed,
be resolved in their favor. A party's standing before this Court is a procedural
technicality which it may, in the exercise of its discretion, set aside in view of
the importance of the issues raised. In the landmark Emergency Powers
Cases, 29 this Court brushed aside this technicality because "the
transcendental importance to the public of these cases demands that they be
settled promptly and definitely, brushing aside, if we must, technicalities of
procedure. (Avelino vs. Cuenco, G.R. No. L-2821)." Insofar as taxpayers'
suits are concerned, this Court had declared that it "is not devoid of
In Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs.
discretion as to whether or not it should be entertained," 30 or that it "enjoys
Tan,33 reiterated in Basco vs. Philippine Amusements and Gaming
an open discretion to entertain the same or not." 31 In De La Llana vs.
Corporation,34 this Court stated:
Alba, 32 this Court declared:
1. The argument as to the lack of standing of petitioners is
easily resolved. As far as Judge de la Llana is concerned, he
certainly falls within the principle set forth in Justice Laurel's
opinion in People vs. Vera [65 Phil. 56 (1937)]. Thus: "The
unchallenged rule is that the person who impugns the
validity of a statute must have a personal and substantial
interest in the case such that he has sustained, or will
sustain, direct injury as a result of its enforcement [Ibid, 89].
The other petitioners as members of the bar and officers of
the court cannot be considered as devoid of "any personal
and substantial interest" on the matter. There is relevance to
this excerpt from a separate opinion in Aquino, Jr. v.
Commission on Elections [L-40004, January 31, 1975, 62
SCRA 275]: "Then there is the attack on the standing of
petitioners, as vindicating at most what they consider a
public right and not protecting their rights as individuals. This
is to conjure the specter of the public right dogma as an
inhibition to parties intent on keeping public officials staying
on the path of constitutionalism. As was so well put by Jaffe;
"The protection of private rights is an essential constituent of
public interest and, conversely, without a well-ordered state
there could be no enforcement of private rights. Private and
public interests are, both in a substantive and procedural
sense, aspects of the totality of the legal order." Moreover,
petitioners have convincingly shown that in their capacity as
taxpayers, their standing to sue has been amply
demonstrated. There would be a retreat from the liberal
approach followed in Pascual v. Secretary of Public Works,
foreshadowed by the very decision of People v. Vera where
the doctrine was first fully discussed, if we act differently
now. I do not think we are prepared to take that step.
Respondents, however, would hard back to the American
Supreme Court doctrine in Mellon v. Frothingham, with their
claim that what petitioners possess "is an interest which is
shared in common by other people and is comparatively so
minute and indeterminate as to afford any basis and
assurance that the judicial process can act on it." That is to
speak in the language of a bygone era, even in the United
States. For as Chief Justice Warren clearly pointed out in the
later case of Flast v. Cohen, the barrier thus set up if not
breached has definitely been lowered.
Objections to taxpayers' suits for lack of sufficient personality
standing or interest are, however, in the main procedural
matters. Considering the importance to the public of the
cases at bar, and in keeping with the Court's duty, under the
1987 Constitution, to determine whether or not the other
branches of government have kept themselves within the
limits of the Constitution and the laws and that they have not
abused the discretion given to them, this Court has brushed
aside technicalities of procedure and has taken cognizance
of these petitions.
and in Association of Small Landowners in the Philippines, Inc. vs. Secretary
of Agrarian Reform,35 it declared:
With particular regard to the requirement of proper party as
applied in the cases before us, we hold that the same is
satisfied by the petitioners and intervenors because each of
them has sustained or is in danger of sustaining an
immediate injury as a result of the acts or measures
complained of. [Ex ParteLevitt, 303 US 633]. And even if,
strictly speaking, they are not covered by the definition, it is
still within the wide discretion of the Court to waive the
requirement and so remove the impediment to its addressing
and resolving the serious constitutional questions raised.
In the first Emergency Powers Cases, ordinary citizens and
taxpayers were allowed to question the constitutionality of
several executive orders issued by President Quirino
although they were invoking only an indirect and general
interest shared in common with the public. The Court
dismissed the objective that they were not proper parties and
ruled that the transcendental importance to the public of
these cases demands that they be settled promptly and
definitely, brushing aside, if we must, technicalities of
procedure. We have since then applied this exception in
many other cases. (Emphasis supplied)
In Daza vs. Singson, 36 this Court once more said:
. . . For another, we have early as in the Emergency Powers
Cases that where serious constitutional questions are
involved, "the transcendental importance to the public of
these cases demands that they be settled promptly and
definitely, brushing aside, if we must, technicalities of
procedure." The same policy has since then been
consistently followed by the Court, as in Gonzales vs.
Commission on Elections [21 SCRA 774] . . .
The Federal Supreme Court of the United States of America has also
expressed its discretionary power to liberalize the rule on locus standi.
In United States vs. Federal Power Commission and Virginia Rea
Association vs. Federal Power Commission,37 it held:
We hold that petitioners have standing. Differences of view,
however, preclude a single opinion of the Court as to both
petitioners. It would not further clarification of this
complicated specialty of federal jurisdiction, the solution of
whose problems is in any event more or less determined by
the specific circumstances of individual situations, to set out
the divergent grounds in support of standing in these cases.
In line with the liberal policy of this Court on locus standi, ordinary taxpayers,
members of Congress, and even association of planters, and non-profit civic
organizations were allowed to initiate and prosecute actions before this Court
to question the constitutionality or validity of laws, acts, decisions, rulings, or
orders of various government agencies or instrumentalities. Among such
cases were those assailing the constitutionality of (a) R.A. No. 3836 insofar
as it allows retirement gratuity and commutation of vacation and sick leave to
Senators and Representatives and to elective officials of both Houses of
Congress;38 (b) Executive Order No. 284, issued by President Corazon C.
Aquino on 25 July 1987, which allowed members of the cabinet, their
undersecretaries, and assistant secretaries to hold other government offices
or positions; 39 (c) the automatic appropriation for debt service in the General
Appropriations Act; 40 (d) R.A. No. 7056 on the holding of desynchronized
elections; 41 (d) R.A. No. 1869 (the charter of the Philippine Amusement and
Gaming Corporation) on the ground that it is contrary to morals, public policy,
and order; 42 and (f) R.A. No. 6975, establishing the Philippine National
Police. 43
Other cases where we have followed a liberal policy regarding locus
standi include those attacking the validity or legality of (a) an order allowing
the importation of rice in the light of the prohibition imposed by R.A. No.
3452; 44 (b) P.D. Nos. 991 and 1033 insofar as they proposed amendments
to the Constitution and P.D. No. 1031 insofar as it directed the COMELEC to
supervise, control, hold, and conduct the referendum-plebiscite on 16
October 1976; 45(c) the bidding for the sale of the 3,179 square meters of
land at Roppongi, Minato-ku, Tokyo, Japan; 46 (d) the approval without
hearing by the Board of Investments of the amended application of the
Bataan Petrochemical Corporation to transfer the site of its plant from Bataan
to Batangas and the validity of such transfer and the shift of feedstock from
naphtha only to naphtha and/or liquefied petroleum gas; 47 (e) the decisions,
orders, rulings, and resolutions of the Executive Secretary, Secretary of
Finance, Commissioner of Internal Revenue, Commissioner of Customs, and
the Fiscal Incentives Review Board exempting the National Power
Corporation from indirect tax and duties; 48 (f) the orders of the Energy
Regulatory Board of 5 and 6 December 1990 on the ground that the hearings
conducted on the second provisional increase in oil prices did not allow the
petitioner substantial cross-examination; 49 (g) Executive Order No. 478
which levied a special duty of P0.95 per liter or P151.05 per barrel of
imported crude oil and P1.00 per liter of imported oil products; 50 (h)
resolutions of the Commission on Elections concerning the apportionment,
by district, of the number of elective members of Sanggunians; 51 and (i)
memorandum orders issued by a Mayor affecting the Chief of Police of
Pasay City.52
In the 1975 case of Aquino vs. Commission on Elections, 53 this Court,
despite its unequivocal ruling that the petitioners therein had no personality
to file the petition, resolved nevertheless to pass upon the issues raised
because of the far-reaching implications of the petition. We did no less in De
Guia vs. COMELEC 54 where, although we declared that De Guia "does not
appear to have locus standi, a standing in law, a personal or substantial
interest," we brushed aside the procedural infirmity "considering the
importance of the issue involved, concerning as it does the political exercise
of qualified voters affected by the apportionment, and petitioner alleging
abuse of discretion and violation of the Constitution by respondent."
We find the instant petition to be of transcendental importance to the public.
The issues it raised are of paramount public interest and of a category even
higher than those involved in many of the aforecited cases. The ramifications
of such issues immeasurably affect the social, economic, and moral well-
being of the people even in the remotest barangays of the country and the
counter-productive and retrogressive effects of the envisioned on-line lottery
system are as staggering as the billions in pesos it is expected to raise. The
legal standing then of the petitioners deserves recognition and, in the
exercise of its sound discretion, this Court hereby brushes aside the
procedural barrier which the respondents tried to take advantage of.
And now on the substantive issue.
Section 1 of R.A. No. 1169, as amending by B.P. Blg. 42, prohibits the PCSO
from holding and conducting lotteries "in collaboration, association or joint
venture with any person, association, company or entity, whether domestic or
foreign." Section 1 provides:
Sec. 1. The Philippine Charity Sweepstakes Office. — The
Philippine Charity Sweepstakes Office, hereinafter
designated the Office, shall be the principal government
agency for raising and providing for funds for health
programs, medical assistance and services and charities of
national character, and as such shall have the general
powers conferred in section thirteen of Act Numbered One
thousand four hundred fifty-nine, as amended, and shall
have the authority:
A. To hold and conduct charity sweepstakes
races, lotteries and other similar activities, in
such frequency and manner, as shall be
determined, and subject to such rules and
regulations as shall be promulgated by the
Board of Directors.
B. Subject to the approval of the Minister of
Human Settlements, to engage in health and
welfare-related investments,
programs, projects and activities which may
be profit-oriented, by itself or in
collaboration, association or joint
venture with any person, association,
company or entity, whether domestic or
foreign, except for the activities mentioned in
the preceding paragraph (A), for the purpose
of providing for permanent and continuing
sources of funds for health programs,
including the expansion of existing ones,
medical assistance and services, and/or
charitable grants: Provided, That such
investment will not compete with the private
sector in areas where investments are
adequate as may be determined by the
National Economic and Development
Authority. (emphasis supplied)
The language of the section is indisputably clear that with respect to its
franchise or privilege "to hold and conduct charity sweepstakes races,
lotteries and other similar activities," the PCSO cannot exercise it "in
collaboration, association or joint venture" with any other party. This is the
unequivocal meaning and import of the phrase "except for the activities
mentioned in the preceding paragraph (A)," namely, "charity sweepstakes
races, lotteries and other similar activities."
B.P. Blg. 42 originated from Parliamentary Bill No. 622, which was covered
by Committee Report No. 103 as reported out by the Committee on Socio-
Economic Planning and Development of the Interim Batasang Pambansa.
The original text of paragraph B, Section 1 of Parliamentary Bill No. 622
reads as follows:
To engage in any and all investments and related profit-
oriented projects or programs and activities by itself or in
collaboration, association or joint venture with any person,
association, company or entity, whether domestic or foreign,
for the main purpose of raising funds for health and medical
assistance and services and charitable grants. 55
During the period of committee amendments, the Committee on Socio- conducting of sweepstakes
Economic Planning and Development, through Assemblyman Ronaldo B. races, lotteries and other
Zamora, introduced an amendment by substitution to the said paragraph B similar acts.
such that, as amended, it should read as follows:
MR. ZAMORA.
Subject to the approval of the Minister of Human
Settlements, to engage in health-oriented investments, We accept the amendment, Mr. Speaker.
programs, projects and activities which may be profit-
oriented, by itself or in collaboration, association, or joint
MR. DAVIDE.
venture with any person, association, company or entity,
whether domestic or foreign, for the purpose of providing for
permanent and continuing sources of funds for health Thank you, Mr. Speaker.
programs, including the expansion of existing ones, medical
assistance and services and/or charitable grants. 56 THE SPEAKER.

Before the motion of Assemblyman Zamora for the approval of the
amendment could be acted upon, Assemblyman Davide introduced an
amendment to the amendment:
MR. DAVIDE.
Mr. Speaker.
THE SPEAKER.
The gentleman from Cebu is recognized.
MR. DAVIDE.
May I introduce an
amendment to the
committee amendment?
The amendment would be
to insert after "foreign" in
the amendment just read
the following: EXCEPT FOR
THE ACTIVITY IN LETTER
(A) ABOVE.
When it is joint venture or in
collaboration with any entity
such collaboration or joint
venture must not include
activity activity letter (a)
which is the holding and
Is there any objection to the
amendment? (Silence) The
amendment, as amended,
is approved. 57
Further amendments to paragraph B were introduced and approved. When
Assemblyman Zamora read the final text of paragraph B as further amended,
the earlier approved amendment of Assemblyman Davide became "EXCEPT
FOR THE ACTIVITIES MENTIONED IN PARAGRAPH (A)"; and by virtue of
the amendment introduced by Assemblyman Emmanuel Pelaez, the word
PRECEDING was inserted before PARAGRAPH. Assemblyman Pelaez
introduced other amendments. Thereafter, the new paragraph B was
approved. 58
This is now paragraph B, Section 1 of R.A. No. 1169, as amended by B.P.
Blg. 42.
No interpretation of the said provision to relax or circumvent the prohibition
can be allowed since the privilege to hold or conduct charity sweepstakes
races, lotteries, or other similar activities is a franchise granted by the
legislature to the PCSO. It is a settled rule that "in all grants by the
government to individuals or corporations of rights, privileges and franchises,
the words are to be taken most strongly against the grantee .... [o]ne who
claims a franchise or privilege in derogation of the common rights of the
public must prove his title thereto by a grant which is clearly and definitely
expressed, and he cannot enlarge it by equivocal or doubtful provisions or by
probable inferences. Whatever is not unequivocally granted is withheld.
Nothing passes by mere implication." 59
In short then, by the exception explicitly made in paragraph B, Section 1 of its
charter, the PCSO cannot share its franchise with another by way of
collaboration, association or joint venture. Neither can it assign, transfer, or
lease such franchise. It has been said that "the rights and privileges
conferred under a franchise may, without doubt, be assigned or transferred
when the grant is to the grantee and assigns, or is authorized by statute. On
the other hand, the right of transfer or assignment may be restricted by
statute or the constitution, or be made subject to the approval of the grantor
or a governmental agency, such as a public utilities commission, exception
that an existing right of assignment cannot be impaired by subsequent
legislation." 60
It may also be pointed out that the franchise granted to the PCSO to hold and
conduct lotteries allows it to hold and conduct a species of gambling. It is
settled that "a statute which authorizes the carrying on of a gambling activity
or business should be strictly construed and every reasonable doubt so
resolved as to limit the powers and rights claimed under its authority." 61
Does the challenged Contract of Lease violate or contravene the exception in
Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, which prohibits the
PCSO from holding and conducting lotteries "in collaboration, association or
joint venture with" another?
We agree with the petitioners that it does, notwithstanding its denomination
or designation as a (Contract of Lease). We are neither convinced nor moved
or fazed by the insistence and forceful arguments of the PGMC that it does
not because in reality it is only an independent contractor for a piece of work,
i.e., the building and maintenance of a lottery system to be used by the
PCSO in the operation of its lottery franchise. Whether the contract in
question is one of lease or whether the PGMC is merely an independent
contractor should not be decided on the basis of the title or designation of the
contract but by the intent of the parties, which may be gathered from the
provisions of the contract itself. Animus hominis est anima scripti. The
intention of the party is the soul of the instrument. In order to give life or
effect to an instrument, it is essential to look to the intention of the individual
who executed it. 62 And, pursuant to Article 1371 of the Civil Code, "to
determine the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered." To put it more bluntly, no
one should be deceived by the title or designation of a contract.
A careful analysis and evaluation of the provisions of the contract and a
consideration of the contemporaneous acts of the PCSO and PGMC
indubitably disclose that the contract is not in reality a contract of lease under
which the PGMC is merely an independent contractor for a piece of work, but
one where the statutorily proscribed collaboration or association, in the least,
or joint venture, at the most, exists between the contracting
parties. Collaboration is defined as the acts of working together in a joint
project. 63 Association means the act of a number of persons in uniting
together for some special purpose or business. 64 Joint venture is defined as
an association of persons or companies jointly undertaking some commercial
enterprise; generally all contribute assets and share risks. It requires a
community of interest in the performance of the subject matter, a right to
direct and govern the policy in connection therewith, and duty, which may be
altered by agreement to share both in profit and
losses.65
The contemporaneous acts of the PCSO and the PGMC reveal that the
PCSO had neither funds of its own nor the expertise to operate and manage
an on-line lottery system, and that although it wished to have the system, it
would have it "at no expense or risks to the government." Because of these
serious constraints and unwillingness to bear expenses and assume risks,
the PCSO was candid enough to state in its RFP that it is seeking for "a
suitable contractor which shall build, at its own expense, all the facilities
needed to operate and maintain" the system; exclusively bear "all capital,
operating expenses and expansion expenses and risks"; and submit "a
comprehensive nationwide lottery development plan . . . which will include
the game, the marketing of the games, and the logistics to introduce the
game to all the cities and municipalities of the country within five (5) years";
and that the operation of the on-line lottery system should be "at no expense
or risk to the government" — meaning itself, since it is a government-owned
and controlled agency. The facilities referred to means "all capital equipment,
computers, terminals, software, nationwide telecommunications network,
ticket sales offices, furnishings and fixtures, printing costs, costs of salaries
and wages, advertising and promotions expenses, maintenance costs,
expansion and replacement costs, security and insurance, and all other
related expenses needed to operate a nationwide on-line lottery system."
In short, the only contribution the PCSO would have is its franchise or
authority to operate the on-line lottery system; with the rest, including
the risks of the business, being borne by the proponent or bidder. It could be
for this reason that it warned that "the proponent must be able to stand to the
acid test of proving that it is an entity able to take on the role of responsible
maintainer of the on-line lottery system." The PCSO, however, makes it clear
in its RFP that the proponent can propose a period of the contract which shall
not exceed fifteen years, during which time it is assured of a "rental" which
shall not exceed 12% of gross receipts. As admitted by the PGMC, upon
learning of the PCSO's decision, the Berjaya Group Berhad, with its affiliates,
wanted to offer its services and resources to the PCSO. Forthwith, it
organized the PGMC as "a medium through which the technical and
management services required for the project would be offered and delivered
to PCSO." 66
Undoubtedly, then, the Berjaya Group Berhad knew all along that in
connection with an on-line lottery system, the PCSO had nothing but its
franchise, which it solemnly guaranteed it had in the General Information of
the RFP. 67Howsoever viewed then, from the very inception, the PCSO and
the PGMC mutually understood that any arrangement between them would
necessarily leave to the PGMC the technical, operations, and
managementaspects of the on-line lottery system while the PCSO would,
primarily, provide the franchise. The words Gaming andManagement in the
corporate name of respondent Philippine Gaming Management Corporation
could not have been conceived just for euphemistic purposes. Of course, the
RFP cannot substitute for the Contract of Lease which was subsequently
executed by the PCSO and the PGMC. Nevertheless, the Contract of Lease
incorporates their intention and understanding.
The so-called Contract of Lease is not, therefore, what it purports to be. Its
denomination as such is a crafty device, carefully conceived, to provide a
built-in defense in the event that the agreement is questioned as violative of
the exception in Section 1 (B) of the PCSO's charter. The acuity or skill of its
draftsmen to accomplish that purpose easily manifests itself in the Contract
of Lease. It is outstanding for its careful and meticulous drafting designed to
give an immediate impression that it is a contract of lease. Yet, woven
therein are provisions which negate its title and betray the true intention of
the parties to be in or to have a joint venture for a period of eight years in the
operation and maintenance of the on-line lottery system.
Consistent with the above observations on the RFP, the PCSO has only its
franchise to offer, while the PGMC represents and warrants that it has
access to all managerial and technical expertise to promptly and effectively
carry out the terms of the contract. And, for a period of eight years, the
PGMC is under obligation to keep all the Facilitiesin safe condition and if
necessary, upgrade, replace, and improve them from time to time as new
technology develops to make the on-line lottery system more cost-effective
and competitive; exclusively bear all costs and expenses relating to the
printing, manpower, salaries and wages, advertising and promotion,
maintenance, expansion and replacement, security and insurance, and all
other related expenses needed to operate the on-line lottery system;
undertake a positive advertising and promotions campaign for both
institutional and product lines without engaging in negative advertising
against other lessors; bear the salaries and related costs of skilled and
qualified personnel for administrative and technical operations; comply
with procedural and coordinating rulesissued by the PCSO; and to train
PCSO and other local personnel and to effect the transfer of technology and
other expertise, such that at the end of the term of the contract, the PCSO
will be able to effectively take over the Facilities and efficiently operate the
on-line lottery system. The latter simply means that, indeed, the managers,
technicians or employees who shall operate the on-line lottery system are not
managers, technicians or employees of the PCSO, but of the PGMC and that
it is only after the expiration of the contract that the PCSO will operate the
system. After eight years, the PCSO would automatically become the owner
of the Facilities without any other further consideration.
For these reasons, too, the PGMC has the initial prerogative to prepare the
detailed plan of all games and the marketing thereof, and determine the
number of players, value of winnings, and the logistics required to introduce
the games, including the Master Games Plan. Of course, the PCSO has the
reserved authority to disapprove them. 68 And, while the PCSO has the sole
responsibility over the appointment of dealers and retailers throughout the
country, the PGMC may, nevertheless, recommend for appointment dealers
and retailers which shall be acted upon by the PCSO within forty-eight hours
and collect and retain, for its own account, a security deposit from dealers
and retailers in respect of equipment supplied by it.
This joint venture is further established by the following:
(a) Rent is defined in the lease contract as the amount to be paid to the
PGMC as compensation for the fulfillment of its obligations under the
contract, including, but not limited to the lease of the Facilities. However,
this rent is not actually a fixed amount. Although it is stated to be 4.9% of
gross receipts from ticket sales, payable net of taxes required by law to be
withheld, it may be drastically reduced or, in extreme cases, nothing may be
due or demandable at all because the PGMC binds itself to "bear all risks if
the revenue from the ticket sales, on an annualized basis, are insufficient to
pay the entire prize money." This risk-bearing provision is unusual in a
lessor-lessee relationship, but inherent in a joint venture.
(b) In the event of pre-termination of the contract by the PCSO, or its
suspension of operation of the on-line lottery system in breach of the contract
and through no fault of the PGMC, the PCSO binds itself "to promptly, and in
any event not later than sixty (60) days, reimburse the Lessor the amount of
its total investment cost associated with the On-Line Lottery System,
including but not limited to the cost of the Facilities, and further compensate
the LESSOR for loss of expected net profit after tax, computed over the
unexpired term of the lease." If the contract were indeed one of lease, the
payment of the expected profits or rentals for the unexpired portion of the
term of the contract would be enough.
(c) The PGMC cannot "directly or indirectly undertake any activity or
business in competition with or adverse to the On-Line Lottery System of
PCSO unless it obtains the latter's prior written consent." If the PGMC is
engaged in the business of leasing equipment and technology for an on-line
lottery system, we fail to see any acceptable reason why it should allow a
restriction on the pursuit of such business.
(d) The PGMC shall provide the PCSO the audited Annual Report sent to its
stockholders, and within two years from the effectivity of the contract, cause
itself to be listed in the local stock exchange and offer at least 25% of its
equity to the public. If the PGMC is merely a lessor, this imposition is
unreasonable and whimsical, and could only be tied up to the fact that the
PGMC will actually operate and manage the system; hence, increasing
public participation in the corporation would enhance public interest.
(e) The PGMC shall put up an Escrow Deposit of P300,000,000.00 pursuant
to the requirements of the RFP, which it may, at its option, maintain as its
initial performance bond required to ensure its faithful compliance with the
terms of the contract.
(f) The PCSO shall designate the necessary personnel to monitor and audit
the daily performance of the on-line lottery system; and
promulgate procedural and coordinating rules governing all activities relating
to the on-line lottery system. The first further confirms that it is the PGMC
which will operate the system and the PCSO may, for the protection of its
interest, monitor and audit the daily performance of the system. The second
admits the coordinating and cooperative powers and functions of the parties.
We thus declare that the challenged Contract of Lease violates the exception
provided for in paragraph B, Section 1 of R.A. No. 1169, as amended by B.P.
Blg. 42, and is, therefore, invalid for being contrary to law. This conclusion
renders unnecessary further discussion on the other issues raised by the
petitioners.
WHEREFORE, the instant petition is hereby GRANTED and the challenged
Contract of Lease executed on 17 December 1993 by respondent Philippine
Charity Sweepstakes Office (PCSO) and respondent Philippine Gaming
Management Corporation (PGMC) is hereby DECLARED contrary to law and
invalid.
The Temporary Restraining Order issued on 11 April 1994 is hereby MADE
PERMANENT.
No pronouncement as to costs.
SO ORDERED.
Regalado, Romero and Bellosillo, JJ., concur.
Narvasa, C.J., took no part.

(g) The PCSO may validly terminate the contract if the PGMC becomes
insolvent or bankrupt or is unable to pay its debts, or if it stops or suspends
or threatens to stop or suspend payment of all or a material part of its debts.

All of the foregoing unmistakably confirm the indispensable role of the PGMC
in the pursuit, operation, conduct, and management of the On-Line Lottery
System. They exhibit and demonstrate the parties' indivisible community of Separate Opinions
interest in the conception, birth and growth of the on-line lottery, and, above
all, in its profits, with each having a right in the formulation and
implementation of policies related to the business and sharing, as well, in the
losses — with the PGMC bearing the greatest burden because of its
CRUZ, J., concurring:
assumption of expenses and risks, and the PCSO the least, because of its
confessed unwillingness to bear expenses and risks. In a manner of
speaking, each is wed to the other for better or for worse. In the final I am happy to join Mr. Justice Hilario G. Davide, Jr. in his excellent ponencia.
analysis, however, in the light of the PCSO's RFP and the above highlighted I will add the following personal observations only for emphasis as it is not
provisions, as well as the "Hold Harmless Clause" of the Contract of Lease, it necessary to supplement his thorough exposition.
is even safe to conclude that the actual lessor in this case is the PCSO and
the subject matter thereof is its franchise to hold and conduct lotteries since it The respondents take great pains to cite specific provisions of the contract to
is, in reality, the PGMC which operates and manages the on-line lottery show that it is PCSO that is actually operating the on-line lottery, but they
system for a period of eight years. have not succeeded in disproving the obvious, to wit, that the document was
intentionally so crafted to make it appear that the operation is not a joint
undertaking of PCSO and PGMC but a mere lease of services. It is a clever
instrument, to be sure, but we are, gratifyingly, not deluded. Lawyers have a
special talent to disguise the real intention of the parties in a contract to make
it come ostensibly within the provisions of a law although the real if furtive
purpose is to violate it. That talent has been exercised in this case, but not
convincingly enough.
It should be quite clear, from the adroit way the contract has been drafted,
that the primary objective was to avoid the conclusion that PCSO will be
operating a lottery "in association, collaboration or joint venture with any
person, association, company or entity," which is prohibited by Section 1 of
Rep. Act No. 1169 as amended by B.P. Blg. 42. Citing the self-serving
provisions of the contract, the respondents would have us believe that the
contract is perfectly lawful because all it does is provide for the lease to
PCSO of the technical know-how and equipment of PGMC, with PCSO
acting as "the sole and individual operator" of the lottery. I am glad we are
not succumbing to this sophistry.
Despite the artfulness of the contract (authorship of which was pointedly
denied by both counsel for the government and the private respondent during
the oral argument on this case), a careful study will reveal telling stipulations
that it is PGMC and not PCSO that will actually be operating the lottery.
Thus, it is provided inter alia that PGMC shall furnish all capital equipment
and other facilities needed for the operation; bear all expenses relating to the
operation, including those for the salaries and wages of the administrative
and technical personnel; undertake a positive advertising and promotion
campaign for public support of the lottery; establish a radio communications
network throughout the country as part of the operation; and assume all risks
if the revenues from ticket sales are insufficient to pay the entire prize
money. Most significantly, to show that it is only after eight years from the
effectivity of the contract that PCSO will actually operate the lottery, Par. 6.7
of the agreement provides that PGMC shall:
6.7. Upon effectivity of this Contract, commence the training
of PCSO and other local personnel and the transfer of
technology and expertise, such that at the end of the term of
this Contract, PCSO will be able to effectively take-over the
Facilities and efficiently operate the On-Line Lottery System.
(Emphasis supplied).
In the meantime, that is to say during the entire 8-year term of the contract, it
will be PGMC that will be operating the lottery. Only "at the end of the term of
this Contract" will PCSO "be able to effectively take-over the Facilities and
efficiently operate the On-Line Lottery System."
Even on the assumption that it is PCSO that will be operating the lottery at
the very start, the authority granted to PGMC by the agreement will readily
show that PCSO will not be acting alone, as the respondents pretend. In fact,
it cannot. PGMC is an indispensable co-worker because it has the equipment
and the technology and the management skills that PCSO does not have at
this time for the operation of the lottery, PCSO cannot deny that it needs the
assistance of PGMC for this purpose, which was its reason for entering into
the contract in the first place.
And when PCSO does avail itself of such assistance, how will it be operating
the lottery? Undoubtedly, it will be doing so "in collaboration, association or
joint venture" with PGMC, which, let it be added, will not be serving as a
mere "hired help" of PCSO subject to its control. PGMC will be functioning
independently in the discharge of its own assigned role as stipulated in detail
under the contract. PGMC is plainly a partner of PCSO in violation of law, no
matter how PGMC's assistance is called or the contract is denominated.
Even if it be conceded that the assistance partakes of a lease of services, the
undeniable fact is that PCSO would still be collaborating or cooperating with
PGMC in the operation of the lottery. What is even worse is that PCSO and
PGMC may be actually engaged in a joint venture, considering that PGMC
does not collect the usual fixed rentals due an ordinary lessor but is entitled
to a special "Rental Fee," as the contract calls it, "equal to four point nine
percent (4.9%) of gross receipts from ticket sales."
The flexibility of this amount is significant. As may be expected, it will induce
in PGMC an active interest and participation in the success of PCSO that is
not expected of an ordinary detached lessor who gets to be paid his rentals
— not a rental fee — whether the lessee's business prospers or not. PGMC's
share in the operation depends on its own performance and the effectiveness
of its collaboration with PCSO. Although the contract pretends otherwise,
PGMC is a co-investor with PCSO in what is practically, if not in a strictly
legal sense, a joint venture.
Concerning the doctrine of locus standi, I cannot agree that out of the sixty
million Filipinos affected by the proposed lottery, not a single solitary citizen
can question the agreement. Locus standi is not such an absolute rule that it
cannot admit of exceptions under certain conditions or circumstances like
those attending this transaction. As I remarked in my dissent in Guazon v. De
Villa, 181 SCRA 623, "It is not only the owner of the burning house who has
the right to call the firemen. Every one has the right and responsibility to
prevent the fire from spreading even if he lives in the other block."
What is especially galling is that the transaction in question would foist upon
our people an essentially immoral activity through the instrumentality of a
foreign corporation, which naturally does not have the same concern for our
interests as we ourselves have. I am distressed that foreigners should be
allowed to exploit the weakness of some of us for instant gain without work,
and with the active collaboration and encouragement of our own government
at that.
Feliciano, J., concurring
I agree with the conclusions reached by my distinguished brother in the Court
Davide, Jr., J., both in respect of the question of locus standi and in respect
of the merits of this case, that is, the issues of legality and constitutionality of
the Contract of Lease entered into between the Philippine Charity
Sweepstakes Office (PCSO) and the Philippine Gaming Management
Corporation (PGMC).
In this separate opinion, I propose to address only the question of locus
standi. It is with some hesitation that I do so, considering the extensive
separate opinions on this question written by my learned brothers Melo,
Puno and Vitug, JJ. I agree with the great deal of what my brothers Melo,
Puno and Vitug say about locus standi in their separate opinions and there is
no need to go over the ground that I share with them. Because, however, I
reach a different conclusion in respect of the presence or absence of locus
standi on the part of the petitioners in the case before the Court, there is an
internal need (a need internal to myself) to articulate the considerations
which led me to that conclusion.
There is no dispute that the doctrine of locus standi reflects an important
constitutional principle, that is, the principle of separation of powers which,
among other things, mandates that each of the great Departments of
government is responsible for performance of its constitutionally allotted
tasks. Insofar as the Judicial Department is concerned, the exercise of
judicial power and carrying out of judicial functions commonly take place
within the context of actual cases or controversies. This, in turn, reflects the
basic notion of judicial power as the power to resolve actual disputes and of
the traditional business of courts as the hearing and deciding of specific
controversies brought before them. In our own jurisdiction, and at least since
the turn of the present century, judicial power has always included the power
of judicial review, understood as the authority of courts (more specifically the
Supreme Court) to assay contested legislative and executive acts in terms of
their constitutionality or legality. Thus, the general proposition has been that
a petitioner who assails the legal or constitutional quality of an executive or
legislative act must be able to show that he has locus standi. Otherwise, the
petition becomes vulnerable to prompt dismissal by the court.
There is, upon the other hand, little substantive dispute that the possession
of locus standi 1 is not, in each and every case, a rigid and absolute
requirement for access to the courts. Certainly that is the case where great
issues of public law are at stake, issues which cannot be approached in the
same way that a court approaches a suit for the collection of a sum of money
or a complaint for the recovery of possession of a particular piece of land.
The broad question is when, or in what types of cases, the court should insist
on a clear showing of locus standiunderstood as a direct and personal
interest in the subject matter of the case at bar, and when the court may or
should relax that apparently stringent requirement and proceed to deal with
the legal or constitutional issues at stake in a particular case.
I submit, with respect, that it is not enough for the Court simply to invoke
"public interest" or even "paramount considerations of national interest," and
to say that the specific requirements of such public interest can only be
ascertained on a "case to case" basis. For one thing, such an approach is
not intellectually satisfying. For another, such an answer appears to come
too close to saying that locus standi exists whenever at least a majority of the
Members of this Court participating in a case feel that an appropriate case for
judicial intervention has arisen.
This is not, however, to say that there is somewhere an over-arching juridical
principle or theory, waiting to be discovered, that permits a ready answer to
the question of when, or in what types of cases, the need to show locus
standi may be relaxed in greater or lesser degree. To my knowledge, no
satisfactory principle or theory has been discovered and none has been
crafted, whether in our jurisdiction or in the United States. 2 I have neither the
competence nor the opportunity to try to craft such principle or formula. It
might, however, be useful to attempt to indicate the considerations of
principle which, in the present case, appear to me to require an affirmative
answer to the question of whether or not petitioners are properly regarded as
imbued with the standing necessary to bring and maintain the present
petition.
Firstly, the character of the funds or other assets involved in the case is of
major importance. In the case presently before the Court, the funds involved
are clearly public in nature. The funds to be generated by the proposed
lottery are to be raised from the population at large. Should the proposed
operation be as successful as its proponents project, those funds will come
from well-nigh every town and barrio of Luzon. The funds here involved are
public in another very real sense: they will belong to the PCSO, a
government owned or controlled corporation and an instrumentality of the
government and are destined for utilization in social development projects
which, at least in principle, are designed to benefit the general public. My
learned brothers Melo, Puno and Vitug, JJ. concede that taxpayers' suits
have been recognized as an exception to the traditional requirement of
recognized as an exception to the traditional requirement of locus standi.
They insist, however, that because the funds here involved will not have
been generated by the exercise of the taxing power of the Government, the
present petition cannot be regarded as a taxpayer's suit and therefore, must
be dismissed by the Court. It is my respectful submission that that constitutes
much too narrow a conception of the taxpayer's suit and of the public policy
that it embodies. It is also to overlook the fact that tax monies, strictly so
called, constitute only one (1) of the major categories of funds today raised
and used for public purposes. It is widely known that the principal sources of
funding for government operations today include, not just taxes and customs
duties, but also revenues derived from activities of the Philippine Amusement
Gaming Corporation (PAGCOR), as well as the proceeds of privatization of
government owned or controlled corporations and other government owned
assets. The interest of a private citizen in seeing to it that public funds, from
whatever source they may have been derived, go only to the uses directed
and permitted by law is as real and personal and substantial as the interest
of a private taxpayer in seeing to it that tax monies are not intercepted on
their way to the public treasury or otherwise diverted from uses prescribed or
allowed by law. It is also pertinent to note that the more successful the
government is in raising revenues by non-traditional methods such as
PAGCOR operations and privatization measures, the lesser will be the
pressure upon the traditional sources of public revenues, i.e., the pocket
books of individual taxpayers and importers.
A second factor of high relevance is the presence of a clear case of
disregard of a constitutional or statutory prohibition by the public respondent
agency or instrumentality of the government. A showing that a constitutional
or legal provision is patently being disregarded by the agency or
instrumentality whose act is being assailed, can scarcely be disregarded by
court. The concept of locus standi — which is part and parcel of the broader
notion of ripeness of the case — "does not operate independently and is not
alone decisive. . . . [I]t is in substantial part a function of a judge's estimate of
the merits of the constitutional [or legal] issue." 3 The notion of locus
standi and the judge's conclusions about the merits of the case, in other
words, interact with each other. Where the Court perceives a serious issue of
violation of some constitutional or statutory limitation, it will be much less
difficult for the Court to find locus standi in the petitioner and to confront the
legal or constitutional issue. In the present case, the majority of the Court
considers that a very substantial showing has been made that the Contract of
Lease between the PCSO and the PGMC flies in the face of legal limitations.
A third consideration of importance in the present case is the lack of any
other party with a more direct and specific interest in raising the questions
here being raised. Though a public bidding was held, no losing or dissatisfied
bidder has come before the Court. The Office of the Ombudsman has not, to
the knowledge of the Court, raised questions about the legality or
constitutionality of the Contract of Lease here involved. The National
Government itself, through the Office of the Solicitor General, is defending
the PCSO Contract (though it had not participated in the drafting thereof). In
a situation like that here obtaining, the submission may be made that the
institution, so well known in corporation law and practice, of the corporate
stockholders' derivative suit furnishes an appropriate analogy and that on the
basis of such an analogy, a taxpayer's derivative suit should be recognized
as available.
The wide range of impact of the Contract of Lease here assailed and of its
implementation, constitutes still another consideration of significance. In the
case at bar, the agreement if implemented will be practically nationwide in its
scope and reach (the PCSO-PGMC Contract is limited in its application to
the Island of Luzon; but if the PCSO Contracts with the other two [2] private
"gaming management" corporations in respect of the Visayas and Mindanao
are substantially similar to PCSO's Contract with PGMC, then the Contract
before us may be said to be national indeed in its implications and
consequences). Necessarily, the amounts of money expected to be raised by
the proposed activities of the PCSO and PGMC will be very substantial,
probably in the hundreds of millions of pesos. It is not easy to conceive of a
contract with greater and more far-reaching consequences, literally speaking,
for the country than the Contract of Lease here involved. Thus, the subject
matter of the petition is not something that the Court may casually pass over
as unimportant and as not warranting the expenditure of significant judicial
resources.
In the examination of the various features of this case, the above
considerations have appeared to me to be important and as pressing for
acceptance and exercise of jurisdiction on the part of this Court. It is with
these considerations in mind that I vote to grant due course to the Petition
and to hold that the Contract of Lease between the PCSO and PGMC in its
present form and content, and given the present state of the law, is fatally
defective.
PADILLA, J., concurring:
My views against gambling are a matter of judicial record. In Basco v.
PAGCOR, (G.R. No. 91649, 14 May 1991, 197 SCRA 52) I expressed these
views in a separate opinion where I was joined by that outstanding lady jurist,
Mme. Justice A. Melencio-Herrera whose incisive approach to legal problems
is today missed in this Court. I reproduce here those views because they are
highly persuasive to the conclusions I reach in the present controversy:
I concur in the result of the learned decision penned by my
brother Mr. Justice Paras. This means that I agree with the
decision insofar as it holds that the prohibition, control, and
regulation of the entire activity known as gambling properly
pertain to "state policy." It is, therefore, the political
departments of government, namely, the legislative and the
executive that should decide on what government should do
in the entire area of gambling, and assume full responsibility
to the people for such policy.
The courts, as the decision states, cannot inquire into the
wisdom, morality or expediency of policies adopted by the
political departments of government in areas which fall within
their authority, except only when such policies pose a clear
and present danger to the life, liberty or property of the
individual. This case does not involve such a factual
situation.
However, I hasten to make of record that I do not subscribe
to gambling in any form. It demeans the human personality,
destroys self-confidence and eviscerates one's self-respect,
which in the long run will corrode whatever is left of the
Filipino moral character. Gambling has wrecked and will
continue to wreck families and homes; it is an antithesis to
individual reliance and reliability as well as personal industry
which are the touchstones of real economic progress and
national development.
Gambling is reprehensible whether maintained by
government or privatized. The revenues realized by the
government out of "legalized" gambling will, in the long run,
be more than offset and negated by the irreparable damage
to the people's moral values.
Also, the moral standing of the government in its repeated
avowals against "illegal gambling" is fatally flawed and
becomes untenable when it itself engages in the very activity
it seeks to eradicate.
One can go through the Court's decision today and mentally
replace the activity referred to therein as gambling, which is
legal only because it is authorized by law and run by the
government, with the activity known as prostitution. Would
prostitution be any less reprehensible were it to be
authorized by law, franchised, and "regulated" by the
government, in return for the substantial revenues it would
yield the government to carry out its laudable projects, such
as infrastructure and social amelioration? The question, I
believe, answers itself. I submit that the sooner the
legislative department outlaws all forms of gambling, as
a fundamental state policy, and the sooner the executive
implements such policy, the better it will be for the nation.
We presently have the sweepstakes lotteries; we already have the
PAGCOR's gambling casinos; the Filipino people will soon, if plans do not
miscarry, be initiated into an even more sophisticated and encompassing
nationwide gambling network known as the "on-line hi-tech lotto system." To
be sure, it is not wealth producing; it is not export oriented. It will draw
from existing wealth in the hands of Filipinos and transfer it into the coffers of
the PCSO and its foreign partners at a price of further debasement of the
moral standards of the Filipino people, the bulk of whom are barely
subsisting below the poverty line.
1. It is said that petitioners 1 have no locus standi to bring
this suit even as they challenge the legality and
constitutionality of a contract of lease between the PCSO, a
government-owned corporation and the PGMC, a private
corporation with substantial (if not controlling) foreign
composition and content. Such contract of lease contains the
terms and conditions under which an "on-line hi-tech lotto
system" will operate in the country.
As the ponente of the extended, unsigned en banc resolution in Valmonte v.
PCSO, (G.R. No. 78716 and G.R. No. 79084, 22 September 1987), I would
be the last to downgrade the rule, therein reiterated, that in order to maintain
a suit challenging the constitutionality and/or legality of a statute, order or
regulation or assailing a particular governmental action as done with grave
abuse of discretion or with lack of jurisdiction, the petitioner must show that
he has a clear personal or legal right that would be violated with the
enforcement of the challenged statute, order or regulation or the
implementation of the questioned governmental action. But, in my considered
view, this rule maybe (and should be) relaxed when the issue involved or
raised in the petition is of such paramount national interest and importance
as to dwarf the above procedural rule into a barren technicality. As a
unanimous Court en banc aptly put it in De Guia vs. COMELEC, G.R. No.
104712, 6 May 1992, 208 SCRA 420.
Before addressing the crux of the controversy, the Court
observes that petitioner does not allege that he is running for
re-election, much less, that he is prejudiced by the election,
by district, in Parañaque. As such, he does not appear to
have locus standi, a standing in law, a personal or
substantial interest. (Sanidad vs. COMELEC, G.R. No. L-
 4640, October 12, 1976. 73 SCRA 333; Municipality of
Malabang vs. Benito, G.R. No. L-28113, March 28, 1969, 27
SCRA 533) He does not also allege any legal right that has
been violated by respondent. If for this alone, petitioner does
not appear to have any cause of action.
However, considering the importance of the issue involved,
concerning as it does the political exercise of qualified voters
affected by the apportionment, and petitioner alleging abuse
of discretion and violation of the Constitution by respondent,
We resolved to brush aside the question of procedural
infirmity, even as We perceive the petition to be one of
declaratory relief. We so held similarly through Mr. Justice
Edgardo L. Paras in Osmeña vs. Commission on Elections.
I view the present case as falling within the De Guia case doctrine. For, when
the contract of lease in question seeks to establish and operate a nationwide
gambling network with substantial if not controlling foreign participation, then
the issue is of paramount national interest and importance as to justify and
warrant a relaxation of the above-mentioned procedural rule on locus standi.
2. The charter of the PCSO — Republic Act No. 1169 as
amended by BP No. 42 — insofar as relevant, reads:
Sec. 1. The Philippine Charity Sweepstakes Office. — The
Philippine Charity Sweepstakes Office, hereinafter
designated the Office, shall be the principal government
agency for raising and providing for funds for health
programs, medical assistance and services and charities of
national character, and as such shall have the general
powers conferred in section thirteen of Act Numbered One
Thousand Four Hundred Fifty-Nine, as amended, and shall
have the authority:
A. To hold and conduct charity sweepstakes races, lotteries
and other similar activities, in such frequency and manner,
as shall be determined, and subject to such rules and
regulations as shall be promulgated by the Board of
Directors.
B. Subject to the approval of the Minister of Human
Settlements, to engage in health and welfare-related
investments, programs, projects and activities which may be
profit-oriented, by itself or in collaboration, association or
joint venture with any person, association, company or
entity, whether domestic or foreign, except for the activities
mentioned in the preceding paragraph (A), for the purpose of
providing for permanent and continuing sources of funds for
health programs, including the expansion of existing ones,
medical assistance and services, and/or charitable grants:
Provided, That such investments will not compete with the
private sector in areas where investments are adequate as
may be determined by the National Economic and
Development Authority.
It is at once clear from the foregoing legal provisions that, while the PCSO
charter allows the PCSO to itself engage in lotteries, it does not however
permit the PCSO to undertake or engage in lotteries in "collaboration,
association or joint venture" with others. The palpable reason for this
prohibition is, that PCSO should not and cannot be made a vehicle for an
otherwise prohibited foreign or domestic entity to engage in lotteries
(gambling activities) in the Philippines.
The core question then is whether the lease contract between PCSO and
PGMC is a device whereby PCSO will engage in lottery in collaboration,
association or joint venture with another, i.e. PGMC. I need not go here into
the details and different specific features of the contract to show that it is a
joint venture between PCSO and PGMC. That has been taken care of in the
opinion of Mr. Justice Davide to which I fully subscribe.
On a slightly different plane and, perhaps simplified, I consider the
agreement or arrangement between the PCSO and PGMC a joint venture
because each party to the contract contributes its share in the enterprise or
project. PGMC contributes its facilities, equipment and know-how (expertise).
PCSO contributes (aside from its charter) the market, directly or through
dealers — and this to me is most important — in the totality or mass of
the Filipinogambling elements who will invest in lotto tickets. PGMC will get
its 4.9% of gross receipts (with assumption of certain risks in the course of
lotto operations); the residue of the whole exercise will go to PCSO. To any
person with a minimum of business know-how, this is a joint venture between
PCSO and PGMC, plain and simple.
But assuming ex gratia argumenti that such arrangement between PCSO
and PGMC is not a joint venture between the two of them to install and
operate an "on-line hi-tech lotto system" in the country, it can hardly be
denied that it is, at the very least, an association or collaboration between
PCSO and PGMC. For one cannot do without the other in the installation,
operation and, most importantly, marketing of the entire enterprise or project
in this country.
Indeed, the contract of lease in question is a clear violation of Republic Act
No. 1169 as amended by BP No. 42 (the PCSO charter).
Having arrived at the conclusion that the contract of lease in question
between the PCSO and PGMC is illegal and, therefore, invalid, I find it
unnecessary to dwell on the other issues raised in the pleadings and
arguments of the parties.
I, therefore, vote to give DUE COURSE to the petition and to declare the
contract of lease in question between PCSO and PGMC, for the reasons
aforestated, of no force and effect.
MELO, J., dissenting:
I submit that the petition before the Court deserves no less than outright
dismissal for the reason that petitioners, as concerned citizens and as
taxpayers and as members of Congress, do not possess the necessary legal
standing to assail the validity of the contract of lease entered into by the
Philippine Charity Sweepstakes Office and the Philippine Gaming
Management Corporation relative to the establishment and operation of an
"On-line Hi-Tech Lottery System" in the country.
As announced in Lamb vs. Phipps (22 Phil. [1912], 559), "[J]udicial power in
its nature, is the power to hear and decide causes pending between parties
who have the right to sue and be sued in the courts of law and equity."
Necessarily, this implies that a party must show a personal stake in the
outcome of the controversy or an injury to himself that can be addressed by a
favorable decision so as to warrant his invocation of the court's jurisdiction
and to justify the court's remedial powers in his behalf (Warth vs. Seldin, 422
U.S. 490; Guzman vs. Marrero, 180 U.S. 81; McMicken vs. United States, 97
U.S. 204). Here, we have yet to see any of petitioners acquiring a personal
stake in the outcome of the controversy or being placed in a situation
whereby injury may be sustained if the contract of lease in question is
implemented. It may be that the contract has somehow evoked public
interest which petitioners claim to represent. But the alleged public interest
which they pretend to represent is not only broad and encompassing but also
strikingly and veritably indeterminate that one cannot truly say whether a
handful of the public, like herein petitioners, may lay a valid claim of
representation in behalf of the millions of citizens spread all over the land
who may have just as many varied reactions relative to the contract in
question.
Any effort to infuse personality on petitioners by considering the present case
as a "taxpayer's suit" could not cure the lack of locus standi on the part of
petitioners. As understood in this jurisdiction, a "taxpayer's suit" refers to a
case where the act complained of directly involves the illegal disbursement of
public funds derived from taxation (Pascual vs. Secretary of Public Works,
110 Phil. [1960] 331; Maceda vs. Macaraig, 197 SCRA [1991]; Lozada vs.
COMELEC, 120 SCRA [1983] 337; Dumlao vs. COMELEC, 95 SCRA [1980]
392; Gonzales vs. Marcos, 65 SCRA [1975] 624). It cannot be overstressed
that no public fund raised by taxation is involved in this case. In fact, it is
even doubtful if the rentals which the PCSO will pay to the lessor for its
operation of the lottery system may be regarded as "public fund". The PCSO
is not a revenue- collecting arm of the government. Income or money
realized by it from its operations will not and need not be turned over to the
National Treasury. Rather, this will constitute corporate funds which will
remain with the corporation to finance its various activities as authorized in its
charter. And if ever some semblance of "public character" may be said to
attach to its earnings, it is simply because PCSO is a government-owned or
controlled entity and not a purely private enterprise.
It must be conceded though that a "taxpayer's suit" had been allowed in a
number of instances in this jurisdiction. For sure, after the trial was blazed
by Pascual vs. Secretary of Public Works, supra, several more followed. It is
to be noted, however, that in those occasions where this Court allowed such
a suit, the case invariably involved either the constitutionality of a statute or
the legality of the disbursement of public funds through the enforcement of
what was perceived to be an invalid or unconstitutional statute or legislation
(Pascual, supra; Philippine Constitution Association, Inc. vs. Jimenez, 15
SCRA [1965] 479; Philippine Constitution Association, Inc. vs. Mathay, 18
SCRA [1966] 300; Tolentino vs. COMELEC, 41 SCRA [1971] 702; Pelaez vs.
Auditor General, 15 SCRA [1965] 569; Iloilo Palay and Corn Planters
Association vs. Feliciano, 13 SCRA [1965] 377).
The case before us is not a challenge to the validity of a statute or an attempt
to restrain expenditure of public funds pursuant to an alleged invalid
congressional enactment. What petitioners ask us to do is to nullify a simple
contract of lease entered into by a government-owned corporation with a
private entity. That contract, as earlier pointed out, does not involve the
disbursement of public funds but of strictly corporate money. If every
taxpayer, claiming to have interest in the contract, no matter how remote,
could come to this Court and seek nullification of said contract, the day may
come when the activities of government corporate entities will ground to a
standstill on account of nuisance suits filed against them by persons whose
supposed interest in the contract is as remote and as obscure as the interest
of any man in the street. The dangers attendant thereto are not hard to
discern and this Court must not allow them to come to pass.
One final observation must be emphasized. When the petition at bench was
filed, the Court decided to hear the case on oral argument on the initial
perception that a constitutional issue could be involved. However, it now
appears that no question of constitutional dimension is at stake as indeed the
majority barely touches on such an issue, concentrating as it does on its
interpretation of the contract between the Philippine Charity Sweepstakes
Office and the Philippine Gaming Management Corporation.
I, therefore, vote to dismiss the petition.
PUNO, J., dissenting:
At the outset, let me state that my religious faith and family upbringing
compel me to regard gambling, regardless of its garb, with hostile eyes. Such
antagonism tempts me to view the case at bench as a struggle between
good and evil, a fight between the forces of light against the forces of
darkness. I will not, however, yield to that temptation for we are not judges of
the Old Testament type who were not only arbiters of law but were also high
priests of morality.
I will therefore strictly confine the peregrinations of my mind to
the legal issues for resolution: (1) whether or not the petitioners have
the Locus standi to file the petition at bench; and (2) assuming their locus
standi, whether or not the Contract of Lease between PCSO and PGMC is
null and void considering: (a) section 1 of R.A. No. 1169, as amended by
B.P. Blg. 42 (Charter of PCSO) which prohibits PCSO from holding and
conducting lotteries "in collaboration, association or joint venture with any
person, association, company or entity"; (b) Act No. 3836 which requires a
congressional franchise before any person or entity can establish and
operate a telecommunication system; (c) section 11, Art. XII of the
Constitution, which requires that for a corporation to operate a public utility,
at least 60% of its capital must be owned by Filipino citizens; and (d) R.A.
No. 7042, otherwise known as the "Foreign Investments Act", which includes
all forms of gambling in its "negative list."
While the legal issues abound, I deferentially submit that the threshold issue
is the locus standi, or standing to sue, of petitioners. The petition describes
petitioner Kilosbayan, Inc., as a non-stock corporation composed of "civic
spirited citizens, pastors, priests, nuns, and lay leaders who are committed to
the cause of truth, justice, and national renewal." 1 Petitioners Jovito R.
Salonga, Cirilo A. Rigos, Ernie Camba, Emilio C. Capulong, Jr., Jose
Abcede, Christine Tan, Felipe L. Gozon, Rafael G. Fernando, Raoul V.
Victorino, Jose Cunanan, and Quintin S. Doromal joined the petition in their
capacity as trustees of Kilosbayan, Inc., and as taxpayers and concerned
citizens. 2 Petitioners Freddie Webb and Wigberto Tañada joined the petition
as senators, taxpayers and concerned citizens. 3 Petitioner Joker P. Arroyo
joined the petition as a member of the House of Representative, a taxpayer
and a concerned citizen. 4
With due respect to the majority opinion, I wish to focus on the interstices
of locus standi, a concept described by Prof. Paul Freund as "among the
most amorphous in the entire domain of public law." The requirement of
standing to sue inheres from the definition of judicial power. It is not merely a
technical rule of procedure which we are at liberty to disregard. Section 1,
Article VIII of the Constitution provides:
xxx xxx xxx
Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or
not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. (Italics supplied)
The phrase "actual controversies involving rights which are legally
demandable and enforceable" has acquired a cultivated meaning given by
courts. It spells out the requirements that must be satisfied before one can
come to court to litigate a constitutional issue. Our distinguished colleague,
Mr. Justice Isagani A. Cruz, gives a shorthand summary of these
requirements when he states that no constitutional question will be heard and
decided by courts unless there is a showing of the following: . . . (1) there
must be an actual case or controversy; (2) the question of constitutionality
must be raised by the proper party; (3) the constitutional question must be
raised at the earliest possible opportunity; and (4) the decision of the
constitutional question must be necessary to the determination of the case
itself. 5
The complexion of the rule on locus standi has been undergoing a change.
Mr. Justice Cruz has observed the continuing relaxation of the rule on
standing, 6 thus:
xxx xxx xxx
A proper party is one who has sustained or is in immediate
danger of sustaining an injury as a result of the act
complained of. Until and unless such actual or potential
injury is established, the complainant cannot have the legal
personality to raise the constitutional question.
In Tileson v. Ullmann, a physician questioned the
constitutionality of a law prohibiting the use of
contraceptives, upon the ground that it might prove
dangerous to the life or health of some of his patients whose
physical condition would not enable them to bear the rigors
of childbirth. The court dismissed the challenge, holding that
the patients of the physician and not the physician himself
were the proper parties.
In Cuyegkeng v. Cruz, the petitioner challenged in a quo
warranto proceeding the title of the respondent who, he
claimed, had been appointed to the board of medical
examiners in violation of the provisions of the Medical Act of
1959. The Supreme Court dismissed the petition, holding
that Cuyegkeng had not made a claim to the position held by
Cruz and therefore could not be regarded as a proper party
who had sustained an injury as a result of the questioned
act.
In People v. Vera, it was held that the Government of the
Philippines was a proper party to challenge the
constitutionality of the Probation Act because, more than any
other, it was the government itself that should be concerned
over the validity of its own laws.
In Ex Parte Levitt, the petitioner, an American taxpayer and
member of the bar, filed a motion for leave to question the
qualifications of Justice Black who, he averred, had been
appointed to the U.S. Supreme Court in violation of the
Constitution of the United States. The Court dismissed the
petition, holding that Levitt was not a proper party since he
was not claiming the position held by Justice Black.
The rule before was that an ordinary taxpayer did not have
the proper party personality to question the legality of an
appropriation law since his interest in the sum appropriated
was not substantial enough. Thus, in Custodio v. Senate
President, a challenge by an ordinary taxpayer to the validity
of a law granting back pay to government officials, including
members of Congress, during the period corresponding to
the Japanese Occupation was dismissed as having been
commenced by one who was not a proper party.
Since the first Emergency Powers Cases, however, the rule
has been changed and it is now permissible for an ordinary
taxpayer, or a group of taxpayers, to raise the question of
the validity of an appropriation law. As the Supreme Court
then put it. "The transcendental importance to the public of
these cases demands that they be settled promptly and
definitely, brushing aside, if we must, technicalities of
procedure."
In Tolentino v. Commission on Elections, it was held that a
senator had the proper party personality to seek the
prohibition of a plebiscite for the ratification of a proposed
constitutional amendment. In PHILCONSA v. Jimenez, an
organization of taxpayers and citizens was held to be a
proper party to question the constitutionality of a law
providing for special retirement benefits for members of the
legislature.
In Sanidad v. Commission on Elections, the Supreme Court
upheld the petitioners as proper parties, thus —
As a preliminary resolution, We rule that the
petitioners in L-44640 (Pablo C. Sanidad
and Pablito V. Sanidad) possess locus
standi to challenge the constitutional
premise of Presidential Decree Nos. 991,
1031, and 1033. It is now an ancient rule
that the valid source of a statute —
Presidential Decrees are of such nature —
may be contested by one who will sustain a
direct injury as a result of its enforcement. At
the instance of taxpayers, laws providing for
the disbursement of public funds may be
enjoined, upon the theory that the
expenditure of public funds by an officer of
the State for the purpose of executing an
unconstitutional act constitutes a
misapplication of such funds. The breadth of
Presidential Decree No. 991 carries an
appropriation of Five Million Pesos for the
effective implementation of its purposes.
Presidential Decree No. 1031 appropriates
the sum of Eight Million Pesos to carry out
its provisions. The interest of the
aforenamed petitioners as taxpayers in the
lawful expenditure of these amounts of
public money sufficiently clothes them with
that personality to litigate the validity of the
Decrees appropriating said funds. Moreover,
as regard taxpayer's suits, this Court enjoys
that open discretion to entertain the same or
not. For the present case, We deem it sound
 to exercise that discretion affirmatively so
that the authority upon which the disputed
Decrees are predicated may be inquired
into.
In Lozada v. Commission on Elections, however, the
petitioners were held without legal standing to demand the
filling of vacancies in the legislature because they had only
"a generalized interest' shared with the rest of the citizenry."
Last July 30, 1993, we further relaxed the rule on standing in Oposa, et al. v.
Hon. Fulgencio S. Factoran, Jr., 7where we recognized the locus standi of
minors representing themselves as well as generations unborn to protect
their constitutional right to a balanced and healthful ecology.
I am perfectly at peace with the drift of our decisions liberalizing the rule
on locus standi. The once stubborn disinclination to decide constitutional
issues due to lack of locus standi is incompatible with the expansion of
judicial power mandated in section 1 of Article VIII of the Constitution, i.e., "to
determine whether or not there has been a grave abuse of discretion,
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the government." As we held thru the ground
breaking ponencia of Mr. Justice Cruz in Daza v. Singson, 8 this provision no
longer precludes the Court from resolving political questions in proper cases.
But even perusing this provision as a constitutional warrant for the court to
enter the once forbidden political thicket, it is clear that the requirement
of locus standi has not been jettisoned by the Constitution for it still
commands courts in no uncertain terms to settle only "actual controversies
involving rights which are legally demandable and enforceable." Stated
otherwise, courts are neither free to decide all kinds of cases dumped into
their laps nor are they free to open their doors to all parties or entities
claiming a grievance. The rationale for this constitutional requirement
of locus standi is by no means trifle. It is intended "to assure a vigorous
adversary presentation of the case, and, perhaps more importantly to warrant
the judiciary's overruling the determination of a coordinate, democratically
elected organ of government." 9 It thus goes to the very essence of
representative democracies. As Mr. Justice Powell carefully explained in U.S.
v.
Richardson, 10 viz:
Relaxation of standing requirements is directly related to the
expansion of judicial power. It seems to me inescapable that
allowing unrestricted taxpayer or citizen standing would
significantly alter the allocation of power at the national level,
with a shift away from a democratic form of government. I
also believe that repeated and essentially head-on
confrontations between the life-tenured branch and the
representative branches of government will not, in the long
run, be beneficial to either. The public confidence essential
to the former and the vitality critical to the latter may well
erode if we do not exercise self- restraint in the utilization of
our power to negative the actions of the other branches. We
should be ever mindful of the contradictions that would arise
if a democracy were to permit at large oversight of the
elected branches of government by a non-representative,
and in large measure insulated, judicial branch. Moreover,
the argument that the Court should allow unrestricted
taxpayer or citizen standing underestimates the ability of the
representative branches of the Federal Government to
respond to the citizen pressure that has been responsible in
large measure for the current drift toward expanded
standing. Indeed, taxpayer or citizen advocacy, given its
potentially broad base, is precisely the type of leverage that
in a democracy ought to be employed against the branches
that were intended to be responsive to public attitudes about
the appropriate operation of government. "We must as
judges recall that, as Mr. Justice Holmes wisely observed,
the other branches of Government are ultimate guardians of
the liberties and welfare of the people in quite as great a
degree as the courts."
Unrestrained standing in federal taxpayer or citizen suits
would create a remarkably illogical system of judicial
supervision of the coordinate branches of the Federal
Government. Randolph's proposed Council of Revision,
which was repeatedly rejected by the Framers, at least had
the virtue of being systematic; every law passed by the
legislature automatically would have been previewed by the
judiciary before the law could take effect. On the other hand,
since the judiciary cannot select the taxpayers or citizens
who bring suit or the nature of the suits, the allowance of
public actions would produce uneven and sporadic review,
the quality of which would be influenced by the resources
and skill of the particular plaintiff. And issues would be
presented in abstract form, contrary to the Court's
recognition that "judicial review is effective largely because it
is not available simply at the behest of a partisan faction, but
is exercised only to remedy a particular, concrete
injury." Sierra Club v. Morton, 405 U.S. 727, 740-741, n. 16
(1972).
A lesser but not insignificant reason for screening the standing of persons
who desire to litigate constitutional issues is economic in character. Given
the sparseness of our resources, the capacity of courts to render efficient
judicial service to our people is severely limited. For courts to indiscriminately
open their doors to all types of suits and suitors is for them to unduly
overburden their dockets, and ultimately render themselves ineffective
dispensers of justice. To be sure, this is an evil that clearly confronts our
judiciary today.
Prescinding from these premises, and with great reluctance, I am not
prepared to concede the standing to sue of petitioners. On a personal level,
they have not shown that elemental injury in fact which will endow them with
a standing to sue. It must be stressed that petitioners are in the main,
seeking the nullity not of a law but of a Contract of Lease. Not one of the
petitioners is a party to the Contract of Lease executed between PCSO and
PGMC. None of the petitioners participated in the bidding, and hence they
are not losing bidders. They are complete strangers to the contract. They
stand neither to gain nor to lose economically by its enforcement. It seems to
me unusual that an unaffected third party to a contract could be allowed to
question its validity. Petitioner Kilosbayan cannot justify this officious
interference on the ground of its commitment to "truth, justice and national
renewal." Such commitment to truth, justice and national renewal, however
noble it may be, cannot give Kilosbayan a roving commission to check the
validity of contracts entered into by the government and its agencies.
Kilosbayan is not a private commission on audit.
Neither can I perceive how the other petitioners can be personally injured by
the Contract of Lease between PCSO and PGMC even if petitioner Salonga
assails as unmitigated fraud the statistical probability of winning the lotto as
he compared it to the probability of being struck twice by lightning. The
reason is obvious: none of the petitioners will be exposed to this alleged
fraud for all of them profess to abjure playing the lotto. It is self-evident that
lotto cannot physically or spiritually injure him who does not indulge in it.
Petitioners also contend they have locus standi as taxpayers. But the case at
bench does not involve any expenditure of public money on the part of
PCSO. In fact, paragraph 2 of the Contract of Lease provides that it is PGMC
that shall build, furnish, and maintain at its own expense and risk the facilities
for the On-Line Lottery System of PCSO and shall bear all maintenance and
other costs. Thus, PGMC alleged it has already spent P245M in equipment
and fixtures and would be investing close to P1 billion to supply adequately
the technology and other requirements of PCSO. 11 If no tax money is being
illegally deflected in the Contract of Lease between PCSO and PGMC,
petitioners have no standing to impugn its validity as taxpayers. Our ruling
in Dumlao v. Comelec, 12 settled this issue well enough, viz:
However, the statutory provisions questioned in this case,
namely, sec. 7, BP Blg. 51, and sections 4, 1, and 5 BP Blg.
52, do not directly involve the disbursement of public funds.
While, concededly, the elections to be held involve the
expenditure of public moneys, nowhere in their Petition do
said petitioners allege that their tax money is "being
extracted and spent in violation of specific constitutional
protections against abuses of legislative power" (Flast v.
Cohen, 392 U.S. 83 [1960]), or that there is a misapplication
of such funds by respondent COMELEC (see Pascual vs.
Secretary of Public Works, 110 Phil. 331 [1960]), or that
public money is being deflected to any improper purpose.
Neither do petitioners seek to restrain respondent from
wasting public funds through the enforcement of an invalid or
unconstitutional law. (Philippine Constitution Association vs.
Mathay, 18 SCRA 300 [1966]), citing Philippine Constitution
Association vs. Gimenez, 15 SCRA 479 [1965]). Besides,
the institution of a taxpayer's suit, per se, is no assurance of
judicial review. As held by this Court in Yan vs.
Macapagal(43 SCRA 677 [1972]), speaking through our
present Chief Justice, this Court is vested with discretion as
to whether or not a taxpayer's suit should be entertained.
Next, petitioners plead their standing as "concerned citizens." As citizens,
petitioners are pleading that they be allowed to advocate the constitutional
rights of other persons who are not before the court and whose protection is
allegedly their concern. A citizen qua citizen suit urges a greater relaxation of
the rule on locus standi. I feel no aversion to the further relaxation of the rule
on standing to accommodate what in other jurisdictions is known as an
assertion of jus tertii in constitutional litigation provided the claimant can
demonstrate: (1) an injury in fact to himself, and (2) the need to prevent the
erosion of a preferred constitutional right of a third person. As stressed
before, the first requirement of injury in fact cannot be abandoned for it is an
essential element for the exercise of judicial power. Again, as stressed by Mr.
Justice Powell, viz: 13
The revolution in standing doctrine that has occurred,
particularly in the 12 years since Baker v. Carr, supra, has
not meant, however, that standing barriers have disappeared
altogether. As the Court noted in Sierra Club, "broadening
the categories of injury that may be alleged in support of
standing is a different matter from abandoning the
requirement that the party seeking review must himself have
suffered an injury." 405 U.S., at 738 . . . Indeed, despite the
diminution of standing requirements in the last decade, the
Court has not broken with the traditional requirement that, in
 the absence of a specific statutory grant of the right of
review, a plaintiff must allege some particularized injury that
sets him apart from the man on the street.
I recognize that the Court's allegiance to a requirement of
particularized injury has on occasion required a reading of
the concept that threatens to transform it beyond
recognition. E.G., Baker v. Carr, supra; Flast v. Cohen,
supra. But despite such occasional digressions, the
requirement remains, and I think it does so for the reasons
outlined above. In recognition of those considerations, we
should refuse to go the last mile towards abolition of
standing requirements that is implicit in broadening the
"precarious opening" for federal taxpayers created by Flast,
see 392 U.S., at 116 (Mr. Justice Fortas, concurring) or in
allowing a citizen qua citizen to invoke the power of the
federal courts to negative unconstitutional acts of the
Federal Government.
In sum, I believe we should limit the expansion of federal
taxpayer and citizen standing in the absence of specific
statutory authorization to an outer boundary drawn by
the results in Flast and Baker v. Carr. I think we should face
up to the fact that all such suits are an effort "to employ a
federal court as a forum in which to air . . . generalized
grievances about the conduct of government or the
allocation of power in the Federal System." Flast v.
Cohen, 392 U.S., at 106. The Court should explicitly reaffirm
traditional prudential barriers against such public actions. My
reasons for this view are rooted in respect for democratic
processes and in the conviction that "[t]he powers of the
federal judiciary will be adequate for the great burdens
placed upon them only if they are employed prudently, with
recognition of the strengths as well as the hazards that go
with our kind of representative government." Id., at 131
The second requirement recognizes society's right in the protection of certain
preferred rights in the Constitution even when the rightholders are not before
the court. The theory is that their dilution has a substantial fall out detriment
to the rights of others, hence the latter can vindicate them.
In the case at bench, it is difficult to see how petitioners can satisfy these two
requirements to maintain a jus tertiiclaim. They claim violation of two
constitutional provisions, to wit:
Section 1, Article XIII. — The Congress shall give highest
priority to the enactment of measures that protect and
enhance the right of all the people to human dignity, reduce
social, economic, and political inequalities, and remove
cultural inequities by equitably diffusing wealth and political
power for the common good.
To this end, the State shall regulate the acquisition,
ownership, use, and disposition of property and its
increments.
and
Section 11, Article XII. - No franchise, certificate, or any
other form of authorization for the operation of a public utility
shall be granted except to citizens of the Philippines or to
corporations or associations organized under the laws of the
Philippines at least sixty per centum of whose capital is
owned by such citizens, nor shall such franchise, certificate,
or authorizations be exclusive in character or for a longer
period than fifty years. Neither shall any such franchise or
right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress
when the common good so requires. The State shall
encourage equity participation in public utilities by the
general public. The participation of foreign investors in the
governing body of any public utility enterprise shall be limited
to their proportionate share in its capital, and all the
executive and managing officers of such corporation or
association must be citizen of the Philippines.
Section 1, Article XIII of the Constitution cannot be the matrix of
petitioners' jus tertii claim for it expresses no more than a policy direction to
the legislative in the discharge of its ordained duty — to give highest priority
to the enactment of measures that protect and enhance the right of all the
people to human dignity, reduce social, economic, and political inequalities
and remove cultural inequities by equitably diffusing wealth and political
power for the common good. Whether the act of the legislature in amending
the charter of PCSO by giving it the authority to conduct lotto and whether
the Contract of Lease entered into between PCSO and PGMC are
incongruent to the policy direction of this constitutional provision is a highly
debatable proposition and can be endlessly argued. Respondents steadfastly
insist that the operation of lotto will increase the revenue base of PCSO and
enable government to provide a wider range of social services to the people.
They also allege that the operation of high-tech lotto will eradicate
illegal jueteng. Petitioners are scandalized by this submission. They dismiss
gambling as evilper se and castigate government for attempting to correct a
wrong by committing another wrong. In any event, the proper forum for this
debate, however cerebrally exciting it may be, is not this court but congress.
So we held in PCSO v. Inopiquez, to wit: 14
By bringing their suit in the lower court, the private
respondents in G.R. No. 79084 do not question the power of
PCSO to conduct the Instant Sweepstakes game. Rather,
they assail the wisdom of embarking upon this project
because of their fear of the "pernicious repercussions" which
may be brought about by the Instant Sweepstakes Game
which they have labelled as "the worst form of gambling"
which thus "affects the moral values" of the people.
The Court, as held in several cases, does not pass upon
questions of wisdom, justice, or expediency of legislation
and executive acts. It is not the province of the courts to
supervise legislation or executive orders as to keep them
within the bounds of propriety, moral values and common
sense. That is primarily and even exclusively a concern of
the political departments of the government; otherwise, there
will be a violation of the principle of separation of powers.
(Italics supplied)
I am not also convinced that petitioners can justify their locus standi to
advocate the rights of hypothetical third parties not before the court by
invoking the need to keep inviolate section 11, Article XII of the Constitution
which imposes a nationality requirement on operators of a public utility. For
even assuming arguendo that PGMC is a public utility, still, the records do
not at the moment bear out the claim of petitioners that PGMC is a foreign
owned and controlled corporation. This factual issue remains unsettled and is
still the subject of litigation by the parties in the Securities and Exchange
Commission. We are not at liberty to anticipate the verdict on this contested
factual issue. But over and above this consideration, I respectfully submit that
this constitutional provision does not confer on third parties any right of a
preferred status comparable to the Bill of Rights whose dilution will justify
petitioners to vindicate them in behalf of its rightholders. The legal right of
hypothetical third parties they profess to advocate is to my mind too
impersonal, too unsubstantial, too indirect, too amorphous to justify their
access to this Court and the further lowering of the constitutional barrier
of locus standi.
Again, with regret, I do not agree that the distinguished status of some of the
petitioners as lawmakers gives them the appropriate locus standi. I cannot
perceive how their constitutional rights and prerogatives as legislators can be
adversely affected by the contract in question. Their right to enact laws for
the general conduct of our society remains unimpaired and
undiminished. 15 Their status as legislators, notwithstanding, they have to
demonstrate that the said contract has caused them to suffer a personal,
direct, and substantial injury in fact. They cannot simply advance a generic
grievance in common with the people in general.
I am not unaware of our ruling in De Guia v. Comelec, 16 viz:
Before addressing the crux of the controversy, the Court
observes that petitioner does not allege that he is running for
reelection, much less, that he is prejudiced by the election,
by district, in Parañaque. As such, he does not appear to
have locus standi, a standing in law, a personal or
substantial interest. (Sanidad vs. COMELEC, G.R. No. L-
44640, October 12, 1976, 73 SCRA 333; Municipality of
Malabang vs. Benito, G.R. No. L-28113, March 28, 1969, 27
SCRA 533). He does not also allege any legal right that has
been violated by respondent. If for this alone, petitioner does
not appear to have any cause of action.
However, considering the importance of the issue involved,
concerning as it does the political exercise of qualified voters
affected by the apportionment, and petitioner alleging abuse
of discretion and violation of the Constitution by respondent,
We resolved to brush aside the question of procedural
infirmity, even as We perceive the petition to be one of
declaratory relief. We so held similarly through Mr.
Justice Edgardo L. Paras in Osmena vs. Commission on
Elections.
It is my respectful submission, however, that we should re-examine de Guia.
It treated the rule on locus standi as a mere procedural rule. It is not a plain
procedural rule but a constitutional requirement derived from section 1,
Article VIII of the Constitution which mandates courts of justice to
settle only "actual controversies involving rights which are legally
demandable and enforceable." The phrase has been construed since time
immemorial to mean that a party in a constitutional litigation must
demonstrate a standing to sue. By downgrading the requirement on locus
standi as a procedural rule which can be discarded in the name of public
interest, we are in effect amending the Constitution by judicial fiat.
De Guia would also brush aside the rule on locus standi if a case raises an
important issue. In this regard, I join the learned observation of Mr. Justice
Feliciano: "that it is not enough for the Court simply to invoke 'public interest'
or even 'paramount considerations of national interest,' and to say that the
specific requirements of such public interest can only be ascertained on a
'case to case' basis. For one thing, such an approach is not intellectually
satisfying. For another, such an answer appears to come too close to saying
that locus standi exists whenever at least a majority of the Members of this
Court participating in a case feel that an appropriate case for judicial
intervention has arisen."
I also submit that de Guia failed to perceive that the rule on locus standi has
little to do with the issue posed in a case, however, important it may be. As
well pointed out in Flast v. Cohen: 17
The fundamental aspect of standing is that it focuses on the
party seeking to get his complaint before a federal court and
not on the issues he wishes to have adjudicated. The "gist of
the question of standing" is whether the party seeking relief
has "alleged such a personal stake in the outcome of the
controversy as to assure that concrete adverseness which
sharpens the presentation of issues upon which the court so
largely depends for illumination of difficult constitutional
questions." Baker v. Carr,369 U.S. 186, 204 (1962). In other
words, when standing is placed in issue in a case, the
question is whether the person whose standing is challenged
is a proper party to request an adjudication of a particular
issue and not whether the issue itself is justiciable. Thus, a
party may have standing in a particular case, but the federal
court may nevertheless decline to pass on the merits of the
case because, for example, it presents a political question. A
proper party is demanded so that federal courts will not be
asked to decide "ill-defined controversies over constitutional
issues," United public Workers v. Mitchell, 330 U.S. 75, 90
(1947), or a case which is of "a hypothetical or abstract
character," Aetna Life Insurance Co. v. Haworth, 300 U.S.
227, 240 (1937).
It is plain to see that in de Guia, the court took an unorthodox posture, to say
the least. It held there was no proper party before it, and yet it resolved the
issues posed by the petition. As there was no proper party before the court,
its decision is vulnerable to be criticized as an advisory opinion.
With due respect, the majority decision appears to have set a dangerous
precedent by unduly trivializing the rule on locus standi. By its decision, the
majority has entertained a public action to annul a private contract. In so
doing, the majority may have given sixty (60) million Filipinos the standing to
assail contracts of government and its agencies. This is an invitation for
chaos to visit our law on contract, and certainly will not sit well with
prospective foreign investors. Indeed, it is difficult to tread the path of the
majority on this significant issue. The majority granted locus standi to
petitioners because of lack of any other party with more direct and specific
interest. But one has standing because he has standing on his own and
standing cannot be acquired because others with standing have refused to
come to court. The thesis is also floated that petitioners have standing as
they can be considered taxpayers with right to file derivative suit like a
stockholder's derivative suit in private corporations. The fact, however, is that
PCSO is not a private but a quasi-public corporation. Our law on private
corporation categorically sanctions stockholder's derivative suit. In contrast,
our law on public corporation does not recognize this so-called taxpayer's
derivative suit. Hence, the idea of a taxpayer's derivative suit, while alluring,
has no legal warrant.
Our brethren in the majority have also taken the unprecedented step of
striking down a contrast at the importunings of strangers thereto, but without
justifying the interposition of judicial power on any felt need to prevent
violation of an important constitutional provision. The contract in question
was voided on the sole ground that it violated an ordinary statute, section 1
of R.A. 1169, as amended by B.P. Blg. 42. If there is no provision of the
Constitution that is involved in the case at bench, it boggles the mind how the
majority can invoke considerations of national interest to justify its
abandonment of the rule on locus standi. The volume of noise created by the
case cannot magically convert it to a case of paramount national importance.
By its ruling, the majority has pushed the Court in unchartered water bereft of
any compass, and it may have foisted the false hope that it is the repository
of all remedies.
If I pay an unwavering reverence to the rule of locus standi, it is because I
consider it as a touchstone in maintaining the proper balance of power
among the three branches of our government. The survival of our democracy
rests in a large measure on our ability to maintain this delicate equipoise of
powers. For this reason, I look at judicial review from a distinct prism. I see it
both as a power and a duty. It is a power because it enables the judiciary to
check excesses of the Executive and the Legislative. But, it is also a duty
because its requirement of locus standi, among others, Executive and the
Legislative. But, it is also a duty because its requirement of locus standi,
among others, keeps the judiciary from overreaching the powers of the other
branches of government. By balancing this duality, we are able to breathe life
to the principle of separation of powers and prevent tyranny. To be sure, it is
our eternal concern to prevent tyranny but that includes tyranny by ourselves.
The Constitution did not install a government by the judiciary, nay, not a
government by the unelected. In offering this submission, I reject the sublimal
fear that an unyielding insistence on the rule on locus standi will weaken the
judiciary vis-a-vis the other branches of government. The hindsight of history
ought to tell us that it is not power per se that strengthens. Power unused is
preferable than power misused. We contribute to constitutionalism both by
the use of our power to decide and its non use. As well said, the cases we
decide are as significant as the cases we do not decide. Real power belongs
to him who has power over power.
IN VIEW WHEREOF, and strictly on the ground of lack of locus standi on the
part of petitioners, I vote to DENY the petition.
VITUG, J., dissenting:
Judicial power encompasses both an authority and duty to resolve "actual
controversies involving rights which are legally demandable and enforceable"
(Article VIII, Section 1, 1987 Constitution). As early as the case of Lamb vs.
Phipps, 1 this Court ruled: "Judicial power, in its nature, is the power to hear
and decide causes pending between parties who have the right to sue in the
courts of law and equity." 2 An essential part of, and corollary to, this principle
is the locus standi of a party litigant, referring to one who is directly affected
by, and whose interest is immediate and substantial in, the controversy. The
rule requires that a party must show a personal stake in the outcome of the
case or an injury to himself that can be redressed by a favorable decision so
as to warrant his invocation of the court's jurisdiction and to justify the
exercise of the court's remedial powers in his behalf. 3 If it were otherwise,
the exercise of that power can easily become too unwieldy by its sheer
magnitude and scope to a point that may, in no small degree, adversely
affect its intended essentiality, stability and consequentiality.
Locus standi, nevertheless, admits of the so-called "taxpayer's suit."
Taxpayer's suits are actions or proceedings initiated by one or more
taxpayers in their own behalf or, conjunctively, in representation of others
similarly situated for the purpose of declaring illegal or unauthorized certain
acts of public officials which are claimed to be injurious to their common
interests as such taxpayers (Cf. 71 Am Jur 2d., 179-180). The principle is
predicated upon the theory that taxpayers are, in equity, the cestui que trust
of tax funds, and any illegal diminution thereof by public officials constitutes a
breach of trust even as it may result in an increased burden on taxpayers
(Haddock vs. Board of Public Education, 86 A 2d 157; Henderson vs.
McCormick, 17 ALR 2d 470).
Justice Brandeis of the United States Supreme Court, in his concurring
opinion in Ashwander vs. Tennessee Valley Authority (297 U.S. 288), said:
. . . . The Court will not pass upon the validity of a statute
upon complaint of one who fails to show that he is injured by
its operation. Tyler v. The Judges, 179 U.S. 405; Hendrick v.
Maryland, 234 U.S. 610, 621. Among the many applications
of this rule, none is more striking than the denial of the right
of challenge to one who lacks a personal or property right.
Thus, the challenge by a public official interested only in the
performance of his official duty will not be
entertained. Columbus & Greenville Ry. v. Miller, 283 U.S.
96, 99-100. In Fairchild v. Hughes, 258 U.S. 126, the Court
affirmed the dismissal of a suit brought by a citizen who
sought to have the Nineteenth Amendment declared
unconstitutional. InMassachusetts v. Mellon, 262 U.S. 447,
the challenge of the federal Maternity Act was not
entertained although made by the Commonwealth on behalf
of all its citizens."
Justice Brandeis' view, shared by Justice Frankfurter in Joint Anti-Fascist
Refugee Commission vs. McGrath (351 U.S. 123), was adopted by the U.S.
Supreme Court in Flast vs. Cohen (392 U.S. 83) which held that it is only
when a litigant is able to show such a personal stake in the controversy as to
assure a concrete adverseness in the issues submitted that legal standing
can attach.
A "taxpayer's suit," enough to confer locus standi to a party, we have held
before, is understood to be a case where the act complained of directly
involves the illegal disbursement of public funds derived from taxation.4 It is
not enough that the dispute concerns public funds. A contrary rule could
easily lead to a limitless application of the term "taxpayer's suit," already by
itself a broad concept, since a questioned act of government would almost so
invariably entail, as a practical matter, a financial burden of some kind.
To be sure, serious doubts have even been raised on the propriety and
feasibility of unqualifiedly recognizing the "taxpayer's suit" as an exception
from the standard rule of requiring a party who invokes the exercise of
judicial power to have a real and personal interest or a direct injury in the
outcome of a controversy. This Court has heretofore spoken on the matter, at
times even venturing beyond the usual understanding of its applicability in
the name of national or public interest. It is remarkable, nevertheless, that the
accepted connotation of locus standi has still managed to be the rule,
sanctioning, by way of exception, the so-called "taxpayer's suit" which courts
accept on valid and compelling reasons.
A provision which has been introduced by the 1987 Constitution is a
definition, for the first time in our fundamental law, of the term "judicial
power," as such authority and duty of courts of justice "to settle actual
controversies involving rights which are legally demandable and enforceable
and to determine whether or not there has been a grave abuse of discretion,
amounting to lack or excess of jurisdiction, on the part of any branch or
instrumentality of the Government" (Article VIII, Section 1, Constitution). I
take it that the provision has not been intended to unduly mutate, let alone to
disregard, the long established rules on locus standi. Neither has it been
meant, I most respectfully submit, to do away with the principle of separation
of powers and its essential incidents such as by, in effect, conferring
omnipotence on, or allowing an intrusion by, the courts in respect to purely
political decisions, the exercise of which is explicitly vested elsewhere, and
subordinate, to that of their own, the will of either the Legislative Department
or the Executive Department — both co- equal, independent and coordinate
branches, along with the Judiciary, in our system of government. Again, if it
were otherwise, there indeed would be truth to the charge, in the words of
some constitutionalists, that "judicial tyranny" has been institutionalized by
the 1987 Constitution, an apprehension which should, I submit, rather be
held far from truth and reality.
In sum, while any act of government, be it executive in nature or legislative in
character, may be struck down and declared a nullity either because it
contravenes an express provision of the Constitution or because it is
perceived and found to be attended by or the result of grave abuse of
discretion, amounting to lack or excess of jurisdiction, that issue, however,
must first be raised in a proper judicial controversy. The Court's authority to
look into and grant relief in such cases would necessitate locus standi on the
part of party litigants. This requirement, in my considered view, is not merely
procedural or technical but goes into the essence of jurisdiction and the
competence of courts to take cognizance of justiciable disputes.
In Bugnay Construction and Development Corporation vs. Laron, 5 this Court
ruled:
. . . . Considering the importance to the public of a suit
assailing the constitutionality of a tax law, and in keeping
with the Court's duty, specially explicated in the 1987
Constitution, to determine whether or not the other branches
of the Government have kept themselves within the limits of
the Constitution and the laws and that they have not abused
the discretion given to them, the Supreme Court may brush
aside technicalities of procedure and take cognizance of the
suit. (Citing Kapatiran vs. Tan, G.R. No. 81311, June 30,
1988.)
However, for the above rule to apply, it is exigent that the
taxpayer-plaintiff sufficiently show that he would be benefited
or injured by the judgment or entitled to the avails of the suit
as a real party in interest. (Citing Estate of George Litton vs.
Mendoza, G.R. No. 49120, June 30, 1988.) Before he can
invoke the power of judicial review, he must specifically
prove that he has sufficient interest in preventing the illegal
expenditure of money raised by taxation (citing 11 Am. Jur.
761; Dumlao, et al. vs. Commission on Elections, 95 SCRA
392) and that he will sustain a direct injury as a result of the
enforcement of the questioned statute or contract. (Citing
Sanidad, et al. vs. Commission on Elections, et al., 73 SCRA
333.) It is not sufficient that he has merely a general interest
common to all members of the public. (Citing Ex Parte Levitt,
302 U.S. 633, cited in 15 SCRA 497, Annotation.)
As so well pointed out by Mr. Justice Camilo D. Quiason during the Court's
deliberations, "due respect and proper regard for the rule on locus
standi would preclude the rendition of advisory opinions and other forms of
pronouncement on abstract issues, avoid an undue interference on matters
which are not justiciable in nature and spare the Court from getting itself
involved in political imbroglio."
The words of Senate President Edgardo J. Angara, carry wisdom; we quote:
The powers of the political branches of our government over
economic policies is rather clear: the Congress is to set in
broad but definite strokes the legal framework and structures
for economic development, while the Executive provides the
implementing details for realizing the economic ends
identified by Congress and executes the same.
xxx xxx xxx
If each economic decision made by the political branches of
government, particularly by the executive, are fully open to
re-examination by the judicial branch, then very little, if any,
reliance can be placed by private economic actors on those
decisions. Investors would always have to factor in possible
costs arising from judicially-determined changes affecting
their immediate business, notwithstanding assurances by
executive authorities.
Judicial decisions are, in addition, inflexible and can never
substitute for sound decision-making at the level of those
who are assigned to execute the laws of the land. Since
judicial power cannot be exercised unless an actual
controversy is brought before the courts for resolution,
decisions cannot be properly modified unless another
appropriate controversy arises." (Sen. Edgardo J. Angara,
"The Supreme Court in Economic Policy Making," Policy
Review — A Quarterly Journal of Policy Studies, Vol. 1, No.
 1, January-March 1994, published by the Senate Policy
Studies Group, pp. 2-3.)
A further set-back in entertaining the petition is that it unfortunately likewise
strikes at factual issues. The allegations to the effect that irregularities have
been committed in the processing and evaluation of the bids to favor
respondent PGMC; that the Malacañang Special Review Committee did not
verify warranties embodied in the contract; that the operation of
telecommunication facilities is indispensable in the operation of the lottery
system; the involvement of multi-national corporations in the operation of the
on-line "hi-tech" lottery system, and the like, require the submission of
evidence. This Court is not a trier of facts, and it cannot, at this time, resolve
the above issues. Just recently, the Court has noted petitioners'
manifestation of its petition with the Securities and Exchange Commission
"for the nullification of the General Information Sheets of PGMC" in respect
particularly to the nationality holdings in the corporation. The doctrine of
primary jurisdiction would not justify a disregard of the jurisdiction of, nor
would it permit us to now preempt, said Commission on the matter.
Petitioners strongly assert, in an attempt to get the Court's concurrence in
accepting the petition, that since lottery is a game of chance, the "lotto"
system would itself be a "crime against morals" defined by Articles 195-
199 6 of the Revised Penal Code.
Being immoral and a criminal offense under the Revised Penal Code,
petitioners contend, any special law authorizing gambling must, by all canons
of statutory constructions, be interpreted strictly against the grantee. Citing
previous decisions of this Court, they maintain that lottery is gambling, pure
and simple, 7 and that this Court has consistently condemned the immorality
and illegality of gambling to be a "national offense and not a minor
transgression;" 8 "that it is a social scourge which must be stamped
out;" 9 and, "that it is pernicious to the body politic and detrimental to the
nation and its citizens."10
I most certainly will not renounce this Court's above concerns. Nevertheless,
the Court must recognize the limitations of its own authority. Courts neither
legislate nor ignore legal mandates. Republic Act No. 1169, as amended,
explicitly gives public respondent
PCSO the authority and power "to hold and conduct sweepstakes
races, lotteries, and other similar activities." In addition, it is authorized:
c. To undertake any other activity that will enhance its funds
generation, operations and funds management capabilities,
subject to the same limitations provided for in the preceding
paragraph.
It shall have a Board of Directors, hereinafter designated the
Board, composed of five members who shall be appointed,
and whose compensation and term of office shall be fixed,
by the President.
xxx xxx xxx
Sec.9. Powers and functions of the Board of Directors. —
The Board of Directors of the Office shall have the following
powers and functions.
(a) To adopt or amend such rules and regulations to
implement the provisions of this Act.
xxx xxx xxx
(d) To promulgate rules and regulations for the operation of
the Office and to do such act or acts as may be necessary
for the attainment of its purposes and objectives. (Emphasis
supplied).
In People vs. Dionisio, 11 cited by the petitioners themselves, we remarked:
"What evils should be corrected as pernicious to the body politic, and how
correction should be done, is a matter primarily addressed to the discretion of
the legislative department, not of the courts . . . ." In Valmonte vs.
PCSO, 12 we also said:
The Court, as held in several cases, does not pass upon
questions of wisdom, justice or expediency of legislation and
executive acts. It is not the province of the courts to
supervise legislation or executive orders as to keep them
within the bounds of propriety, moral values and common
sense. That is primarily and even exclusively a concern of
the political departments of the government; otherwise, there
will be a violation of the principle of separation of powers.
The constraints on judicial power are clear. I feel, the Court must thus beg
off, albeit not without reluctance, from giving due course to the instant
petition.
Accordingly, I vote for the dismissal of the petition.
KAPUNAN, J., dissenting:
I regret that I am unable to join my colleagues in the majority in spite of my
own personal distaste for gambling and other gaming operations. Such
considerations aside, I feel there are compelling reasons why the instant
petition should be dismissed. I shall forthwith state the reasons why.
Petitioners anchor their principal objections against the contract entered into
between the Philippine Charity Sweepstakes Office (PCSO) and the PGMC
on the ground that the contract entered into by the PCSO with the PGMC
violates the PCSO Charter (R.A. No. 1169 as amended by B.P. Blg 427,
specifically section 1 thereof which bars the said body from holding
conducting lotteries "in collaboration, association or joint venture with any
person association, company or entity."). However, a perusal of the petition
reveals that the compelling reasons behind it, while based on apparently
legal questions involving the contract between the PCSO and the PGMC, are
prompted by the petitioners' moral objections against the whole idea of
gambling operations operated by the government through the PCSO. The
whole point of the petition, in essence, is a fight between good and evil,
between the morality or amorality of lottery operations conducted on a wide
scale involving millions of individuals and affecting millions of lives. Their
media of opposition are the above stated defects in the said contract which
they assail to be fatally defective. They come to this Court, as taxpayers and
civic spirted citizens, asserting a right of standing on a transcendental issue
which they assert to be of paramount public interest.
Moral or legal questions aside, I believe that there are unfortunately certain
standards1 that have to be followed in the exercise of this Court's awesome
power of review before this Court could even begin to assay the validity of
the contract between the PCSO and the PGMC. This, in spite of the apparent
expansion of judicial power granted by Section 1 of Article VIII of the 1987
Constitution. It is fundamental that such standards be complied with before
this Court could even begin to explore the substantive issues raised by any
controversy brought before it, for no issue brought before this court could
possibly be so fundamental and paramount as to warrant a relaxation of the
requisite rules for judicial review developed by settled jurisprudence inorder
to avoid entangling this court in controversies which properly belong to the
legislative or executive branches of our government. The potential harm to
our system of government, premised on the concept of separation of powers,
by the Court eager to exercise its powers and prerogatives at every turn,
cannot be gainsaid. The Constitution does not mandate this Court to wield
the power of judicial review with excessive vigor and alacrity in every area or
at every turn, except in appropriate cases and controversies which meet
established requirements for constitutional adjudication. Article VIII Sec. 1 of
the Constitution notwithstanding, there are questions which I believe are still
beyond the pale of judicial power. Moreover, it is my considered opinion that
the instant petition does not meet the requirements set by this court for a
valid exercise of judicial review.
Our Constitution expressly defines judicial power as including "the duty to
settle actual cases and controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has
been a grave abuse of discretion amounting to a lack or excess of jurisdiction
on the part of any branch or instrumentality of the government." 2 This
constitutional requirement for an actual case and controversy limits this
Court's power of review to precisely those suits between adversary litigants
with real interests at stake2 thus preventing it from making all sorts of
hypothetical pronouncements on abstract, contingent and amorphous issues.
The Court will therefore not pass upon the validity of an act of government or
a statute passed by a legislative body without a requisite showing of
injury. 3 A personal stake is essential, which absence renders our
pronouncements gratuitous and certainly violative of the constitutional
requirement for actual cases and controversies.
The requirement for standing based on personal injury may of course be
bypassed, as the petitioners in this case attempt to do, by considering the
case as a "taxpayer suit" which would thereby clothe them with the
personality they would lack under ordinary circumstances. However, the act
assailed by the petitioners on the whole involves the generation rather than
disbursement of public funds. In a line of cases starting from Pascual v.
Secretary of Public Works 4 "taxpayer suits" have been understood to refer
only to those cases where the act or statute assailed involves the illegal or
unconstitutional disbursement of public funds derived from taxation. The
main premise behind the "taxpayer suit" is that the pecuniary interest of the
taxpayer is involved whenever there is an illegal or wasteful use of public
funds which grants them the right to question the appropriation or
disbursement on the basis of their contribution to government funds. 5 Since
it has not been alleged that an illegal appropriation or disbursement of a fund
derived from taxation would be made in the instant case, I fail to see how the
petitioners in this case would be able to satisfy the locus standi requirement
on the basis of a "taxpayer's suit". This alone should inhibit this Court from
proceeding with the case at bench. The interest alleged and the potential
injury asserted are far too general and hypothetical for us to rush into a
judicial determination of what to me appears to be judgment better left to
executive branch of our government.
This brings me to one more important point: The idea that a norm of
constitutional adjudication could be lightly brushed aside on the mere
supposition that an issue before the Court is of paramount public concern
does great harm to a democratic system which espouses a delicate balance
between three separate but co-equal branches of government. It is equally of
paramount public concern, certainly paramount to the survival of our
democracy, that acts of the other branches of government are accorded due
respect by this Court. Such acts, done within their sphere of competence,
have been — and should always be — accorded with a presumption of
regularity. When such acts are assailed as illegal or unconstitutional, the
burden falls upon those who assail these acts to prove that they satisfy the
essential norms of constitutional adjudication, because when we finally
proceed to declare an act of the executive or legislative branch of our
government unconstitutional or illegal, what we actually accomplish is the
thwarting of the will of the elected representatives of the people in the
executive or legislative branches government.6 Notwithstanding Article VIII,
Section 1 of the Constitution, since the exercise of the power of judicial
review by this Court is inherently antidemocratic, this Court should exercise a
becoming modesty in acting as a revisor of an act of the executive or
legislative branch. The tendency of a frequent and easy resort to the function
of judicial review, particularly in areas of economic policy has become
lamentably too common as to dwarf the political capacity of the people
expressed through their representatives in the policy making branches of
government and to deaden their sense of moral responsibility. 7
This court has been accused, of late, of an officious tendency to delve into
areas better left to the political branches of government. 8 This tendency, if
exercised by a court running riot over the other co-equal branches of
government, poses a greater danger to our democratic system than the
perceived danger — real or imagined — of an executive branch espousing
economic or social policies of doubtful moral worth. Moreover economic
policy decisions in the current milieu- including the act challenged in the
instant case-involve complex factors requiring flexibility and a wide range of
discretion on the part of our economic managers which this Court should
respect because our power of review, under the constitution, is a power to
check, not to supplant those acts or decisions of the elected representatives
of the people.
Finally, the instant petition was brought to this Court on the assumption that
the issue at bench raises primarily constitutional issues. As it has ultimately
turned out, the core foundation of the petitioners' objections to the LOTTO
operations was based on the validity of the contract between the PCSO and
the PGMC in the light of Section 1 of R.A. 1169 as amended by B.P. Blg.
427. It might have been much more appropriate for the issue to have taken
its normal course in the courts below.
I vote to deny the petition.
# Separate Opinions
CRUZ, J., concurring:
I am happy to join Mr. Justice Hilario G. Davide, Jr. in his excellent ponencia.
I will add the following personal observations only for emphasis as it is not
necessary to supplement his thorough exposition.
The respondents take great pains to cite specific provisions of the contract to
show that it is PCSO that is actually operating the on-line lottery, but they
have not succeeded in disproving the obvious, to wit, that the document was
intentionally so crafted to make it appear that the operation is not a joint
undertaking of PCSO and PGMC but a mere lease of services. It is a clever
instrument, to be sure, but we are, gratifyingly, not deluded. Lawyers have a
special talent to disguise the real intention of the parties in a contract to make
it come ostensibly within the provisions of a law although the real if furtive
purpose is to violate it. That talent has been exercised in this case, but not
convincingly enough.
It should be quite clear, from the adroit way the contract has been drafted,
that the primary objective was to avoid the conclusion that PCSO will be
operating a lottery "in association, collaboration or joint venture with any
person, association, company or entity," which is prohibited by Section 1 of
Rep. Act No. 1169 as amended by B.P. Blg. 42. Citing the self-serving
provisions of the contract, the respondents would have us believe that the
contract is perfectly lawful because all it does is provide for the lease to
PCSO of the technical know-how and equipment of PGMC, with PCSO
acting as "the sole and individual operator" of the lottery. I am glad we are
not succumbing to this sophistry.
Despite the artfulness of the contract (authorship of which was pointedly
denied by both counsel for the government and the private respondent during
the oral argument on this case), a careful study will reveal telling stipulations
that it is PGMC and not PCSO that will actually be operating the lottery.
Thus, it is provided inter alia that PGMC shall furnish all capital equipment
and other facilities needed for the operation; bear all expenses relating to the
operation, including those for the salaries and wages of the administrative
and technical personnel; undertake a positive advertising and promotion
campaign for public support of the lottery; establish a radio communications
network throughout the country as part of the operation; and assume all risks
if the revenues from ticket sales are insufficient to pay the entire prize
money. Most significantly, to show that it is only after eight years from the
effectivity of the contract that PCSO will actually operate the lottery, Par. 6.7
of the agreement provides that PGMC shall:
6.7. Upon effectivity of this Contract, commence the training
of PCSO and other local personnel and the transfer of
 technology and expertise, such that at the end of the term of
this Contract, PCSO will be able to effectively take-over the
Facilities and efficiently operate the On-Line Lottery System.
(Emphasis supplied).
In the meantime, that is to say during the entire 8-year term of the contract, it
will be PGMC that will be operating the lottery. Only "at the end of the term of
this Contract" will PCSO "be able to effectively take-over the Facilities and
efficiently operate the On-Line Lottery System."
Even on the assumption that it is PCSO that will be operating the lottery at
the very start, the authority granted to PGMC by the agreement will readily
show that PCSO will not be acting alone, as the respondents pretend. In fact,
it cannot. PGMC is an indispensable co-worker because it has the equipment
and the technology and the management skills that PCSO does not have at
this time for the operation of the lottery, PCSO cannot deny that it needs the
assistance of PGMC for this purpose, which was its reason for entering into
the contract in the first place.
And when PCSO does avail itself of such assistance, how will it be operating
the lottery? Undoubtedly, it will be doing so "in collaboration, association or
joint venture" with PGMC, which, let it be added, will not be serving as a
mere "hired help" of PCSO subject to its control. PGMC will be functioning
independently in the discharge of its own assigned role as stipulated in detail
under the contract. PGMC is plainly a partner of PCSO in violation of law, no
matter how PGMC's assistance is called or the contract is denominated.
Even if it be conceded that the assistance partakes of a lease of services, the
undeniable fact is that PCSO would still be collaborating or cooperating with
PGMC in the operation of the lottery. What is even worse is that PCSO and
PGMC may be actually engaged in a joint venture, considering that PGMC
does not collect the usual fixed rentals due an ordinary lessor but is entitled
to a special "Rental Fee," as the contract calls it, "equal to four point nine
percent (4.9%) of gross receipts from ticket sales."
The flexibility of this amount is significant. As may be expected, it will induce
in PGMC an active interest and participation in the success of PCSO that is
not expected of an ordinary detached lessor who gets to be paid his rentals
— not a rental fee — whether the lessee's business prospers or not. PGMC's
share in the operation depends on its own performance and the effectiveness
of its collaboration with PCSO. Although the contract pretends otherwise,
PGMC is a co-investor with PCSO in what is practically, if not in a strictly
legal sense, a joint venture.
Concerning the doctrine of locus standi, I cannot agree that out of the sixty
million Filipinos affected by the proposed lottery, not a single solitary citizen
can question the agreement. Locus standi is not such an absolute rule that it
cannot admit of exceptions under certain conditions or circumstances like
those attending this transaction. As I remarked in my dissent in Guazon v. De
Villa, 181 SCRA 623, "It is not only the owner of the burning house who has
the right to call the firemen. Every one has the right and responsibility to
prevent the fire from spreading even if he lives in the other block."
What is especially galling is that the transaction in question would foist upon
our people an essentially immoral activity through the instrumentality of a
foreign corporation, which naturally does not have the same concern for our
interests as we ourselves have. I am distressed that foreigners should be
allowed to exploit the weakness of some of us for instant gain without work,
and with the active collaboration and encouragement of our own government
at that.
Feliciano, J., concurring
I agree with the conclusions reached by my distinguished brother in the Court
Davide, Jr., J., both in respect of the question of locus standi and in respect
of the merits of this case, that is, the issues of legality and constitutionality of
the Contract of Lease entered into between the Philippine Charity
Sweepstakes Office (PCSO) and the Philippine Gaming Management
Corporation (PGMC).
In this separate opinion, I propose to address only the question of locus
standi. It is with some hesitation that I do so, considering the extensive
separate opinions on this question written by my learned brothers Melo,
Puno and Vitug, JJ. I agree with the great deal of what my brothers Melo,
Puno and Vitug say about locus standi in their separate opinions and there is
no need to go over the ground that I share with them. Because, however, I
reach a different conclusion in respect of the presence or absence of locus
standi on the part of the petitioners in the case before the Court, there is an
internal need (a need internal to myself) to articulate the considerations
which led me to that conclusion.
There is no dispute that the doctrine of locus standi reflects an important
constitutional principle, that is, the principle of separation of powers which,
among other things, mandates that each of the great Departments of
government is responsible for performance of its constitutionally allotted
tasks. Insofar as the Judicial Department is concerned, the exercise of
judicial power and carrying out of judicial functions commonly take place
within the context of actual cases or controversies. This, in turn, reflects the
basic notion of judicial power as the power to resolve actual disputes and of
the traditional business of courts as the hearing and deciding of specific
controversies brought before them. In our own jurisdiction, and at least since
the turn of the present century, judicial power has always included the power
of judicial review, understood as the authority of courts (more specifically the
Supreme Court) to assay contested legislative and executive acts in terms of
their constitutionality or legality. Thus, the general proposition has been that
a petitioner who assails the legal or constitutional quality of an executive or
legislative act must be able to show that he has locus standi. Otherwise, the
petition becomes vulnerable to prompt dismissal by the court.
There is, upon the other hand, little substantive dispute that the possession
of locus standi 1 is not, in each and every case, a rigid and absolute
requirement for access to the courts. Certainly that is the case where great
issues of public law are at stake, issues which cannot be approached in the
same way that a court approaches a suit for the collection of a sum of money
or a complaint for the recovery of possession of a particular piece of land.
The broad question is when, or in what types of cases, the court should insist
on a clear showing of locus standiunderstood as a direct and personal
interest in the subject matter of the case at bar, and when the court may or
should relax that apparently stringent requirement and proceed to deal with
the legal or constitutional issues at stake in a particular case.
I submit, with respect, that it is not enough for the Court simply to invoke
"public interest" or even "paramount considerations of national interest," and
to say that the specific requirements of such public interest can only be
ascertained on a "case to case" basis. For one thing, such an approach is
not intellectually satisfying. For another, such an answer appears to come
too close to saying that locus standi exists whenever at least a majority of the
Members of this Court participating in a case feel that an appropriate case for
judicial intervention has arisen.
This is not, however, to say that there is somewhere an over-arching juridical
principle or theory, waiting to be discovered, that permits a ready answer to
the question of when, or in what types of cases, the need to show locus
standi may be relaxed in greater or lesser degree. To my knowledge, no
satisfactory principle or theory has been discovered and none has been
crafted, whether in our jurisdiction or in the United States. 2 I have neither the
competence nor the opportunity to try to craft such principle or formula. It
might, however, be useful to attempt to indicate the considerations of
principle which, in the present case, appear to me to require an affirmative
answer to the question of whether or not petitioners are properly regarded as
imbued with the standing necessary to bring and maintain the present
petition.
Firstly, the character of the funds or other assets involved in the case is of
major importance. In the case presently before the Court, the funds involved
are clearly public in nature. The funds to be generated by the proposed
lottery are to be raised from the population at large. Should the proposed
operation be as successful as its proponents project, those funds will come
from well-nigh every town and barrio of Luzon. The funds here involved are
public in another very real sense: they will belong to the PCSO, a
government owned or controlled corporation and an instrumentality of the
government and are destined for utilization in social development projects
which, at least in principle, are designed to benefit the general public. My
learned brothers Melo, Puno and Vitug, JJ. concede that taxpayers' suits
have been recognized as an exception to the traditional requirement of
recognized as an exception to the traditional requirement of locus standi.
They insist, however, that because the funds here involved will not have
been generated by the exercise of the taxing power of the Government, the
present petition cannot be regarded as a taxpayer's suit and therefore, must
be dismissed by the Court. It is my respectful submission that that constitutes
much too narrow a conception of the taxpayer's suit and of the public policy
that it embodies. It is also to overlook the fact that tax monies, strictly so
called, constitute only one (1) of the major categories of funds today raised
and used for public purposes. It is widely known that the principal sources of
funding for government operations today include, not just taxes and customs
duties, but also revenues derived from activities of the Philippine Amusement
Gaming Corporation (PAGCOR), as well as the proceeds of privatization of
government owned or controlled corporations and other government owned
assets. The interest of a private citizen in seeing to it that public funds, from
whatever source they may have been derived, go only to the uses directed
and permitted by law is as real and personal and substantial as the interest
of a private taxpayer in seeing to it that tax monies are not intercepted on
their way to the public treasury or otherwise diverted from uses prescribed or
allowed by law. It is also pertinent to note that the more successful the
government is in raising revenues by non-traditional methods such as
PAGCOR operations and privatization measures, the lesser will be the
pressure upon the traditional sources of public revenues, i.e., the pocket
books of individual taxpayers and importers.
A second factor of high relevance is the presence of a clear case of
disregard of a constitutional or statutory prohibition by the public respondent
agency or instrumentality of the government. A showing that a constitutional
or legal provision is patently being disregarded by the agency or
instrumentality whose act is being assailed, can scarcely be disregarded by
court. The concept of locus standi — which is part and parcel of the broader
notion of ripeness of the case — "does not operate independently and is not
alone decisive. . . . [I]t is in substantial part a function of a judge's estimate of
the merits of the constitutional [or legal] issue." 3 The notion of locus
standi and the judge's conclusions about the merits of the case, in other
words, interact with each other. Where the Court perceives a serious issue of
violation of some constitutional or statutory limitation, it will be much less
difficult for the Court to find locus standi in the petitioner and to confront the
legal or constitutional issue. In the present case, the majority of the Court
considers that a very substantial showing has been made that the Contract of
Lease between the PCSO and the PGMC flies in the face of legal limitations.
A third consideration of importance in the present case is the lack of any
other party with a more direct and specific interest in raising the questions
here being raised. Though a public bidding was held, no losing or dissatisfied
bidder has come before the Court. The Office of the Ombudsman has not, to
the knowledge of the Court, raised questions about the legality or
constitutionality of the Contract of Lease here involved. The National
Government itself, through the Office of the Solicitor General, is defending
the PCSO Contract (though it had not participated in the drafting thereof). In
a situation like that here obtaining, the submission may be made that the
institution, so well known in corporation law and practice, of the corporate
stockholders' derivative suit furnishes an appropriate analogy and that on the
basis of such an analogy, a taxpayer's derivative suit should be recognized
as available.
The wide range of impact of the Contract of Lease here assailed and of its
implementation, constitutes still another consideration of significance. In the
case at bar, the agreement if implemented will be practically nationwide in its
scope and reach (the PCSO-PGMC Contract is limited in its application to
the Island of Luzon; but if the PCSO Contracts with the other two [2] private
"gaming management" corporations in respect of the Visayas and Mindanao
are substantially similar to PCSO's Contract with PGMC, then the Contract
before us may be said to be national indeed in its implications and
consequences). Necessarily, the amounts of money expected to be raised by
the proposed activities of the PCSO and PGMC will be very substantial,
probably in the hundreds of millions of pesos. It is not easy to conceive of a
contract with greater and more far-reaching consequences, literally speaking,
for the country than the Contract of Lease here involved. Thus, the subject
matter of the petition is not something that the Court may casually pass over
as unimportant and as not warranting the expenditure of significant judicial
resources.
In the examination of the various features of this case, the above
considerations have appeared to me to be important and as pressing for
acceptance and exercise of jurisdiction on the part of this Court. It is with
these considerations in mind that I vote to grant due course to the Petition
and to hold that the Contract of Lease between the PCSO and PGMC in its
present form and content, and given the present state of the law, is fatally
defective.
PADILLA, J., concurring:
My views against gambling are a matter of judicial record. In Basco v.
PAGCOR, (G.R. No. 91649, 14 May 1991, 197 SCRA 52) I expressed these
views in a separate opinion where I was joined by that outstanding lady jurist,
Mme. Justice A. Melencio-Herrera whose incisive approach to legal problems
is today missed in this Court. I reproduce here those views because they are
highly persuasive to the conclusions I reach in the present controversy:
I concur in the result of the learned decision penned by my
brother Mr. Justice Paras. This means that I agree with the
decision insofar as it holds that the prohibition, control, and
regulation of the entire activity known as gambling properly
pertain to "state policy." It is, therefore, the political
departments of government, namely, the legislative and the
executive that should decide on what government should do
in the entire area of gambling, and assume full responsibility
to the people for such policy.
The courts, as the decision states, cannot inquire into the
wisdom, morality or expediency of policies adopted by the
political departments of government in areas which fall within
their authority, except only when such policies pose a clear
and present danger to the life, liberty or property of the
individual. This case does not involve such a factual
situation.
However, I hasten to make of record that I do not subscribe
to gambling in any form. It demeans the human personality,
destroys self-confidence and eviscerates one's self-respect,
which in the long run will corrode whatever is left of the
Filipino moral character. Gambling has wrecked and will
continue to wreck families and homes; it is an antithesis to
individual reliance and reliability as well as personal industry
which are the touchstones of real economic progress and
national development.
Gambling is reprehensible whether maintained by
government or privatized. The revenues realized by the
government out of "legalized" gambling will, in the long run,
be more than offset and negated by the irreparable damage
to the people's moral values.
Also, the moral standing of the government in its repeated
avowals against "illegal gambling" is fatally flawed and
becomes untenable when it itself engages in the very activity
it seeks to eradicate.
 One can go through the Court's decision today and mentally
replace the activity referred to therein as gambling, which is
legal only because it is authorized by law and run by the
government, with the activity known as prostitution. Would
prostitution be any less reprehensible were it to be
authorized by law, franchised, and "regulated" by the
government, in return for the substantial revenues it would
yield the government to carry out its laudable projects, such
as infrastructure and social amelioration? The question, I
believe, answers itself. I submit that the sooner the
legislative department outlaws all forms of gambling, as
a fundamental state policy, and the sooner the executive
implements such policy, the better it will be for the nation.
We presently have the sweepstakes lotteries; we already have the
PAGCOR's gambling casinos; the Filipino people will soon, if plans do not
miscarry, be initiated into an even more sophisticated and encompassing
nationwide gambling network known as the "on-line hi-tech lotto system." To
be sure, it is not wealth producing; it is not export oriented. It will draw
from existing wealth in the hands of Filipinos and transfer it into the coffers of
the PCSO and its foreign partners at a price of further debasement of the
moral standards of the Filipino people, the bulk of whom are barely
subsisting below the poverty line.
1. It is said that petitioners 1 have no locus standi to bring
this suit even as they challenge the legality and
constitutionality of a contract of lease between the PCSO, a
government-owned corporation and the PGMC, a private
corporation with substantial (if not controlling) foreign
composition and content. Such contract of lease contains the
terms and conditions under which an "on-line hi-tech lotto
system" will operate in the country.
As the ponente of the extended, unsigned en banc resolution in Valmonte v.
PCSO, (G.R. No. 78716 and G.R. No. 79084, 22 September 1987), I would
be the last to downgrade the rule, therein reiterated, that in order to maintain
a suit challenging the constitutionality and/or legality of a statute, order or
regulation or assailing a particular governmental action as done with grave
abuse of discretion or with lack of jurisdiction, the petitioner must show that
he has a clear personal or legal right that would be violated with the
enforcement of the challenged statute, order or regulation or the
implementation of the questioned governmental action. But, in my considered
view, this rule maybe (and should be) relaxed when the issue involved or
raised in the petition is of such paramount national interest and importance
as to dwarf the above procedural rule into a barren technicality. As a
unanimous Court en banc aptly put it in De Guia vs. COMELEC, G.R. No.
104712, 6 May 1992, 208 SCRA 420.
Before addressing the crux of the controversy, the Court
observes that petitioner does not allege that he is running for
re-election, much less, that he is prejudiced by the election,
by district, in Parañaque. As such, he does not appear to
have locus standi, a standing in law, a personal or
substantial interest. (Sanidad vs. COMELEC, G.R. No. L-
4640, October 12, 1976. 73 SCRA 333; Municipality of
Malabang vs. Benito, G.R. No. L-28113, March 28, 1969, 27
SCRA 533) He does not also allege any legal right that has
been violated by respondent. If for this alone, petitioner does
not appear to have any cause of action.
However, considering the importance of the issue involved,
concerning as it does the political exercise of qualified voters
affected by the apportionment, and petitioner alleging abuse
of discretion and violation of the Constitution by respondent,
We resolved to brush aside the question of procedural
infirmity, even as We perceive the petition to be one of
declaratory relief. We so held similarly through Mr. Justice
Edgardo L. Paras in Osmeña vs. Commission on Elections.
I view the present case as falling within the De Guia case doctrine. For, when
the contract of lease in question seeks to establish and operate a nationwide
gambling network with substantial if not controlling foreign participation, then
the issue is of paramount national interest and importance as to justify and
warrant a relaxation of the above-mentioned procedural rule on locus standi.
2. The charter of the PCSO — Republic Act No. 1169 as
amended by BP No. 42 — insofar as relevant, reads:
Sec. 1. The Philippine Charity Sweepstakes Office. — The
Philippine Charity Sweepstakes Office, hereinafter
designated the Office, shall be the principal government
agency for raising and providing for funds for health
programs, medical assistance and services and charities of
national character, and as such shall have the general
powers conferred in section thirteen of Act Numbered One
Thousand Four Hundred Fifty-Nine, as amended, and shall
have the authority:
A. To hold and conduct charity sweepstakes races, lotteries
and other similar activities, in such frequency and manner,
 as shall be determined, and subject to such rules and
regulations as shall be promulgated by the Board of
Directors.
B. Subject to the approval of the Minister of Human
Settlements, to engage in health and welfare-related
investments, programs, projects and activities which may be
profit-oriented, by itself or in collaboration, association or
joint venture with any person, association, company or
entity, whether domestic or foreign, except for the activities
mentioned in the preceding paragraph (A), for the purpose of
providing for permanent and continuing sources of funds for
health programs, including the expansion of existing ones,
medical assistance and services, and/or charitable grants:
Provided, That such investments will not compete with the
private sector in areas where investments are adequate as
may be determined by the National Economic and
Development Authority.
It is at once clear from the foregoing legal provisions that, while the PCSO
charter allows the PCSO to itself engage in lotteries, it does not however
permit the PCSO to undertake or engage in lotteries in "collaboration,
association or joint venture" with others. The palpable reason for this
prohibition is, that PCSO should not and cannot be made a vehicle for an
otherwise prohibited foreign or domestic entity to engage in lotteries
(gambling activities) in the Philippines.
The core question then is whether the lease contract between PCSO and
PGMC is a device whereby PCSO will engage in lottery in collaboration,
association or joint venture with another, i.e. PGMC. I need not go here into
the details and different specific features of the contract to show that it is a
joint venture between PCSO and PGMC. That has been taken care of in the
opinion of Mr. Justice Davide to which I fully subscribe.
On a slightly different plane and, perhaps simplified, I consider the
agreement or arrangement between the PCSO and PGMC a joint venture
because each party to the contract contributes its share in the enterprise or
project. PGMC contributes its facilities, equipment and know-how (expertise).
PCSO contributes (aside from its charter) the market, directly or through
dealers — and this to me is most important — in the totality or mass of
the Filipinogambling elements who will invest in lotto tickets. PGMC will get
its 4.9% of gross receipts (with assumption of certain risks in the course of
lotto operations); the residue of the whole exercise will go to PCSO. To any
person with a minimum of business know-how, this is a joint venture between
PCSO and PGMC, plain and simple.
But assuming ex gratia argumenti that such arrangement between PCSO
and PGMC is not a joint venture between the two of them to install and
operate an "on-line hi-tech lotto system" in the country, it can hardly be
denied that it is, at the very least, an association or collaboration between
PCSO and PGMC. For one cannot do without the other in the installation,
operation and, most importantly, marketing of the entire enterprise or project
in this country.
Indeed, the contract of lease in question is a clear violation of Republic Act
No. 1169 as amended by BP No. 42 (the PCSO charter).
Having arrived at the conclusion that the contract of lease in question
between the PCSO and PGMC is illegal and, therefore, invalid, I find it
unnecessary to dwell on the other issues raised in the pleadings and
arguments of the parties.
I, therefore, vote to give DUE COURSE to the petition and to declare the
contract of lease in question between PCSO and PGMC, for the reasons
aforestated, of no force and effect.
MELO, J., dissenting:
I submit that the petition before the Court deserves no less than outright
dismissal for the reason that petitioners, as concerned citizens and as
taxpayers and as members of Congress, do not possess the necessary legal
standing to assail the validity of the contract of lease entered into by the
Philippine Charity Sweepstakes Office and the Philippine Gaming
Management Corporation relative to the establishment and operation of an
"On-line Hi-Tech Lottery System" in the country.
As announced in Lamb vs. Phipps (22 Phil. [1912], 559), "[J]udicial power in
its nature, is the power to hear and decide causes pending between parties
who have the right to sue and be sued in the courts of law and equity."
Necessarily, this implies that a party must show a personal stake in the
outcome of the controversy or an injury to himself that can be addressed by a
favorable decision so as to warrant his invocation of the court's jurisdiction
and to justify the court's remedial powers in his behalf (Warth vs. Seldin, 422
U.S. 490; Guzman vs. Marrero, 180 U.S. 81; McMicken vs. United States, 97
U.S. 204). Here, we have yet to see any of petitioners acquiring a personal
stake in the outcome of the controversy or being placed in a situation
whereby injury may be sustained if the contract of lease in question is
implemented. It may be that the contract has somehow evoked public
interest which petitioners claim to represent. But the alleged public interest
which they pretend to represent is not only broad and encompassing but also
strikingly and veritably indeterminate that one cannot truly say whether a
handful of the public, like herein petitioners, may lay a valid claim of
representation in behalf of the millions of citizens spread all over the land
who may have just as many varied reactions relative to the contract in
question.
Any effort to infuse personality on petitioners by considering the present case
as a "taxpayer's suit" could not cure the lack of locus standi on the part of
petitioners. As understood in this jurisdiction, a "taxpayer's suit" refers to a
case where the act complained of directly involves the illegal disbursement of
public funds derived from taxation (Pascual vs. Secretary of Public Works,
110 Phil. [1960] 331; Maceda vs. Macaraig, 197 SCRA [1991]; Lozada vs.
COMELEC, 120 SCRA [1983] 337; Dumlao vs. COMELEC, 95 SCRA [1980]
392; Gonzales vs. Marcos, 65 SCRA [1975] 624). It cannot be overstressed
that no public fund raised by taxation is involved in this case. In fact, it is
even doubtful if the rentals which the PCSO will pay to the lessor for its
operation of the lottery system may be regarded as "public fund". The PCSO
is not a revenue- collecting arm of the government. Income or money
realized by it from its operations will not and need not be turned over to the
National Treasury. Rather, this will constitute corporate funds which will
remain with the corporation to finance its various activities as authorized in its
charter. And if ever some semblance of "public character" may be said to
attach to its earnings, it is simply because PCSO is a government-owned or
controlled entity and not a purely private enterprise.
It must be conceded though that a "taxpayer's suit" had been allowed in a
number of instances in this jurisdiction. For sure, after the trial was blazed
by Pascual vs. Secretary of Public Works, supra, several more followed. It is
to be noted, however, that in those occasions where this Court allowed such
a suit, the case invariably involved either the constitutionality of a statute or
the legality of the disbursement of public funds through the enforcement of
what was perceived to be an invalid or unconstitutional statute or legislation
(Pascual, supra; Philippine Constitution Association, Inc. vs. Jimenez, 15
SCRA [1965] 479; Philippine Constitution Association, Inc. vs. Mathay, 18
SCRA [1966] 300; Tolentino vs. COMELEC, 41 SCRA [1971] 702; Pelaez vs.
Auditor General, 15 SCRA [1965] 569; Iloilo Palay and Corn Planters
Association vs. Feliciano, 13 SCRA [1965] 377).
The case before us is not a challenge to the validity of a statute or an attempt
to restrain expenditure of public funds pursuant to an alleged invalid
congressional enactment. What petitioners ask us to do is to nullify a simple
contract of lease entered into by a government-owned corporation with a
private entity. That contract, as earlier pointed out, does not involve the
disbursement of public funds but of strictly corporate money. If every
taxpayer, claiming to have interest in the contract, no matter how remote,
could come to this Court and seek nullification of said contract, the day may
come when the activities of government corporate entities will ground to a
standstill on account of nuisance suits filed against them by persons whose
supposed interest in the contract is as remote and as obscure as the interest
of any man in the street. The dangers attendant thereto are not hard to
discern and this Court must not allow them to come to pass.
One final observation must be emphasized. When the petition at bench was
filed, the Court decided to hear the case on oral argument on the initial
perception that a constitutional issue could be involved. However, it now
appears that no question of constitutional dimension is at stake as indeed the
majority barely touches on such an issue, concentrating as it does on its
interpretation of the contract between the Philippine Charity Sweepstakes
Office and the Philippine Gaming Management Corporation.
I, therefore, vote to dismiss the petition.
PUNO, J., dissenting:
At the outset, let me state that my religious faith and family upbringing
compel me to regard gambling, regardless of its garb, with hostile eyes. Such
antagonism tempts me to view the case at bench as a struggle between
good and evil, a fight between the forces of light against the forces of
darkness. I will not, however, yield to that temptation for we are not judges of
the Old Testament type who were not only arbiters of law but were also high
priests of morality.
I will therefore strictly confine the peregrinations of my mind to
the legal issues for resolution: (1) whether or not the petitioners have
the Locus standi to file the petition at bench; and (2) assuming their locus
standi, whether or not the Contract of Lease between PCSO and PGMC is
null and void considering: (a) section 1 of R.A. No. 1169, as amended by
B.P. Blg. 42 (Charter of PCSO) which prohibits PCSO from holding and
conducting lotteries "in collaboration, association or joint venture with any
person, association, company or entity"; (b) Act No. 3836 which requires a
congressional franchise before any person or entity can establish and
operate a telecommunication system; (c) section 11, Art. XII of the
Constitution, which requires that for a corporation to operate a public utility,
at least 60% of its capital must be owned by Filipino citizens; and (d) R.A.
No. 7042, otherwise known as the "Foreign Investments Act", which includes
all forms of gambling in its "negative list."
While the legal issues abound, I deferentially submit that the threshold issue
is the locus standi, or standing to sue, of petitioners. The petition describes
petitioner Kilosbayan, Inc., as a non-stock corporation composed of "civic
spirited citizens, pastors, priests, nuns, and lay leaders who are committed to
the cause of truth, justice, and national renewal." 1 Petitioners Jovito R.
Salonga, Cirilo A. Rigos, Ernie Camba, Emilio C. Capulong, Jr., Jose
Abcede, Christine Tan, Felipe L. Gozon, Rafael G. Fernando, Raoul V.
Victorino, Jose Cunanan, and Quintin S. Doromal joined the petition in their
capacity as trustees of Kilosbayan, Inc., and as taxpayers and concerned
citizens. 2 Petitioners Freddie Webb and Wigberto Tañada joined the petition
as senators, taxpayers and concerned citizens. 3 Petitioner Joker P. Arroyo
joined the petition as a member of the House of Representative, a taxpayer
and a concerned citizen. 4
With due respect to the majority opinion, I wish to focus on the interstices
of locus standi, a concept described by Prof. Paul Freund as "among the
most amorphous in the entire domain of public law." The requirement of
standing to sue inheres from the definition of judicial power. It is not merely a
technical rule of procedure which we are at liberty to disregard. Section 1,
Article VIII of the Constitution provides:
xxx xxx xxx
Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or
not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. (Italics supplied)
The phrase "actual controversies involving rights which are legally
demandable and enforceable" has acquired a cultivated meaning given by
courts. It spells out the requirements that must be satisfied before one can
come to court to litigate a constitutional issue. Our distinguished colleague,
Mr. Justice Isagani A. Cruz, gives a shorthand summary of these
requirements when he states that no constitutional question will be heard and
decided by courts unless there is a showing of the following: . . . (1) there
must be an actual case or controversy; (2) the question of constitutionality
must be raised by the proper party; (3) the constitutional question must be
raised at the earliest possible opportunity; and (4) the decision of the
constitutional question must be necessary to the determination of the case
itself. 5
The complexion of the rule on locus standi has been undergoing a change.
Mr. Justice Cruz has observed the continuing relaxation of the rule on
standing, 6 thus:
xxx xxx xxx
A proper party is one who has sustained or is in immediate
danger of sustaining an injury as a result of the act
complained of. Until and unless such actual or potential
injury is established, the complainant cannot have the legal
personality to raise the constitutional question.
In Tileson v. Ullmann, a physician questioned the
constitutionality of a law prohibiting the use of
contraceptives, upon the ground that it might prove
dangerous to the life or health of some of his patients whose
physical condition would not enable them to bear the rigors
of childbirth. The court dismissed the challenge, holding that
the patients of the physician and not the physician himself
were the proper parties.
In Cuyegkeng v. Cruz, the petitioner challenged in a quo
warranto proceeding the title of the respondent who, he
claimed, had been appointed to the board of medical
examiners in violation of the provisions of the Medical Act of
1959. The Supreme Court dismissed the petition, holding
that Cuyegkeng had not made a claim to the position held by
Cruz and therefore could not be regarded as a proper party
who had sustained an injury as a result of the questioned
act.
In People v. Vera, it was held that the Government of the
Philippines was a proper party to challenge the
constitutionality of the Probation Act because, more than any
other, it was the government itself that should be concerned
over the validity of its own laws.
In Ex Parte Levitt, the petitioner, an American taxpayer and
member of the bar, filed a motion for leave to question the
qualifications of Justice Black who, he averred, had been
appointed to the U.S. Supreme Court in violation of the
Constitution of the United States. The Court dismissed the
petition, holding that Levitt was not a proper party since he
was not claiming the position held by Justice Black.
The rule before was that an ordinary taxpayer did not have
the proper party personality to question the legality of an
appropriation law since his interest in the sum appropriated
was not substantial enough. Thus, in Custodio v. Senate
President, a challenge by an ordinary taxpayer to the validity
of a law granting back pay to government officials, including
members of Congress, during the period corresponding to
the Japanese Occupation was dismissed as having been
commenced by one who was not a proper party.
Since the first Emergency Powers Cases, however, the rule
has been changed and it is now permissible for an ordinary
taxpayer, or a group of taxpayers, to raise the question of
the validity of an appropriation law. As the Supreme Court
then put it. "The transcendental importance to the public of
these cases demands that they be settled promptly and
definitely, brushing aside, if we must, technicalities of
procedure."
In Tolentino v. Commission on Elections, it was held that a
senator had the proper party personality to seek the
prohibition of a plebiscite for the ratification of a proposed
constitutional amendment. In PHILCONSA v. Jimenez, an
organization of taxpayers and citizens was held to be a
proper party to question the constitutionality of a law
providing for special retirement benefits for members of the
legislature.
In Sanidad v. Commission on Elections, the Supreme Court
upheld the petitioners as proper parties, thus —
As a preliminary resolution, We rule that the
petitioners in L-44640 (Pablo C. Sanidad
and Pablito V. Sanidad) possess locus
standi to challenge the constitutional
premise of Presidential Decree Nos. 991,
1031, and 1033. It is now an ancient rule
that the valid source of a statute —
Presidential Decrees are of such nature —
may be contested by one who will sustain a
direct injury as a result of its enforcement. At
the instance of taxpayers, laws providing for
the disbursement of public funds may be
enjoined, upon the theory that the
expenditure of public funds by an officer of
the State for the purpose of executing an
unconstitutional act constitutes a
misapplication of such funds. The breadth of
Presidential Decree No. 991 carries an
appropriation of Five Million Pesos for the
effective implementation of its purposes.
Presidential Decree No. 1031 appropriates
the sum of Eight Million Pesos to carry out
its provisions. The interest of the
aforenamed petitioners as taxpayers in the
lawful expenditure of these amounts of
public money sufficiently clothes them with
that personality to litigate the validity of the
Decrees appropriating said funds. Moreover,
as regard taxpayer's suits, this Court enjoys
that open discretion to entertain the same or
not. For the present case, We deem it sound
to exercise that discretion affirmatively so
that the authority upon which the disputed
Decrees are predicated may be inquired
into.
In Lozada v. Commission on Elections, however, the
petitioners were held without legal standing to demand the
filling of vacancies in the legislature because they had only
"a generalized interest' shared with the rest of the citizenry."
Last July 30, 1993, we further relaxed the rule on standing in Oposa, et al. v.
Hon. Fulgencio S. Factoran, Jr., 7where we recognized the locus standi of
minors representing themselves as well as generations unborn to protect
their constitutional right to a balanced and healthful ecology.
I am perfectly at peace with the drift of our decisions liberalizing the rule
on locus standi. The once stubborn disinclination to decide constitutional
issues due to lack of locus standi is incompatible with the expansion of
judicial power mandated in section 1 of Article VIII of the Constitution, i.e., "to
determine whether or not there has been a grave abuse of discretion,
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the government." As we held thru the ground
breaking ponencia of Mr. Justice Cruz in Daza v. Singson, 8 this provision no
longer precludes the Court from resolving political questions in proper cases.
But even perusing this provision as a constitutional warrant for the court to
enter the once forbidden political thicket, it is clear that the requirement
of locus standi has not been jettisoned by the Constitution for it still
commands courts in no uncertain terms to settle only "actual controversies
involving rights which are legally demandable and enforceable." Stated
otherwise, courts are neither free to decide all kinds of cases dumped into
their laps nor are they free to open their doors to all parties or entities
claiming a grievance. The rationale for this constitutional requirement
of locus standi is by no means trifle. It is intended "to assure a vigorous
adversary presentation of the case, and, perhaps more importantly to warrant
the judiciary's overruling the determination of a coordinate, democratically
elected organ of government." 9 It thus goes to the very essence of
representative democracies. As Mr. Justice Powell carefully explained in U.S.
v.
Richardson, 10 viz:
Relaxation of standing requirements is directly related to the
expansion of judicial power. It seems to me inescapable that
allowing unrestricted taxpayer or citizen standing would
significantly alter the allocation of power at the national level,
with a shift away from a democratic form of government. I
also believe that repeated and essentially head-on
confrontations between the life-tenured branch and the
representative branches of government will not, in the long
run, be beneficial to either. The public confidence essential
to the former and the vitality critical to the latter may well
erode if we do not exercise self- restraint in the utilization of
our power to negative the actions of the other branches. We
should be ever mindful of the contradictions that would arise
if a democracy were to permit at large oversight of the
elected branches of government by a non-representative,
and in large measure insulated, judicial branch. Moreover,
the argument that the Court should allow unrestricted
taxpayer or citizen standing underestimates the ability of the
representative branches of the Federal Government to
respond to the citizen pressure that has been responsible in
large measure for the current drift toward expanded
standing. Indeed, taxpayer or citizen advocacy, given its
potentially broad base, is precisely the type of leverage that
in a democracy ought to be employed against the branches
that were intended to be responsive to public attitudes about
the appropriate operation of government. "We must as
judges recall that, as Mr. Justice Holmes wisely observed,
the other branches of Government are ultimate guardians of
the liberties and welfare of the people in quite as great a
degree as the courts."
Unrestrained standing in federal taxpayer or citizen suits
would create a remarkably illogical system of judicial
supervision of the coordinate branches of the Federal
Government. Randolph's proposed Council of Revision,
which was repeatedly rejected by the Framers, at least had
the virtue of being systematic; every law passed by the
legislature automatically would have been previewed by the
judiciary before the law could take effect. On the other hand,
since the judiciary cannot select the taxpayers or citizens
who bring suit or the nature of the suits, the allowance of
public actions would produce uneven and sporadic review,
the quality of which would be influenced by the resources
and skill of the particular plaintiff. And issues would be
presented in abstract form, contrary to the Court's
recognition that "judicial review is effective largely because it
is not available simply at the behest of a partisan faction, but
is exercised only to remedy a particular, concrete
injury." Sierra Club v. Morton, 405 U.S. 727, 740-741, n. 16
(1972).
A lesser but not insignificant reason for screening the standing of persons
who desire to litigate constitutional issues is economic in character. Given
the sparseness of our resources, the capacity of courts to render efficient
judicial service to our people is severely limited. For courts to indiscriminately
open their doors to all types of suits and suitors is for them to unduly
overburden their dockets, and ultimately render themselves ineffective
dispensers of justice. To be sure, this is an evil that clearly confronts our
judiciary today.
Prescinding from these premises, and with great reluctance, I am not
prepared to concede the standing to sue of petitioners. On a personal level,
they have not shown that elemental injury in fact which will endow them with
a standing to sue. It must be stressed that petitioners are in the main,
seeking the nullity not of a law but of a Contract of Lease. Not one of the
petitioners is a party to the Contract of Lease executed between PCSO and
PGMC. None of the petitioners participated in the bidding, and hence they
are not losing bidders. They are complete strangers to the contract. They
stand neither to gain nor to lose economically by its enforcement. It seems to
me unusual that an unaffected third party to a contract could be allowed to
question its validity. Petitioner Kilosbayan cannot justify this officious
interference on the ground of its commitment to "truth, justice and national
renewal." Such commitment to truth, justice and national renewal, however
noble it may be, cannot give Kilosbayan a roving commission to check the
validity of contracts entered into by the government and its agencies.
Kilosbayan is not a private commission on audit.
Neither can I perceive how the other petitioners can be personally injured by
the Contract of Lease between PCSO and PGMC even if petitioner Salonga
assails as unmitigated fraud the statistical probability of winning the lotto as
he compared it to the probability of being struck twice by lightning. The
reason is obvious: none of the petitioners will be exposed to this alleged
fraud for all of them profess to abjure playing the lotto. It is self-evident that
lotto cannot physically or spiritually injure him who does not indulge in it.
Petitioners also contend they have locus standi as taxpayers. But the case at
bench does not involve any expenditure of public money on the part of
PCSO. In fact, paragraph 2 of the Contract of Lease provides that it is PGMC
that shall build, furnish, and maintain at its own expense and risk the facilities
for the On-Line Lottery System of PCSO and shall bear all maintenance and
other costs. Thus, PGMC alleged it has already spent P245M in equipment
and fixtures and would be investing close to P1 billion to supply adequately
the technology and other requirements of PCSO. 11 If no tax money is being
illegally deflected in the Contract of Lease between PCSO and PGMC,
petitioners have no standing to impugn its validity as taxpayers. Our ruling
in Dumlao v. Comelec, 12 settled this issue well enough, viz:
However, the statutory provisions questioned in this case,
namely, sec. 7, BP Blg. 51, and sections 4, 1, and 5 BP Blg.
52, do not directly involve the disbursement of public funds.
While, concededly, the elections to be held involve the
expenditure of public moneys, nowhere in their Petition do
said petitioners allege that their tax money is "being
extracted and spent in violation of specific constitutional
protections against abuses of legislative power" (Flast v.
Cohen, 392 U.S. 83 [1960]), or that there is a misapplication
of such funds by respondent COMELEC (see Pascual vs.
Secretary of Public Works, 110 Phil. 331 [1960]), or that
public money is being deflected to any improper purpose.
Neither do petitioners seek to restrain respondent from
wasting public funds through the enforcement of an invalid or
unconstitutional law. (Philippine Constitution Association vs.
Mathay, 18 SCRA 300 [1966]), citing Philippine Constitution
Association vs. Gimenez, 15 SCRA 479 [1965]). Besides,
the institution of a taxpayer's suit, per se, is no assurance of
judicial review. As held by this Court in Yan vs.
Macapagal(43 SCRA 677 [1972]), speaking through our
present Chief Justice, this Court is vested with discretion as
to whether or not a taxpayer's suit should be entertained.
Next, petitioners plead their standing as "concerned citizens." As citizens,
petitioners are pleading that they be allowed to advocate the constitutional
rights of other persons who are not before the court and whose protection is
allegedly their concern. A citizen qua citizen suit urges a greater relaxation of
the rule on locus standi. I feel no aversion to the further relaxation of the rule
on standing to accommodate what in other jurisdictions is known as an
assertion of jus tertii in constitutional litigation provided the claimant can
demonstrate: (1) an injury in fact to himself, and (2) the need to prevent the
erosion of a preferred constitutional right of a third person. As stressed
before, the first requirement of injury in fact cannot be abandoned for it is an
essential element for the exercise of judicial power. Again, as stressed by Mr.
Justice Powell, viz: 13
The revolution in standing doctrine that has occurred,
particularly in the 12 years since Baker v. Carr, supra, has
not meant, however, that standing barriers have disappeared
altogether. As the Court noted in Sierra Club, "broadening
the categories of injury that may be alleged in support of
standing is a different matter from abandoning the
requirement that the party seeking review must himself have
suffered an injury." 405 U.S., at 738 . . . Indeed, despite the
diminution of standing requirements in the last decade, the
Court has not broken with the traditional requirement that, in
the absence of a specific statutory grant of the right of
review, a plaintiff must allege some particularized injury that
sets him apart from the man on the street.
I recognize that the Court's allegiance to a requirement of
particularized injury has on occasion required a reading of
the concept that threatens to transform it beyond
recognition. E.G., Baker v. Carr, supra; Flast v. Cohen,
supra. But despite such occasional digressions, the
requirement remains, and I think it does so for the reasons
outlined above. In recognition of those considerations, we
should refuse to go the last mile towards abolition of
standing requirements that is implicit in broadening the
"precarious opening" for federal taxpayers created by Flast,
see 392 U.S., at 116 (Mr. Justice Fortas, concurring) or in
allowing a citizen qua citizen to invoke the power of the
federal courts to negative unconstitutional acts of the
Federal Government.
In sum, I believe we should limit the expansion of federal
taxpayer and citizen standing in the absence of specific
statutory authorization to an outer boundary drawn by
the results in Flast and Baker v. Carr. I think we should face
up to the fact that all such suits are an effort "to employ a
federal court as a forum in which to air . . . generalized
grievances about the conduct of government or the
allocation of power in the Federal System." Flast v.
Cohen, 392 U.S., at 106. The Court should explicitly reaffirm
traditional prudential barriers against such public actions. My
reasons for this view are rooted in respect for democratic
processes and in the conviction that "[t]he powers of the
federal judiciary will be adequate for the great burdens
placed upon them only if they are employed prudently, with
recognition of the strengths as well as the hazards that go
with our kind of representative government." Id., at 131
The second requirement recognizes society's right in the protection of certain
preferred rights in the Constitution even when the rightholders are not before
the court. The theory is that their dilution has a substantial fall out detriment
to the rights of others, hence the latter can vindicate them.
In the case at bench, it is difficult to see how petitioners can satisfy these two
requirements to maintain a jus tertiiclaim. They claim violation of two
constitutional provisions, to wit:
Section 1, Article XIII. — The Congress shall give highest
priority to the enactment of measures that protect and
enhance the right of all the people to human dignity, reduce
social, economic, and political inequalities, and remove
cultural inequities by equitably diffusing wealth and political
power for the common good.
To this end, the State shall regulate the acquisition,
ownership, use, and disposition of property and its
increments.
and
Section 11, Article XII. - No franchise, certificate, or any
other form of authorization for the operation of a public utility
shall be granted except to citizens of the Philippines or to
corporations or associations organized under the laws of the
Philippines at least sixty per centum of whose capital is
owned by such citizens, nor shall such franchise, certificate,
or authorizations be exclusive in character or for a longer
period than fifty years. Neither shall any such franchise or
right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress
when the common good so requires. The State shall
encourage equity participation in public utilities by the
general public. The participation of foreign investors in the
governing body of any public utility enterprise shall be limited
to their proportionate share in its capital, and all the
executive and managing officers of such corporation or
association must be citizen of the Philippines.
Section 1, Article XIII of the Constitution cannot be the matrix of
petitioners' jus tertii claim for it expresses no more than a policy direction to
the legislative in the discharge of its ordained duty — to give highest priority
to the enactment of measures that protect and enhance the right of all the
people to human dignity, reduce social, economic, and political inequalities
and remove cultural inequities by equitably diffusing wealth and political
power for the common good. Whether the act of the legislature in amending
the charter of PCSO by giving it the authority to conduct lotto and whether
the Contract of Lease entered into between PCSO and PGMC are
incongruent to the policy direction of this constitutional provision is a highly
debatable proposition and can be endlessly argued. Respondents steadfastly
insist that the operation of lotto will increase the revenue base of PCSO and
enable government to provide a wider range of social services to the people.
They also allege that the operation of high-tech lotto will eradicate
illegal jueteng. Petitioners are scandalized by this submission. They dismiss
gambling as evilper se and castigate government for attempting to correct a
wrong by committing another wrong. In any event, the proper forum for this
debate, however cerebrally exciting it may be, is not this court but congress.
So we held in PCSO v. Inopiquez, to wit: 14
By bringing their suit in the lower court, the private
respondents in G.R. No. 79084 do not question the power of
PCSO to conduct the Instant Sweepstakes game. Rather,
they assail the wisdom of embarking upon this project
because of their fear of the "pernicious repercussions" which
may be brought about by the Instant Sweepstakes Game
which they have labelled as "the worst form of gambling"
which thus "affects the moral values" of the people.
The Court, as held in several cases, does not pass upon
questions of wisdom, justice, or expediency of legislation
and executive acts. It is not the province of the courts to
supervise legislation or executive orders as to keep them
within the bounds of propriety, moral values and common
sense. That is primarily and even exclusively a concern of
the political departments of the government; otherwise, there
will be a violation of the principle of separation of powers.
(Italics supplied)
I am not also convinced that petitioners can justify their locus standi to
advocate the rights of hypothetical third parties not before the court by
invoking the need to keep inviolate section 11, Article XII of the Constitution
which imposes a nationality requirement on operators of a public utility. For
even assuming arguendo that PGMC is a public utility, still, the records do
not at the moment bear out the claim of petitioners that PGMC is a foreign
owned and controlled corporation. This factual issue remains unsettled and is
still the subject of litigation by the parties in the Securities and Exchange
Commission. We are not at liberty to anticipate the verdict on this contested
factual issue. But over and above this consideration, I respectfully submit that
this constitutional provision does not confer on third parties any right of a
preferred status comparable to the Bill of Rights whose dilution will justify
petitioners to vindicate them in behalf of its rightholders. The legal right of
hypothetical third parties they profess to advocate is to my mind too
impersonal, too unsubstantial, too indirect, too amorphous to justify their
access to this Court and the further lowering of the constitutional barrier
of locus standi.
Again, with regret, I do not agree that the distinguished status of some of the
petitioners as lawmakers gives them the appropriate locus standi. I cannot
perceive how their constitutional rights and prerogatives as legislators can be
adversely affected by the contract in question. Their right to enact laws for
the general conduct of our society remains unimpaired and
undiminished. 15 Their status as legislators, notwithstanding, they have to
demonstrate that the said contract has caused them to suffer a personal,
direct, and substantial injury in fact. They cannot simply advance a generic
grievance in common with the people in general.
I am not unaware of our ruling in De Guia v. Comelec, 16 viz:
Before addressing the crux of the controversy, the Court
observes that petitioner does not allege that he is running for
reelection, much less, that he is prejudiced by the election,
by district, in Parañaque. As such, he does not appear to
have locus standi, a standing in law, a personal or
substantial interest. (Sanidad vs. COMELEC, G.R. No. L-
44640, October 12, 1976, 73 SCRA 333; Municipality of
Malabang vs. Benito, G.R. No. L-28113, March 28, 1969, 27
SCRA 533). He does not also allege any legal right that has
been violated by respondent. If for this alone, petitioner does
not appear to have any cause of action.
However, considering the importance of the issue involved,
concerning as it does the political exercise of qualified voters
affected by the apportionment, and petitioner alleging abuse
of discretion and violation of the Constitution by respondent,
We resolved to brush aside the question of procedural
infirmity, even as We perceive the petition to be one of
declaratory relief. We so held similarly through Mr.
Justice Edgardo L. Paras in Osmena vs. Commission on
Elections.
It is my respectful submission, however, that we should re-examine de Guia.
It treated the rule on locus standi as a mere procedural rule. It is not a plain
procedural rule but a constitutional requirement derived from section 1,
Article VIII of the Constitution which mandates courts of justice to
settle only "actual controversies involving rights which are legally
demandable and enforceable." The phrase has been construed since time
immemorial to mean that a party in a constitutional litigation must
demonstrate a standing to sue. By downgrading the requirement on locus
standi as a procedural rule which can be discarded in the name of public
interest, we are in effect amending the Constitution by judicial fiat.
De Guia would also brush aside the rule on locus standi if a case raises an
important issue. In this regard, I join the learned observation of Mr. Justice
Feliciano: "that it is not enough for the Court simply to invoke 'public interest'
or even 'paramount considerations of national interest,' and to say that the
specific requirements of such public interest can only be ascertained on a
'case to case' basis. For one thing, such an approach is not intellectually
satisfying. For another, such an answer appears to come too close to saying
that locus standi exists whenever at least a majority of the Members of this
Court participating in a case feel that an appropriate case for judicial
intervention has arisen."
I also submit that de Guia failed to perceive that the rule on locus standi has
little to do with the issue posed in a case, however, important it may be. As
well pointed out in Flast v. Cohen: 17
The fundamental aspect of standing is that it focuses on the
party seeking to get his complaint before a federal court and
not on the issues he wishes to have adjudicated. The "gist of
the question of standing" is whether the party seeking relief
has "alleged such a personal stake in the outcome of the
controversy as to assure that concrete adverseness which
sharpens the presentation of issues upon which the court so
largely depends for illumination of difficult constitutional
questions." Baker v. Carr,369 U.S. 186, 204 (1962). In other
words, when standing is placed in issue in a case, the
question is whether the person whose standing is challenged
is a proper party to request an adjudication of a particular
issue and not whether the issue itself is justiciable. Thus, a
party may have standing in a particular case, but the federal
court may nevertheless decline to pass on the merits of the
case because, for example, it presents a political question. A
proper party is demanded so that federal courts will not be
asked to decide "ill-defined controversies over constitutional
issues," United public Workers v. Mitchell, 330 U.S. 75, 90
(1947), or a case which is of "a hypothetical or abstract
character," Aetna Life Insurance Co. v. Haworth, 300 U.S.
227, 240 (1937).
It is plain to see that in de Guia, the court took an unorthodox posture, to say
the least. It held there was no proper party before it, and yet it resolved the
issues posed by the petition. As there was no proper party before the court,
its decision is vulnerable to be criticized as an advisory opinion.
With due respect, the majority decision appears to have set a dangerous
precedent by unduly trivializing the rule on locus standi. By its decision, the
majority has entertained a public action to annul a private contract. In so
doing, the majority may have given sixty (60) million Filipinos the standing to
assail contracts of government and its agencies. This is an invitation for
chaos to visit our law on contract, and certainly will not sit well with
prospective foreign investors. Indeed, it is difficult to tread the path of the
majority on this significant issue. The majority granted locus standi to
petitioners because of lack of any other party with more direct and specific
interest. But one has standing because he has standing on his own and
standing cannot be acquired because others with standing have refused to
come to court. The thesis is also floated that petitioners have standing as
they can be considered taxpayers with right to file derivative suit like a
stockholder's derivative suit in private corporations. The fact, however, is that
PCSO is not a private but a quasi-public corporation. Our law on private
corporation categorically sanctions stockholder's derivative suit. In contrast,
our law on public corporation does not recognize this so-called taxpayer's
derivative suit. Hence, the idea of a taxpayer's derivative suit, while alluring,
has no legal warrant.
Our brethren in the majority have also taken the unprecedented step of
striking down a contrast at the importunings of strangers thereto, but without
justifying the interposition of judicial power on any felt need to prevent
violation of an important constitutional provision. The contract in question
was voided on the sole ground that it violated an ordinary statute, section 1
of R.A. 1169, as amended by B.P. Blg. 42. If there is no provision of the
Constitution that is involved in the case at bench, it boggles the mind how the
majority can invoke considerations of national interest to justify its
abandonment of the rule on locus standi. The volume of noise created by the
case cannot magically convert it to a case of paramount national importance.
By its ruling, the majority has pushed the Court in unchartered water bereft of
any compass, and it may have foisted the false hope that it is the repository
of all remedies.
If I pay an unwavering reverence to the rule of locus standi, it is because I
consider it as a touchstone in maintaining the proper balance of power
among the three branches of our government. The survival of our democracy
rests in a large measure on our ability to maintain this delicate equipoise of
powers. For this reason, I look at judicial review from a distinct prism. I see it
both as a power and a duty. It is a power because it enables the judiciary to
check excesses of the Executive and the Legislative. But, it is also a duty
because its requirement of locus standi, among others, Executive and the
Legislative. But, it is also a duty because its requirement of locus standi,
among others, keeps the judiciary from overreaching the powers of the other
branches of government. By balancing this duality, we are able to breathe life
to the principle of separation of powers and prevent tyranny. To be sure, it is
our eternal concern to prevent tyranny but that includes tyranny by ourselves.
The Constitution did not install a government by the judiciary, nay, not a
government by the unelected. In offering this submission, I reject the sublimal
fear that an unyielding insistence on the rule on locus standi will weaken the
judiciary vis-a-vis the other branches of government. The hindsight of history
ought to tell us that it is not power per se that strengthens. Power unused is
preferable than power misused. We contribute to constitutionalism both by
the use of our power to decide and its non use. As well said, the cases we
decide are as significant as the cases we do not decide. Real power belongs
to him who has power over power.
IN VIEW WHEREOF, and strictly on the ground of lack of locus standi on the
part of petitioners, I vote to DENY the petition.
VITUG, J., dissenting:
Judicial power encompasses both an authority and duty to resolve "actual
controversies involving rights which are legally demandable and enforceable"
(Article VIII, Section 1, 1987 Constitution). As early as the case of Lamb vs.
Phipps, 1 this Court ruled: "Judicial power, in its nature, is the power to hear
and decide causes pending between parties who have the right to sue in the
courts of law and equity." 2 An essential part of, and corollary to, this principle
is the locus standi of a party litigant, referring to one who is directly affected
by, and whose interest is immediate and substantial in, the controversy. The
rule requires that a party must show a personal stake in the outcome of the
case or an injury to himself that can be redressed by a favorable decision so
as to warrant his invocation of the court's jurisdiction and to justify the
exercise of the court's remedial powers in his behalf. 3 If it were otherwise,
the exercise of that power can easily become too unwieldy by its sheer
magnitude and scope to a point that may, in no small degree, adversely
affect its intended essentiality, stability and consequentiality.
Locus standi, nevertheless, admits of the so-called "taxpayer's suit."
Taxpayer's suits are actions or proceedings initiated by one or more
taxpayers in their own behalf or, conjunctively, in representation of others
similarly situated for the purpose of declaring illegal or unauthorized certain
acts of public officials which are claimed to be injurious to their common
interests as such taxpayers (Cf. 71 Am Jur 2d., 179-180). The principle is
predicated upon the theory that taxpayers are, in equity, the cestui que trust
of tax funds, and any illegal diminution thereof by public officials constitutes a
breach of trust even as it may result in an increased burden on taxpayers
(Haddock vs. Board of Public Education, 86 A 2d 157; Henderson vs.
McCormick, 17 ALR 2d 470).
Justice Brandeis of the United States Supreme Court, in his concurring
opinion in Ashwander vs. Tennessee Valley Authority (297 U.S. 288), said:
. . . . The Court will not pass upon the validity of a statute
upon complaint of one who fails to show that he is injured by
its operation. Tyler v. The Judges, 179 U.S. 405; Hendrick v.
Maryland, 234 U.S. 610, 621. Among the many applications
of this rule, none is more striking than the denial of the right
of challenge to one who lacks a personal or property right.
Thus, the challenge by a public official interested only in the
performance of his official duty will not be
entertained. Columbus & Greenville Ry. v. Miller, 283 U.S.
96, 99-100. In Fairchild v. Hughes, 258 U.S. 126, the Court
affirmed the dismissal of a suit brought by a citizen who
sought to have the Nineteenth Amendment declared
unconstitutional. InMassachusetts v. Mellon, 262 U.S. 447,
the challenge of the federal Maternity Act was not
entertained although made by the Commonwealth on behalf
of all its citizens."
Justice Brandeis' view, shared by Justice Frankfurter in Joint Anti-Fascist
Refugee Commission vs. McGrath (351 U.S. 123), was adopted by the U.S.
Supreme Court in Flast vs. Cohen (392 U.S. 83) which held that it is only
when a litigant is able to show such a personal stake in the controversy as to
assure a concrete adverseness in the issues submitted that legal standing
can attach.
A "taxpayer's suit," enough to confer locus standi to a party, we have held
before, is understood to be a case where the act complained of directly
involves the illegal disbursement of public funds derived from taxation.4 It is
not enough that the dispute concerns public funds. A contrary rule could
easily lead to a limitless application of the term "taxpayer's suit," already by
itself a broad concept, since a questioned act of government would almost so
invariably entail, as a practical matter, a financial burden of some kind.
To be sure, serious doubts have even been raised on the propriety and
feasibility of unqualifiedly recognizing the "taxpayer's suit" as an exception
from the standard rule of requiring a party who invokes the exercise of
judicial power to have a real and personal interest or a direct injury in the
outcome of a controversy. This Court has heretofore spoken on the matter, at
times even venturing beyond the usual understanding of its applicability in
the name of national or public interest. It is remarkable, nevertheless, that the
accepted connotation of locus standi has still managed to be the rule,
sanctioning, by way of exception, the so-called "taxpayer's suit" which courts
accept on valid and compelling reasons.
A provision which has been introduced by the 1987 Constitution is a
definition, for the first time in our fundamental law, of the term "judicial
power," as such authority and duty of courts of justice "to settle actual
controversies involving rights which are legally demandable and enforceable
and to determine whether or not there has been a grave abuse of discretion,
amounting to lack or excess of jurisdiction, on the part of any branch or
instrumentality of the Government" (Article VIII, Section 1, Constitution). I
take it that the provision has not been intended to unduly mutate, let alone to
disregard, the long established rules on locus standi. Neither has it been
meant, I most respectfully submit, to do away with the principle of separation
of powers and its essential incidents such as by, in effect, conferring
omnipotence on, or allowing an intrusion by, the courts in respect to purely
political decisions, the exercise of which is explicitly vested elsewhere, and
subordinate, to that of their own, the will of either the Legislative Department
or the Executive Department — both co- equal, independent and coordinate
branches, along with the Judiciary, in our system of government. Again, if it
were otherwise, there indeed would be truth to the charge, in the words of
some constitutionalists, that "judicial tyranny" has been institutionalized by
the 1987 Constitution, an apprehension which should, I submit, rather be
held far from truth and reality.
In sum, while any act of government, be it executive in nature or legislative in
character, may be struck down and declared a nullity either because it
contravenes an express provision of the Constitution or because it is
perceived and found to be attended by or the result of grave abuse of
discretion, amounting to lack or excess of jurisdiction, that issue, however,
must first be raised in a proper judicial controversy. The Court's authority to
look into and grant relief in such cases would necessitate locus standi on the
part of party litigants. This requirement, in my considered view, is not merely
procedural or technical but goes into the essence of jurisdiction and the
competence of courts to take cognizance of justiciable disputes.
In Bugnay Construction and Development Corporation vs. Laron, 5 this Court
ruled:
. . . . Considering the importance to the public of a suit
assailing the constitutionality of a tax law, and in keeping
with the Court's duty, specially explicated in the 1987
Constitution, to determine whether or not the other branches
of the Government have kept themselves within the limits of
the Constitution and the laws and that they have not abused
the discretion given to them, the Supreme Court may brush
aside technicalities of procedure and take cognizance of the
suit. (Citing Kapatiran vs. Tan, G.R. No. 81311, June 30,
1988.)
 However, for the above rule to apply, it is exigent that the
taxpayer-plaintiff sufficiently show that he would be benefited
or injured by the judgment or entitled to the avails of the suit
as a real party in interest. (Citing Estate of George Litton vs.
Mendoza, G.R. No. 49120, June 30, 1988.) Before he can
invoke the power of judicial review, he must specifically
prove that he has sufficient interest in preventing the illegal
expenditure of money raised by taxation (citing 11 Am. Jur.
761; Dumlao, et al. vs. Commission on Elections, 95 SCRA
392) and that he will sustain a direct injury as a result of the
enforcement of the questioned statute or contract. (Citing
Sanidad, et al. vs. Commission on Elections, et al., 73 SCRA
333.) It is not sufficient that he has merely a general interest
common to all members of the public. (Citing Ex Parte Levitt,
302 U.S. 633, cited in 15 SCRA 497, Annotation.)
As so well pointed out by Mr. Justice Camilo D. Quiason during the Court's
deliberations, "due respect and proper regard for the rule on locus
standi would preclude the rendition of advisory opinions and other forms of
pronouncement on abstract issues, avoid an undue interference on matters
which are not justiciable in nature and spare the Court from getting itself
involved in political imbroglio."
The words of Senate President Edgardo J. Angara, carry wisdom; we quote:
The powers of the political branches of our government over
economic policies is rather clear: the Congress is to set in
broad but definite strokes the legal framework and structures
for economic development, while the Executive provides the
implementing details for realizing the economic ends
identified by Congress and executes the same.
xxx xxx xxx
If each economic decision made by the political branches of
government, particularly by the executive, are fully open to
re-examination by the judicial branch, then very little, if any,
reliance can be placed by private economic actors on those
decisions. Investors would always have to factor in possible
costs arising from judicially-determined changes affecting
their immediate business, notwithstanding assurances by
executive authorities.
Judicial decisions are, in addition, inflexible and can never
substitute for sound decision-making at the level of those
who are assigned to execute the laws of the land. Since
judicial power cannot be exercised unless an actual
controversy is brought before the courts for resolution,
decisions cannot be properly modified unless another
appropriate controversy arises." (Sen. Edgardo J. Angara,
"The Supreme Court in Economic Policy Making," Policy
Review — A Quarterly Journal of Policy Studies, Vol. 1, No.
1, January-March 1994, published by the Senate Policy
Studies Group, pp. 2-3.)
A further set-back in entertaining the petition is that it unfortunately likewise
strikes at factual issues. The allegations to the effect that irregularities have
been committed in the processing and evaluation of the bids to favor
respondent PGMC; that the Malacañang Special Review Committee did not
verify warranties embodied in the contract; that the operation of
telecommunication facilities is indispensable in the operation of the lottery
system; the involvement of multi-national corporations in the operation of the
on-line "hi-tech" lottery system, and the like, require the submission of
evidence. This Court is not a trier of facts, and it cannot, at this time, resolve
the above issues. Just recently, the Court has noted petitioners'
manifestation of its petition with the Securities and Exchange Commission
"for the nullification of the General Information Sheets of PGMC" in respect
particularly to the nationality holdings in the corporation. The doctrine of
primary jurisdiction would not justify a disregard of the jurisdiction of, nor
would it permit us to now preempt, said Commission on the matter.
Petitioners strongly assert, in an attempt to get the Court's concurrence in
accepting the petition, that since lottery is a game of chance, the "lotto"
system would itself be a "crime against morals" defined by Articles 195-
199 6 of the Revised Penal Code.
Being immoral and a criminal offense under the Revised Penal Code,
petitioners contend, any special law authorizing gambling must, by all canons
of statutory constructions, be interpreted strictly against the grantee. Citing
previous decisions of this Court, they maintain that lottery is gambling, pure
and simple, 7 and that this Court has consistently condemned the immorality
and illegality of gambling to be a "national offense and not a minor
transgression;" 8 "that it is a social scourge which must be stamped
out;" 9 and, "that it is pernicious to the body politic and detrimental to the
nation and its citizens."10
I most certainly will not renounce this Court's above concerns. Nevertheless,
the Court must recognize the limitations of its own authority. Courts neither
legislate nor ignore legal mandates. Republic Act No. 1169, as amended,
explicitly gives public respondent
PCSO the authority and power "to hold and conduct sweepstakes
races, lotteries, and other similar activities." In addition, it is authorized:
c. To undertake any other activity that will enhance its funds
generation, operations and funds management capabilities,
subject to the same limitations provided for in the preceding
paragraph.
It shall have a Board of Directors, hereinafter designated the
Board, composed of five members who shall be appointed,
and whose compensation and term of office shall be fixed,
by the President.
xxx xxx xxx
Sec.9. Powers and functions of the Board of Directors. —
The Board of Directors of the Office shall have the following
powers and functions.
(a) To adopt or amend such rules and regulations to
implement the provisions of this Act.
xxx xxx xxx
(d) To promulgate rules and regulations for the operation of
the Office and to do such act or acts as may be necessary
for the attainment of its purposes and objectives. (Emphasis
supplied).
In People vs. Dionisio, 11 cited by the petitioners themselves, we remarked:
"What evils should be corrected as pernicious to the body politic, and how
correction should be done, is a matter primarily addressed to the discretion of
the legislative department, not of the courts . . . ." In Valmonte vs.
PCSO, 12 we also said:
The Court, as held in several cases, does not pass upon
questions of wisdom, justice or expediency of legislation and
executive acts. It is not the province of the courts to
supervise legislation or executive orders as to keep them
within the bounds of propriety, moral values and common
sense. That is primarily and even exclusively a concern of
the political departments of the government; otherwise, there
will be a violation of the principle of separation of powers.
The constraints on judicial power are clear. I feel, the Court must thus beg
off, albeit not without reluctance, from giving due course to the instant
petition.
Accordingly, I vote for the dismissal of the petition.
KAPUNAN, J., dissenting:
I regret that I am unable to join my colleagues in the majority in spite of my
own personal distaste for gambling and other gaming operations. Such
considerations aside, I feel there are compelling reasons why the instant
petition should be dismissed. I shall forthwith state the reasons why.
Petitioners anchor their principal objections against the contract entered into
between the Philippine Charity Sweepstakes Office (PCSO) and the PGMC
on the ground that the contract entered into by the PCSO with the PGMC
violates the PCSO Charter (R.A. No. 1169 as amended by B.P. Blg 427,
specifically section 1 thereof which bars the said body from holding
conducting lotteries "in collaboration, association or joint venture with any
person association, company or entity."). However, a perusal of the petition
reveals that the compelling reasons behind it, while based on apparently
legal questions involving the contract between the PCSO and the PGMC, are
prompted by the petitioners' moral objections against the whole idea of
gambling operations operated by the government through the PCSO. The
whole point of the petition, in essence, is a fight between good and evil,
between the morality or amorality of lottery operations conducted on a wide
scale involving millions of individuals and affecting millions of lives. Their
media of opposition are the above stated defects in the said contract which
they assail to be fatally defective. They come to this Court, as taxpayers and
civic spirted citizens, asserting a right of standing on a transcendental issue
which they assert to be of paramount public interest.
Moral or legal questions aside, I believe that there are unfortunately certain
standards1 that have to be followed in the exercise of this Court's awesome
power of review before this Court could even begin to assay the validity of
the contract between the PCSO and the PGMC. This, in spite of the apparent
expansion of judicial power granted by Section 1 of Article VIII of the 1987
Constitution. It is fundamental that such standards be complied with before
this Court could even begin to explore the substantive issues raised by any
controversy brought before it, for no issue brought before this court could
possibly be so fundamental and paramount as to warrant a relaxation of the
requisite rules for judicial review developed by settled jurisprudence inorder
to avoid entangling this court in controversies which properly belong to the
legislative or executive branches of our government. The potential harm to
our system of government, premised on the concept of separation of powers,
by the Court eager to exercise its powers and prerogatives at every turn,
cannot be gainsaid. The Constitution does not mandate this Court to wield
the power of judicial review with excessive vigor and alacrity in every area or
at every turn, except in appropriate cases and controversies which meet
established requirements for constitutional adjudication. Article VIII Sec. 1 of
the Constitution notwithstanding, there are questions which I believe are still
beyond the pale of judicial power. Moreover, it is my considered opinion that
the instant petition does not meet the requirements set by this court for a
valid exercise of judicial review.
Our Constitution expressly defines judicial power as including "the duty to
settle actual cases and controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has
been a grave abuse of discretion amounting to a lack or excess of jurisdiction
on the part of any branch or instrumentality of the government." 2 This
constitutional requirement for an actual case and controversy limits this
Court's power of review to precisely those suits between adversary litigants
with real interests at stake2 thus preventing it from making all sorts of
hypothetical pronouncements on abstract, contingent and amorphous issues.
The Court will therefore not pass upon the validity of an act of government or
a statute passed by a legislative body without a requisite showing of
injury. 3 A personal stake is essential, which absence renders our
pronouncements gratuitous and certainly violative of the constitutional
requirement for actual cases and controversies.
The requirement for standing based on personal injury may of course be
bypassed, as the petitioners in this case attempt to do, by considering the
case as a "taxpayer suit" which would thereby clothe them with the
personality they would lack under ordinary circumstances. However, the act
assailed by the petitioners on the whole involves the generation rather than
disbursement of public funds. In a line of cases starting from Pascual v.
Secretary of Public Works 4 "taxpayer suits" have been understood to refer
only to those cases where the act or statute assailed involves the illegal or
unconstitutional disbursement of public funds derived from taxation. The
main premise behind the "taxpayer suit" is that the pecuniary interest of the
taxpayer is involved whenever there is an illegal or wasteful use of public
funds which grants them the right to question the appropriation or
disbursement on the basis of their contribution to government funds. 5 Since
it has not been alleged that an illegal appropriation or disbursement of a fund
derived from taxation would be made in the instant case, I fail to see how the
petitioners in this case would be able to satisfy the locus standi requirement
on the basis of a "taxpayer's suit". This alone should inhibit this Court from
proceeding with the case at bench. The interest alleged and the potential
injury asserted are far too general and hypothetical for us to rush into a
judicial determination of what to me appears to be judgment better left to
executive branch of our government.
This brings me to one more important point: The idea that a norm of
constitutional adjudication could be lightly brushed aside on the mere
supposition that an issue before the Court is of paramount public concern
does great harm to a democratic system which espouses a delicate balance
between three separate but co-equal branches of government. It is equally of
paramount public concern, certainly paramount to the survival of our
democracy, that acts of the other branches of government are accorded due
respect by this Court. Such acts, done within their sphere of competence,
have been — and should always be — accorded with a presumption of
regularity. When such acts are assailed as illegal or unconstitutional, the
burden falls upon those who assail these acts to prove that they satisfy the
essential norms of constitutional adjudication, because when we finally
proceed to declare an act of the executive or legislative branch of our
government unconstitutional or illegal, what we actually accomplish is the
thwarting of the will of the elected representatives of the people in the
executive or legislative branches government.6 Notwithstanding Article VIII,
Section 1 of the Constitution, since the exercise of the power of judicial
review by this Court is inherently antidemocratic, this Court should exercise a
becoming modesty in acting as a revisor of an act of the executive or
legislative branch. The tendency of a frequent and easy resort to the function
of judicial review, particularly in areas of economic policy has become
lamentably too common as to dwarf the political capacity of the people
expressed through their representatives in the policy making branches of
government and to deaden their sense of moral responsibility. 7
This court has been accused, of late, of an officious tendency to delve into
areas better left to the political branches of government. 8 This tendency, if
exercised by a court running riot over the other co-equal branches of
government, poses a greater danger to our democratic system than the
perceived danger — real or imagined — of an executive branch espousing
economic or social policies of doubtful moral worth. Moreover economic
policy decisions in the current milieu- including the act challenged in the
instant case-involve complex factors requiring flexibility and a wide range of
discretion on the part of our economic managers which this Court should
respect because our power of review, under the constitution, is a power to
check, not to supplant those acts or decisions of the elected representatives
of the people.
Finally, the instant petition was brought to this Court on the assumption that
the issue at bench raises primarily constitutional issues. As it has ultimately
turned out, the core foundation of the petitioners' objections to the LOTTO
operations was based on the validity of the contract between the PCSO and
the PGMC in the light of Section 1 of R.A. 1169 as amended by B.P. Blg.
427. It might have been much more appropriate for the issue to have taken
its normal course in the courts below.
I vote to deny the petition.
G.R. No. L-35861 October 18, 1979
MUNICIPALITY OF DAET, petitioner,
vs.
COURT OF APPEALS and LI SENG GIAP & CO., INC., respondent.
GUERRERO, J.:
The judgment of the respondent Court of Appeals, subject of the instant
petition to review on certiorari, "fixing the fair market value of the property
sought to be expropriated at P200.00 per square meter or for of FIVE
HUNDRED FORTY THREE THOUSAND FOUR HUNDRED (P543,400.00)
PESOS, and the value of the improvement thereon at THIRTY SIC
THOUSAND FIVE HUNDRED (P36,500.00) PESOS, Philippine Currency,
both amounts to bear legal interest from and after the date of the actual
taking of possession by the Municipality of Daet, Camarines Norte until the
full amount is paid, with costs against plaintiff-appellant," must be affirmed in
the light of the unusual, unique and abnormal circumstances obtaining in this
case where the complaint for condemnation was filed on August 9, 1962 or
seventeen (17) years ago but up to the present, the petitioner Municipality of
Daet has failed to make the deposit required to take possession of the
property sought to be expropriated.
The Municipality of Daet instituted condemnation proceedings against private
respondent Li Seng Giap & Co. Inc. on August 9, 1962 before the Court of
Firs Instance of Camarines Norte for the purpose of acquiring and
subsequently converting the following described property owned by private
respondent as a public park:
A parcel of land (Lot No. 3 Plans PSU-57331 situated in the
Poblacion, Municipality of Daet, bounded on the North-East
by a provincial road known as Vinzons Avenue; on the
South-East, by Felipe II Street; on the South, by Ildefonso
Moreno Street, and on the West, by J. Lukban Street,
covering an area of TWO THOUSAND SEVEN HUNDRED
AND SEVENTEEN (2,717 sq. meters) SQUARE METERS,
more or less and assessed by TRANSFER CERTIFICATE
OF TITLE NO. 207 in the name of Li Seng Giap & Co.1
On August 20, 1962, private respondent, having been served with summons
through counsel, filed a "Motion to Dismiss" on the following grounds:
1. The proposed expropriation has not been duly authorized
as provided by law, principally because it has not been
approved by the Office of the President as required by
Section 2245 of the Revised Administrative Code;
2. There is no genuine necessity for the proposed
expropriation of the defendant's property;
3. The proposed park should be put up in a different site
which would entail less expense to the plaintiff;
4. The present expropriation proceeding instituted by the
herein plaintiff against the defendant is discriminatory;
5. The plaintiff does not have sufficient funds to push
through its project of constructing a park and to allow the
plaintiff to expropriate defendant's property this time would
be only to needlessly deprive the latter of the use of its
property.2
On February 8, 1963, the trial court rendered a decision dismissing the
expropriation proceedings mainly on the grounds that there is no "genuine
need" for the petitioner to convert the aforestated lot into a park nor necessity
to widen the streets and that even if there is genuine necessity for the
proposed expropriation, still the petitioner cannot, in this case, exercise the
power of eminent domain as it has no funds to pay the reasonable value of
the land and the building thereon.3
On February 12, 1963, petitioner filed a motion for reconsideration which was
denied on February 27, 1963. Petitioner then appealed to the Court of
Appeals, which appeal was docketed as CA-G.R. No. 32-259-R. On April 14,
1968, the Court of Appeals rendered a decision reversing the trial court's
decision, the dispositive portion of which is as follows:
WHEREFORE, the appealed "decision" (order) in Civil Case
No. 1436 for expropriation is hereby reversed and set aside,
and, in lieu thereof, another one is hereby rendered denying
defendant Li Seng Gia & Company's motion for dismiss;
declaring that plaintiff Municipality of Daet has a lawful right
to take the property sought to be condemned, for the public
use described in the complaint, upon payment of just
compensation to be determined as of the date of the filing of
the complaint; directing the court a quo to promptly fix the
provisional value of the property sought to be condemned for
the purposed of the motion of plaintiff Municipality of Daet to
 take immediate possession of said property under Sec. 2 of
Rules 67 (formerly Sec. 3 of Rules 69) of the Rules of Court;
and remanding the case to the court a quo for further
proceedings consistent with this decision, the costs in this
appeal to be taxed against plaintiff Municipality of Daet in
accordance with Sec. 12 of Rule 67 (formerly Sec. 13 of
Rule 69) of the Rules of Court; ...4
On March 20, 1969, after the records of the case were remanded to the trial
court, private respondent filed a "Motion for Appointment of Commissioners
to Fix Just Compensation for the Property Sought to be Taken."
On April 15, 1969, the trial court issued twin orders: (1) fixing the provisional
value of the land at P129,99 per square meter and the value of the
improvement at P30,000.00 totalling P356,040.00 and require the
Municipality to deposit with the Provincial Treasurer in cash or in security
which should be payable on demand and upon deposit being effected, the
Clerk of Court was ordered to issue the necessary writ of place the
Municipality in possession of the property; and (2) appointing Atty. Ernesto
de Jesus, Provincial Assessor, as chairman; Atty. Jose V. Jamito, PNB
Branch Attorney and Dr. Mateo Aquino, a resident of the municipality, as
members of the committee on appraisal. The committee members proceeded
to qualify by taking their oaths of office and then held three sessions on May
10, May 17, and May 24, 1969. On May 28, 1969, the committee filed t he
following report:
COMMISSIONERS' REPORT
In compliance with the order of this Honorable Court dated
April 15, 1969, and pursuant to the provisions of Sec. 6. Rule
67 of the Rules of Court, the undersigned commissioners,
with due notice to the counsels of both parties, convened in
the morning of May 10, 1969, for the purpose of finding ways
and means by which the commissioners could ascertain the
fair market value of the property subject of this proceeding.
There are two basic approaches used in the appraisal of
land sought to be condemned — the sale approach, and the
income approach. The commissioners as well as the
counsels of both parties agreed to use the sale approach. In
order to enable the counsels of both parties, as well as the
commissioners, to gather or secure documents regarding
transaction of real property which the commissioners might
use as guide in determining the fair market value, the parties
agreed to postpone the hearing to May 17, 1969, at 6:30 in
the morning.
Hearing was resumed in the morning of May 17, forthwith,
the counsel for the plaintiff presented documents which were
submitted as Exhibits, to wit:
1. Exh. "A" — Deed of absolute sale executed by Lydia
Moreno in favor of Jaime R. Alegre, entered as Doc. No.
160: Page No. 33: Book No. IV; Series of 1962. (The
consideration was about P13.00 per square meter).
2. Exh. "B" — Deed of absolute sale executed by Jesus
Villafranca y Aules in favor of Sourthern Products Import and
Export Corporation, entered as Doc. No. 314; Page No. 64;
Book No. II; Series of 1962. (The consideration was around
P14.00 per square meter).
3 Exh. "C" — Deed of absolute sale executed by Julio
Curva, et al. in favor of Felicidad Vinzons Pajarillo, entered
as Doc. No. 186; Page No. 39; Book No. 1; Series of 1958.
(The consideration was P 15.00 per square meter).
4. Exh. "D" — Deed of Absolute Sale executed by Clao Dy
Kim To in favor of Concepcion Fonacier-Abaño, entered as
Doc. No. 133; Page No. 88; Book No. V; Series of 1948.
(The consideration was about P8.57 per square meter).
5. Exh. "E" — Deed of sale with mortgage executed by Dr.
Agustin F. Cuevas and Leticia Lopez, in favor of the
Camarines Norte Teachers Cooperative Credit Union, Inc.,
entered as Doc. No. 117; Page No. 56; Book NO. VIII;
Series of 1961. (The consideration was P57,000.00 — the
lot with an area of 972 square meters, and a three-storey
concrete building assessed at P16,000.00 under Tax Dec.
No. 7083. If we will exclude the value of the building, the
consideration for the land will be about P43.00 per square
meter).
After the submission of the aforementioned exhibits, upon
motion of the counsel for the defendant, the hearing was
postponed to May 24, 1969, at 8:30 in the morning. Upon
resumption of the hearing on said hour and date, the counsel
for the defendant presented Exh. 1, which the deed of sale
executed by the Municipality of Daet in favor of the
Development Bank of the Philippines; the document was
executed on January 30, 1969; Exh. "1-A", the consideration
in the amount of P205,600.00; Exh. "1-B", the area of 2,056
square meters; and Exh. "2", the letter of Tomas Cootauco After all the exhibits submitted by the plaintiff had been
to Li Seng Giap & Co., dated July 21, 1962. In addition to the examined by the commissioners, and upon a conscientious
aforementioned evidence, the counsel for the defendant and analytical study of the sales of land near the land
presented as witness Lo Chin who testified that sometime in subject of this proceeding, and after serious deliberations on
July, 1962. In addition to the aforementioned evidence, the the matter, the commissioners agreed that, in the year 1962,
counsel for the defendant presented as witness Lo Chin who the reasonable or fair market value of the land subject of this
testified that sometime in July, 19 1962 (after the fire), he proceeding should be P60.00 per square meter; and the
was instructed by his son-in-law, Mr. Jesus Ty Poco, to see structure remaining thereon at P15,000.00
Mr. Jose Ong, the representative of Mr. William Lee, for the
purpose of making an offer to buy the land subject of this Attached hereto is the map of the commercial center of Daet
proceeding for a price of P120.00 per square meter, and wherein the land subject of this case is shown. The lands
P30,000.00 for the structure thereon; that he had talked with described in the Exhibits submitted by the plaintiff are also
Mr. William Lee, for the purpose of making an offer to buy indicated thereon.
the land subject of this proceeding for a price of P120.00 per
square meter, and P30,000.00 for the structure thereon; that Daet, Camarines Norte, May 28, 1969.
he had talked with Mr. Jose Ong, for the same purpose, on
several occasions 5 or 6 times, the last was sometime in the
first week of May, this year wherein he offered to pay as high
as P150.00 per square meter, and P50,000,00 for the
structure thereon; and that Mr. Ty Poco, having been born in
Mercedes, and resided here since birth, was desirous of
buying said property because he intends to build a memorial
thereon. Counsel likewise presented Mr. Jose Ong as
witness to corroborate the testimony of Lo Chin.

After the hearing held by the commissioners, Atty. Ernesto

de Jesus, who is the incumbent provincial assessor, dig up
the records in his office for the purpose of finding, in addition
to the exhibits already presented, other documents covering
transactions of properties located within the areas near the
land sought to be condemned, but failed to locate even a
single document Hence, the commissioners have no other
recourse but to base their appraisal of the value of the land
under consideration from the Exhibits submitted by the
parties.

Under Sec. 4, Rule 67, of the Rules of Court, just

compensation is to be determined as of the date of the filing
of the complaint. The above-entitled complaint was filed in
August, 1962; hence, Exh. "1", Exh. "1-B" and Exh. "1-C"
(Sgd.) Ernesto de Jesus (Sgd.) Jose V. Jamito
could not be taken into consideration, the same having been
executed in the year 1969 — seven years after the filing of
the complaint. The offer of Mr. Jesus Ty Poco could not also Commissioner Commissioner
be considered because the same was made by one who
was under an imperative necessity of buying the property. (Sgd.) Mateo D. Aquino
 C Both petitioner and private respondent filed their respective motions for
o reconsideration, the former praying that the trial court give due course to the
m commissioner's report while the latter insisting that the market value of the
m land be fixed at P200.00 per square meter. Upon denial of the said motions,
i both parties then appealed to the Court of Appeals.
s
s On October 18, 1972, respondent Court of Appeals rendered a decision
i sustaining the valuation of the property in 1969, declaring the municipality to
o have a lawful right to expropriate and modified the judgment of the trial court
n with respect to the interest that can be recovered which should be from and
e after the date of actual taking.
r
5
Petitioner's motion for reconsideration having been denied, the instant
petition for review on certiorari was filed and the following assignment of
Private respondent, having received copy of the commissioner's report, filed errors raised:
a "Motion to Admit Additional Evidence" which was opposed by petitioner but
the same was granted by the Court provided that the additional evidence
I. Contrary to law and jurisprudence, the Court of Appeals
consisted of the expert testimony of a duly licensed broker. On August 20,
erred in the interpretation and application of Section 4, Rule
1969, the municipality manifested its conformity to the commissioner's report. 67 of the Rules of Court by determining the value of the
property in condemnation proceedings at the time of the
Meanwhile, on July 23, 1969, Judge Gabriel V. Valero, the Presiding Judge rendition of the judgment of the trial court and not at the date
at Branch I, issued an order transferring this case to Judge Isidro Vera of of the filing of the complaint.
Branch II, who proceeded to take the additional evidence of private
respondent. Said evidence consisted of the testimony of Engineer Aurelio B. II. Contrary to the principle of res judicata, the Court of
Aquino, who appraised the land involved herein at P200.00 per square meter
Appeals gravely abused its power in modifying, disregarding
and the improvement thereon at P36,500.00 in 1969.
and amending its own decision which has long become final
and executory (in CA-G.R. No. 32259-R).
On December 2, 1969, after submission of evidence for both parties, the trial
court rendered a decision disregarding the valuation made by the III. Without regard to the guidelines set forth by procedural
commissioners and using the appraisal of Engineer Aurelio B. Aquino in
laws and jurisprudence, the Court of Appeals erred in giving
1969 as the basis in determining the value of the land in 1962. The
credence to an appraiser under the employ of the private
dispositive portion of said decision is quoted herein as follows:
respondent and totally disregarded the findings of the
commissioners appointed by the Court and the by not
WHEREFORE, the Court renders judgment fixing the declaring that the trial judge of Branch II of the Court of First
reasonable value of the property sought to be expropriated Instance of Camarines Norte has gravely abused his
at P117.00 per square meter or for a total amount of Three discretion in taking cognizance of the condemnation case.
Hundred Seventeen Thousand Eight Hundred Eighty Nine
Pesos (P317,889.00), and the value of the improvement at
IV. In any event, by virtue of the Presidential Decree No. 42
Thirty Six Thousand Five Hundred Pesos (P36,500.00), this issued on November 9, 1972 private respondent in estopped
amount to bear interest at the legal rate from the filing of the from claiming in valuation higher than the assessed value of
complaint until paid with costs against the plaintiff.
the property sought to be condemned.7

SO ORDERED.6
The first assignment of error assails the respondent Court's application of
Section 4, Rule 67 of the Revised Rules of Court which states the time when
the value of the land should be determined in condemnation proceedings.
The Rule provides thus:
Sec. 4. Order of condemnation. — When such a motion is
overruled or when any party fails to defend as required by
this rule, the court may enter an order of condemnation
declaring that the plaintiff has a lawful right to take the
property sought to be condemned, for the public use or
purpose described in the complaint, upon payment of just
compensation to be determined as of the date of the filing of
the complaint ...
A look into the original of this provision reveals that it is a reproduction of
Section 5, Rule 69 of the Rules of Court of July 1, 1940. In turn, the said
provision in the Rules of 1940 appears to have been taken from the
ruling Manila Railroad Company vs. Caligsihan,8 a 1919 case, where the rule
that "the value of the property taken should be fixed as of the date of the
proceedings" was enunciated.
Prior to the promulgation of the Rules of 1940, however, there is another
case that touched on the question of time when valuation of the property
taken should be fixed. This is the case of Provincial Government of Rizal vs.
Caro de Araullo9 a 1938 case, where the value of the property therein
involved was fixed as of the date when it was taken in 1927 and not at the
time of the filing of the complaint in 1928. This ruling was reiterated
in Republic vs. Lara, 10 a 1954 case, where it was held that the value of the
lands expropriated must be reckoned as of the time of the actual possession
by the Government in 1946 and not as of the time of the filing of the
complaint in 1949. Such was the ruling notwithstanding the fact that the
Rules of 1940 was already in force and effect. In explaining the ruling, the
Court therein held:
... Ordinarily, inquiry is limited to actual market values at the
time of the institution of the condemnation proceedings
because under normal circumstances, the filing of the
complaint coincides or even precedes the taking of the
property by the plaintiff; and Rule 69 simply fixes this
convenient date for the valuation of property sought to be
expropriated. Where, however, the actual taking or
occupation by the plaintiff, with the consent of the landowner
long precedes the filing of the complaint for expropriation the
rule to be followed must still be that enunciated by us
in Provincial Government of Rizal vs. Caro, supra, that "that
value of the property should be fixed as of the date when it
was taken and not of the date of the filing of the
proceedings." For where property is taken ahead of the filing
of the condemnation proceedings, the value thereof may be
enhanced by the public purpose for which it is taken, the
entry of the plaintiff upon the property may have depreciated
its value thereby, or there may have been a natural increase
in the value of the property from the time it is taken to the
time the complaint is filed, due to general economic
conditions. The owner of the private property should be
compensated only for what he actually loses, it is not
intended that his compensation shall extend beyond his loss
or injury. And what he loses is only the actual value of his
property at the time it is taken. This is the only way the
compensation to be paid can be truly just, i.e., "just" not only
to the individual whose property is taken, "but to the public,
which is to pay for it." (18 Am. Jur. 873, 874)
Subsequent cases where the taking preceded the filing of the expropriation
proceedings followed the doctrine in the Caro case. These cases
were: Republic vs. Garcellano, et al.; 11 Municipal Government of Sagay vs.
Jison, et al.; 12and Alfonso vs. Pasay City. 13 However, in the case
of Republic vs. Narciso, et al., 14 where the expropriation proceeding
preceded the taking, it was held that the value of "the property to be
considered are those at the beginning of the expropriation" and not
accordingly at the time of the taking of said property. For this reason, this
Court fittingly saw the need for clarify the departure of some cases from the
mandate of Section 5, Rule 69 of the Rules of Court of 1940 (now Section 4,
Rule 67 of the Revised Rules of Court) in the case of Republic of the
Philippines vs. Philippine National Bank, 15 where it was held:
It is apparent from the foregoing that, when plaintiff takes
possession before the institution of the condemnation
proceedings, the value should be fixed as of the time of the
taking of the said possession, not the filing of the complaint,
and the latter should be the basis for the determination of the
value, when the taking of the property involved coincides
with or is subsequent to, the commencement of the
proceedings. Indeed, otherwise, the provision of Rule 69,
Section 5, directing that compensation" be determined as of
the date of the filing of the complaint," would never be
operative.
In Capitol Subdivision, Inc. vs. Province of Negros Occidental, 7 SCRA 60,
the Court said that "Since the right of the Province of Negros Occidental to
expropriate the lot in question in the present case is not contested, the owner
of said lot is entitled to recover from said province the fair and full value of
the lot, as of the time when possession thereof was actually taken by the
province, plus consequential damages — including attorney's fees — from
which the consequential benefits, if any, should be deducted with interest at
the legal rate, on the aggregate sum due to the owner from and after the date
of actual taking." And in the case of J.M. Tuason & Co., INc. vs. Land Tenure
Administration, 31 SCRA 413, the Court, speaking thru now Chief Justice
Fernando, reiterated the "well-settled (rule) of the property at the time of its
taking. Anything beyond that is more and anything short of that is less, than
just compensation. It means a fair and full equivalent for the loss sustained,
which is the measure of the indemnity, not whatever gain would accrue to the
expropriation entity."
In the case at bar, it is a fact that there has been no taking of the property
prior to the institution of the condemnation proceedings. And it cannot even
be said that the filing of the complaint coincided with he taking of the property
by the plaintiff because the latter did not enter into possession of the property
since it failed or did not comply with the order of the Court requiring the
municipality to make the necessary deposit of the provisional value as fixed
by the Court in its Order of April 15, 1969. Petitioner did not even move for a
reconsideration of said Order. The trial proceeded and after hearing and
submission of evidence for both parties, the trial court rendered on
December 2, 1969 its decision "fixing the reasonable value of the property
sought to be expropriated at P117.00 per square meter or for a total amount
of Three Hundred Seventeen Thousand Eight Hundred Eighty Nine Pesos
(P317,889.00), and the value of the improvement at Thirty Six Thousand Five
Hundred Pesos (P36,500.00), said amount ... to bear interest at the legal rate
from the date of the filing of the complaint until paid."
Still questioning the value determined by the trial court, petitioner appealed to
the Court of Appeals and on October 8, 1972, the appellate court in its
judgment fixed the value of the property at P200.00 per square meter and
P36,500.00 for the improvement. Not yet satisfied, the municipality appealed
to the Supreme Court and meantime took no step to take possession of the
land. While petitioner submitted a Manifestation on September 15, 1977 to
this Court invoking Presidential Decree No. 42 dated November 9, 1972 and
manifesting that it had made a deposit to the Philippine National Bank in the
amount of P54,370.00 as per PNB Certificate No. 9381 dated February 9,
1973, We hold that petitioner has not made the correct and proper deposit of
the provisional value as fixed by the trial court. It is elementary that
Presidential Decree No. 42 of November 9, 1972 which grants the right to
take or enter upon the possession of the property sought to be expropriated if
he deposits with the Philippine National Bank an amount equivalent tot he
assessed value of the property for purposes of taxation has no application to
the case at bar where the Court of Appeals had already fixed the value of the
property at P200.00 per square meter and P36,500.00 for the improvement
in its decision promulgated on October 18, 1972 about three weeks earlier
than the issuance of the Presidential Decree No. 42
By not complying with the orders of the trial court and the appellate court,
petitioner would benefit by its non-compliance and dilly-dallying in taking
possession of the property which We will not sanction or allow to the
prejudice of the private respondent landowner who should not be penalized
by the protracted delay of petitioner in taking over the property over a period
of seventeen (17) years during which time private respondent was deprived
of the beneficial use of the land and the improvement thereon. Petitioner
upon tiling the complaint has the duty to make the deposit in the amount
provisionally ascertained and fixed by the court (Sec. 2, Rule 67, Rules of
Court), which deposit serves the double purpose of pre- payment of the
property if the same is finally expropriated and of an indemnity for damages if
the proceedings are dismissed. (Visayan Refining Co. vs. Camus, 40 Phil.
550; Republic of the Philippines vs. Baylosis, L-13582, Sept. 30, 1960)
The records disclose that petitioner filed a Motion for Authority to Demolish
Building of Private Respondent dated June 27, 1974 for reasons therein
alleged which private respondent opposed as not being the proper procedure
under the law to abate a nuisance unless petitioner deposits the amount of
P36,500.00 which is the value of the improvement. The Court resolved to
deny the motion without prejudice to petitioner's taking the proper
proceedings for the abatement of the alleged nuisance pursuant to the
provisions of the new Civil Code in its Resolution of July 24, 1974.
The records further disclose that in the Petition to Cite the Mayor of the
Municipality of Daet (Herein Petitioner) in Contempt of Court filed by private
respondent on February 14, 1978, this Court was informed that the petitioner
acting thru its Mayor, Engineer Jose P. Timoner, started to demolish on
February 6, 1978 the building of the private respondent, attaching thereto
photographs marked Annexes 1 and 2 showing the building before and
during the demolition. Private respondent prayed that the Mayor be cited for
contempt or alternatively, that the petitioner be ordered to deposit with the
Philippine National Bank the amount of P36,500.00 instead of P28,830.00 to
await the final outcome of this case.
Commenting on the petition to cite the Mayor in contempt of court, petitioner
again relies on Presidential Decree No. 42 alleging that the assessed value
of the property for taxation purposes is only P18,250.00 which is less than
the amount of P28,830.00 it had already deposited with the Philippine
National Bank.
The above antecedent facts and circumstances of this case are unique and
abnormal such that by reason thereof, We agree with the judgment of the
Court of Appeals fixing the fair market value of the property sought to be
expropriated at P200.00 per sq. meter or for a total of FIVE HUNDRED
FORTY THREE THOUSAND FOUR HUNDRED (P543,400.00) PESOS, and
the value of the improvement thereon at THIRTY SIX THOUSAND FIVE
HUNDRED (P36,500.00) PESOS, Philippine Currency, both amounts to bear
legal interest from and after the date of the actual taking of possession by the
Municipality of Daet, Camarines Norte until the full amount is paid, with costs
against plaintiff-appellant.
We hold that the decision of the Court of Appeals fixing the market value of
the property to be that obtaining, at least, as of the date of the rendition of the
judgment on December 2, 1969 as prayed by private respondent, which the
Court fixed at P200.00 per square meter is in conformity with doctrinal rulings
herein above cited that the value should be fixed as of the time of the taking
of the possession of the property because firstly, at the time judgment was
rendered on December 2, 1969, petitioner had not actually taken possession
of the property sought to be expropriated and secondly, We find the valuation
determined by the Court of Appeals to be just, fair and reasonable.
On the second assignment of error, petitioner faults the respondent court in
modifying, disregarding and amending its own decision in CA-G.R. No.
32259-R which directed payment of just compensation to be determined as
of the date of the filing of the complaint. Petitioner claims that this decision
has tong become final and executory and it would be contrary to the doctrine
of res judicata to modify, disregard and amend said decision.
In order that there may be res judicata, the following requisites must be
present: (a) the former judgment must be final; (b) it must have been
rendered by a court having jurisdiction of the subject- matter and of the
parties; (c) it must be a judgment on the merits; and (d) there must be,
between the first and second actions, Identity of parties, of subject matter,
and of cause of action. 16
When, between the first case where the judgment was rendered, and the
second case where such judgment is invoked, the three Identities mentioned
in paragraph (d) above, are present, the judgment on the merits rendered in
the first case constitutes an absolute bar to the subsequent action. It is final
as to the claim or demand in the controversy, including the parties and those
in privity with them, not only as to every matter which was offered and
received to sustain or defeat the claim or demand, but as to any other
admissible matter which might have been offered for that purpose and of all
matters that could have been adjudged in that case. 17
This is, however, not the situation in the case at bar. The only question
drawn in issue before the Court of Appeals in CA-G.R. No. 32259-R was
whether petitioner had the authority to exercise the right of eminent domain.
The question regarding the amount of just compensation was expressly
reserved by the Court of Appeals for the trial court to determine. Perforce,
Between the first case wherein the judgment is rendered, and the second
case wherein such judgment is invoked, there is Identity of parties but there
is no Identity of causes of action. In such a situation, the judgment is
conclusive in the second case only to those matters actually and directly
controverted and determined, and not as to matters merely involved therein.
To constitute res judicata, the right to relief in one suit must rest upon the
same question which in essence and substance was litigated and determined
in the first suit. 18
That phrase in the dispositive portion of the decision of the Court of Appeals
in CA-G.R. No. 32259-R referring to the time that should be considered in
reckoning the just compensation, to wit — "declaring that plaintiff Municipality
of Daet has the lawful right to take the Property sought to be condemned, for
the public use described in the complaint, upon payment of just
compensation to be determined as of the date of the filing of the complaint"
— cannot likewise constitute the law of the case, which is a doctrine closely
akin to res judicata. The law of the case, as applied to a former decision of
an appellate court, merely expresses the practice of the courts in refusing to
reopen what has been decided. 19 It differs from res judicata in that the
conclusiveness of the first judgment ' is not dependent upon its finality. The
first judgment is generally' if not universally, not final. 20 It relates entirely to
questions of law, and is confined in its operation to subsequent proceedings
in the same case. 21 While it is conclusive as to all matters within its scope, it
cannot be invoked, except as to questions as have been actually considered
and determined in the first appeal. In the application of this rule, courts will
take cognizance of such points only as affirmatively appears in the last to
have been decided in the former appeal. 22
Moreover, this case is before the Supreme Court and being the Court of last
resort, it is the final arbiter of all legal questions properly brought before it
and its decision in any given case constitutes the law of this particular case.
Once Our judgment becomes final, it is binding on all inferior courts, and
hence beyond their power and authority to alter or modify. (Kabigting vs.
Acting Director oil Prisons, 6 SCRA 281, 286). Petitioner's second
assignment of error is, therefore, without merit.
The first part of the third assignment of error hinges on what is the proper
procedure in determining the just compensation in proceedings.
Section 5, Rule 67 of the Revised Rules of Court calls for the appointment of
not more than three (3) competent and disinterested persons as
commissioners to ascertain and report to the court the just compensation for
the property sought to be taken. As to the extent of this function and power of
the commissioner, this Court held in Manila Railroad Company vs.
Velasquez 23 that the commissioners' power is limited to assessing the value
and determining the amount of damages. There it stops; they can go no
farther. The value and damages awarded must be a just compensation and
no more and no less. But in fixing these amounts, the commissioners are not
to act ad libitum.They are to discharge the trust reposed in them according to
well-established rules and form their judgment upon correct legal principles.
To deny this is to place them where no one else in this country is placed,
above the law and beyond accountability.
Corollary to tills limitation, it has been held that reports submitted by
commissioners of appraisals in condemnation proceedings are not binding,
but merely advisory in character, as far as the court is concerned. 24 An early
case enunciated the rule that a Court of First Instance has the undoubted
right to reject the report of the commissioners as to the value of the land, if
the report is not founded upon legal evidence. The judge has the undoubted
right also to discharge the commission and appoint a new one. He also has
the right to formulate an opinion of his own as to the value of the land in
question, nevertheless, if he formulates such an opinion, he must base it
upon competent evidence. 25 When the commissioners report is not in
accordance with the law on the matter, another case ruled that it cannot
serve as the basis of the judicial decision but must be annulled and set aside,
and the case remanded to the court below for reopening of trial.26 Then, in
still other cases, it was held that a Court of First Instance or on appeal, the
Supreme Court may substitute its own estimate of value as gathered from
the record submitted to it, in cases where the only error of the commissioners
is that they have applied illegal principles to the evidence submitted to them;
or that they have disregarded a clear preponderance of evidence; or that
they have used an improper rule of assessment in arriving at the amount of
the award; provided always that the evidence be clear and convincing and
the amount allowed by the commissioners is grossly inadequate or
excessive. 27
That the commissioners' report is not final and conclusive, but merely
recommendatory is bolstered by the requirement in Section 8, Rule 67 of the
Revised Rules of Court of conducting a hearing thereon. Otherwise stated,
said provision requires that upon the expiration of the period of ten (10) days
within which all interested parties may file their objects to the report, or even
before the expiration of such period if all interested parties have filed their
objections to the report or their statement of agreement therewith, the court
must conduct a hearing on the report.
In view of these basic provisions of the Rules of Court on eminent domain
and various jurisprudence on the function of the commissioners as limited by
the Court, We hold that the respondent Court of Appeals did not err in giving
credence to the appraiser employed by private respondent and in
disregarding the commissioners report.
Respondent court found that aside from being a civil engineer, Aurelio B.
Aquino is a licensed real estate broker and appraiser of long standing, being
one of the incorporators of C.M. Hoskins and Co., Inc., a corporation
engaged in real estate brokerage since October, 1938 and of which firm he is
presently the Chairman of the board of directors. With these qualifications,
respondent court committed no error in concluding that he was competent to
make the appraisal of the fair market value of the parcel of land under
consideration. Although he does not maintain an office in Daet nor does he
appear to have had any transactions in said locality, he is compatent since a
commercial parcel of land retains the same characteristics whether it is
located in Manila or Daet, and the criterion for making an appraisal of a
parcel of land is universally applied, irrespective of the locality where it is
situated. And since the value of a parcel of land taken by eminent domain is
always a matter of opinion, the same may be proved by opinion evidence of
the real estate appraiser. 28 Hence, We find substantial basis for the court to
fix the value of the land at P200-00 per square meter and the building at
P36,500.00 as testified to by the broker.
Petitioner assails the transfer of the case from Branch I of the Court of First
Instance of Camarines Norte to Branch 11 thereof, claiming that the
jurisdiction of the respective branches are delineated by a controlling
department circular and thereby concluding that Branch 11 has no legal and
valid authority to take over said expropriation case.
We do not agree. Where a court of first instance is divided into several
branches, each of the branches is not a court distinct and separate from the
others. Jurisdiction is vested in the court, not in the judges, so that when a
complaint or information is filed before one branch or judge, jurisdiction does
not attach to said branch or judge alone, to the exclusion of the others. Trial
may be had or proceedings may continue by and before another branch or
judge. It is for this reason that Section 57 of the Judiciary Act, expressly
grants the Minister of Justice, upon recommendation of the district Judge, the
administrative right or power to apportion the cases among the different
branches, both for the convenience of the parties and the coordination of the
work by the different branches, and the judges presiding each branch. The
apportionment does not involve a grant or limitation or jurisdiction; this
continues to be vested in the court of first instance of the province as a
whole, and trial may be had by any judge or branch of the court. 29
We do agree, however, that the apportionment of cases must be respected
by the judges in the interest of order and coordination in the dispatch of
cases. But the question of whether Branch II took cognizance of a case
properly belonging to another branch is negated by the fact, pointed out by
respondents, that Administrative Order No. 472 of the Secretary of Justice
dividing the Province of Camarines Norte between Branch I and Branch II
took effect on January 1, 1971 long after Branch II had disposed of the case
at bar because said case was decided on December 2, 1969.
The fourth assignment of error is clearly untenable. Presidential Decree No.
42 issued on November 9, 1972 does not limit the just compensation in
expropriation proceedings to the assessed value of the value sought to be
condemned. By its title alone, i.e., "Authorizing the Plaintiff in Eminent
Domain Proceedings to Take Possession of the Property Involved Upon
Depositing the Assessed Value for Purposes of Taxation," it can already be
gleaned that said decree fixes only the provisional value of the property. As a
provisional value, "it does not necessarily represent the true and correct
value of the land. The value is only "provisional" or "tentative" to serve as the
basis for the immediate occupancy of the property being expropriated by the
condemnor. 30
This decree repealed Section 2, Rule 67 of the Revised Rules of Court which
imposed upon the court having jurisdiction of the proceeding with the duty of
ascertaining and fixing the provisional value of The property. As stated in the
said decree itself, the repeal was necessary inasmuch as the "existing
procedure for the exercise of the right of eminent domain is not expeditious
enough to enable the plaintiff to take possession of the real property involved
as soon as possible, when needed for public purposes."
Even in Presidential Decree No. 76, "Requiring All Persons, Natural or
Juridical Owning or Administering Real Property, Including the Improvements
Thereon, to File Sworn Statement of the True Value of Such Property,"
issued on December 6, 1972, it is clearly stated that the just compensation is
based on the current and fair market value and not on the assessed value.
The pertinent provisions state as follows:
But more importantly, this assignment of error is bereft of merit because
Presidential Decree No. 42 is inapplicable in the case at bar. As pointed out
by private respondent, it is a cardinal rule of statutory construction that laws
shall have only prospective effect. The provisional value of the property in
this case having already been fixed, the deposit on February 9, 1973 of the
amount of P54,370.00 representing the assessed value of the land and the
deposit on October 21, 1977 of the amount of P25,830.00 representing the
assessed value of the improvement, both pursuant to the said decree, are
not sufficient. Nevertheless, said amounts should be deducted from the total
amount due to private respondent.
To elucidate and clarify the judgment of this Court in affirming the decision
appealed from, We consider and hold that the demolition of the building of
private respondent standing on the land by the Municipal Mayor, Engr. Jose
P. Timoner on February 14, 1978 constituted the actual taking of possession
of the property sought to be expropriated by the Municipality of Daet. And
from said date, February 14, 1978, interest at the legal rate shall be paid by
the municipality until the full amount is paid.
IN VIEW OF ALL THE FOREGOING, the judgment under review is hereby
AFFIRMED in toto.
SO ORDERED.

For purposes of just compensation in cases of private

property acquired by the government for public use, the
basis shall be the current and fair market value as declared
by the owner or administrator or such market value as
determined by the assessor, whichever is lower.

Under this Decree, the assessed valuation which shall be

the basis for payment of real property tax beginning the
calendar year 1974 shall be fifty per centum of the current
fair market value, as determined by the assessor, in case of
commercial, industrial or mineral lands; forty per centum in
the case of agricultural lands and thirty per centum in the
case of lands for purely residential purposes.

Clearly, therefore, the assessed value of a property constitutes only a

percentage of its current fair market value. It cannot, thus, be the direct basis
of just compensation in expropriation proceedings.
G.R. No. 76265 April 22, 1992
VIRGINIA CALALANG, petitioner,
vs.
REGISTER OF DEEDS OF QUEZON CITY, ADMINISTRATOR OF
NATIONAL LAND TITLES AND DEEDS REGISTRATION
ADMINISTRATION, LUCIA DE LA CRUZ, CONSTANCIO SIMANGAN and
IGLESIA NI KRISTO, respondents.
G.R. No. 83280 April 22, 1992
AUGUSTO M. DE LEON, JOSE M. DE CASTRO, JOSE A. PANLILEO,
FELICIDAD VERGARA VDA. DE PINEDA, FERNANDO L. VITUG I,
FERNANDO M. VITUG II, FERNANDO M. VITUG III, FAUSTINO TOBIA,
ELENA M. OSTREA and FELISA C. CRISTOBAL-
GENEROSO, petitioners,
vs.
THE HON. COURT OF APPEALS and BISHOP ERAÑO
MANALO, respondents.
GUTIERREZ, JR., J.:
The subject of controversy in these two consolidated petitions is a parcel of
land — Lot 671-A of the Piedad Estate located in Barrio Culiat, Diliman.
The petitioners are individual lot owners who claim to have bought their
respective portions from Amando Clemente in the 1950's.
Amando Clemente is alleged to be the registered owner of said land
evidenced by Transfer of Certificate Title No. 16212 covering about 81,160
square meters who converted it into a subdivision known as Clemville
Subdivision.
Lot 671-A is actually part of a bigger parcel known as Lot 671 which is
claimed by respondent Iglesia ni Kristo (INK), which bought said property
from Lucia dela Cruz in 1975. Dela Cruz was adjudged the rightful owner of
Lot 671 in the case of dela Cruz v. dela Cruz (130 SCRA 666 [1984]). INK
began fencing the whole area and placed the following sign "NO
TRESPASSING — IGLESIA NI KRISTO PROPERTY SUPREME COURT
CASE NO. 61969, July 25, 1984."
Briefly, the dela Cruz v. dela Cruz case is an action for reconveyance
founded on breach of trust filed by Augustina dela Cruz, et al. against Lucia
dela Cruz and INK. Augustina and her co-plaintiffs charged that the parcel of
land purchased by the INK from Lucia dela Cruz was actually a part of their
inheritance share in the estate of their late grandfather, Policarpio dela Cruz
but which, in breach of trust known to the INK, Lucia sold to the latter.
Augustina's suit was originally decided in her favor by the trial court. On
appeal to the Court of Appeals, the judgment was reversed and the
questioned sale by Lucia dela Cruz to the INK was upheld. Consequently,
Augustina went to the Supreme Court on a petition for review on certiorari,
docketed as G. R. No. 61969.
On July 25, 1984, the Court rendered a decision in affirming the decision of
the Court of Appeals. The validity of the sale of Lucia to the INK was thereby
upheld and the title of INK to the subject realty (Lot 671) was validated as
well.
This Supreme Court decision spawned the two (2) petitions now before us
assailing the validity of Lucia dela Cruz's title over Lot 671 which in turn was
sold to INK.
In G.R. No. 76265, petitioner Virginia Calalang alleged that she is the
registered owner of a portion of Lot 671-A (subdivision plan –– PSD 32221)
as evidenced by TCT Nos. 17556, 17564 and 17562. She allegedly came to
know of INK'S claim only when a prospective buyer inspected the land on
August 1986 and saw the "no trespassing" sign.
Petitioner Calalang lost no time in inquiring into the status of the land and
learned about the pending consulta case (LRC 1978) filed before the
Administrator of the National Land Titles and Deeds Registration
Administration (NLTDRA). This consulta came about when the Register of
Deeds doubted the registrability of the documents presented before it in the
light of his findings that the land affected was covered by two (2) sets of titles
issued in the names of different owners.
On September 9, 1986, the petitioner filed a Motion to Intervene requesting
the Administrator to conduct an investigation of the supposed anomaly
committed in connection with the reconstitution of TCT No. RT-58 in the
name of Lucia dela Cruz. This was denied by the Administrator invoking our
ruling in dela Cruz v. dela Cruz to the effect that TCT RT-58 in the name of
respondent Lucia dela Cruz is the valid title. (Rollo, pp. 44-47)
Consequently, a Motion for Reconsideration was filed by herein petitioner but
this was likewise denied by the Administrator on October 20, 1986 on the
ground that the issues raised therein have already been passed upon and
that the issues being litigious in nature cannot be decided in a consulta case
"where the only question to be determined is the registrability of the
document presented for registration."
Hence, on October 27, 1986, the petitioner file the instant Special Civil Action
for Certiorari and Prohibition in G.R. No. 76265 against the Administrator of
the NLTDRA, the Register of Deeds of Quezon City and private respondents
Lucia dela Cruz, Constancio Simangan and Iglesia ni Kristo. Lucia dela Cruz
and Constancio Simangan were impleaded as they were predecessors-in-
interest of INK.
INK and the Administrator filed their comments on January 5, 1987 and June
29, 1987 respectively. For failure to locate Constancio Simangan's
whereabouts despite diligent efforts and considering further that INK is the
indispensable party and the one interested in upholding the validity of the
reconstituted title of respondent Lucia dela Cruz, the petitioner moved to drop
him as respondent. This was granted by the Court in a resolution dated April
13, 1988. (Rollo, p. 189)
Taking the cue from the Administrator that present certificates of title must be
cancelled to avoid duplication, the Register of Deeds, instead of filing its
comment initiated cancellation proceedings of more than 100 titles, against
81 defendants which included herein petitioner on the basis of this Court's
declaration in the case of dela Cruz that the reconstituted title of respondent
Lucia dela Cruz is the valid title. This petition was filed by the Office of the
Solicitor-General (OSG) on January 5, 1987 with the Regional Trial Court of
Quezon City docketed as Civil Case No. Q-49900.
Consequently, the petitioner moved to dismiss on the ground that the
complaint was premature and maliciously filed with knowledge of the instant
petition with this Court. INK, on the other hand, filed a Motion to Intervene in
said case. Claiming ownership over Lot 671, it prayed for damages against
some of the defendants namely Augusto de Leon, Jose M. Panlilio and
Felicidad Vda. de Pineda who filed an injunction suit against it (Civil Case
No. Q-45767) with the Regional Trial Court (RTC) of Quezon City on
September 12, 1985.
Despite opposition of the petitioner to respondent INK's Motion to Intervene,
presiding Judge Benigno T. Dayaw granted the motion of INK and denied
petitioner's Motion to Dismiss on the ground that the issues raised in the
instant petition (G. R. No. 76265) will not substantially affect said civil case.
The subsequent motion for reconsideration filed by the petitioner was
likewise denied considering that no restraining order has been issued
(Rollo, pp. 198-216).
However, instead of filing an answer to the complaint in Civil Case No. Q-
49900, the petitioners filed on July 15, 1988 a supplemental petition before
this Court to include as additional respondent, the Honorable Judge Benigno
T. Dayaw and petitioner's children who were named as defendants in said
Civil Case, as additional petitioners. At the same time the petitioner prayed
for a restraining order (Rollo, p.197).
To this supplemental petition, the OSG in behalf of the Republic filed its
comment pursuant to the Court's resolution granting the petitioner's motion
for leave to include additional parties and to admit supplemental petition
(Rollo, p. 228).
In the meantime, fire gutted the records of the Register of Deeds in Quezon
City, so respondent Judge required the parties to agree to a stipulation of
facts instead of trial.
In G.R. No. 83280, the petitioners alleged that they and/or their predecessors
in interest were issued their corresponding titles to the lots purchased from
Amando Clemente in the 1950's yet.
They alleged that they took physical possession of their lots in Clemville
Subdivision by actually occupying the same, declaring them in their names
for tax purposes, fencing or marking them off and entrusting their care to
"katiwalas". From the time they acquired their Torrens Title they and they
alone to the exclusion of INK exercised all acts of undisturbed, peaceful and
uninterrupted ownership and possession including the payment of their realty
taxes.
On or about the second week of August, 1985, INK started to enclose the
entire Clemville Subdivision with "sawali" fences with billboards randomly
posted which read:
NO TRESPASSING
I.N.C. PROPERTY
SC DECISION
2ND DIVISION
G. R. NO. L 61969
JULY 25, 1984
INK also destroyed the concrete/hollow block fence surrounding the lot of
petitioner de Castro and started the construction of housing structures
therein. At the same time, it commenced the delivery of construction
materials to the former premises of petitioner Panlilio to erect a permanent
structures of strong materials on it.
Thus, on August 22, 1985, the petitioners filed with the RTC-Branch 101 a
petition for injunction with damages. This case was docketed an Civil Case
No. 45767. Later, this petition was amended to include Elena Ostrea and
Feliza C. Cristobal-Generoso as additional petitioners.
August 25, 1985, presiding Judge Santiago issued a restraining order and
set the case for hearing the writ for preliminary injunction on September 5,
1985.
The September 5 hearing was however, reset to September 19, 1985 with
respondent Eraño Manalo volunteering to maintain the status quo until then
or until the matter had been resolved by the trial court.
On September 19, by agreement of the parties and in open court, the Judge
issued an order, granting the parties' motion to enter into a stipulation of facts
instead of going on with the hearing and to maintain the status quo.
In the course of the exchange of pleadings between the parties, the trial
judge issued an Order on December 6, 1985 denying the petitioners' prayer
for the issuance of a writ of preliminary injunction on the grounds that:
From the exchange of written arguments and the authorities
cited, it appears that the petitioners' titles which were issued
some ten years earlier than that of respondent's emanated
from a reconstituted TCT No. RT-52, which covered portion
of Lot 671 of the Piedad Estate of Quezon City. Petitioner's
parcels of land are within that estate. This reconstituted TCT
No. RT-52 was the subject of a case, "De la Cruz v. De la
Cruz", 130 SCRA 66 [1984], wherein the Honorable
Supreme Court declared the said reconstituted title null and
void.
The principal argument of petitioners that they were not
parties thereto can not be given serious extended discussion
as they could acquire no more rights than the source of their
titles. For brevity, at this initial stage, suffice it to say that
under the foregoing discussed circumstances, the petitioners
have not shown a clear and positive right to a temporary
relief. (Emphasis supplied) (Rollo, p. 35)
Assailing this order, the petitioners by way of certiorari elevated the matter to
the Court of Appeals in CA-G.R. SP No. 08146.
On April 9, 1986, the Court of Appeals promulgated a Decision with the
following dispositive portion:
WHEREFORE, the petition is given due course and is
hereby RESOLVED by setting aside the Order dated
December 6, 1985 in Civil Case No. Q-45767 and directing
that the application for preliminary injunctive relief therein be
properly heard and evidence for or against the same be
adduced in due course. (Rollo, p. 39)
On February 12, 1987, respondent INK filed with the lower court a motion to
dismiss the petitioners' complaint for injunction on the ground that it does not
state a cause of action.
On August 7, 1987, the lower court issued an Order with the following
dispositive portion:
WHEREFORE, premises considered, finding respondent's
Motion to Dismiss justified, the instant petition is hereby
DISMISSED, with costs against petitioners. (Rollo, p. 48)
Seeking relief from the dismissal, the petitioners filed the two pleadings, to
wit:
1) "Motion for Reconsideration Ad Cautelam" dated
September 18, 1987 filed with the RTC, NCR, Branch 101
Quezon City; and
2) "Omnibus Motion Incident to Execution of the Decision
dated April 9, 1986" dated September 29, 1987 filed with the
Court of Appeals.
On December 10, 1987, the Court of Appeals denied petitioners' Omnibus
Motion. The petitioners' motion for reconsideration was likewise denied in a
resolution by the RTC dated May 4, 1988.
Hence, the instant petition with the following assignment of errors.
THE HONORABLE COURT OF APPEALS, IN ITS
DECEMBER 10, 1987 RESOLUTION, ERRED IN HOLDING
THAT THE ORDERS OF DECEMBER 12, 1986 AND
AUGUST 7, 1986 RELATE TO INCIDENTS IN CIVIL CASE
NO. 45767 TOTALLY ALIEN TO THE SUBJECT MATTER
OF CA-G.R. SP NO. 08146.
 THE HONORABLE COURT OF APPEALS ERRED IN
VALIDATING THE ORDER OF AUGUST 7, 1986. (Rollo, p.
16)
In a resolution dated August 30, 1989, G.R. No. 83280 was consolidated with
G.R. No. 76265.
Although other minor issues are involved in these consolidated cases, the
principal and crucial issue that alone needs to be resolved is the applicability
of this Court's decision in the dela Cruz case to these cases now before us.
The petitioners argue that the dela Cruz case could not be applied to them
since they were not parties in that case nor were they ever notified of such
case pending between the parties. The petitioners explained that the de la
Cruz case was a case among the heirs of Policarpio de la Cruz. Since they
acquired their properties from an entirely different person, Amando Clemente
and not from any of the heirs of Policarpio de la Cruz, they could not be
considered privies to any of them.
In denying applicability, however, the petitioners assail the Court's ruling that
"the reconstituted title of Lucia dela Cruz over Lot 671 (TCT No. RT 58) was
valid. As the registered and rightful owner, Lucia dela Cruz had the perfect
and legal right to sell, assign, and convert the property to respondent INK
who as purchaser for value in good faith holds the same free from all
encumbrances except those noted in said certificate."
With this Court's ruling promulgated in 1984, it is our considered view that
the petitioner can not raise anew the question of ownership of Lucia dela
Cruz over Lot 671 which had been determined by the Court of Appeals and
affirmed by the Supreme Court in the dela Cruz case. Well-settled is the rule
enunciated in Church Assistance Program, Inc. v. Sibulo, 171 SCRA 408
[1989] that:
When a right or fact has been judicially tried and determined
by a court of competent jurisdiction, so long as it remains
unreversed, it should be conclusive upon the parties and
those in privity with them in law or estate.
The Court's ruling has long been final and the issue on ownership of Lot 671
finally disposed of several years ago. This declaration must be respected and
followed in the instant case applying the principle of res judicata or,
otherwise, the rule on conclusiveness of judgment. The less familiar concept
or less terminological usage of res judicata as a rule on conclusiveness of
judgment refers to the situation where the judgment in the prior action
operates as an estoppel only as to the matters actually determined therein or
which were necessarily included therein (De la Cruz v. Court of Appeals, 187
SCRA 165 [1990]).
Inevitably, the dela Cruz ruling should be applied to the present petitions
since the facts on which such decision was predicated continue to be the
facts of the case before us now (See Rivas v. SEC, 190 SCRA 295 [1990]).
Even the petitioners substantially adopt the same findings of facts in their
pleadings. The factual inquiry with regards to the history of Lot 671 has
already been laid to rest and may no longer be disturbed. We quote:
The undisputed facts indicate that the parcel of land in
question is Lot 671 of the Piedad Estate, GLRO Rec. No.
5975, with an area of 184, 268 square meters, more or less,
situated in Barrio Culiat, Quezon City; that the totality of the
Piedad Estate consists of a vast tract of land, registered on
March 12, 1912, in the name of the Philippine Government,
under Original Certificate of Title (OCT) No. 614 of the
Register of Deeds of the Province of Rizal; that when the
Piedad Estate was subdivided (with Lot No. 671 as one of
the resulting parcels) whoever was in possession of a
particular lot was given priority and/or preference in the
acquisition thereof provided that the price and the cost of
titling would be paid; that upon such payment, the
government would issue the corresponding certificate of title;
that Policarpio dela Cruz and his wife Luciana Rafael were
originally in possession of the land; that they had three
children, namely
(1) Maximo de la Cruz (married to Feliza Yabut);
(2) Filomeno de la Cruz (married to Narcisa Santiago); and
(3) defendant-appellant Lucia de la Cruz (a widow);
that the plaintiffs-appellees herein are the descendants of
the two sons (Maximo and Filomeno) of Policarpio; that on
April 25, 1940, Lot No. 671 was segregated from the totality
of the Piedad Estate, covered by OCT No. 614 and a
separate title was issued in the name of
"Eugenia de la Paz, soltera" and "Dorotea de la Cruz, viuda"
(this was Transfer Certificate of Title (TCT) No. 40355 of the
Register of Deeds for the Province of Rizal); that on
November 29, 1941, a deed of sale over Lot No. 671 was
executed by Eugenia de la Paz and Dorotea de la Cruz (the
registered owners) in favor of defendant-appellant Lucia de
la Cruz; that said deed of sale was registered with the office
of the Register of Deeds on July 17, 1943 and the
corresponding certificate of title was issued to Lucia de la
Cruz; that in 1971, Lucia de la Cruz obtained from the land
registration court a reconstituted title (TCT No. RT-59 over
Lot No. 671), the transfer certificate of title previously issued
to her in 1943 having been lost; that subsequently, Lot
No. 671 (this time, already covered by TCT No. RT-58) was
subdivided into three (3) lots, each of which was issued a
separate title, as follows:
(a) Lot No. 671-A containing an area of 30,000 square
meters and covered by TCT No. 168320;
(b) Lot No. 671-B, containing an area of 4,268 square
meters and covered by TCT No. 168321; and
(c) Lot No. 671-C, containing an area of 150,000 square
meters and covered by TCT No. 168322;
that meanwhile TCT No. 40355 (already previously issued to
and in the names of Eugenia de la Paz and Dorotea de la
Cruz) continued to exist; that when the title was transferred
from the Rizal Registry to the Quezon City Registry, from the
latter Registry assigned to this TCT a new number, RT-52;
that this same Lot (No. 671) was later subdivided into two
lots, each with a title:
(a) Lot No. 671-A (TCT No. 16212)
(b) Lot No. 671-B (TCT No. 16213)
both in the names of Eugenia de la Paz and Dorotea de la
Cruz; that the second lot (lot No. 671-B, with an area of
103,108 square meters) was sold on December 17, 1952 to
one Narcisa Vda. de Leon (to whom TCT No. 2009 was later
issued); that on May 6, 1964, Narcisa Vda. de Leon
transferred the same Lot 671-B to Nieves Paz Eraña (who
was later issued in her own name TCT No. 79971).
The undisputed facts further show that in 1971, Nieves Paz
Eraña filed before the Court of First instance of Quezon City
Civil Case No. 16125 for 'quieting of title' against Lucia de la
Cruz, et al., praying that TCT No. RT-58, (the reconstituted
title of Lucia de la Cruz), as well as all titles derived
therefrom, be declared null and void; that the case ended
with the parties submitting a compromise agreement with
Lucia de la Cruz, among other things, paying plaintiff Eraña
the amount of P250,000.00 to cover the acquisitive cost of
the 103,108 square meters of land included in the certificate
of title of defendant Lucia de la Cruz; that on July 17, 1975,
Lucia de la Cruz sold a portion of Lot No. 671-C (one of the
three portions to which the lot included in RT-58 had been
subdivided, and which portion was covered by TCT No.
168322), consisting of 103,108 square meters to defendant-
appellant Iglesia Ni Cristo, for the amount of P2,108,850.00;
that this sale was later registered in the Registry of Deeds of
Quezon City, with a new title, TCT No. 209554 being issued
in the name of the Iglesia Ni Cristo; that another deed of
absolute sale was executed for the remaining 84,356 square
meters in favor also of the Iglesia and said sale was
annotated on TCT No. 168322. In view of said sales and the
fact that registration of the involved parcels is now in the
name (separately) of Lucia de la Cruz and the Iglesia Ni
Cristo, the present action for reconveyance with damages
was instituted. (Emphasis supplied)
Apparently, there is no mention of Amando Clemente in the above recital of
facts. A closer perusal of the records in G. R. 76265 would, however, reveal
that TCT No. 16212 was issued for Lot 671-A in the name of Amando
Clemente on August 9, 1951 per report of the Acting Administrator of the
NLTDRA (Rollo, p. 92). Amando Clemente's TCT No. 16212 emanated from
TCT No. 40355 in the name of Eugenia de la Paz and Dorotea dela Cruz.
Thus, Amando Clemente's predecessors-in-interest are Eugenia dela Paz
and Dorotea dela Cruz whom the Court found to have lost their rights over
Lot 671 by virtue of the sale made to Lucia dela Cruz.
The Register of Deeds correctly observed that this is a clear case where
there is a duplication or overlapping of titles issued to different names over
the same land which thereby compelled him to file the consulta case with the
NLTDRA:
(1) Lucia dela Cruz's reconstituted title (RT-58) which was divided into 3
Lots, Lot 671-A, Lot 671-B and Lot 671-C and was subsequently sold to INK;
(2) Eugenia dela Paz and Dorotea dela Cruz's reconstituted title (RT-52)
which was divided into 2 lots, Lot 671-A and Lot 671-B.
Notwithstanding, it is undisputed that Lot 671 was sold to Lucia dela Cruz by
Eugenia dela Paz and Dorotea dela Cruz as evidenced by Entry No. 258,
page 7, Vol. 7, Primary Entry Book of the Registry of Deeds of Manila. (de la
Cruz v. de la Cruz, supra, pp. 697-698) This is a finding which can not be
disturbed.
We need not emphasize the fact that the Supreme Court by
tradition and in our system of judicial administration, has the
last word on what the law is. It is the final arbiter of any
justiciable controversy. There is only one Supreme Court
from whose decisions all other courts should take their
bearings. Consequently, we cannot and should not review a
case already passed upon by the Highest Tribunal. It is only
proper to allow the case to take its rest. (Church assistance
Program, Inc. v. Sibulo, supra.).
The sale of the land to Lucia dela Cruz and the subsequent registration
thereof in the Primary Book of the Registry of Deeds, Manila constitutes
constructive notice to the whole world. (Heirs of Maria Marasigan v.
Intermediate Appellate Court, 152 SCRA 253 [1987]; People v. Reyes, 175
SCRA 597 [1988])
Since it is the act of registration which transfers ownership of the land sold
(Government Service Insurance System v. Court of Appeals, 169 SCRA 244
[1989]). Lot 671 was already owned by Lucia dela Cruz as early as 1943.
Amando Clemente's alleged title meanwhile which was issued on August 9,
1951 was very much later. Thus, the petitioners, who merely stepped into the
shoes of Amando Clemente cannot claim a better right over said land. "Prior
est temporae, prior est in jura" (he who is first in time is preferred in right)
(Garcia v. Court of Appeals, 95 SCRA 380 [1980]). The fact that Amando
Clemente possessed a certificate of title does not necessarily make him the
true owner. And not being the owner, he cannot transmit any right to nor
transfer any title or interest over the land conveyed (Beaterio del Santisimo
Rosario de Molo v. Court of Appeals, 137 SCRA 459 [1985]; Treasurer of the
Phil. v. Court of Appeals, 153 SCRA 359 [1987]).
Moreover, the petition for reconstitution of title by Lucia dela Cruz which the
court held to be valid was a proceeding in rem. It is well established that in
rem proceedings such as land registration constitute constructive notice to
the whole world. The petitioners cannot now claim that they were not notified
of the reconstitution proceedings over said lot. Under the facts of the case,
the title in the name of Lucia dela Cruz (TCT No. RT 58) has become
indefeasible and incontrovertible.
Likewise, the INK was also issued a Torrens Title over Lot 671 as a result of
the sale made to it by the rightful owner, Lucia dela Cruz in 1975. Under the
Torrens System of registration, the Torrens Title became indefeasible and
incontrovertible one year from its final decree (Tirado v. Sevilla, 188 SCRA
321 [1990]). A Torrens Title is generally a conclusive evidence of the
ownership of the land referred to therein. (Ching v. Court of Appeals, 181
SCRA 9 [1990]) It is, therefore, too late in the day for the petitioners to
reopen or question the legality of INK's title over Lot 671 at this time.
The petitioners also contend that what INK purchased from Lucia dela Cruz
in 1975 was Lot 671-C-4 LRC 322534 which corresponds roughly to Lot 671-
B (Psd-32221) and did not affect Lot 671-A of Amando Clemente at all. This
is, however, belied by the fact that the sale made by Dorotea dela Cruz to
Lucia dela Cruz (as indicated in Entry No. 258) was Lot 671 which was later
on conveyed to INK.
In challenging the validity of the reconstitution of Lucia dela Cruz's title, the
petitioners are not alleging fraud, collusion and illegality in the procurement
of the certificate of title of Lucia dela Cruz. It must be recalled that G.R. No.
76265 stemmed merely from a consulta case with the National Land Titles
and Deeds Administration. Undeniably, the arguments and issues raised by
the petitioner require adjudication of facts which, under the circumstances of
this case, we are not prepared to do as this Court is not a trier of facts.
Moreover, the present petition is not the proper remedy in challenging the
validity of certificates of titles since the judicial action required is a direct and
not a collateral attack. (Natalia Realty Corp. v. Vallez, 173 SCRA 534
[1989]).
The Court had this to say:
We note with approval the lower court's patient explanation
that, inter alia the certificate of title issued in the name of the
plaintiff in accordance with the Land Registration Act (Act
No. 496) is indefeasible after the expiration of one year from
the entry of the decree of registration. Under Section 38
thereof, a petition for review of the decree must be
presented within one year after its entry as described and
defined in Section 40 of the same. After the lapse of one
year, the decree of registration becomes incontrovertible and
is binding upon and conclusive against all persons whether
or not they were notified of or participated in the registration
proceedings. . . .
Even assuming arguendo that said titles may still be
challenged, the present case does not provide the vehicle for
 that remedy since the judicial action required is a direct, and
not a collateral attack. In fact, under the existing law, Section
48 of the Property Registration Decree expressly provides
that a certificate of title cannot be subject to collateral attack
and can be altered, modified or cancelled only in a direct
proceeding in accordance with law. (at p. 542)

In our capacity as the court of last resort, the petitioners try to convince us to
look or inquire into the validity of the reconstitution proceedings initiated by
Lucia dela Cruz, contending that the implementation of de la Cruz ruling
would deprive them of their properties without due process of law. We have
looked long and hard into the records of the case but the facts and
circumstances plus law and jurisprudence on the matter do not warrant such
action from the Court. INK's title over Lot 671 which necessarily included Lot
671-A had already become incontrovertible and indefeasible. To reopen or to
question the legality of INK's title would defeat the purpose of our Torrens
system which seeks to insure stability by quieting titled lands and putting to a
stop forever any question of the legality of the registration in the certificate or
questions which may arise therefrom. (de la Cruz v. de la Cruz, supra.) In
fairness to INK, as registered owner it is entitled to rest secure in its land title.

In view of all the foregoing, it would be for the public interest and the
maintenance of the integrity and stability of the Torrens system of land
registration that all transfer certificates of title derived from the reconstituted
title of Eugenia dela Paz and Dorotea dela Cruz be annulled in order to
prevent the proliferation of derivative titles which are null and void. The
legality or validity of INK's title over Lot 671 has been settled. The Court has
spoken and it has done so with finality, logically and rightly so as to assure
stability in legal relations and avoid confusion. (see Ver v. Quetulio, 163
SCRA 80 [1988])

WHEREFORE, the petitions in G. R. Nos. 76265 and 83280 are hereby

DISMISSED for lack of merit.

SO ORDERED.
G.R. No. 159910 May 4, 2006
HEIRS OF CLEMENCIA PARASAC, Petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
DECISION
CHICO-NAZARIO, J.:
Petitioners Heirs of Clemencia Parasac filed the present Petition for Review
on Certiorari, under Rule 45 of the Revised Rules of Court, seeking the
annulment and setting aside of the Resolution of the Tenth Division of the
Court of Appeals in CA-G.R. CV No. 66594, dated 10 September
2003,1 which granted the motion for reconsideration of respondent Republic
of the Philippines, and reversed and set aside its earlier Decision in the same
case, dated 24 February 2003.2
The petition at bar commenced on 17 July 1961, when Casiano Sandoval
and Luz Marquez filed an application for registration of Lot No. 7453 of the
Santiago Cadastral Survey 211, located in Cordon, Isabela, with an area of
15,303.5928 hectares. The application was docketed as Land Registration
Case No. II-N-36 before the Court of First Instance (CFI)3 of Isabela, Branch
2, entitled, "Heirs of Casiano Sandoval v. Director of Lands, et al." Initial
hearing was held on 30 March 1962, and upon motion of the applicants
Sandoval and Marquez, the CFI of Isabela, Branch 2, issued an Order of
general default against the whole world except the oppositors who were then
present, among which, were the Director of Lands, the Director of Forestry,
the Heirs of Clemencia Parasac, the Heirs of Liberato Bayaua, and the
Philippine Cacao and Farm Products, Inc. For some reason not explained,
Land Registration Case No. II-N-36 remained dormant for almost two
decades, until the parties to the case submitted to the CFI of Isabela, Branch
2, a Compromise Agreement,4 dated 6 February 1981, pertinent portions of
which read as follows –
1. That the parties herein agree that the subject of this proceeding is
Cadastral Lot No. 7453 of the Santiago Cadastral Survey 211,
situated in Cordon, Isabela with an area of 15,303.5928 hectares,
more or less, as appearing in the technical description attached to
the application for registration.
2. That all the parties herein have agreed to this compromise
settlement of their respective claim in the manner hereunder set
forth, to wit:
a) Applicant Heirs of Casiano Sandoval do hereby disclaim
in favor of the Bureau of Lands the area of 1,750 hectares,
more or less, embraced within subdivision survey GSS-361-
D, surveyed for Honorato Collantes, et al., Cad-315-D,
surveyed for Mauricio Manuel, et al. and GSS-283 surveyed
for Ernesto Taruc, et al.,
b) Applicant Heirs of Casiano Sandoval do hereby disclaim
in favor of the Bureau of Forest Development an area of
5,661 hectares, the exact metes and bounds of which shall
be surveyed for the purpose of this Compromise Agreement
and the adjudication of title in this proceedings; the
disclaimer to include areas covered by the watershed
management and erosion control project funded by the
World Bank;
c) Applicant Heirs of Casiano Sandoval do hereby disclaim
in favor of the Heirs of Clemencia Parasac and Liberato
Bayaua, represented by their attorney-in-fact, Remedios
Alvarez, an area of 1,000 hectares, the exact metes and
bounds of which shall likewise be surveyed for the purposes
of this Compromise Agreement and the adjudication of title
in this proceeding;
d) Applicant Heirs of Casiano Sandoval do hereby disclaim
in favor of the Philippine Cacao and Farm Products, Inc., an
area of 4,000 hectares, the exact metes and bounds of
which shall be surveyed for the purposes of this
Compromise Agreement and the adjudication of title in this
proceeding;
e) The area of 2,892.5928 hectares of Lot 7453 shall be
adjudicated to the Heirs of Casiano Sandoval. Out of this
area, 892.5928 hectares is hereby assigned and transferred
to their counsel of record, Jose C. Reyes by way of
attorney’s fees. The exact metes and bounds of the area of
2,892.5928 hectares adjudicated to the Heirs of Casiano
Sandoval, segregating therefrom the area of 892.5928
hectares assigned and transferred to Jose C. Reyes by way
of attorney’s fees shall be surveyed separately for the
purposes of this Compromise Agreement to the end that
separate titles thereto may issue to the Heirs of Casiano
Sandoval and their counsel of record, Jose C. Reyes.
 3. That by virtue of the aforementioned disclaimer of the applicant
Heirs of Casiano Sandoval in the concept of a Compromise
Agreement to the claims of all the afore-mentioned parties in the
above-entitled case, the said parties mutually quit claim against each
other all their previous claims to and over Cadastral Lot No. 7453 of
the Santiago Cadastre, subject matter of this registration proceeding,
and pray the Hon. Court to render judgment based on this
Compromise Agreement; x x x [Underscoring ours.]
In its Decision5 and Order,6 both dated 3 March 1981, the CFI of Isabela,
Branch 2, approved the afore-quoted Compromise Agreement after finding
that it was not contrary to law, public policy, and public order.
Pursuant to the Decision of the CFI of Isabela, Branch 2, in Land Registration
Case No. II-N-36, the National Land Titles and Deeds Registration
Administration (NLTDRA),7 issued Decree No. N-1980718 in favor of the
Heirs of Clemencia Parasac and Liberato Bayaua covering the piece of land
adjudicated to them in the judicially approved Compromise Agreement. The
NLTDRA forwarded the said Decree, together with its corresponding
Certificate of Title, to the Registry of Deeds of Ilagan, Isabela. Although the
Register of Deeds of Ilagan, Isabela, acknowledged receipt of Decree No. N-
198071 and its corresponding Certificate of Title on 20 December 1991, he
reported that the Decree could not be found despite exhaustive efforts to
locate it. 9 As a result, Decree No. N-198071 was not yet
registered,10 although, apparently, a copy of the unregistered Original
Certificate of Title over the adjudicated piece of land was already released to
the Heirs of Clemencia Parasac and Liberato Bayaua.11
Upon advice of the Land Registration Authority, the Heirs of Clemencia
Parasac and Liberato Bayaua filed, on 19 August 1998, a Petition12 for the
issuance of a new decree of registration, docketed as LRC Rec. No. 35-
2578, before the Regional Trial Court (RTC) of Santiago City, Branch 35.
When the RTC of Santiago City, Branch 35, issued an Order,13 dated 4
November 1998, setting the Petition for hearing on 22 February 1999,14 it
forwarded a copy of the said Order to the Office of the Solicitor General
(OSG). On 16 February 1999, the OSG, on behalf of the Republic of the
Philippines, opposed the Petition in LRC Rec. No. 35-2578 and prayed for
the denial thereof. In its Opposition,15 the OSG argued that –
1. The Petition is one for the issuance of decree in lieu of one
allegedly lost, Decree No. N-198071.
2. The purported issuance of Decree No. N-198071, however, is
premature, if not anomalous and irregular.
3. To date, the purported Decision dated March 3, 1981 of the
Regional Trial [Court], Branch 2, in Isabela, rendered in LRC No. II-
N-36, Lot 745[3], Santiago Cadastre 211, has not been received by
the Office of the Solicitor General (OSG).
[4.] In Republic v. Court of Appeals, 201 SCRA 1, 6 [1991], the
Supreme Court stressed that "service of decision on the Solicitor
General is the proper basis for computing the reglementary period
for filing of appeals and for determining whether a decision had
attained finality."
[5.] Since the Decision dated March 3, 1981, has not been received
by the OSG, the same did not attain finality. In consequence, any
decree issued pursuant to said decision is void.
[6.] Moreover, that no valid Decree N[o]. N-198071 was ever issued
is patent from the Registry of Deeds’ letter dated April 20, 1998,
addressed to the Administrator of the Land Registration Authority
(LRA), confirming that "a verification on the Primary Entry Book
shows that said decree was not registered and never been issued to
the adjudicatee" x x x
After conducting hearings in due course, the RTC of Santiago City, Branch
35, issued an Order, dated 9 November 1999, finding that –
The jurisdictional facts having [been] proven and that the Court having been
satisfied that there is a need for the issuance of another copy of Decree No.
N-198071 based on the record on file with the Land Registration Authority,
the herein petition is granted.
WHEREFORE, the National Land Titles and Deeds Registration
Administration, Department of Justice (Land Registration Commission), now
Land Registration Authority, is hereby ordered to issue another copy of
Decree No. N-198071, under the name of heirs of Liberato Bayaua and
Clemencia Parasac, represented by their attorney-in-fact, Remedios Alvarez,
upon payment of fees required by law.16
From the foregoing facts arose two separate cases before the Court of
Appeals, CA-G.R. SP No. 54618 and CA-G.R. CV No. 66594, both instituted
by the OSG, on behalf of the Republic of the Philippines.
1) CA-G.R. SP No. 54618 – Complaint for the annulment of the Decision of
the CFI of Isabela, Branch 2, in Land Registration Case No. II-N-36, dated 3
March 1981.
The Republic of the Philippines, represented by the OSG, filed a Complaint
before the Court of Appeals, docketed as CA-G.R. SP No. 54618, seeking
the annulment of the Decision of the CFI of Isabela, Branch 2, in Land
Registration Case No. II-N-36, dated 3 March 1981, because the said
Decision was based solely on a Compromise Agreement, dated 6 February
1981, which was entered into by the Directors of the Bureau of Lands and
the Bureau of Forest Development, who were without authority to dispose of
lands of the public domain. In addition, the Compromise Agreement was
entered into without notice to, knowledge or participation of, the Solicitor
General, the mandated counsel of the Republic of the Philippines. Lastly, the
Solicitor General was not furnished a copy of the assailed Decision in
contravention of law.1avvphil.net
Parties to the Compromise Agreement, namely, the Heirs of Clemencia
Parasac and Liberato Bayaua; Elvira G. Reyes, in substitution of the
deceased Atty. Jose C. Reyes; and the Philippine Cacao and Farm Products,
Inc., filed separate Motions to Dismiss the Complaint asserting, among other
reasons, that its cause of action was already barred by prior judgment or by
the statute of limitations, as well as by laches or estoppel.
On 19 July 2001, the First Division of the Court of Appeals promulgated its
Decision17 in favor of the Republic of the Philippines, essentially on the basis
of another case already decided by the Supreme Court, Republic v.
Sayo,18ruling thus –
[A]s held in Republic v. Sayo (191 SCRA 71), which We shall presently
discuss in more detail, the receipt by the Solicitor General of a copy of the
Decision dated March 3, 1981, did not make it binding on the Republic of the
Philippines inasmuch as the decision was based on a compromise
agreement entered into by the Directors of Land and Forest Development
without the participation of the Solicitor General, plaintiff government’s
counsel.
Except for the identity of the land and the trial court which rendered the
decision, the instant case has practically the same parties and may be
considered to be the virtual twin of another case entitled "Republic vs. Hon.
Sofronio G. Sayo, Judge, Br. I, CFI, Nueva Vizcaya, Heirs of Casiano
Sandoval, Heirs of Liberato Bayaua, Jose C. Reyes and Philippine Cacao
and Farm Products, Inc." (SC-G.R. No. 60413, October 31, 1990; 191 SCRA
71 supra).
The above-mentioned GR 60413 involved Lot No. 7454 of the Cadastral
Survey of Santiago, BL, CAD 211 with an area of 33,950 hectares. Lot 7454
is adjacent to Lot No. 7453, subject of the instant case. Lot 7454 was
formerly also part of the Municipality of Santiago, Province of Isabela, but is
now within the province of Nueva Vizcaya by virtue of Republic Act No. 236.
As in the present case, that case dragged for about twenty (20) years until
the trial court rendered a Decision on March 3, 1981, the very same date as
the assailed Decision in the instant case, also based on a Compromise
Agreement. The Supreme Court annulled the decision of the trial court,
ratiocinating as follows:
"It thus appears that the decision of the Registration Court a quo is based
solely on the compromise agreement of the parties. But that compromise
agreement included private persons who had not adduced any competent
evidence of their ownership over the land subject of the registration
proceeding. Portions of the land in controversy were assigned to persons or
entities who had presented nothing whatever to prove their ownership of any
part of the land. What was done was to consider the compromise agreement
as proof of title of the parties taking part therein, a totally unacceptable
proposition. The result has been the adjudication of lands of no little
extension to persons who had not submitted any substantiation at all of their
pretensions to ownership, founded on nothing but the agreement among
themselves that they had rights and interests over the land.
"The assent of the Directors of Lands and Forest Development to the
compromise agreement did not and could not supply the absence of
evidence of title required of the private respondents.
"xxx xxx xxx
"Finally, it was error to disregard the Solicitor General in the execution
of the compromise agreement and its submission to the Court for
app(r)oval. It is, after all, the Solicitor General, who is the principal
counsel of the Government; this is the reason for our holding that
‘Court orders and decisions sent to the fiscal, acting as agent of the
Solicitor General in land registration cases, are not binding until they
are actually received by the Solicitor General.’ (Republic v. CA, 148
SCRA 480 [1987]; Republic v. C.A., 135 SCRA 157 [1985]; Republic v.
Mendoza, 125 SCRA 539 [1983].
"It thus appears that the compromise agreement and the judgment proving it
must be, as they are hereby, declared null and void and set aside. x x x."
(Emphasis supplied)
The foregoing decision of the High Court, rendered in a case that is the
veritable twin of the case at bench, has settled the points raised herein based
on the doctrine of stare decisis et non quieta movere, if not the more
specific principle of law of the case (Mangoma vs. CA, 241 SCRA 21; In re
Petition, Group Comdr. ISG PA vs. Dr. Malvar, et al., 231 SCRA 62, 86).
Nevertheless, it is beneficial to respond to the issues raised in the motions.
We rule that the instant petition is not barred by prescription, laches,
estoppel, or res judicata. Prescription does not lie against the State (Article
1108, Civil Code of the Philippines) and no laches attach when the judgment
is null and void for want of jurisdiction (Arcelona vs. Court of Appeals, 280
SCRA 20).
Res judicata does not apply where the second action is precisely to annul
the judgment in the first action, as one of the requisites of res judicata is that
there must be a former valid judgment (Almeda vs. Cruz, 84 Phil 636). Where
the trial court has not acquired jurisdiction over the subject matter, the
principle of res judicata does not apply (Republic vs. Court of Appeals, 99
SCRA 473).
xxxx
Under section 2, Rule 47 of the 1997 Rules of Civil Procedure, annulment of
judgments may be based on the grounds of extrinsic fraud and lack of
jurisdiction, with the effect of the judgment of annulment definitively set forth
in section 7 thereof. Based on all the foregoing considerations, this Court
holds and so rules that the court below had no jurisdiction to render the
assailed Decision which must accordingly be set aside, without prejudice
however to the original action being refiled (sec. 7, Rule 47, supra).
WHEREFORE, respondents’ motions are DENIED and the petition is
hereby GRANTED. The assailed Decision dated March 3, 1981
is ANNULLED and SET ASIDE, without prejudice to the original action being
refiled in the proper court.
No costs.19
There is nothing in the records that would show if the Heirs of Clemencia
Parasac and Liberato Bayaua filed a motion for reconsideration of the
foregoing Decision of the Court of Appeals. They did file before this Court a
Petition for Review on Certiorari, under Rule 45 of the Rules of Civil
Procedure, docketed as G.R. No. 149446. This Court, however, in a
Resolution,20 dated 17 October 2001, denied the Petition in G.R. No. 149446
for failure of the petitioners therein to comply with the following requirements
– rendered in Land Registration Case No. II-N-36, which adjudicated portions
(a) take the appeal within the reglementary period of fifteen (15) days
in accordance with Section 2, Rule 45 in relation to Section 5(a),
Rule 56, in view of the denial of petitioners’ motion for extension of
time to file petition in the resolution of 17 September 2001; and
(b) submit an affidavit of service of copies of the petition on
respondent and the Court of Appeals executed by the party serving
containing a full statement of the date, place and manner of service
in accordance with Sections 3 and 5, Rule 45 and Section 5(d), Rule
56 in relation to Section 13, Rule 13 of the Rules.
On 12 December 2001, this Court issued a Resolution 21 denying with finality
the motion filed by the Heirs of Clemencia Parasac and Liberato Bayaua, for
reconsideration of the Resolution, dated 17 September 2001, which denied
their motion for extension of time to file the Petition in G.R. No. 149446.
Likewise, on 11 February 2002, this Court issued another
Resolution22 denying with finality their motion for reconsideration of the
Resolution, dated 17 October 2002, which denied the Petition in G.R. No.
149446 for late filing and non-compliance with the Rules. In both
Resolutions, dated 12 December 2001 and 11 February 2002, this Court
found no compelling reason to warrant the reconsideration sought in the
motions.
With no other remedies brought before this Court, the Decision of the Court
of Appeals in CA-G.R. SP No. 54618, dated 19 July 2001, already became
final and executory. The said Decision annulled and set aside the Decision of
the CFI of Isabela, Branch 2, dated 3 March 1981, approving the
Compromise Agreement which adjudicated a portion of Lot No. 7453 of the
Santiago Cadastral Survey 211 to the Heirs of Clemencia Parasac and
Liberato Bayaua.
2) CA-G.R. CV No. 66594 – Appeal from the Order of the RTC of Santiago
City, Branch 35, dated 9 November 1999, in LRC Rec. No. 35-2578
Simultaneous with CA-G.R. SP No. 54618, the Republic of the Philippines,
represented by the OSG, filed an Appeal with the Court of Appeals, docketed
as CA-G.R. CV No. 66594, assailing the Order of the RTC of Santiago City,
Branch 35, dated 9 November 1999, which directed the Land Registration
Authority to issue to the Heirs of Clemencia Parasac and Liberato Bayaua
another copy, in replacement of the lost orignal, of Decree No. N-198071.
The OSG contended that the RTC of Santiago City, Branch 35, gravely erred
in rendering the assailed Order, despite the opposition thereto of the OSG,
because the Decision of the CFI of Isabela, Branch 2, dated 3 March 1981,
of Lot No. 7453 of the Santiago Cadastral Survey 211 to the parties therein,
had not yet attained finality for the simple reason that the OSG, as of the time
of filing of the Appeal, had not yet been furnished a copy of the said
Decision. In fact, as the OSG informed the Court of Appeals, there was
already a pending Petition for annulment of the Decision of the CFI of
Isabela, Branch 2, dated 3 March 1981, in Land Registration Case No. II-N-
36, before another Division of the Court of Appeals and docketed as CA-G.R.
SP No. 54618.
After the parties filed their respective briefs, the Tenth Division of the Court of
Appeals promulgated its Decision23on 24 February 2003, resolving the
appeal of the Republic of the Philippines in the following manner –
The appeal is devoid of merit.
Anent the first assigned error, oppositor-appellant belies the claim of
petitioners-appellees that Decree No. N-198071 issued by the Commissioner
of Land Registration is now considered lost and unrecoverable. They
contend that petitioners-appellees, in filing the present petition actually
intended for the issuance of a new decree in lieu of Decree No. N-198071.
We do not agree. The dispositive portion of the assailed Order dated
November 9, 1999 of the court a quo directs the Commissioner of Land
Registration to issue another copy of Decree No. N-198071 and not the
issuance of a new decree. It is the duty of the said commissioner to issue
decrees of registration. After judgment in a land registration proceeding
becomes final and executory, it shall devolve upon the court to forthwith
issue an order in accordance with Section 39 of Presidential Decree No.
1529 to the Commissioner of Land Registration for the issuance of the
decree of registration.
In the present case, the Court of [F]irst Instance of Isabela, Branch 2, already
issued an order for the issuance of a decree of registration on July 19, 1984
to the applicants of LRC Case No. II-N-36. Thus, the court a quo correctly
ordered for the issuance of another copy of Decree No. N-198071 since it
has been shown by petitioners-appellees that their copy of Decree No. N-
198071 was misplaced by the Registry of Deeds of Isabela when they
submitted it for registration.
As to the second assigned error, oppositor-appellant contends that the
issuance of Decree No. N-198071, pursuant to the Decision dated March 3,
1981 is full of legal setbacks and one of these is the fact that the OSG was
not furnished a copy of the said decision. Thus, a complaint was filed by the
OSG before this Court on August 27, 1999, docketed as C.A.-G.R. SP No.
54618 for the annulment of the Decision dated March 3, 1981.
We disagree. Under review in this appeal is the Order dated November 9,
1999 issued by the Regional Trial Court of Santiago City, Branch 35 and not
the March 3, 1981 decision of the Court of First Instance of Isabela, Branch
2. The said decision is not being assailed in this appeal hence, We are not at
liberty to review the same.
Furthermore, it would not be proper to consider and review the Decision
dated March 3, 1981 of the Court of First Instance of Isabela, Branch 2. To
do so would require us to modify or interfere with the judgment or order of
another division since the issue of its finality is pending before the Eleventh
Division of this Honorable Court docketed as SP No. 54618. Well-entrenched
in our jurisdiction is the doctrine that a court has no power to do so, as that
action may lead to confusion and seriously hinder the administration of
justice.
WHEREFORE, in view of the foregoing the assailed Order dated November
9, 1999 of the Regional Trial Court of Santiago City, Branch 35 is hereby
AFFIRMED. No costs.
The Republic of the Philippines timely moved for the reconsideration of the
afore-quoted decision of the Tenth Division of the Court of Appeals, dated 24
February 2003, in CA-G.R. CV No. 66594. It brought to the attention of the
Tenth Division of the Court of Appeals that the First Division of the same
Court had already rendered a Decision, dated 19 July 2001, in CA-G.R. SP
No. 54618, annulling and setting aside the Decision of the CFI of Isabela,
Branch 2, dated 3 March 1981, in Land Registration Case No. II-N-36.
Although the Heirs of Clemencia Parasac and Liberato Bayaua attempted to
file a Petition for Review on Certiorari of the Decision of the First Division of
the Court of Appeals, dated 19 July 2001, in CA-G.R. SP No. 54618, their
Petition was denied with finality by this Court for failure to comply with the
requirements in filing such a Petition. By virtue of this new information, the
Tenth Division of the Court of Appeals issued a Resolution24 on 10
September 2003 granting the motion for reconsideration of the Republic of
the Philippines, to wit –
The motion for reconsideration is meritorious.
The main issue of this case is whether or not another copy of Decree No. N-
198071 should be issued to herein petitioners-appellees. In our decision
dated February 24, 2003, We ruled in the affirmative. However, on July 19,
2001, the First Division of this Court promulgated its decision in Special
Proceeding No. 54618, annulling and setting aside the decision of the
Regional Trial Court of Isabela, Branch 2 dated March 3, 1981. The said
decision was the basis for the issuance of Decree No. N-198071 and as a
consequence of its annulment, a copy of the decree can no longer be issued.
WHEREFORE, in view thereof, the motion for reconsideration is
hereby GRANTED and our decision dated February 24, 2003 is
hereby REVERSED and SET ASIDE and the November 9, 1999 Order of the
Trial Court declared null and void.
It is this Resolution of the Tenth Division of the Court of Appeals, dated 10
September 2003, in CA-G.R. CV No. 66594, which is now the subject of the
petition at bar. In their lone assignment of error,25 petitioners Heirs of
Clemencia Parasac allege that –
THE FORMER TENTH (10th) DIVISION (now Eleventh Division) OF THE
COURT OF APPEALS GRAVELY ERRED IN ISSUING THE ASSAILED
RESOLUTION OF SEPTEMBER 10, 2003, WHICH GRANTED THE
MOTION FOR RECONSIDERATION OF ITS EARLIER DECISION DATED
FEBRUARY 24, 2003 AND REVERSING AND SETTING ASIDE THE SAME,
AS WELL AS NULLIFYING THE ORDER OF RTC branch 35 OF SANTIAGO
CITY DATED NOVEMBER 9, 1999, WHEN IT MERELY BASED ITS
JUDGMENT ON THE DECISION OF THE FIRST DIVISION OF THE SAME
COURT IN C.A. G.R. NO. 54618, NOTWITHSTANDING THE FACT THAT
THE LATTER DECISION CONSTITUTES A COLLATERAL ATTACK OF
THE DECISION OF THE CFI (now RTC) branch 2, OF ISABELA, IN LRC
CASE No. II-N-36, WHICH BY ITSELF HAS ALREADY ATTAINED
FINALITY LONG BEFORE C.A. G.R. NO. 54618 WAS FILED, CONTRARY
TO THE SPIRIT BEHIND THE TORRENS SYSTEM OF REGISTRATION.
In their Prayer, the Heirs of Clemencia Parasac sought from this Court the
following –
WHEREFORE, in view of the foregoing, petitioners most respectfully pray
that the Decision of the First Division of the Court of Appeals in CA G.R. SP
No. 54618 promulgated on July 19, 2001, which became the basis of the
Resolution of September 10, 2003 of the Former Tenth Division in C.A. G.R.
No. 66594, be annulled and set aside for being contrary to law and that the
Decision of the Former Tenth Division in C.A. G.R. No. 66594 promulgated
on February 24, 2003 be affirmed in toto.26
It is a prayer this Court cannot grant. This Court, finding that the instant
petition is devoid of merit, is compelled to deny the same.
When the Tenth Division of the Court of Appeals came out with its Decision,
dated 24 February 2003, in CA-G.R. CV No. 66594, it was not yet aware that
another Division of the same Court, namely, the First Division, already
promulgated a Decision, dated 19 July 2001, in CA-G.R. SP No. 54618.
Although the two cases were instituted and adjudged separately, it is
incontrovertible that they were related. More particularly, the issue in CA-
G.R. CV No. 66594 on whether or not another copy of Decree No. N-198071
should be issued to the Heirs of Clemencia Parasac, was dependent on the
resolution of the issue in CA-G.R. SP No. 54618 on whether or not the
Decision of the CFI of Isabela, Branch 2, dated 3 March 1981, in Land
Registration Case No. II-N-36, on which the Heirs of Clemencia Parasac
based their claim to the piece of land covered by Decree No. N-198071,
should be annulled.
It is uncontested that the only basis for the issuance of Decree No. N-
198071, covering a portion of Lot No. 7453 of the Santiago Cadastral Survey
211, is the Decision of the CFI of Isabela, Branch 2, dated 3 March 1981, in
Land Registration Case No. II-N-36, which approved the Compromise
Agreement, dated 6 February 1981, adjudicating such portion to the herein
petitioners Heirs of Clemencia Parasac, together with the Heirs of Liberato
Bayaua. When the First Division of the Court of Appeals, in its Decision,
dated 19 July 2001, in CA-G.R. SP No. 54618, annulled and set aside the
said Decision of the CFI of Isabela, Branch 2, dated 3 March 1981, in Land
Registration Case No. II-N-36, then, in effect, the titles of the parties therein
to certain portions of Lot No. 7453, as adjudicated in the Compromise
Agreement, dated 6 February 1981, remained unconfirmed. Without any
confirmed title to their supposed portion of Lot No. 7453, it follows that the
Heirs of Clemencia Parasac did not have a right to the issuance of any
decree of registration, for they cannot register in their name a title to a piece
of land which has not been confirmed, whether judicially or administratively,
in accordance with existing laws. Since the Heirs of Clemencia Parasac had
no right to the issuance of the original Decree No. N-198071, consequently,
they also had no right to the issuance of a copy thereof. With the annulment
and setting aside of the Decision of the CFI of Isabela, Branch 2, dated 3
March 1981, in Land Registration Case No. II-N-36, by virtue of the Decision
of the First Division of the Court of Appeals, dated 19 July 2001, in CA-G.R.
SP No. 54618, there is also no more basis for the Order of the RTC of
Santiago City, Branch 35, dated 9 November 1999, directing the Land
Registration Authority to issue another copy of Decree No. N-198071 to the
Heirs of Clemencia Parasac and Liberato Bayaua. Thus, the Tenth Division
of the Court of Appeals did not err when it granted the motion for
reconsideration of the Republic of the Philippines in a Resolution, issued on
10 September 2003, wherein it reversed and set aside its earlier Decision,
dated 24 February 2003, and declared the Order of the RTC of Santiago
City, Branch 35, dated 9 November 1999, null and void.
Moreover, in the arguments and prayer contained in their present petition,
the Heirs of Clemencia Parasac seek from this Court the annulment and
setting aside of the Decision of the First Division of the Court of Appeals,
dated 19 July 2001, in CA-G.R. SP No. 54618, which declared null and void
the Decision of the CFI of Isabela, Branch 2, dated 3 March 1981, in Land
Registration Case No. II-N-36, the latter being their sole basis for their claim
for the issuance of Decree No. N-198071.
It bears to emphasize that the instant Petition arose from CA-G.R. CV No.
66594, which only involves the appropriateness of issuing another copy of
Decree No. N-198071 to the Heirs of Clemencia Parasac. The Decision of
the First Division of the Court of Appeals, dated 19 July 2001, in CA-G.R. SP
No. 54618 was already the subject of another Petition, also filed before this
Court by the Heirs of Clemencia Parasac, docketed as G.R. No. 149446.
However, because the Petition in G.R. No. 149446 was filed out of time and
without the required affidavit of service, it was denied by this Court in a
Resolution, dated 17 October 2001. This Court denied with finality the motion
filed by the Heirs of Clemencia Parasac for reconsideration of its previous
Resolution, dated 17 October 2001. There being no other remedy brought
before this Court as to the Decision of the First Division of the Court of
Appeals, dated 19 July 2001, in CA-G.R. SP No. 54618, the same had
already become final and executory. Any subsequent attempt by the Heirs of
Clemencia Parasac to reverse or modify the same is already barred by res
judicata.
In the case of Spouses Barretto v. Court of Appeals,27 this Court expounded
on the doctrine of res judicata in the following manner –
Section 47, Rule 39 of the Rules of Court, provides:
"Sec. 47. Effect of judgments or final orders. - The effect of a judgment or
final order rendered by a court of the Philippines, having jurisdiction to
pronounce the judgment or final order, may be as follows:
xxxx
(b) In other cases, the judgment or final order is, with respect to the
matter directly adjudged or as to any other matter that could have
been raised in relation thereto, conclusive between the parties and
their successors in interest by title subsequent to the
commencement of the action or special proceeding, litigating for the
same thing and under the same title and in the same capacity; and
(c) In any other litigation between the same parties of their
successors in interest, that only is deemed to have been adjudged in
a former judgment or final order which appears upon its face to have
been so adjudged, or which was actually and necessarily included
therein or necessary thereto."
The aforecited rule in point embodies the fundamental principles of res
judicata, finality of judgment and estoppel by judgment, which means that
once a judgment has become final and executory, the issues therein litigated
upon are laid to rest.
The doctrine of res judicata is of two aspects. The first aspect is the effect of
a judgment as a bar to the prosecution of a second action upon the same
claim, demand or cause of action. The second aspect precludes the
relitigation of a particular fact or issue in another action between the same
parties or their successors in interest, on a different claim or cause of action.
There is also a discussion, along similar lines, on the doctrine of res
judicata in the earlier case of Calalang v. Register of Deeds of Quezon
City,28 which reads –
The doctrine res judicata actually embraces two different concepts: (1) bar by
former judgment and (b) conclusiveness of judgment.
The second concept – conclusiveness of judgment – states that a fact or
question which was in issue in a former suit and was there judicially passed
upon and determined by a court of competent jurisdiction, is conclusively
settled by the judgment therein as far as the parties to that action and
persons in privity with them are concerned and cannot be again litigated in
any future action between such parties or their privies, in the same court or
any other court of concurrent jurisdiction on either the same or different
cause of action, while the judgment remains unreversed by proper authority.
It has been held that in order that a judgment in one action can be conclusive
as to a particular matter in another action between the same parties or their
privies, it is essential that the issue be identical. If a particular point or
question is in issue in the second action, and the judgment will depend on
the determination of that particular point or question, a former judgment
between the same parties or their privies will be final and conclusive in the
second if that same point or question was in issue and adjudicated in the first
suit (Nabus vs. Court of Appeals , 193 SCRA 732 [1991]). Identity of cause of
action is not required but merely identity of issues.
The case of Legarda v. Savellano29 elucidates the rationale for respecting the
conclusiveness of judgment, thus –
As we have repeatedly enunciated, public policy and sound practice enshrine
the fundamental principle upon which the doctrine of res judicata rests that
parties ought not to be permitted to litigate the same issues more than once.
It is a general rule common to all civilized system of jurisprudence, that the
solemn and deliberate sentence of the law, pronounced by its appointed
organs, upon a disputed fact or a state of facts, should be regarded as a final
and conclusive determination of the question litigated, and should forever set
the controversy at rest. Indeed, it has been well said that this maxim is more
than a mere rule of law; more even than an important principle of public
policy; and that it is not too much to say that it is a fundamental concept in
the organization of every jural sytem. Public policy and sound practice
demand that, at the risk of occasional errors, judgments of courts should
become final at some definite date fixed by law. The very object for which Costs against the petitioners Heirs of Clemencia Parasac.
courts were constituted was to put an end to controversies.
SO ORDERED.
If this Court should grant the Petition at bar, it would be violating the second
concept of the doctrine of res judicata, the conclusiveness of judgment. Even
when the instant Petition is supposedly for the issuance of another copy of
Decree No. N-198071 in favor of the Heirs of Clemencia Parasac, what it is
actually praying for is the re-litigation of the issue of the validity of the
Decision of the CFI of Isabela, Branch 2, dated 3 March 1981, in Land
Registration Case No. II-N-36, on which the Heirs of Clemencia Parasac
based their claim to the piece of land covered by Decree No. N-198071. The
said issue was already directly put into question in CA-G.R. SP No. 54618,
because the Petition therein, filed by the Republic of the Philippines, as
represented by the OSG, against the Heirs of Clemencia Parasac, among
other persons, precisely sought the annulment of the Decision of the CFI of
Isabela, Branch 2, dated 3 March 1981, in Land Registration Case No. II-N-
36. The First Division of the Court of Appeals rendered its Decision on the
merits of the said case on 19 July 2001. The said Decision comprehensively
presented the findings of fact and law of the First Division of the Court of
Appeals, which led to its conclusion that the Decision of the CFI of Isabela,
Branch 2, dated 3 March 1981, in Land Registration Case No. II-N-36, was
indeed null and void. This Decision of the First Division of the Court of
Appeals, dated 19 July 2001, in CA-G.R. SP No. 54618, had already attained
finality and, hence, conclusive on the Tenth Division of the Court of Appeals,
who resolved CA-G.R. CV No. 66594, there being an unmistakable identity of
issues and parties between CA-G.R. SP No. 54618 and CA-G.R. CV No.
66594.

Finally, the Heirs of Clemencia Parasac cannot use the Petition at bar as a
substitute to their Petition in G.R. No. 149446. Their Petition in G.R. No.
149446 sought the review on certiorari of the Decision of the First Division of
the Court of Appeals, dated 19 July 2001, in CA-G.R. SP No. 54618.
However, it was denied by this Court for failure to comply with the
requirements for such a Petition. To grant the instant Petition would not only
be a violation of the conclusiveness of judgment, one of the concepts of the
principle of res judicata, but also a circumvention of the procedural rules,
which would render the previous denial by this Court of the Petition in G.R.
No. 149446 nugatory.

IN VIEW OF THE FOREGOING, the instant Petition is hereby DENIED. The

Resolution of the Tenth Division of the Court of Appeals in CA-G.R. No.
66594, dated 10 September 2003, which granted the motion for
reconsideration of the Republic of the Philippines by reversing and setting
aside its earlier Decision in the same case, dated 24 February 2003, and
declaring null and void the Order of the RTC of Santiago City, Branch 35, in
LRC Rec. No. 35-2578, dated 9 November 1999, is hereby AFFIRMED.
G.R. No. 191101 October 1, 2014
SPOUSES MARIO OCAMPO and CARMELITA F. OCAMPO, Petitioners,
vs.
HEIRS OF BERNARDINO U. DIONISIO, represented by ARTEMIO SJ.
DIONISIO, Respondents.
DECISION
REYES, J.:
Before this Court is a petition for review on certiorari1 under Rule 45 of the
Rules of Court seeking to annul and set aside the Decision2 dated July 2,
2009 and Resolution3 dated January 27, 2010 issued by the Court of
Appeals (CA) in CA-G.R. SP No. 106064, which affirmed the Decision4 dated
September 3, 2008 of the Regional Trial Court (RTC) of Binangonan, Rizal,
Branch 69, in SCA Case No. 08-014.
The Facts
On August 28, 1996, Bernardino U. Dionisio (Dionisio) filed a complaint 5 for
forcible entry with the Municipal Trial Court (MTC) of Cardona, Rizal,
docketed as Civil Case No. 96-0031 (forcible entry case), against Mario
Ocampo (Mario) and Felix Ocampo (Felix). Dionisio sought to recover the
possession of a portion ofhis property, covered by Original Certificate of Title
(OCT) No. M-4559, situated in Dalig, Cardona, Rizal, alleging that Mario and
Felix built a piggery thereon without his consent. In his answer,6 Mario
denied Dionisio’s allegation, claiming that the disputed parcel of land is
owned by his wife, Carmelita Ocampo (Carmelita), who inherited the same
from her father. Mario further claimed that they have been in possession of
the said parcel of land since 1969.
On September 12, 1997, the MTC rendered a decision,7 which dismissed the
complaint for forcible entry filed by Dionisio. The MTC opined that Dionisio
failed to establish his prior possession of the disputed parcel of land.
Dionisio’s notice of appeal was denied by the MTC in its Order 8 dated
January 26, 1998 for having been filed beyond the reglementary period.
Dionisio died on September 27, 1997.Consequently, on July 3, 1998, the
heirs of Dionisio (respondents), filed a complaint9 for recovery of possession
with the MTC, docketed as Civil Case No. 98-0006 (recovery of possession
case), against the spouses Mario and Carmelita (petitioners). The
respondents sought to recover the same portion of the parcel of land subject
of Civil Case No. 96-0031.
The respondents averred that the subject property was acquired by Dionisio
on February 10, 1945 when he purchased the same from Isabelo Capistrano.
That Dionisio thereafter took possession of the subject property and was able
to obtain a free patent covering the subject property. OCT No. M-4559 was
subsequently issued in the name of Dionisio on December 22, 1987. The
respondents further claimed that sometime in 1995, Mario constructed a
piggery on a portion of the subject property without their consent. 10
In their answer,11 the petitioners maintained that the subject parcel of land is
owned by Carmelita, having acquired the same through inheritance and that
they have been in possession thereof since 1969. Additionally, the petitioners
claimed that the respondents’ complaint for recovery of possession of the
subject property is barred by res judicatain the light of the finality of the
decision in the forcible entry case.
On February 18, 2008, the MTC rendered a decision12 dismissing the
complaint for recovery ofpossession filed by the respondents on the ground
of res judicata. Thus:
The Court has taken cognizance of the fact that the earlier case for forcible
entry docketed as Civil Case No. 96-0031 was filed by Bernardino U.
Dionisio against the same defendant Mario Ocampo before this Court on
August 28, 1996, and a decision based on the merit was rendered on
September 12, 1997 where this Court ruled to dismiss the complaint for
failure on the part of the plaintiff to establish their prior possession of the land
and sufficient evidence to establish cause of action by preponderance of
evidence.
xxxx
Hence, the present complaint must be dismissed on ground of res judicata.
The material fact or question in issue in the forcible entry is for recovery of
possession which was conclusively settled in the decision dated September
12, 1997, such fact or question may not again be litigated in the present
action for accion publiciana, although covered by ordinary civil proceeding,
but technically has the same purpose, a suit for recovery of the right to
possess.13
On appeal, the RTC rendered a Decision14 on September 3, 2008, the
decretal portion of which reads:
WHEREFORE, premises considered, the appealed decision of Municipal
Trial Court of Cardona, Rizal, dated February 8, 2008, is hereby REVERSED
and SET ASIDE and a new one rendered in favor of the plaintiffs-appellants
as follows:
1. Declaring plaintiffs-appellants as entitled to possession for being
the lawful owners of the lands described under paragraph II of the
complaint and covered by Original Certificate of Title No. M-4559.
2. Ordering the defendants-appellees and all persons claiming rights
under them to vacate the parcel of land located at Dalig, Cardona,
Rizal with an area of 225 square meters covered by Original
certificate of Title No. M-4559 in the name of Bernardino Dionisio
and more particularly described under paragraph 2 of the complaint,
to remove the improvements thereon and deliver its possession to
the plaintiffs.
3. Ordering the defendants-appellees to pay plaintiffs-appellants
₱10,000.00 as attorney’s fees and litigation expenses of ₱5,000.
SO ORDERED.15
The RTC ruled that the MTC erred in dismissing the respondents’ complaint
for recovery of possession ofthe subject property solely on the ground of res
judicata. The RTC opined that the forcible entry case, only involves the
question of who has a better right to the possession of the subject property
while the recovery ofpossession case not only involves the right to the
possession of the subject property, but the ownership thereof as well. The
RTC stressed that a judgment rendered in a forcible entry case will not bar
an action for recovery ofpossession based on title or ownership since there is
no identity of cause of action as between the two cases.
Further, the RTC held that the respondents were able to establish that the
subject property is indeed part ofthe parcel of land covered by OCT No. M-
4559 registered in the name of Dionisio. Considering that OCT No. M-4559 is
registered under the name of Dionisio, the RTC opined that the respondents,
as sucessors-in-interestof Dionisio, are entitled to the possession of the
subject property as an attribute of their ownership over the same. On the
other hand, the RTC averred that the petitioners failed to adduce sufficient
evidence to support their claim that they indeed own the subject property.
Unperturbed, the petitioners filed a petition for review with the CA, alleging
that the RTC erred in setting aside the MTC Decision dated February 18,
2008. They maintained that the finality of the decision in the forcible entry
case constitutes res judicata, which would warrant the outright dismissal of
the respondents’ complaint for recovery of possession; that the respondents
were not able to sufficiently prove their ownership of the subject property.
The petitioners further contended that OCT No. M-4559 registered in the
name of Dionisio was irregularly issued. They likewise claimed that
respondents’ cause of action in the recovery of possession case is already
barred by laches.
On July 2, 2009, the CA rendered the herein assailed decision,16 which
affirmed the RTC Decision dated September 3, 2008.The CA held that the
doctrine of res judicata cannot be applied in this case since there is no
identity of cause of action as between the forcible entry case and the
recovery of possession case. The CA likewise affirmed the RTC’s finding that
the respondents, as successors-in-interest of Dionisio, have sufficiently
established their ownership of the subject property and, hence, are entitled to
the possession thereof. Further, the CAheld that the respondents’ cause of
action is not barred by laches.
The petitioners sought a reconsideration of the Decision dated July 2, 2009,
but it was denied by the CA in its Resolution 17 dated January 27, 2010.
Hence, the instant petition.
Issues
Essentially, the issues set forth bythe petitioners for this Court’s resolution
are the following: (1) whether the finality of the decision in the forcible entry
case constitutes res judicata, which would warrant the dismissal of the
respondents’ complaint for recovery of possession; (2) whether the
respondents were able to establish their ownership of the subject property;
and (3) whether the respondents’ cause of action is already barred by laches.
The Ruling of the Court
The petition is denied.
First Issue: Res Judicata
The doctrine of res judicata is laid down under Section 47, Rule 39 of the
Rules of Court, which pertinently provides that:
Sec. 47. Effect of judgments or final orders.— The effect of a judgment or
final order rendered by a court of the Philippines, having jurisdiction to
pronounce the judgment or final order, may be as follows:
xxxx
 (b) In other cases, the judgment orfinal order is, with respect to the
matter directly adjudged or as to any other matter that could have
been raised in relation thereto, conclusive between the parties and
their successors in interest by title subsequent to the
commencement of the action or special proceeding, litigating for the
same thing and under the same title and in the same capacity; and
(c) In any other litigation between the same parties of their
successors in interest, that only is deemed to have been adjudged in
a former judgment or final order which appears upon its faceto have
been so adjudged, or which was actually and necessarily included
therein or necessary thereto.
This provision comprehends two distinct concepts of res judicata: (1) bar by
former judgmentand (2) conclusiveness of judgment.18 In Judge Abelita III v.
P/Supt. Doria, et al.,19 the Court explained the two aspects of res judicata,
thus:
There is "bar by prior judgment" when, as between the first case where the
judgment was rendered and the second case that is sought to be barred,
there is identity of parties, subject matter, and causes of action. In this
instance, the judgment in the first case constitutes an absolute bar to the
second action. Otherwise put, the judgment or decree of the court of
competent jurisdiction on the merits concludes the litigation between the
parties, as well as their privies, and constitutes a bar to a new action or suit
involving the same cause of action before the same or other tribunal.
But where there is identity of parties in the first and second cases, but no
identity of causes of action, the first judgment is conclusive only as to those
matters actually and directly controverted and determined and not as to
matters merely involved therein. This is the concept of res judicata known as
"conclusiveness of judgment." Stated differently, any right, fact or matter in
issue directly adjudicated or necessarily involved in the determination of an
action before a competent court in which judgment is rendered on the merits
is conclusivelysettled by the judgment therein and cannot again be litigated
between the parties and their privies whether or not the claim, demand,
purpose, or subject matter of the two actions is the same.20
For res judicataunder the first concept, bar by prior judgment, to apply, the
following requisites must concur, viz: (a) finality of the former judgment; (b)
the court which rendered it had jurisdiction over the subject matter and the
parties; (c) it must bea judgment on the merits; and (d) there must be,
between the first and second actions, identity of parties, subject matter and
causes of action.21
The first three requisites are present in this case. The Decision dated
September 12, 1997 in the forcible entry case rendered by the MTC, a court
which has jurisdiction over the subjectproperty and the parties, had long
become final. The said MTC decision is an adjudication on the merits.
However, the fourth requisite is not present. Although there is identity of
parties and subject matter as between the forcible entry case and recovery of
possession case, there is no identity of causes of action.
As correctly found by the RTC and the CA, the forcible entry case only
involves the issue of possession over the subject property while the recovery
of possession case puts in issue the ownership of the subject property and
the concomitant right to possess the same as an attribute of ownership.
In an action for forcible entry and detainer, the only issue is possession in
fact, or physical possession of real property, independently of any claim of
ownership that either party may put forth in his pleading. If plaintiff can prove
prior physical possession in himself, he may recover such possession even
from the owner, but, on the other hand, if he cannot prove such prior physical
possession, he has no right of action for forcible entry and detainer even if he
should be the owner of the property.22
Thus, even the MTC, in its Decision dated September 12, 1997 in the forcible
entry case, stressed that its determination is only limited to the issue of who
has "actual prior possession" of the subject property regardless of the
ownership of the same.23
On the other hand, the recovery of possession case is actually an accion
reinvindicatoria or a suit to recover possession of a parcel of land as an
element of ownership. A perusal of the complaint filed by the respondents in
the recoveryof possession case shows that the respondents, as successors-
in-interest of Dionisio, are asserting ownership of the subject property and
are seeking the recovery of possession thereof.
A judgment rendered in a forcible entry case will not bar an action between
the same parties respecting title or ownership because between a case for
forcible entry and an accion reinvindicatoria, there is no identity of causes of
action.24 Such determination does not bind the title or affect the ownership of
the land; neither is it conclusive of the facts therein found in a case between
the same parties upon a different cause of action involving possession.
The decision in the forcible entry case is conclusive only as to the MTC’s
determination that the petitioners are not liable for forcible entry since the
respondents failed to prove their prior physical possession; it is not
conclusive as to the ownership of the subject property. Besides, Section 18,
Rule 70 of the Rules of Court expressly provides that a "judgment rendered
in an action for forcible entry or detainer shall be conclusive with respect to of the registered owner shall be acquired by prescription or adverse
the possession only and shall in no wise bind the title or affect the ownership possession."27
of the land."
WHEREFORE, in consideration of the foregoing disquisitions, the petition is
Second Issue: Ownership of the Subject Property DENIED. The Decision dated July 2, 2009 and Resolution dated January 27,
2010 of the Court of Appeals in CA-G.R. SP No. 106064 are hereby
The respondents were able to prove that they have a superior right over the AFFIRMED.
subject property as against the petitioners.1âwphi1 It is undisputed that the
subject property is indeed covered by OCT No. M-4559, which is registered SO ORDERED.
in the name of Dionisio, the respondents’ predecessor-in-interest. Between
the petitioners’ unsubstantiated and self-serving claim that the subject
property was inherited byCarmelita from her father and OCT No. M-4559
registered in Dionisio’s name, the latter must prevail. The respondents’ title
over the subject property is evidence of their ownership thereof. That a
certificate of title serves as evidence of an indefeasible and incontrovertible
title to the property in favor of the person whose name appears therein and
that a person who has a Torrens title over a land is entitled to the possession
thereof are fundamental principles observed in this jurisdiction.25

Further, it is settled that a Torrens Certificate of Title is indefeasible and

binding upon the whole world unless and until it has been nullified by a court
of competent jurisdiction. Under existing statutory and decisional law, the
power to pass upon the validity of such certificate of title at the first instance
properly belongs to the Regional Trial Courts in a direct proceeding for
cancellation of title.26 Accordingly, the petitioners may not assail the validity
of the issuance of OCT No. M-4559 in the name of Dionisio in their answer to
the complaint filed by the respondents for recovery of possession of the
subject property; it is a collateral attack to the validity of OCT No. M-4559,
which the RTC and the CA aptly disregarded.

Third Issue: Laches

Equally untenable is the petitioners’ claim that the respondents’ right to

recover the possession of the subject property is already barred by laches.
As owners of the subject property, the respondents have the right to recover
the possession thereof from any person illegally occupying their property.
This right is imprescriptible. Assuming arguendo that the petitioners indeed
have been occupying the subject property for a considerable length of time,
the respondents, as lawful owners, have the right to demand the return of
their property at any time as long as the possession was unauthorized or
merely tolerated, if at all.

Jurisprudence consistently holds that "prescription and laches can not apply
to registered land covered by the Torrens system" because "under the
Property Registration Decree, no title to registered land in derogation to that
G.R. No. 166495 February 16, 2011
ROQUE C. FACURA and EDUARDO F. TUASON, Petitioners,
vs.
COURT OF APPEALS, RODOLFO S. DE JESUS and EDELWINA DG.
PARUNGAO, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 184129
RODOLFO S. DE JESUS, Petitioner,
vs.
OFFICE OF THE OMBUDSMAN, EDUARDO F. TUASON, LOCAL WATER
UTILITIES ADMINISTRATION (LWUA), represented by its new
Administrator Orlando C. Hondrade, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 184263
OFFICE OF THE OMBUDSMAN, Petitioner,
vs.
EDELWINA DG. PARUNGAO, and the HONORABLE COURT OF
APPEALS (Former 7th Division),Respondents.
DECISION
MENDOZA, J.:
For resolution before this Court are the following:
G.R. No. 166495 is a petition for certiorari filed by Roque
Facura (Facura) and Eduardo Tuason (Tuason) assailing the
Resolutions1 dated September 22, 2004 and January 4, 2005 of the Court of
Appeals (CA) in CA-G.R. SP No. 84902, which granted the applications for
preliminary mandatory injunction filed by Atty. Rodolfo De Jesus (De Jesus)
and Atty. Edelwina Parungao (Parungao) by ordering their reinstatement to
their former positions despite the standing order of dismissal issued by the
Office of the Ombudsman (Ombudsman) against them.
G.R. No. 184129 is an appeal, by way of Petition for Review on Certiorari
under Rule 45 of the Rules of Court, filed by De Jesus, from the
Decision2 dated May 26, 2005 and Resolution3 dated August 6, 2008 of the
CA, in CA-G.R. SP No. 84902, which affirmed the Review and
Recommendation4 dated January 26, 2004 and Order 5 dated April 20, 2004
issued by the Ombudsman in OMB-C-A-02-0496-J, which dismissed De
Jesus from the government service with prejudice to re-entry thereto.
G.R. 184263 is another appeal, by way of Petition for Review on Certiorari
under Rule 45 of the Rules of Court, filed by the Ombudsman, from the
Decision dated May 26, 2005 and Resolution dated August 6, 2008 of the
CA, in CA-G.R. SP No. 84902, for ordering the reinstatement of Parungao as
Manager of the Human Resources Management Department (HRMD) of the
Local Water Utilities Administration (LWUA), thereby modifying the Review
and Recommendation6 dated January 26, 2004 and Order7 dated April 20,
2004, issued by the Ombudsman in OMB-C-A-02-0496-J, which dismissed
Parungao from the government service with prejudice to re-entry thereto.
These consolidated cases arose from a Joint Complaint-Affidavit filed with
the Ombudsman by Facura and Tuason against De Jesus and Parungao for
violation of Republic Act (R.A.) No. 3019 (the Anti-Graft and Corrupt
Practices Act), dishonesty, gross neglect of duty, grave misconduct,
falsification of official documents, being notoriously undesirable, and conduct
prejudicial to the best interest of the service.
The Facts
The LWUA is a government-owned and controlled corporation chartered
under Presidential Decree (P.D) No. 198, as amended. De Jesus was the
Deputy Administrator for Administrative Services of LWUA, while Parungao
was its HRMD Manager for Administrative Services.
De Jesus was dismissed from the service per LWUA Board Resolution No.
0618 dated March 28, 2001. Through Board Resolution No. 069 dated April
17, 2001, the Board denied his motion for reconsideration and prohibited De
Jesus from acting on any matter as head of Administrative Services. On April
18, 2001, De Jesus appealed to the Civil Service Commission (CSC) to
nullify Board Resolution Nos. 061 and 069.
On August 20, 2001, pending resolution of his petition with the CSC, De
Jesus filed a petition for reinstatement with a newly-reconstituted LWUA
Board, which granted it on September 4, 2001 through Board Resolution No.
172.9 De Jesus then withdrew his petition with the CSC on September 5,
2001.
Under the CSC Accreditation Program, particularly under CSC Resolution
No. 96770110 dated December 3, 1996, LWUA has been granted the
authority to take final action on appointment papers effective January 1,
1997. Under LWUA Officer Order No. 205.0111 dated September 25, 2001,
LWUA Administrator Lorenzo Jamora (Administrator Jamora) granted De
Jesus the authority to sign/approve and issue appointment papers of
appointees to vacant plantilla positions in LWUA which have been previously
cleared or approved in writing by the Administrator or the Board of Trustees.
Prior to the grant of authority to De Jesus to sign appointment papers, in a
letter12 dated August 27, 2001 signed by Administrator Jamora, LWUA
requested the Department of Budget and Management (DBM) for authority to
hire confidential staff for the LWUA Board of Trustees. The request was to
seek exemption for LWUA from Administrative Order No. 5 which prohibited
the hiring of new personnel in order to generate savings.
While awaiting the reply of DBM on his request, Jamora, in an inter-office
memorandum 13 dated October 23, 2001, directed the Office of Administrative
Services (OAS), headed by De Jesus, and the Investment and Financial
Services, to process the payment of the salaries and allowances of his two
(2) newly appointed confidential staff who reported to him effective October
10, 2001. Upon receipt of the said inter-office memorandum, the OAS
forwarded it to the HRMD headed by Parungao for appropriate action.
On December 11, 2001, LWUA received a reply letter14 from DBM granting
the request to fill positions for the LWUA Board’s confidential staff. On the
same day, on the strength of said letter of approval, LWUA board members
issued their respective inter-office memoranda15 and letter16 containing the
retroactive appointments of their confidential staff, as follows: Board
Chairman Francisco Dumpit appointed Michael M. Raval and Ma. Geraldine
Rose D. Buenaflor effective August 20, 2001; Trustee Bayani Dato, Sr.
appointed Albino G. Valenciano, Jr. effective August 20, 2001; and Trustee
Solomon Badoy appointed Kristina Joy T. Badoy and Noelle Stephanie R.
Badoy effective June 19, 2001. On December 18, 2001, Trustee Normando
Toledo also issued an inter-office memorandum 17appointing, effective August
20, 2001, Marc Anthony S. Verzosa and Ma. Lourdes M. Manaloto. These
inter-office memoranda and letter directed De Jesus to prepare their
appointment papers. They bore the written concurrence of Administrator
Jamora as agency head and mandated appointing authority of LWUA
employees under the LWUA charter. Upon his receipt of the aforesaid inter-
office memoranda and letter, De Jesus forwarded them to the HRMD for the
preparation and processing of the corresponding appointment papers.
As HRMD head, Parungao forwarded the said documents to the Personnel
Division to have them transformed into formal appointment papers, otherwise
known as CSC Standard Form No. 33. The encoded standard forms
indicated the names and positions of the confidential staff and the dates of
signing and issuance of the appointments, which were the retroactive
effectivity dates appearing in the inter-office memoranda and letter issued by
the Board member. The concerned HRMD staff and Parungao affixed their
initials below the printed name of De Jesus who, in turn, signed the formal
appointment papers as respresentative of the appointing authority. The nine
(9) appointment papers18 bore Serial Nos. 168207, 168210, 168213, 168214,
168215, 168216, 168217, 168287, and 168288.
In Office Order No. 286.01 dated December 13, 2001 and Office Order No.
001.02 dated December 20, 2001 issued by De Jesus and Parungao, it was
stated therein that the following nine (9) personnel were appointed
retroactively to the dates indicated below:
Ma. Geraldine Rose D. Buenaflor - August 20, 2001
Michael M. Raval - August 20, 2001
Albino G. Valenciano, Jr. - August 20, 2001
Noelle Stephanie R. Badoy - June 19, 2001
Kristina Joy T. Badoy - June 19, 2001
Jesusito R. Toren - October 15, 2001
Ma. Susan G. Facto - October 10, 2001
Ma. Lourdes M. Manaloto - August 20, 2001
Marc Anthony S. Versoza - August 20, 2001
On December 20, 2001, Administrator Jamora issued an inter-office
memorandum19 to the accounting department on the matter of payment of
back salaries of the said confidential staff, stating therein that as approved by
the DBM in its letter, the hiring of such personnel was authorized retroactive
to their employment date, thus, ordering the immediate payment of their back
salaries and other remunerations. On the same day, a LWUA disbursement
voucher20 was prepared and processed by the Accounting Department, and
Administrator Jamora thereafter approved the release of a Land Bank check
amounting to ₱624,570.00 as part of the cash advance amounting to
₱692,657.31, for the payment of the back salaries.
The appointments of the subject confidential staff were reflected in the
Supplemental Quarterly Report on Accession for June and August 2001
and Quarterly Report on Accession and Separation for October to December
2001 which were submitted to the CSC on January 8, 2002.
On January 25, 2002, HRMD and OAS issued a Memorandum 21 for
Administrator Jamora on the subject of the appointment papers of the nine
(9) confidential staff of the Board. De Jesus and Parungao called his
attention to the requirements under CSC Resolution No. 96770122 of the
submission to the CSC of two (2) copies of the Report on Personnel
Actions (ROPA) within the first fifteen (15) days of the ensuing month
together with the certified true copies of the appointments acted on, and
appointments not submitted within the prescribed period would be made
effective thirty (30) days prior to the date of submission to the CSC. It was
explained that the appointment papers with retroactive effectivity dates
violated the provisions of CSC Res. No. 967701 and Rule 7, Section 11 of
the CSC Omnibus Rules on Appointments. For said reason, LWUA
accreditation could be cancelled and the Administrator be held personally
liable for the invalidated appointments. It was suggested instead that the
appointments be re-issued effective December 12, 2001, the ROPA be dated
January 15, 2002, and the earlier retroactive appointments be cancelled, as
advised by a CSC Field Director in a previous informal consultation. It was
also proposed that the salaries and benefits already paid be made
on quantum meruit basis, based on actual services rendered as certified by
the Board members.
Therefore, for the purpose of meeting the monitoring and reportorial
requirements of the CSC in relation to the accreditation given to LWUA to
take final action on its appointments, De Jesus and Parungao, with the prior
approval of Administrator Jamora, re-issued the appointments of the Board’s
nine (9) confidential staff. The appointment papers 23 were now all dated
December 12, 2001, with Serial Nos. 168292, 168293, 168294, 168295,
168297, 168298, 168299, 168301, and 168304 and were transmitted to the
CSC.
On February 28, 2002, Administrator Jamora again wrote a letter24 to the
DBM clarifying whether its December 11, 2001 letter, approving the hiring of
the confidential staff of the LWUA Board, had retroactive effect. It was
explained that the said confidential staff had started rendering services as
early as August 20, 2001, when the Board assumed office because their
services were urgently needed by the trustees.
Meanwhile, the LWUA Accounting Department, in a Brief to the Legal
Department dated March 2, 2002, sought its legal opinion on the subject of
the first payment of salary of the confidential staff. The Legal Department
replied that a letter had been sent to the DBM seeking clarification on
whether the previous DBM approval retroacted to the actual service of the
confidential staff.
Thereafter, the Internal Control Office (ICO) of LWUA issued a memorandum
dated May 10, 2002, questioning the issuance of the retroactive appointment
papers. It pointed out that since the appointment papers submitted to the
CSC indicated December 12, 2001 as effective date, the appointment of the
involved personnel to the government service should be considered effective
only on said date, with their salaries and other compensation computed only
from December 12, 2001. Thus, there was an overpayment made as follows:
Ma. Geraldine Rose D. Buenaflor - ₱107,730.09
Michael M. Raval - ₱111,303.16
Albino G. Valenciano, Jr. - ₱107, 730.09
Noelle Stephanie R. Badoy - ₱157, 210.34
Kristina Joy T. Badoy - ₱163, 130.69
It was further recommended that the Legal Department conduct an
investigation to identify the person liable to refund to LWUA the
overpayments made to the subject personnel and that the Accounting
Department take appropriate actions to recover the overpayment.
On June 5, 2002, LWUA received DBM’s reply letter25 on June 5, 2002,
informing Administrator Jamora that the previously granted authority on the
hiring of the confidential staff to the LWUA Board may be implemented
retroactive to the date of actual service rendered by the employees involved.
In a Brief to Administrator Jamora dated July 26, 2002, signed by De Jesus
and initialed by Parungao, the issues raised by ICO in its Memorandum on
the retroactive appointments of the concerned confidential staff and
overpayments were deemed clarified with the reply letter of the DBM on the
retroactive implementation of the authority granted to LWUA in the previous
letter of approval.
Meanwhile, on November 20, 2001, in relation to the earlier appeal of De
Jesus (which he withdrew upon his reinstatement by the newly reconstituted
LWUA Board), the CSC issued Resolution No. 011811,26 which remanded
the case to LWUA for the conduct of an investigation regarding De Jesus’
dismissal, to be finished within three (3) calendar months, failure of which
would result in the dismissal of the case against De Jesus.
On August 15, 2002, the CSC issued Resolution No. 02109027 ruling that
CSC Resolution No. 011811 had not been rendered moot and academic by
the reinstatement of De Jesus by the LWUA Board. It further declared the
reinstatement as illegal, null and void. The Board was directed to recall the
reinstatement of De Jesus, and LWUA was ordered to continue the conduct
of the investigation on De Jesus as earlier directed, within three (3) calendar
months from receipt of the resolution. For failure of LWUA to conduct an
investigation within the required period, CSC Resolution No. 03050428 was
issued dated May 5, 2003 considering the dismissal case closed and
terminated.
Complaint of Facura and Tuason
On October 18, 2002, Facura and Tuason filed a Joint Affidavit-
Complaint29 before the Evaluation and Preliminary Investigation Bureau of
the Ombudsman against De Jesus and Parungao charging them with: 1)
violation of Section 3(e) of R.A. No. 3019; and 2) dishonesty, gross neglect of
duty, grave misconduct, falsification of official documents, being notoriously
undesirable, and conduct prejudicial to the best interest of the service, for the
fabrication of fraudulent appointments of nine (9) coterminous employees of
LWUA.
Facura and Tuason alleged that the retroactive appointment papers were
fabricated and fraudulent as they were made to appear to have been
signed/approved on the dates stated, and not on the date of their actual
issuance. They further alleged that with malice and bad faith, De Jesus and
Parungao willfully and feloniously conspired not to submit the fraudulent
appointment papers to the CSC, and to submit instead the valid set of
appointment papers bearing the December 12, 2001 issuance date.
They questioned the issuance of the fraudulent appointments in favor of the
nine (9) confidential staff, to the prejudice of the government in the amount of
₱692,657.31, as these were used as basis for the payment of their back
salaries. They also alleged that De Jesus’ reinstatement was illegal and that
he had lost authority to sign any LWUA documents effective upon the
issuance of LWUA Board Resolution Nos. 061 and 069. Thus, the actions
undertaken by him in signing the fraudulent appointments were all
misrepresented and, therefore, unlawful. They further alleged that contrary to
law, De Jesus continued to receive his salary and benefits as Deputy
Administrator of LWUA despite having already been dismissed. They cited
the string of criminal and administrative cases against De Jesus before the
trial courts and the Ombudsman.
In their Joint Counter-Affidavit,30 De Jesus and Parungao alleged that they
were mere rank-and-file employees who had no knowledge of or participation
in personnel matters; that their actions in issuing the two sets of
appointments were all documented and above-board; that as subordinate
employees, they had no discretion on the matter of the retroactive
appointments of the nine confidential staff specifically requested by the
Board members; and that the re-issuance of the second set of appointments
effective December 12, 2001 was duly approved by Administrator Jamora.
They denied any financial damage on the part of LWUA since the retroactive
payment of salaries was justified under the DBM letter approving the hiring of
personnel retroactive to the date of actual services rendered by them.
The Ruling of the Ombudsman
The complaint was originally referred to the Ombudsman’s Preliminary
Investigation and Administrative Adjudication Bureau – B, and assigned to
Graft Investigation and Prosecution Officer I Vivian Magsino-Gonzales (Pros.
Magsino-Gonzales). After evaluating the documents on file, Pros. Magsino-
Gonzales dispensed with the preliminary conference and preliminary
investigation of the case. In her Decision dated September 30, 2003, she
recommended the outright dismissal of the case, ratiocinating that the
Ombudsman did not have the jurisdiction to resolve the issues of fraudulent
appointments of the nine confidential staff and their alleged overpayment to
the damage of LWUA and the government and to decide on the status of De
Jesus as a dismissed employee which, in her view, belonged to the primary
jurisdiction and technical expertise of the CSC.
Said recommendation was disapproved by the Ombudsman and the case
was referred for review to Special Prosecution Officer Roberto
Agagon (Special Pros. Agagon) of the Preliminary Investigation and
Administrative Adjudication Bureau – A. Without conducting a preliminary
conference or investigation, Special Pros. Agagon came up with the assailed
Review and Recommendation finding De Jesus and Parungao guilty of grave
misconduct, dishonesty, gross neglect of duty, and falsification, the
dispositive portion of which reads:
WHEREFORE, respondents Rodolfo S. De Jesus and Edelwina DG.
Parungao are meted out the penalty of Dismissal from the service with
prejudice to re-entry into the government service.
On March 24, 2004, Facura and Tuason filed their Motion for
Reconsideration but the same was denied in the assailed Order dated April
20, 2004.
The Ombudsman found that during De Jesus’ dismissal from the service at
the LWUA, and despite the advice of the CSC to await the final resolution of
his appeal, De Jesus illegally issued appointments to several co-terminous
employees in June and August 2001. The appointments were found to have
been prepared and issued by De Jesus and Parungao after the former had
been terminated from LWUA, therefore, without authority to sign/act on any
official LWUA document/official matter, which fact he was fully aware of,
thereby making the solemnity of the documents questionable. All said
appointments were, thus, found to be fraudulent, illegal, and of no legal force
and effect. Since these were also prepared and initialed by Parungao, a
conspiracy to commit falsification through dishonesty was found to have
been present.
It was also found that the DBM approved the LWUA request on retroactivity
of payment of back salaries because not all facts attendant to the illegal
appointments had been disclosed to said office. The deliberate concealment
of the illegal appointment papers was dishonest. The attachment of the illegal
appointments to the LWUA Disbursement Voucher for payment of
backsalaries, to the prejudice and damage of the government, was also cited
as another deliberate concealment and distortion with false narration of facts.
The Ombudsman also viewed the second set of appointment papers as to
have been issued for no apparent reason and designed to legalize the illegal
appointments issued in June and August 2001. Thus, dishonesty on the part
of De Jesus was found to be present for acting against a series of orders
issued by the CSC and for the falsification of the illegal appointment papers.
The Ruling of the Court of Appeals
Aggrieved, De Jesus and Parungao filed a petition for review with the CA on
July 5, 2004 which was docketed as CA-G.R. SP No. 84902, praying, among
others, for the issuance of a Temporary Restraining Order (TRO) and/or
preliminary prohibitory injunction to enjoin the implementation of the order of
dismissal against them. The CA, in its Resolution dated July 20, 2004,
deferred action on the application for TRO and gave Facura and Tuason time
to comment.
After the petition to the CA was filed, LWUA implemented the order of
dismissal against De Jesus and Parungao. Administrator Jamora issued
Office Order No. 151204 notifying De Jesus and Parungao of their dismissal
from the LWUA effective at the close of office hours on July 23, 2004.
On August 12, 2004, the CA granted the application for TRO so as not to
render the issues raised in the petition moot and academic. On August 24,
2004, Facura and Tuason filed their Manifestation with Extremely Urgent
Motion for Dissolution of the issued TRO because the act to be enjoined, the
implementation of the dismissal order, was fait accompli.
On September 22, 2004, the CA issued the assailed Resolution denying
Facura and Tuason’s motion to dissolve the TRO, and granting the issuance
of a writ of preliminary mandatory injunction in favor of De Jesus and
Parungao, which reads as follows:
WHEREFORE, the foregoing considered, the Motion to Dissolve TRO filed
by respondents is hereby DENIED. Accordingly, let writ of preliminary
mandatory injunction issue enjoining LWUA and the Office of the
Ombudsman from enforcing the assailed Order and are thereby directed to
maintain and/or restore the status quo existing at the time of the filing of the
present petition by reinstating petitioners to their former positions pending the
resolution of this case upon the filing of petitioner’s bond in the amount of
P40,000.00 each, which will answer for whatever damages respondents may
sustain in the event that the petition is not granted.
The CA found that the right to appeal from decisions of the Ombudsman
imposing a penalty other than public censure or reprimand, or a penalty of
suspension of more than one month or a fine equivalent to more than one
month’s salary, granted to parties by Section 27 of R.A. No. 6770 (the
Ombudsman Act) should generally carry with it the stay of these decisions
pending appeal citing Lopez v. Court of Appeals.31 The right to a writ of
preliminary mandatory injunction was deemed to be in order because De
Jesus’ and Parungao’s right to be protected under R.A. No. 6770 was found
to exist prima facie, and the acts sought to be enjoined are violative of such
right.
On October 4, 2004, Facura, Tuason and LWUA moved for the
reconsideration of the September 22, 2004 Resolution, which motion was
opposed by De Jesus and Parungao. Their Motions for Reconsideration were
denied by the CA on January 4, 2005, as follows:
WHEREFORE, the foregoing considered, the respondents’ respective
Motions for Reconsideration of the Resolution dated 22 September 2004 are
hereby DENIED. Petitioner De Jesus’ Most Urgent Motion to Deputize the
Philippine National Police to Implement the Injunctive Writ dated 29
September 2004 is GRANTED and accordingly the said entity is hereby
deputized to implement the injunctive relief issued by this Court.
Facura and Tuason then filed the present Petition for Certiorari with this
Court questioning the above-mentioned Resolutions of the CA, docketed as
G.R. No. 166495. Pending resolution of the said Petition, the CA rendered its
decision in CA-G.R. SP No. 84902, dated May 26, 2005, the dispositive
portion of which reads:
WHEREFORE, the foregoing considered, the petition is GRANTED and the
assailed Review and Recommendation and Order are MODIFIED hereby
ordering the reinstatement of petitioner Parungao as Manager of the Human
Resource Management Department of LWUA with back pay and without loss
of seniority. The dismissal of petitioner De Jesus from the government
service with prejudice to re-entry thereto is AFFIRMED.
Facura, Tuazon and the Ombudsman filed their respective Motions for Partial was found to be distinct from misrepresentation of authority to sign
Reconsideration, while De Jesus filed his Motion for Reconsideration. These appointment papers.
were denied by the CA in its Resolution dated August 6, 2008.
Hence, the present Petitions for Review on Certiorari separately filed by De
The CA believed that at the time De Jesus signed the two sets of Jesus and the Ombudsman, docketed as G.R. Nos. 185129 and 184263,
appointment papers, the CSC had not divested itself of jurisdiction and respectively.
authority over his dismissal case. Thus, he misrepresented his authority to do
so as his dismissal was still in effect and for resolution by the CSC. The CA THE ISSUES
agreed with De Jesus that it was his ministerial duty to comply with the
request of the Board members. However, he failed to perform his ministerial
The issues presented for resolution by Facura (now deceased) and Tuason
duty, for if he had in fact done so, the second set of appointments would not
in G.R. No. 166495 are as follows:
have been issued as the first set of appointments with retroactive effectivity
dates would have already been submitted to the CSC.
a. Whether or not an appeal of the Ombudsman’s decision in
administrative cases carries with it the suspension of the imposed
The CA further found the request for approval to the DBM to apply the earlier
penalty;
granted authority to hire retroactively as a disingenuous attempt to provide a
semblance of legality to the intended retroactive appointments. It held that
the approval or disapproval of appointment to the government was the sole b. Whether or not petitioners were heard before the issuance of the
office of the CSC, and not the DBM, as the LWUA authority to take final writ of preliminary mandatory injunction; and
action on its appointments was by virtue of CSC’s accreditation program. De
Jesus’ failure to submit the retroactive appointment papers as prescribed c. Whether or not private respondents are entitled to the writ of
under the CSC accreditation was viewed by the CA as a concealment of preliminary mandatory injunction.
such retroactivity and, thus, dishonesty. To its mind, the CSC was
deliberately made unaware of what the DBM was doing, and vice versa. The assignment of errors presented by De Jesus in G.R. No. 184129, are as
follows:
Parungao was exonerated by the CA after having been found that she took
steps to clarify the matter with the CSC, informed her superiors about her I
misgivings and the legal effects of the retroactive appointments, and
published such retroactive appointments in the LWUA Quarterly Reports on THE COURT OF APPEALS GROSSLY ERRED IN NOT APPLYING THE
Accession, thus, demonstrating her good faith. DOCTRINE OF CONCLUSIVENESS OF JUDGMENT AND/OR RES
JUDICATA ARISING FROM SC DECISION DATED OCTOBER 17, 2007 IN
In its Resolution denying the motions for reconsideration filed by Facura, G.R. NOS. 164166 & 164173-80 AND CSC RES. NOS. 03-0504, 07-0146 &
Tuazon and De Jesus, the CA ruled, among others, that the case of De 07-0633.
Jesus v. Sandiganbayan32 could not be used as basis to absolve
administrative liability, as the present case was not limited solely to II
falsification and preparation of the two sets of appointment papers. The CA
found that De Jesus failed to comply with CSC rules due to his failure to
THE COURT OF APPEALS GROSSLY ERRED IN NOT FINDING
submit the first set of appointment papers to the CSC. Dishonesty was found
PETITIONER TO HAVE ACTED IN GOOD FAITH WHEN HE OBEYED THE
present when De Jesus submitted the first set of appointment papers to the
PATENTLY LAWFUL ORDERS OF HIS SUPERIORS.
DBM and the second set to CSC to comply with reportorial requirements,
ensuring that the DBM was unaware of what the CSC was doing and vice
versa. The CSC resolutions dismissing the complaint against De Jesus were III
found to have no bearing as the dismissal case was already before the CSC
for resolution when De Jesus affixed his signature. Thus, De Jesus had no THE COURT OF APPEALS GROSSLY ERRED IN STILL RELYING ON
authority to sign the appointment papers and by doing so, he defied the CSC CSC RES. NO. 01-1811 AND RES. NO. 02-1090 AFTER HAVING BEEN
directive recalling his reinstatement. Violation of CSC rules on appointment RENDERED MOOT AND ACADEMIC BY CSC RES. NO. 03-0405.
 IV
THE COURT OF APPEALS GROSSLY ERRED IN FINDING PETITIONER
TO HAVE COMMITTED AN ACT OF DISHONESTY IN RELATION TO THE
CSC ACCREDITATION PROGRAM.
V is public censure or reprimand, suspension of not more than one month, or a
PUBLIC RESPONDENT OFFICE OF THE OMBUDSMAN AND THE COURT
OF APPEALS DO NOT HAVE JURISDICTION TO COLLATERALLY RULE
AGAINST PETITIONER’S TITLE AS DEPUTY ADMINISTRATOR OF LWUA.
VI
THE COURT OF APPEALS GROSSLY ERRED IN FAILING TO
APPRECIATE AS MITIGATING CIRCUMSTANCES THE EDUCATION AND
LENGTH OF SERVICE OF PETITIONER IN THE IMPOSITION OF
SUPREME PENALTY OF DISMISSAL.
VII
THE COURT OF APPEALS GROSSLY ERRED IN STILL FINDING
PETITIONER GUILTY OF MISREPRESENTATION OF AUTHORITY AFTER
EXONERATING ATTY. EDELWINA DG. PARUNGAO.
The issue presented for resolution by the Ombudsman in G.R. No. 184263 is
as follows:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT
NO SUBSTANTIAL EVIDENCE EXISTS AGAINST RESPONDENT
PARUNGAO FOR THE ADMINISTRATIVE OFFENSE OF DISHONESTY
WHICH WARRANTS HER DISMISSAL FROM THE SERVICE .
THE RULING OF THE COURT
G.R. No. 166495
The issue of whether or not an appeal of the Ombudsman decision in an
administrative case carries with it the immediate suspension of the imposed
penalty has been laid to rest in the recent resolution of the case of
Ombudsman v. Samaniego,33 where this Court held that the decision of the
Ombudsman is immediately executory pending appeal and may not be
stayed by the filing of an appeal or the issuance of an injunctive writ, to wit:
Section 7, Rule III of the Rules of Procedure of the Office of the
Ombudsman,34 as amended by Administrative Order No. 17 dated
September 15, 2003, provides:
SEC. 7. Finality and execution of decision. – Where the respondent is
absolved of the charge, and in case of conviction where the penalty imposed
fine equivalent to one month salary, the decision shall be final, executory and
unappealable. In all other cases, the decision may be appealed to the Court
of Appeals on a verified petition for review under the requirements and
conditions set forth in Rule 43 of the Rules of Court, within fifteen (15) days
from receipt of the written Notice of the Decision or Order denying the motion
for reconsideration.
An appeal shall not stop the decision from being executory. In case the
penalty is suspension or removal and the respondent wins such
appeal, he shall be considered as having been under preventive
suspension and shall be paid the salary and such other emoluments
that he did not receive by reason of the suspension or removal.
A decision of the Office of the Ombudsman in administrative cases
shall be executed as a matter of course. The Office of the Ombudsman
shall ensure that the decision shall be strictly enforced and properly
implemented. The refusal or failure by any officer without just cause to
comply with an order of the Office of the Ombudsman to remove, suspend,
demote, fine, or censure shall be a ground for disciplinary action against
such officer. [Emphases supplied]
The Ombudsman’s decision imposing the penalty of suspension for one year
is immediately executory pending appeal.35 It cannot be stayed by the mere
filing of an appeal to the CA. This rule is similar to that provided under
Section 47 of the Uniform Rules on Administrative Cases in the Civil Service.
In the case of In the Matter to Declare in Contempt of Court Hon. Simeon A.
Datumanong, Secretary of the DPWH,36 we held:
The Rules of Procedure of the Office of the Ombudsman are clearly
procedural and no vested right of the petitioner is violated as he is
considered preventively suspended while his case is on appeal. Moreover, in
the event he wins on appeal, he shall be paid the salary and such other
emoluments that he did not receive by reason of the suspension or removal.
Besides, there is no such thing as a vested interest in an office, or even an
absolute right to hold office. Excepting constitutional offices which provide for
special immunity as regards salary and tenure, no one can be said to have
any vested right in an office.
Following the ruling in the above cited case, this Court, in Buencamino v.
Court of Appeals,37 upheld the resolution of the CA denying Buencamino’s
application for preliminary injunction against the immediate implementation of
the suspension order against him. The Court stated therein that the CA did
not commit grave abuse of discretion in denying petitioner’s application for
injunctive relief because Section 7, Rule III of the Rules of Procedure of the
Office of the Ombudsman was amended by Administrative Order No. 17
dated September 15, 2003.
Respondent cannot successfully rely on Section 12, Rule 43 of the Rules of
Court which provides:
SEC. 12. Effect of appeal ― The appeal shall not stay the award, judgment,
final order or resolution sought to be reviewed unless the Court of Appeals
shall direct otherwise upon such terms as it may deem just.
In the first place, the Rules of Court may apply to cases in the Office of the
Ombudsman suppletorily only when the procedural matter is not governed by
any specific provision in the Rules of Procedure of the Office of the
Ombudsman.38 Here, Section 7, Rule III of the Rules of Procedure of the
Office of the Ombudsman, as amended, is categorical, an appeal shall not
stop the decision from being executory.
Moreover, Section 13 (8), Article XI of the Constitution authorizes the Office
of the Ombudsman to promulgate its own rules of procedure. In this
connection, Sections 18 and 27 of the Ombudsman Act of 198939 also
provide that the Office of the Ombudsman has the power to "promulgate its
rules of procedure for the effective exercise or performance of its powers,
functions and duties" and to amend or modify its rules as the interest of
justice may require. For the CA to issue a preliminary injunction that will stay
the penalty imposed by the Ombudsman in an administrative case would be
to encroach on the rule-making powers of the Office of the Ombudsman
under the Constitution and RA 6770 as the injunctive writ will render nugatory
the provisions of Section 7, Rule III of the Rules of Procedure of the Office of
the Ombudsman.
Clearly, Section 7, Rule III of the Rules of Procedure of the Office of the
Ombudsman supersedes the discretion given to the CA in Section 12,40 Rule
43 of the Rules of Court when a decision of the Ombudsman in an
administrative case is appealed to the CA. The provision in the Rules of
Procedure of the Office of the Ombudsman that a decision is immediately
executory is a special rule that prevails over the provisions of the Rules of
Court. Specialis derogat generali. When two rules apply to a particular case,
that which was specially designed for the said case must prevail over the
other.41 [Emphases supplied]
Thus, Section 7, Rule III of the Rules of Procedure of the Office of the
Ombudsman, as amended by Administrative Order (A.O.) No. 17, is
categorical in providing that an appeal shall not stop an Ombudsman
decision from being executory. This rule applies to the appealable decisions
of the Ombudsman, namely, those where the penalty imposed is other than
public censure or reprimand, or a penalty of suspension of more than one
month, or a fine equivalent to more than one month’s salary. Hence, the
dismissal of De Jesus and Parungao from the government service is
immediately executory pending appeal.
The aforementioned Section 7 is also clear in providing that in case the
penalty is removal and the respondent wins his appeal, he shall be
considered as having been under preventive suspension and shall be paid
the salary and such other emoluments that he did not receive by reason of
the removal. As explained above, there is no such thing as a vested interest
in an office, or an absolute right to hold office, except constitutional offices
with special provisions on salary and tenure. The Rules of Procedure of the
Ombudsman being procedural, no vested right of De Jesus and Parungao
would be violated as they would be considered under preventive suspension,
and entitled to the salary and emoluments they did not receive in the event
that they would win their appeal.
The ratiocination above also clarifies the application of Rule 43 of the Rules
of Court in relation to Section 7 of the Rules of Procedure of the Office of the
Ombudsman. The CA, even on terms it may deem just, has no discretion to
stay a decision of the Ombudsman, as such procedural matter is governed
specifically by the Rules of Procedure of the Office of the Ombudsman.
The CA’s issuance of a preliminary mandatory injunction, staying the penalty
of dismissal imposed by the Ombudsman in this administrative case, is thus
an encroachment on the rule-making powers of the Ombudsman under
Section 13 (8), Article XI of the Constitution, and Sections 18 and 27 of R.A.
No. 6770, which grants the Office of the Ombudsman the authority to
promulgate its own rules of procedure. The issuance of an injunctive writ
renders nugatory the provisions of Section 7, Rule III of the Rules of
Procedure of the Office of the Ombudsman.
The CA, however, cannot be blamed for so ruling because at that time the
Court’s rulings were not definite and, thus, nebulous. There were no clear-cut
guidelines yet. Even the initial ruling in Samaniego on September 11, 2008,
stated in effect that the mere filing by a respondent of an appeal sufficed to
stay the execution of the joint decision against him. The Samaniego initial
ruling merely followed that in the case of Office of the Ombudsman v.
Laja,42where it was stated:
[O]nly orders, directives or decisions of the Office of the Ombudsman in
administrative cases imposing the penalty of public censure, reprimand, or
suspension of not more than one month, or a fine not equivalent to one
month salary shall be final and unappealable hence, immediately
executory. In all other disciplinary cases where the penalty imposed is
other than public censure, reprimand, or suspension of not more than
one month, or a fine not equivalent to one month salary, the law gives
the respondent the right to appeal. In these cases, the order, directive
or decision becomes final and executory only after the lapse of the
period to appeal if no appeal is perfected, or after the denial of the
appeal from the said order, directive or decision. It is only then that
execution shall perforce issue as a matter of right. The fact that the
Ombudsman Act gives parties the right to appeal from its decisions
should generally carry with it the stay of these decisions pending
appeal. Otherwise, the essential nature of these judgments as being
appealable would be rendered nugatory. [Emphasis in the original].
Having ruled that the decisions of the Ombudsman are immediately
executory pending appeal, The Court finds it unncessary to determine
whether or not Facura and Tuason were heard before the issuance of the
writ of preliminary mandatory injunction.
G.R. Nos. 184129 & 184263
The Court now looks into the issue of whether De Jesus was rightfully
dismissed from the government service, and whether Parungao was righfully
exonerated by the CA.
Conclusiveness of Judgment
De Jesus contends that under the doctrine of conclusiveness of judgment
and/or res judicata, the present case is bound by the decision of this Court in
De Jesus v. Sandiganbayan.43
The original complaint filed with the Ombudsman by Facura and Tuason
spawned two cases, an administrative proceeding docketed as OMB-C-A-
0496-J, which is the subject of this present case, and a proceeding for the
determination of probable cause for the filing of criminal charges docketed as
OMB-C-C-02-0712-J.
As to the criminal charges, probable cause was found to be present by the
Ombudsman, and nine (9) informations for falsification of public documents
were separately filed against De Jesus and Parungao with the
Sandiganbayan docketed as Criminal Case Nos. 27894-27902. After his
Motion to Quash was denied, De Jesus filed a petition for certiorari with this
Court docketed as G.R. Nos. 164166 & 164173-80, entitled De Jesus v.
Sandiganbayan.44 This petition was resolved on October 17, 2007 in favor of
De Jesus with the finding that the evidence could not sustain a prima facie
case. His Motion to Quash was granted for lack of probable cause to form a
sufficient belief as to the guilt of the accused. The Court stated that there was
no reasonable ground to believe that the requisite criminal intent or mens
rea was present, finding that nothing in the two sets of appointment papers
constituted an absolutely false narration of facts.
As a result, the criminal cases filed with the Sandiganbayan were
consequently dismissed on March 14, 2008.45Copies of the decisions of this
Court and the Sandiganbayan were submitted to the CA through a
Manifestation with Most Urgent Ex-Parte Motion on April 24, 2008.
De Jesus cited the case of Borlongan v. Buenaventura 46 to support his
argument that this administrative case should be bound by the decision in De
Jesus v. Sandiganbayan.47 In Borlongan, similar to the situation prevailing in
this case, the complaint-affidavit filed with the Ombudsman also spawned
two cases – a proceeding for the determination of probable cause for the
filing of criminal charges, and an administrative case subject of the petition.
In said case, this Court found that its factual findings regarding the
proceeding for the determination of probable cause bound the disposition of
the factual issues in the administrative case under the principle of
conclusiveness of judgment, as both the probable cause proceeding and the
administrative case require the same quantum of evidence, that is,
substantial evidence. Furthermore, the factual backdrop in the proceeding for
the determination of probable cause, which this Court declared as insufficient
to hold respondents for trial, was the same set of facts which confronted this
Court in the administrative case.
On the other hand, the Ombudsman, Tuason and LWUA raised the
jurisprudential principle that the dismissal of a criminal case involving the
same set of facts does not automatically result in the dismissal of the
administrative charges due to the distinct and independent nature of one
proceeding from the other. They further countered that the only issue
resolved in De Jesus was the absence of mens rea, which was not a
mandatory requirement for a finding of falsification of official documents as
an administrative offense;48 and although it was found that there was no
absolutely false narration of facts in the two sets of appointment papers, the
issue in this administrative case was not limited solely to falsification of
official documents. It was further contended that the evidence and
admissions in the administrative case were different from the evidence in the
criminal case, thus, the findings in the criminal case could not bind the
administrative case. Finally, they argued that the doctrine of res judicata
would only apply to judicial or quasi-judicial proceedings and not to
administrative matters.49
The Court agrees with De Jesus insofar as the finding regarding the
falsification of official documents is concerned.
The doctrine of res judicata is set forth in Section 47 of Rule 39 of the Rules
of Court, as follows:
Sec. 47. Effect of judgments or final orders. - The effect of a judgment or final
order rendered by a court of the Philippines, having jurisdiction to pronounce
the judgment or final order, may be as follows:
xxx
(b)In other cases, the judgment or final order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors in
interest by title subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same title and in the
same capacity; and
(c)In any other litigation between the same parties or their successors in
interest, that only is deemed to have been adjudged in a former judgment or
final order which appears upon its face to have been so adjudged, or which
actually and necessarily included therein or necessary thereto.
The principle of res judicata lays down two main rules: (1) the judgment or
decree of a court of competent jurisdiction on the merits concludes the
litigation between the parties and their privies and constitutes a bar to a new
action or suit involving the same cause of action either before the same or
any other tribunal; and (2) any right, fact, or matter in issue directly
adjudicated or necessarily involved in the determination of an action before a
competent court in which a judgment or decree is rendered on the merits is
conclusively settled by the judgment therein and cannot again be litigated
between the parties and their privies whether or not the claims or demands,
purposes, or subject matters of the two suits are the same.50 The first rule
which corresponds to paragraph (b) of Section 47 above, is referred to as
"bar by former judgment"; while the second rule, which is embodied in
paragraph (c), is known as "conclusiveness of judgment."51
As what is involved in this case is a proceeding for the determination of
probable cause and an administrative case, necessarily involving different
causes of action, the applicable principle is conclusiveness of judgment. The
Court in Calalang v. Register of Deeds of Quezon City52 explained such, to
wit:
The second concept - conclusiveness of judgment- states that a fact or
question which was in issue in a former suit and was there judicially passed
upon and determined by a court of competent jurisdiction, is conclusively
settled by the judgment therein as far as the parties to that action and
persons in privity with them are concerned and cannot be again litigated in
any future action between such parties or their privies, in the same court or
any other court of concurrent jurisdiction on either the same or different
cause of action, while the judgment remains unreversed by proper authority.
It has been held that in order that a judgment in one action can be conclusive
as to a particular matter in another action between the same parties or their
privies, it is essential that the issue be identical. If a particular point or
question is in issue in the second action, and the judgment will depend on
the determination of that particular point or question, a former judgment
between the same parties or their privies will be final and conclusive in the
second if that same point or question was in issue and adjudicated in the first
suit (Nabus v. Court of Appeals, 193 SCRA 732 [1991]). Identity of cause of
action is not required but merely identity of issue.
Justice Feliciano, in Smith Bell & Company (Phils.), Inc. v. Court of
Appeals (197 SCRA 201, 210 [1991]), reiterated Lopez v. Reyes (76 SCRA
179 [1977]) in regard to the distinction between bar by former judgment
which bars the prosecution of a second action upon the same claim,
demand, or cause of action, and conclusiveness of judgment which bars the
relitigation of particular facts or issues in another litigation between the same
parties on a different claim or cause of action.
The general rule precluding the relitigation of material facts or questions
which were in issue and adjudicated in former action are commonly applied
to all matters essentially connected with the subject matter of the litigation.
Thus, it extends to questions necessarily implied in the final judgment,
although no specific finding may have been made in reference thereto and
although such matters were directly referred to in the pleadings and were not
actually or formally presented. Under this rule, if the record of the former trial
shows that the judgment could not have been rendered without deciding the
particular matter, it will be considered as having settled that matter as to all
future actions between the parties and if a judgment necessarily
presupposes certain premises, they are as conclusive as the judgment itself.
Under the principle of conclusiveness of judgment, when a right or fact has
been judicially tried and determined by a court of competent jurisdiction, or
when an opportunity for such trial has been given, the judgment of the court,
as long as it remains unreversed, should be conclusive upon the parties and
those in privity with them. Simply put, conclusiveness of judgment bars the
relitigation of particular facts or issues in another litigation between the same
parties on a different claim or cause of action.53
Although involving different causes of action, this administrative case and the
proceeding for probable cause are grounded on the same set of facts,
involve the same issue of falsification of official documents, and require the
same quantum of evidence54– substantial evidence, as was similarly found in
Borlongan, and correctly relied upon by De Jesus.
It was ruled in De Jesus that there was no reasonable ground to believe that
the requisite criminal intent or mens rea was present. Although the presence
of mens rea is indeed unnecessary for a finding of guilt in an administrative
case for falsification of official documents,55 it was expressly found by this
Court in De Jesus that there was no absolutely false narration of facts in the
two sets of appointment papers. The pertinent portion is quoted hereunder as
follows:
Criminal intent must be shown in felonies committed by means of dolo, such
as falsification. In this case, there is no reasonable ground to believe that the
requisite criminal intent or mens rea was present. The Ombudsman assails
the first set of documents with dates of appointment earlier than December
12, 2001. Clearly, the first set of CSC Form No. 33 was prepared earlier as
shown by the serial numbers. The first set has serial numbers 168207,
168210, 168213, 168214, 168215, 168216, 168217, 168287 and 168288;
while the second set has serial numbers 168292, 168293, 168294, 168295,
168297, 168298, 168299, 168301 and 168304. The Ombudsman also admits
this fact. Indeed, petitioner admits having signed two sets of appointment
papers but nothing in said documents constitutes an absolutely false
narration of facts. The first set was prepared and signed on the basis of the
inter-office memoranda issued by the members of the Board appointing their
respective confidential staff conformably with the DBM approval. There was
no untruthful statement made on said appointment papers as the concerned
personnel were in fact appointed earlier than December 12, 2001. In fact, the
DBM also clarified that the authority to hire confidential personnel may be
implemented retroactive to the date of actual service of the employee
concerned.In any case, Jamora authorized the issuance of the second set of
appointment papers. Following the CSC Rules, the second set of
appointment papers should mean that the first set was ineffective and that
the appointing authority, in this case, the members of the Board, shall be
liable for the salaries of the appointee whose appointment became
ineffective. There was nothing willful or felonious in petitioner's act warranting
his prosecution for falsification. The evidence is insufficient to sustain a prima
facie case and it is evident that no probable cause exists to form a sufficient
belief as to the petitioner's guilt.56 [Emphasis supplied]
Hence, the finding that nothing in the two sets of appointment papers
constitutes an absolutely false narration of facts is binding on this case, but
only insofar as the issue of falsification of public documents is concerned,
and not on the other issues involved herein, namely, the other acts of De
Jesus and Parungao which may amount to dishonesty, gross neglect of duty,
grave misconduct, being notoriously undesirable, and conduct prejudicial to
the best interest of the service, as charged in the complaint.
Contrary to Tuason and LWUA’s contentions, the factual finding of this Court
in De Jesus as to the absence of falsification is based on the same evidence
as in this administrative case. There are, however, other evidence and
admissions present in this case as cited by Tuason and LWUA which pertain
to other issues and not to the issue of falsification.
Meanwhile the doctrine in Montemayor v. Bundalian57 that res
judicata applies only to judicial or quasi-judicial proceedings, and not to the
exercise of administrative powers, has been abandoned in subsequent
cases58 which have since applied the principle of res judicata to
administrative cases. Hence, res judicata can likewise be made applicable to
the case at bench. Thus, given all the foregoing, the factual finding in De
Jesus that there was no false statement of facts in both sets of appointment
papers, is binding in this case.
Even granting that the principle of conclusiveness of judgment is inapplicable
to the case at bench, this Court finds no cogent reason to deviate from the
factual findings in De Jesus based on a careful review of the evidence on
record. The existence of malice or criminal intent is not a mandatory
requirement for a finding of falsification of official documents as an
administrative offense. What is simply required is a showing that De Jesus
and Parungao prepared and signed the appointment papers knowing fully
well that they were false.59
The Court, however, believes that in this case, at the time each set of
appointment papers were made, De Jesus and Parungao believed they were
making true statements. They prepared and signed the first set on the basis
of the inter-office memoranda issued by the Board members appointing their
respective confidential staff conformably with DBM approval. The second set
was prepared to correct the retroactive appointments to conform to the CSC
reportorial requirements, and the same was also approved by Administrator
Jamora. There was no reason for De Jesus and Parungao to believe such to
be false. Irregular it is perhaps, not being in conformity with the CSC rules on
accreditation, but not false. Therefore, this Court finds that no falsification of
official documents occured.
Legality of Reinstatement and Authority to Sign
The CA held that, as evinced from CSC Resolution No. 011811, which
ordered LWUA to conduct an investigation, the CSC had not divested itself of
jurisdiction and authority over De Jesus’ dismissal case at the time he issued
and signed both sets of appointment papers. The CA ruled that in doing so,
he defied the CSC directive recalling his reinstatement.
De Jesus argues that, his title is not open to indirect challenge and can only
be assailed in a proceeding for quo warranto; and that absent any judicial
declaration, he remained to be a de jure officer, and even if he were only a
de facto officer, his acts were done under color of authority and, thus, valid
and binding. De Jesus further argues that the pendency of his appeal to the
CSC did not render his reinstatement illegal, as he had no choice but to rely
on the regularity of the LWUA board resolution which reinstated him, and this
reinstatement should have rendered superfluous the CSC resolution ordering
investigation. He further contends that it was wrong for the CA to rely on the
CSC resolutions which were interlocutory. Since CSC Resolution No. 030504
ultimately dismissed the case against him and in effect nullified his prior
dismissal from LWUA, he should be considered as never having left his
office. Said CSC resolution should have also rendered the previous CSC
resolutions moot and academic.
De Jesus also cites CSC Resolution Nos. 07-0633 and 07-0146, which relate
to other complaints filed against him, and which recognize the legality of his
reinstatement and affirm CSC Resolution No. 030504 as res judicata. He
argues that this case should be bound by the three aforementioned CSC
resolutions under the principle of res judicata.
A brief review of the relevant facts is necessary to resolve the issue at hand.
LWUA dismissed De Jesus on March 28, 2001. He appealed to the CSC on
April 18, 2001. He was reinstated on September 4, 2001 and so withdrew his
appeal with the CSC the next day. Notwithstanding, in connection with his
appeal, the CSC issued Resolution No. 011811 on November 20, 2001
ordering LWUA to investigate. The two sets of appointment papers were
signed by De Jesus in December 2001. It was only on August 15, 2002 that
the CSC issued Resolution No. 021090, which recalled De Jesus’
reinstatement and declared it illegal and void. However, De Jesus title was
conclusively established on May 5, 2003 by CSC Resolution No. 030504,
which finally dismissed the case against him.
Thus, prior to the CSC resolution recalling his reinstatement and declaring it
illegal and void, De Jesus cannot be faulted for relying on the LWUA board
resolution reinstating him as Deputy Administrator. Furthermore, the CSC
resolution recalling his reinstatement and declaring it illegal and void was
issued only after the appointment papers were prepared and signed. Thus,
there was no misrepresentation of authority on the part of De Jesus when he
signed the appointment papers because he did so after he was reinstated by
the LWUA Board and before such reinstatement was declared illegal and
void by the CSC.
More important, the dismissal case against him was ultimately dismissed,
thereby conclusively establishing his right to his title and position as Deputy
Administrator of LWUA.
Duties under the CSC Accreditation Program
The CA also found that De Jesus failed to comply with the CSC rules under
the Accreditation Program due to his failure to submit the first set of
retroactive appointment papers to the CSC. Such failure was said to
constitute a concealment of the retroactivity from the CSC and, thus,
dishonesty on his part. Parungao, on the other hand, was reinstated by the
CA after having been found that she took steps to clarify the matter with the
CSC; that she informed her superiors about her misgivings and the legal
effects of the retroactive appointments; and that she published such
retroactive appointments in the LWUA Quarterly Reports on Accession, thus,
demonstrating her good faith.
De Jesus argues that, as Deputy Administrator, it was not his responsibility to
comply with the CSC rules under the Accreditation Program. He contends
that the CA itself recognized this fact when it stated that it was the
responsibility of the LWUA Administrator to know and implement the terms
and conditions of accreditation. The CA even further stated that it was the
Human Resources Management Officer who had the responsibility of
preparing and submitting the appointment papers with the ROPA.
On the other hand, Tuason and LWUA argue that under Executive
Order (E.O.) No. 286, the Office of the Deputy Administrator has direct
supervision over the HRMD, and so De Jesus should be held liable for failure
to submit the first set of appointment papers in accordance with the CSC
rules.
Under CSC Resolution No. 96770160 granting LWUA authority to take final
action on its appointments under the CSC Accreditation Program, the
following was said to have been violated:
6. That for purposes of immediate monitoring and records keeping,
the LWUA shall submit within the first fifteen calendar days of each
ensuing month to the CSFO two copies of the monthly Report on
Personnel Actions (ROPA) together with certified true copies of
appointments acted upon;
7. That failure to submit the ROPAs within the prescribed period shall
render all appointments listed therein lapsed and ineffective;
 8. That appointments issued within the month but not listed in the
ROPA for the said month shall become ineffective 30 days from
issuance;
xxx
As culled from the CSC letter61 dated November 11, 1996, addressed to then
LWUA Admistrator De Vera, which accompanied CSC Resolution No.
967701, the following responsibilities under the CSC Accreditation Program
were reiterated thus:
The LWUA Administrator/appointing authority shall:
- Take final action on all appointments that he issues/signs;
- Exercise delegated authority to take final action on appointments
following the terms and conditions stipulated in the Resolution and
within the limits and restrictions of Civil Service Law, rules, policies
and standards;
- Assume personal liability for the payment of salaries for actual
services rendered by employees whose appointments have been
invalidated by the CSNCRO.
On the other hand, the Human Resources Management Officer shall:
- Ensure that all procedures, requirements, and supporting papers to
appointments specified in MC No. 38, s. 1997 and MC Nos. 11 and
12, s. 1996 have been complied with and found to be in order before
the appointment is signed by the appointing authority;
xxx
- Prepare and submit within the first fifteen calendar days of each
ensuing month to the CSFO concerned two copies of the monthly
ROPA together with certified true copies of appointments issued and
finally acted upon; and
xxx
[Emphases supplied]
Under LWUA Office Order No. 205.01,62 Administrator Jamora authorized De
Jesus to sign appointment papers of appointees to vacant plantilla positions
in LWUA which were previously approved by the Administrator or the Board
of Trustees. Thus:
In the exigency of the service and to facilitate/expedite administrative works,
the Deputy Administrator, Administrative Services, is hereby authorized
under delegated authority to act on and sign for and in behalf of the
Administrator, documents such as Office Orders, Appointment Papers, Inter-
Office Memoranda and other administrative documents including
communications to CSC and/or DBM relating to filling up of vacant positions,
either by promotion or recruitment, as well as transfer of personnel, which
have been previously cleared/approved in writing by the Administrator, or by
the Board of Trustees, as the case may be. Also delegated is the authority to
act and sign for and in behalf of the Administrator, the Notice(s) of Salary
Adjustment (NOSA) and Notice(s) of Salary Increment (NOSI). [Emphases
supplied]
It is clear from the above that the responsibility to submit within the first
fifteen (15) calendar days of each ensuing month to the CSFO two copies of
the monthly ROPA together with certified true copies of appointments acted
upon lies with the Human Resources Management Officer (HRMO), namely,
Parungao. Even granting that De Jesus, as Deputy Administrator, has direct
supervision over the Human Resources and Management Department, it is
the HRMO who is expressly tasked with the duty to submit to the CSC the
ROPA with true copies of appointments finally acted upon. Therefore, De
Jesus, as Deputy Administrator, cannot be held liable for such failure to
submit the first set of appointment papers with the ROPA as prescribed
under the CSC accreditation rules.
The authority to exercise the delegated authority to take final action on
appointment papers is lodged in the LWUA Administrator. The only duty of
De Jesus is to sign appointment papers previously approved by the
Administrator or Board. Thus, De Jesus’ duty to sign appointment papers is
only ministerial in nature, while the discretionary power to take final action on
appointments remains lodged in the LWUA Administrator. De Jesus is, thus,
bound only to sign appointment papers previously approved by the LWUA
Administrator or Board, in accordance with LWUA Office Order No. 205.01,
having no power to exercise any discretion on the matter.
In exercising his ministerial duty of signing the appointment papers, De Jesus
obeyed the patently lawful order of his superior. CSC Resolution No. 967701
does not charge De Jesus with the duty to know and comply with the rules of
the Accreditation Program, that being the province of the LWUA
Administrator and HRMO, as expressly provided for in the CSC letter.
Therefore, so long as the appointment papers were approved by the
Administrator or Board, the order to sign them is patently lawful. Hence, De
Jesus cannot be faulted for obeying the patently lawful orders of his superior.
Furthermore, there is no evidence on record to indicate that he acted in bad
faith, as what he did was in conformity with the authority granted to him by
LWUA Office Order No. 205.01.
The same, however, cannot be said of Parungao. As HRMO, she was
expressly charged with the duty to prepare and submit within the first fifteen
calendar days of each ensuing month to the CSFO concerned two copies of
the monthly ROPA together with certified true copies of appointments issued
and finally acted upon. Thus, she must necessarily be aware that failure to
submit the ROPAs within the prescribed period shall render all appointments
listed therein lapsed and ineffective, and that appointments issued within the
month but not listed in the ROPA for the said month shall become ineffective
30 days from issuance. Knowing this, she should never have given her
approval by initialing the first set of retroactive appointments as she should
have known that they would be ineffective under the CSC accreditation rules.
No Dishonesty, Mere Confusion
With the finding that the request for approval of the DBM to apply the earlier
granted authority retroactively was a disingenuous attempt to provide a
semblance of legality to the intended retroactive appointments, the CA held
that the approval or disapproval of appointment to the government was the
sole office of the CSC, and not the DBM. Furthermore, dishonesty was found
present when De Jesus submitted the first set of appointment papers to the
DBM and the second set to the CSC, apparently to ensure that the DBM was
unaware of what the CSC was doing and vice versa.
A careful perusal of the records will show that the request for approval to the
DBM, characterized by the CA as an attempt to provide a semblance of
legality, was the act of Administrator Jamora and not of De Jesus or
Parungao. The request letter63 to the DBM was signed by Jamora. Therefore,
neither De Jesus nor Parungao can be held liable for the act. The Court also
failed to find any evidence on record that De Jesus deliberately ensured that
DBM was unaware of what the CSC was doing and vice versa. It has already
been discussed that De Jesus’ only duty was to sign the appointment papers
in accordance with the LWUA office order granting him authority to do so. All
responsibilities relating to the reportorial requirements pertain to Parungao as
the HRMO.
Furthermore, the appointment papers provided to the DBM were referenced
by Administrator Jamora in his request letter, and not by De Jesus or
Parungao. The first set of appointment papers was never submitted to the
CSC not because the retroactivity of the appointments was being concealed,
but precisely because it was realized that such did not comply with the
reportorial requirements. Given the foregoing, there could have been no
dishonesty on the part of De Jesus and Parungao.
Instead, it appears that the root of the dilemma in the case at bench lies in
confusion rather than dishonesty.1awphi1 This confusion pertains to the
misunderstanding of the roles of the CSC and the DBM vis-a-vis the
issuance of appointment papers. Such confusion can be gleaned from the
brief to Administrator Jamora signed by De Jesus and initialed by Parungao,
stating that the issues on the retroactive appointments and overpayments
were deemed settled with the reply letter of the DBM on the retroactive
implementation of the authority previously granted.
The CA correctly stated that the approval or disapproval of appointment to
the government is the sole office of the CSC, and not the DBM, as the very
authority given to LWUA to take final action on its appointments is by virtue
of CSC’s accreditation program.64 Thus, the DBM approval to retroact its
previously granted authority to hire the LWUA confidential staff is subject to
an appointment validly issued in accordance with CSC rules. In other words,
the DBM approval for retroactivity presupposed valid appointments. DBM’s
approval was mistakenly understood to pertain to both the back salaries and
the validity of the staff’s appointments when, in fact, DBM’s approval related
only to LWUA’s authority to hire and not to the validity of the appointments of
the hired personnel. Therefore, back salaries should only have been due
upon the effectivity of valid appointments, which is within the authority of the
CSC to approve, and not of the DBM.
Dishonesty refers to a person’s "disposition to lie, cheat, deceive, or defraud;
untrustworthiness; lack of integrity; lack of honesty, probity or integrity in
principle; lack of fairness and straightforwardness; disposition to defraud,
deceive or betray."65 The absence of dishonesty on the part of De Jesus and
Parungao is supported by their good faith in complying with the orders of
Administrator Jamora. Their good faith is manifested in several
circumstances. First, their brief to Administrator Jamora, stating that the
issues on the retroactive appointments and overpayments were deemed
settled with the reply letter of the DBM, demonstrates that they actually and
honestly believed that the letter had in fact resolved the issue. Second, their
memorandum66 to Administrator Jamora explained that the appointment
papers with retroactive effectivity dates would be violative of the provisions of
CSC Res. No. 967701 and CSC Omnibus Rules on Appointments Rule 7,
Section 11. Third, an informal consultation67 was held with the CSC Field
Director to seek advice regarding the retroactive appointments, wherein it
was suggested that the appointments be re-issued effective December 12,
2001, hence, the issuance of the second set of appointment papers. Finally,
such retroactive appointments were published in the LWUA Quarterly
Reports on Accession. The foregoing circumstances are apparently contrary
to any intention to defraud or deceive.
Parungao - Guilty b. finding Human Resources Management Officer Edelwina
Of Simple Neglect of Duty DG. Parungao GUILTY of Simple Neglect of Duty and
hereby imposing the penalty of suspension from office for
Simple neglect of duty is defined as the failure to give proper attention to a one (1) month and one (1) day without pay.
task expected from an employee resulting from either carelessness or
indifference.68 In this regard, the Court finds Parungao, as HRMO, guilty of SO ORDERED.
simple neglect of duty. Given her duties under the CSC Accreditation
Program, she should have been aware of the reportorial requirements, and of
the fact that it is the CSC which has authority over appointments, and not the
DBM. Had she given the proper attention to her responsibility as HRMO, the
first set of appointment papers would never have been issued, thereby
avoiding the present predicament altogether.

When a public officer takes an oath of office, he or she binds himself or

herself to faithfully perform the duties of the office and use reasonable skill
and diligence, and to act primarily for the benefit of the public. Thus, in the
discharge of duties, a public officer is to use that prudence, caution and
attention which careful persons use in the management of their
affairs.69 Parungao failed to exercise such prudence, caution and attention.

Simple neglect of duty is classified under the Uniform Rules on

Administrative Cases in the Civil Service as a less grave offense punishable
by suspension without pay for one month and one day to six months. Finding
no circumstance to warrant the imposition of the maximum penalty of six
months, and considering her demonstrated good faith, the Court finds the
imposition of suspension without pay for one month and one day as justified.

WHEREFORE,

(1) in G.R. No. 166495, the petition is GRANTED. The assailed

September 22, 2004 and January 4, 2005 Resolutions of the Court of
Appeals are hereby REVERSED and SET ASIDE. The writ of
preliminary mandatory injunction issued in CA-G.R. SP No. 84902 is
ordered DISSOLVED.

(2) in G.R. No. 184129, the petition is GRANTED, and in G.R. No.
184263, the petition is PARTIALLY GRANTED. The assailed May
26, 2005 Decision and August 6, 2008 Resolution of the Court of
Appeals in CA-G.R. SP No. 84902, are hereby REVERSED and SET
ASIDE, and a new one entered

a. ordering the reinstatement of Rodolfo S. De Jesus as

Deputy Administrator of the LWUA with full back salaries and
such other emoluments that he did not receive by reason of
his removal; and
G.R. No. L-13578 May 31, 1960
HEIRS OF MARCIANO A. ROXAS, namely: CIRILA N. VDA. DE ROXAS,
ET AL., plaintiffs-appellants,
vs.
FLORENCIO GALINDO, ET AL., defendant-appellees.
Ruben L. Roxas for appellants.
Ejercito, Cruz and Maclan for appellees.
LABRADOR, J.:
Plantiffs appeal from an order of the Court of First Instance of Bulacan, Hon.
Angel H. Mojica, presiding, denying their motion to amend their complaint, in
Civil case no. 1067, entitled Heirs of Marciano A. Roxas, et al., plaintiffs, vs.
Florencio Galindo, et al., defendants.
On April 14, 1955, plaintiffs filed a complaint in the Court of First Instance of
Bulacan, alleging that Gregorio Galindo, predecessor-in-interest of
defendants purchased on installment basis from the Bureau of Lands Lot No.
1048 of the S. M. de Pandi Estate located in Bulacan; that after the death of
Gregorio Galindo, his legal heirs, namely Florencio Galindo, Anita and
Zenaida Pagsanghan, the minors Juanito and Rogelio Esguerra and Mario,
Leonila, Carmen, Esperanza, Bernardina and Benedicto Pagsanghan,
Mercedes Galindo, and Federico de Guzman, also a minor, who was
represented by his father, Luis de Guzman, who are some of the defendants
herein, sold their rights and interests in said Lot No. 1048 to Marciano A.
Roxas, predecessor-in-interest of herein plaintiffs, for P384.00, under a
document (Documento de Compromiso) dated December 1, 1916 (Annex A
to complaint); that by virtue of Annex A, the defendants bound themselves to
execute a final deed of sale of said Lot 1048 in favor of Marciano A. Roxas;
that defendant Urbano Galindo, who was still a minor when Annex A was
executed, adopted as his own said document in an instrument dated May 23,
1931 (Annex B); that after execution of Annex A, the possession of Lot 1048
was transferred to the deceased Marciano A. Roxas, who has paid the
balance of the purchase price to the Bureau of Lands; that herein plaintiffs
continued to possess the land and to pay taxes thereon since the death of
Marciano A. Roxas in June, 1950 to date; that on February 13, 1948,
Transfer Certificate of Title No. T-2145 was issued over Lot 1048 by the
Register of Deeds in the name of the legal heirs of Gregorio Galindo; that
herein plaintiffs demanded of defendants execution of the final deed of sale
pursuant to Annex A, but the latter refused and failed to execute the deed.
Plaintiffs pray that defendants be ordered to execute the final deed of sale
and to reconvey the lot to them, etc.
On May 9, 1955, defendants filed a motion to dismiss on the ground that (a)
the cause of action is barred by statute of limitations, (b) the cause of action
did not accrue against the defendants because of infancy, and (c) there is no
cause of action. In said motion, defendants argue that insofar as the
defendants Federico de Guzman is concerned, his father Luis de Guzman
did not have authority to represent him in Annex A, and that the presentation
made by the latter is null and void (p. 18, Rec. on Appeal). This motion was
opposed by the plaintiff on May 20, 1955, and in their opposition plaintiffs
contend, among others, that although Federico de Guzman was not validly
represented by his father, he has, after attaining majority, ratified said
contract by his acts and declarations. Note, however, that the original
complaint contains no allegation as to the supposed ratification. The court on
July 19, 1955 dismissed the complaint only insofar as defendant Federico de
Guzman is concerned, for the reason that he was not a party to, nor was he
validly represented, in the contract, Annex A. The court denied the motion to
dismiss insofar as the other defendants are concerned, and on August 4,
1955, they filed their answer. A motion for reconsideration of the order
dismissing the complaint with respect to Federico de Guzman was denied by
the court on October 10, 1955. No appeal was taken from this order.
On October 29, 1956, plaintiffs filed with the Court of Appeals a "Complaint
for Certiorari and Mandamus with Preliminary Injunction", which was
docketed therein as CA-G.R. No. 18810. The petition sought to annul and set
aside the orders of the judge dated July 19, 1955 and October 10, 1955,
issued in Civil Case No. 1067, to compel respondent judge to reinstate de
Guzman as party defendant in said case, and to restrain the said judge from
hearing the case on the merits until after adjudication of the issued raised in
the petition. But the Court of Appeals on January 11, 1957 dismissed the
petition for certiorari and mandamus and dissolved the preliminary injunction
previously issued, for the reason that the petitioner is not the proper remedy.
On May 10, 1957, plaintiffs herein filed a "Motion to Admit Amended
Complaint", to include in the amended complaint the following facts against
defendant Federico de Guzman:
10. ... and Federico de Guzman, duly represented by his father and
natural guardian, Luis de Guzman, ... .
17. To this date, long after his disability by non-age had ceased,
defendant Federico de Guzman had not sought the nullity of the
contract entered into in his name by his father and natural guardian
and had ratified and acquiesced in said contract.
18. That plaintiffs and their predecessor in interest have acquired title
to lot No. 1048 including the portion pertaining to defendant Federico
 de Guzman by acquisitive adverse possession openly, publicly,
continuously under a claim of title exclusive of any other right and
adverse to all claimants.
This motion was opposed by the defendants, claiming that the amended
complaint sought to be admitted is filed out of time and that the original case
between plaintiffs and Federico de Guzman is now res judicata and can no
longer be reopened. After a reply to the opposition was filed by plaintiffs, the
court on October 1, 1957 denied the motion to admit the amended complaint.
The reason for the denial is that the order of the court dated July 19, 1955,
dismissing the complaint insofar as Federico de Guzman is concerned, has
already become final. This is the order now sought to be set aside in this
appeal.
Two questions present themselves for our resolution to decide the appeal,
namely, (1) whether the original complaint against Federico de Guzman,
which complaint has been dismissed and the order of dismissal have
become final, may still be subject of amendment in view of the fact that the
order of dismissal has become final; and (2) whether the original complaint
may still be subject to amendment. The appellee claims that under Rule 30,
Section 4 of the Rules of Court, which provides:
Unless otherwise ordered by the court, any dismissal not provided
for in this rule, other than a dismissal for lack of jurisdiction, operates
as an adjudication upon the merits.
the dismissal of the complaint against Federico de Guzman operates as an
adjudication of the merits and bars the amended complaint filed against said
Federico de Guzman.
It should be remembered that the principal of res judicata actually embraces
two different concepts, each of which is distinct and different from the other.
The first concept is known as "Bar by former judgment" and the other, as"
conclusiveness of judgment". Chief Justice Moran explicitly points out these
differences between the first and the second:
In this regard, distinction should be made between "bar by former
judgment" and "conclusiveness of the judgment." There is "bar by
former judgment" when, between the first case where the judgment
was rendered, and the second case where such judgment is
invoked, there is identity of parties, subject-matter and cause of
action. When the three identities are present, the judgment on the
merits render in the first case constitutes an absolute bar to the
subsequent action. It is final as to the claim or demand in
controversy, including the parties and those in privity with them, not
only as to every matter which was offered and received to sustain or
defeat the claim or demand, but as to any other admissible matter
which might have offered for that purpose. ... .
But where between the first case wherein the judgment is rendered
and the second case wherein such judgment is invoked, there is
identity of parties, but there is no identity of cause of action, the
judgment is conclusive in the second case, only as to those matters
actually and directly controverted and determined, and not as to
matters merely controverted and determined, and not as to matters
merely involved therein. This is what is termed "conclusiveness of
the judgment". ... .
The first rule, or the bar by former judgment, is contained in the following
legal provision:
SEC. 44. Effect of Judgment. — The effect of a judgment or final
order rendered by a court or judge of the Philippines, having
jurisdiction to pronounce the judgment or order, may be as follows:
xxx xxx xxx
(b) In other case the judgment so ordered is, in respect to the matter
directly adjudged conclusive between the parties and their
successors in interest by title subsequent to commencement of the
action or special proceeding, litigating for the same thing and under
the same title and in the same capacity. (Rule 39, Rule of Court.)
while the second one is contained in this Rule:
SEC. 45. What is deemed to have been adjudged.-That only is
deemed to have been adjudged in a former judgment which appears
upon its face to have been so adjudged, or which was actually and
necessarily included therein or necessary thereto. (Id.)
The question to be decided is, Which of the above rules apply to the case at
bar?
The complaint which was dismissed as to Federico de Guzman contains in
paragraph 10 thereof the following allegations as to how Federico de
Guzman participated in the sale:
10. That after Gregorio Galindo's death, his legal heirs, the herein
defendants ... Federico de Guzman, represented by his father Luis
 de Guzman, sold for the sum of THREE HUNDRED EIGHTY FOUR
PESOS (P384.00) to Marciano A. Roxas, herein plaintiffs
predecessor under a document (Documento de Compromiso) ... . (p.
4, Rec. on Appeal)
We must note that three is nothing in the complaint about any subsequent
act of ratification by Federico de Guzman of the sale after he reached his age
of majority. So in the order dismissing the complaint as to Federico de
Guzman, the court expressly declares:
SEC. 2. By leave. — The court may, upon motion at any stage of an
action, and upon such terms as may be just, order or give leave to
either part to alter or amend any pleading, process, affidavit, or other
document in the cause, to the end that the real matter in dispute and
all matters in the action in dispute between the parties may, as far as
possible, be completely determined in a single proceeding. But such
order or leave shall be refused if it appears to the court that the
motion was made with intent to delay the action. (Rule 17, Rules of
Court)

Considering that defendant Federico de Guzman was not a party to
the said contract (Annex A) or was he validly represented by his
father, Luis de Guzman:
WHEREFORE, the complaint is hereby dismissed insofar as the
defendant Federico de Guzman is concerned and the motion to
dismiss filed by the other defendants is hereby denied. ... . (pp. 41-
42, Rec. on Appeal)
The rule expressly directs that the court should amend any pleading to the
end that all matters in dispute between the parties may, as far as
possible, be completely determined in a single proceeding." Precisely such
are the circumstances in the case at bar. If the amendment is not allowed,
another action would have to be instituted against Federico de Guzman thus
making two actions, two trials, and two appeals possible and probable. This
situation is what the rule precisely seeks to avoid — to limit the decision of all
the issues in a single proceeding.

We hold that the rule of res judicata applicable is that of conclusiveness of It is apparent to us that the judge below violated the above directions of the
rule when he denied the motion for amendment. He also committed an error
judgment denied in Section 45 of the Rules, so that what was concluded in
in holding that the proposed amendment may not be admitted as his previous
the order above-quoted is that in the execution of the deed of sale Annex A,
order of dismissal has become final.
Federico de Guzman was not validly represented by his father. It is this
conclusion that was arrived at in the final order dismissing the complaint
against Federico de Guzman. Wherefore, the order appealed from is hereby reversed and the amended
complaint ordered admitted. With costs against the defendant-appellee. So
ordered.
It will be seen that the allegations contained in the amendments introduced in
the amended complaint have not been passed upon in the above-mentioned
order. The amendments are that Federico de Guzman since he attained
majority has not sought to annul the deed as to the representation by his
father and he has ratified the contract and acquiesced therein, and that
plaintiffs have acquired the land by adverse possession. These new
allegations present new issues not decided in the order of dismissal. The rule
of res judicata, known as "bar by former judgment" is not applicable because
"there is no identity of issues" between those contained in the original
complaint and those contained in the amended one. What is applicable is the
rule of conclusiveness of judgment as we have said above.
It necessary follows that the order of dismissal does not bar the amended
complaint.

We next come to the second question, whether the amendment may still be
introduced. The record shows that there has not been any trial of the case on
the merits as yet. The rule on amendment provides:
G.R. No. 117897 May 14, 1997
ISLAMIC DIRECTORATE OF THE PHILIPPINES, MANUEL F. PEREA and
SECURITIES & EXCHANGE COMMISSION, petitioners,
vs.
COURT OF APPEALS and IGLESIA NI CRISTO, respondents.
HERMOSISIMA, JR., J.:
The subject of this petition for review is the Decision of the public respondent
Court of Appeals, 1 dated October 28, 1994, setting aside the portion of the
Decision of the Securities and Exchange Commission (SEC, for short) in
SEC Case No. 4012 which declared null and void the sale of two (2) parcels
of land in Quezon City covered by the Deed of Absolute Sale entered into by
and between private respondent Iglesia Ni Cristo (INC, for short) and the
Islamic Directorate of the Philippines, Inc., Carpizo Group, (IDP, for short).
The following facts appear of record.
Petitioner IDP-Tamano Group alleges that sometime in 1971, Islamic leaders
of all Muslim major tribal groups in the Philippines headed by Dean Cesar
Adib Majul organized and incorporated the ISLAMIC DIRECTORATE OF
THE PHILIPPINES (IDP), the primary purpose of which is to establish an
Islamic Center in Quezon City for the construction of a "Mosque (prayer
place), Madrasah (Arabic School), and other religious infrastructures" so as
to facilitate the effective practice of Islamic faith in the area. 2
Towards this end, that is, in the same year, the Libyan government donated
money to the IDP to purchase land at Culiat, Tandang Sora, Quezon City, to
be used as a Center for the Islamic populace. The land, with an area of
49,652 square meters, was covered by two titles: Transfer Certificate of Title
Nos. RT-26520 (176616) 3 and RT-26521 (170567), 4 both registered in the
name of IDP.
It appears that in 1971, the Board of Trustees of the IDP was composed of
the following per Article 6 of its Articles of Incorporation:
Senator Mamintal Tamano 5
Congressman Ali Dimaporo
Congressman Salipada Pendatun
Dean Cesar Adib Majul
Sultan Harun Al-Rashid Lucman
Delegate Ahmad Alonto
Commissioner Datu Mama Sinsuat
Mayor Aminkadra Abubakar 6
According to the petitioner, in 1972, after the purchase of the land by the
Libyan government in the name of IDP, Martial Law was declared by the late
President Ferdinand Marcos. Most of the members of the 1971 Board of
Trustees like Senators Mamintal Tamano, Salipada Pendatun, Ahmad
Alonto, and Congressman Al-Rashid Lucman flew to the Middle East to
escape political persecution.
Thereafter, two Muslim groups sprung, the Carpizo Group, headed by
Engineer Farouk Carpizo, and the Abbas Group, led by Mrs. Zorayda
Tamano and Atty. Firdaussi Abbas. Both groups claimed to be the legitimate
IDP. Significantly, on October 3, 1986, the SEC, in a suit between these two
contending groups, came out with a Decision in SEC Case No. 2687
declaring the election of both the Carpizo Group and the Abbas Group as
IDP board members to be null and void. The dispositive portion of the SEC
Decision reads:
WHEREFORE, judgment is hereby rendered declaring the
elections of both the petitioners 7 and respondents 8 as null
and void for being violative of the Articles of Incorporation of
petitioner corporation. With the nullification of the election of
the respondents, the approved by-laws which they certified
to this Commission as members of the Board of Trustees
must necessarily be likewise declared null and void.
However, before any election of the members of the Board
of Trustees could be conducted, there must be an approved
by-laws to govern the internal government of the association
including the conduct of election. And since the election of
both petitioners and respondents have been declared null
and void, a vacuum is created as to who should adopt the
by-laws and certify its adoption. To remedy this unfortunate
situation that the association has found itself in, the
members of the petitioning corporation are hereby
authorized to prepare and adopt their by-laws for submission
to the Commission. Once approved, an election of the
members of the Board of Trustees shall immediately be
called pursuant to the approved by-laws.
SO ORDERED. 9
Neither group, however, took the necessary steps prescribed by the SEC in
its October 3, 1986 Decision, and, thus, no valid election of the members of
the Board of Trustees of IDP was ever called. Although the Carpizo
Group 10attempted to submit a set of by-laws, the SEC found that, aside from
Engineer Farouk Carpizo and Atty. Musib Buat, those who prepared and
adopted the by-laws were not bona fide members of the IDP, thus rendering
the adoption of the by-laws likewise null and void.
On April 20, 1989, without having been properly elected as new members of
the Board of Trustee of IDP, the Carpizo Group caused to be signed an
alleged Board Resolution 11 of the IDP, authorizing the sale of the subject two
parcels of land to the private respondent INC for a consideration of
P22,343,400.00, which sale was evidenced by a Deed of Absolute
Sale 12 dated April 20, 1989.
On May 30, 1991, the petitioner 1971 IDP Board of Trustees headed by
former Senator Mamintal Tamano, or the Tamano Group, filed a petition
before the SEC, docketed as SEC Case No. 4012, seeking to declare null
and void the Deed of Absolute Sale signed by the Carpizo Group and the
INC since the group of Engineer Carpizo was not the legitimate Board of
Trustees of the IDP.
Meanwhile, private respondent INC, pursuant to the Deed of Absolute Sale
executed in its favor, filed an action for Specific Performance with Damages
against the vendor, Carpizo Group, before Branch 81 of the Regional Trial
Court of Quezon City, docketed as Civil Case No. Q-90-6937, to compel said
group to clear the property of squatters and deliver complete and full physical
possession thereof to INC. Likewise, INC filed a motion in the same case to
compel one Mrs. Leticia P. Ligon to produce and surrender to the Register of
Deeds of Quezon City the owner's duplicate copy of TCT Nos. RT-26521 and
RT-26520 covering the aforementioned two parcels of land, so that the sale
in INC's favor may be registered and new titles issued in the name of INC.
Mrs. Ligon was alleged to be the mortgagee of the two parcels of land
executed in her favor by certain Abdulrahman R.T. Linzag and Rowaida
Busran-Sampaco claimed to be in behalf of the Carpizo Group.
The IDP-Tamano Group, on June 11, 1991, sought to intervene in Civil Case
No. Q-90-6937 averring, inter alia:
xxx xxx xxx
2. That the Intervenor has filed a case before the Securities
and Exchange Commission (SEC) against Mr. Farouk
Carpizo, et. al., who, through false schemes and
machinations, succeeded in executing the Deed of Sale
between the IDP and the Iglesia Ni Kristo (plaintiff in the
instant case) and which Deed of Sale is the subject of the
case at bar;
3. That the said case before the SEC is docketed as Case
No. 04012, the main issue of which is whether or not the
aforesaid Deed of Sale between IDP and the Iglesia ni Kristo
is null and void, hence, Intervenor's legal interest in the
instant case. A copy of the said case is hereto attached as
Annex "A";
4. That, furthermore, Intervenor herein is the duly constituted
body which can lawfully and legally represent the Islamic
Directorate of the Philippines;
xxx xxx xxx 13
Private respondent INC opposed the motion arguing, inter alia, that the issue
sought to be litigated by way of intervention is an intra-corporate dispute
which falls under the jurisdiction of the SEC. 14
Judge Celia Lipana-Reyes of Branch 81, Regional Trial Court of Quezon
City, denied petitioner's motion to intervene on the ground of lack of juridical
personality of the IDP-Tamano Group and that the issues being raised by
way of intervention are intra-corporate in nature, jurisdiction thereto properly
pertaining to the SEC. 15
Apprised of the pendency of SEC Case No. 4012 involving the controverted
status of the IDP-Carpizo Group but without waiting for the outcome of said
case, Judge Reyes, on September 12, 1991, rendered Partial Judgment in
Civil Case No. Q-90-6937 ordering the IDP-Carpizo Group to comply with its
obligation under the Deed of Sale of clearing the subject lots of squatters and
of delivering the actual possession thereof to INC. 16
Thereupon, Judge Reyes in another Order, dated March 2, 1992, pertaining
also to Civil Case No. Q-90-6937, treated INC as the rightful owner of the
real properties and disposed as follows:
WHEREFORE, Leticia P. Ligon is hereby ordered to produce
and/or surrender to plaintiff 17 the owner's copy of RT-26521
(170567) and RT-26520 (176616) in open court for the
registration of the Deed of Absolute Sale in the latter's name
and the annotation of the mortgage executed in her favor by
herein defendant Islamic Directorate of the Philippines on
the new transfer certificate of title to be issued to plaintiff.
SO ORDERED. 18
On April 6, 1992, the above Order was amended by Judge Reyes directing
Ligon "to deliver the owner's duplicate copies of TCT Nos. RT-26521
(170567) and RT-26520 (176616) to the Register of Deeds of Quezon
City for the purposes stated in the Order of March 2, 1992." 19
Mortgagee Ligon went to the Court of Appeals, thru a petition for certiorari,
docketed as CA-G.R No. SP-27973, assailing the foregoing Orders of Judge
Reyes. The appellate court dismissed her petition on October 28, 1992. 20
Undaunted, Ligon filed a petition for review before the Supreme Court which
was docketed as G.R. No. 107751.
In the meantime, the SEC, on July 5, 1993, finally came out with a Decision
in SEC Case No. 4012 in this wise:
1. Declaring the by-laws submitted by the respondents 21 as
unauthorized, and hence, null and void.
2. Declaring the sale of the two (2) parcels of land in Quezon
City covered by the Deed of Absolute Sale entered into by
Iglesia ni Kristo and the Islamic Directorate of the
Philippines, Inc. 22 null and void;
3. Declaring the election of the Board of Directors, 23 of the
corporation from 1986 to 1991 as null and void;
4. Declaring the acceptance of the respondents, except
Farouk Carpizo and Musnib Buat, as members of the IDP
null and void.
No pronouncement as to cost.
SO ORDERED. 24
Private respondent INC filed a Motion for Intervention, dated September 7,
1993, in SEC Case No. 4012, but the same was denied on account of the
fact that the decision of the case had become final and executory, no appeal
having been taken therefrom. 25
INC elevated SEC Case No. 4012 to the public respondent Court of Appeals
by way of a special civil action for certiorari, docketed as CA-G.R SP No.
33295. On October 28, 1994, the court a quo promulgated a Decision in CA-
G.R. SP No. 33295 granting INC's petition. The portion of the SEC Decision
in SEC Case No. 4012 which declared the sale of the two (2) lots in question
to INC as void was ordered set aside by the Court of Appeals.
Thus, the IDP-Tamano Group brought the instant petition for review, dated
December 21, 1994, submitting that the Court of Appeals gravely erred in:
1) Not upholding the jurisdiction of the SEC to declare the nullity of the sale;
2) Encouraging multiplicity of suits; and
26
3) Not applying the principles of estoppel and laches.
While the above petition was pending, however, the Supreme Court rendered
judgment in G.R. No. 107751 on the petition filed by Mrs. Leticia P. Ligon.
The Decision, dated June 1, 1995, denied the Ligon petition and affirmed the
October 28, 1992 Decision of the Court of Appeals in CA-G.R. No. SP-27973
which sustained the Order of Judge Reyes compelling mortgagee Ligon to
surrender the owner's duplicate copies of TCT Nos. RT-26521 (170567) and
RT-26520 (176616) to the Register of Deeds of Quezon City so that the
Deed of Absolute Sale in INC's favor may be properly registered.
Before we rule upon the main issue posited in this petition, we would like to
point out that our disposition in G.R. No. 107751 entitled, "Ligon v. Court of
Appeals," promulgated on June 1, 1995, in no wise constitutes res
judicata such that the petition under consideration would be barred if it were
the ease. Quite the contrary, the requisites or res judicata do not obtain in the
case at bench.
Section 49, Rule 39 of the Revised Rules of Court lays down the dual
aspects of res judicata in actions in personam, to wit:
Effect of judgment. — The effect of a judgment or final order
rendered by a court or judge of the Philippines, having
jurisdiction to pronounce the judgment or order, may be as
follows:
xxx xxx xxx
(b) In other cases the judgment or order is, with respect to
the matter directly adjudged or as to any other matter that
could have been raised in relation thereto, conclusive
between the parties and their successors in interest by title
subsequent to the commencement of the action or special
 proceeding, litigating for the same thing and under the same
title and in the same capacity;
(c) In any other litigation between the same parties or their
successors in interest, that only is deemed to have been
adjudged in a former judgment which appears upon its face
to have been so adjudged, or which was actually and
necessarily included therein or necessary thereto.
Section 49(b) enunciates the first concept of res judicata known as "bar by
prior judgment," whereas, Section 49(c) is referred to as "conclusiveness of
judgment."
There is "bar by former judgment" when, between the first case where the
judgment was rendered, and the second case where such judgment is
invoked, there is identity of parties, subject matter and cause of action. When
the three identities are present, the judgment on the merits rendered in the
first constitutes an absolute bar to the subsequent action. But where between
the first case wherein judgment is rendered and the second case wherein
such judgment is invoked, there is only identity of parties but there is no
identity of cause of action, the judgment is conclusive in the second case,
only as to those matters actually and directly controverted and determined,
and not as to matters merely involved therein. This is what is termed
"conclusiveness of judgment." 27
Neither of these concepts of res judicata find relevant application in the case
at bench. While there may be identity of subject matter (IDP property) in both
cases, there is no identity of parties. The principal parties in G.R. No. 107751
were mortgagee Leticia P. Ligon, as petitioner, and the Iglesia Ni Cristo, as
private respondent. The IDP, as represented by the 1971 Board of Trustees
or the Tamano Group, was only made an ancillary party in G.R. No. 107751
as intervenor. 28 It was never originally a principal party thereto. It must be
noted that intervention is not an independent action, but is merely collateral,
accessory, or ancillary to the principal action. It is just an interlocutory
proceeding dependent on or subsidiary to the case between the original
parties. 29 Indeed, the IDP-Tamano Group cannot be considered a principal
party in G.R. No. 107751 for purposes of applying the principle of res
judicata since the contrary goes against the true import of the action of
intervention as a mere subsidiary proceeding without an independent life
apart from the principal action as well as the intrinsic character of the
intervenor as a mere subordinate party in the main case whose right may be
said to be only in aid of the right of the original party. 30 It is only in the
present case, actually, where the IDP-Tamano Group became a principal
party, as petitioner, with the Iglesia Ni Cristo, as private respondent. Clearly,
there is no identity of parties in both cases.
In this connection, although it is true that Civil Case No. Q-90-6937, which
gave rise to G.R. No. 107751, was entitled, "Iglesia Ni Kristo, Plaintiff
v. Islamic Directorate of the Philippines, Defendant," 31 the IDP can not be
considered essentially a formal party thereto for the simple reason that it was
not duly represented by a legitimate Board of Trustees in that case. As a
necessary consequence, Civil Case No. Q-90-6937, a case for Specific
Performance with Damages, a mere action in personam, did not become
final and executory insofar as the true IDP is concerned since petitioner
corporation, for want of legitimate representation, was effectively deprived of
its day in court in said case. Res inter alios judicatae nullum allis
praejudicium faciunt. Matters adjudged in a cause do not prejudice those
who were not parties to it. 32 Elsewise put, no person (natural or juridical)
shall be affected by a proceeding to which he is a stranger. 33
Granting arguendo, that IDP may be considered a principal party in Ligon,
res judicata as a "bar by former judgment" will still not set in on the ground
that the cause of action in the two cases are different. The cause of action in
G.R. No. 107751 is the surrender of the owner's duplicate copy of the
transfer certificates of title to the rightful possessor thereof, whereas the
cause of action in the present case is the validity of the Carpizo Group-INC
Deed of Absolute Sale.
Res Judicata in the form of "conclusiveness of judgment" cannot likewise
apply for the reason that any mention at all in Ligon as to the validity of the
disputed Carpizo Board-INC sale may only be deemed incidental to the
resolution of the primary issue posed in said case which is: Who between
Ligon and INC has the better right of possession over the owner's duplicate
copy of the TCTs covering the IDP property? G.R. No. 107751 cannot be
considered determinative and conclusive on the matter of the validity of the
sale for this particular issue was not the principal thrust of Ligon. To rule
otherwise would be to cause grave and irreparable injustice to IDP which
never gave its consent to the sale, thru a legitimate Board of Trustees.
In any case, while it is true that the principle of res judicata is a fundamental
component of our judicial system, it should be disregarded if its rigid
application would involve the sacrifice of justice to technicality. 34
The main question though in this petition is: Did the Court of Appeals commit
reversible error in setting aside that portion of the SEC's Decision in SEC
Case No. 4012 which declared the sale of two (2) parcels of land in Quezon
City between the IDP-Carpizo Group and private respondent INC null and
void?
We rule in the affirmative.
There can be no question as to the authority of the SEC to pass upon the
issue as to who among the different contending groups is the legitimate
Board of Trustees of the IDP since this is a matter properly falling within the
original and exclusive jurisdiction of the SEC by virtue of Sections 3 and 5(c)
of Presidential Decree No. 902-A:
Sec. 3. The Commission shall have absolute jurisdiction,
supervision and control over all corporations, partnership or
associations, who are the grantees of primary franchises
and/or a license or permit issued by the government to
operate in the Philippines . . . .
xxx xxx xxx
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:
xxx xxx xxx
c) Controversies in the selection or appointment of directors,
trustees, officers, or managers of such corporations,
partnerships or associations. . . . .
If the SEC can declare who is the legitimate IDP Board, then by
parity of reasoning, it can also declare who is not the legitimate IDP
Board. This is precisely what the SEC did in SEC Case No. 4012
when it adjudged the election of the Carpizo Group to the IDP Board
of Trustees to be null and
void. 35 By this ruling, the SEC in effect made the unequivocal finding
that the IDP-Carpizo Group is a bogus Board of Trustees.
Consequently, the Carpizo Group is bereft of any authority
whatsoever to bind IDP in any kind of transaction including the sale
or disposition of ID property.
It must be noted that SEC Case No. 4012 is not the first case wherein the
SEC had the opportunity to pass upon the status of the Carpizo Group. As
far back as October 3, 1986, the SEC, in Case No. 2687, 36 in a suit between
the Carpizo Group and the Abbas Group, already declared the election of the
Carpizo Group (as well as the Abbas Group) to the IDP Board as null and
void for being violative of the Articles of Incorporation. 37 Nothing thus
becomes more settled than that the IDP-Carpizo Group with whom private
respondent INC contracted is a fake Board.
Premises considered, all acts carried out by the Carpizo Board, particularly
the sale of the Tandang Sora property, allegedly in the name of the IDP,
have to be struck down for having been done without the consent of the IDP
thru a legitimate Board of Trustees. Article 1318 of the New Civil Code lays
down the essential requisites of contracts:
There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
All these elements must be present to constitute a valid contract.
For, where even one is absent, the contract is void. As succinctly put
by Tolentino, consent is essential for the existence of a contract, and
where it is wanting, the contract is non-existent. 38 In this case, the
IDP, owner of the subject parcels of land, never gave its consent,
thru a legitimate Board of Trustees, to the disputed Deed of Absolute
Sale executed in favor of INC. This is, therefore, a case not only of
vitiated consent, but one where consent on the part of one of the
supposed contracting parties is totally wanting. Ineluctably, the
subject sale is void and produces no effect whatsoever.
The Carpizo Group-INC sale is further deemed null and void ab
initio because of the Carpizo Group's failure to comply with Section 40 of the
Corporation Code pertaining to the disposition of all or substantially all assets
of the corporation:
Sec. 40. Sale or other disposition of assets. — Subject to the
provisions of existing laws on illegal combinations and
monopolies, a corporation may, by a majority vote of its
board of directors or trustees, sell, lease, exchange,
mortgage, pledge or otherwise dispose of all or substantially
all of its property and assets, including its goodwill, upon
terms and conditions and for such consideration, which may
be money, stocks, bonds or other instruments for the
payment of money or other property or consideration, as its
board of directors or trustees may deem expedient, when
authorized by the vote of the stockholders representing at
least two-thirds (2/3) of the outstanding capital stock; or in
 case of non-stock corporation, by the vote of at least two-
thirds (2/3) of the members, in a stockholders' or members'
meeting duly called for the purpose. Written notice of the
proposed action and of the time and place of the meeting
shall be addressed to each stockholder or member at his
place of residence as shown on the books of the corporation
and deposited to the addressee in the post office with
postage prepaid, or served personally: Provided, That any
dissenting stockholder may exercise his appraisal right
under the conditions provided in this Code.
A sale or other disposition shall be deemed to cover
substantially all the corporate property and assets if thereby
the corporation would be rendered incapable of continuing
the business or accomplishing the purpose for which it was
incorporated.
xxx xxx xxx
The Tandang Sora property, it appears from the records, constitutes the only
property of the IDP. Hence, its sale to a third-party is a sale or disposition of
all the corporate property and assets of IDP falling squarely within the
contemplation of the foregoing section. For the sale to be valid, the majority
vote of the legitimate Board of Trustees, concurred in by the vote of at least
2/3 of the bona fide members of the corporation should have been obtained.
These twin requirements were not met as the Carpizo Group which voted to
sell the Tandang Sora property was a fake Board of Trustees, and those
whose names and signatures were affixed by the Carpizo Group together
with the sham Board Resolution authorizing the negotiation for the sale were,
from all indications, not bona fide members of the IDP as they were made to
appear to be. Apparently, there are only fifteen (15) official members of the
petitioner corporation including the eight (8) members of the Board of
Trustees. 39
All told, the disputed Deed of Absolute Sale executed by the fake Carpizo
Board and private respondent INC was intrinsically void ab initio.
Private respondent INC nevertheless questions the authority of the SEC to
nullify the sale for being made outside of its jurisdiction, the same not being
an intra-corporate dispute.
The resolution of the question as to whether or not the SEC had jurisdiction
to declare the subject sale null and void is rendered moot and academic by
the inherent nullity of the highly dubious sale due to lack of consent of the
IDP, owner of the subject property. No end of substantial justice will be
served if we reverse the SEC's conclusion on the matter, and remand the
case to the regular courts for further litigation over an issue which is already
determinable based on what we have in the records.
It is unfortunate that private respondent INC opposed the motion for
intervention filed by the 1971 Board of Trustees in Civil Case. No. Q-90-
6937, a case for Specific Performance with Damages between INC and the
Carpizo Group on the subject Deed of Absolute Sale. The legitimate IDP
Board could have been granted ample opportunity before the regional trial
court to shed light on the true status of the Carpizo Board and settled the
matter as to the validity of the sale then and there. But INC, wanting to
acquire the property at all costs and threatened by the participation of the
legitimate IDP Board in the civil suit, argued for the denial of the motion
averring, inter alia, that the issue sought to be litigated by the movant is intra-
corporate in nature and outside the jurisdiction of the regional trial
court. 40 As a result, the motion for intervention was denied. When the
Decision in SEC Case No. 4012 came out nullifying the sale, INC came
forward, this time, quibbling over the issue that it is the regional trial court,
and not the SEC, which has jurisdiction to rule on the validity of the sale. INC
is here trifling with the courts. We cannot put a premium on this clever legal
maneuverings of private respondent which, if countenanced, would result in a
failure of justice.
Furthermore, the Court observes that the INC bought the questioned
property from the Carpizo Group without even seeing the owner's duplicate
copy of the titles covering the property. This is very strange considering that
the subject lot is a large piece of real property in Quezon City worth millions,
and that under the Torrens System of Registration, the minimum requirement
for one to be a good faith buyer for value is that the vendee at least sees the
owner's duplicate copy of the title and relies upon the same. 41 The private
respondent, presumably knowledgeable on the aforesaid workings of the
Torrens System, did not take heed of this and nevertheless went through
with the sale with undue haste. The unexplained eagerness of INC to buy
this valuable piece of land in Quezon City without even being presented with
the owner's copy of the titles casts very serious doubt on the rightfulness of
its position as vendee in the transaction.
WHEREFORE, the petition is GRANTED. The Decision of the public
respondent Court of Appeals dated October 28, 1994 in CA-G.R. SP No.
33295 is SET ASIDE. The Decision of the Securities and Exchange
Commission dated July 5, 1993 in SEC Case No. 4012 is REINSTATED. The
Register of Deeds of Quezon City is hereby ordered to cancel the registration
of the Deed of Absolute Sale in the name of respondent Iglesia Ni Cristo, if
one has already been made. If new titles have been issued in the name of
Iglesia Ni Cristo, the Register of Deeds is hereby ordered to cancel the
same, and issue new ones in the name of petitioner Islamic Directorate of the
Philippines. Petitioner corporation is ordered to return to private respondent
whatever amount has been initially paid by INC as consideration for the
property with legal interest, if the same was actually received by IDP.
Otherwise, INC may run after Engineer Farouk Carpizo and his group for the
amount of money paid.

SO ORDERED.
G.R. No. 160994 July 27, 2006
WILFREDO and SWARNIE AROMIN, petitioners,
vs.
PAULO FLORESCA, VICTOR FLORESCA, JUANITO FLORESCA and
LILIA FLORESCA-ROXAS, respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari filed by the spouses
Wilfredo and Swarnie Aromin seeking the reversal of the Decision1 dated
June 6, 2003 of the Court of Appeals in CA-G.R. CV No. 69651. The assailed
decision reversed and set aside the joint decision of the Regional Trial Court
(RTC) of Bauang, La Union, Branch 67. Likewise sought to be reversed and
set aside is the Resolution dated October 24, 2003 of the appellate court
denying reconsideration of the assailed decision.
The present case arose from three civil cases pending before the Regional
Trial Court (RTC) of Bauang, La Union, Branch 67 (court a quo) involving the
same property and parties, namely: the spouses Wilfredo and Swarnie
Aromin, Paulo Floresca and his brother's children, Lilia (now surnamed
Roxas), Victor and Juanito Floresca.
The first case, Civil Case No. 921-BG, was an action for specific
performance filed by the spouses Aromin against Paulo. In their complaint,
the spouses Aromin alleged that Paulo was the owner of the following
properties:
a) A parcel of unirrigated riceland situated at Taberna, Bauang, La
Union under Cad. Lot No. 4894-pt, with a total area of 68,658 square
meters, more or less. x x x Covered by Tax Declaration No. 26377;
b) A parcel of unirrigated riceland situated at Taberna, Bauang, La
Union under Cad. Lot No. 4894, with a total area of 34,456 square
meters, more or less. x x x Covered by Tax Declaration No. 25257.2
On different dates from 1990 up to 1992, Paulo sold to the spouses Aromin
several portions of the above-mentioned properties as follows:
1. Deed of Sale dated November 22, 1990 covering 12,214 square
meters;
2. Deed of Sale dated June [undated] 1991 covering 25,656 square
meters;
3. Deed of Sale dated June 26, 1991 covering 1,656 square meters;
4. Deed of Sale dated February 7, 1992 covering 30,313 square
meters;
5. Deed of Sale dated February 19, 1992 covering 9,436 square
meters;
6. Deed of Sale dated February 19, 1992 covering 9,759 square
meters;
7. Deed of Sale dated February 19, 1992 covering 9,123 square
meters.3
All these deeds of sale were not registered with the Register of Deeds. On
September 29, 1992, Paulo executed a receipt acknowledging that he
received from the spouses Aromin a total amount of P1,462,000.00 in
consideration for the sale of a total of 98,257 square meters of Cad. Lot No.
4894. In their complaint, the spouses Aromin sought to compel Paulo to
formally execute the corresponding deed of sale covering the entire property.
The siblings Victor, Juanito and Lilia filed a Motion for Leave to Intervene4 in
Civil Case No. 921-BG alleging that the properties subject thereof actually
comprised only one parcel of land designated as Cad. Lot No. 4894 and,
although declared in the name of Paulo alone in the tax declarations, it was
actually owned in common by him and the siblings. It was further alleged that
the said land was the subject of an action for partition involving them (Paulo
and the siblings) before the Regional Trial Court of Bauang, La Union,
Branch 33. The case was docketed as Civil Case No. 832-BG and a Notice
of Lis Pendens to the said effect was filed with the Register of Deeds, San
Fernando, La Union. Thereafter, on February 10, 1993, a judgment based on
compromise agreement was rendered by the said RTC (Branch 33) in Civil
Case No. 832-BG. The share of Paulo with respect to Cad. Lot No. 4894
based on the said judgment was allegedly as follows: one-half of the
swampland, one-half of the sandy land, and one-half of the riceland which
comprised the said lot.5
The second case, Civil Case No. 938-BG, was an action for quieting of title
filed by the spouses Aromin against Victor, Juanito, Lilia, and Paulo. In their
complaint, the spouses Aromin alleged that they are the owners and in actual
physical possession of the subject property which they purchased from
Paulo. Further, they just discovered that a judgment based on compromise
agreement in Civil Case No. 832-BG had been rendered and that the said
case involved the same property as that in Civil Cases Nos. 921-BG and
938-BG. They alleged that the said judgment based on compromise
agreement is not binding on them as they were not parties to Civil Case No.
832-BG. They prayed for an injunction to restrain the enforcement of the writ
of execution in the said case and instead to declare them as the lawful
owners of the subject property.
Victor, Juanito, and Lilia filed their joint answer substantially denying the
material allegations of the complaint for quieting of title. They raised the
affirmative defense that the judgment based on compromise agreement in
Civil Case No. 832-BG had already become final and executory. The said
judgment declared them owners of one-half of the land designated as Cad.
Lot No. 4894 while Paulo was declared the owner of the other half. The
spouses Aromin allegedly had no cause of action because they have not
acquired any legal title over the portions of the subject property sold to them
by Paulo. Prior to the partition as embodied in the judgment based on
compromise agreement, Paulo did not allegedly own a specific portion
thereof. Hence, any sale he made to the spouses Aromin was subject to the
outcome of the partition in Civil Case No. 832-BG.
In his answer, Paulo alleged that he had yet to determine which parcels of
land he had sold to the spouses Aromin. However, he maintained that if he
had sold properties to them, such sale pertained only to properties
exclusively belonging to him. He also impugned the judgment based on
compromise agreement rendered in Civil Case No. 832-BG claiming that he
did not understand the import of the said agreement. He was not allegedly
assisted by counsel when he agreed thereto.
The third case, Civil Case No. 965-BG, was an action for the annulment of
sale filed by Victor, Juanito, and Lilia against their uncle Paulo and the
spouses Aromin. The siblings alleged that their father Alberto, his sister
Josefa, and his brother Paulo were the co-owners of the subject property as
they acquired the same upon the death of their parents Juan and Cornelia
Floresca. In 1966, the said co-owners caused the preparation of the survey
thereof and, subsequently, the subject property was designated as Cad. Lot
No. 4894 with an area of 105,991 square meters. In July 1973, Alberto died
leaving his share in the co-ownership to his children Victor, Juanito, and Lilia.
On the other hand, Josefa became ill and left the administration of the
subject property to Paulo. She died on June 18, 1988, unmarried, and
without any child.
Victor, Juanito, and Lilia alleged that Paulo was able to fraudulently secure
Tax Declaration No. 25246 in his name as purported owner of the north
portion of the subject property to the exclusion of Victor, Juanito, and Lilia.
Using another fraudulent means, Paulo was likewise allegedly able to secure
Tax Declaration No. 25244 in his name as purported owner of the south
portion of the subject property. Thereafter, with Tax Declarations Nos. 25246
and 25244 in his name, Paulo allegedly obtained Tax Declaration Nos.
25257 and 26377 covering the entire Cad. Lot No. 4894 purportedly as the
sole owner thereof.
Victor, Juanito, and Lilia alleged that they filed the complaint for partition in
Civil Case No. 832-BG and, during the proceedings therein, they and Paulo
entered into a compromise agreement which they submitted to the trial court.
On February 10, 1993, acting thereon, the said court rendered the judgment
based on compromise agreement and partitioned Cad. Lot No. 4894, thus:
"one-half of the area of the riceland, one-half of the area of the sandy land,
and one-half of the area of the swampland" belonged to Victor, Juanito, and
Lilia while the other half of the said areas belonged to Paulo. The said
judgment became final and executory and its execution was pending
resolution by the trial court. The spouses Aromin allegedly knew of this fact.
Nonetheless, on February 10, 1994, Paulo and the spouses Aromin allegedly
executed a Deed of Sale where the former, purportedly as the true and
absolute owner of the subject property, conveyed to the latter the ownership
of the same. The said deed was allegedly part of the compromise agreement
entered into between Paulo and the spouses Aromin in Civil Case No. 921-
BG and which they submitted for the trial court's approval.
Victor, Juanito, and Lilia opposed the approval of the said compromise
agreement. They likewise prayed for the annulment of the Deed of Sale
dated February 10, 1994, executed by Paulo in favor of the spouses Aromin
covering the entire subject property.
In their joint answer, Paulo and the spouses Aromin alleged that the subject
property was sold under the deed of sale executed between them on
February 10, 1994. The spouses Aromin raised the defense that they were
buyers in good faith as they believed that Paulo was the sole owner of the
subject property. The spouses Aromin further alleged that they have been in
actual and physical possession thereof, and have been actually appropriating
for themselves the fruits thereof for the past years. They have also allegedly
introduced improvements thereon.
These three civil cases (Civil Cases Nos. 921-BG, 938-BG and 965-BG)
were jointly tried before the court a quo. Incidentally, while the case was
pending resolution, Paulo died and was accordingly substituted by his heirs,
namely, Jose Floresca, Angelina Floresca-Dumpit, Eliseo Floresca,
Consolacion Floresca, and Cecilio Floresca.
During the pre-trial of the cases, the parties stipulated on the following facts:
 1. Both parties stipulated and admitted that there is a Decision in
Civil Case No. 832-BG dated February 10, 1993 at RTC, Br. 33,
Bauang, La Union;
2. Both parties stipulated and admitted that Wilfredo and Swarnie
Aromin are not parties to Civil Case No. 832-BG;
3. Both parties stipulated and admitted the fact that there is a Notice
of Lis Pendens duly registered on August 16, 1991;
4. Both parties stipulated and admitted that Wilfredo and Swarnie
Aromin, and Dr. Paulo J. Floresca were not given that notice of lis
pendens;
5. Both parties stipulated and admitted the existence of seven (7)
Deeds of Sale executed between the Aromins and Dr. Paulo J.
Floresca, all unregistered and the last four (4) Deeds of Sale were
allegedly executed after the date of the institution of Civil Case No.
832-BG;
6. Both parties stipulated and admitted that the acknowledgment
receipt of March 9, 1993 and the Deed of Sale of February 24, 1994,
all came after the institution of Civil Case No. 832-BG;
7. Both parties stipulated and admitted the existence of a Deed of
Sale dated February 10, 1994, executed by and between Dr. Paulo
J. Floresca and the Aromins which covers the entire lot 4894;
8. Both parties stipulated and admitted that the Aromins never
obtained a [t]ax declaration of the property either in parts or in whole
over Cadastral lot 4894;
9. Both parties stipulated and admitted that the Deed of Sale was the
basis of the Compromise Agreement.6
After due trial, the court a quo rendered the Decision dated September 15,
2000 on the consolidated Civil Cases Nos. 921-BG, 938-BG and 965-BG in
favor of the spouses Aromin. The court a quo disbelieved the claim of Victor,
Juanito, and Lilia that they were co-owners of the subject property. Instead, it
gave credence to Paulo's testimony that when he signed the compromise
agreement in Civil Case No. 832-BG, which was made the basis of the
judgment thereof, he was of the belief that the said agreement did not include
those properties that he had already disposed of. The court a quo likewise
noted that Paulo was not assisted by counsel when he entered into the said
agreement. It opined that Victor, Juanito, and Lilia surreptitiously prepared
the compromise agreement and that they took advantage of Paulo's
advanced age and weak mental faculties during the execution thereof.
The court a quo found that the subject property was Paulo's share in the
estate of their parents and, thus, was exclusively owned by him. Alberto,
Paulo's brother, and the father of Victor, Juanito, and Lilia, no longer had a
share therein because his own share consisted in the properties situated in
San Agustin, Bauang, La Union. Relying on the testimonies of tenants who
stated that they delivered the produce of the subject property to Paulo and
not to the siblings Victor, Juanito, and Lilia, the court a quo concluded that
this proved that Paulo was the sole owner thereof.
Moreover, it believed Paulo's claim that the subject property was previously
declared for tax purposes in the name of his sister Josefa but she
subsequently donated the same to his daughter Angelina Floresca Dumpit
who, in turn, donated it to him. On the other hand, the court a quo rejected
the allegation that the spouses Aromin acted in bad faith. This was the
contention of Victor, Juanito, and Lilia pointing out that some of the
transactions of the spouses Aromin with Paulo involving the subject property
were made after the institution of the complaint for partition in Civil Case No.
832-BG and a notice of lis pendens had been recorded. According to the
court a quo, the siblings failed to adduce any evidence to support their
contention that the spouses Aromin were purchasers in bad faith. On the
other hand, it gave credence to Wilfredo Aromin's testimony that he and his
spouse Swarnie did not have any knowledge about Civil Case No. 832-BG.
It is the view of the court a quo that the spouses Aromin rightfully relied on
Paulo's assurance that he was the sole owner of the subject property on the
basis of the tax declarations in his name. The first sale was made between
Paulo and the spouses Aromin on November 12, 1990 covering an area of
12,314 square meters of the subject property and forthwith the latter built
their house thereon. The failure of the Floresca siblings to take any action
against this act of adverse possession was interpreted by the court a quo as
indicative of their recognition of Paulo's right to dispose his own property.
The court a quo posited that Victor, Juanito, and Lilia were claiming co-
ownership over the subject property only because its value has considerably
increased by reason of the improvements introduced thereon by the spouses
Aromin. It also faulted the siblings for not impleading the spouses Aromin as
parties to Civil Case No. 832-BG despite their knowledge that several
portions of the subject property had already been sold to the latter. Moreover,
the notice of lis pendens in the said case was not served on either Paulo or
the spouses Aromin.
The court a quo declared the spouses Aromin as buyers in good faith of the
subject property. It likewise held that the Deed of Sale dated February 10,
1994 entered into by the said spouses and Paulo prevailed over the
judgment on compromise agreement in Civil Case No. 832-BG.
The dispositive portion of the court a quo's decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered:
1. Declaring the decision in Civil Case No. 832-BG not binding upon
the Spouses Wilfredo and Swarnie Aromin and has no legal effect
upon said spouses;
2. Declaring that the Spouses Wilfredo and Swarnie Aromin being
buyers in good faith, are the owners of the whole property sold to
them by Dr. Paulo J. Floresca;
3. No pronouncement as to the amount of damages as Spouses
Aromin failed to adduce evidence in support thereto;
4. With costs.
SO ORDERED.7
On appeal by Victor, Juanito, and Lilia, the Court of Appeals (CA) rendered
the assailed Decision dated June 6, 2003 reversing the court a quo's
decision.
With respect to the issue of co-ownership, the appellate court ruled that it
was erroneous for the court a quo to impugn the judgment based on
compromise agreement rendered by the RTC (Branch 33) in Civil Case No.
832-BG. Under the terms thereof, the subject property had been partitioned
such that one-half of the riceland, sandy land, and swampland belonged to
Paulo while the other half of the said areas belonged to the siblings Victor,
Juanito, and Lilia.
The appellate court explained that "a judicial compromise has the effect of
res judicata and is immediately executory and not appealable unless a
motion to set aside the same is filed on the ground of fraud, mistake, or
duress, in which event an appeal may be filed from an order denying the
same. A court cannot set aside a judgment based on compromise without
having declared in an incidental hearing that such a compromise is vitiated
by any of the grounds for nullity enumerated in Article 2038 of the Civil
Code."8
Following these precepts, the appellate court stated that it was not within the
ambit of the court a quo's judicial power to disturb, much more to nullify,
absent any appeal or motion to set aside the judgment, the co-ownership of
the subject property between Paulo and the siblings which was the subject of
the judgment based on compromise agreement rendered by the RTC
(Branch 33) in Civil Case No. 832-BG. It was also noted that Paulo himself
recognized the existence of the said co-ownership because in his answer
with compulsory counterclaim in Civil Case No. 921-BG, he admitted the sale
of the subject property to the spouses Aromin "only to the extent of his share
in the parcels described therein, considering that the said parcels are not
owned exclusively by defendant (referring to Paulo) but co-owned with his
deceased brother and sister Alberto Floresca and Josefa Floresca,
respectively x x x."9
The claim of the spouses Aromin that they were buyers in good faith was not
given credence by the appellate court. It found that when portions of the
subject property were being offered for sale, the spouses Aromin merely
relied on the representations made by Paulo that he was the sole owner
thereof. The appellate court faulted them for not making any inquiries with
the Register of Deeds or the Assessor's Office in their province about the
ownership of the subject property.
According to the appellate court, when the three deeds of sale pertaining to
some portions of the subject property were executed in November 1990 and
June 1991,10 the spouses Aromin already knew of the existence of the co-
ownership over the subject property. This knowledge should have impelled
them to verify the extent of Paulo's ownership rights. Their failure to do so,
the appellate court held, indicated negligence on their part and such
negligence precluded them from claiming that they were buyers in good faith.
With respect to the other four deeds of sale that were executed in February
1992,11 the appellate court observed that Civil Case No. 832-BG had already
been filed at the time and, in connection therewith, a notice of lis pendenshad
also been filed with the register of deeds. These facts should have put the
spouses Aromin on notice that the lots they were buying were not solely
owned by Paulo. Addressing the spouses Aromin's argument that they
should have been served with a copy of the notice of lis pendens, the
appellate court stated that the said notice filed with the register of deeds
already constituted constructive notice to all. Moreover, there is nothing in
Section 14,12 Rule 13 of the Rules of Court that requires the parties to a
pending case to furnish a copy of the complaint and of the notice of lis
pendens to any person, other than the register of deeds of the municipality or
province where the property is situated.
Despite the absence of good faith, the sale made by Paulo in favor of the
spouses Aromin was declared valid but only to the extent of his one-half
share of the subject property. The appellate court cited the settled rule that
even if a co-owner sells the whole property as his, the sale will affect only his
own share but not those of the other co-owners who did not consent to the
sale.13
The appellate court held Paulo liable to pay moral damages and attorney's
fees to Victor, Juanito, and Lilia. It mentioned that it was likewise inclined to
direct Paulo to reimburse to the spouses Aromin the amount equivalent to
one-half of the total purchase price that they paid to him corresponding to the
one-half portion of the subject property which must be returned to the
siblings, as co-owners thereof. The appellate court nonetheless did not so
because the spouses Aromin did not appeal from the decision of the court a
quo, hence, were not entitled to any relief.
The dispositive portion of the assailed CA decision reads:
WHEREFORE, PREMISES CONSIDERED, the assailed Decision is
hereby REVERSED and judgment is hereby rendered:
1. Declaring the Decision in Civil Case No. 832-Bg binding upon
Spouses Wilfredo and Swarnie Aromin;
2. Declaring that the Spouses Wilfredo and Swarnie Aromin are not
buyers in good faith and their ownership over the subject properties
must be limited to the one-half share of Paulo Floresca as stipulated
by the appellants in Civil Case No. 832-Bg;
3. Ordering the Spouses Wilfredo and Swarnie Aromin to restore the
ownership and possession over one-half of the subject properties in
favor of the appellants [referring to Victor, Juanito and Lilia] who are
the owners thereof as stipulated by the appellants in Civil Case No.
832-Bg;
4. Adjudging Paulo Floresca liable for moral damages in favor of the
appellants in the amount of P250,000.00 and attorney's fees of
P50,000.00.
5. With costs against Paulo Floresca.
SO ORDERED.14
The spouses Aromin sought to reconsider the said decision but the appellate
court, in the assailed Resolution dated October 24, 2003, denied their motion
for reconsideration. Hence, the recourse to this Court.
In support of their petition for review on certiorari, the spouses Aromin (the
petitioners) allege that the judgment based on compromise agreement
rendered in Civil Case No. 832-BG does not bind them because they were
not parties to the said case. In the same manner, the principle of res
judicata does not apply because the element of identity of parties is not
present. The petitioners insist that as to the effects and scope of the
judgment based on compromise agreement, its effectivity is limited to the
parties thereto.
The petitioners posit that assuming arguendo that the subject property is co-
owned, they should have been impleaded as parties in Civil Case No. 832-
BG. They invoke Article 49715 of the Civil Code of the Philippines contending
that when the complaint for partition in Civil Case No. 832-BG was filed by
Victor, Juanito and Lilia, the petitioners were already assignees of Paulo and,
as such, deemed to be co-owners of the subject property. Victor, Juanito,
and Lilia therefore should have allegedly notified the petitioners about the
partition and impleaded them as parties in Civil Case No. 832-BG.
The petitioners likewise invoke Article 49916 of the Civil Code as they argue
that the partition under the judgment based on compromise agreement did
not prejudice their rights as owners of the subject property. They point out
that when the said judgment was registered on June 9, 1993, the entire
subject property had already been sold to them by Paulo.
The petitioners characterize themselves as indispensable parties within the
meaning of Section 1,17 Rule 69 of the Rules of Court. Since they were not
impleaded as parties in Civil Case No. 832-BG, the judgment based on
compromise agreement therein cannot allegedly attain finality. Further, the
said judgment could not have the effect of res judicata on the issue of
ownership of the subject property.
The petitioners maintain that the CA's findings that the subject property is co-
owned by Paulo and the siblings cannot be given weight. On the other hand,
the petitioners submit that the court a quo's finding that Paulo is the sole
owner of the subject property is correct as it is based on the latter's testimony
that the same is his share from the estate of their parents. His testimony was
allegedly corroborated by the testimonies of the tenants that they delivered
the produce of the subject property to Paulo.
The CA's finding that they were purchasers in bad faith was also impugned
by the petitioners. Quoting extensively from the court a quo's decision, they
insist that its finding that they were purchasers in good faith should be
accorded respect. It is also their submission that the registration of the notice
of lis pendens and, subsequently, the judgment based on compromise
agreement in the register of deeds did not prejudice their right because they
acquired the ownership of the subject property even before the said
registration. On this point, the petitioners cite Section 113 18 of Presidential
Decree No. 1529 and the commentary of Noblejas thereon that "the
registration of any instrument under this system shall be understood to be
without prejudice to a third party with a better right."
By way of conclusion, the petitioners aver that in the event that they are
obliged to return one-half of the subject property to Victor, Juanito, and Lilia,
in the interest of justice and equity, the heirs of Paulo should be directed to
reimburse to the petitioners the amount equivalent thereto.
The contentions of the petitioners shall be addressed in seriatim.
The petitioners vigorously assert that they are not bound by the judgment
based on compromise agreement rendered in Civil Case No. 832-BG. The
said judgment was rendered when Victor, Juanito, and Lilia, as plaintiffs
therein, and Paulo, as defendant therein, agreed to the settlement of the
case. The pertinent judgment based on compromise agreement provided, in
part, as follows:
xxxx
SETTLEMENT OF THE THIRD CAUSE OF ACTION:
1. The parcel of land, Lot No. 4894, declared under Tax Declaration
No. 26377 which cancelled No. 25236, and Tax Declaration No.
25257 (both Tax Declarations bear the same descriptions) consisting
of riceland, sandyland, and swampland is partitioned between the
plaintiffs and the defendant as follows:
2. Share of the plaintiffs: The share of the plaintiffs is one-half of the
area of the riceland, one-half of the area of the sandyland, and one-
half of the area of the swampland.
3. Share of the defendant: The share of the defendant is also one-
half of the area of the riceland, one-half of the area of the sandy
land, and one-half of the area of the swampland.
4. That within a reasonable time from the execution of this settlement
the plaintiffs and the defendant, or at the instance of either of them
but both sharing in the cost, a land survey be made and sketch plan
be prepared to determine the exact boundaries and definite limits of
their respective one-half share of the riceland, one-half share of the
sandyland, and one-half share of the swampland.
5. That in consideration of this settlement, the defendant waives,
quitclaim, and renounce forever, absolutely and unconditionally, unto
the plaintiffs, their heirs and assigns, their above-stated one-half
share of the riceland, one-half share of the sandyland, and one-half
share of the swampland.
That with this COMPROMISE AGREEMENT, the plaintiffs and the
defendant have waived and renounce[d] forever any and all claims
that each of them have or may have against each of them in this
instant case, monetary or otherwise, and both agreed to work jointly
for the issuance to them of their respective shares' tax declaration
and other documents.
That the plaintiffs and the defendant executed this COMPROMISE
AGREEMENT freely, voluntarily, with their sound minds, without any
force, duress, threat, intimidation, mistake or undue influence
exerted upon them from anyone, in the presence of the Honorable
Claudio de Guzman, Barangay Captain of Barangay Central West,
Bauang, La Union. Two barangay councilmen signed as witnesses.
That in their earnest and sincere desire to terminate this case the
soonest, the plaintiffs and the defendant agreed to submit this
COMPROMISE AGREEMENT to this Honorable Court even without
the concurrence of their respective counsels. A copy for each is
furnished for their information.
WHEREFORE, the plaintiffs and the defendant most respectfully
submit this COMPROMISE AGREEMENT to this Honorable Court
and pray for its kind approval and the rendition of a judgment based
on the same." x x x
the terms and conditions of which are not contrary to law, morals and
public policy, the Court hereby approves the same, renders judgment
in accordance therewith and enjoins the parties to comply with their
respective undertakings.
SO ORDERED.19
Contrary to their claim, the petitioners, even if they were not parties to Civil
Case No. 832-BG, are bound by the judgment based on compromise
agreement rendered therein under the principle of res judicata. It is well
settled that a judicial compromise has the effect of res judicata and is
immediately executory and not appealable unless set aside on grounds of
nullity under Article 203820 of the Civil Code.21 Further, a judgment based on
a compromise agreement is a judgment on the merits, wherein the parties
have validly entered into stipulations and the evidence was duly considered
by the trial court that approved the agreement.22
The principle of res judicata is embodied in Section 47, Rule 39 of the Rules
of Court thus:
Sec. 47. Effect of judgments or final orders. – The effect of a
judgment or final order rendered by a court of the Philippines, having
jurisdiction to pronounce the judgment or final order, may be as
follows:
(a) In case of a judgment or final order against a specific
thing, or in respect to the probate of a will, or the
administration of the estate of the deceased person, or in
respect to the personal, political or legal condition or status
of a particular person or his relationship to another, the
judgment or final order is conclusive upon the title to the
thing, the will or administration, or the condition, status or
relationship of the person; however, the probate of a will or
granting of letters of administration shall only be prima facie
evidence of the death of the testator or intestate;
(b) In other cases, the judgment or final order is, with respect
to the matter directly adjudged or as to any other matter that
could have been raised in relation thereto, conclusive
between the parties and their successors in interest by title
subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same
title and in the same capacity; and
(c) In any other litigation between the same parties or their
successors in interest, that only is deemed to have been
adjudged in a former judgment or final order which appears
upon its face to have been so adjudged, or which was
actually and necessarily included therein or necessary
thereto.
The doctrine of res judicata embraces two concepts: the first is "bar by prior
judgment" under paragraph (b) of Section 47, Rule 39, and the second is
"conclusiveness of judgment" under paragraph (c) thereof. In the present
case, the second concept – conclusiveness of judgment – applies. The said
concept is explained in this manner:
x x x conclusiveness of judgment – states that a fact or question
which was in issue in a former suit and there was judicially passed
upon and determined by a court of competent jurisdiction, is
conclusively settled by the judgment therein as far as the parties to
that action and persons in privity with them are concerned and
cannot be again litigated in any future action between such parties
or their privies, in the same court or any other court of concurrent
jurisdiction on either the same or different cause of action, while the
judgment remains unreversed by proper authority. It has been held
that in order that a judgment in one action can be conclusive as to a
particular matter in another action between the same parties or their
privies, it is essential that the issue be identical. If a particular point
or question is in issue in the second action, and the judgment will
depend on the determination of that particular point or question, a
former judgment between the same parties or their privies will be
final and conclusive in the second if that same point or question was
in issue and adjudicated in the first suit. Identity of cause[s] of action
is not required but merely identity of issues.23
The question on the co-ownership of the subject property was already settled
in the judgment based on compromise agreement in Civil Case No. 832-BG
which categorically stated that the subject property, "consisting of a riceland,
sandy land and swampland," is partitioned such that one-half of the said
areas belongs to Victor, Juanito and Lilia while the other half belongs to
Paulo.
The petitioners are bound by the said judgment based on compromise
agreement, particularly on the question of the co-ownership of the subject
property by Paulo, on one hand, and the siblings, on the other, as they (the
petitioners) are privies-in-interest or successors-in-interest of Paulo. Case
law, both here and in the United States, recognizes privity of interest under
the following situations:
The historic and most common situation in which privity is upheld
exists when a person acquires an interest in the subject matter of the
suit after it was filed or decided. Successors-in-interest, whether they
obtain their interests by virtue of an assignment, by inheritance or by
law are bound along with their predecessors by the rules of res
judicata and collateral estoppel. This is necessary in order to
preserve the finality of judgments; otherwise a person confronted
with an adverse decision might subject the winning party to the
prospect of continual litigation simply by transferring his interest in
 the subject matter of the suit to another who could begin the suit
anew.
A second well-defined privity relationship arises when legal
appointed representative parties, such as trustees and executors,
are involved; those individuals are deemed in privity with those
whom they represent. Since parties litigating in representative
capacity have no interests of their own, but either sued or are sued
on behalf of the beneficiaries whom they serve.
Privity also has been universally recognized when it is determined
that the newly named party in the second suit actually controlled or
participated in litigating the first action. Although the non-party will
not be bound by res judicata because different claims are involved,
identical issues that were necessarily and actually litigated will be
precluded. Having received one opportunity to defend or prosecute
those issues, he may not be allowed another.24
The petitioners fall under the first category, i.e., they are Paulo's privies-in-
interest or successors-in-interest who acquired most of the portions of the
subject property after the filing of the complaint in Civil Case No. 832-BG on
August 13, 1991. In connection with their complaint for partition against
Paulo in the said case, Victor, Juanito, and Lilia likewise filed a notice of lis
pendens with the register of deeds on August 16, 1991 and the said notice
was annotated on the face of Tax Declarations Nos. 26377 and 25257
covering the subject property. As shown earlier, four out of the seven deeds
of sale25 were executed by Paulo in favor of the petitioners in February 1992
or after the filing of the complaint for partition in Civil Case No. 832-BG.
Consequently, the petitioners are Paulo's privies-in-interest or successors-in-
interest and, as such, are bound by the judgment based on compromise
agreement rendered therein.
As persons whose interest over the subject property is deemed in privity to
the interest of Paulo, the petitioners could not be considered indispensable
parties to Civil Case No. 832-BG. The following discussion on who is or is not
an indispensable party is apropos:
An indispensable party is one whose interest will be affected by the
court's action in the litigation, and without whom no final
determination of the case can be had. The party's interest in the
subject matter of the suit and in the relief sought are so inextricably
intertwined with the other parties' that his legal presence as a party
to the proceeding is an absolute necessity. In his absence there
cannot be a resolution of the dispute of the parties before the court
which is effective, complete, or equitable.
Conversely, a party is not indispensable to the suit if his interest in
the controversy or subject matter is distinct and divisible from the
interest of the other parties and will not necessarily be prejudiced by
a judgment which does complete justice to the parties in court. He is
not indispensable if his presence would merely permit complete relief
between him and those already parties to the action or will simply
avoid multiple litigation.26
With respect to Civil Case No. 832-BG, Paulo was an indispensable party
thereto as well as the siblings Victor, Juanito, and Lilia as it involved the
subject property which they acquired from their ascendants, the deceased
parents of Paulo and Alberto. It was, in fact, a partition of the estate of their
ascendants. Paulo and, in representation of their father Alberto, Victor,
Juanito, and Lilia, as the heirs, may be properly considered indispensable
parties thereto. Indeed, a final determination could be had therein even
without the petitioners as their claim of interest was merely derived from
Paulo's interest. In other words, they merely stepped into his shoes as his
successors-in-interest.
To invoke res judicata, absolute identity of parties is not required. A
substantial identity of parties is sufficient. And there is substantial identity of
parties when there is a community of interest between a party in the first
case and that in the second one, even if the latter party was not impleaded in
the first.27 As his privies-in-interest or successors-in-interest, the petitioners
clearly had a community of interest with that of Paulo who was party to Civil
Case No. 832-BG. Res judicata applies and the petitioners' argument that
the judgment based on compromise agreement rendered in Civil Case No.
832-BG was null and void because they were not impleaded as
indispensable parties thereto must perforce fail.
Thus, the appellate court correctly held that it was not within the court a
quo's power to disturb, much more nullify, the stipulation on the co-ownership
of the subject property as contained in the judgment based on compromise
agreement in Civil Case No. 832-BG absent any appeal or motion to set
aside the said judgment. As explained earlier, the said judgment based on
compromise agreement constitutes res judicata particularly on the question
or issue of the co-ownership of the subject property among Paulo and the
siblings.
Moreover, the petitioners' claim that they were purchasers in good faith is
untenable. The issue of good faith or bad faith of a buyer is relevant only
where the subject of the sale is a registered land but not where the property
is an unregistered land. One who purchases an unregistered land does so at
his peril.28
It bears noting that when the petitioners bought portions of the subject Q When you executed with Dr. Floresca the Deed of Sale,
property from Paulo, it was not a registered land.29 In fact, in the deeds of particularly the Deeds of Sale which [were] executed only in 1992 –
sale covering portions of the subject property, it was referred to as Cad. Lot
No. 4894 and covered by tax declarations in Paulo's name. In other words, ATTY. LIBATIQUE:
the petitioners bought portions of the subject land even if Paulo never
presented to them a title over the same in his name. The petitioners' claim of
No, misleading, Your Honor. The Deeds of Sale [were]
having bought the subject property in good faith is thus irrelevant.
executed in 1990 and 1991.

In any case, the petitioners are clearly not buyers in good faith of the subject
ATTY. ESTIGOY:
property as revealed from petitioner Wilfredo's own testimony. During cross-
examination, he admitted to having prior knowledge that the subject property
was co-owned by Paulo, his brother Alberto and sister Josefa but, relying Well, let us see, Exhibits "A" to "F."
solely on Paulo's word that the subject property became exclusively his, the
petitioners bought the subject property from him piece by piece. Petitioner COURT:
Wilfredo testified, thus:
You see the date, what is Exhibit "A"?
ATTY. ESTIGOY:
ATTY. ESTIGOY:
Cross-examination:
Yes, Exhibit "A" is dated 1992, your honor.
Continuing:
ATTY. LABATIQUE:
Q And you know then, Mr. Aromin that that property was owned by
the brothers of Dr. Floresca, sister of Dr. Floresca and Dr. Floresca Exhibit "A" is the Acknowledgment Receipt, it is not a Deed
himself? of Sale. The Deed of Sale is Exhibit "B" up to Exhibit "B".

A Yes, Sir. ATTY. ESTIGOY:

Q So you know then that it being a co-ownership, Mr. Aromin, it will Cross-examination:
be subject to a partition, is that right?
Continuing:
A Well, that is really hard to answer because Dr. Floresca told me
that he is already the sole owner of those properties and I also Q Alright, Mr. Aromin, it seems that your Exhibit "B" which had been
believed it because I was out of the country for a long time and it executed by you and Dr. Floresca is in blank date in 1991 –
might be divided already and he is the sole owner.
COURT:
Q Alright, Mr. Aromin, when you executed - when Dr. Floresca
executed the Deeds of Sale which were presented by you as
Q How about the month?
Exhibits "A" to "F", you were already aware that the case for partition
was being tried in this Honorable Court? Is that right?
A It is June and with blank date, Your Honor, of 1991.
A I did not under[stand] the question, Sir. Will you please repeat?
Cross-examination:
Continuing: A My Attorney [has] been the one dealing on it, Sir.

Q Which refers to a portion of Lot 4894, were you aware at the time
that Dr. Floresca is not the true owner alone of the property?
A Not really, he told me – what he told me is that, he is the sole
owner of the property.
Q So, you answer the question, Mr. Witness.
A I passed it on to Atty. Hipol to deal on it, Sir.
COURT:

Q No, what I mean is, since you are a – no – you said a while ago, No, this refers to the question, you answer the question.
Mr. Aromin, that you actually worked on that land?
ATTY. LIBATIQUE:
A Yes, I worked on that land long time ago and passed it to my
nieces and nephews when I started working outside the country, that
There is no question yet, Sir.
is, in 1963.
ATTY. ESTIGOY:
Q You know then that it was formerly a co-ownership?
No, there is no answer yet to my question, Your Honor.
A Yes, but that was a long time back. What I know is, they have
shared already. They have already divided their properties that
before he sold me this property, he is already the sole owner as that COURT:
was what he told me; that is it.
That is why I am asking him to answer the question, - did
Q And you know that that lot was covered by Cadastral Lot No. you not, before you bought this property, this parcel of land,
4894, is that correct? [and] executed a Deed of Sale without date, in June 1991,
did you not inquire from the Register of Deeds or from the
Assessor's Office whether this property is a co-ownership?
A Yes, Sir, I am sure and –
Witness:
Q And you did not know that –
A Well, I took the word of Dr. Paulo J. Floresca, Your Honor.
A I got the number, but I do not know the meaning of these numbers.
COURT:
Q I see. And did you not know, as a tenant of that property, that this
Lot 4894 is a co-ownership of the three (3) brothers and sisters?
You answer with "yes" or "no."
A I told you before, Sir, that I was a tenant before. I know that it was
a co-ownership but I was away a long time and when I came back he WITNESS:
offered me to buy this lot and he told me about that, that he is the
sole owner already. A No, Sir.30

Q And did you not inquire from the Register of Deeds or the An innocent purchaser for value is one who buys the property of another
Assessor's Office before you bought this property, whether this without notice that some other person has a right to or interest in that same
property is still a co-ownership? property, and who pays a full and fair price at the time of the purchase or
before receiving any notice of another person's claim. The honesty of
intention that constitutes good faith implies freedom from knowledge of
circumstances that ought to put a prudent person on inquiry. 31
The petitioners' knowledge that the subject property was, at one time, co-
owned by Paulo, his brother Alberto and sister Josefa should have impelled
them to inquire and investigate, as any prudent vendee should, about the
status of the co-ownership before buying the subject property. The
petitioners' reliance on Paulo's word alone that he was the sole owner of the
subject property when they bought the same, despite their knowledge of
facts that should have put them on guard, constitutes gross negligence
amounting to bad faith. They cannot therefore rightfully claim that they are
buyers in good faith.
Having established that the subject property was owned in common by Paulo
and the siblings, it necessarily follows that Paulo could only dispose to the
petitioners his share in the subject property. Article 493 of the Civil Code
provides that "[e]ach co-owner shall have the full ownership of his part and of
the fruits and benefits pertaining thereto, and he may therefore alienate,
assign or mortgage it, and even substitute another person in its enjoyment,
except when personal rights are involved. But the effect of the alienation or
the mortgage, with respect to the co-owners, shall be limited to the portion
which may be allotted to him in the division upon the termination of the co-
ownership."
Under the said provision, while a co-owner has the right to freely sell and
dispose of his undivided interest, nevertheless, as a co-owner he cannot
alienate the shares of his other co-owners – nemo dat qui non habet.32Paulo,
however, sold the entire subject property to the petitioners without the
consent of the co-owners. Following the well-established principle that the
binding force of a contract must be recognized as far as it is legally possible
to do so – quando res non valet ut ago, valeat quantum valere potest33 - the
disposition affects only Paulo's share pro indiviso, and the transferee, in this
case the petitioners, gets only what corresponds to Paulo's share in the
partition of the subject property, i.e., one-half of the areas described as
riceland, sandy land and swampland which constitute the subject property.
Finally, the Court cannot accede to the petitioners' plea that, in the interest of
equity and justice, the heirs of Paulo should be directed to reimburse to them
the amount equivalent to one-half of the total purchase price of the subject
property. Under the circumstances, the petitioners have no one else to blame
for the consequences of their imprudent purchase of the subject property.
They did so at their peril and the consequences would have to be borne by
them alone because, unfortunately for them, Paulo had already passed
away. It would be unfair to Paulo's heirs if they themselves would be required
to reimburse the petitioners the amount equivalent to one-half of the
purchase price that Paulo received for the subject property absent any
showing that they had received any amount for the transactions between the
petitioners and Paulo.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated
June 6, 2003 and Resolution dated October 24, 2003 of the Court of Appeals
in CA-G.R. CV No. 69651 are AFFIRMED in toto.
SO ORDERED.