Part 1

Rizal Commercial Banking Corporation v. Metro Container Corporation, G.R. No. 127913, 13
September 2001

Facts: For failure of Ley Construction Corporation (LEYCON) to settle its loan obligations, Rizal
Commercial Banking Corporation (RCBC) instituted an extrajudicial foreclosure proceeding against it. In a
bidding, RCBC was adjudged the highest bidder. LEYCON promptly filed an action for Nullification of
Extrajudicial Foreclosure Sale and Damages against RCBC. Meanwhile, RCBC consolidated its ownership
over the property due to LEYCON's failure to redeem the mortgaged property within the 12-month
redemption period. By virtue thereof, RCBC demanded rental payments from Metro Container
Corporation (METROCAN) which was leasing the mortgaged property from LEYCON.

On the other hand, LEYCON filed an action for Unlawful Detainer against METROCAN before the MeTC.
Consequently, METROCAN filed a complaint for Interpleader against LEYCON and RCBC before the RTC
to compel them to interplead and litigate their several claims among themselves and to determine
which among them shall rightfully receive the payment of monthly rentals on the subject property.

On 31 October 1995, judgment was rendered in the Unlawful Detainer case, which, among other things,
ordered METROCAN to pay LEYCON whatever rentals due on the subject premises. The said decision
became final and executory. By reason thereof, METROCAN and LEYCON separately filed a motion to
dismiss the interpleader case. However, the said motions were dismissed for lack of merit. METROCAN
appealed to the Court of Appeals which granted the petition and ordered the dismissal of the
interpleader case. Hence, RCBC filed the instant petition.

Issue: May METROCAN unilaterally cause the dismissal of the interpleader case?

Held: Yes. An action of interpleader is afforded to protect a person not against double liability but
against double vexation in respect of one liability. It requires, as an indispensable requisite, that
conflicting claims upon the same subject matter are or may be made against the plaintiff-in-interpleader
who claims no interest whatever in the subject matter or an interest which in whole or in part is not
disputed by the claimants.

When the decision in the Unlawful Detainer case became final and executory, METROCAN has no other
alternative left but to pay the rentals to LEYCON. Precisely because there was already a judicial fiat to
METROCAN, there was no more reason to continue with the interpleader case. Thus, METROCAN moved
for the dismissal of the interpleader action not because it is no longer interested but because there is no
more need for it to pursue such cause of action. The decision in the Unlawful Detainer case resolved the
conflicting claims insofar as payment of rentals was concerned.

RCBC was correct in saying that it is not bound by the decision in the Unlawful Detainer case. It is not a
party thereto. However, it could not compel METROCAN to pursue the interpleader case. RCBC has
other avenues to prove its claim. It is not bereft of other legal remedies. In fact, the issue of ownership
can very well be threshed out in the case for Nullification of Extrajudicial Foreclosure Sale and Damages
filed by LEYCON against RCBC. (RCBC vs Metro Container Corporation, G.R. No. 127913. September 13,
2001)

United Coconut Planters Bank v. Intermediate Appellate Court, G.R. Nos. 726645-65, 20 March 1990
Pdf

Sy-Quia v. Sheriff of Ilocos Sur, 46 Phi. 400 (1924)

This is a petition for a writ of mandamus to compel the Sheriff of the Province of Ilocos Sur to proceed
with a chattel mortgage foreclosure sale.

It appears from the record that on February 3, 1915, Miguel Aglipay Cheng-Laco and Feliciano Reyes
Cheng-Kiangco executed a chattel mortgage in favor of the petitioner, Gregorio R. Sy-Quia on their
mercantile, establishment, with all the merchandise therein contained, as security for a debt of P6,000.
The chattel mortgage was duly recorded on the date of its execution and fell due on February 3, 1917.
From its terms it may be inferred that it was the intention of the parties that the mortgagors were to be
permitted to sell the merchandise replenishing their stock from time to time and that the new stock
brought in should also be subject to the mortgage.

On May 5, 1924, Miguel Aglipay Cheng-Laco executed another chattel mortgage on the same
establishment and all its contents in favor of the respondent Filadelfo de Leon as security for the sum of
P4,900, which mortgage was recorded on May 4, 1924.

On the latter date of the petitioner, in writing, requested the sheriff to take possession of the mortgaged
property and to sell it at public auction under the provisions of section 14 of the Chattel Mortgage Law
(Act No. 1508). The sheriff seized the establishment in question as well as its contents and fixed the date
of the sale at June 2, 1924. In the meantime Filadelfo de Leon presented an adverse claim to the
property by virtue of his chattel mortgage, alleging that all the goods on which the chattel mortgage of
Gregorio R. Sy-Quia was given had been sold long before the chattel mortgage in favor of De Leon was
executed and that, therefore, the earlier chattel mortgage was of no effect.

The sheriff being in doubt as to the priority of the conflicting claims, suspended the foreclosure
proceedings and brought an action under section 120 of the Code of Civil Procedure requiring the two
claimants to interplead. Thereupon, the present proceeding that the duty of the sheriff to proceed with
the sale was a ministerial one and praying that the sheriff be commanded to proceed.1awph!l.net

Though it, perhaps, would have been better practice for the sheriff to sell the property and hold the
proceeds of the sale subject to the outcome of the action of interpleader, we, nevertheless, are of the
opinion that the facts shown do not justify our interference by mandamus. The sheriff might lay himself
open to an action for damages if he sold the goods without the consent of the holder of the last
mortgage, and it does not appear that the petitioner offered to give bond to hold him harmless in such
an event. In these circumstances, his action in suspending the sale pending the determination of the
action of interpleader seems justified.

We may say further that in cases such as the present, the petition for mandamus should be addressed to
the Courts of First Instance rather than to this court. The petition is denied with the costs against the
petitioner. So ordered.

Beltran v. People’s Homesite and Housing Corporation, G.R. No. L-25138, 28 August 1996

Facts: Plaintiffs since they first occupied their housing units under lease from PHHC, under lease and
paying monthly rentals therefor, they were assured that after 5 years of continuous occupancy they
would be entitled to purchase said units. In 1991, PHHC announced that the management of the project
would be transferred to GSIS in payment of PHHC's debts to GSIS. Subsequently, however, the new
manager of PHHC refused to recognize all transactions and undertakings previously entered into with
GSIS. Alleging that they do not know now to whom they should pay the monthly amortizations, plaintiffs
filed an interpleader suit against GSIS and PHHC.

GSIS and PHHC filed a motion to dismiss for failure to state a cause of action. After hearing the motion,
the court dismissed the interpleader case ruling that during the hearing, the counsel for defendant
ratified the allegations in his motion and made of record that GSIS has no objection that payments on
the monthly amortizations from the residents of Project 4 be made directly to PHHC. Plaintiffs appealed,
contending the allegations in their complaint raise questions of fact that can be established only by
answer and trial on the merits and not by a motion to dismiss heard by mere oral manifestations in open
court.

Issue: Did the trial court erred in dismissing the complaint for interpleader?

Held: No. Rule 63, section 1 of the Revised Rules of Court requires as an indispensable element that
"conflicting claims upon the same subject matter are or may be made" against the plaintiff-in-
interpleader "who claims no interest whatever in the subject matter or an interest which in whole or in
part is not disputed by the claimants."

The record shows clearly that there were no conflicting claims by defendant corporations as against
plaintiff-tenants, which they may properly be compelled in an interpleader suit to interplead and litigate
among themselves. While the two defendant corporations may have conflicting claims between
themselves with regard to the management, administration and ownership of Project 4, such conflicting
claims are not against the plaintiffs nor do they involve or affect the plaintiffs. No allegation is made in
their complaint that any corporation other than the PHHC which was the only entity privy to their lease-
purchase agreement, ever made on them any claim or demand for payment of the rentals or
amortization payments. Both defendant corporations were in conformity and had no dispute, as pointed
out by the trial court that the monthly payments and amortizations should be made directly to the PHHC
alone. Both defendant corporations were agreed that PHHC should continue receiving the tenants'
payments, and that such payments would be duly recognized even if the GSIS should eventually take
over Project 4 by virtue of their turnover agreement. (Beltran, et al. vs. PHHC, G.R. No. L-25138, August
28, 1969)

Wack-Wack Golf & Country Club, Inc. v. Won, G.R. No. L-23851, 26 March 1976

Facts: Wack Wack Golf and Country Club filed a complaint for interpleader against Won and Tan who
both claim ownership over membership fee certificate 201. Won claims its ownership stemming from a
decision rendered in Civil Case 26044 entitled "Lee E. Won alias Ramon Lee vs. Wack Wack Golf &
Country Club, Inc." Meanwhile, Tan claims ownership from the assignment made by the alleged true
owner of the same certificate. The trial court dismissed the complaint on the ground of res judicata by
reason of the previous civil case that issued Won the right to the certificate. Hence, the appeal.

Issue: Was the remedy of interpleader proper and timely?

Held: There is no question that the subject matter of the present controversy, i.e., the membership fee
certificate 201, is proper for an interpleader suit. However, the Corporation may not properly invoke the
remedy of interpleader.
It is the general rule that before a person will be deemed to be in a position to ask for an order of
intrepleader, he must be prepared to show, among other prerequisites, that he has not become
independently liable to any of the claimants. Indeed, if a stakeholder defends a suit filed by one of the
adverse claimants and allows said suit to proceed to final judgment against him, he cannot later on have
that part of the litigation repeated in an interpleader suit.

In the case at hand, the Corporation allowed civil case 26044 to proceed to final judgment. It was aware
of the conflicting claims of the appellees with respect to the membership fee certificate 201 long before
it filed the present interpleader suit. Yet it did not interplead Tan. It preferred to proceed with the
litigation and to defend itself therein. As a matter of fact, final judgment was rendered against it and
said judgment has already been executed. It is therefore too late for it to invoke the remedy of
interpleader

To now permit the Corporation to bring Won to court after the latter's successful establishment of his
rights in civil case 26044 to the membership fee certificate 201, is to increase instead of to diminish the
number of suits, which is one of the purposes of an action of interpleader, with the possibility that the
latter would lose the benefits of the favorable judgment. This cannot be done because having elected to
take its chances of success in said civil case 26044, with full knowledge of all the fact, the Corporation
must submit to the consequences of defeat.

Besides, a successful litigant cannot later be impleaded by his defeated adversary in an interpleader suit
and compelled to prove his claim anew against other adverse claimants, as that would in effect be a
collateral attack upon the judgment.

In fine, the instant interpleader suit cannot prosper because the Corporation had already been made
independently liable in civil case 26044 and, therefore, its present application for interpleader would in
effect be a collateral attack upon the final judgment in the said civil case; the appellee Lee had already
established his rights to membership fee certificate 201 in the aforesaid civil case and, therefore, this
interpleader suit would compel him to establish his rights anew, and thereby increase instead of
diminish litigations, which is one of the purposes of an interpleader suit, with the possibility that the
benefits of the final judgment in the said civil case might eventually be taken away from him; and
because the Corporation allowed itself to be sued to final judgment in the said case, its action of
interpleader was filed inexcusably late, for which reason it is barred by laches or unreasonable delay.
(Wack-Wack Golf and Country Club vs. Won, G.R. No. L-23851, March 26, 1976)

United Coconut Planters Bank v. Intermediate Appellate Court, G.R. Nos. 726645-65, 20 March 1990

Repeated Case Pdf

Part 2

Valerde v. Social Justice Society, G.R. No. 159357, 28 April 2004

FACTS: SJS, a registered political party, sought the interpretation of several constitutional provisions,
specifically on the separation of church and state; and a declaratory judgment on the constitutionality of
the acts of religious leaders endorsing a candidate for an elective office, or urging or requiring the
members of their flock to vote for a specified candidate.

The subsequent proceedings were recounted in the challenged Decision in these words:
“x x x. Bro. Eddie Villanueva submitted, within the original period [to file an Answer], a Motion to
Dismiss. Subsequently, Executive Minister Eraño Manalo and Bro. Mike Velarde, filed their Motions to
Dismiss. While His Eminence Jaime Cardinal L. Sin, filed a Comment and Bro. Eli Soriano, filed an Answer
within the extended period and similarly prayed for the dismissal of the Petition. All sought the
dismissal of the Petition on the common grounds that it does not state a cause of action and that there
is no justiciable controversy. They were ordered to submit a pleading by way of advisement, which was
closely followed by another Order denying all the Motions to Dismiss. Bro. Mike Velarde, Bro. Eddie
Villanueva and Executive Minister Eraño Manalo moved to reconsider the denial. His Eminence Jaime
Cardinal L. Sin, asked for extension to file memorandum. Only Bro. Eli Soriano complied with the first
Order by submitting his Memorandum.

The Court denied the Motions to Dismiss, and the Motions for Reconsideration filed by Velarde,
Villanueva and Manalo, which raised no new arguments other than those already considered in the
motions to dismiss.

The trial court said that it had jurisdiction over the Petition, because “in praying for a determination as
to whether the actions imputed to the respondents are violative of Article II, Section 6 of the
Constitution, [the Petition] has raised only a question of law.” It then proceeded to a lengthy discussion
of the issue raised in the Petition – the separation of church and state – even tracing, to some extent,
the historical background of the principle. Through its discourse, the court a quo opined at some point
that the “endorsement of specific candidates in an election to any public office is a clear violation of the
separation clause.”

After its essay on the legal issue, however, the trial court failed to include a dispositive portion in its
assailed Decision. Thus, Velarde and Soriano filed separate Motions for Reconsideration which, as
mentioned earlier, were denied by the lower court.

ISSUE: What is the standard form of a Decision? Did the challenged Decision comply with the aforesaid
form?

RULING: No. The challenged Decision did not comply with the proper form of a Decision.

In general, the essential parts of a good decision consist of the following:

(1) statement of the case; (2) statement of facts; (3) issues or assignment of errors; (4) court ruling, in
which each issue is, as a rule, separately considered and resolved; and, finally, (5) dispositive portion.
The ponente may also opt to include an introduction or a prologue as well as an epilogue, especially in
cases in which controversial or novel issues are involved.

Indeed, the assailed Decision was rendered in clear violation of the Constitution, because it made no
findings of facts and final disposition. Hence, it is void and deemed legally inexistent. Consequently,
there is nothing for this Court to review, affirm, reverse or even just modify.

Failure to comply with the constitutional injunction is a grave abuse of discretion amounting to lack or
excess of jurisdiction. Decisions or orders issued in careless disregard of the constitutional mandate are
a patent nullity and must be struck down as void. Indeed, the RTC’s Decision cannot be upheld for its
failure to express clearly and distinctly the facts on which it was based. Thus, the trial court clearly
transgressed the constitutional directive.
Mangahas, et al., v. Paredes, et al., G.R. No. 157866, 14 February 2007

Word File

Ollada v. Central Bank of the Philippines, No. L-11357, 31 May 1962

Facts: Felipe B. Ollada is a certified public accountant, accredited to practice accountancy in the office of
the Central Bank of the Philippines. In December 1955, by reason of a requirement of the Import-Export
Department of said bank that CPAs submit to an accreditation under oath before they could certify
financial statements of their clients applying for import dollar allocations with its office, Ollada's
previous accreditation was nullified. Ollada thus filed a petition for declaratory relief before the trial
court to nullify said accreditation requirement. He alleges that because of these requirements he had
suffered serious injury, and that such enforcement has resulted in the unlawful restraint in the practice
of CPAs in the Office of the Central Bank.

Issue: Will the petition for declaratory relief prosper?

Held: The complaint for declaratory relief will not prosper if filed after a contract, statute or right has
been breached or violated. In the present case such is precisely the situation arising from the facts
alleged in the petition for declaratory relief. As vigorously claimed by petitioner himself, respondent had
already invaded or violated his right and caused him injury — all these giving him a complete cause of
action enforceable in an appropriate ordinary civil action or proceeding.

An action for declaratory relief should be filed before there has been a breach of a contract, statutes or
right, and that it is sufficient to bar such action, that there had been a breach — which would constitute
actionable violation. The rule is that an action for Declaratory Relief is proper only if adequate relief is
not available through the means of other existing forms of action or proceeding. (Ollada vs. Central
Bank, G.R. No. L-11357, May 31, 1962)

PDIC v. CA, G.R. No. 126911, 30 April 2003

Pdf

Matalin Coconut Co., v. Municipal Council of Malabang, Lano del Sur, G.R. No. L-28138, 13 August
1986

On August 24, 1966, the Municipal Council of Malabang, Lanao del Sur, invoking the authority of Section
2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act, enacted Municipal Ordinance
No. 45-46, entitled "AN ORDINANCE IMPOSING A POLICE INSPECTION FEE OF P.30 PER SACK OF
CASSAVA STARCH PRODUCED AND SHIPPED OUT OF THE MUNICIPALITY OF MALABANG AND IMPOSING
PENALTIES FOR VIOLATIONS THEREOF." The ordinance made it unlawful for any person, company or
group of persons "to ship out of the Municipality of Malabang, cassava starch or flour without paying to
the Municipal Treasurer or his authorized representatives the corresponding fee fixed by (the)
ordinance." It imposed a "police inspection fee" of P.30 per sack of cassava starch or flour, which shall
be paid by the shipper before the same is transported or shipped outside the municipality. Any person
or company or group of individuals violating the ordinance "is liable to a fine of not less than P100.00,
but not more than P1,000.00, and to pay Pl.00 for every sack of flour being illegally shipped outside the
municipality, or to suffer imprisonment of 20 days, or both, in the discretion of the court.
The validity of the ordinance was challenged by the Matalin Coconut, Inc. in a petition for declaratory
relief filed with the then Court of First Instance of Lanao del Sur against the Municipal Council, the
Municipal Mayor and the Municipal Treasurer of Malabang, Lanao del Sur. Alleging among others that
the ordinance is not only ultra vires, being violative of Republic Act No. 2264, but also unreasonable,
oppressive and confiscatory, the petitioner prayed that the ordinance be declared null and void ab initio,
and that the respondent Municipal Treasurer be ordered to refund the amounts paid by petitioner
under the ordinance. The petitioner also prayed that during the pendency of the action, a preliminary
injunction be issued enjoining the respondents from enforcing the ordinance. The application for
preliminary injunction, however, was denied by the trial court; instead respondent Municipal Treasurer
was ordered to allow payment of the taxes imposed by the ordinance under protest.

Claiming that it was also adversely affected by the ordinance, Purakan Plantation Company was granted
leave to intervene in the action. The intervenor alleged that while its cassava flour factory was situated
in another municipality, i.e., Balabagan, Lanao del Sur, it had to transport the cassava starch and flour it
produced to the seashore through the Municipality of Malabang for loading in coastwise vessels; that
the effect of the enactment of Ordinance No. 45-46, is that intervenor had to refrain from transporting
its products through the Municipality of Malabang in order to ship them by sea to other places.

After trial, the Court a quo rendered a decision declaring the municipal ordinance in question null and
void; ordering the respondent Municipal Treasurer to refund to the petitioner the payments it made
under the said ordinance from September 27, 1966 to May 2, 1967, amounting to P 25,500.00, as well as
all payments made subsequently thereafter; and enjoining and prohibiting the respondents, their agents
or deputies, from collecting the tax of P.30 per bag on the cassava flour or starch belonging to
intervenor, Purakan Plantation Company, manufactured or milled in the Municipality of Balabagan, but
shipped out through the Municipality of Malabang.

After the promulgation of the decision, the Trial Court issued a writ of preliminary mandatory injunction,
upon motion of petitioner, requiring the respondent Municipal Treasurer to deposit with the Philippine
National Bank, Iligan Branch, in the name of the Municipality of Malabang, whatever amounts the
petitioner had already paid or shall pay pursuant to the ordinance in question up to and until final
termination of the case; the deposit was not to be withdrawn from the said bank without any order
from the court. On motion for reconsideration by respondents, the writ was subsequently modified on
July 20, 1967, to require the deposit only of amounts paid from the effectivity of the writ up to and until
the final termination of the suit.

From the decision of the trial court, the respondents appealed to this Court.

A motion to dismiss appeal filed by petitioner-appellee, was denied by this court in its resolution of
October 31, 1967. Subsequently, respondents-appellants filed a motion to dissolve the writ of
preliminary mandatory injunction issued by the trial court on July 20, 1967. This motion was also denied
by this Court on January 10, 1968.

Of the assignments of error raised by the appellants in their Brief, only the following need be discussed:
(1) that the trial court erred in adjudicating the money claim of the petitioner in an action for
declaratory relief; and (2) that the trial court erred in declaring the municipal ordinance in question null
and void.

The respondents-appellants maintain that it was error for the trial court, in an action for declaratory
relief, to order the refund to petitioner-appellee of the amounts paid by the latter under the municipal
ordinance in question. It is the contention of respondents-appellants that in an action for declaratory
relief, all the court can do is to construe the validity of the ordinance in question and declare the rights
of those affected thereby. The court cannot declare the ordinance illegal and at the same time order the
refund to petitioner of the amounts paid under the ordinance, without requiring petitioner to file an
ordinary action to claim the refund after the declaratory relief judgment has become final. Respondents
maintain that under Rule 64 of the Rules of Court, the court may advise the parties to file the proper
pleadings and convert the hearing into an ordinary action, which was not done in this case.

We find no merit in such contention. Under Sec. 6 of Rule 64, the action for declaratory relief may be
converted into an ordinary action and the parties allowed to file such pleadings as may be necessary or
proper, if before the final termination of the case "a breach or violation of an...ordinance, should take
place." In the present case, no breach or violation of the ordinance occurred. The petitioner decided to
pay "under protest" the fees imposed by the ordinance. Such payment did not affect the case; the
declaratory relief action was still proper because the applicability of the ordinance to future transactions
still remained to be resolved, although the matter could also be threshed out in an ordinary suit for the
recovery of taxes paid (Shell Co. of the Philippines, Ltd. vs. Municipality of Sipocot, L-12680, March 20,
1959). In its petition for declaratory relief, petitioner-appellee alleged that by reason of the enforcement
of the municipal ordinance by respondents it was forced to pay under protest the fees imposed
pursuant to the said ordinance, and accordingly, one of the reliefs prayed for by the petitioner was that
the respondents be ordered to refund all the amounts it paid to respondent Municipal Treasurer during
the pendency of the case. The inclusion of said allegation and prayer in the petition was not objected to
by the respondents in their answer. During the trial, evidence of the payments made by the petitioner
was introduced. Respondents were thus fully aware of the petitioner's claim for refund and of what
would happen if the ordinance were to be declared invalid by the court.

Respondents' contention, if sustained, would in effect require a separate suit for the recovery of the
fees paid by petitioner under protest. Multiplicity of suits should not be allowed or encouraged and, in
the context of the present case, is clearly uncalled for and unnecessary.

The main issue to be resolve in this case whether not Ordinance No. 45-66 enacted by respondent
Municipal Council of Malabang, Lanao del Sur, is valid. The respondents-appellants contend that the
municipality has the power and authority to approve the ordinance in question pursuant to Section 2 of
the Local Autonomy Act (Republic Act No. 2264).

Since the enactment of the Local Autonomy Act, a liberal rule has been followed by this Court in
construing municipal ordinances enacted pursuant to the taxing power granted under Section 2 of said
law. This Court has construed the grant of power to tax under the above-mentioned provision as
sufficiently plenary to cover "everything, excepting those which are mentioned" therein, subject only to
the limitation that the tax so levied is for public purposes, just and uniform (Nin Bay Mining Company vs.
Municipality of Roxas, Province of Palawan, 14 SCRA 661; C.N. Hodges vs. Municipal Board, Iloilo City, et
al., 19 SCRA 28).
We agree with the finding of the trial court that the amount collected under the ordinance in question
partakes of the nature of a tax, although denominated as "police inspection fee" since its undeniable
purpose is to raise revenue. However, we cannot agree with the trial court's finding that the tax
imposed by the ordinance is a percentage tax on sales which is beyond the scope of the municipality's
authority to levy under Section 2 of the Local Autonomy Act. Under the said provision, municipalities
and municipal districts are prohibited from imposing" any percentage tax on sales or other taxes in any
form based thereon. " The tax imposed under the ordinance in question is not a percentage tax on sales
or any other form of tax based on sales. It is a fixed tax of P.30 per bag of cassava starch or flour
"shipped out" of the municipality. It is not based on sales.

However, the tax imposed under the ordinance can be stricken down on another ground. According to
Section 2 of the abovementioned Act, the tax levied must be "for public purposes, just and uniform"
(Emphasis supplied.) As correctly held by the trial court, the so-called "police inspection fee" levied by
the ordinance is "unjust and unreasonable." Said the court a quo:

... It has been proven that the only service rendered by the Municipality of Malabang, by way of
inspection, is for the policeman to verify from the driver of the trucks of the petitioner passing by at the
police checkpoint the number of bags loaded per trip which are to be shipped out of the municipality
based on the trip tickets for the purpose of computing the total amount of tax to be collect (sic) and for
no other purpose. The pretention of respondents that the police, aside from counting the number of
bags shipped out, is also inspecting the cassava flour starch contained in the bags to find out if the said
cassava flour starch is fit for human consumption could not be given credence by the Court because,
aside from the fact that said purpose is not so stated in the ordinance in question, the policemen of said
municipality are not competent to determine if the cassava flour starch are fit for human consumption.
The further pretention of respondents that the trucks of the petitioner hauling the bags of cassava flour
starch from the mill to the bodega at the beach of Malabang are escorted by a policeman from the
police checkpoint to the beach for the purpose of protecting the truck and its cargoes from molestation
by undesirable elements could not also be given credence by the Court because it has been shown,
beyond doubt, that the petitioner has not asked for the said police protection because there has been
no occasion where its trucks have been molested, even for once, by bad elements from the police
checkpoint to the bodega at the beach, it is solely for the purpose of verifying the correct number of
bags of cassava flour starch loaded on the trucks of the petitioner as stated in the trip tickets, when
unloaded at its bodega at the beach. The imposition, therefore, of a police inspection fee of P.30 per
bag, imposed by said ordinance is unjust and unreasonable.

The Court finally finds the inspection fee of P0.30 per bag, imposed by the ordinance in question to be
excessive and confiscatory. It has been shown by the petitioner, Matalin Coconut Company, Inc., that it
is merely realizing a marginal average profit of P0.40, per bag, of cassava flour starch shipped out from
the Municipality of Malabang because the average production is P15.60 per bag, including
transportation costs, while the prevailing market price is P16.00 per bag. The further imposition,
therefore, of the tax of P0.30 per bag, by the ordinance in question would force the petitioner to close
or stop its cassava flour starch milling business considering that it is maintaining a big labor force in its
operation, including a force of security guards to guard its properties. The ordinance, therefore, has an
adverse effect on the economic growth of the Municipality of Malabang, in particular, and of the nation,
in general, and is contrary to the economic policy of the government.
Having found the ordinance in question to be invalid, we find it unnecessary to rule on the other errors
assigned by the appellants.

WHEREFORE, petition is dismissed. The decision of the court a quo is hereby affirmed. No costs.

Department of Budget and Mangement, et al., v. Manila’s Finest Retirees Association, Inc., et al., G.R.
No. 169466, 9 May 2007

Assailed and sought to be set aside in this petition for review on certiorari under Rule 45 of the Rules of
Court are the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 78203, to wit:

1. Decision1 dated July 7, 2005 which affirmed in toto the decision of the Regional Trial Court of Manila,
Branch 32, in Civil Case No. 02-103702, a suit for declaratory relief, declaring the herein respondents
entitled to the same retirement benefits accorded upon retirees of the Philippine National Police (PNP)
under Republic Act (R.A.) No. 6975, as amended by R.A. No. 8551, and ordering the herein petitioners to
implement the proper adjustments on respondents’ retirement benefits; and

2. Resolution2 dated August 24, 2005 which denied the petitioners’ motion for reconsideration.

The antecedent facts:

In 1975, Presidential Decree (P.D.) No. 765 was issued constituting the Integrated National Police (INP)
to be composed of the Philippine Constabulary (PC) as the nucleus and the integrated police forces as
components thereof. Complementing P.D. No. 765 was P.D. No. 11843 dated August 26, 1977 (INP Law,
hereinafter) issued to professionalize the INP and promote career development therein.

On December 13, 1990, Republic Act (R.A.) No. 6975, entitled "AN ACT ESTABLISHING THE PHILIPPINE
NATIONAL POLICE UNDER A REORGANIZED DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT,
AND FOR OTHER PURPOSES," hereinafter referred to as PNP Law, was enacted. Under Section 23 of said
law, the Philippine National Police (PNP) would initially consist of the members of the INP, created under
P.D. No. 765, as well as the officers and enlisted personnel of the PC. In part, Section 23 reads:

SEC. 23. Composition. – Subject to the limitation provided for in this Act, the Philippine National Police,
hereinafter referred to as the PNP, is hereby established, initially consisting of the members of the
police forces who were integrated into the Integrated National Police (INP) pursuant to Presidential
Decree No. 765, and the officers and enlisted personnel of the Philippine Constabulary (PC).

A little less than eight (8) years later, or on February 25, 1998, R.A. No. 6975 was amended by R.A. No.
8551, otherwise known as the "PHILIPPINE NATIONAL POLICE REFORM AND REORGANIZATION ACT OF
1998." Among other things, the amendatory law reengineered the retirement scheme in the police
organization. Relevantly, PNP personnel, under the new law, stood to collect more retirement benefits
than what INP members of equivalent rank, who had retired under the INP Law, received.

The INP retirees illustrated the resulting disparity in the retirement benefits between them and the PNP
retirees as follows:4

Retirement Rank Monthly Pension Difference

INP PNP INP PNP

Corporal SPO3 P 3,225.00 P 11,310.00 P 8,095.00

Captain P. Sr. Insp. P 5,248.00 P 15,976.00 P10,628.00

Brig. Gen. P. Chief Supt. P 10,054.24 P 18,088.00 P 8,033.76

Hence, on June 3, 2002, in the Regional Trial Court (RTC) of Manila, all INP retirees, spearheaded by the
Manila’s Finest Retirees Association, Inc., or the MFRAI (hereinafter collectively referred to as the INP
Retirees), filed a petition for declaratory relief,5 thereunder impleading, as respondents, the
Department of Budget and Management (DBM), the PNP, the National Police Commission (NAPOLCOM),
the Civil Service Commission (CSC) and the Government Service Insurance System (GSIS). Docketed in
the RTC as Civil Case No. 02-103702, which was raffled to Branch 22 thereof, the petition alleged in gist
that INP retirees were equally situated as the PNP retirees but whose retirement benefits prior to the
enactment of R.A. No. 6975, as amended by R.A. No. 8551, were unconscionably and arbitrarily
excepted from the higher rates and adjusted benefits accorded to the PNP retirees. Accordingly, in their
petition, the petitioning INP retirees pray that a –

DECLARATORY JUDGMENT be rendered in their favor, DECLARING with certainty that they, as INP-
retirees, are truly absorbed and equally considered as PNP-retirees and thus, entitled to enjoy the SAME
or IDENTICAL retirement benefits being bestowed to PNP-retirees by virtue of said PNP Law or Republic
Act No. 6975, as amended by Republic Act 8551, with the corollary mandate for the respondents-
government agencies to effect the immediate adjustment on their previously received disparate
retirement benefits, retroactive to its effectivity, and with due payment thereof.

The GSIS moved to dismiss the petition on grounds of lack of jurisdiction and cause of action. On the
other hand, the CSC, DBM, NAPOLCOM and PNP, in their respective answers, asserted that the
petitioners could not claim the more generous retirement benefits under R.A. No. 6975 because at no
time did they become PNP members, having retired prior to the enactment of said law. DBM,
NAPOLCOM and PNP afterwards filed their respective pre-trial briefs.

The ensuing legal skirmish is not relevant to the disposition of the instant case. The bottom line is that,
on March 21, 2003, the RTC came out with its decision6 holding that R.A. No. 6975, as amended, did not
abolish the INP but merely provided for the absorption of its police functions by the PNP, and
accordingly rendered judgment for the INP retirees, to wit:

WHEREFORE, this Court hereby renders JUDGMENT DECLARING the INP Retirees entitled to the same or
identical retirement benefits and such other benefits being granted, accorded and bestowed upon the
PNP Retirees under the PNP Law (RA No. 6975, as amended).

The respondents Government Departments and Agencies shall IMMEDIATELY EFFECT and IMPLEMENT
the proper adjustments on the INP Retirees’ retirement and such other benefits, RETROACTIVE to its
date of effectivity, and RELEASE and PAY to the INP Retirees the due payments of the amounts.

SO ORDERED.

On April 2, 2003, the trial court issued what it denominated as Supplement to the Decision whereunder
it granted the GSIS’ motion to dismiss and thus considered the basic petition as withdrawn with respect
to the latter.
From the adverse decision of the trial court, the remaining respondents, namely, DBM, PNP, NAPOLCOM
and CSC, interposed an appeal to the CA whereat their appellate recourse was docketed as CA-G.R. CV
No. 78203.

As stated at the threshold hereof, the CA, in its decision of July 7, 2005,7 affirmed that of the trial court
upholding the entitlement of the INP retirees to the same or identical retirement benefits accorded
upon PNP retirees under R.A. No. 6975, as amended

Their motion for reconsideration having been denied by the CA in` its equally assailed resolution of
August 24, 2005,8 herein petitioners are now with this Court via the instant recourse on their singular
submission that -

THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN LAW IN AFFIRMING THE DECISION OF THE
TRIAL COURT NOTWITHSTANDING THAT IT IS CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE.

We DENY.

In the main, it is petitioners’ posture that R.A. No. 6975 clearly abolished the INP and created in its stead
a new police force, the PNP. Prescinding therefrom, petitioners contend that since the PNP is an
organization entirely different from the INP, it follows that INP retirees never became PNP members.
Ergo, they cannot avail themselves of the retirement benefits accorded to PNP members under R.A. No.
6975 and its amendatory law, R.A. No. 8551.

A flashback at history is proper.

As may be recalled, R.A. No. 6975 was enacted into law on December 13, 1990, or just about four (4)
years after the 1986 Edsa Revolution toppled down the dictatorship regime. Egged on by the current
sentiment of the times generated by the long period of martial rule during which the police force, the
PC-INP, had a military character, being then a major service of the Armed Forces of the Philippines, and
invariably moved by a fresh constitutional mandate for the establishment of one police force which
should be national in scope and, most importantly, purely civilian in character,9 Congress enacted R.A.
No. 6975 establishing the PNP and placing it under the Department of Interior and Local Government.
To underscore the civilian character of the PNP, R.A. No. 6975 made it emphatically clear in its
declaration of policy the following:

Section 2. Declaration of policy - It is hereby declared to be the policy of the State to promote peace and
order, ensure public safety and further strengthen local government capability aimed towards the
effective delivery of the basic services to the citizenry through the establishment of a highly efficient and
competent police force that is national in scope and civilian in character. xxx

The police force shall be organized, trained and equipped primarily for the performance of police
functions. Its national scope and civilian character shall be paramount. No element of the police force
shall be military nor shall any position thereof be occupied by active members of the [AFP]. (Emphasis
and word in bracket supplied.)

Pursuant to Section 23, supra, of R.A. No. 6975, the PNP initially consisted of the members of the police
forces who were integrated into the INP by virtue of P.D. No. 765, while Section 8610 of the same law
provides for the assumption by the PNP of the police functions of the INP and its absorption by the
former, including its appropriations, funds, records, equipment, etc., as well as its personnel.11 And to
govern the statute’s implementation, Section 85 of the Act spelled out the following absorption phases:

Phase I – Exercise of option by the uniformed members of the [PC], the PC elements assigned with the
Narcotics Command, CIS, and the personnel of the technical services of the AFP assigned with the PC to
include the regular CIS investigating agents and the operatives and agents of the NAPOLCOM Inspection.
Investigation and Intelligence Branch, and the personnel of the absorbed National Action Committee on
Anti-Hijacking (NACAH) of the Department of National Defense to be completed within six (6) months
from the date of the effectivity of this Act. At the end of this phase, all personnel from the INP, PC, AFP
Technical Services, NACAH, and NAPOLCOM Inspection, Investigation and Intelligence Branch shall have
been covered by official orders assigning them to the PNP, Fire and Jail Forces by their respective units.

Phase II – Approval of the table of organization and equipment of all bureaus and offices created under
this Act, preparation and filling up of their staffing pattern, transfer of assets to the [DILG] and
organization of the Commission, to be completed within twelve (12) months from the effectivity date
hereof. At the end of this phase, all personnel to be absorbed by the [DILG] shall have been issued
appointment papers, and the organized Commission and the PNP shall be fully operational.

The PC officers and enlisted personnel who have not opted to join the PNP shall be reassigned to the
Army, Navy or Air Force, or shall be allowed to retire under existing AFP rules and regulations. Any PC-
INP officer or enlisted personnel may, within the twelve-month period from the effectivity of this Act,
retire and be paid retirement benefits corresponding to a position two (2) ranks higher than his present
grade, subject to the conditions that at the time he applies for retirement, he has rendered at least
twenty (20) years of service and still has, at most, twenty-four (24) months of service remaining before
the compulsory retirement age as provided by existing law for his office.

Phase III – Adjustment of ranks and establishment of one (1) lineal roster of officers and another for
non-officers, and the rationalization of compensation and retirement systems; taking into consideration
the existing compensation schemes and retirement and separation benefit systems of the different
components of the PNP, to ensure that no member of the PNP shall suffer any diminution in basic
longevity and incentive pays, allowances and retirement benefits due them before the creations of the
PNP, to be completed within eighteen (18) months from the effectivity of this Act. xxx.

Upon the effectivity of this Act, the [DILG] Secretary shall exercise administrative supervision as well as
operational control over the transferred, merged and/or absorbed AFP and INP units. The incumbent
Director General of the PC-INP shall continue to act as Director General of the PNP until … replaced ….
(Emphasis and words in brackets supplied.)

From the foregoing, it appears clear to us that the INP was never, as posited by the petitioners,
abolished or terminated out of existence by R.A. No. 6975. For sure, nowhere in R.A. No. 6975 does the
words "abolish" or "terminate" appear in reference to the INP. Instead, what the law provides is for the
"absorption," "transfer," and/or "merger" of the INP, as well as the other offices comprising the PC-INP,
with the PNP. To "abolish" is to do away with, to annul, abrogate or destroy completely;12 to "absorb" is
to assimilate, incorporate or to take in.13 "Merge" means to cause to combine or unite to become
legally absorbed or extinguished by merger14 while "transfer" denotes movement from one position to
another. Clearly, "abolition" cannot be equated with "absorption."
True it is that Section 9015 of R.A. No. 6975 speaks of the INP "[ceasing] to exist" upon the effectivity of
the law. It ought to be stressed, however, that such cessation is but the logical consequence of the INP
being absorbed by the PNP.1a\^/phi1.net

Far from being abolished then, the INP, at the most, was merely transformed to become the PNP, minus
of course its military character and complexion.

Even the petitioners’ effort at disclosing the legislative intent behind the enactment of R.A. No. 6975
cannot support their theory of abolition. Rather, the Senate and House deliberations on the bill that
eventually became R.A. No. 6975 reveal what has correctly been held by the CA in its assailed decision:
that the PNP was precisely created to erase the stigma spawned by the militarization of the police force
under the PC-INP structure. The rationale behind the passage of R.A. No. 6975 was adequately
articulated by no less than the sponsor16 of the corresponding House bill in his sponsorship speech,
thus:

By removing the police force from under the control and supervision of military officers, the bill seeks to
restore and underscore the civilian character of police work - an otherwise universal concept that was
muddled up by the martial law years

Indeed, were the legislative intent was for the INP’s abolition such that nothing would be left of it, the
word "abolish" or what passes for it could have easily found its way into the very text of the law itself,
what with the abundant use of the word during the legislative deliberations. But as can be gleaned from
said deliberations, the lawmakers’ concern centered on the fact that if the entire PC-INP corps join the
PNP, then the PC-INP will necessarily be abolished, for who then would be its members? Of more
consequence, the lawmakers were one in saying that there should never be two national police agencies
at the same time.

With the conclusion herein reached that the INP was not in fact abolished but was merely transformed
to become the PNP, members of the INP which include the herein respondents are, therefore, not
excluded from availing themselves of the retirement benefits accorded to PNP retirees under Sections
7417 and 7518 of R.A. No. 6975, as amended by R.A. No. 8551. It may be that respondents were no
longer in the government service at the time of the enactment of R.A. No. 6975. This fact, however,
without more, would not pose as an impediment to the respondents’ entitlement to the new retirement
scheme set forth under the aforecited sections. As correctly ratiocinated by the CA to which we are in
full accord:

For sure, R.A. No. 6975 was not a retroactive statute since it did not impose a new obligation to pay the
INP retirees the difference between what they received when they retired and what would now be due
to them after R.A. No. 6975 was enacted. Even so, that did not render the RTC’s interpretation of R.A.
No. 6975 any less valid. The [respondents’] retirement prior to the passage of R.A. No. 6975 did not
exclude them from the benefits provided by R.A. No. 6975, as amended by R.A. No. 8551, since their
membership in the INP was an antecedent fact that nonetheless allowed them to avail themselves of
the benefits of the subsequent laws. R.A. No. 6975 considered them as PNP members, always referring
to their membership and service in the INP in providing for their retirement benefits. 19
Petitioners maintain, however, that NAPOLCOM Resolution No. 8,20 particularly Section 1121 thereof,
bars the payment of any differential in retirement pay to officers and non-officers who are already
retired prior to the effectivity of R.A. No. 6975.

The contention does not commend itself for concurrence.

Under the amendatory law (R.A. No. 8551), the application of rationalized retirement benefits to PNP
members who have meanwhile retired before its (R.A. No. 8551) enactment was not prohibited. In fact,
its Section 3822 explicitly states that the rationalized retirement benefits schedule and program "shall
have retroactive effect in favor of PNP members and officers retired or separated from the time
specified in the law." To us, the aforesaid provision should be made applicable to INP members who had
retired prior to the effectivity of R.A. No. 6975. For, as afore-held, the INP was, in effect, merely
absorbed by the PNP and not abolished.

Indeed, to bar payment of retirement pay differential to INP members who were already retired before
R.A. No. 6975 became effective would even run counter to the purpose of NAPOLCOM Resolution No. 8
itself, as expressed in its preambulatory clause, which is to rationalize the retirement system of the PNP
taking into consideration existing retirement and benefit systems (including R.A. No. 6975 and P.D. No.
1184) of the different components thereof "to ensure that no member of the PNP shall suffer any
diminution in the retirement benefits due them before the creation of the PNP."23

Most importantly, the perceived restriction could not plausibly preclude the respondents from asserting
their entitlement to retirement benefits adjusted to the level when R.A. No. 6975 took effect. Such
adjustment hews with the constitutional warrant that "the State shall, from time to time, review to
upgrade the pensions and other benefits due to retirees of both the government and private sectors,"24
and the implementing mandate under the Senior Citizen’s Law25 that "to the extent practicable and
feasible, retirement benefits xxx shall be upgraded to be at par with the current scale enjoyed by those
in actual service."1awphi1.nét

Certainly going for the respondents in their bid to enjoy the same retirement benefits granted to PNP
retirees, either under R.A. No. 6975 or R.A. No. 8551, is Section 34 of the latter law which amended
Section 75 of R.A. No. 6975 by adding thereto the following proviso:

Section 75. Retirement benefits. x x x: Provided, finally, That retirement pay of the officers/non-officers
of the PNP shall be subject to adjustments based on the prevailing scale of base pay of police personnel
in the active service.

Then, too, is the all familiar rule that:

Retirement laws should be liberally construed in favor of the retiree because their intention is to provide
for his sustenance and hopefully, even comfort, when he no longer has the stamina to continue earning
his livelihood. The liberal approach aims to achieve the humanitarian purposes of the law in order that
efficiency, security and well-being of government employees may be enhanced.26

The petitioners parlay the notion of prospective application of statutes, noting in this regard that R.A.
No. 6975, as amended, cannot be applied retroactively, there being no provision to that effect.

We are not persuaded.

As correctly found by the appellate court, R.A. No. 6975 itself contextually provides for its retroactive
application to cover those who had retired prior to its effectivity. In this regard, we invite attention to
the three (3) phases of implementation under Section 85 for the absorption and continuation in the
service of, among others, the INP members under the newly-established PNP.

In a further bid to scuttle respondents’ entitlement to the desired retirement benefits, the petitioners
fault the trial court for ordering the immediate adjustments of the respondents’ retirement benefits
when the basic petition filed before it was one for declaratory relief. To the petitioners, such petition
does not essentially entail an executory process, the only relief proper under that setting being a
declaration of the parties’ rights and duties.

Petitioners’ above posture is valid to a point. However, the execution of judgments in a petition for
declaratory relief is not necessarily indefensible. In Philippine Deposit Insurance Corporation[PDIC] v.
Court of Appeals,27 wherein the Court affirmed the order for the petitioners therein to pay the balance
of the deposit insurance to the therein respondents, we categorically ruled:

Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the filing
of a counterclaim based on the same transaction, deed or contract subject of the complaint. A special
civil action is after all not essentially different from an ordinary civil action, which is generally governed
by Rules 1 to 56 of the Rules of Court, except that the former deals with a special subject matter which
makes necessary some special regulation. But the identity between their fundamental nature is such
that the same rules governing ordinary civil suits may and do apply to special civil actions if not
inconsistent with or if they may serve to supplement the provisions of the peculiar rules governing
special civil actions.28

Similarly, in Matalin Coconut Co., Inc. v. Municipal Council of Malabang, Lanao del Sur:29 the Court
upheld the lower court’s order for a party to refund the amounts paid by the adverse party under the
municipal ordinance therein questioned, stating:

x x x Under Sec. 6 of Rule 64, the action for declaratory relief may be converted into an ordinary action
and the parties allowed to file such pleadings as may be necessary or proper, if before the final
termination of the case "a breach or violation of an … ordinance, should take place." In the present case,
no breach or violation of the ordinance occurred. The petitioner decided to pay "under protest" the fees
imposed by the ordinance. Such payment did not affect the case; the declaratory relief action was still
proper because the applicability of the ordinance to future transactions still remained to be resolved,
although the matter could also be threshed out in an ordinary suit for the recovery of taxes paid …. In its
petition for declaratory relief, petitioner-appellee alleged that by reason of the enforcement of the
municipal ordinance by respondents it was forced to pay under protest the fees imposed pursuant to
the said ordinance, and accordingly, one of the reliefs prayed for by the petitioner was that the
respondents be ordered to refund all the amounts it paid to respondent Municipal Treasurer during the
pendency of the case. The inclusion of said allegation and prayer in the petition was not objected to by
the respondents in their answer. During the trial, evidence of the

payments made by the petitioner was introduced. Respondents were thus fully aware of the petitioner's
claim for refund and of what would happen if the ordinance were to be declared invalid by the court.
The Court sees no reason for treating this case differently from PDIC and Matalin.1awphi1.nét This
disposition becomes all the more appropriate considering that the respondents, as petitioners in the
RTC, pleaded for the immediate adjustment of their retirement benefits which, significantly, the herein
petitioners, as respondents in the same court, did not object to. Being aware of said prayer, the
petitioners then already knew the logical consequence if, as it turned out, a declaratory judgment is
rendered in the respondents’ favor.

At bottom then, the trial court’s judgment forestalled multiplicity of suits which, needless to stress,
would only entail a long and arduous process. Considering their obvious advanced years, the
respondents can hardly afford another protracted proceedings. It is thus for this Court to already write
finis to this case.

WHEREFORE, the instant petition is DENIED and the assailed decision and resolution of the CA,
respectively dated July 7, 2005 and August 24, 2005, are AFFIRMED.

Lucasan, et al., v. Philippine Deposit Insurance Corporation, G.R. No. 176929, 04 July 2008

On appeal is the March 23, 2006 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 81518,
affirming the July 24, 2003 Order2 of the Regional Trial Court (RTC) of Bacolod City, Branch 43, granting
respondent’s motion to dismiss, as well as its subsequent Resolution3 denying petitioner’s motion for
reconsideration.

The factual antecedents are as follows.

Petitioner Inocencio Y. Lucasan (Lucasan) and his wife Julianita Sorbito (now deceased) were the owners
of Lot Nos. 1500-A and 229-E situated in Bacolod City, respectively covered by TCT Nos. T-68115 and T-
13816.

On August 3, 1972, Pacific Banking Corporation (PBC) extended a P5,000.00 loan to Lucasan, with Carlos
Benares as his co-maker. Lucasan and Benares failed to pay the loan when it became due and
demandable. Consequently, PBC filed a collection case with the RTC of Bacolod City, docketed as Civil
Case No. 12188.

On April 30, 1979, the RTC rendered a decision ordering Lucasan and Benares to jointly and severally pay
PBC P7,199.99 with interest at 14% per annum computed from February 7, 1979, until the full payment
of the obligation. Lucasan failed to pay the monetary award; thus, to satisfy the judgment, the RTC
issued a writ of execution directing the sheriff to effect a levy on the properties owned by Lucasan and
sell the same at public auction.

In compliance with the writ, the City Sheriff of Bacolod issued a Notice of Embargo on January 8, 1981,
which was annotated on Lucasan’s TCT Nos. T-68115 and T-13816 as Entry No. 110107. Annotated as
prior encumbrances on the same titles were the mortgages in favor of Philippine National Bank (PNB)
and Republic Planter’s Bank (RPB) executed to secure Lucasan’s loans with the banks.

On May 13, 1981, the lots were sold at public auction and were awarded to PBC as the highest bidder. A
certificate of sale was executed in its favor and was registered and annotated on TCT Nos. T- 68115 and
T-13816 as Entry No. 112552 on June 5, 1981. Neither PNB nor RPB, the mortgagees, assailed the
auction sale.

Lucasan, as well as the mortgagee banks, PNB and RPB, did not redeem the properties within the
redemption period. Nevertheless, PBC did not file a petition for consolidation of ownership.

In January 1997, Lucasan, through counsel, wrote a letter to the Philippine Deposit Insurance
Corporation (PDIC), PBC’s receiver and liquidator seeking the cancellation of the certificate of sale and
offering to pay PBC’s claim against Lucasan.4

Not long thereafter, Lucasan paid his loans with the PNB and RPB. Consequently, the mortgagee banks
executed their respective releases of mortgage, resulting in the cancellation of the prior encumbrances
in favor of PNB and RPB.

On August 13, 2001, PDIC denied Lucasan’s request for the cancellation of the certificate of sale stating:

Please be informed that based on our records, TCT Nos. T-68115 and T-13816 have already become part
of the acquired assets of Pacific Banking Corporation by virtue of a Certificate of Sale dated May 13,
1981 executed by the City Sheriff of Bacolod. Subsequently, this document was registered on the titles
on June 5, 1981 so that the last day of the redemption period was June 5, 1982.

With regard to your request, we regret to inform you that reacquisition of the subject properties have to
be through sale following PDIC’s policy on disposal. Accordingly, these properties can be disposed
through public bidding using the latest appraised value in the total amount of P2,900,300.00 as of March
29, 2000 as a minimum bid. If you are still interested to acquire the properties, please get in touch with
our Asset Management Group x x x.5

Lucasan then filed a petition denominated as declaratory relief with the RTC of Bacolod City docketed as
Civil Case No. 02-11874.6 He sought confirmation of his rights provided in the second paragraph of
Section 1, Rule 63 of the Rules of Court in relation to Section 75 of Presidential Decree (P.D.) No. 1529.
Lucasan also pleaded for the lifting and/or cancellation of the notice of embargo and the certificate of
sale annotated on TCT Nos. T-68115 and T-13816, and offered to pay P100,000.00 or such amount as
may be determined by the RTC, as consideration for the cancellation.

PDIC moved to dismiss the complaint for lack of cause of action. It averred that an action to quiet title
under Section 1 of Rule 63 may only be brought when there is a cloud on, or to prevent a cloud from
being cast upon, the title to real property. It asseverated that a cloud on the title is an outstanding
instrument record, claim, encumbrance or proceeding which is actually invalid or inoperative, but which
may nevertheless impair or affect injuriously the title to property. PDIC claimed that the notice of
embargo was issued pursuant to a writ of execution in Civil Case No. 12188, while the certificate of sale
was executed as a result of a public bidding. Thus, their annotations on the titles were valid, operative or
effective. PDIC asserted that Lucasan’s petition is nothing but a disguised attempt to compel PDIC to
resell the properties at a reduced price of P100,000.00. Accordingly, it prayed for the dismissal of the
petition.7

Lucasan opposed the motion.8 He countered that the subject properties were still in his possession, and
neither PBC nor PDIC instituted an action for consolidation of ownership. Since the certificate of title
was still in his name, he contended that he could pursue all legal and equitable remedies, including
those provided for in Section 1, Rule 63 of the Rules of Court to reacquire the properties. He also
claimed that PDIC’s policy of disposing the subject properties through public bidding at the appraised
value of P2,900,300.00 was unjust, capricious and arbitrary, considering that the judgment debt
amounted only to P7,199.99 with interest at 14% per annum. Lucasan urged the RTC to apply the liberal
construction of the redemption laws stressed in Cometa v. Court of Appeals.9

In its Order10 dated July 24, 2003, the RTC granted PDIC’s motion to dismiss, thus:

The clouds contemplated by the provision of law under Article 476 of the Civil Code is one where the
instrument, record, claim, encumbrance or proceeding is apparently valid or effective on its face that
nothing appears to be wrong, but in reality, is null and void. Hence, the petition filed by [Lucasan]
pursuant to the said article is equivalent to questioning the validity of the subsequent annotation of
Entry No. 110107 and Entry No. 112522 in TCT Nos. T-13816 and T-68115.

Records disclose that Entry No. 110107 which is a Notice of Embargo was issued by virtue of a valid
judgment rendered in Civil Case No. 12188 entitled "Pacific Banking Corporation vs. [Inocencio] Lucasan,
et al.," whereby the Court found [Lucasan] liable in favor of [PBC] the sum of P7,199.99 with 14%
interest per annum to be computed from February 7, 1979 until fully paid

As mandated in Sec. 12, Rule 39 of the Revised Rules of Court, such levy on execution create a lien in
favor of [PBC] over the right, title and interest of [Lucasan] over the two (2) subject parcels of land
covered by TCT Nos. T-13816 and T-68115, subject to liens and encumbrances then existing. The fact
that [Lucasan] has redeemed the mortgage properties from the first mortgages (sic), PNB and PNB (sic)
Republic Bank, does not vest him any title free from the lien of [PBC].

While the law requires that the judgment debtor, [Lucasan] must be served with a notice of levy and
even if not served therewith, the defect is cured by service on him of the notice of sale prior to the sale,
nowhere in the petition which alleges that [Lusasan] refutes the validity of the execution sale. Thus, he is
deemed to have received and recognized the same.

As support for his thesis, [Lucasan] cites the case of Balanga vs. Ca., et al. (supra). However this Court is
unable to agree that it is applicable to the present case. As correctly argued by [PDIC], in that case the
proceedings under execution suffered infirmity from the very start as the levy and sale made by the
sheriff of the land of petitioner Balanga included the house erected on the land [and] constituted as a
family home which, under the law, exempt from execution. In the case at bar, no objection was
interposed by [Lucasan] as a valid levy has been made pursuant to Sec. 7, Rule 57 of the Revised Rules of
Court, as a consequence of which, the sale made pursuant to Sec. 11 of the same rule is also valid and
effective.11

The dispositive portion of the RTC Order reads:

WHEREFORE, finding the claim of any cloud over the titles of [Lucasan] to be bereft of basis in fact and in
law, the Motion to Dismiss filed by [PDIC] is granted. Accordingly, this is hereby ordered DISMISSED.

SO ORDERED.12

Lucasan filed a motion for reconsideration, but the RTC denied it on October 20, 2003.13
On appeal, the CA affirmed in toto the RTC ruling. It declared that Lucasan already lost his right to
redeem the properties when he failed to exercise it within the prescribed period. The effect of such
failure was to vest in PBC absolute ownership over the subject properties.14

The CA disposed, thus

WHEREFORE, in view of all the foregoing premises, the appeal is hereby DENIED. Accordingly, the
assailed Order of the Regional Trial Court of Bacolod City, Branch 43 dated 24 July 2003 dismissing
[Lucasan’s] Petition for Declaratory Relief and the subsequent Order of the same Court dated 20
October 2003 denying [Lucasan’s] motion for reconsideration from the Order of Denial (sic) are hereby
affirmed in toto. No costs.

SO ORDERED.15

Lucasan sought a reconsideration of the CA Decision, but the same was denied on February 7, 2007.16

Before us, Lucasan impugns the CA Decision on the following grounds:

1- THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN AFFIRMING THE ORDER OF
DISMISSAL OF THE PETITIONER’S PETITION IN THE REGIONAL TRIAL COURT WHEN IT DISREGARDED THE
CLEAR PROVISION OF SECTION 75 OF PRESIDENTIAL DECREE NO. 1529 AND PUT TO NAUGHT THE
APPLICABLE JURISPRUDENCE IN ZACARIAS COMETA x x x AND THE CASES CITED THEREIN, INSPITE (sic)
OF THE CLEAR AND OUTSTANDING SIMILARITY OF FACTS WITH THE CASE UNDER CONSIDERATION.

2- THE COURT OF APPEALS ALSO ERRED AND GRAVELY ABUSED ITS DISCRETION WHEN IT FAILED TO
CONSIDER THAT THE NOTICE OF EMBARGO AND CERTIFICATE OF SALE ISSUED BY THE CITY SHERIFF
WERE ONLY LEVY ON THE INTEREST OF THE PETITIONER ON THE TWO (2) SUBJECT LOTS, AS DECREED IN
QUEZON BEARING & PARTS CORPORATION, x x x, WHICH IS LIKEWISE APPLICABLE TO THE CASE AT
BAR.17

Lucasan posits that he has sufficient cause of action against PDIC; thus, he chides the RTC for dismissing
his complaint, and the CA for affirming the dismissal. In support of his thesis, he cites Section 75 of
Presidential Decree (PD) No. 1529, or the Property Registration Decree18 and Cometa v. Court of
Appeals.19

As gleaned from the averments of the complaint, Lucasan’s action was one for quieting of title under
Rule 63 of the Rules of Court. Essentially, he sought the cancellation of the notice of embargo and the
certificate of sale annotated on TCT Nos. T-68115 and T-13816 claiming that the said annotations
beclouded the validity and efficacy of his title. The RTC, however, dismissed his complaint for lack of
cause of action which was affirmed by the CA in its assailed Decision. Thus, the key issue for our
consideration is whether the dismissal of Lucasan’s complaint was proper.

Quieting of title is a common law remedy for the removal of any cloud of doubt or uncertainty with
respect to real property. The Civil Code authorizes the said remedy in the following language:

ART. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any
instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in
truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an
action may be brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast upon title to real property or any
interest therein.

ART. 477. The plaintiff must have legal or equitable title to, or interest in the real property which is the
subject-matter of the action. He need not be in possession of said property.

To avail of the remedy of quieting of title, two (2) indispensable requisites must concur, namely: (1) the
plaintiff or complainant has a legal or an equitable title to or interest in the real property subject of the
action; and (2) the deed, claim, encumbrance or proceeding claimed to be casting a cloud on his title
must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal
efficacy.20 Stated differently, the plaintiff must show that he has a legal or at least an equitable title
over the real property in dispute, and that some deed or proceeding beclouds its validity or efficacy.

Unfortunately, the foregoing requisites are wanting in this case.

Admittedly, the subject parcels of land were levied upon by virtue of a writ of execution issued in Civil
Case No. 12188. On May 13, 1981, a public auction of the subject parcels of land was held and the lots
were awarded to PBC as the highest bidder. A certificate of sale in favor of PBC was issued on the same
day, and was registered and annotated on TCT Nos. T-68115 and T-13816 as Entry No. 112552 on June 5,
1981.

Under the 1964 Rules of Court, which were in effect at that time, the judgment debtor or redemptioner
had the right to redeem the property from PBC within twelve (12) months from the registration of the
certificate of sale.21 With the expiration of the twelve-month period of redemption and no redemption
having been made, as in this case, the judgment debtor or the redemptioner lost whatever right he had
over the land in question.22

Lucasan admitted that he failed to redeem the properties within the redemption period, on account of
his then limited financial situation.23 It was only in January 1997 or fifteen (15) years later that he
manifested his desire to reacquire the properties. Clearly thus, he had lost whatever right he had over
Lot Nos. 1500-A and 229-E.

The payment of loans made by Lucasan to PNB and RPB in 1997 cannot, in any way, operate to restore
whatever rights he had over the subject properties. Such payment only extinguished his loan obligations
to the mortgagee banks and the liens which Lucasan claimed were subsisting at the time of the
registration of the notice of embargo and certificate of sale.

Neither can Lucasan capitalize on PBC’s failure to file a petition for consolidation of ownership after the
expiration of the redemption period. As we explained in Calacala v. Republic:24

[P]etitioners' predecessors-in-interest lost whatever right they had over [the] land in question from the
very moment they failed to redeem it during the 1-year period of redemption. Certainly, the Republic's
failure to execute the acts referred to by the petitioners within ten (10) years from the registration of
the Certificate of Sale cannot, in any way, operate to restore whatever rights petitioners' predecessors-
in-interest had over the same. For sure, petitioners have yet to cite any provision of law or rule of
jurisprudence, and we are not aware of any, to the effect that the failure of a buyer in a foreclosure sale
to secure a Certificate of Final Sale, execute an Affidavit of Consolidation of Ownership and obtain a writ
of possession over the property thus acquired, within ten (10) years from the registration of the
Certificate of Sale will operate to bring ownership back to him whose property has been previously
foreclosed and sold.

xxxx

Moreover, with the rule that the expiration of the 1-year redemption period forecloses the obligor's
right to redeem and that the sale thereby becomes absolute, the issuance thereafter of a final deed of
sale is at best a mere formality and mere confirmation of the title that is already vested in the
purchaser. As this Court has said in Manuel vs. Philippine National Bank, et al.:

Note must be taken of the fact that under the Rules of Court the expiration of that one-year period
forecloses the owner's right to redeem, thus making the sheriff's sale absolute. The issuance thereafter
of a final deed of sale becomes a mere formality, an act merely confirmatory of the title that is already in
the purchaser and constituting official evidence of that fact. (Emphasis supplied.)

Certainly, Lucasan no longer possess any legal or equitable title to or interest over the subject parcels of
land; hence, he cannot validly maintain an action for quieting of title.

Furthermore, Lucasan failed to demonstrate that the notice of embargo and the certificate of sale are
invalid or inoperative. In fact, he never put in issue the validity of the levy on execution and of the
certificate of sale duly registered on June 5, 1981. It is clear, therefore, that the second requisite for an
action to quiet title is, likewise, absent.

Concededly, Lucasan can pursue all the legal and equitable remedies to impeach or annul the execution
sale prior to the issuance of a new certificate of title in favor of PBC. Unfortunately, the remedy he had
chosen cannot prosper because he failed to satisfy the requisites provided for by law for an action to
quiet title. Hence, the RTC rightfully dismissed Lucasan’s complaint.

Lucasan tries to find solace in our ruling in Cometa v. Court of Appeals. Sadly for him, that case is not on
all fours with his case, for it was not for quieting of title but a petition for issuance of a writ of possession
and cancellation of lis pendens. Likewise, in Cometa the registered owner assailed the validity of the levy
and sale, which Lucasan failed to do.

Undoubtedly, Lucasan’s right to redeem the subject properties had elapsed on June 5, 1982. His offer to
redeem the same in 1997 or long after the expiration of the redemption period is not really one for
redemption but for repurchase. Thus, PBC and PDIC, its receiver and liquidator, are no longer bound by
the bid price. It is entirely within their discretion to set a higher price. As we explained in De Robles v.
Court of Appeals:25

The right to redeem becomes functus officio on the date of its expiry, and its exercise after the period is
not really one of redemption but a repurchase. Distinction must be made because redemption is by
force of law; the purchaser at public auction is bound to accept redemption. Repurchase however of
foreclosed property, after redemption period, imposes no such obligation. After expiry, the purchaser
may or may not re-sell the property but no law will compel him to do so. And, he is not bound by the bid
price; it is entirely within his discretion to set a higher price, for after all, the property already belongs to
him as owner.
Accordingly, the condition imposed by the PDIC for the re-acquisition of the property cannot be
considered unjust or unreasonable.

Verily, in several cases,26 this Court allowed redemption even after the lapse of the redemption period.
But in those cases a valid tender was made by the original owners within the redemption period. Even in
Cometa, the redemption was allowed beyond the redemption period because a valid tender of payment
was made within the redemption period. The same is not true in the case before us.

In fine, we find that the RTC correctly dismissed Lucasan’s complaint for quieting of title. Thus, the CA
committed no reversible error in sustaining the RTC.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. CV
No. 81518, are AFFIRMED. Costs against the petitioner.

Part 3

Fortune Life Insurance Co., Inc. v. COA, G.R. No. 213525, 27 January 2015

FACTS: Respondent Provincial Government of Antique (LGU) and the petitioner executed a
memorandum of agreement concerning the life insurance coverage of qualified barangay secretaries,
treasurers and tanod, and subsequently submitting the corresponding disbursement voucher to COA-
Antique for pre-audit. COA disallowed the payment for lack of legal basis under the Local Government
Code. Consequently, petitioner filed its petition for money claim in the COA which denied its petition.

Petitioner received a copy of the COA decision on December 14, 2012, and filed its motion for
reconsideration on January 14, 2013. However, the COA denied the motion, the denial being received by
the petitioner on July 14, 2014.Petitioner filed a petition for certiorari on August 12, 2014, but petition
was dismissed for (a) late filing of the petition; (b) the nonsubmission of proof of service and verified
declaration; and (c) the failure to show graver abuse of discretion on the part of COA.

Petitioner contended that it has substantially complied with the rule despite the fact that its petition
only bore the cut print-outs of what appeared to be the registry receipt numbers of the registered
matters, not the registry receipts themselves. It also averred that the petition was filed on time since the
fresh period rule also applies to petitions brought under Rule 64.

ISSUES:

1. Whether or not petitioner complied with the rule on proof of service.

2. Whether or not Fresh Period Rule under Neypes applied to petition for certiorari under Rule 64 of the
Rules of Court

HELD:

1. Petitioner did not comply with the rule on proof of service.

The petitioner obviously ignores that Section 13, Rule 13 of the Rules of Court concerns two types of
proof of service, namely: the affidavit and the registry receipt. The Rule requires that if the service is
done by registered mail, proof of service shall consist of the affidavit of the person effecting the mailing
and the registry receipt, both of which must be appended to the paper being served. A compliance with
the rule is mandatory, such that there is no proof of service if either or both are not submitted. The rules
requires to be appended the registry receipt, not their reproductions. Hence, the cut print-outs did not
substantially comply with the rule.

2. Fresh Period Rule under Neypes did not apply to the petition for certiorari under Rule 64 of the Rules
of Court.

The reglementary periods under Rule 42 and Rule 64 are different. In the former, the aggrieved party is
allowed 15 days to file the petition for review from receipt of the assailed decision or final order, or from
receipt of the denial of a motion for new trial or reconsideration. In the latter, the petition is filed within
30 days from notice of the judgment or final order or resolution sought to be reviewed. The filing of a
motion for new trial or reconsideration, if allowed under the procedural rules of the Commission
concerned, interrupts the period; hence, should the motion be denied, the aggrieved party may file the
petition within the remaining period, which shall not be less than 5 days in any event, reckoned from the
notice of denial.

Considering that it received the notice of denial on July 14m 2014, it had only until July 19, 2014 to file
the petition. However, it filed the petition on August 13, 2014, which was 25 days too late.

Osmeña v. COA, G.R. No. 188818, 31 May 2011

The City of Cebu was to play host to the 1994 Palarong Pambansa (Palaro). In preparation for the games,
the City engaged the services of WT Construction, Inc. (WTCI) and Dakay Construction and Development
Company (DCDC) to construct and renovate the Cebu City Sports Complex. Osmeña, then city mayor,
was authorized by the Sangguniang Panlungsod (Sanggunian) of Cebu to represent the City and to
execute the construction contracts.

While the construction was being undertaken, Osmeña issued a total of 20 Change/Extra Work Orders to
WTCI, amounting to ₱35,418,142.42 (about 83% of the original contract price), and to DCDC, amounting
to ₱15,744,525.24 (about 31% of the original contract price). These Change/Extra Work Orders were not
covered by any Supplemental Agreement, nor was there a prior authorization from the Sanggunian.
Nevertheless, the work proceeded on account of the "extreme urgency and need to have a suitable
venue for the Palaro."4 The Palaro was successfully held at the Cebu City Sports Complex during the first
six months of 1994.

Thereafter, WTCI and DCDC demanded payment for the extra work they performed in the construction
and renovation of the sports complex. A Sanggunian member, Councilor Augustus Young, sponsored a
resolution authorizing Osmeña to execute the supplemental agreements with WTCI and DCDC to cover
the extra work performed, but the other Sanggunian members refused to pass the resolution. Thus, the
extra work completed by WTCI and DCDC was not covered by the necessary appropriation to effect
payment, prompting them to file two separate collection cases before the Regional Trial Court (RTC) of
Cebu City (Civil Case Nos. CEB-170045 and CEB-171556 ). The RTC found the claims meritorious, and
ordered the City to pay for the extra work performed. The RTC likewise awarded damages, litigation
expenses and attorney’s fees in the amount of ₱2,514,255.40 to WTCI7 and ₱102,015.00 to DCDC.8 The
decisions in favor of WTCI and DCDC were affirmed on appeal, subject to certain modifications as to the
amounts due, and have become final. To satisfy the judgment debts, the Sanggunian finally passed the
required appropriation ordinances.
During post-audit, the City Auditor issued two notices disallowing the payment of litigation expenses,
damages, and attorney’s fees to WTCI and DCDC.9 The City Auditor held Osmeña, the members of the
Sanggunian, and the City Administrator liable for the ₱2,514,255.40 and ₱102,015.00 awarded to WTCI
and DCDC, respectively, as damages, attorney’s fees, and interest charges. These amounts, the City
Auditor concluded, were unnecessary expenses for which the public officers should be held liable in
their personal capacities pursuant to the law.

Osmeña and the members of the Sanggunian sought reconsideration of the disallowance with the COA
Regional Office, which, through a 2nd Indorsement dated April 30, 2003,10 modified the City Auditor’s
Decision by absolving the members of the sanggunian from any liability. It declared that the payment of
the amounts awarded as damages and attorney’s fees should solely be Osmeña’s liability, as it was him
who ordered the change or extra work orders without the supplemental agreement required by law, or
the prior authorization from the Sanggunian. The Sanggunian members cannot be held liable for
refusing to enact the necessary ordinance appropriating funds for the judgment award because they are
supposed to exercise their own judgment and discretion in the performance of their functions; they
cannot be mere "rubber stamps" of the city mayor.

The COA Regional Office’s Decision was sustained by the COA’s National Director for Legal and
Adjudication (Local Sector) in a Decision dated January 16, 2004.11 Osmeña filed an appeal against this
Decision.

On May 6, 2008, the COA issued the assailed Decision which affirmed the notices of disallowance.12
Osmeña received a copy of the Decision on May 23, 2008. Eighteen days after or on June 10, 2008,
Osmeña filed a motion for reconsideration of the May 6, 2008 COA Decision.

The COA denied Osmeña’s motion via a Resolution dated June 8, 2009.13 The Office of the Mayor of
Cebu City received the June 8, 2009 Resolution of the COA on June 29, 2009. A day before, however,
Osmeña left for the United States of America for his check-up after his cancer surgery in April 2009 and
returned to his office only on July 15, 2009. Thus, it was only on July 27, 2009 that Osmeña filed the
present petition for certiorari under Rule 64 to assail the COA’s Decision of May 6, 2008 and Resolution
of June 8, 2009

THE PETITION

Rule 64 of the Rules of Court governs the procedure for the review of judgments and final orders or
resolutions of the Commission on Elections and the COA. Section 3 of the same Rule provides for a 30-
day period, counted from the notice of the judgment or final order or resolution sought to be reviewed,
to file the petition for certiorari. The Rule further states that the filing of a motion for reconsideration of
the said judgment or final order or resolution interrupts the 30-day period

Osmeña filed his motion for reconsideration, of the COA’s May 6, 2008 Decision, 18 days from his
receipt thereof, leaving him with 12 days to file a Rule 64 petition against the COA ruling. He argues that
the remaining period should be counted not from the receipt of the COA’s June 8, 2009 Resolution by
the Office of the Mayor of Cebu City on June 29, 2009, but from the time he officially reported back to
his office on July 15, 2009, after his trip abroad. Since he is being made liable in his personal capacity, he
reasons that the remaining period should be counted from his actual knowledge of the denial of his
motion for reconsideration. Corollary, he needed time to hire a private counsel who would review his
case and prepare the petition.

Osmeña pleads that his petition be given due course for the resolution of the important issues he raised.
The damages and interest charges were awarded on account of the delay in the payment of the extra
work done by WTCI and DCDC, which delay Osmeña attributes to the refusal of the Sanggunian to
appropriate the necessary amounts. Although Osmeña acknowledges the legal necessity for a
supplemental agreement for any extra work exceeding 25% of the original contract price, he justifies the
immediate execution of the extra work he ordered (notwithstanding the lack of the supplemental
agreement) on the basis of the extreme urgency to have the construction and repairs on the sports
complex completed in time for the holding of the Palaro. He claims that the contractors themselves did
not want to embarrass the City and, thus, proceeded to perform the extra work even without the
supplemental agreement.

Osmeña also points out that the City was already adjudged liable for the principal sum due for the extra
work orders and had already benefitted from the extra work orders by accepting and using the sports
complex for the Palaro. For these reasons, he claims that all consequences of the liability imposed,
including the payment of damages and interest charges, should also be shouldered by the City and not
by him.

THE COURT’S RULING

Relaxation of procedural rules to give effect to a party’s right to appeal

Section 3, Rule 64 of the Rules of Court states:

SEC. 3. Time to file petition.—The petition shall be filed within thirty (30) days from notice of the
judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or
reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of
the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the aggrieved
party may file the petition within the remaining period, but which shall not be less than five (5) days in
any event, reckoned from notice of denial. [Emphasis ours.]

Several times in the past, we emphasized that procedural rules should be treated with utmost respect
and due regard, since they are designed to facilitate the adjudication of cases to remedy the worsening
problem of delay in the resolution of rival claims and in the administration of justice. From time to time,
however, we have recognized exceptions to the Rules but only for the most compelling reasons where
stubborn obedience to the Rules would defeat rather than serve the ends of justice. Every plea for a
liberal construction of the Rules must at least be accompanied by an explanation of why the party-
litigant failed to comply with the Rules and by a justification for the requested liberal construction.14
Where strong considerations of substantive justice are manifest in the petition, this Court may relax the
strict application of the rules of procedure in the exercise of its legal jurisdiction.15

Osmeña cites the mandatory medical check-ups he had to undergo in Houston, Texas after his cancer
surgery in April 2009 as reason for the delay in filing his petition for certiorari. Due to his weakened state
of health, he claims that he could not very well be expected to be bothered by the affairs of his office
and had to focus only on his medical treatment. He could not require his office to attend to the case as
he was being charged in his personal capacity.
We find Osmeña’s reasons sufficient to justify a relaxation of the Rules. Although the service of the June
8, 2009 Resolution of the COA was validly made on June 29, 2009 through the notice sent to the Office
of the Mayor of Cebu City,16 we consider July 15, 2009 – the date he reported back to office – as the
effective date when he was actually notified of the resolution, and the reckoning date of the period to
appeal. If we were to rule otherwise, we would be denying Osmeña of his right to appeal the Decision of
the COA, despite the merits of his case.

Moreover, a certiorari petition filed under Rule 64 of the Rules of Court must be verified, and a
verification requires the petitioner to state under oath before an authorized officer that he has read the
petition and that the allegations therein are true and correct of his personal knowledge. Given that
Osmeña was out of the country to attend to his medical needs, he could not comply with the
requirements to perfect his appeal of the Decision of the COA.

While the Court has accepted verifications executed by a petitioner’s counsel who personally knows the
truth of the facts alleged in the pleading, this was an alternative not available to Osmeña, as he had yet
to secure his own counsel. Osmeña could not avail of the services of the City Attorney, as the latter is
authorized to represent city officials only in their official capacity.17 The COA pins liability for the
amount of damages paid to WTCI and DCDC on Osmeña in his personal capacity, pursuant to Section
103 of Presidential Decree No. 1445 (PD 1445).18

Thus, the reckoning date to count the remaining 12 days to file his Rule 64 petition should be counted
from July 15, 2009, the date Osmeña had actual knowledge of the denial of his motion for
reconsideration of the Decision of the COA and given the opportunity to competently file an appeal
thereto before the Court. The present petition, filed on July 27, 2009, was filed within the reglementary
period.

Personal liability for expenditures of government fund when made in violation of law

The Court’s decision to adopt a liberal application of the rules stems not only from humanitarian
considerations discussed earlier, but also on our finding of merit in the petition.

Section 103 of PD 1445 declares that "[e]xpenditures of government funds or uses of government
property in violation of law or regulations shall be a personal liability of the official or employee found to
be directly responsible therefor." Notably, the public official’s personal liability arises only if the
expenditure of government funds was made in violation of law. In this case, the damages were paid to
WTCI and DCDC pursuant to final judgments rendered against the City for its unreasonable delay in
paying its obligations. The COA, however, declared that the judgments, in the first place, would not be
rendered against the City had it not been for the change and extra work orders that Osmeña made
which (a) it considered as unnecessary, (b) were without the Sanggunian’s approval, and (c) were not
covered by a supplemental agreement.

The term "unnecessary," when used in reference to expenditure of funds or uses of property, is relative.
In Dr. Teresita L. Salva, etc. v. Guillermo N. Carague, etc., et al.,19 we ruled that "[c]ircumstances of time
and place, behavioural and ecological factors, as well as political, social and economic conditions, would
influence any such determination. x x x [T]ransactions under audit are to be judged on the basis of not
only the standards of legality but also those of regularity, necessity, reasonableness and moderation."
The 10-page letter of City Administrator Juan Saul F. Montecillo to the Sanggunian explained in detail
the reasons for each change and extra work order; most of which were made to address security and
safety concerns that may arise not only during the holding of the Palaro, but also in other events and
activities that may later be held in the sports complex. Comparing this with the COA’s general and
unsubstantiated declarations that the expenses were "not essential"20 and not "dictated by the
demands of good government,"21 we find that the expenses incurred for change and extra work orders
were necessary and justified.

The COA considers the change and extra work orders illegal, as these failed to comply with Section III, C1
of the Implementing Rules and Regulations of Presidential Decree No. 1594,22 which states that:

5. Change Orders or Extra Work Orders may be issued on a contract upon the approval of competent
authorities provided that the cumulative amount of such Change Orders or Extra Work Orders does not
exceed the limits of the former's authority to approve original contracts.

6. A separate Supplemental Agreement may be entered into for all Change Orders and Extra Work
Orders if the aggregate amount exceeds 25% of the escalated original contract price. All change
orders/extra work orders beyond 100% of the escalated original contract cost shall be subject to public
bidding except where the works involved are inseparable from the original scope of the project in which
case negotiation with the incumbent contractor may be allowed, subject to approval by the appropriate
authorities. [Emphases ours.]

Reviewing the facts of the case, we find that the prevailing circumstances at the time the change and
extra work orders were executed and completed indicate that the City of Cebu tacitly approved these
orders, rendering a supplemental agreement or authorization from the Sanggunian
unnecessary.1âwphi1

The Pre-Qualification, Bids and Awards Committee (PBAC), upon the recommendation of the Technical
Committee and after a careful deliberation, approved the change and extra work orders. It bears
pointing out that two members of the PBAC were members of the Sanggunian as well – Rodolfo Cabrera
(Chairman, Committee on Finance) and Ronald Cuenco (Minority Floor Leader). A COA representative
was also present during the deliberations of the PBAC. None of these officials voiced any objection to
the lack of a prior authorization from the Sanggunian or a supplemental agreement. The RTC Decision in
fact mentioned that the Project Post Completion Report and Acceptance was approved by an authorized
representative of the City of Cebu on September 21, 1994.23 "[a]s the projects had been completed,
accepted and used by the [City of Cebu]," the RTC ruled that there is "no necessity of [executing] a
supplemental agreement."24 Indeed, as we declared in Mario R. Melchor v. COA,25 a supplemental
agreement to cover change or extra work orders is not always mandatory, since the law adopts the
permissive word "may." Despite its initial refusal, the Sanggunian was eventually compelled to enact the
appropriation ordinance in order to satisfy the RTC judgments. Belated as it may be, the enactment of
the appropriation ordinance, nonetheless, constitutes as sufficient compliance with the requirements of
the law. It serves as a confirmatory act signifying the Sanggunian’s ratification of all the change and extra
work orders issued by Osmeña. In National Power Corporation (NPC) v. Hon. Rose Marie Alonzo-Legasto,
etc., et al.,26 the Court considered the compromise agreement between the NPC and the construction
company as a ratification of the extra work performed, without prior approval from the NPC’s Board of
Directors.
As in Melchor,27 we find it "unjust to order the petitioner to shoulder the expenditure when the
government had already received and accepted benefits from the utilization of the [sports complex],"
especially considering that the City incurred no substantial loss in paying for the additional work and the
damages awarded. Apparently, the City placed in a time deposit the entire funds allotted for the
construction and renovation of the sports complex. The interest that the deposits earned amounted to
₱12,835,683.15, more than enough to cover the damages awarded to WTCI (₱2,514,255.40) and the
DCDC (₱102,015.00). There was "no showing that [the] petitioner was ill-motivated, or that [the
petitioner] had personally profited or sought to profit from the transactions, or that the disbursements
have been made for personal or selfish ends."28 All in all, the circumstances showed that Osmeña
issued the change and extra work orders for the City’s successful hosting of the Palaro, and not for any
other "nefarious endeavour."29

WHEREFORE, in light of the foregoing, we hereby GRANT the petitioner’s Petition for Certiorari filed
under Rule 64 of the Rules of Court. The respondent’s Decision of May 6, 2008 and Resolution of June 8,
2009 are SET ASIDE.