THIRD DIVISION

[G.R. No. 210636. July 28, 2014.]

MA. HAZELINA A. TUJAN-MILITANTE IN BEHALF OF THE

MINOR CRISELDA M. CADA, petitioner, vs. RAQUEL M. CADA-
DEAPERA, respondent.

DECISION

VELASCO, JR., J : p

Nature of the Case

Before Us is a petition for review on certiorari under Rule 45 of the Rules of Court with
prayer for injunctive relief seeking the reversal of the Court of Appeals (CA) Decision 1
dated May 17, 2013 as well as its Resolution dated December 27, 2013 in CA-G.R. SP
No. 123759. In the main, petitioner questions the jurisdiction of the Regional Trial Court,
Branch 130 in Caloocan City (RTC-Caloocan) to hear and decide a special civil action
for habeas corpus in relation to the custody of a minor residing in Quezon City.

The Facts

On March 24, 2011, respondent Raquel M. Cada-Deapera filed before the RTC-Caloocan
a verified petition for writ of habeas corpus, docketed as Special Civil Action Case No.
C-4344. In the said petition, respondent demanded the immediate issuance of the special
writ, directing petitioner Ma. Hazelina Tujan-Militante to produce before the court
respondent's biological daughter, minor Criselda M. Cada (Criselda), and to return to her
the custody over the child. Additionally, respondent indicated that petitioner has three (3)
known addresses where she can be served with summons and other court processes, to
wit: (1) 24 Bangkal St., Amparo Village, Novaliches, Caloocan City; (2) 118B K9 Street,
Kamias, Quezon City; and (3) her office at the Ombudsman-Office of the Special
Prosecutor, 5th Floor, Sandiganbayan, Centennial Building, Commonwealth Avenue cor.
Batasan Road, Quezon City. 2 CaTSEA

The next day, on March 25, 2011, the RTC-Caloocan issued a writ of habeas corpus,
ordering petitioner to bring the child to court on March 28, 2011. Despite diligent efforts
and several attempts, however, the Sheriff was unsuccessful in personally serving
petitioner copies of the habeas corpus petition and of the writ. Instead, on March 29,
2011, the Sheriff left copies of the court processes at petitioner's Caloocan residence, as
witnessed by respondent's counsel and barangay officials. 3 Nevertheless, petitioner
failed to appear at the scheduled hearings before the RTC-Caloocan.

Meanwhile, on March 31, 2011, petitioner filed a Petition for Guardianship over the
person of Criselda before the RTC, Branch 89 in Quezon City (RTC-Quezon City).
Respondent filed a Motion to Dismiss the petition for guardianship on the ground of litis
pendentia, among others. Thereafter, or on June 3, 2011, respondent filed a criminal case
for kidnapping before the Office of the City Prosecutor — Quezon City against petitioner
and her counsel.

On July 12, 2011, the RTC-Quezon City granted respondent's motion and dismissed the
guardianship case due to the pendency of the habeas corpus petition before RTC-
Caloocan. 4 The fallo of the Order reads:

WHEREFORE, in view of the foregoing, the subject motion is hereby

GRANTED. Accordingly, the case is hereby DISMISSED.

SO ORDERED. 5

Then, on August 4, 2011, Raquel moved for the ex parte issuance of an alias writ of
habeas corpus before the RTC-Caloocan, which was granted by the trial court on August
8, 2011. On even date, the court directed the Sheriff to serve the alias writ upon petitioner
at the Office of the Assistant City Prosecutor of Quezon City on August 10, 2011. 6 In
compliance, the Sheriff served petitioner the August 8, 2011 Order as well as the Alias
Writ during the preliminary investigation of the kidnapping case. 7

Following this development, petitioner, by way of special appearance, moved for the
quashal of the writ and prayed before the RTC Caloocan for the dismissal of the habeas
corpus petition, 8 claiming, among others, that she was not personally served with
summons. Thus, as argued by petitioner, jurisdiction over her and Criselda's person was
not acquired by the RTC-Caloocan.

Ruling of the Trial Court

On January 20, 2012, the RTC-Caloocan issued an Order denying petitioner's omnibus
motion, citing Saulo v. Brig. Gen. Cruz, 9 where the Court held that a writ of habeas
corpus, being an extraordinary process requiring immediate proceeding and action, plays
a role somewhat comparable to a summons in ordinary civil actions, in that, by service of
said writ, the Court acquires jurisdiction over the person of the respondent, as petitioner
herein. 10

Moreover, personal service, the RTC said, does not necessarily require that service be
made exclusively at petitioner's given address, for service may be made elsewhere or
wherever she may be found for as long as she was handed a copy of the court process in
person by anyone authorized by law. Since the sheriff was able to personally serve
petitioner a copy of the writ, albeit in Quezon City, the RTC-Caloocan validly acquired
jurisdiction over her person. 11 The dispositive portion of the Order reads: aHICDc

WHEREFORE, premises considered, the Very Urgent Motion (Motion to

Quash Alias Writ; Motion to Dismiss) filed by respondent Ma. Hazelina Tujan-
Militante dated August 11, 2011 is hereby DENIED for lack of merit.

In the meantime, respondent Ma. Hazelina Tujan-Militante is hereby directed to

appear and bring Criselda Martinez Cada before this Court on February 10,
2012 at 8:30 o'clock in the morning.

SO ORDERED. 12

Aggrieved, petitioner, via certiorari to the CA, assailed the issued Order.

Ruling of the Court of Appeals

Over a year later, the CA, in the challenged Decision dated May 17, 2013, 13 dismissed
the petition for certiorari in the following wise:

WHEREFORE, the instant petition is hereby DISMISSED for lack of merit.

The Regional Trial Court, Branch 130 of Caloocan City is DIRECTED to
proceed with due dispatch in Spec. Proc. Case No. C-4344 for Habeas Corpus,
giving utmost consideration to the best interest of the now nearly 14-year old
child.

SO ORDERED. 14

In so ruling, the CA held that jurisdiction was properly laid when respondent filed the
habeas corpus petition before the designated Family Court in Caloocan City. 15 It also
relied on the certification issued by the punong barangay of Brgy. 179, Caloocan City,
stating that petitioner is a bona fide resident thereof, as well as the medical certificate
issued by Criselda's doctor on April 1, 2011, indicating that her address is "Amparo
Village, KC." 16 Anent the RTC-Caloocan's jurisdiction, the appellate court ruled that
service of summons is not required under Section 20 of A.M. No. 03-04-04-SC,
otherwise known as the Rules on Custody of Minors and Habeas Corpus in Relation to
Custody of Minors. According to the CA, the rules on summons contemplated in ordinary
civil actions have no place in petitions for the issuance of a writ of habeas corpus, it being
a special proceeding. 17

Petitioner sought reconsideration of the above Decision but the same was denied by the
CA in its December 27, 2013 Resolution.
Hence, this Petition.

The Issues

At the core of this controversy is the issue of whether or not the RTC-Caloocan has
jurisdiction over the habeas corpus petition filed by respondent and, assuming arguendo it
does, whether or not it validly acquired jurisdiction over petitioner and the person of
Criselda. Likewise pivotal is the enforceability of the writ issued by RTC-Caloocan in
Quezon City where petitioner was served a copy thereof.

The Court's Ruling

The petition lacks merit. The RTC-Caloocan correctly took cognizance of the habeas
corpus petition. Subsequently, it acquired jurisdiction over petitioner when the latter was
served with a copy of the writ in Quezon City.

The RTC-Caloocan has jurisdiction

over the habeas corpus proceeding

Arguing that the RTC-Caloocan lacked jurisdiction over the case, petitioner relies on
Section 3 of A.M. No. 03-04-04-SC and maintains that the habeas corpus petition should
have been filed before the family court that has jurisdiction over her place of residence or
that of the minor or wherever the minor may be found. 18 As to respondent, she asserts,
among others, that the applicable rule is not Section 3 but Section 20 of A.M. No. 03-04-
04-SC. 19

We find for respondent. IcSHTA

In the case at bar, what respondent filed was a petition for the issuance of a writ of habeas
corpus under Section 20 of A.M. No. 03-04-04-SC and Rule 102 of the Rules of Court.
20 As provided:

Section 20. Petition for writ of habeas corpus. — A verified petition for a
writ of habeas corpus involving custody of minors shall be filed with the
Family Court. The writ shall be enforceable within its judicial region to
which the Family Court belongs.

However, the petition may be filed with the regular court in the absence of the
presiding judge of the Family Court, provided, however, that the regular court
shall refer the case to the Family Court as soon as its presiding judge returns to
duty.

The petition may also be filed with the appropriate regular courts in places
where there are no Family Courts.
 The writ issued by the Family Court or the regular court shall be enforceable in
the judicial region where they belong.

The petition may likewise be filed with the Supreme Court, Court of Appeals, or
with any of its members and, if so granted, the writ shall be enforceable
anywhere in the Philippines. The writ may be made returnable to a Family
Court or to any regular court within the region where the petitioner resides or
where the minor may be found for hearing and decision on the merits.

Upon return of the writ, the court shall decide the issue on custody of minors.
The appellate court, or the member thereof, issuing the writ shall be furnished a
copy of the decision. (emphasis added)

Considering that the writ is made enforceable within a judicial region, petitions for the
issuance of the writ of habeas corpus, whether they be filed under Rule 102 of the Rules
of Court or pursuant to Section 20 of A.M. No. 03-04-04-SC, may therefore be filed with
any of the proper RTCs within the judicial region where enforcement thereof is sought.
21 HcTEaA

On this point, Section 13 of Batas Pambansa Blg. 129 (BP 129), otherwise known as the
Judiciary Reorganization Act of 1980, finds relevance. Said provision, which contains the
enumeration of judicial regions in the country, states:

Section 13. Creation of Regional Trial Courts. — There are hereby created
thirteen Regional Trial Courts, one for each of the following judicial regions:

xxx xxx xxx

The National Capital Judicial Region, consisting of the cities of Manila,

Quezon, Pasay, Caloocan and Mandaluyong, and the municipalities of
Navotas, Malabon, San Juan, Makati, Pasig, Pateros, Taguig, Marikina,
Parañaque, Las Piñas, Muntinlupa, and Valenzuela. (emphasis ours)

In view of the afore-quoted provision, it is indubitable that the filing of a petition for the
issuance of a writ of habeas corpus before a family court in any of the cities enumerated
is proper as long as the writ is sought to be enforced within the National Capital Judicial
Region, as here.

In the case at bar, respondent filed the petition before the family court of Caloocan City.
Since Caloocan City and Quezon City both belong to the same judicial region, the writ
issued by the RTC-Caloocan can still be implemented in Quezon City. Whether petitioner
resides in the former or the latter is immaterial in view of the above rule.
Anent petitioner's insistence on the application of Section 3 of A.M. No. 03-04-04-SC, a
plain reading of said provision reveals that the provision invoked only applies to petitions
for custody of minors, and not to habeas corpus petitions. Thus:

Section 3. Where to file petition. — The petition for custody of minors shall
be filed with the Family Court of the province or city where the petitioner
resides or where the minor may be found. (emphasis added)

Lastly, as regards petitioner's assertion that the summons was improperly served, suffice
it to state that service of summons, to begin with, is not required in a habeas corpus
petition, be it under Rule 102 of the Rules of Court or A.M. No. 03-04-04-SC. As held in
Saulo v. Cruz, a writ of habeas corpus plays a role somewhat comparable to a summons,
in ordinary civil actions, in that, by service of said writ, the court acquires jurisdiction
over the person of the respondent. 22

In view of the foregoing, We need not belabor the other issues raised. cHECAS

WHEREFORE, the instant petition is DENIED. The Court of Appeals Decision dated
May 17, 2013 and its Resolution dated December 27, 2013 are AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

Bersamin, * Villarama, Jr., ** Mendoza and Leonen, JJ., concur.

||| (Tujan-Militante v. Cada-Deapera, G.R. No. 210636, [July 28, 2014])

 THIRD DIVISION

[G.R. No. 208321. July 30, 2014.]

WESLEYAN UNIVERSITY PHILIPPINES, petitioner, vs.

NOWELLA REYES, respondent.

DECISION

VELASCO, JR., J : p

Nature of the Case

The issue in this petition boils down to the legality of respondent Nowella Reyes'
termination as University Treasurer of petitioner Wesleyan University — Philippines
(WUP) on the ground of loss of trust and confidence. Petitioner prays in this recourse that
We reverse the February 28, 2013 Decision of the Court of Appeals (CA) in CA-G.R. SP
No. 122536 which declared respondent's termination illegal.

The Facts

On March 16, 2004, respondent Nowella Reyes was appointed as WUP's University
Treasurer on probationary basis. A little over a year after, she was appointed as full time
University Treasurer.

On April 27, 2009, a new WUP Board of Trustees was constituted. Among its first acts
was to engage the services of Nepomuceno Suner & Associates Accounting Firm
(External Auditor) to investigate circulating rumors on alleged anomalies in the contracts
entered into by petitioner and in its finances.

Discovered following an audit were irregularities in the handling of petitioner's finances,

mainly, the encashment by its Treasury Department of checks issued to WUP personnel,
a practice purportedly in violation of the imprest system of cash management, and the
encashment of various crossed checks payable to the University Treasurer by Chinabank
despite management's intention to merely have the funds covered thereby transferred
from one of petitioner's bank accounts to another. The External Auditor's report
embodied the following findings and recommendations: 1

Treasury Department (Cash Management):

Findings:
 1. It was noted that checks consisting of various checks payable to teachers,
staffs and other third parties had been the subject of encashment directly
with the Treasury Department under the stewardship of Mrs. Nowella A.
Reyes, the University Treasurer. This practice is a clear violation of
imprest system of cash management, hence, resulting to unsound
accounting practice. This laxity in cash management of those checks
were paid as intended for them.

Recommendations:

For internal control reasons, the treasury should not accept any check
encashment from its daily collections. Checks are being issued for encashment
with our depository bank for security reasons. The mere acceptance of checks
from the collections is tantamount to cash disbursement out of collections.

Findings:

2. It was also noted that various checks payable to the Treasurer of WUP . . .
had been negotiated for encashment directly to China Bank —
Cabanatuan Branch, while the intention of the management for these
checks were merely for fund transfer with the other account maintained
at China Bank. This practice is a violation not only in the practice of
accounting/cash custodianship but had been mingled with spurious
elements. Unfortunately, check vouchers relating to this exception are
nowhere to be found or not on file.ESTDIA

Findings:

3. A crossed check payable to the Treasurer — [WUP] . . . had been negotiated

for encashment to China Bank — Cabanatuan Branch despite of the
restriction indicated in the face of the check. Unfortunately, the used
check was no longer found on file.

As a result of said audit, petitioner served respondent a Show Cause Order and placed her
under preventive suspension. 2 The said Show Cause Order required her to explain the
following matters found by the External Auditors:

(a) your encashment of Php300,000.00 of a crossed check you issued payable to

yourself (Chinabank Check No. 000873613 dated 26 November 2008) . .
.;

(b) the encashment of various checks without any supporting vouchers . . .;

(c) unliquidated cash advances in the aggregate amount of Php9.7 million . . . .

3
On June 18, 2009, respondent submitted her Explanation. Following which, WUP's
Human Resources Development Office (HRDO) conducted an investigation. Finding
respondent's Explanation unsatisfactory, the HRDO, on July 2, 2009, submitted an
Investigation Report 4 to the University President containing its findings and
recommending respondent's dismissal as University Treasurer.

Upon receipt of her notice of termination on July 9, 2009, respondent post-haste filed a
complaint for illegal dismissal with the Arbitration Branch of the National Labor
Relations Commission. She contended that her dismissal was illegal, void and unjust, for
the following reasons:

First, her 60-day preventive suspension violated the Labor Code provisions prohibiting
such suspensions to last for more than thirty (30) days. Thus, the fact that she was not
reinstated to her former position before the lapse of thirty (30) days, amounted to
constructive dismissal; 5

Second, there was a violation of her right to substantive and procedural due process, as
evidenced by petitioner's failure to apply the pertinent due process provisions under its
Administrative and Personnel Policy Manual; 6 and

Finally, the charges against her were based on mere suspicion and speculations
and unsupported by evidence. 7

Petitioner, for its part, predicated its defense on the contention that respondent was a
highly confidential employee who handled significant amounts of money as University
Treasurer and that the irregularities attributed to her in the performance of her duties
justify her dismissal on the basis of loss of trust and confidence. 8

Petitioner also averred that the 60-day preventive suspension thus imposed does not
necessarily make such suspension void, inasmuch as the law merely requires that after a
30-day preventive suspension, the affected employee shall automatically be reinstated.
But in the case of respondent, there was no need for her automatic reinstatement
inasmuch as she was duly terminated within the 30-day period of her preventive
suspension. 9 Moreover, respondent was duly afforded her right to due process since
WUP substantially complied with the twin-notice rule. IHaCDE

Ruling of the Labor Arbiter

On December 15, 2010, Labor Arbiter Reynaldo V. Abdon rendered a Decision finding
for respondent. The dispositive portion of the Labor Arbiter Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered,

DECLARING that complainant Nowella Reyes . . . [was] illegally dismissed by
respondent Wesleyan University Philippines.
 Accordingly, respondent Wesleyan University Philippines through its President
is hereby DIRECTED to:

(1) Reinstate complainant Nowella Reyes to her former or equivalent position

without loss of seniority right;

(1.1) Since reinstatement is immediately executory, to render a Report of

Compliance to this Office within ten (10) days from receipt of
this Decision.

(2) Pay complainant Reyes her backwages, from the time of her dismissal until
reinstatement, the present sum of which is P429,000.00;

(3) Pay complainant Reyes, her 13th month pay in the sum of P52,000; her
shared (sic) in related learning experience fee, P12,000.00; clothing
allowance, P6,000.00; Honorarium as member of standing committees,
P4,000.00; and her vacation leave credits in the sum of P17,862.59;

(4) Pay complainant Reyes, moral damages in the sum of P150,000.00,

exemplary damages in the amount of P100,000.00, and 10% attorney's
fees in the sum of P77,086.25; CaDEAT

xxx xxx xxx

SO ORDERED. 10

The Labor Artbiter noted, as respondent has insisted, that the charges against the latter
were based on mere rumors and speculations. As observed too by the Labor Arbiter,
petitioner itself was in the wrong because it had no proper policies on its accounting and
financial procedures and that the encashment and accommodation of checks to personnel,
especially after banking hours, had been the practice of its previous and present
administrations. Thus, it was unfair to put all the blame on respondent without any
evidence that her actions were highly irregular, unfair or unjustified. 11

As regards petitioner's findings on the alterations in the Check Disbursement Voucher

(CDV), unliquidated cash advances and duplicate checks, the Labor Arbiter found and
wrote:

Anent the alleged finding of the university that there was material alteration on
the documents as regards the Check Disbursement Voucher (CDV), for
allegedly there was an absence of Board Resolution entry in the CDV filed in
the Accounting while the copy submitted by the Treasurer has a Board
Resolution entry as well as the word ATM on the payee portion on the
photocopy as crossed out while in the original it was not crossed out, respondent
cannot summarily state that complainant was at fault. The Human Resource
 should have conducted an in-depth investigation on this matter. Unfortunately,
respondent just followed the twin-notice rule, and did not conduct a thorough
administrative investigation in accordance with their own internal rules and
policies in the Manual. Consequently, this Office has serious doubt that such
matter was the fault of the complainant for the blame may fall on the accounting
personnel who is handling the CDV.

With respect to the unliquidated cash advances, it is not likewise the fault of the
complainant. She pointed out that follow ups of the liquidation is [sic] being
handled by the auditor, while respondent claims that she was previously
handling the same before it was transferred to Accounting Office in August
2008. We see no evidence to prove that the liquidation is being handled by the
complainant prior to August 2008. Moreover, it is common practice that the
Treasurer disburses the funds such as cash advances but the liquidation must be
done by the beneficiary of the fund, and the responsible people who should
follow up the liquidation is the accounting office.

With respect to the duplicate checks, the same were done by a syndicate or
individuals not connected with the University. The bank has already admitted
responsibility in the encashment of these checks and had returned the amounts
to the respondent University, thus complainant has no fault about this incident.
12

Ruling of the NLRC

Petitioner filed an appeal with the National Labor Relations Commission (NLRC) which
was granted in the tribunal's Decision dated July 11, 2011, declaring that respondent was
legally dismissed. However, petitioner was ordered to pay respondent her proportionate
13th month pay, the monetary value of her vacation leave, and attorney's fees.

Adopting a stance entirely opposite to that of the Labor Arbiter, the NLRC held that
respondent failed to controvert and disprove the established charges of petitioner (as
appellant-respondent) and instead conveniently put the blame on other departments for
her inculpatory acts. The NLRC opined that her termination was not motivated by the
change of petitioner's officers but by the University's goal to promote the economy and
efficiency of its Treasury Department. 13

In net effect, the NLRC found petitioner's contention of loss of trust and confidence in
respondent with sufficient basis. While respondent, so the NLRC notes, may not have
been guilty of willful breach of trust, the fact that she held a highly confidential position,
and considering that anomalous transactions transpired under her command
responsibility, provided petitioner with ample ground to distrust and dismiss her. 14 The
NLRC explained: TcEaDS
In this case, complainant-appellee [herein respondent] may not have been guilty
of willful breach of trust. But as Treasurer of [WUP] who handles and
supervises all monetary transactions in the University and being a highly
confidential employee at that, holding trust and confidence and after considering
the series of irregular and anomalous transactions that transpired under
complainant-appellee's command responsibility, respondent has basis or ample
reason to distrust complainant-appellee. Thus, we cannot justly deny [WUP] the
authority to dismiss complainant-appellee.

The principle of respondent (sic) superior or command responsibility may be

cited as basis for the termination of employment of managerial employees based
on loss of trust and confidence.

In the Etcuban case (Ibid) the Supreme Court in upholding the validity of
petitioner-employee's dismissal on the ground of loss of trust and confidence,
ruled that even if the employee . . . had no actual and direct participation in the
alleged anomalies, his failure to detect any anomaly that would normally fall
within the scope of his work reflects his ineffectiveness and amounts to gross
negligence and incompetence which are likewise justifiable grounds for his
irregularity, for what is material is that his actuations were more than sufficient
to sow in his employer the seed of mistrust and loss of confidence.

As found by the External Auditor, complainant-appellee should have

implemented an imprest system of cash management in order to secure the
indicated payees in those checks and they were paid of the checks as intended
for them. It appears that checks payable to teachers, staffs and other third parties
had been the subject of encashment directly with the Treasury Department . . .
and this is an unsound accounting practice.

Moreover, the External Auditors found that various checks payable to the
Treasurer of Wesleyan University has been negotiated for encashment directly
to China Bank-Cabanatuan Branch while the intention of the management for
those checks were merely for fund transfer with the other account maintained at
China Bank. That this practice violated accounting or cash custodianship and
check vouchers are nowhere to be found.

Further, the crossed check payable to the Treasurer (complainant-appellee) in

the amount of P300,000.00 dated 26 November 2008 had been negotiated for
encashment to China Bank — Cabanatuan Branch despite of restriction
indicated in the face of the check and that the used check was no longer found
on file. There is a need for a clear policy when to issue crossed-checks or
otherwise and the use of debit/credit memo to transfer one account to another
with the same bank. That these acts of violation of cash and check custodianship
by complainant-appellee resulted in the loss of respondent-appellant thus
affecting the economy of the respondent-appellant institution.
 In view of our finding that respondents-appellants (sic) has validly terminated
complainant-appellee the latter's claim for damages and attorney's fees lacks
sufficient factual and legal basis. Accordingly, the Labor Arbiter's decision
directing the reinstatement of complainant-appellee with full backwages is
hereby vacated and set aside. 15

The NLRC denied respondent's motion for reconsideration in a Resolution dated

September 29, 2011. Therefrom, respondent went on Certiorari to the CA, in CA-G.R.
SP No. 122536.

Ruling of the Court of Appeals

On February 28, 2013, the CA, through its assailed Decision, 16 found the NLRC's ruling
tainted with grave abuse of discretion and reinstated the Decision of the Labor Arbiter.
The fallo of the CA Decision reads: HCATEa

WHEREFORE, premises considered, the assailed Decision and Resolution of

the National Labor Relations Commission dated July 11, 2011 and September
29, 2011 are REVERSED and SET ASIDE. The Decision of the Labor Arbiter
dated December 15, 2010 is hereby REINSTATED, subject to the modification
that if reinstatement is no longer feasible, petitioner shall be awarded separation
pay equivalent to one month salary for every year of service reckoned from the
time of employment to the finality of this decision. 17

Holding that respondent's termination was unjust, the CA, in virtual restoration of the
findings and conclusions of the Labor Arbiter, pointed out, among others, that: (1)
respondent sufficiently countered all charges against her; (2) it had been the practice of
the previous and present administrations of petitioner to encash and accommodate checks
of WUP personnel; thus, it would be unjust to penalize respondent for observing a
practice already in place when she assumed office; (3) the duty to liquidate cash advances
is assigned to the internal auditor; (4) it has been established that the encashments of
spurious duplicate checks were perpetrated by individuals not connected with WUP, and
that the bank admitted responsibility therefor and had returned the amount involved to
petitioner; (5) there was no imputation of any violation of the University's Administration
and Personnel Policy Manual; (6) while the acts complained of violated the imprest
system of cash management, there was no showing that the said system had been adopted
and observed in the school's accounting and financial procedures; and (7) there was no
showing that respondent had the responsibility to implement changes in petitioner's
accounting system even if it were not in accordance with the generally accepted
principles of accounting. 18

Hence, the instant petition.

The Issues
For consideration herein are the following issues raised by petitioner: DHIcET

1. Whether or not the CA over-reached its power of review under Rule 65

of the Rules of Court when it reversed the judgment of the NLRC;
and

2. Whether or not the CA erred in finding respondent illegally dismissed

by petitioner on the ground of loss of trust and confidence.

The Court's Ruling

The petition is impressed with merit. The CA erred in reinstating the Labor Arbiter's
Decision and in finding that respondent was illegally dismissed.

The CA's power of review

We first resolve the procedural issue raised in this recourse. Petitioner contends that the
CA over-reached its power of review under Rule 65 when it substituted its own judgment
over errors of judgment that it found in the NLRC Decision, stressing that the province of
a writ of certiorari is to correct only errors of jurisdiction and not errors of judgment.

This contention is misplaced. It is settled that under Section 9 of Batas Pambansa Blg.
129, 19 as amended by Republic Act No. 7902, 20 the CA, pursuant to the exercise of its
original jurisdiction over petitions for certiorari, is specifically given the power to pass
upon the evidence, if and when necessary, to resolve factual issues. Sec. 9 clearly states:

The Court of Appeals shall have the power to try cases and conduct hearings,
receive evidence and perform any and all acts necessary to resolve factual issues
raised in cases falling within its original and appellate jurisdiction, including the
power to grant and conduct new trials or further proceedings. . . .

Hence, the appellate court acted within its sound discretion when it re-evaluated the
NLRC's factual findings and substituted the latter's own judgment.

Loss of trust and confidence as a ground for termination

We now proceed to the substantive issue on the propriety of respondent's dismissal due to
loss of trust and confidence. As provided in Art. 282(c) of Presidential Decree No. 442,
otherwise known as the Labor Code of the Philippines:

Article 282. Termination by employer. An employer may terminate an

employment for any of the following causes:

xxx xxx xxx

 c. Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;

We explained in M+W Zander Philippines, Inc. v. Enriquez 21 the requisites of a valid

dismissal based on loss of trust and confidence. As the case elucidates:

Article 282 (c) of the Labor Code allows an employer to terminate the services
of an employee for loss of trust and confidence. Certain guidelines must be
observed for the employer to terminate an employee for loss of trust and
confidence. We held in General Bank and Trust Company v. Court of
Appeals, viz.:

[L]oss of confidence should not be simulated. It should not be used as a

subterfuge for causes which are improper, illegal, or unjustified. Loss of
confidence may not be arbitrarily asserted in the face of overwhelming
evidence to the contrary. It must be genuine, not a mere afterthought to
justify earlier action taken in bad faith.

The first requisite for dismissal on the ground of loss of trust and confidence is
that the employee concerned must be one holding a position of trust and
confidence. cTDIaC

There are two classes of positions of trust: managerial employees and fiduciary
rank-and-file employees.

Managerial employees are defined as those vested with the powers or

prerogatives to lay down management policies and to hire, transfer, suspend,
lay-off, recall, discharge, assign or discipline employees or effectively
recommend such managerial actions. They refer to those whose primary duty
consists of the management of the establishment in which they are employed or
of a department or a subdivision thereof, and to other officers or members of the
managerial staff. Officers and members of the managerial staff perform work
directly related to management policies of their employer and customarily and
regularly exercise discretion and independent judgment.

The second class or fiduciary rank-and-file employees consist of cashiers,

auditors, property custodians, etc., or those who, in the normal exercise of their
functions, regularly handle significant amounts of money or property. These
employees, though rank-and-file, are routinely charged with the care and
custody of the employer's money or property, and are thus classified as
occupying positions of trust and confidence. 22

xxx xxx xxx

The second requisite of terminating an employee for loss of trust and confidence
is that there must be an act that would justify the loss of trust and confidence.
 To be a valid cause for dismissal, the loss of confidence must be based on a
willful breach of trust and founded on clearly established facts. 23

To summarize, the first requisite is that the employee concerned must be one holding a
position of trust and confidence, thus, one who is either: (1) a managerial employee; or
(2) a fiduciary rank-and-file employee, who, in the normal exercise of his or her
functions, regularly handles significant amounts of money or property of the employer.
The second requisite is that the loss of confidence must be based on a willful breach of
trust and founded on clearly established facts.

In Lima Land, Inc. v. Cuevas, 24 We discussed the difference between the criteria for
determining the validity of invoking loss of trust and confidence as a ground for
terminating a managerial employee on the one hand and a rank-and-file employee on the
other. In the said case, We held that with respect to rank-and-file personnel, loss of trust
and confidence, as ground for valid dismissal, requires proof of involvement in the
alleged events in question, and that mere uncorroborated assertions and accusations by
the employer would not suffice. With respect to a managerial employee, the mere
existence of a basis for believing that such employee has breached the trust of his
employer would suffice for his dismissal. The following excerpts from Lima Land are
instructive:

As firmly entrenched in our jurisprudence, loss of trust and confidence, as a just

cause for termination of employment, is premised on the fact that an employee
concerned holds a position where greater trust is placed by management and
from whom greater fidelity to duty is correspondingly expected. This includes
managerial personnel entrusted with confidence on delicate matters, such as the
custody, handling, or care and protection of the employer's property. The
betrayal of this trust is the essence of the offense for which an employee is
penalized.

It must be noted, however, that in a plethora of cases, this Court has

distinguished the treatment of managerial employees from that of rank-and-file
personnel, insofar as the application of the doctrine of loss of trust and
confidence is concerned. Thus, with respect to rank-and-file personnel, loss of
trust and confidence, as ground for valid dismissal, requires proof of
involvement in the alleged events in question, and that mere uncorroborated
assertions and accusations by the employer will not be sufficient. But as regards
a managerial employee, the mere existence of a basis for believing that such
employee has breached the trust of his employer would suffice for his dismissal.
Hence, in the case of managerial employees, proof beyond reasonable doubt is
not required, it being sufficient that there is some basis for such loss of
confidence, such as when the employer has reasonable ground to believe that
the employee concerned is responsible for the purported misconduct, and the
nature of his participation therein renders him unworthy of the trust and
confidence demanded of his position. DcSTaC
 On the other hand, loss of trust and confidence as a ground of dismissal has
never been intended to afford an occasion for abuse because of its subjective
nature. It should not be used as a subterfuge for causes which are illegal,
improper, and unjustified. It must be genuine, not a mere afterthought intended
to justify an earlier action taken in bad faith. Let it not be forgotten that what is
at stake is the means of livelihood, the name, and the reputation of the
employee. To countenance an arbitrary exercise of that prerogative is to negate
the employee's constitutional right to security of tenure. 25

Respondent's employment classification is

irrelevant in light of her proven willful breach

There is no doubt that respondent held a position of trust; thus, greater fidelity is expected
of her. She was not an ordinary rank-and-file employee but an employee occupying a
very sensitive position. As University Treasurer, she handled and supervised all monetary
transactions and was the highest custodian of funds belonging to WUP. 26 To be sure, in
the normal exercise of her functions, she regularly handled significant amounts of money
of her employer and managed a critical department.

The presence of the first requisite is certain. So is as regards the second requisite. Indeed,
the Court finds that petitioner adequately proved respondent's dismissal was for a just
cause, based on a willful breach of trust and founded on clearly established facts as
required by jurisprudence. At the end of the day, the question of whether she was a
managerial or rank-and-file employee does not matter in this case because not only is
there basis for believing that she breached the trust of her employer, her involvement in
the irregularities attending to petitioner's finances has also been proved.

To recall, petitioner, per its account, allegedly lost trust and confidence in respondent
owing to any or an interplay of the following events: (1) she encashed a check payable to
the University Treasurer in the amount of three hundred thousand pesos (PhP300,000);
(2) she encashed crossed checks payable to the University Treasurer, when the intention
of management in this regard was to merely transfer funds from one of petitioner's
accounts to another in the same bank; (3) she allowed the Treasury Department to encash
the checks issued to WUP personnel rather than requiring the latter to have said checks
encashed by the bank, in violation of the imprest system of accounting; (4) she caused the
disbursement of checks without supporting check vouchers; (5) there were unliquidated
cash advances; and (6) spurious duplicate checks bearing her signature were encashed
causing damage to petitioner.

We disagree with the CA's finding that respondent has sufficiently countered all
inculpatory allegations and accusations against her. On the contrary, We find that here,
there was an admitted, actual and real breach of duty committed by respondent, which
translates into a breach of trust and confidence in her. For perspective, respondent's
explanation as to the charges against her is as follows:
1. That the alleged crossed check issued by her payable to THE TREASURER
— WUP was done in the exercise of her duty and function as such, and
not with her name and not to herself and personal favor, and that said
check had been prepared passing through the usual system;

2. That the University heads were the beneficiaries of said amount who strongly
requested that their love gift be given, hence, the encashment;

3. That the amount of the check was properly disposed of as evidenced by the
document bearing the signatures of recipients;

4. That the Office to point to if vouchers and supporting documents will have to
be checked concerning payments made is the Accounting Office; EASCDH

5. That cash advances to various University personnel pass through her office
in the exercise of her duties as such but the office who follow up the
liquidation of payments received is the Office of the University Auditor;

6. That respondent Reyes adopted her reply on the show-cause order in the
investigation previously conducted by Dr. Jeremias Garcia about the
duplicated checks alleging among others:

a) She and her staff confirmed that only the checks issued to General
Capulong and Leodigario David were encashed by the
University Teller;

b) The check issued to Norma de Jesus was encashed by the Pick-up

Chinabank Teller on December 5, 2008 while collecting deposits
from the University with the assistance of the University teller;

c) That the check issued to Mercedes was not encashed with the
University teller but with WEMCOOP;

d) As to the encashment and accommodation of checks to personnel, it

has been the practice of previous and present administration
moreso when employees cannot anymore go to Chinabank to
transact business as it is mostly beyond banking hours when
checks are ready for disbursement;

e) That Respondent's department has no control over fraudulent

transactions done outside the University, that it is the Bank's
duty to protect its clients as to the proper procedures to secure
our account;

f) That the computer system program of the University's depository bank

has very limited capabilities to detect fraudulent entries;
 g) That the signature verifier also had been remiss in carefully checking
the authenticity of previous signatories. 27

a. Respondent's encashment of checks

As it were, respondent did not deny, in fact admitted, the encashment of the three
hundred thousand peso (PhP300,000) crossed check payable to the University Treasurer
which covered the total amount of the "love gift" for administrative and academic
officials of WUP. Neither did she deny the fact that the Treasury Department encashed
checks issued to WUP personnel rather than requiring them to have the checks encashed
by the bank. Instead, she explained that the beneficiaries of the amounts strongly
requested that their love gifts be given in cash, hence the encashment of the PhP300,000
crossed check and, thereafter, the accommodation and encashment of their checks
directly by the Treasury Department. Moreover, she submitted a document bearing the
signatures of the recipients of the "love gift" as proof that the amount was disposed
properly. 28 She further insisted that this was the usual practice of the University and that
she merely accommodated the requests of WUP personnel especially when Chinabank
was already closed.

Jurisprudence has pronounced that the crossing of a check means that the check may not
be encashed but only deposited in the bank. 29 As Treasurer, respondent knew or is at
least expected to be aware of and abide by this basic banking practice and commercial
custom. Clearly, the issuance of a crossed check reflects management's intention to
safeguard the funds covered thereby, its special instruction to have the same deposited to
another account and its restriction on its encashment.

Here, respondent, as aptly detailed in the auditor's report, disregarded management's

intentions and ignored the measures in place to secure the handling of WUP's funds. By
encashing the crossed checks, respondent put the funds covered thereby under the risk of
being lost, stolen, co-mingled with other funds or spent for other purposes. Furthermore,
the accommodation and encashment by the Treasury Department of checks issued to
WUP personnel were highly irregular. First, WUP, not being a bank, had no business
encashing the checks of its personnel. 30 More importantly, in encashing the said checks,
the Treasury Department made disbursements contrary to the wishes of management
because, in issuing said checks, management has made clear its intention that movies
therefor would be sourced from petitioner's deposit with Chinabank, under a specific
account, and not from the cash available in the Treasury Department.

That the encashment of crossed checks and payment of checks directly to WUP personnel
had been the practice of the previous and present administration of petitioner is of no
moment. To Our mind, this was simply respondent's convenient excuse, a poorly
disguised afterthought, when her unbecoming carelessness in managing WUP's finances
was exposed. Moreover, the prevalence of this practice could have been contained if only
respondent consistently observed the regular procedure for encashing crossed checks and
properly handled requests for accommodation of checks issued to the WUP personnel.

b. Unliquidated cash advances

On the matter of unliquidated cash advances in the aggregate amount of nine million
seven hundred thousand pesos (PhP9,700,000), respondent explained that while it was
true that cash advances to WUP personnel passed through her office in the exercise of her
duties as University Treasurer, the office that follows up the liquidation of advances
received is the office of the University Auditor. 31 However, granting that the
responsibility of handling the liquidation of cash advances is no longer lodged in her
office, there is proof showing that before the Treasury Department was relieved of said
responsibility, the total unliquidated cash advances was even bigger, amounting to eleven
million five hundred thirty-three thousand two hundred thirty pesos and thirty-seven
centavos (PhP11,533,230.37). There is nothing in the records before us showing that
respondent denied the following findings in the Investigation Report of the WUP's
Human Resource Development Office (HRDO) on this matter, to wit:

In the matter of unliquidated cash advances in the aggregate amount of

Php9.7million as found by the External Auditors, respondent's contention was
that cash advances to various University personnel pass through her office in
the exercise of her duties as such but the office who follows up the liquidation of
payments received is the Office of the University Auditor.

On the inquiry done . . . of the Internal Auditor, Treasury and Accounting

officer on July 1, 2009, it was found out that the responsibility of handling cash
advances and liquidation report was transferred from Treasury Office to
Accounting Office on August 2008, when Ms. Luzviminda Torres, the personnel
handling the same detailed at the Treasury Office went on leave. It was
transferred to Ms. Julieta Mateo. What was surprising was that as per
certification and summary submitted by Ms. Mateo, the amount of unliquidated
cash advances previous to August 2008, when the same was under the
responsibility of the Treasury Office, was even bigger with the total amount of
ELEVEN MILLION FIVE HUNDRED THIRTY THREE THOUSAND, TWO
HUNDRED THIRTY PESOS AND THIRTY SEVEN CENTAVOS (Attached as
Annex "G')

Even if there is truth in the contention of herein Respondent that she was no
longer the one in charge of the liquidation proceedings, the same would not
absolve her from gross negligence of duties. The fact that the said function was
with her office until August 2008, with unliquidated cash advances even bigger,
still showed that she reneged in her duties which she had overlooked for so
long. She now mistakenly points the responsibility to the Office of the University
Auditor. These informations are enough to be considered as Respondent's acts
constitutive of breach of trust and confidence. 32 . . .
c. Other irregularities in respondent's performance

In all, We find the Investigation Report of the HRDO a credible, extensive and thorough
account of respondent's involvement in incidents which are sufficient grounds for
petitioner's loss of trust and confidence in her, to wit:

Respondent Nowella C. Reyes has committed

breach of trust and confidence in the conduct
of her office.

In her answer, Respondent admitted the encashment of the crossed check with
the defense that the same was done in the performance of her duty, not for her
personal use but because of the request of University heads who wanted their
love gifts be given. She also admitted habitual encashment of checks issued by
the University to its personnel on the basis of practice of previous
administration.

The charge against Respondent of the act of improper encashment of a check,

which aside from being irregular is clearly violative of imprest system of cash
management. Moreover, the same being a crossed check, should not be
negotiated for encashment to Chinabank — Cabanatuan Branch because of the
restriction indicated on its face, which Mrs. Reyes, by reason of her office knew
very well.

During the investigation conducted, it was revealed that the check disbursement
voucher attached by Respondent on her answer to justify the regularity of its
issuance and eventual encashment was not exactly the same as the one filed at
the Accounting Office. It showed that the photocopy of the original CDV which
was attached by Respondent (attached as Annex "E" of this report) bear some
material alterations, namely:

1. The absence of entry of the Board Resolution which was reflected as a sort of
inquiry by the Internal Auditor, and which at present was left blank on
the original, as compared to the photocopy submitted by respondent
bearing an entry of the Board Resolution number;

2. The word ATM on the payee portion of the CDV in the original as compared
to the photocopy wherein the entry ATM was crossed out.

During a discussion with the external auditors, it was categorically stated by

them that during the course of external audit, said document was inexistent in
the records presented by the Accounting and Treasurer's Offices. The
production of the photocopy by Respondent already altered only after the
suspension was effected cast doubt on the regularity of its issuance, negating
her otherwise claim. Another significant observation was that the original copy
of CDV (attached as Annex "F" of this report) and corresponding signatures of
 administrative heads who received payments showed folded marks halfways,
with the fastener holes unmatched, showing that those two documents were not
really filed together, as regularly done, and the same were not filed in the
regular course and must have been kept previously on a different manner in
possession of person other than the office which must file the same.

xxx xxx xxx

On the last charge in the show cause order specifically the existence of
duplicate checks in the account of the University amounting to Php1.050
Million, included in Respondent's defenses were that among the checks
duplicated, only two of them were encashed with the University Teller and the
check originally named to Norma de Jesus as payee was paid by the pick-up
teller only through the assistance of the University teller.

Again, Respondent's defense were void of truth and merit. The act of encashing
checks issued by the Treasury Office, clearly violative of imprest system of cash
management which Mrs. Reyes by reason of her office knew very well, showed
that Respondent directly reneged in her duty to observe economic security
measures.

As found on the documents attached to the Investigation report of Dr. Garcia

which had been expressly adopted by herein respondent in her answer is an
Affidavit of Norma de Jesus stating that she actually encashed the check with
the personnel of the Treasury Office particularly Shirley Punay, who gave her
the amount equivalent days after the check was handed to the Treasury office.

However noble the intention of herein Respondent in helping her fellow workers
in the University by her acts of accommodation by encashing their checks
directly with the Treasury Office when Chinabank was already closed, the same
still reneged in her duty to protect the economic security of the University. An
act of misconduct which caused [sic] 33

An employer cannot be compelled to retain an employee who is guilty of acts inimical to

the interests of the employer. A company has the right to dismiss its employees if only as
a measure of self-protection. This is all the more true in the case of supervisors or
personnel occupying positions of responsibility. 34 In this case, let it be remembered that
respondent was not an ordinary rank-and-file employee as she was no less the Treasurer
who was in charge of the coffers of the University. It would be oppressive to require
petitioner to retain in their management an officer who has admitted to knowingly and
intentionally committing acts which jeopardized its finances and who was untrustworthy
in the handling and custody of University funds.

WHEREFORE, premises considered, we GRANT the petition. The assailed Decision of

the Court of Appeals in CA-G.R. SP No. 122536 is, thus, SET ASIDE. The Decision of
the National Labor Relations Commission in NLRC RAB III Case No. 07-15131-09 is
REINSTATED.

SO ORDERED.

Peralta, Villarama, Jr., * Mendoza and Leonen, JJ., concur.

||| (Wesleyan University Phils. v. Reyes, G.R. No. 208321, [July 30, 2014])
 EN BANC

[G.R. No. 212953. August 5, 2014.]

JOSE TAPALES VILLAROSA, petitioner, vs. ROMULO DE MESA

FESTIN and COMMISSION ON ELECTIONS, respondents.

RESOLUTION

VELASCO, JR., J : p

Nature of the Case

This treats of the Petition for Certiorari under Rule 64 in relation to Rule 65 of the Rules
of Court assailing the Order 1 dated June 3, 2014 of public respondent Commission on
Elections (COMELEC) in SPR (AEL) No. 04-2014.

The Facts

Petitioner Jose Tapales Villarosa (Villarosa) and respondent Romulo de Mesa Festin
(Festin) were two of the four rival candidates for the mayoralty post in San Jose,
Occidental Mindoro during the May 13, 2013 National and Local Elections. On May 15,
2013, private respondent was proclaimed the victor, having garnered 20,761 votes,
edging out petitioner who obtained 19,557 votes.

With a difference of only 1,204 votes, petitioner filed a Petition for Protest Ad Cautelam
before the Regional Trial Court (RTC) alleging irregularities attending the conduct of the
elections. Specifically, petitioner brought to the attention of the court the complaints of
various voters who claimed that several ballots were pre-marked or that the ovals
appearing on the face of the ballots corresponding to the name of petitioner were
embossed or waxed to prevent them from being shaded. As a consequence of the alleged
massive electoral fraud and irregularities in the 92 clustered precincts of San Jose,
Occidental Mindoro, private respondent, so petitioner claimed, was illegally proclaimed.

In his answer, private respondent Festin likewise impugned the election results in the
precincts, particularly the number of votes credited to petitioner.

With both parties raising as principal issue the accuracy of the vote count, a physical
recount of the ballots were conducted under the auspices of the RTC, Branch 46 in San
Jose, Occidental Mindoro.
 Ruling of the RTC

On November 7, 2013, the RTC rendered a Decision declaring the proclamation of

respondent Festin void, viz.:

WHEREFORE, premises considered, this Court hereby DECLARES the

Protestant, JOSE TAPALES VILLAROSA as the duly elected mayor of San
Jose, Occidental Mindoro during the May 13, 2013 National and Local Election
and VOIDS the Proclamation of Protestee Romulo De Mesa Festin as elected
Mayor by the Board of Election Inspectors of San Jose, Occidental Mindoro. 2

The RTC justified its ruling by deducting 2,050 votes from private respondent that were
allegedly pre-marked or tampered.

Following this development, petitioner filed a Motion for Execution Pending Appeal,
which was granted by the RTC on January 15, 2014. 3 On January 23, 2014, respondent
Festin's motion for reconsideration was denied. ICcaST

Meanwhile, on February 3, 2014, private respondent Festin elevated the case to public
respondent COMELEC via a Petition for Certiorari with prayer for injunctive relief.
Petitioner immediately moved for its dismissal on the ground that the petition's
verification is allegedly defective.

Ruling of the COMELEC

Without yet ruling on the motion to dismiss, the COMELEC, acting through its First
Division, on February 13, 2014, issued an Order requiring petitioner to file his answer to
the petition. Through the same Order, the COMELEC issued a Temporary Restraining
Order (TRO) to enjoin the RTC from implementing its Decision during the pendency of
the case. Without waiving the grounds relied on his motion to dismiss, petitioner timely
filed his answer to the petition.

To petitioner's surprise, on April 10, 2014, public respondent COMELEC granted private
respondent's request for a preliminary injunction, enjoining the RTC Decision's execution
pending appeal. What petitioner considered questionable was that the injunction was
issued by a newly-constituted Special First Division, which was allegedly formed due to
the absence of several COMELEC commissioners who, at that time, were personally
attending to the concerns of the overseas absentee voters abroad. Petitioner points out that
the special division was constituted only on April 8, 2014 through Resolution No. 9868
and was composed of only two members, Chairman Sixto S. Brillantes, Jr. and
Commissioner Al A. Parreño, with the former presiding.
In response to the issuance of the injunction, petitioner filed an urgent motion praying for
its quashal, which was denied by public respondent COMELEC First Division through
the assailed June 3, 2014 Order. Thus, the instant petition.

The Issues

In ascribing grave abuse of discretion on the part of public respondent COMELEC,

petitioner relied on the following grounds:

1. Public respondent COMELEC (First Division) committed grave abuse

of discretion amounting to lack or excess of jurisdiction when it
did not find that the Special First Division did not have jurisdiction
to issue an injunction;

2. Public respondent COMELEC (First Division) committed grave abuse

of discretion amounting to lack or excess of jurisdiction when it
denied the urgent ex-parte motion to quash the writ of preliminary
injunction.

Concisely stated, the issue in this case is the legality of the formation of the Special First
Division and the validity of the Orders it issued, specifically the April 10, 2014 Order
granting the issuance of a writ of preliminary injunction.

According to the petitioner, the COMELEC First Division acquired jurisdiction over the
case on February 13, 2014 when it directed him to file an answer relative to the appeal
filed by private respondent Festin, and when it issued a TRO enjoining the execution
pending appeal. Thus, petitioner insists that this precluded the Special First Division from
acquiring jurisdiction over the same case and, consequently, from issuing the writ of
preliminary injunction. As argued by the petitioner, the mere absence of two of the
commissioners in the division is not sufficient to oust it of jurisdiction and confer the
same on a new one.

The Court's Ruling

We dismiss the petition for lack of merit.

Propriety of certiorari in assailing COMELEC rulings

Petitioner's recourse, aside from being unsound in substance, is procedurally infirm. The
governing provision is Section 7, Article IX of the 1987 Constitution, which provides:

Section 7. Each Commission shall decide by a majority vote of all its Members
any case or matter brought before it within sixty days from the date of its
submission for decision or resolution. A case or matter is deemed submitted for
 decision or resolution upon the filing of the last pleading, brief, or memorandum
required by the rules of the Commission or by the Commission itself. Unless
otherwise provided by this Constitution or by law, any decision, order, or
ruling of each Commission may be brought to the Supreme Court on certiorari
by the aggrieved party within thirty days from receipt of a copy thereof.
(emphasis added)

In the instructive case of Ambil v. Commission on Elections, 4 We have interpreted the

provision to limit the remedy of certiorari against final orders, rulings and decisions of
the COMELEC en banc rendered in the exercise of its adjudicatory or quasi-judicial
powers. 5 Certiorari will not generally lie against an order, ruling, or decision of a
COMELEC division for being premature, taking into account the availability of the plain,
speedy and adequate remedy of a motion for reconsideration. As elucidated in the case:

Rule 65, Section 1, 1997 Rules of Civil Procedure, as amended, requires that
there be no appeal, or any plain, speedy and adequate remedy in the ordinary
course of law. A motion for reconsideration is a plain and adequate remedy
provided by law. Failure to abide by this procedural requirement constitutes a
ground for dismissal of the petition.

In like manner, a decision, order or resolution of a division of the Comelec

must be reviewed by the Comelec en banc via a motion for reconsideration
before the final en banc decision may be brought to the Supreme Court on
certiorari. The pre-requisite filing of a motion for reconsideration is
mandatory. 6 (emphasis added)

The above doctrine further gained force when it was reiterated in Our recent ruling in
Cagas v. COMELEC, 7 in which We held that a party aggrieved by an interlocutory order
issued by a Division of the COMELEC in an election protest may not directly assail the
said order in this Court through a special civil action for certiorari. The remedy is to seek
the review of the interlocutory order during the appeal of the decision of the Division in
due course. 8

The exception in Kho v COMELEC is inapplicable

As an exception to the cases of Ambil and Cagas, We have ruled in Kho vs. COMELEC 9
that when it does not appear to be specifically provided under the COMELEC Rules of
Procedure that the challenged final order or decision is one that the COMELEC en banc
may sit and consider, the aggrieved party can, by necessity, directly resort to the Court as
the proper forum for reviewing the ruling. Thus, We have granted, in the said case, the
petition assailing an interlocutory order of a COMELEC division.

The exception, however, does not obtain herein. Noteworthy is that in 1997, when Kho
was resolved, what was then in force was the COMELEC Rules of Procedure
promulgated on February 15, 1993 (1993 COMELEC Rules). As expressly provided in
Rule 3 of the 1993 COMELEC Rules:

Section 2. The Commission en banc. — The Commission shall sit en banc in

cases hereinafter specifically provided, or in pre-proclamation cases upon a vote
of a majority of the members of a commission, or in all other cases where a
division is not authorized to act, or where, upon a unanimous vote of all the
members of a Division, an interlocutory matter or issue relative to an action or
proceeding before it is decided to be referred to the commission en banc.

xxx xxx xxx

Section 5. Quorum; Votes required. — . . .

(c) Any motion to reconsider a decision, resolution, order or ruling of a Division

shall be resolved by the Commission en banc except motions on interlocutory
orders of the division which shall be resolved by the division which issued
the order. EacHSA

Patent in the above-cited provisions is that the COMELEC en banc, at that time, did not
have the power to resolve motions for reconsideration with respect to interlocutory orders
issued by a division. This circumstance was a controlling factor in Our ruling in Kho.

On the other hand, applicable in the instant petition is COMELEC Resolution No. 8804,
10 promulgated on March 22, 2010. As expressly provided:

Rule 20

Motion for Reconsideration

Section 1. Grounds of Motion for Reconsideration. — A motion for

reconsideration may be filed on the grounds that the evidence is insufficient to
justify the decision, order or ruling; or that the said decision, is contrary to law.

xxx xxx xxx

Section 5. How motion for Reconsideration Disposed of. — Upon the filing of a
motion to reconsider a decision, resolution, order or ruling of a Division, the
ECAD Clerk concerned shall, within twenty-four (24) hours from the filing
thereof, notify the Presiding Commissioner. The latter shall within two (2) days
thereafter certify the case to the Commission en banc.

xxx xxx xxx

Section 7. Period to Decide by the Commission En Banc. — The motion for

reconsideration shall be decided within fifteen (15) days from the date the
 case or matter is deemed submitted for decision, unless otherwise provided by
law. (emphasis added)

Stark is the contrast between the two cited rules. To reiterate, under the 1993 COMELEC
Rules, the COMELEC en banc is strictly prohibited from entertaining motions for
reconsideration of interlocutory orders unless unanimously referred to the en banc by the
members of the division that issued the same, whereas under COMELEC Resolution No.
8804, all motions for reconsideration filed with regard to decisions, resolutions, orders
and rulings of the COMELEC divisions are automatically referred to the COMELEC en
banc. Thus, in view of COMELEC Resolution No. 8804's applicability in the instant
petition, a motion for reconsideration before the COMELEC en banc is available to
petitioner herein unlike in Kho.

From the foregoing, petitioner's procedural lapse becomes manifest. With the availability
of a plain, speedy, and adequate remedy at petitioner's disposal, his hasty resort to
certiorari to this Court cannot be justified. On this ground alone, the instant petition can
and should be dismissed outright.

The assailed Order was not issued in grave abuse of discretion

Even delving into the merits of the case, it cannot be said that the issuance of the assailed
Order was tainted with grave abuse of discretion since public respondent's actions find
sufficient constitutional basis under Sec. 3, Art. IX-C of the 1987 Constitution, which
provides:

Sec. 3. The Commission on Elections may sit en banc or in two divisions,

and shall promulgate its rules of procedure in order to expedite disposition
of election cases, including pre-proclamation controversies. All such election
cases shall be heard and decided in division, provided that motions for
reconsideration of decisions shall be decided by the Commission en banc.
(emphasis added)

Evidently, it is pursuant to this mandate that the COMELEC promulgated Resolution No.
7808 11 on January 16, 2007. Sec. 6, Rule 3 of the said Resolution, in part, provides:

Sec. 6. Substitution of members of a Division. —

(a) Temporary vacancy. — Whenever a member of a Division is on leave,

seriously ill, temporarily disabled, is absent, inhibits himself, or is disqualified
from sitting in a case, the junior member of the other Division shall
substitute such Commissioner, participating therein in an acting capacity, in
addition to his regular membership in his own Division.

xxx xxx xxx

 Under either of the foregoing substitutions, the Division where the acting or
signing member is assigned shall be designated as "Special First Division" or
"Special Second Division," as the case may be, for purposes of the pertinent
cases therein pending."

Thereafter, with the retirement of Commissioner Rene V. Sarmiento and Commissioner

Armando Velasco, the above-quoted rule was amended by Resolution No. 9636 12 on
February 13, 2013 to now read as:

Sec. 6 Substitution of member of a Division. —

(a) Temporary vacancy. — Whenever a member of a Division is on Leave,

seriously ill, temporarily disabled, is absent, inhibits himself, or is disqualified
from sitting in a case, the Chairman shall substitute him with another
Commissioner, or the Chairman shall sit in place of said member, and in
that event he will preside. HScDIC

xxx xxx xxx

Under either of the foregoing substitutions, the Division where the acting or
signing member is assigned shall be designated as "Special First Division" or
"Special Second Division" as the case may be, for purposes of the pertinent
case therein pending.

Invoking the rule, as amended, the COMELEC then issued Resolution No. 9868 13 on
April 8, 2014. The Resolution sought to address the temporary vacancies in both
Divisions of the COMELEC in view of the pressing matters concerning overseas
absentee voting that required the attention and presence abroad of Commissioners
Lucenito N. Tagle and Christian Robert S. Lim of the COMELEC First Division, and of
Commissioner Elias R. Yusoph of the Second Division. 14

Due to the absences of the aforementioned Commissioners, and to constitute a quorum

for the Divisions, Chairman Sixto S. Brillantes, Jr. sat as presiding Chairman for both
Divisions until his colleagues' return. 15 Thus, pursuant to Section 6, Rule 3 as amended,
Special Divisions were created with the following compositions: 16

SPECIAL FIRST DIVISION

Chairman Sixto S. Brillantes, Jr. — Presiding

Commissioner Al A. Parreño — Member Commissioner

SPECIAL SECOND DIVISION
Chairman Sixto S. Brillantes, Jr. — Presiding

Commissioner Maria Gracia Cielo M. Padaca — Member Commissioner

 Commissioner Luie Tito F. Guia — Member Commissioner

With the foregoing discussion, it becomes indisputable that the formation of the Special
Divisions is not only sanctioned by the COMELEC Rules but also by the Constitution no
less.

No fault, let alone grave abuse of discretion, can be ascribed to the COMELEC when the
Special First Division issued the questioned writ of preliminary injunction. Contrary to
petitioner's claim, it cannot be said that the First Division and the Special First Division
are two distinct bodies and that there has been consequent transfers of the case between
the two. Strictly speaking, the COMELEC did not create a separate Division but merely
and temporarily filled in the vacancies in both of its Divisions. The additional term
"special," in this case, merely indicates that the commissioners sitting therein may only
be doing so in a temporary capacity or via substitution.

The COMELEC First Division exercises jurisdiction over the cases that were assigned to
it before the substitution was made, including SPR (AEL) No. 04-2014. This jurisdiction
was not lost by the subsequent formation of the Special First Division since this only
entailed a change in the Division's composition of magistrates. Indeed, the case was not
reassigned or re-raffled anew. If anything, it was only petitioner's naivety that misled him
into interpreting the designation of the division as a "special" one, meaning it is distinct
from the first. Corollarily, petitioner is also mistaken in claiming that the jurisdiction was
eventually "re-acquired" by the First Division from the Special First Division by ruling
on the motion to quash since the First Division never lost jurisdiction to begin with.

Petitioner raises a fuss anent the temporary or permanent shuffling of members in the
Commission when, in fact, this is not a novel practice. In instances such as this,
exigencies justify the substitution of members and the designation of special divisions to
prevent paralysis in the administration of justice. This is also resorted to in order to
ensure that the speedy disposition of cases is not impeded and that docket systems are
unclogged. Obviously, these advantages far outweigh petitioner's baseless cry of
violation of due process.

WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED.

SO ORDERED.

Carpio, ** Leonardo-de Castro, Peralta, Bersamin, Del Castillo, Villarama, Jr., Perez,
Mendoza, Reyes, Perlas-Bernabe and Leonen, JJ., concur.

Sereno, C.J., * is on leave.

Brion, J., see: separate concurring opinion.

 Separate Opinions
BRION, J., concurring:

I agree with the ponencia's conclusion that the recourse to the present petition for
certiorari is improper and that, even if we entertain the petition on the merits, the
Commission on Elections (Comelec) committed no grave abuse of discretion. ESHcTD

However, I write this Separate Concurring Opinion to reflect my view on the ponencia's
discussion on the propriety of the certiorari petition.

The Case

Jose Tapales Villarosa (petitioner) filed an election protest against Romulo de Mesa
Festin (respondent) before the Regional Trial Court (RTC). After trial, the RTC nullified
the respondent's proclamation and declared petitioner the victor in the 2013 mayoralty
elections. The respondent appealed to the Comelec First Division. In the meantime, the
RTC ordered the execution of its decision pending the respondent's appeal.

During the pendency of the respondent's appeal with the Comelec First Division,
Comelec Chairman Sixto Brillantes constituted a "Special First Division," where he sat
as Presiding Chairman together with Commissioner Al Parreño. The move was due to the
absence of some of the Comelec Commissioners who had to attend to official duties
abroad. The "Special First Division" then issued a preliminary injunction to prevent the
execution of the RTC's decision.

The petitioner moved for the quashal of the injunction. The Comelec First Division
denied the petitioner's motion, prompting him to file the present petition for certiorari.

The Ponencia

The ponencia dismissed the petition because the petitioner failed to avail, in the words of
Section 1, Rule 65, in relation to Rule 64, of the Rules of Court,of the "plain, speedy and
adequate remedy in the ordinary course of law" before seeking recourse with the Court.
This remedy is a motion for reconsideration (of the denial of the petitioner's motion to
quash the injunction) with the Comelec en banc.

According to the ponencia, under Section 5(c), Rule 3 of the 1993 Comelec Rules of
Procedure, the general rule is that the Comelec en banc cannot entertain a motion for
reconsideration of an interlocutory order (e.g., denial of a motion to quash an injunction)
of a division. One of the exceptions is where the members of the Division that issued the
interlocutory order unanimously voted to refer the matter to the Comelec en banc.
Section 5(c) reads:
 Sec. 5. Quorum; Votes Required. — . . .

xxx xxx xxx

(c) Any motion to reconsider a decision, resolution, order or ruling of a

Division shall be resolved by the Commission en banc except motions on
interlocutory orders of the division which shall be resolved by the division
which issued the order. [italics supplied]

The result of the general rule is that after the division denies reconsideration of its
interlocutory order, the remedy of certiorari with the Supreme Court may only
exceptionally be availed of by the aggrieved party.

Under Section 5, Rule 20 of Comelec Resolution No. 8804 1 (March 22, 2010), however,
a motion for reconsideration of an interlocutory order, among others, is now
automatically referred to and necessarily must be coursed through the Comelec en banc.

According to the ponencia, there is a "stark contrast" between Section 5(c), Rule 3 of the
1993 Comelec Rules of Procedure, on one hand, and Section 5, Rule 20 of Comelec
Resolution No. 8804, on the other hand. Unlike the earlier rule, the present rule provides
an available remedy of a motion for reconsideration (of an interlocutory order of a
division) with the Comelec en banc itself.

It is at this point that I express my own view on the propriety of a certiorari petition.

My Dissent

Contrary to the ponencia's observation, Section 5, Rule 20 of Comelec Resolution No.

8804 is already present under the 1993 Comelec Rules of Procedure as Section 5 of
Rule 19, as follows:

Sec. 5. How Motion for Reconsideration Disposed of. — Upon the filing of a
motion to reconsider a decision, resolution, order or ruling of a Division, the
Clerk of Court concerned shall, within twenty-four (24) hours from the filing
thereof, notify the Presiding Commissioner. The latter shall within two (2)
days thereafter certify the case to the Commission en banc. [italics supplied]

In other words, whether under the 1993 Comelec Rules of Procedure or Comelec
Resolution No. 8804, the Presiding Commissioner of the Comelec division is required to
"certify the case to the [Comelec] en banc" when a motion for reconsideration of "a
decision, resolution, order or ruling of a Division" is filed. While this requirement has
been in existence under both Comelec issuances, the Comelec has interpreted this
requirement as applicable only to a final — not interlocutory — order of the Comelec in
view of Section 5(c), Rule 3 of the 1993 Comelec Rules of Procedure. This Court has
likewise been of the same view. 2 IEHTaA

Thus in Cagas v. Commission on Elections, 3 the Court observed that the proper remedy
available to a party aggrieved by an interlocutory order issued by the Comelec division is
to wait for the Comelec division to first decide the main case (election protest) on its
merits; and if the decision is unfavorable, then to appeal this decision to the Comelec en
banc, and question the propriety of the interlocutory order along with the other errors
committed by the division upon the merits.

At this juncture, it may be observed that in Cagas, the petitioner moved for
reconsideration of the assailed interlocutory order of the Comelec division in observance
of the exception in Section 5(c), Rule 3 of the 1993 Comelec Rules of Procedure. As it
stands, the only generally available remedy against an interlocutory order of a Comelec
division is a motion for reconsideration addressed to the division itself.

While the provision of Section 5(c), Rule 3 of the 1993 Comelec Rules of Procedure is
nowhere found in Comelec Resolution No. 8804, this absence does not mean that the
Comelec intended to repeal this provision and thereby support the ponencia's reasoning.
Section 3, Rule 1 of Comelec Resolution No. 8804 reads:

Section 3. Application of the Rules of Court and other related rules. — The
Commission on Elections (COMELEC) Rules of Procedure, the Rules of
Court,and the Rules on Electronic Evidence shall apply by analogy, or in a
suppletory character, and whenever necessary, practicable, and convenient.

In other words, Section 5(c), Rule 3 of the 1993 Comelec Rules of Procedure continues
to be the governing rule to determine what cases are required to be elevated to the
Comelec en banc. Simply put, it is not the "change" in the rules — because there is
none — that makes the present petition premature for lack of a motion for
reconsideration it being filed with the Comelec en banc. The prematurity of the petition
lies in the petitioner's failure to file a motion for reconsideration with the Comelec
division itself which rendered the assailed order.

But even if the petitioner did file a motion for reconsideration with the Comelec First
Division, the present petition must still fail because the petitioner failed to establish
grave abuse of discretion, as the ponencia correctly held. Again, what we mentioned in
Cagas v. Commission on Elections 4 is worth emphasizing:

In a situation . . . where the Commission in division committed grave abuse of

discretion or acted without or in excess of jurisdiction in issuing interlocutory
orders relative to an action pending before it and the controversy did not fall
under any of the instances mentioned in Section 2, Rule 3 of the COMELEC
Rules of Procedure, 5 the remedy of the aggrieved party is not to refer the
 controversy to the Commission en banc as this is not permissible under its
present rules but to elevate it to this Court via a petition for certiorari under
Rule 65 of the Rules of Court.

Thus, in Sahali v. COMELEC, 6 the Court already clarified that this Court may take
cognizance of a certiorari action directed against an interlocutory order issued by a
division of the COMELEC when the following circumstances are present: first, the order
was issued without jurisdiction or in excess of jurisdiction or with grave abuse of
discretion tantamount to lack or excess of jurisdiction; and second, under the
COMELEC Rules of Procedure, the subject of the controversy is a matter which (1) the
COMELEC en banc may not sit and consider; (2) a division is not authorized to act; or
(3) the members of the division unanimously vote to refer to the COMELEC en banc.

In short, the absence of an available remedy with the Comelec en banc must
indispensably be coupled with a strong case for grave abuse of discretion in order to
warrant the issuance of the writ of certiorari.

While I ultimately agree with the ponencia's conclusion, I submit that the ponencia's
reasoning on the propriety of a certiorari petition may result in confusion on what is
otherwise a clear subject in jurisprudence. If the Court intends to require a party to
secure a certification and, eventually, a decision from the Comelec en banc on a
challenge to an interlocutory order of a Comelec division (as a requisite for filing a
certiorari petition with the Court), then the Court's action must have some clear basis
under the Comelec rules. EHDCAI

||| (Villarosa v. Festin, G.R. No. 212953 (Resolution), [August 5, 2014])

 THIRD DIVISION

[G.R. No. 203655. August 13, 2014.]

SM LAND, INC., petitioner, vs. BASES CONVERSION AND

DEVELOPMENT AUTHORITY and ARNEL PACIANO D.
CASANOVA, ESQ., in his official capacity as President and CEO of
BCDA, respondents.

DECISION

VELASCO, JR., J : p

The Case

Before Us is a Petition for Certiorari, Prohibition and Mandamus under Rule 65 of the
Rules of Court, with prayer for injunctive relief, seeking to nullify and set aside the Bases
Conversion and Development Authority (BCDA) Supplemental Notice No. 5 as well as
all other acts pursued in furtherance thereof, and to order respondents to immediately
conduct and complete the Competitive Selection Process on petitioner's duly accepted
unsolicited proposal.

The Facts

As culled from the records, the facts are simple and undisputed.

Pursuant to Republic Act No. (RA) 7227 or the "Bases Conversion and Development Act
of 1992," the BCDA opened for disposition and development its Bonifacio South
Property, a 33.1-hectare expanse located at Taguig City that was once used as the
command center for the country's military forces. Jumping on the opportunity, petitioner
SM Land, Inc. (SMLI), on December 14, 2009, submitted to the BCDA an unsolicited
proposal for the development of the lot through a public-private joint venture agreement.
The proposal guaranteed the BCDA secured payments amounting to PhP15,985/sq.m. or
a total of PhP8.1 billion.

Barely three months later, the initial proposal was followed by a second one with
guaranteed secured payments of PhP31,139/sq.m., totaling PhP20 billion. On May 4,
2010, however, SMLI submitted its third unsolicited proposal with guaranteed secured
payments amounting to PhP32,501/sq.m. for a total of PhP22.6 billion. cASTED
Thereafter, the BCDA created a Joint Venture Selection Committee (JV-SC) following
the procedures prescribed under Annex "C" of the Detailed Guidelines for Competitive
Challenge Procedure for Public-Private Joint Ventures (NEDA JV Guidelines)
promulgated by the National Economic Development Authority (NEDA). The said
committee recommended the acceptance of the unsolicited proposal, which
recommendation was favorably acted upon by the BCDA.

Through a letter dated May 12, 2010, the BCDA communicated to petitioner its
acceptance of the unsolicited proposal. Despite its acceptance, however, the BCDA
clarified that its act should not be construed to bind the agency to enter into a joint
venture agreement with the petitioner but only constitutes an authorization granted to the
JV-SC to conduct detailed negotiations with petitioner SMLI and iron out the terms and
conditions of the agreement.

Pursuant to this authorization, the JV-SC and SMLI embarked on a series of detailed
negotiations, and on July 23, 2010, SMLI submitted its final revised proposal with
guaranteed secured payments amounting to a total of PhP25.9 billion. Afterwards, upon
arriving at mutually acceptable terms and conditions, a Certification of Successful
Negotiations (Certification) was issued by the BCDA and signed by both parties on
August 6, 2010. Through the said Certification, the BCDA undertook to "subject
SMLI's Original Proposal to Competitive Challenge pursuant to Annex C" and
committed itself to "commence the activities for the solicitation for comparative
proposals." 1

In an attempt to comply with its obligations, the BCDA prepared for the conduct of a
Competitive Challenge to determine whether or not there are other Private Sector Entities
(PSEs) that can match the proposal of SMLI, and concurrently ensure that the joint
venture contract will be awarded to the party that can offer the most advantageous terms
in favor of the government. In furtherance thereof, the agency issued Terms of Reference
(TOR), 2 which mapped out the procedure to be followed in connection with the
Competitive Challenge. Consequently, SMLI was required, as it did, to post a proposal
security in the amount of PhP187 million, following the prescribed procedure outlined in
the TOR and the NEDA JV Guidelines.

Afterwards, the BCDA set the Pre-eligibility Conference on September 3, 2010.

Invitations to apply for eligibility and to submit comparative proposals were then duly
published on August 12, 16 and 20, 2010. Hence, the pre-eligibility conference was
conducted as scheduled. The companies that participated in the conference included
SMLI, as the Original Proponent, and three (3) PSEs, namely Ayala Land, Inc., Rockwell
Land Corp., and Filinvest Land, Inc.

On Ayala Land, Inc.'s request, the deadline for submission of Eligibility Documents was
scheduled on October 20, 2010 through Supplemental Notice No. 1. However, the
deadline was again moved to November 19, 2010 to allow the BCDA, in conjunction
with other national agencies, to resolve issues concerning the relocation and replication
of facilities located in the subject property. For this purpose, the BCDA issued
Supplemental Notice No. 2.

Following a conference, the BCDA, on November 18, 2010, issued Supplemental Notice
No. 3, again rescheduling the submission deadline this time to an unspecified future date
"pending final results of the policy review by the Office of the President on the lease
versus joint venture/sale mode and other issues." 3 Henceforth, the BCDA repeatedly
postponed the deadline of eligibility requirements until two (2) years have already
elapsed from the signing of the Certification without the Competitive Challenge being
completed.

Then, instead of proceeding with the Competitive Challenge, the BCDA addressed a
letter 4 to Jose T. Gabionza, Vice President of SMLI, stating that it will welcome any
"voluntary and unconditional proposal" to improve the original offer, with the assurance
that the BCDA will nonetheless respect any right which may have accrued in favor of
SMLI. SMLI, through a letter dated December 22, 2011, replied by increasing the total
secured payments to PhP22.436 billion in over fifteen (15) years with an upfront payment
of PhP3 billion. SMLI likewise proposed to increase the net present value of the property
to PhP38,500.00/sq.m. With this accelerated terms of payment, the total inflow to be
received by the BCDA from the project after five (5) years would amount to PhP9.289
billion. In the same letter, SMLI clarified that its improved offer is tendered on reliance
of the BCDA's previous commitment to respect SMLI's status as the Original Proponent.
aTDcAH

Without responding to SMLI's new proposal, the BCDA sent a memorandum to the
Office of the President (OP) dated February 13, 2012, categorically recommending the
termination of the Competitive Challenge. The memorandum, in part, reads:

In view of the foregoing, may we respectfully recommend the President's

approval for BCDA to terminate the proceedings for the privatization and
development of the BNS/PMC/ASCOM/SSU Properties in Bonifacio South
through Competitive Challenge and proceed with the bidding of the property.
5

Alarmed by this development, SMLI, in a letter dated August 10, 2012, urged the BCDA
to proceed with the Competitive Challenge as agreed upon. However, the BCDA, via the
assailed Supplemental Notice No. 5, terminated the Competitive Challenge altogether.
Said Supplemental Notice pertinently reads:

This Supplemental Notice No. 05 is issued to inform the [PSEs] that the
Competitive Challenge for the Selection of BCDA's Private Sector Partner for
the Privatization and Development of the approximately 33.1-hectare
 BNS/PMC/ASCOM/SSU Properties in Bonifacio South is hereby terminated.
BCDA shall not dispose the property through Competitive Challenge. 6

To support its position, the BCDA invoked Article VIII of the TOR on the subject
"Qualifications and Waivers," to wit:

The BCDA reserves the right to call off [the] disposition prior to acceptance of
the proposal(s) and call for a new disposition process under amended rules and
without any liability whatsoever to any or all the PSEs, except the obligation to
return the Proposal Security.

Thereafter, the BCDA informed SMLI of the OP's decision to subject the development of
the subject property to public bidding. When asked by SMLI, the JV-SC manifested its
conformity with the actions thus taken by the BCDA and OP. DTcACa

The JV-SC's declaration proved to be the last straw that fractured SMLI's patience as it
lost no time in interposing the instant recourse.

In the meantime, the BCDA issued in favor of SMLI Philippine National Bank Check
No. 11-634-610001-0 in the amount of PhP188,508,466.67 dated September 28, 2012.
The check was sent through registered mail with no explanation whatsoever
accompanying the same, although the BCDA admitted that its value corresponds to the
proposal security posted by SMLI, plus interest in an unspecified rate. SMLI attempted to
return the check but to no avail.

The BCDA likewise caused the publication of an "Invitation to Bid" for the development
of the subject property in the December 21, 2012 issue of the Philippine Star. 7 This
impelled SMLI to file an Urgent Manifestation with Reiterative Motion to Resolve
SMLI's Application for Temporary Restraining Order (TRO) and Preliminary Injunction
on the same day. By Resolution 8 of January 9, 2013, the Court issued the TRO prayed
for by petitioner and enjoined respondent BCDA from proceeding with the new selection
process for the development of the property.

The Issue

Without a doubt, the issue in this case boils down to whether or not the BCDA gravely
abused its discretion in issuing Supplemental Notice No. 5, in unilaterally aborting the
Competitive Challenge, and in subjecting the development of the project to public
bidding.

For its part, SMLI alleged in its petition that the Certification issued by the BCDA and
signed by the parties constituted a contract and that under the said contract, BCDA
cannot renege on its obligation to conduct and complete the Competitive Challenge. The
BCDA, on the other hand, relies chiefly on the reservation clause in the TOR, which
allegedly authorized the agency to unilaterally cancel the Competitive Challenge.
Respondents add that the terms and conditions agreed upon are disadvantageous to the
government, and that it cannot legally be barred by estoppel in correcting a mistake
committed by its agents.

The Court's Ruling

The petition is impressed with merit. SMLI has the right to a completed competitive
challenge pursuant to the NEDA JV Guidelines and the Certification issued by the
BCDA. The reservation clause adverted to by the respondent cannot, in any way,
prejudice said right.
ISDCaT

The Procurement Process under the NEDA JV Guidelines

In resolving the case, discussing the procedure outlined under the NEDA JV Guidelines
and a brief backgrounder thereof is apropos.

To streamline the procurement process and expedite the acquisition of goods and
services, Executive Order No. (EO) 423 was issued on April 30, 2005, which prescribed
the rules and procedures on the review and approval of government contracts. The EO, in
part, provides:

Section 8. Joint Venture Agreements. — The NEDA, in consultation with the

GPPB, shall issue guidelines regarding joint venture agreements with private
entities with the objective of promoting transparency, competitiveness, and
accountability in government transactions, and, where applicable, complying
with the requirements of an open and competitive public bidding.

Taking its cue from the above-quoted provision, the NEDA promulgated the NEDA JV
Guidelines, which detailed two (2) modes of selecting a private sector JV partner: by
competitive selection or through negotiated agreements.

Competitive selection involves a selection process based on transparent criteria, which

should not constrain or limit competition, and is open to participation by any interested
and qualified private entity. 9 Selection by negotiated agreements 10 or negotiated
projects, 11 on the other hand, comes about as an end result of an unsolicited proposal 12
from a private sector proponent, or if the government has failed to identify an eligible
private sector partner for a desired activity after subjecting the same to a competitive
selection.

Relevant to the case at bar is the selection modality by negotiated agreement arising from
the submission and acceptance of an unsolicited proposal, known as the Swiss Challenge
method, 13 in esse a hybrid mechanism between the direct negotiation approach and the
competitive bidding route. 14 With the availability of the Swiss Challenge method for
utilization by those in the private sector, PSEs have studied, formulated, and submitted
numerous suo moto or unsolicited proposals with the ultimate goal of assisting the public
sector in elevating the country's place in the global economy, as in the case herein. AaCEDS

The development and adoption by several countries of the Swiss Challenge scheme 15 is
attributed to the recognition that the private sector can be an important source of technical
and managerial expertise, as well as financing, as evidenced by private companies'
practice of directly approaching governments with new and innovative project ideas
through unsolicited proposals. 16 Some states, however, frown on the practice since
transparency is allegedly compromised when the government directly negotiates with a
proponent. In this method, the Original Proponent, who first submitted and secured
acceptance of the unsolicited proposal, is given the right to match the successful bid
received in the competitive bid process for the said project. 17

Item III, Annex "C" of the NEDA JV Guidelines, where the Swiss Challenge format is
tucked in, maps out a three-stage framework, to which Negotiated JV Agreements are to
be mandatorily subjected, as summarized below:

Stage One
Submission and the Acceptance
or Rejection of the Unsolicited Proposal

Stage One 18 of the process involves the submission, evaluation, and the acceptance of
unsolicited proposals from private entities. The steps involved are:

1. A PSE submits an unsolicited proposal to the government entity (GE)

or the GE seeks out a JV partner after a failed competition (open
bidding) for a JV activity or project.

2. The GE, through its JV-SC, undertakes the initial evaluation of the
proposal. TSHEIc

3. The head of the GE shall then either issue an acceptance or non-

acceptance notice of the proposal.

a. An acceptance shall not bind the GE to enter into the JV activity,

but shall mean that authorization is given to proceed with
detailed negotiations on the terms and conditions of the JV
activity.

b. In case of non-acceptance, the private sector entity shall be

informed of the reasons/grounds for such action.
 Stage Two
Detailed Negotiations

Stage Two 19 entails negotiation on the terms and conditions of the JV activity. Below is
a summary of the parameters adhered to in detailed negotiations, and the preparation of
the proposal documents in case of successful negotiations:

1. The parties shall negotiate on, among other things, the scope as well as
all legal, technical, and financial aspects of the JV activity.

2. The JV-SC shall determine the eligibility of the PSE to enter into the
JV activity in accordance with pre-set rules.

3. Negotiations shall comply with the process, requirements and

conditions as stipulated under Sections 6 (General Guidelines) and
7 (Process for Entering into JV Agreements) of the JV Guidelines.

a. If successful, the GE head and the representative of the PSE

shall issue a signed certification of successful negotiation to
the effect that:

a) an agreement has been reached;

b) the PSE is eligible to enter into the proposed JV activity; and

c) the GE shall commence the activities for the solicitation for

comparative proposals. ESCcaT

b. If an acceptable agreement is not reached, the GE may:

a) reject the proposal and thereafter accept a new one from

private sector participants; or

b) pursue the proposed activity through alternative routes other

than a joint venture.

4. After an agreement is reached, the contract documents, including the

selection documents for the competitive challenge, are prepared.

Stage Three
Competitive Challenge
In Stage Three, 20 upon the successful completion of the detailed negotiation phase, the
JV activity shall be subjected to a competitive challenge, 21 which includes the
observance of the following procedure:

1. Preparation and approval of all tender documents including the draft

contract before the invitation for comparative proposals is
published.

2. Publication of the invitation for comparative proposals followed by the

posting by the PSE of the proposal security.

3. Determination of the eligibility of comparative proponents/PSEs,

issuance of supplemental competitive selection bulletins and pre-
selection conferences, submission, opening and evaluation of
comparative proposals.

4. In the evaluation of the comparative proposals as a prelude to

determine the best offer, the original proposal of the original
proponent shall be considered. caDTSE

a. If the GE determines that an offer made by a comparative

private sector participant is more advantageous to the
government than the original proposal, the original
proponent shall be given the right to match such superior or
more advantageous offer.

b. Should no matching offer be received, the JV activity shall be

awarded to the comparative private sector participant
submitting the most advantageous proposal.

c. If a matching offer is received, or if there is no comparative

proposal, the JV activity shall be awarded to the original
proponent.

5. After the completion of the competitive challenge, the JV-SC shall

submit the recommendation of award to the head of the GE. 22

6. Embarking on activities leading to the execution of the Final

Agreement. 23

Deviation from the procedure outlined cannot be countenanced. Well-established is the

rule that administrative issuances — such as the NEDA JV Guidelines, duly promulgated
pursuant to the rule-making power granted by statute — have the force and effect of law.
24 Being an issuance in compliance with an executive edict, the NEDA JV Guidelines,
therefore, has the same binding effect as if it were issued by the President himself. 25 As
such, no agency or instrumentality covered by the JV Guidelines 26 can validly stray from
the mandatory procedures set forth therein, even if the other party acquiesced therewith 27
or not.

SMLI's rights as an Original Proponent and BCDA's correlative

duty under the NEDA JV Guidelines and the parties' agreement

It is well to point out that after BCDA accepted the unsolicited proposal of SMLI and
after both parties herein successfully concluded the detailed negotiations on the terms and
conditions of the project, SMLI acquired the status of an Original Proponent. An Original
Proponent, per the TOR, pertains to the party whose unsolicited proposal for the
development and privatization of the subject property though n JV with BCDA has been
accepted by the latter, subject to certain conditions, and is now being subjected to a
competitive challenge. 28

In this regard, SMLI insists that as an Original Proponent, it obtained the right to a
completed competitive challenge. On the other hand, the BCDA argues that it can, at any
time, withdraw from the disposition process as it is not bound to enter into the proposed
JV activity with SMLI.

Petitioner's argument holds water. SCIAaT

A scrutiny of the NEDA JV Guidelines reveals that certain rights are conferred to an
Original Proponent. As correctly pointed out by SMLI, these rights include:

1. The right to the conduct and completion of a competitive challenge;

2. The right to match the superior or more advantageous offer, if any; cIEHAC

3. The right to be awarded the JV activity in the event that a matching

offer is submitted within the prescribed period; and

4. The right to be immediately awarded the JV activity should there be no

comparative proposals. 29 (emphasis added)

Material to the present case is the right to the conduct and completion of a Competitive
Challenge. Based on the NEDA JV Guidelines, it is necessary that Stages One and Two
of the Swiss Challenge shall have been fruitful for this right to arise.

To recall, Stages One and Two of the framework deal with the submission and evaluation
of the unsolicited proposal and the conduct of the detailed negotiations. Should the
parties productively conclude the in-depth negotiations, the guidelines require the
preparation of the contract and selection documents for the competitive challenge. 30
Following this, Stage Three of the same rules provides that the GE shall subject the terms
agreed upon to a Competitive Challenge. Thus:

Stage Three — Once the negotiations have been successfully completed, the JV
activity shall be subjected to a competitive challenge, as follows:

1. The [GE] shall prepare the tender documents pursuant to Section II

(Selection/Tender Documents) of Annex A hereof. The eligibility criteria used
in determining the eligibility of the [PSE] shall be the same as those stated in
the tender documents. . . . The Head of the [GE] shall approve all tender
documents including the draft contract before the publication of the invitation
for comparative proposals. HCEcaT

2. Within seven (7) calendar days from the issuance of the Certification of a
successful negotiation referred to in Stage Two above, the JV-SC shall publish
the invitation for comparative proposals in accordance with Section III.2.
(Publication of Invitation to Apply for Eligibility and to Submit Proposal) under
Annex A hereof.

3. The [PSE] shall post the proposal security at the date of the first day of the
publication of the invitation for comparative proposals in the amount and form
stated in the tender documents.

4. The procedure for the determination of eligibility of comparative

proponents/private sector participants, issuance of supplemental competitive
selection bulletins and pre-selection conferences, submission and receipt of
proposals, opening and evaluation of proposals shall follow the procedure
stipulated under Annex A hereof. In the evaluation of proposals, the best offer
shall be determined to include the original proposal of the [PSE]. If the [GE]
determines that an offer made by a comparative private sector participant other
than the original proponent is superior or more advantageous to the government
than the original proposal, the [PSE] who submitted the original proposal shall
be given the right to match such superior or more advantageous offer . . . .
Should no matching offer be received within the stated period, the JV activity
shall be awarded to the comparative private sector participant submitting the
most advantageous proposal. If a matching offer is received within the
prescribed period, the JV activity shall be awarded to the original proponent. If
no comparative proposal is received by the [GE], the JV activity shall be
immediately awarded to the original private sector proponent.

5. Within seven (7) calendar days from the date of completion of the
Competitive Challenge, the JV-SC shall submit the recommendation of award
to the Head of the [GE]. Succeeding activities shall be in accordance with
Sections VIII (Award and Approval of Contract) and X (Final Approval) of
Annex A hereof. 31 (emphasis added) AIaSTE
Anent the above-quoted directives, emphasis must be given to the repeated use of the
word "shall." It is elementary that the word "shall" underscores the mandatory character
of the rule. It is a word of command, one which always has or must be given a
compulsory meaning, and is generally imperative or mandatory. 32 Considering the
compulsory tenor of the order, the rule could not be any clearer — that once the
negotiations at Stage Two shall have been successfully completed, it becomes
mandatory for the GE to subject the JV activity to a competitive challenge. By the
Guidelines' explicit order, proceeding to Stage Three of the process is compulsory,
conditioned only on the successful conclusion of Stage Two. The GE is not given any
discretion to decide whether it will proceed with the competitive challenge or not.

Furthermore, there is no question in the case at hand that the unsolicited proposal for the
development of the subject property passed through scrutiny under the first two stages,
resulting in the issuance and signing of the Certification. As a matter of fact, this is
clearly evinced in the whereas clauses of the Certification, to wit:

WHEREAS, on 04 May 2010, BCDA received from [SMLI] an unsolicited

proposal for the development of [the subject property]. . . .

WHEREAS, after evaluation of the unsolicited proposal submitted by SMLI

in accordance with the provisions of Annex "C" of the JV Guidelines, the [JV-
SC] created by BCDA . . . recommended to the BCDA Board, and the BCDA
Board approved, per Board Resolution No. 2010-05-100, the acceptance of
the unsolicited proposal, subject to the condition that such acceptance shall not
bind BCDA to enter into a JV activity, but shall mean that authorization is
given to proceed with detailed negotiations on the terms and conditions of the
JV activity;

WHEREAS, pursuant to the authorization granted by the Board and issued

pursuant to Annex "C", Part III, Stage One of the JV Guidelines, BCDA went
into detailed negotiations with SMLI. The JV-SC simultaneously ascertained
the eligibility of SMLI in accordance with Annex "C", Part III, Stage 2 (2) of
the JV Guidelines;

WHEREAS, this Certification is issued pursuant to Annex "C" Part III, Stage 2
(2) of the JV Guidelines;

NOW, THEREFORE, for and in consideration of the foregoing, BCDA and

SMLI, after successful negotiations pursuant to Stage II of Annex C . . .
reached an agreement on the purpose, terms and conditions of the JV
development of the subject property, which shall become the terms for the
Competitive Challenge pursuant to Annex C of the JV Guidelines . . . . 33
(emphasis added)
Moreover, the Certification further discloses that the BCDA has the obligation to subject
SMLI's unsolicited proposal to a Competitive Challenge, to which SMLI assented. As
provided:

BCDA and SMLI have agreed to subject SMLI's Original Proposal to

Competitive Challenge pursuant to Annex C — Detailed Guidelines for
Competitive Challenge Procedure for Public-Private Joint Ventures of the
NEDA JV Guidelines, which competitive challenge process shall be
immediately implemented following the Terms of Reference (TOR) Volumes 1
and 2. BCDA shall, thus, commence the activities for the solicitation for
comparative proposals with the publication of the Invitation to Apply for
Eligibility and to Submit Comparative Proposals (IAESCP) thrice for two (2)
consecutive weeks in three (3) major newspapers starting on 10 August 2010,
on which date SMLI shall post the required Proposal Security as stated above.
Pursuant to Annex C of the NEDA JV Guidelines, if, after solicitation of
comparative proposals, BCDA determines that an offer by a comparative PSE is
found to be superior to SMLI's Original Proposal, SMLI shall be given the right
to match such superior offer within the period prescribed in the attached TOR
Volumes 1 and 2. If SMLI is able to match such superior offer, SMLI shall be
issued the Notice of Award, subject to Item No. 19 above. In the event,
however, that SMLI is unable to match the superior offer, the comparative PSE
which submitted such superior offer shall be awarded the contract, subject to
Item No. 19 above. 34 (emphasis added)

By their mutual consent and in signing the Certification, both parties, in effect,
entered into a binding agreement to subject the unsolicited proposal to the
Competitive Challenge. Evidently, the certification partakes of a contract wherein
BCDA committed itself to proceed with the Third Stage of the process and
simultaneously grants SMLI the right to expect that the BCDA will fulfill its obligations
under the same. The preconditions to the conduct of the Competitive Challenge having
been met, what is left, therefore, is to subject the terms agreed upon to a Competitive
Challenge pursuant to Stage Three, Annex "C" of the NEDA JV Guidelines.

The Reservation Clause only covers the Third Stage and cannot
prejudice SMLI's rights stemming from the first two stages

In an attempt to advance its claim, BCDA invokes the reservation clause in Article VIII
of the TOR on "Qualifications and Waivers." To reiterate, said provision reads: EScAID

3. BCDA further reserves the right to call off this disposition prior to
acceptance of the proposal(s) and call for a new disposition process under
amended rules, and without any liability whatsoever to any or all of the PSEs,
except the obligation to return the Proposal Security. 35 (emphasis ours)
The BCDA insists that the "disposition process" to which the reservation clause refers is
the entire Swiss Challenge, and not merely Stage Three thereof regarding the
Competitive Challenge. This interpretation does not come as a surprise considering the
term's technical meaning, that is, alienation of property; 36 the transfer of the property
and possession of lands, tenements, or other things from one person to another; or the
voluntary resignation of title to real estate by one person to another and accepted by the
latter, in the forms prescribed by law. 37 On the basis of said definition, indeed, the
reservation clause seemingly refers to the Swiss Challenge itself since in the case at bar,
it is the Swiss Challenge, not the competitive challenge, that is the avenue for the
disposition.

To anchor the real import of the clause on the basis only of a single word may, however,
result in a deviation from its true meaning by rendering all the other terms unnecessary or
insignificant. Such an interpretation would run afoul Article 1373 of the Civil
Code,which states that "[i]f some stipulation of any contract should admit of several
meanings, it shall be understood as bearing that import which is most adequate to render
it effectual." It is a cardinal rule in statutory construction that no word, clause, sentence,
provision or part of a statute shall be considered surplusage or superfluous, meaningless,
void and insignificant. 38 For this purpose, an interpretation which renders every word
operative is preferred over that which makes some words idle and nugatory.

We find that the reservation clause cannot justify the cancellation of the entire
procurement process. Respondent cannot merely harp on the lone provision adverted to
without first explaining the context surrounding the reservation clause. The said provision
cannot be interpreted in a vacuum and should instead be read in congruence with the
other provisions in the TOR for Us to fully appreciate its import.

At this juncture, it is worthy to point out that the TOR containing the reservation clause
details the requirements for eligibility to qualify as a PSE that may submit its proposal for
the JV, 39 as well as the procedure to be followed in the assessment of the eligibility
requirements submitted and in the conduct of the Competitive Challenge. It basically
governs only part and parcel of Stage Three of the Swiss Challenge Process, that is,
the requirements for and the determination of an interested PSE's eligibility to
participate in the Competitive Challenge. This conclusion is deduced from the very
provisions of the TOR, viz.:

These [TOR] describe the procedures that shall be followed in connection with
the disposition of the approximately Three Hundred Thirty-one Thousand Three
Hundred Twenty-seven square meters (331,327 sq.m.) or 3.1-hectare Bonifacio
Naval Station (BNS)/Philippine Marine Corps (PMC)/Army Support Command
(ASCOM)/Service Support Unit (SSU) Properties in Bonifacio South (the
"Property"), located along Lawton Avenue, Fort Bonifacio, Taguig City, Metro
Manila, Philippines.ECAaTS
These TOR are issued in two (2) volumes: Volume 1 — Eligibility Documents;
and Volume 2 — Tender Documents. This first volume details the
requirements for eligibility to qualify as a Private Sector Entity (PSE) that
may submit Technical and Financial Proposals for the Joint Venture (JV)
Privatization and Development of [the] subject Property, and the procedures
involved in the entire Competitive Challenge procedure. [PSEs] which shall
be declared eligible shall be issued the second volume of the TOR which details
the requirements and procedures for the submission of Technical and Financial
Proposals, with the end-view of determining a Winning PSE for subject JV
development.

xxx xxx xxx

I. GENERAL INFORMATION

xxx xxx xxx

2. Publication of Invitation for Comparative Proposals. BCDA shall

publish . . . the "Invitation to Apply for Eligibility and to Submit
a Comparative Proposal" (IAESCP). This shall serve to inform
and to invite the prospective PSEs to the Competitive Challenge
procedure at hand. . . .acIASE

3. Joint Venture Agreement. . . . the ultimate objective of BCDA in

qualifying prospective PSEs to be eligible to submit Technical
and Financial Proposals is to select a partner in the
unincorporated/contractual [JV] for the privatization and
development of the subject Property. . . .

xxx xxx xxx

4. Amendment of these TOR. . . . Should any of the information and/or

procedures contained in these TOR be amended or replaced, the
JV-SC shall inform and send Supplemental Notices to all PSEs.
To ensure all PSEs are informed of any amendments, all PSEs
are requested to inform BCDA of their contact [details]. In
addition, receipt of all Supplemental Notices shall be duly
acknowledged by each PSE prior to the submission of eligibility
documents and/or proposals and shall be so indicated therein.

5. Pre-Eligibility Conference. Interested parties are invited to attend a

Pre-Eligibility Conference for prospective PSEs . . . .

6. One-on-One Meetings. Prospective PSEs may request for one-on-

one meetings with the JV-SC or its duly authorized
representatives. . . .
 xxx xxx xxx

9. Due Diligence. . . .

The PSE shall investigate . . . [and] carefully examine [the] conditions

of and at the Property and its surrounding vicinities affecting the
actual execution and such other information as to allow the
PSE to make a competitive estimate. The PSE, by the act of
submitting its proposal, acknowledges that it has inspected
the Property and accepted all the terms and conditions for
this competitive challenge as set in TOR Volumes 1 and 2.

xxx xxx xxx

V. APPLICATION FOR ELIGIBILITY

1. Eligibility Requirements. Only eligible PSEs shall be allowed to

submit comparative Technical and Financial Proposals, or
collectively, the Tender Documents . . . . Hence, interested
PSEs are invited to apply for eligibility and to participate in the
Competitive Challenge procedure. Aside from being required to
purchase the [TOR] — Volume 1, for a non-refundable fee . . ., a
PSE shall be considered eligible if it satisfies all of the following
requirements: IACDaS

1.1. Legal Requirements. The PSE must be a duly-registered

and existing corporation authorized by Philippine Laws to
own, hold or develop lands in the Philippines. . . .

1.2. Technical Requirements.

1.2.1. Firm Experience. The PSE . . . shall have

completed within a period of ten (10) years from
the date of submission and receipt of Proposals, a
similar or related development project . . . .

1.2.2. Key Personnel. . . .

1.3. Financial Capability. The PSE . . . must have adequate

capability to sustain the financing requirements for the
proposed development of the Property. This shall be
measured in terms of:

1.3.1. Net Worth. . . .

1.3.2. Good financial standing. . . .

 1.3.3. No Arrears. . . .

1.3.4. Timely and Complete Payment of Taxes. . . .

1.3.5. Financial Capacity to Undertake the Project. ITDSAE

xxx xxx xxx

2. Required Eligibility Documents. The PSEs . . . that wish to be

considered for eligibility are required to submit . . . the
following documents: HETDAC

xxx xxx xxx

VI. EVALUATION OF ELIGIBILITY

1. Opening of Eligibility Documents. . . .

2. Evaluation Process. Eligibility Documents submitted by the PSE

shall be evaluated on a pass or fail basis to determine if the PSE .
. . complies with or satisfies all of the requirements specified in
Article V hereof. . . .

3. Motion for Reconsideration/Appeal on Eligibility. A prospective

PSE determined as "Ineligible" has seven (7) calendar days upon
written notice within which to file a motion for reconsideration
to the JV-SC. . . .

4. No Eligible [PSEs]. In the event that no PSE be found eligible or no

PSE submitted itself to eligibility check for the Competitive
Challenge procedure, BCDA shall proceed to the issuance of
Notice of Award to SMLI, as the original proponent for the
subject JV project.

xxx xxx xxx

VII. CHANGE IN MEMBERSHIP OF AN ELIGIBLE PSE.

xxx xxx xxx

VIII. QUALIFICATIONS AND WAIVERS

1. BCDA reserves the right to reject any or all Eligibility Documents, to

waive any defect or informality thereon or minor deviations,
which do not affect the substance and validity of the proposal.
 2. BCDA reserves the right to review other relevant information
affecting the PSE or its Eligibility Documents before its
declaration as eligible to participate further in the selection
process, and be allowed to submit a Final Proposal. Should such
review uncover any misrepresentations made in the eligibility
documents, or any change in the situation of the PSE, which
affects its eligibility, BCDA may disqualify the PSE from
obtaining any award/contract.

3. BCDA further reserves the right to call of this disposition prior to

acceptance of the proposal(s) and call for a new disposition
process under amended rules, and without any liability
whatsoever to any or all the PSEs, except the obligation to return
the Proposal Security . . . . 40 (emphasis ours; citation omitted)

A cursory reading of the TOR, as couched, readily shows that it focuses only on the
eligibility requirements for PSEs who wish to challenge SMLI's proposal as well as the
procedure to be followed by the BCDA JV-SC in the evaluation of the PSEs' submittals.
We thus find merit in SMLI's thrust that since the TOR governs the eligibility
requirements for PSE's, the "disposition process" referred to in the reservation clause
could only refer to the eligibility process in Stage Three of the Swiss Challenge and
not the entire Swiss Challenge process itself. We are convinced that the said provision
does not authorize BCDA to abort the entire procurement process and cannot impair any
of SMLI's statutorily and contractually-conferred rights stemming from the first two
stages' conclusion. To rule otherwise would grant the GE unbridled authority to thrust
aside the agreement between the parties after successful detailed negotiations. It would
disregard the fact that through the said covenant, the GE bound itself to conduct and
complete the Competitive Challenge pertaining to SMLI's proposal. AcEIHC

Provisions of the TOR cannot prevail over the NEDA JV Guidelines

In the same vein, We cannot also agree with respondents' contention that the term
"disposition" in the assailed reservation clause refers to the entire Swiss Challenge itself
and authorizes the BCDA to abandon the negotiations even at Stage Three of the process
for this would result in an interpretation that is antagonistic with the NEDA JV
Guidelines.

A review of the outlined three-stage framework reveals that there are only two occasions
where pre-termination of the Swiss Challenge process is allowed: at Stage One, prior to
acceptance of the unsolicited proposal; and at Stage Two, should the detailed
negotiations prove unsuccessful. In the Third Stage, the BCDA can no longer withdraw
with impunity from conducting the Competitive Challenge as it became ministerial for
the agency to commence and complete the same. Thus, acceding to the interpretation
of the TOR offered by BCDA will, in effect, result not only in the alteration of the
agreement between the parties but also of the NEDA JV Guidelines itself, both of
which has the force and effect of law.

The interpretation offered by BCDA is, therefore, unacceptable. Between procedural

guidelines promulgated by an agency pursuant to its rule-making power and a condition
unilaterally designed and imposed for the implementation of the same, the former must
prevail. BCDA does not wield any rule-making power such that it can validly alter or
abandon a clear and definite provision in the NEDA JV Guidelines under the guise of a
condition under the TOR. As We have time and again harped, the ones duty-bound to
ensure observance with laws and rules should not be the ones to depart therefrom. 41 A
contrary rule would open the floodgates to abuses and anomalies more detrimental to
public interest. 42 For how can others be expected to respect the rule of law if the very
persons or entities tasked to administer laws and their implementing rules and regulations
are the first to violate them, blatantly or surreptitiously?
STaCcA

BCDA gravely abused its discretion when it issued Supplemental

Notice No. 5 in breach of its contractual obligation to SMLI

"Grave abuse of discretion" implies such capricious and whimsical exercise of judgment
as is equivalent to lack of jurisdiction. It must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all
in contemplation of law. 43 While it is the general policy of the Court to sustain the
decisions of administrative authorities, not only on the basis of the doctrine of separation
of powers but also for their presumed expertise in the laws they are entrusted to enforce,
when said decisions and orders are tainted with unfairness or arbitrariness that would
amount to grave abuse of discretion, the Courts are duty-bound to entertain petitions
questioning the former's rulings or actions. 44

In the present case, the Court finds that BCDA gravely abused its discretion for having
acted arbitrarily and contrary to its contractual commitment to SMLI, to the damage and
prejudice of the latter. It veritably desecrated the rules the Government itself set in the
award of public contracts.

To review, We have demonstrated that the BCDA is duty-bound to proceed with and
complete the competitive challenge if the detailed negotiations proved successful.
Afterwards, it becomes mandatory for the competitive challenge to proceed. Whatever
rights and obligations that may have accrued to the parties by that time can no longer be
altered by a new disposition process. At most, the reservation clause in the TOR can only
serve to alter the rules of the eligibility process under the Competitive Challenge. ETIDaH

In the case at bar, however, BCDA, in its mistaken reliance on the reservation clause,
aborted not just the eligibility process of the Competitive Challenge but the entire Swiss
Challenge. Even though the language of Supplemental Notice No. 5 at first blush appears
to limit its application to the Third Stage of the framework, BCDA's actuations say
otherwise. Worthy of reiteration at this point is the fact that after BCDA issued the
assailed notice, the agency also returned through registered mail the security posted by
SMLI. Coupled with the fact that BCDA subjected the property instead to straight
bidding, it becomes obvious that BCDA no longer intends to comply with its obligations
to SMLI and that it abandoned the Swiss Challenge process altogether, in contravention
of its statutory and contractual obligations.

Moreover, the asseveration of the BCDA in its last ditch effort to salvage its position —
that the withdrawal is justified since it allegedly found that the revised SMLI proposal
shall not yield the best value for the government 45 — deserves scant consideration. On
the contrary, the BCDA's statements have been inconsistent when it comes to identifying
the procurement process that would best serve the interest of the state.

Noticeably, in its November 8, 2010 Memorandum, the BCDA posited that competitive
challenge is more advantageous to the government than straight bidding, to wit:

The price of the Bonifacio South properties has already been set by the winning
price in the bidding for the joint venture development of the JUSMAG property
(P31,111/sq.m.). Thus, BCDA has established the benchmark for the price of
the remaining Bonifacio South properties, of which the JUSMAG property is
the most prime. Logically the minimum bid price under straight bidding for the
BNS/PMC/ASCOM/SSU property, which is a far less inferior property, would
be P31,111/sq.m. However, with SM's submission of a revised unsolicited
proposal at P31,732/sq.m. and later further revised to P32,500/sq.m., BCDA
saw the opportunity to negotiate for better terms and eventually arrived at a
higher price of P36,900/sq.m. In this case, BCDA deemed that going into
Competitive Challenge was more advantageous to the government than
Competitive Selection (straight bidding) because of the opportunity to
increase the price. ACIESH

Furthermore, subjecting the price to subsequent price challenge will possibly

drive up the price even higher than P38,900/sq.m. These opportunities cannot be
taken advantage of under a straight bidding where failure of bidding would
likely ensue if in case BCDA immediately sets the price of the property too
high. The competition in the real estate industry and as experienced by BCDA is
such that the other developers will usually challenge the original proposal to "up
the ante" as they cannot allow the original proponent to get the property easily.
46

Despite this testament, the BCDA, over a year later, made a complete turnaround stating
that straight bidding will be best for the Government. 47 As can be gleaned from the
BCDA's Memorandum to the President dated February 13, 2012, respondents themselves
recommended to the President that the selection proceedings be terminated. To reiterate:
CTDAaE
 In view of the foregoing, may we respectfully recommend the President's
approval for BCDA to terminate the proceedings for the privatization and
development of the BNS/PMC/ASCOM/SSU Properties in Bonifacio South
through Competitive Challenge and proceed with the bidding of the property.
48

The BCDA offered no explanation to reconcile its opposing positions. It also neglected to
inform SMLI of the provisions in its proposal that it deemed disadvantageous to the
government. The sweeping statement of the BCDA that the terms are disadvantageous
cannot be accepted at face value, bearing in mind that a fruitful in-depth negotiation
necessarily implies that BCDA found the terms offered by SMLI acceptable. Consider
also that should the Competitive Challenge prove to be unsuccessful, it has no other
recourse but to award the project to SMLI, the Original Proponent. This caveat forces
BCDA to ensure that the terms agreed upon during the detailed negotiations are
advantageous to it, lest it run the risk of being bound to a project that is not beneficial to
the government in the first place. SHTEaA

Overall, the foregoing goes to show that the BCDA failed to establish a justifiable reason
for its refusal to proceed with the Competitive Challenge and for canceling the entire
Swiss Challenge. Because of BCDA's mistaken reliance on the TOR provision, and by
changing its stand on the conduct of the Competitive Challenge without pointing out with
specificity the so-called unfavorable terms, We are left to believe that the cancellation of
the Swiss Challenge was only due to BCDA's whims and caprices.

Acceptance of Unsolicited Proposal vis-à-vis Estoppel

Lastly, respondents argue that the government cannot be estopped by the mistakes or
errors of its agents, implying that when it issued the Certification, it committed a lapse of
judgment as it later discovered that the terms of the proposal allegedly turned out to be
disadvantageous to the Government. Thus, according to them, it cannot be compelled to
proceed with the Competitive Challenge.

We are very much aware of the time-honored rule that "the government cannot be
estopped by the mistakes or errors of its agents." 49 Suffice it to state, however, that this
precept is not absolute. As jurisprudence teaches, this rule on estoppel cannot be used to
perpetrate an injustice. 50

In the case at bar, it is evident that to allow BCDA to renege on its statutory and
contractual obligations would cause grave prejudice to petitioner, who already invested
time, effort, and resources in the study and formulation of the proposal, in the adjustment
thereof, as well as in the negotiations. To permit BCDA to suddenly cancel the
procurement process and strip SMLI of its earlier-enumerated rights as an Original
Proponent at this point — after the former has already benefited from SMLI's proposal
through the acquisition of information and ideas for the development of the subject
property — would unjustly enrich the agency through the efforts of petitioner. What is
worse, to do so would be contrary to BCDA's representations and assurances that it will
respect SMLI's earlier acquired rights, which statements SMLI reasonably and innocently
believed.

All told, the BCDA's acceptance of the unsolicited proposal and the successful in-depth
negotiation cannot be written off as mere mistake or error that respondents claim to be
reversible and not susceptible to the legal bar of estoppel. The subsequent cancellation of
the Competitive Challenge on grounds that infringe the contractual rights of SMLI and
violate the NEDA JV Guidelines cannot be shrouded with legitimacy by invoking the
above-cited rule.

Conclusion

To increase government prospects, participation in joint ventures has been incentivized

by granting rights and advantages to the Original Proponent in the Competitive Challenge
phase of a Swiss Challenge. Faithful observance of these provisions of law that grant the
aforesaid rights, may it be sourced from a bilateral contract or executive edict, aids in
improving government reliability. This, in turn, heavily correlates with greater
availability of options when entering into future joint venture agreements with private
sector entities via public-private enterprises as it will attract investors to contribute in
formulating a roadmap towards a nationwide infrastructure development. AaCTcI

Needless to say, allowing government agencies to retract their commitments to the

project proponents will essentially render inutile the incentives offered to and have
accrued in favor of the private sector entity. Without securing these rights, the business
community will be wary when it comes to forging contracts with the government. Simply
put, the failure of the government to abide by the rules it itself set would have detrimental
effects on the private sector's confidence that the government will comply with its
statutory and contractual obligations to the letter.
cHSIDa

In the case at bench, considering the undisputed facts presented before Us, We cannot
sustain the BCDA's arguments that its withdrawal from the negotiations is permissible
and was not done with grave abuse of discretion. Being an instrumentality of the
government, it is incumbent upon the BCDA to abide by the laws, rules and regulations,
and perform its obligations with utmost good faith. It cannot, under the guise of
protecting the public interest, disregard the clear mandate of the NEDA JV Guidelines
and unceremoniously disregard the very commitments it made to the prejudice of the
SMLI that innocently relied on such promises. 51 It is in instances such as this — where
an agency, instrumentality or officer of the government evades the performance of a
positive duty enjoined by law 52 — wherein the exercise of judicial power is warranted.
Consistent with Our solemn obligation to afford protection by ensuring that grave abuses
of discretion on the part of a branch or instrumentality of the government do not go
unchecked, the Petition for Certiorari must be granted and the corresponding injunctive
relief be made permanent.

As a final note, it is worth mentioning that the foreseeable repercussion of a contrary

ponencia encompasses the reduction of the number of interested private sector entities
that would be willing to submit suo moto proposals and invest in government projects.
After all, what would be the point of developing ideas and allocating resources in the
formulation of PPP projects when one's rights as an Original Proponent, under the NEDA
JV Guidelines and the agreement between the parties, can easily be wiped out should the
agency decide to level the playing field and conduct straight bidding instead? Evidently,
this would not attract but would, in contrast, repel investors from tendering offers. In
addition, even if potential investors do submit unsolicited or comparative proposals, the
terms therein might be driven to become less competitive due to the adjustment in the
balance of risks and returns on investment. Taking into account the increased possibility
of the development project not pushing through, investors might not be too keen in
guaranteeing a high amount of secured payments for the same. These considerations
further validate the need to secure the private sector's trust and confidence in the
government.

WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed

Supplemental Notice No. 5 dated August 6, 2012 issued by the BCDA is hereby
ANULLED and SET ASIDE. The Temporary Restraining Order issued by this Court on
January 9, 2013 is hereby made PERMANENT. aTHASC

Respondent Bases Conversion and Development Authority and Arnel Paciano D.

Casanova, or whoever assumes the position of president of BCDA, are hereby
ORDERED to conduct and complete the Competitive Challenge pursuant to the
Certification, TOR, and NEDA JV Guidelines.

Specifically, the BCDA and/or the JV-SC are DIRECTED to carry out the following:

1. Publish, within seven (7) calendar days from finality of this Decision,
the "Invitation to Apply for Eligibility and to Submit a
Comparative Proposal" (IAESCP) in three (3) newspapers of
general nationwide circulation for two (2) consecutive weeks, and
in the BCDA website (www.bcda.gov.ph), in accordance with
Section III.2. (Publication of Invitation to Apply for Eligibility and
to Submit Proposal), Section III (Project Rationale), Item 5 of the
TOR, and Section III (General Information), Item 2 (Publication of
Invitation for Comparative Proposals) of the TOR;

2. Immediately make the necessary adjustments to the timetable of

activities set forth in Supplemental Notice No. 1, considering that
 the periods specified therein have already lapsed, without awaiting
the lapse of the period for publication;

3. Strictly adhere to the TOR, Supplemental Notice No. 1, as adjusted, the

Certification of Successful Negotiations, and the NEDA JV
Guidelines, in the conduct and completion of the Swiss Challenge
procedure on SM Land, Inc.'s unsolicited proposal accepted by the
BCDA; and

4. Perform any and all acts necessary to carry out and complete Stage
Three of the Swiss Challenge pursuant to the provisions of the
TOR and NEDA JV Guidelines, including, but not limited to,
subjecting petitioner's unsolicited proposal to a competitive
challenge.

In the event that SM Land, Inc. already obtained from BCDA the amount representing its
Proposal Security, SM Land, Inc. is hereby DIRECTED to re-post the Proposal Security,
in the same amount as the previous one, on the first day of the publication of the
invitation for comparative proposals, per the NEDA JV Guidelines.

SO ORDERED.

Peralta, Villarama, Jr. * and Mendoza, JJ., concur.

Leonen, J., see dissenting opinion.

Separate Opinions
LEONEN, J., dissenting:

SM Land, Inc. (SMLI) offered to pay the Bases Conversion and Development Authority
(BCDA) P38,500.00 per square meter for the development of BCDA's 33.1-hectare
BNS/PMC/ASCOM/SSU properties in Fort Bonifacio. 1

BCDA claimed that SMLI's offer would be "prejudicial to government's interest for . . . it
will not yield the best value for the government." 2 BCDA estimates that it could get a
minimum bid of P40,000.00 per square meter through public bidding. 3 IDaEHS

This case arose from BCDA's issuance of Supplemental Notice No. 05, 4 which
terminated the competitive challenge for the selection of BCDA's joint venture partner
for the development of a portion of Fort Bonifacio. A pertinent portion of BCDA's
Supplemental Order No. 05 reads:
 Supplemental Notice No. 05
06 August 2012

This Supplemental Notice No. 05 is issued to inform the Private Sector Entities
(PSEs) that the Competitive Challenge for the Selection of BCDA's Private
Sector Partner for the Privatization and Development of the approximately 33.1-
hectare BNS/PMC/ASCOM/SSU Properties in Bonifacio South is hereby
terminated. BCDA shall not dispose the property through Competitive
Challenge.

Article VIII. Qualifications and Waivers of the Terms of Reference provides

that BCDA reserves the right to call off this disposition prior to acceptance of
the proposal(s) and call for a new disposition process under amended rules and
without any liability whatsoever to any or all the PSEs, except the obligation to
return the Proposal Security.

BCDA will notify and invite interested Proponents to the next scheduled
selection process for BCDA's partner for the privatization and development of
the subject property. 5

SMLI now challenges the supplemental order through a petition 6 for certiorari,
prohibition, and mandamus. Its main argument is that BCDA's unilateral termination of
the competitive challenge is a violation of SMLI's rights as an original proponent and
constitutes abandonment of BCDA's contractual obligations based on BCDA's acceptance
of petitioner's unsolicited proposal, the certification of successful negotiation, the terms
of reference, and the National Economic and Development Authority Joint Venture
Guidelines and Procedures (Joint Venture Guidelines). 7

The issue here is not whether the Joint Venture Guidelines should apply. Rather, the issue
is whether the government is contractually bound to complete the competitive challenge
initiated by its acceptance of SMLI's unsolicited proposal.

I dissent from the conclusion of the majority.

The government is not clearly contractually bound to a specific selection and disposition
process.

In a situation where there can be many possible bidders, competitive challenge where the
first offer is lower than the potential floor for open competitive bidding may be
disadvantageous to the public's interest.

I
 BCDA did not consent to a
provision that limits the selection
process to competitive challenge

SMLI's arguments arise from the premise that there was a contract between the parties,
providing that the selection process should be restricted to competitive challenge. ASHaDT

Neither BCDA's acceptance of SMLI's unsolicited proposal, its issuance of the

certification of successful negotiation, nor the terms of reference did create a contract that
could give rise to a right on the part of SMLI and an obligation on the part of BCDA to
adhere to a specific selection process.

Article 1318 of the Civil Code provides the requisites of a contract:

Art. 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established.

The documents used by SMLI as bases for its alleged right to a completed competitive
challenge do not show that the parties had a clear meeting of the minds to give SMLI a
right to a completed competitive challenge or to restrict the selection process to
competitive challenge. BCDA's acceptance of SMLI's unsolicited proposal shows no
commitment on the part of BCDA to restrict its options for the selection process.

Based on BCDA's letter 8 dated May 12, 2010, the acceptance contained only a
declaration that SMLI's proposal was accepted for purposes of subjecting it to a
procedure. 9 BCDA did not make a binding commitment on any matter, including the
completion of the procedure, in favor of any person. Pertinent provisions in the
acceptance letter are reproduced as follows: cTaDHS

12 May 2010

xxx xxx xxx

We are pleased to inform you that the Bases Conversion and Development
Authority (BCDA) has, after initial evaluation, decided to accept your proposal,
finding it substantially compliant and responsive to the plans and requirements
of BCDA, for the purpose of subjecting the same to Competitive Challenge
Procedure (Annex "C") of the 2008 Guidelines and Procedures for Entering into
Joint Venture Agreements issued by the National Economic and Development
Authority (NEDA) on 02 May 2008.
 Please note that this acceptance shall mean only that authorization is given to
proceed with detailed negotiations on the terms and conditions of the JV
activity and shall not bind BCDA to enter into a JV agreement, nor to the
terms of your unsolicited proposal. 10 (Emphasis supplied)

Meanwhile, the certification of successful negotiation merely stated that SMLI and
BCDA had reached an agreement as to the terms and conditions of the joint venture
activity 11 and that SMLI was eligible to enter into a joint venture activity with BCDA.
12 It does not contain a commitment on the part of BCDA a) to enter into a joint venture
activity; b) to subject SMLI's proposal to a completed competitive challenge; or c) to
limit BCDA's options of the selection process to competitive challenge only. Neither does
it vest the right upon SMLI to the award of the joint venture agreement. The terms agreed
upon are merely drafts of what would be the joint venture agreement terms. These are
documents preparatory to the joint venture agreement. Pertinent provisions of the
certification are quoted as follows: HSTaEC

Certification of Successful Negotiation

WHEREAS, under Republic Act No. 7227, the Bases Conversion and
Development Authority (BCDA) is mandated to accelerate the sound and
balanced conversion into alternative productive uses of the Clark and Subic
military reservations and their extensions, to raise funds by the sale of portions
of Metro Manila military camps, and to apply said funds for the development
and conversion to productive civilian use of the said military base lands;

xxx xxx xxx

WHEREAS, after evaluation of the unsolicited proposal submitted by SMLI in

accordance with the provisions of Annex "C" of the JV Guidelines, the Joint
Venture Selection Committee (JV-SC) created by BCDA for the selection of a
private partner for the BNS/PMC/ASCOM/SSU Property recommended to the
BCDA Board, and the BCDA Board approved, per Board Resolution NO. 2010-
05-100, the acceptance of the unsolicited proposal, subject to the condition that
such acceptance shall not bind BCDA to enter into a JV activity, but shall mean
that authorization is given to proceed with detailed negotiations on the terms
and conditions of the JV activity;

xxx xxx xxx

NOW THEREFORE, for and in consideration of the foregoing, BCDA and

SMLI have, after successful negotiations pursuant to Stage II of Annex C —
Detailed Guidelines for Competitive Challenge Procedure for Public-Private
Joint Ventures of the NEDA JV Guidelines, reached an agreement on the
purpose, terms and conditions on the JV development of the subject property,
which shall become the terms for the Competitive Challenge pursuant to Annex
C of the JV Guidelines, as follows:
 xxx xxx xxx

FURTHERMORE, BCDA hereby declares SMLI eligible to enter into the

proposed JV activity. Based on the eligibility documents submitted by SMLI,
BCDA determined that SMLI (i) is a duly registered and existing corporation
with Filipino ownership of more than sixty (60%) and is authorized by
Philippine laws to own, hold or develop lands in the Philippines; (ii) it has
completed within a period of ten (10) years from the date of submission of and
receipt of its Proposal a similar or related development Project with a total cost
of at least fifty percent (50%) of the minimum investment requirement, which in
this case is P18.7 billion; and (iii) it has the financial capability to undertake the
Project.EDCIcH

BCDA and SMLI have agreed to subject SMLI's Original Proposal to

Competitive Challenge pursuant to Annex C — Detailed Guidelines for
Competitive Challenge Procedure for Public-Private Joint Ventures of the
NEDA JV Guidelines, which competitive challenge process shall be
immediately implemented following the Terms of Reference (TOR) Volumes 1
and 2. BCDA shall, thus, commence the activities for the solicitation for
comparative proposals, with the publication of the Invitation to Apply for
Eligibility and to Submit Comparative Proposals (IAESCP) thrice for two (2)
consecutive weeks in three (3) major newspapers starting on 10 August 2010,
on which date SMLI shall post the required Proposal Security as stated above.
Pursuant to Annex C of the NEDA JV Guidelines, if, after solicitation of
comparative proposals, BCDA determines that an offer by a comparative PSE is
found to be superior to SMLI's Original Proposal, SMLI shall be given the right
to match such superior offer within the period prescribed in the attached TOR
Volumes 1 and 2. If SMLI is able to match such superior offer, SMLI shall be
issued the Notice of Award, subject to Item No. 19 above. In the event,
however, that SMLI is unable to match the superior offer, the comparative PSE
which submitted such superior offer shall be awarded the contract, subject to
Item No. 19 above. 13 (Emphasis supplied) HIaTCc

Similarly, the terms of reference only described the procedural aspects of the competitive
challenge. It contained no provision limiting BCDA's selection process options to
competitive challenge, thus:

TERMS OF REFERENCE
for the Competitive Challenge for the Selection
of BCDA's Joint Venture Partner
for the Privatization and Development of the Approximately
33.1-Hectare NS/PMC/ASCOM/SSU Properties in Bonifacio
South
Volume 1: Eligibility Documents
These Terms of Reference (TOR) describe the procedures that shall be followed
in connection with the disposition of the approximately . . . 33.1-hectare
Bonifacio Naval Station (BNS)/Philippine Marine Corps (PMC)/Army Support
Command (ASCOM)/Service Support Unit (SSU) Properties in Bonifacio South
(the "Property"), located along Lawton Avenue, Fort Bonifacio, Taguig City,
Metro Manila, Philippines.

These TOR are issued in two (2) volumes: Volume 1 — Eligibility Documents;
and Volume 2 — Tender Documents. This first volume details the requirements
for eligibility to qualify as a Private Sector Entity (PSE) that may submit
Technical and Financial Proposals for the Joint Venture (JV) Privatization and
Development of subject Property, and the procedures involved in the entire
Competitive Challenge procedure. Private sector entities (PSEs) which shall be
declared eligible shall be issued the second volume of the TOR which details
the requirements and procedures for the submission of Technical and Financial
Proposals, with the end-view of determining a Winning PSE for subject JV
development.

BCDA reserves the right to amend or supplement Volume 1 of these TOR at

any time prior to the submission of the Eligibility Documents.cHaCAS

These TOR shall be administered by the Joint Venture Selection Committee

(JV-SC) that has been duly constituted for the purpose pursuant to BCDA Board
Resolution No. 2010-03-057. Any decision of and/or action taken by the JV-SC
is recommendatory and is subject to the approval/ratification/confirmation of
the BCDA Board. Prior to BCDA's execution of the Joint Venture Agreement
(JVA) with the Winning PSE, the Office of the Government Corporate Counsel
(OGCC), as BCDA's statutory counsel, shall issue the corresponding Counsel's
Opinion.

I. PROJECT RATIONALE

1. Under Republic Act No. 7227, BCDA is mandated to accelerate the sound
and balanced conversion into alternative productive uses of the Clark
and Subic military reservations and their extensions, to raise funds by
the sale of portions of Metro Manila camps, and to apply said funds for
the development and conversion to productive civilian use of said
military base lands.

2. The overall legal basis and framework for the selection of BCDA's joint
venture partner for the privatization and development of the Property are
R.A. 7227, as amended by R.A. 7917, Executive Order No. 40, the
NEDA JV Guidelines issued pursuant to E.O. No. 423 s. 2005, R.A.
9184 and its Implementing Rules and Regulations to the extent
applicable, and other relevant laws, Executive Orders, and rules and
regulations, to the extent applicable.
3. On 04 May 2010, BCDA received from SM Land, Inc. (SMLI) an unsolicited
proposal for the development of the said Property. The "Guidelines and
Procedures for Entering into Joint Venture (JV) Agreements Between
Government and Private Entities" (JV Guidelines), issued by the
National Economic and Development Authority (NEDA) in consultation
with the Government Procurement Policy Board (GPPB) and the OGCC
pursuant to Executive Order No. 423 s. 2005, were published last 17
April 2008 (Philippine Star) and had taken full force and effect on 02
May 2008. Annex C thereof, or the "Detailed Guidelines for Competitive
Challenge Procedure for Public-Private Joint Ventures", provides the
bases for BCDA's consideration of the unsolicited proposal of SMLI . . .
.SIcCTD

xxx xxx xxx

4. Hence, in accordance with Annex C of the JV Guidelines, BCDA proceeded

with the consideration of the unsolicited proposal submitted by SMLI.
Upon recommendation by the BCDA JV-SC, the BCDA Board
approved, per Board Resolution No. 2010-05-100, the acceptance of the
unsolicited proposal. Subject to the condition that such acceptance shall
not bind BCDA to enter into a JV activity, but shall mean that
authorization is given to proceed with detailed negotiations on the terms
and conditions of the JV activity, BCDA went into detailed negotiations
with SMLI. The JV-SC ascertained the eligibility of SMLI, in
accordance with Article III.2 of Annex C of the JV Guidelines, and
reached an agreement with the same on the purpose, terms and
conditions of the JV development of subject Property on _____ 2010.

Therefore, BCDA, under Stage 3 of the Annex C Guidelines on Competitive

Challenge, is now seeking comparative proposals from PSEs for the JV
privatization and development of the Property, located along Lawton
Avenue, Fort Bonifacio, Taguig City, on an "AS-IS, WHERE-IS" basis,
to challenge the SMLI proposal. . . .TIaEDC

xxx xxx xxx

III. GENERAL INFORMATION

1. Applicable Laws. All laws governing the operation and implementation of

these TOR shall be deemed to be those of the Republic of the
Philippines, such as, but not limited to, Republic Act No. 7227, as
amended by Republic Act No. 7917, and the "Guidelines and
Procedures for Entering into Joint Venture Agreements Between
Government and Private Entities" issued by the NEDA pursuant to
Executive Order No. 423, which took effect on 02 May 2008, as well as
Executive Order No. 62 and Republic Act No. 9184, its Implementing
 Rules and Regulations and its amendments, to the extent applicable,
where applicable.

2. Publication of Invitation for Comparative Proposals. BCDA shall publish

in three (3) newspapers of general nationwide circulation . . . the
"Invitation to Apply for Eligibility and to Submit a Comparative
Proposal" (IAESCP). This shall serve to inform and to invite
prospective PSEs to the Competitive Challenge procedure at hand. . . .

3. Joint Venture Arrangement. As laid out in Article 1 above, the ultimate

objective of BCDA in qualifying prospective PSEs to be eligible to
submit Technical and Financial Proposals is to select a partner in the
unincorporated/contractual joint venture (JV) for the privatization and
development of the subject Property. . . .

xxx xxx xxx

4. Amendment of these TOR. The information and/or procedures contained

in these TOR may be amended or replaced at any time, at the
discretion of the JV-SC, subject to the approval/confirmation of the
BCDA Board, without giving prior notice or providing for any reason.
Should any of the information and/or procedures contained in these TOR
be amended or replaced, the JV-SC shall inform and send Supplemental
Notices to all PSEs. . . .
DEAaIS

VIII. QUALIFICATIONS AND WAIVERS

xxx xxx xxx

3. BCDA further reserves the right to call off this disposition prior to
acceptance of the proposal(s) and call for a new disposition process
under amended rules, and without any liability whatsoever to any or
all the PSEs, except the obligation to return the Proposal Security.

xxx xxx xxx 14 (Emphasis supplied)

The inclusion of Article III.4 and Article VIII.3 in the terms of reference confirms
BCDA's authority to reconsider the selection process. These sections confirm BCDA's
power to unilaterally terminate the selection procedure.

Article III.4 provides for unilateral amendment of the information and procedures. This is
a window for BCDA to alter the procedures to adopt other selection processes.

Meanwhile, Article VIII.3 expressly bestows upon BCDA the power to terminate the
disposition process without incurring any liability to the private sector entities.
DTEAHI
 II
BCDA cannot consent to a
provision that limits the selection
process to competitive challenge

Not only is it unclear from the above documents that BCDA consented to restricting its
choice of selection process to competitive challenge; it would also be grave abuse of
discretion on the part of BCDA to agree to that restriction. This is because the law
requires that it adhere to certain policy considerations.

When the terms admit different interpretations, the Civil Code requires the use of an
interpretation "bearing that import which is most adequate to render it effectual." 15
When the government enters into agreements or terms, it does so only in accordance with
the law and to carry out the policies and purposes of the law. These laws and the
corresponding policies are incorporated in terms entered into by the government. The
presumption when terms are ambiguous, therefore, should be that which is consistent
with the law, government policies, and its purposes. That would be the import that is
"most adequate to render [the terms of a government deal or understanding] effectual." 16

Section 2 of Republic Act No. 7227 17 provides for the government's policy to enhance
the benefits from the conversion of BCDA-administered properties, thus:

Sec. 2. Declaration of Policies. — It is hereby declared the policy of the

Government to accelerate the sound and balanced conversion into alternative
productive uses of the Clark and Subic military reservations and their extension
(John Hay Station, Wallace Air Station, O'Donnell Transmitter Station, San
Miguel Naval Communications Station and Capas Relay Station), to raise funds
by the sale of portions of Metro Manila military camps, and to apply said funds
as provided herein for the development and conversion to productive civilian
use of the lands covered under the 1947 Military Bases Agreement between the
Philippines and the United States of America, as amended.

It is likewise the declared policy of the Government to enhance the benefits to

be derived from said properties in order to promote the economic and social
development of Central Luzon in particular and the country in general.
(Emphasis supplied)

Executive Order No. 62 18 provides for BCDA's duty to ensure maximized use of Metro
Manila military camps. It also provides that public bidding is the general rule in
determining the privatization process to be used. Other processes may be considered only
when the exigencies demand it and in accordance with national interest, thus: EDSAac

SEC. 1. POLICY FRAMEWORK. — The BCDA shall be guided by the

following policy framework in its conversion program:
 xxx xxx xxx

1.4 The BCDA shall plan and implement fund generating projects which will
maximize the use of the military camps in Metro Manila that shall be sold
pursuant to Section 8 of the Act with the funds generated therefrom to be
strictly utilized as provided for in the Act; and

1.5 Conversion projects must be financially self-sustaining in the long term and
should contribute significantly to national economic development.

xxx xxx xxx

SEC. 4. PRIVATIZATION. — The BCDA hereby adopts the following policy

guidelines in pursuing privatization, commercialization or divestment projects:

4.1 Privatization shall be the basic thrust of the conversion and development of
the baselands. Privatization modes shall include, among others, leasing, joint
ventures, management contract, build-operate-transfer (BOT) and its variants;

xxx xxx xxx

4.3 As a general rule, the privatization process should be conducted through

public bidding. However, in the exigency of public service and national interest,
and consonant with existing laws, rules and regulations on negotiated
contracts, simplified bidding through sealed canvass of at least three (3) pre-
qualified investors, or direct negotiation, may be resorted to. The process of
selecting the prospective lessees and private investors shall be transparent,
where procedures and selection processes adapted are made public through
newspaper advertisements and similar other means; . . . . (Emphasis supplied)
EcTaSC

BCDA issued Supplemental Notice No. 05 only after finding that the competitive
challenge would be disadvantageous to the government and, therefore, against national
interest. Unless BCDA was determined in deviating from government policies, it had no
choice but to recommend to the President who had control and supervision over BCDA
on policy matters 19 that the privatization be done through public bidding.

As opposed to competitive challenge, public bidding allows the government to set the
minimum contract price and set contract terms known to and applied to all interested
private entities. It is the more transparent and competitive mode of awarding government
contracts because no one is given a preferred status. Competitive challenge may only be
applicable should there be no interested party or there is need to entice interest among
other private sector entities. Certainly, it should not be availed to give advantage to any
party without any clear basis. In this case, petitioner has not shown why competitive
challenge is more advantageous from the public policy standpoint. Competitive challenge
is the exception. Open competitive bidding is the general rule.
Our laws abide by the principles of transparency and competitiveness in awarding
government contracts. Republic Act No. 9184, 20 for example, provides:

Sec. 3. Governing Principles on Government Procurement. — All

procurement of the national government, its departments, bureaus, offices and
agencies, including state universities and colleges, government-owned and/or -
controlled corporations, government financial institutions and local government
units, shall, in all cases, be governed by these principles:
SEcITC

(a) Transparency in the procurement process and in the implementation of

procurement contracts.

(b) Competitiveness by extending equal opportunity to enable private

contracting parties who are eligible and qualified to participate in public
bidding.

xxx xxx xxx (Emphasis supplied)

Section 8 of Executive Order No. 423 21 provides that guidelines issued by the National
Economic and Development Authority regarding joint venture agreements with private
entities should adhere to the objective of "promoting transparency and competitiveness,"
thus:

Sec. 8. Joint Venture Agreements. — The NEDA, in consultation with the

GPPB, shall issue guidelines regarding joint venture agreements with private
entities with the objective of promoting transparency, competitiveness, and
accountability in government transactions, and, where applicable, complying
with the requirements of an open and competitive public bidding. (Emphasis
supplied)

Because of the level of transparency and competitiveness in public bidding, it is

considered the preferred mode of awarding government contracts. Section 2 of Executive
Order No. 40 22 states:

Sec. 2. Statement of Policy. — It is the policy of the government that

procurement shall be competitive and transparent and therefore shall be through
public bidding, except as otherwise provided in this Executive Order.

Republic Act No. 9184 provides: CDESIA

Sec. 10. Competitive Bidding. — All Procurement shall be done through

Competitive Bidding, except as provided for in Article XVI of this Act.

Executive Order No. 423 confirmed public bidding's preferred status as a mode of
awarding government contracts:
 Sec. 1. Policy Requiring Public Bidding. — It is the policy of this
Administration that all Government contracts of Government Agencies shall be
awarded through open and competitive public bidding, save in exceptional cases
provided by law and applicable rules and regulations. . . .

BCDA's acceptance of SMLI's unsolicited proposal, the issuance of the certificate of

successful negotiations, and terms of reference, should be read in light of the preference
given to public bidding, the policy in favor of maximized use of properties, and national
interest. Any person who deals with the government also accepts the condition that the
government is not bound by any provision or interpretation that is against the law,
government policies, and national interest. The government may not agree to contract
stipulations that are disadvantageous to it. These are conditions that are deemed
incorporated in dealings with BCDA.

In this case, the government policies and purposes are best served through public bidding.
Public bidding provides more transparency, competitiveness, and benefit to the
government.

The ponencia is correct in reading the word "shall" in Stage Three of Annex C of the
applicable Joint Venture Guidelines 23 as mandatory:

Stage Three — Once the negotiations have been successfully completed, the JV
activity shall be subjected to a competitive challenge, as follows: CSIDTc

1. The Government Entity shall prepare the tender documents pursuant to

Section II (Selection/Tender Documents) of Annex A hereof. The
eligibility criteria used in determining the eligibility of the private sector
entity shall be the same as those stated in the tender documents.
Proprietary information shall, however, be respected and protected, and
treated with confidentiality. As such, it shall not form part of the tender
and related documents. The Head of the Government Entity shall
approve all tender documents including the draft contract before the
publication of the invitation for comparative proposals.

2. Within seven (7) calendar days from the issuance of the Certification of a
successful negotiation referred to in Stage Two above, the JV-SC shall
publish the invitation for comparative proposals in accordance with
Section III.2. (Publication of Invitation to Apply for Eligibility and to
Submit Proposal) under Annex A hereof.

3. The private sector entity shall post the proposal security at the date of the first
day of the publication of the invitation for comparative proposals in the
amount and form stated in the tender documents.
 4. The procedure for the determination of eligibility of comparative
proponents/private sector participants, issuance of supplemental
competitive selection bulletins and pre-selection conferences,
submission and receipt of proposals, opening and evaluation of
proposals shall follow the procedure stipulated under Annex A hereof. In
the evaluation of proposals, the best offer shall be determined to include
the original proposal of the private sector entity. If the Government
Entity determines that an offer made by a comparative private sector
participant other than the original proponent is superior or more
advantageous to the government than the original proposal, the private
sector entity who submitted the original proposal shall be given the right
to match such superior or more advantageous offer within thirty (30)
calendar days from receipt of notification from the Government Entity
of the results of the competitive selection. Should no matching offer be
received within the stated period, the JV activity shall be awarded to the
comparative private sector participant submitting the most advantageous
proposal. If a matching offer is received within the prescribed period, the
JV activity shall be awarded to the original proponent. If no comparative
proposal is received by the Government Entity, the JV activity shall be
immediately awarded to the original private sector proponent.

5. Within seven (7) calendar days from the date of completion of the
Competitive Challenge, the JV-SC shall submit the recommendation of
award to the Head of the Government Entity. Succeeding activities shall
be in accordance with Sections VIII (Award and Approval of Contract)
and X (Final Approval) of Annex A hereof.

However, this only applies when the parties have contractually agreed to abide by the
procedure outlined in Annex C of the Joint Venture Guidelines.

The procedure in Annex C are guidelines. They do not have the same standing as law. It
may be modified by the parties in their contract, provided that the modifications are
consistent with the law. The rights of the parties are determined by a valid agreement or,
in this case, by Annex C, if it was agreed upon and only so long as it is still consistent
with the law. In that case, private sector entities may expect that the competitive
challenge be done in accordance with it.

Hence, contrary to what was stated in the ponencia, the word, "shall," in "Stage Three —
Once the negotiations have been successfully completed, the JV activity shall be
subjected to a competitive challenge . . ." should not be interpreted to vest upon private
sector entities the right to proceed to the competitive challenge after the completion of
Stages One and Two, once it is determined that proceeding with competitive challenge
would be against the law and government policy. CSDcTH
First, the Joint Venture Guidelines does not vest upon the original proponent "[t]he right
to the conduct and completion of a competitive challenge." 24 Based on the Joint Venture
Guidelines and the terms of reference, the extent of protection given to an original
proponent is limited to the right to match the proposals of comparative private sector
entities or PSEs. It becomes effective only upon submission of proposals from other
PSEs, thus:

TERMS OF REFERENCE
for the Competitive Challenge for the Selection
of BCDA's Joint Venture Partner
for the Privatization and Development of the Approximately
33.1-Hectare NS/PMC/ASCOM/SSU Properties in Bonifacio
South
Volume 1: Eligibility Documents

xxx xxx xxx

II. DEFINITION OF TERMS

xxx xxx xxx

Competitive Challenge means an alternative selection process, as defined under

the "Guidelines and Procedures for Entering into Joint Venture Agreements
Between Government and Private Entities" issued by the NEDA, wherein third
parties shall be invited to submit comparative proposals to an unsolicited
proposal; the PSE that submitted the unsolicited proposal is accorded the right
to match any superior offers given by a comparative PSE. 25 ScaAET

Annex C of the National Economic and Development Authority Joint Venture Guidelines
reads as follows:

xxx xxx xxx

Stage Three — . . .

xxx xxx xxx

4. The procedure for the determination of eligibility of comparative

proponents/private sector participants, issuance of supplemental
competitive selection bulletins and pre-selection conferences,
submission and receipt of proposals, opening and evaluation of
proposals shall follow the procedure stipulated under Annex A hereof. In
the evaluation of proposals, the best offer shall be determined to include
the original proposal of the private sector entity. If the Government
Entity determines that an offer made by a comparative private sector
participant other than the original proponent is superior or more
 advantageous to the government than the original proposal, the private
sector entity who submitted the original proposal shall be given the right
to match such superior or more advantageous offer within thirty (30)
calendar days from receipt of notification from the Government Entity of
the results of the competitive selection. Should no matching offer be
received within the stated period, the JV activity shall be awarded to the
comparative private sector participant submitting the most advantageous
proposal. If a matching offer is received within the prescribed period, the
JV activity shall be awarded to the original proponent. If no comparative
proposal is received by the Government Entity, the JV activity shall be
immediately awarded to the original private sector proponent. (Emphasis
supplied) DaScAI

Second, if Stage Three is read in conjunction with Executive Order No. 62 and other
laws, it is not the completion of Stages 1 and 2 of the competitive challenge procedure
under Annex C of the Joint Venture Guidelines that gives private sector entities rights.
Whatever rights that may have accrued to private sector entities under Annex C of the
Joint Venture Guidelines exist only as long as competitive challenge remains the
operating process for the selection of a joint venture partner.

Commencement of the procedures under Annex C of the Joint Venture Guidelines cannot
be interpreted as binding the government to adhere to a specific selection process,
regardless of policy and national interest considerations.

The documents issued by BCDA, therefore, should be considered as effective only if the
choice of selection process is competitive challenge. At any time prior to the execution of
the joint venture agreement and after finding that national interest and government
policies should be best served through other processes, BCDA and the government
should not be limited in their choice of selection process for a joint venture partner.

It is for this reason that BCDA is not prohibited from aborting the entire process.
Contrary to the ponencia's position, there is no vested right to impair. Neither is there an
obligation to renege on. Thus, any issue that may have arisen regarding the interpretation
of the term "disposition" in Section VIII.3 of the terms of reference is rendered
immaterial. 26 For clarity, however, the term "disposition" cannot be interpreted as
anything other than the entire competitive challenge process. 27 The terms of reference
define "privatization" as "the disposition of the Property through joint venture." 28 In the
context of SMLI and BCDA's dealings, the object of disposition is always the 33.1-
hectare property of BCDA in Fort Bonifacio, and the disposition of that property is
privatization. Privatization is an entire process that starts from selection and ends with the
actual transfer of ownership of property. HTIEaS

This is not to say that the government may at any time renege on its contractual
obligations. In this instance, however, there is no contractual obligation to speak of that
limits BCDA's power to change the selection process because it is not allowed to consent
to such a provision. The documents used by SMLI to support its argument that BCDA
has the obligation to complete the competitive challenge contain no provision to that
effect. However, granting that there is such provision, that provision should be
considered void because BCDA has no authority to agree to it. For this reason alone,
BCDA did not gravely abuse its discretion in issuing Supplemental Notice No. 05.

Finally, there would be no unjust enrichment on the part of BCDA or injustice on the part
of SMLI if the competitive challenge is terminated. BCDA offered to return the value of
SMLI's security plus interest and admitted its obligation to return it upon termination of
the process. 29 As shown in the letter dated August 15, 2012, BCDA even "invite[d]
SMLI to participate in the bidding for the subject property." 30 SMLI is, therefore, not
precluded from participating in the subsequent disposition process that may be selected
by BCDA. SMLI will be given an equal opportunity and chance to become BCDA's
partner.

Any advantage given to SMLI now, arising from ambiguous terms and from an erroneous
interpretation of the Joint Venture Guidelines, may have unnecessary and undesirable
effects. ICTcDA

It is partiality in favor of one company that has deterred investors. Fairness and
transparency have always been an expectation for those who would wish to participate in
our economy.

Accordingly, I vote to deny the petition.

||| (SM Land, Inc. v. BCDA, G.R. No. 203655, [August 13, 2014])
 THIRD DIVISION

[G.R. No. 204369. September 17, 2014.]

ENRIQUETA M. LOCSIN, petitioner, vs. BERNARDO HIZON,

CARLOS HIZON, SPS. JOSE MANUEL & LOURDES GUEVARA,
respondents.

DECISION

VELASCO, JR., J : p

Nature of the Case

Before Us is a Petition for Review on Certiorari under Rule 45 assailing the Decision 1
and Resolution of the Court of Appeals (CA), dated June 6, 2012 and October 30, 2012,
respectively, in CA-G.R. CV No. 96659 entitled Enriqueta M. Locsin v. Marylou Bolos,
et al. In reversing the ruling of the trial court, the CA held that respondents are innocent
purchasers in good faith and for value of the subject property.

The Facts

Petitioner Enriqueta M. Locsin (Locsin) was the registered owner of a 760-sq.m. lot
covered by Transfer Certificate of Title (TCT) No. 235094, located at 49 Don Vicente
St., Don Antonio Heights Subdivision, Brgy. Holy Spirit, Capitol, Quezon City. In 1992,
she filed an ejectment case, Civil Case No. 38-6633, 2 against one Billy Aceron (Aceron)
before the Metropolitan Trial Court, Branch 38 in Quezon City (MTC) to recover
possession over the land in issue. Eventually, the two entered into a compromise
agreement, which the MTC approved on August 6, 1993. 3 Locsin later went to the
United States without knowing whether Aceron has complied with his part of the bargain
under the compromise agreement. In spite of her absence, however, she continued to pay
the real property taxes on the subject lot.

In 1994, after discovering that her copy of TCT No. 235094 was missing,
Locsin filed a petition for administrative reconstruction in order to secure a new one,
TCT No. RT-97467. Sometime in early 2002, she then requested her counsel to check
the status of the subject lot. It was then that they discovered the following:

1. One Marylou Bolos (Bolos) had TCT No. RT-97467 cancelled on

February 11, 1999, and then secured a new one, TCT No. N-
200074, in her favor by registering a Deed of Absolute Sale dated
 November 3, 1979 allegedly executed by Locsin with the Registry
of Deeds;

2. Bolos later sold the subject lot to Bernardo Hizon (Bernardo) for PhP
1.5 million, but it was titled under Carlos Hizon's (Carlos') name
on August 12, 1999. Carlos is Bernardo's son;

3. On October 1, 1999, Bernardo, claiming to be the owner of the

property, filed a Motion for Issuance of Writ of Execution for the
enforcement of the court-approved compromise agreement in Civil
Case No. 38-6633;

4. The property was already occupied and was, in fact, up for sale.

On May 9, 2002, Locsin, through counsel, sent Carlos a letter requesting the return of the
property since her signature in the purported deed of sale in favor of Bolos was a forgery.
In a letter-reply dated May 20, 2002, Carlos denied Locsin's request, claiming that he was
unaware of any defect or flaw in Bolos' title and he is, thus, an innocent purchaser for
value and good faith.

On June 13, 2002, 4 Bernardo met with Locsin's counsel and discussed the possibility of
a compromise. He ended the meeting with a promise to come up with a win-win situation
for his son and Locsin, a promise which turned out to be deceitful, for, on July 15, 2002,
Locsin learned that Carlos had already sold the property for PhP 1.5 million to his sister
and her husband, herein respondents Lourdes and Jose Manuel Guevara (spouses
Guevara), respectively, who, as early as May 24, 2002, had a new certificate of title, TCT
No. N-237083, issued in their names. The spouses Guevara then immediately mortgaged
the said property to secure a PhP 2.5 million loan/credit facility with Damar Credit
Corporation (DCC). HcSaTI

It was against the foregoing backdrop of events that Locsin filed an action for
reconveyance, annulment of TCT No. N-237083, the cancellation of the mortgage lien
annotated thereon, and damages, against Bolos, Bernardo, Carlos, the Sps. Guevara,
DCC, and the Register of Deeds, Quezon City, docketed as Civil Case No. Q-02-47925,
which was tried by the Regional Trial Court, Branch 77 in Quezon City (RTC). The
charges against DCC, however, were dropped on joint motion of the parties. This is in
view of the cancellation of the mortgage for failure of the spouses Guevara to avail of the
loan/credit facility DCC extended in their favor. 5

Ruling of the Trial Court

On November 19, 2010, the RTC rendered a Decision 6 dismissing the complaint and
finding for respondents, as defendants thereat, holding that: (a) there is insufficient
evidence to show that Locsin's signature in the Deed of Absolute Sale between her and
Bolos is a forgery; (b) the questioned deed is a public document, having been notarized;
thus, it has, in its favor, the presumption of regularity; (c) Locsin cannot simply rely on
the apparent difference of the signatures in the deed and in the documents presented by
her to prove her allegation of forgery; (d) the transfers of title from Bolos to Carlos and
from Carlos to the spouses Guevara are valid and regular; (e) Bernardo, Carlos, and the
spouses Guevara are all buyers in good faith.

Aggrieved, petitioner appealed the case to the CA.

Ruling of the Court of Appeals

The CA, in its assailed Decision, ruled that it was erroneous for the RTC to hold that
Locsin failed to prove that her signature was forged. In its appreciation of the evidence,
the CA found that, indeed, Locsin's signature in the Deed of Absolute Sale in favor of
Bolos differs from her signatures in the other documents offered as evidence.

The CA, however, affirmed the RTC's finding that herein respondents are innocent
purchasers for value. Citing Casimiro Development Corp. v. Renato L. Mateo, 7 the
appellate court held that respondents, having dealt with property registered under the
Torrens System, need not go beyond the certificate of title, but only has to rely on the
said certificate. Moreover, as the CA added, any notice of defect or flaw in the title of the
vendor should encompass facts and circumstances that would impel a reasonably prudent
man to inquire into the status of the title of the property in order to amount to bad faith.

Accordingly, the CA ruled that Locsin can no longer recover the subject lot. 8 Hence, the
instant petition.

Arguments

Petitioner Locsin insists that Bernardo was well aware, at the time he purchased the
subject property, of a possible defect in Bolos' title since he knew that another person,
Aceron, was then occupying the lot in issue. 9 As a matter of fact, Bernardo even moved
for the execution of the compromise agreement between Locsin and Aceron in Civil Case
No. 38-6633 in order to enforce to oust Aceron of his possession over the property. 10

Thus, petitioner maintains that Bernardo, knowing as he did the incidents involving the
subject property, should have acted as a reasonably diligent buyer in verifying the
authenticity of Bolos' title instead of closing his eyes to the possibility of a defect therein.
Essentially, petitioner argues that Bernardo's stubborn refusal to make an inquiry beyond
the face of Bolos' title is indicative of his lack of prudence in protecting himself from
possible defects or flaws therein, and consequently bars him from interposing the
protection accorded to an innocent purchaser for value.
As regards Carlos and the Sps. Guevara's admissions and testimonies, petitioner points
out that when these are placed side-by-side with the concurrent circumstances in the case,
it is readily revealed that the transfer from the former to the latter was only simulated and
intended to keep the property out of petitioner's reach.

For their part, respondents maintain that they had the right to rely solely upon the face of
Bolos' clean title, considering that it was free from any lien or encumbrance. They are not
even required, so they claim, to check on the validity of the sale from which they derived
their title. 11 Too, respondents claim that their knowledge of Aceron's possession cannot
be the basis for an allegation of bad faith, for the property was purchased on an "as-is
where-is" basis.

The Issue

Considering that the finding of the CA that Locsin's signature in the Deed of Absolute
Sale in favor of Bolos was indeed bogus commands itself for concurrence, the resolution
of the present petition lies on this singular issue — whether or not respondents are
innocent purchasers for value. 12

The Court's Ruling

The petition is meritorious. ETHaDC

Procedural issue

As a general rule, only questions of law may be raised in a petition for review on
certiorari. 13 This Court is not a trier of facts; and in the exercise of the power of review,
we do not normally undertake the re-examination of the evidence presented by the
contending parties during the trial of the case. 14 This rule, however, admits of
exceptions. For one, the findings of fact of the CA will not bind the parties in cases where
the inference made on the evidence is mistaken, as here. 15

That being said, we now proceed to the core of the controversy.

Precautionary measures for

buyers of real property

An innocent purchaser for value is one who buys the property of another without notice
that some other person has a right to or interest in it, and who pays a full and fair price at
the time of the purchase or before receiving any notice of another person's claim. 16 As
such, a defective title — or one the procurement of which is tainted with fraud and
misrepresentation — may be the source of a completely legal and valid title, provided
that the buyer is an innocent third person who, in good faith, relied on the correctness of
the certificate of title, or an innocent purchaser for value. 17

Complementing this is the mirror doctrine which echoes the doctrinal rule that every
person dealing with registered land may safely rely on the correctness of the certificate of
title issued therefor and is in no way obliged to go beyond the certificate to determine the
condition of the property. 18 The recognized exceptions to this rule are stated as follows:

[A] person dealing with registered land has a right to rely on the Torrens
certificate of title and to dispense with the need of inquiring further except when
the party has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry or when the purchaser has
knowledge of a defect or the lack of title in his vendor or of sufficient facts to
induce a reasonably prudent man to inquire into the status of the title of the
property in litigation. The presence of anything which excites or arouses
suspicion should then prompt the vendee to look beyond the certificate and
investigate the title of the vendor appearing on the face of said certificate.
One who falls within the exception can neither be denominated an innocent
purchaser for value nor a purchaser in good faith and, hence, does not
merit the protection of the law. 19 (emphasis added)

Thus, in Domingo Realty, Inc. v. CA, 20 we emphasized the need for prospective parties
to a contract involving titled lands to exercise the diligence of a reasonably prudent
person in ensuring the legality of the title, and the accuracy of the metes and bounds of
the lot embraced therein, by undertaking precautionary measures, such as:

1. Verifying the origin, history, authenticity, and validity of the title with
the Office of the Register of Deeds and the Land Registration
Authority;

2. Engaging the services of a competent and reliable geodetic engineer to

verify the boundary, metes, and bounds of the lot subject of said
title based on the technical description in the said title and the
approved survey plan in the Land Management Bureau;

3. Conducting an actual ocular inspection of the lot;

4. Inquiring from the owners and possessors of adjoining lots with respect
to the true and legal ownership of the lot in question;

5. Putting up of signs that said lot is being purchased, leased, or

encumbered; and
 6. Undertaking such other measures to make the general public aware that
said lot will be subject to alienation, lease, or encumbrance by the
parties.

In the case at bar, Bolos' certificate of title was concededly free from liens and
encumbrances on its face. However, the failure of Carlos and the spouses Guevara to
exercise the necessary level of caution in light of the factual milieu surrounding the
sequence of transfers from Bolos to respondents bars the application of the mirror
doctrine and inspires the Court's concurrence with petitioner's proposition.

Carlos is not an innocent purchaser for value

Foremost, the Court is of the view that Bernardo negotiated with Bolos for the property
as Carlos' agent. This is bolstered by the fact that he was the one who arranged for the
sale and eventual registration of the property in Carlos' favor. Carlos testified during the
May 27, 2009 hearing: 21

Q: Are you privy with the negotiations between your father, Mr. Bernardo
Hizon, and your co-defendant, Marylou Bolos, the alleged seller?

A: No, Ma'am.

Q: Do you remember having signed a Deed of Absolute Sale, dated August 12,
1999?

A: Yes, Ma'am.

Q: And, at that time that you have signed the Deed, was Marylou Bolos present?

A: No, Ma'am.

Q: Who negotiated and arranged for the sale of the property between
Marylou Bolos and you?

A: It was my father. (emphasis ours)

Consistent with the rule that the principal is chargeable and bound by the knowledge of,
or notice to, his agent received in that capacity, 22 any information available and known
to Bernardo is deemed similarly available and known to Carlos, including the following:

1. Bernardo knew that Bolos, from whom he purchased the subject

property, never acquired possession over the lot. As a matter of
fact, in his March 11, 2009 direct testimony, 23 Bernardo admitted
having knowledge of Aceron's lot possession as well as the
compromise agreement between petitioner and Aceron.
 2. Bolos' purported Deed of Sale was executed on November 3, 1979 but
the ejectment case commenced by Locsin against Aceron was
in 1992, or thirteen (13) years after the property was
supposedly transferred to Bolos.

3. The August 6, 1993 Judgment, 24 issued by the MTC on the

compromise agreement between Locsin and Aceron, clearly stated
therein that "[o]n August 2, 1993, the parties [Aceron and Locsin]
submitted to [the MTC] for approval a Compromise Agreement
dated July 28, 1993." It further indicated that "[Aceron]
acknowledges [Locsin's] right of possession to [the subject
property], being the registered owner thereof."

Having knowledge of the foregoing facts, Bernardo and Carlos, to our mind, should have
been impelled to investigate the reason behind the arrangement. They should have been
pressed to inquire into the status of the title of the property in litigation in order to protect
Carlos' interest. It should have struck them as odd that it was Locsin, not Bolos, who
sought the recovery of possession by commencing an ejectment case against Aceron, and
even entered into a compromise agreement with the latter years after the purported sale
in Bolos' favor. Instead, Bernardo and Carlos took inconsistent positions when they
argued for the validity of the transfer of the property in favor of Bolos, but in the
same breath prayed for the enforcement of the compromise agreement entered into
by Locsin. TIcEDC

At this point it is well to emphasize that entering into a compromise agreement is an act
of strict dominion. 25 If Bolos already acquired ownership of the property as early as
1979, it should have been her who entered into a compromise agreement with Aceron in
1993, not her predecessor-in-interest, Locsin, who, theoretically, had already divested
herself of ownership thereof.

The spouses Guevara are not innocent purchasers for value

As regards the transfer of the property from Carlos to the spouses Guevara, We find the
existence of the sale highly suspicious. For one, there is a dearth of evidence to support
the respondent spouses' position that the sale was a bona fide transaction. Even if we
repeatedly sift through the evidence on record, still we cannot find any document,
contract, or deed evidencing the sale in favor of the spouses Guevara. The same goes for
the purported payment of the purchase price of the property in the amount of PhP 1.5
million in favor of Carlos. As a matter of fact, the only documentary evidence that they
presented were as follows:

1. Deed of Sale between Locsin and Bolos;

 2. TCT No. 200074 issued in Bolos' name;

3. TCT No. N-205332 in Carlos' name;

4. TCT No. N-237083 in the name of the Sps. Guevara.

To bridge the gap in their documentary evidence, respondents proffer their own
testimonies explaining the circumstances surrounding the alleged sale. 26 However, basic
is the rule that bare and self-serving allegations, unsubstantiated by evidence, are not
equivalent to proof under the Rules. 27 As such, we cannot give credence to their
representations that the sale between them actually transpired.

Furthermore, and noticeably enough, the transfer from Carlos to the spouses Guevara was
effected only fifteen (15) days after Locsin demanded the surrender of the property from
Carlos. Reviewing the timeline:

May 9, 2002: Locsin's counsel sent a letter to Carlos, requesting that he return
the property to Locsin since the latter's signature in the purported deed of sale
between her and Bolos was a forgery.

May 20, 2002: Carlos' counsel replied to Locsin's May 9, 2002 letter, claiming
that Carlos was unaware of any defect or flaw in Bolos' title, making him an
innocent purchaser of the subject property.CTEaDc

May 24, 2002: The Sps. Guevara allegedly purchased the property from Carlos.

When Bernardo met with Locsin's counsel on June 13, 2002, and personally made a
commitment to come up with a win-win situation for his son and Locsin, he knew fully
well, too, that the property had already been purportedly transferred to his daughter and
son-in-law, the spouses Guevara, for he, no less, facilitated the same. This, to us, is
glaring evidence of bad faith and an apparent intention to mislead Locsin into believing
that she could no longer recover the subject property.

Also, the fact that Lourdes Guevara and Carlos are siblings, and that Carlos' agent in his
dealings concerning the property is his own father, renders incredible the argument that
Lourdes had no knowledge whatsoever of Locsin's claim of ownership at the time of the
purported sale.

Indeed, the fact that the spouses Guevara never intended to be the owner in good faith
and for value of the lot is further made manifest by their lack of interest in protecting
themselves in the case. It does not even appear in their testimonies that they, at the very
least, intended to vigilantly protect their claim over the property and prevent Locsin take
28 To be sure, respondent Jose Manuel Guevara was not even presented as a witness in
the case.
There is also strong reason to believe that even the mortgage in favor of DCC was a mere
ploy to make it appear that the Sps. Guevara exercised acts of dominion over the subject
property. This is so considering the proximity between the property's registration in their
names and its being subjected to the mortgage. Most telling is that the credit line secured
by the mortgage was never used by the spouses, resulting in the mortgage's cancellation
and the exclusion of DCC as a party in Civil Case No. Q-02-47925.

These circumstances, taken altogether, strongly indicate that Carlos and the spouses
Guevara failed to exercise the necessary level of caution expected of a bona fide buyer
and even performed acts that are highly suspect. Consequently, this Court could not give
respondents the protection accorded to innocent purchasers in good faith and for value.

Locsin is entitled to nominal damages

We now delve into petitioner's prayer for exemplary damages, attorney's fees, and costs
of suit.

Here, the Court notes that petitioner failed to specifically pray that moral damages be
awarded. Additionally, she never invoked any of the grounds that would have warranted
the award of moral damages. As can be gleaned from the records, lacking from her
testimony is any claim that she suffered any form of physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, or any other similar circumstance. 29 Thus, we are constrained to refrain
from awarding moral damages in favor of petitioner.

In the same vein, exemplary damages cannot be awarded in favor of petitioner. Well-
settled that this species of damages is allowed only in addition to moral damages such
that no exemplary damages can be awarded unless the claimant first establishes his clear
right to moral damages. 30 Consequently, despite our finding that respondents acted in a
fraudulent manner, petitioner's claim for exemplary damages is unavailing at this point.

Nevertheless, we find an award for nominal damages to be in order. Under prevailing

jurisprudence, nominal damages are "recoverable where a legal right is technically
violated and must be vindicated against an invasion that has produced no actual present
loss of any kind or where there has been a breach of contract and no substantial injury
or actual damages whatsoever have been or can be shown." 31 As expounded in
Almeda v. Cariño, 32 a violation of the plaintiff's right, even if only technical, is
sufficient to support an award of nominal damages. So long as there is a showing of a
violation of the right of the plaintiff, as herein petitioner, an award of nominal
damages is proper. 33

In the case at bar, this Court recognizes that petitioner was unduly deprived of her
ownership rights over the property, and was compelled to litigate for its recovery, for
almost ten (10) years. Clearly, this could have entitled her to actual or compensatory
damages had she quantified and proved, during trial, the amounts which could have
accrued in her favor, including commercial fruits such as reasonable rent covering the
pendency of the case. Nonetheless, petitioner's failure to prove actual or compensatory
damages does not erase the fact that her property rights were unlawfully invaded by
respondents, entitling her to nominal damages.

As to the amount to be awarded, it bears stressing that the same is addressed to the sound
discretion of the court, taking into account the relevant circumstances. 34 Considering the
length of time petitioner was deprived of her property and the bad faith attending
respondents' actuations in the extant case, we find the amount of seventy-five thousand
pesos (PhP 75,000) as sufficient nominal damages. Moreover, respondents should be held
jointly and severally liable for the said amount, attorney's fees in the amount of an
additional seventy-five thousand pesos (PhP 75,000), and the costs of the suit.

WHEREFORE, in light of the foregoing, the Petition is hereby GRANTED. The

assailed Decision of the Court of Appeals dated June 6, 2012 in CA-G.R. CV No. 96659
affirming the Decision of the Regional Trial Court, Branch 77, Quezon City, in Civil
Case No. Q-02-47925; as well as its Resolution dated October 30, 2012, denying
reconsideration thereof, are hereby REVERSED and SET ASIDE. TCT No. N-200074
in the name of Marylou Bolos, and the titles descending therefrom, namely, TCT Nos. N-
205332 and N-237083 in the name of Carlos Hizon, and the Spouses Jose Manuel &
Lourdes Guevara, respectively, are hereby declared NULL and VOID. Respondents and
all other persons acting under their authority are hereby DIRECTED to surrender
possession of the subject property in favor of petitioner. Respondents Bernardo Hizon,
Carlos Hizon, and the spouses Jose Manuel and Lourdes Guevara shall jointly and
severally pay petitioner PhP 75,000 as nominal damages, PhP 75,000 as attorney's fees,
and costs of suit.

The Register of Deeds of Quezon City is hereby ORDERED to (1) cancel TCT No. N-
237083; (2) reinstate TCT No. RT-97467; and (3) reissue TCT No. RT-97467 in favor of
petitioner, without requiring from petitioner payment for any and all expenses in
performing the three acts.

SO ORDERED.

Peralta, Villarama, Jr., Reyes and Jardeleza, JJ., concur.

||| (Locsin v. Hizon, G.R. No. 204369, [September 17, 2014])

 THIRD DIVISION

[G.R. No. 202666. September 29, 2014.]

RHONDA AVE S. VIVARES and SPS. MARGARITA and DAVID

SUZARA, petitioners, vs. ST. THERESA'S COLLEGE, MYLENE
RHEZA T. ESCUDERO, and JOHN DOES, respondents.

DECISION

VELASCO, JR., J : p

The individual's desire for privacy is never absolute, since participation in

society is an equally powerful desire. Thus each individual is continually
engaged in a personal adjustment process in which he balances the desire for
privacy with the desire for disclosure and communication of himself to others,
in light of the environmental conditions and social norms set by the society in
which he lives.

~ Alan Westin, Privacy and Freedom (1967)

The Case

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, in
relation to Section 19 of A.M. No. 08-1-16-SC, 1 otherwise known as the "Rule on the
Writ of Habeas Data." Petitioners herein assail the July 27, 2012 Decision 2 of the
Regional Trial Court, Branch 14 in Cebu City (RTC) in SP. Proc. No. 19251-CEB, which
dismissed their habeas data petition.

The Facts

Nenita Julia V. Daluz (Julia) and Julienne Vida Suzara (Julienne), both minors, were,
during the period material, graduating high school students at St. Theresa's College
(STC), Cebu City. Sometime in January 2012, while changing into their swimsuits for a
beach party they were about to attend, Julia and Julienne, along with several others, took
digital pictures of themselves clad only in their undergarments. These pictures were then
uploaded by Angela Lindsay Tan (Angela) on her Facebook 3 profile.

Back at the school, Mylene Rheza T. Escudero (Escudero), a computer teacher at STC's
high school department, learned from her students that some seniors at STC posted
pictures online, depicting themselves from the waist up, dressed only in brassieres.
Escudero then asked her students if they knew who the girls in the photos are. In turn,
they readily identified Julia, Julienne, and Chloe Lourdes Taboada (Chloe), among
others.

Using STC's computers, Escudero's students logged in to their respective personal

Facebook accounts and showed her photos of the identified students, which include: (a)
Julia and Julienne drinking hard liquor and smoking cigarettes inside a bar; and (b) Julia
and Julienne along the streets of Cebu wearing articles of clothing that show virtually the
entirety of their black brassieres. What is more, Escudero's students claimed that there
were times when access to or the availability of the identified students' photos was not
confined to the girls' Facebook friends, 4 but were, in fact, viewable by any Facebook
user. 5

Upon discovery, Escudero reported the matter and, through one of her student's Facebook
page, showed the photos to Kristine Rose Tigol (Tigol), STC's Discipline-in-Charge, for
appropriate action. Thereafter, following an investigation, STC found the identified
students to have deported themselves in a manner proscribed by the school's Student
Handbook, to wit:

1. Possession of alcoholic drinks outside the school campus;

2. Engaging in immoral, indecent, obscene or lewd acts;

3. Smoking and drinking alcoholic beverages in public places;

4. Apparel that exposes the underwear;

5. Clothing that advocates unhealthy behaviour; depicts obscenity;

contains sexually suggestive messages, language or symbols; and

6. Posing and uploading pictures on the Internet that entail ample body
exposure.

On March 1, 2012, Julia, Julienne, Angela, and the other students in the pictures in
question, reported, as required, to the office of Sr. Celeste Ma. Purisima Pe (Sr.
Purisima), STC's high school principal and ICM 6 Directress. They claimed that during
the meeting, they were castigated and verbally abused by the STC officials present in the
conference, including Assistant Principal Mussolini S. Yap (Yap), Roswinda Jumiller,
and Tigol. What is more, Sr. Purisima informed their parents the following day that, as
part of their penalty, they are barred from joining the commencement exercises scheduled
on March 30, 2012. EDHCSI
A week before graduation, or on March 23, 2012, Angela's mother, Dr. Armenia M. Tan
(Tan), filed a Petition for Injunction and Damages before the RTC of Cebu City against
STC, et al., docketed as Civil Case No. CEB-38594. 7 In it, Tan prayed that defendants
therein be enjoined from implementing the sanction that precluded Angela from joining
the commencement exercises. On March 25, 2012, petitioner Rhonda Ave Vivares
(Vivares), the mother of Julia, joined the fray as an intervenor.

On March 28, 2012, defendants in Civil Case No. CEB-38594 filed their memorandum,
containing printed copies of the photographs in issue as annexes. That same day, the RTC
issued a temporary restraining order (TRO) allowing the students to attend the graduation
ceremony, to which STC filed a motion for reconsideration.

Despite the issuance of the TRO, STC, nevertheless, barred the sanctioned students from
participating in the graduation rites, arguing that, on the date of the commencement
exercises, its adverted motion for reconsideration on the issuance of the TRO remained
unresolved.

Thereafter, petitioners filed before the RTC a Petition for the Issuance of a Writ of
Habeas Data, docketed as SP. Proc. No. 19251-CEB 8 on the basis of the following
considerations:

1. The photos of their children in their undergarments (e.g., bra) were

taken for posterity before they changed into their swimsuits on the
occasion of a birthday beach party;

2. The privacy setting of their children's Facebook accounts was set at

"Friends Only." They, thus, have a reasonable expectation of
privacy which must be respected.

3. Respondents, being involved in the field of education, knew or ought to

have known of laws that safeguard the right to privacy. Corollarily,
respondents knew or ought to have known that the girls, whose
privacy has been invaded, are the victims in this case, and not the
offenders. Worse, after viewing the photos, the minors were called
"immoral" and were punished outright;

4. The photos accessed belong to the girls and, thus, cannot be used and
reproduced without their consent. Escudero, however, violated
their rights by saving digital copies of the photos and by
subsequently showing them to STC's officials. Thus, the Facebook
accounts of petitioners' children were intruded upon;
 5. The intrusion into the Facebook accounts, as well as the copying of
information, data, and digital images happened at STC's Computer
Laboratory; and

6. All the data and digital images that were extracted were boldly
broadcasted by respondents through their memorandum submitted
to the RTC in connection with Civil Case No. CEB-38594.

To petitioners, the interplay of the foregoing constitutes an invasion of their children's

privacy and, thus, prayed that: (a) a writ of habeas data be issued; (b) respondents be
ordered to surrender and deposit with the court all soft and printed copies of the subject
data before or at the preliminary hearing; and (c) after trial, judgment be rendered
declaring all information, data, and digital images accessed, saved or stored, reproduced,
spread and used, to have been illegally obtained in violation of the children's right to
privacy.

Finding the petition sufficient in form and substance, the RTC, through an Order dated
July 5, 2012, issued the writ of habeas data. Through the same Order, herein respondents
were directed to file their verified written return, together with the supporting affidavits,
within five (5) working days from service of the writ.

In time, respondents complied with the RTC's directive and filed their verified written
return, laying down the following grounds for the denial of the petition, viz.: (a)
petitioners are not the proper parties to file the petition; (b) petitioners are engaging in
forum shopping; (c) the instant case is not one where a writ of habeas data may issue;
and (d) there can be no violation of their right to privacy as there is no reasonable
expectation of privacy on Facebook.

Ruling of the Regional Trial Court

On July 27, 2012, the RTC rendered a Decision dismissing the petition for habeas data.
The dispositive portion of the Decision pertinently states:

WHEREFORE, in view of the foregoing premises, the Petition is hereby

DISMISSED.

The parties and media must observe the aforestated confidentiality.

xxx xxx xxx

SO ORDERED. 9 SEcTHA

To the trial court, petitioners failed to prove the existence of an actual or threatened
violation of the minors' right to privacy, one of the preconditions for the issuance of the
writ of habeas data. Moreover, the court a quo held that the photos, having been
uploaded on Facebook without restrictions as to who may view them, lost their privacy in
some way. Besides, the RTC noted, STC gathered the photographs through legal means
and for a legal purpose, that is, the implementation of the school's policies and rules on
discipline.

Not satisfied with the outcome, petitioners now come before this Court pursuant to
Section 19 of the Rule on Habeas Data. 10

The Issues

The main issue to be threshed out in this case is whether or not a writ of habeas data
should be issued given the factual milieu. Crucial in resolving the controversy, however,
is the pivotal point of whether or not there was indeed an actual or threatened violation of
the right to privacy in the life, liberty, or security of the minors involved in this case.

Our Ruling

We find no merit in the petition.

Procedural issues concerning the

availability of the Writ of Habeas Data

The writ of habeas data is a remedy available to any person whose right to privacy in
life, liberty or security is violated or threatened by an unlawful act or omission of a public
official or employee, or of a private individual or entity engaged in the gathering,
collecting or storing of data or information regarding the person, family, home and
correspondence of the aggrieved party. 11 It is an independent and summary remedy
designed to protect the image, privacy, honor, information, and freedom of information of
an individual, and to provide a forum to enforce one's right to the truth and to
informational privacy. It seeks to protect a person's right to control information regarding
oneself, particularly in instances in which such information is being collected through
unlawful means in order to achieve unlawful ends. 12 IaTSED

In developing the writ of habeas data, the Court aimed to protect an individual's right to
informational privacy, among others. A comparative law scholar has, in fact, defined
habeas data as "a procedure designed to safeguard individual freedom from abuse in the
information age." 13 The writ, however, will not issue on the basis merely of an alleged
unauthorized access to information about a person. Availment of the writ requires the
existence of a nexus between the right to privacy on the one hand, and the right to life,
liberty or security on the other. 14 Thus, the existence of a person's right to informational
privacy and a showing, at least by substantial evidence, of an actual or threatened
violation of the right to privacy in life, liberty or security of the victim are indispensable
before the privilege of the writ may be extended. 15

Without an actionable entitlement in the first place to the right to informational privacy, a
habeas data petition will not prosper. Viewed from the perspective of the case at bar, this
requisite begs this question: given the nature of an online social network (OSN) — (1)
that it facilitates and promotes real-time interaction among millions, if not billions, of
users, sans the spatial barriers, 16 bridging the gap created by physical space; and (2) that
any information uploaded in OSNs leaves an indelible trace in the provider's databases,
which are outside the control of the end-users — is there a right to informational
privacy in OSN activities of its users? Before addressing this point, We must first
resolve the procedural issues in this case.

a. The writ of habeas data is not only confined to cases of extralegal

killings and enforced disappearances

Contrary to respondents' submission, the Writ of Habeas Data was not enacted solely for
the purpose of complementing the Writ of Amparo in cases of extralegal killings and
enforced disappearances.

Section 2 of the Rule on the Writ of Habeas Data provides:

Sec. 2. Who May File. — Any aggrieved party may file a petition for the writ of
habeas data. However, in cases of extralegal killings and enforced
disappearances, the petition may be filed by:

(a) Any member of the immediate family of the aggrieved party,

namely: the spouse, children and parents; or

(b) Any ascendant, descendant or collateral relative of the aggrieved

party within the fourth civil degree of consanguinity or affinity,
in default of those mentioned in the preceding paragraph.
(emphasis supplied)

Had the framers of the Rule intended to narrow the operation of the writ only to cases of
extralegal killings or enforced disappearances, the above underscored portion of Section
2, reflecting a variance of habeas data situations, would not have been made.

Habeas data, to stress, was designed "to safeguard individual freedom from abuse in the
information age." 17 As such, it is erroneous to limit its applicability to extralegal killings
and enforced disappearances only. In fact, the annotations to the Rule prepared by the
Committee on the Revision of the Rules of Court, after explaining that the Writ of
Habeas Data complements the Writ of Amparo, pointed out that:
 The writ of habeas data, however, can be availed of as an independent
remedy to enforce one's right to privacy, more specifically the right to
informational privacy. The remedies against the violation of such right can
include the updating, rectification, suppression or destruction of the database or
information or files in possession or in control of respondents. 18 (emphasis
Ours)

Clearly then, the privilege of the Writ of Habeas Data may also be availed of in cases
outside of extralegal killings and enforced disappearances.

b. Meaning of "engaged" in the gathering, collecting or storing of

data or information

Respondents' contention that the habeas data writ may not issue against STC, it not being
an entity engaged in the gathering, collecting or storing of data or information regarding
the person, family, home and correspondence of the aggrieved party, while valid to a
point, is, nonetheless, erroneous.

To be sure, nothing in the Rule would suggest that the habeas data protection shall be
available only against abuses of a person or entity engaged in the business of gathering,
storing, and collecting of data. As provided under Section 1 of the Rule:

Section 1. Habeas Data. — The writ of habeas data is a remedy available to

any person whose right to privacy in life, liberty or security is violated or
threatened by an unlawful act or omission of a public official or employee, or of
a private individual or entity engaged in the gathering, collecting or storing
of data or information regarding the person, family, home and
correspondence of the aggrieved party. (emphasis Ours)

The provision, when taken in its proper context, as a whole, irresistibly conveys the idea
thathabeas data is a protection against unlawful acts or omissions of public officials and
of private individuals or entities engaged in gathering, collecting, or storing data about
the aggrieved party and his or her correspondences, or about his or her family. Such
individual or entity need not be in the business of collecting or storing data. ATcEDS

To "engage" in something is different from undertaking a business endeavour. To

"engage" means "to do or take part in something." 19 It does not necessarily mean that
the activity must be done in pursuit of a business. What matters is that the person or
entity must be gathering, collecting or storing said data or information about the
aggrieved party or his or her family. Whether such undertaking carries the element of
regularity, as when one pursues a business, and is in the nature of a personal endeavour,
for any other reason or even for no reason at all, is immaterial and such will not prevent
the writ from getting to said person or entity.
To agree with respondents' above argument, would mean unduly limiting the reach of the
writ to a very small group, i.e., private persons and entities whose business is data
gathering and storage, and in the process decreasing the effectiveness of the writ as an
instrument designed to protect a right which is easily violated in view of rapid
advancements in the information and communications technology — a right which a
great majority of the users of technology themselves are not capable of protecting.

Having resolved the procedural aspect of the case, We now proceed to the core of the
controversy.

The right to informational privacy on Facebook

a. The Right to Informational Privacy

The concept of privacy has, through time, greatly evolved, with technological
advancements having an influential part therein. This evolution was briefly recounted in
former Chief Justice Reynato S. Puno's speech, The Common Right to Privacy, 20 where
he explained the three strands of the right to privacy, viz.: (1) locational or situational
privacy; 21 (2) informational privacy; and (3) decisional privacy. 22 Of the three, what is
relevant to the case at bar is the right to informational privacy — usually defined as the
right of individuals to control information about themselves. 23

With the availability of numerous avenues for information gathering and data sharing
nowadays, not to mention each system's inherent vulnerability to attacks and intrusions,
there is more reason that every individual's right to control said flow of information
should be protected and that each individual should have at least a reasonable expectation
of privacy in cyberspace. Several commentators regarding privacy and social networking
sites, however, all agree that given the millions of OSN users, "[i]n this [Social
Networking] environment, privacy is no longer grounded in reasonable expectations, but
rather in some theoretical protocol better known as wishful thinking." 24

It is due to this notion that the Court saw the pressing need to provide for judicial
remedies that would allow a summary hearing of the unlawful use of data or information
and to remedy possible violations of the right to privacy. 25 In the same vein, the South
African High Court, in its Decision in the landmark case, H v. W, 26 promulgated on
January 30, 2013, recognized that "[t]he law has to take into account the changing
realities not only technologically but also socially or else it will lose credibility in the
eyes of the people. . . . It is imperative that the courts respond appropriately to changing
times, acting cautiously and with wisdom." Consistent with this, the Court, by developing
what may be viewed as the Philippine model of the writ of habeas data, in effect,
recognized that, generally speaking, having an expectation of informational privacy is
not necessarily incompatible with engaging in cyberspace activities, including those
that occur in OSNs.
The question now though is up to what extent is the right to privacy protected in OSNs?
Bear in mind that informational privacy involves personal information. At the same time,
the very purpose of OSNs is socializing — sharing a myriad of information, 27 some of
which would have otherwise remained personal.

b. Facebook's Privacy Tools: a response to the clamor for privacy in

OSN activities

Briefly, the purpose of an OSN is precisely to give users the ability to interact and to stay
connected to other members of the same or different social media platform through the
sharing of statuses, photos, videos, among others, depending on the services provided by
the site. It is akin to having a room filled with millions of personal bulletin boards or
"walls," the contents of which are under the control of each and every user. In his or her
bulletin board, a user/owner can post anything — from text, to pictures, to music and
videos — access to which would depend on whether he or she allows one, some or all of
the other users to see his or her posts. Since gaining popularity, the OSN phenomenon
has paved the way to the creation of various social networking sites, including the one
involved in the case at bar, www.facebook.com (Facebook), which, according to its
developers, people use "to stay connected with friends and family, to discover what's
going on in the world, and to share and express what matters to them." 28

Facebook connections are established through the process of "friending" another user. By
sending a "friend request," the user invites another to connect their accounts so that they
can view any and all "Public" and "Friends Only" posts of the other. Once the request is
accepted, the link is established and both users are permitted to view the other user's
"Public" or "Friends Only" posts, among others. "Friending," therefore, allows the user to
form or maintain one-to-one relationships with other users, whereby the user gives his or
her "Facebook friend" access to his or her profile and shares certain information to the
latter. 29

To address concerns about privacy, 30 but without defeating its purpose, Facebook was
armed with different privacy tools designed to regulate the accessibility of a user's profile
31 as well as information uploaded by the user. In H v. W, 32 the South Gauteng High
Court recognized this ability of the users to "customize their privacy settings," but did so
with this caveat: "Facebook states in its policies that, although it makes every effort to
protect a user's information, these privacy settings are not fool-proof." 33

For instance, a Facebook user can regulate the visibility and accessibility of digital
images (photos), posted on his or her personal bulletin or "wall," except for the user's
profile picture and ID, by selecting his or her desired privacy setting:

(a) Public — the default setting; every Facebook user can view the photo;
 (b) Friends of Friends — only the user's Facebook friends and their
friends can view the photo;

(b) Friends — only the user's Facebook friends can view the photo;

(c) Custom — the photo is made visible only to particular friends and/or
networks of the Facebook user; and

(d) Only Me — the digital image can be viewed only by the user.

The foregoing are privacy tools, available to Facebook users, designed to set up barriers
to broaden or limit the visibility of his or her specific profile content, statuses, and
photos, among others, from another user's point of view. In other words, Facebook
extends its users an avenue to make the availability of their Facebook activities reflect
their choice as to "when and to what extent to disclose facts about [themselves] — and to
put others in the position of receiving such confidences." 34 Ideally, the selected setting
will be based on one's desire to interact with others, coupled with the opposing need to
withhold certain information as well as to regulate the spreading of his or her personal
information. Needless to say, as the privacy setting becomes more limiting, fewer
Facebook users can view that user's particular post.ISDCHA

STC did not violate petitioners' daughters' right to privacy

Without these privacy settings, respondents' contention that there is no reasonable

expectation of privacy in Facebook would, in context, be correct. However, such is not
the case. It is through the availability of said privacy tools that many OSN users are
said to have a subjective expectation that only those to whom they grant access to
their profile will view the information they post or upload thereto. 35

This, however, does not mean that any Facebook user automatically has a protected
expectation of privacy in all of his or her Facebook activities.

Before one can have an expectation of privacy in his or her OSN activity, it is first
necessary that said user, in this case the children of petitioners, manifest the intention
to keep certain posts private, through the employment of measures to prevent access
thereto or to limit its visibility. 36 And this intention can materialize in cyberspace
through the utilization of the OSN's privacy tools. In other words, utilization of these
privacy tools is the manifestation, in cyber world, of the user's invocation of his or
her right to informational privacy. 37

Therefore, a Facebook user who opts to make use of a privacy tool to grant or deny
access to his or her post or profile detail should not be denied the informational privacy
right which necessarily accompanies said choice. 38 Otherwise, using these privacy tools
would be a feckless exercise, such that if, for instance, a user uploads a photo or any
personal information to his or her Facebook page and sets its privacy level at "Only Me"
or a custom list so that only the user or a chosen few can view it, said photo would still be
deemed public by the courts as if the user never chose to limit the photo's visibility and
accessibility. Such position, if adopted, will not only strip these privacy tools of their
function but it would also disregard the very intention of the user to keep said photo or
information within the confines of his or her private space.

We must now determine the extent that the images in question were visible to other
Facebook users and whether the disclosure was confidential in nature. In other words, did
the minors limit the disclosure of the photos such that the images were kept within their
zones of privacy? This determination is necessary in resolving the issue of whether the
minors carved out a zone of privacy when the photos were uploaded to Facebook so that
the images will be protected against unauthorized access and disclosure.

Petitioners, in support of their thesis about their children's privacy right being violated,
insist that Escudero intruded upon their children's Facebook accounts, downloaded copies
of the pictures and showed said photos to Tigol. To them, this was a breach of the minors'
privacy since their Facebook accounts, allegedly, were under "very private" or "Only
Friends" setting safeguarded with a password. 39 Ultimately, they posit that their
children's disclosure was only limited since their profiles were not open to public
viewing. Therefore, according to them, people who are not their Facebook friends,
including respondents, are barred from accessing said post without their knowledge and
consent. As petitioner's children testified, it was Angela who uploaded the subject photos
which were only viewable by the five of them, 40 although who these five are do not
appear on the records.

Escudero, on the other hand, stated in her affidavit 41 that "my students showed me some
pictures of girls clad in brassieres. This student [sic] of mine informed me that these are
senior high school [students] of STC, who are their friends in [F]acebook. . . . They then
said [that] there are still many other photos posted on the Facebook accounts of these
girls. At the computer lab, these students then logged into their Facebook account [sic],
and accessed from there the various photographs . . . . They even told me that there had
been times when these photos were 'public' i.e., not confined to their friends in
Facebook."

In this regard, We cannot give much weight to the minors' testimonies for one key
reason: failure to question the students' act of showing the photos to Tigol disproves their
allegation that the photos were viewable only by the five of them. Without any evidence
to corroborate their statement that the images were visible only to the five of them, and
without their challenging Escudero's claim that the other students were able to view the
photos, their statements are, at best, self-serving, thus deserving scant consideration. 42
It is well to note that not one of petitioners disputed Escudero's sworn account that her
students, who are the minors' Facebook "friends," showed her the photos using their own
Facebook accounts. This only goes to show that no special means to be able to view the
allegedly private posts were ever resorted to by Escudero's students, 43 and that it is
reasonable to assume, therefore, that the photos were, in reality, viewable either by (1)
their Facebook friends, or (2) by the public at large.

Considering that the default setting for Facebook posts is "Public," it can be surmised that
the photographs in question were viewable to everyone on Facebook, absent any proof
that petitioners' children positively limited the disclosure of the photograph. If such were
the case, they cannot invoke the protection attached to the right to informational privacy.
The ensuing pronouncement in US v. Gines-Perez 44 is most instructive: DEAaIS

[A] person who places a photograph on the Internet precisely intends to forsake
and renounce all privacy rights to such imagery, particularly under
circumstances such as here, where the Defendant did not employ protective
measures or devices that would have controlled access to the Web page or the
photograph itself. 45

Also, United States v. Maxwell 46 held that "[t]he more open the method of transmission
is, the less privacy one can reasonably expect. Messages sent to the public at large in the
chat room or e-mail that is forwarded from correspondent to correspondent loses any
semblance of privacy."

That the photos are viewable by "friends only" does not necessarily bolster the
petitioners' contention. In this regard, the cyber community is agreed that the digital
images under this setting still remain to be outside the confines of the zones of privacy in
view of the following:

(1) Facebook "allows the world to be more open and connected by giving
its users the tools to interact and share in any conceivable way;" 47

(2) A good number of Facebook users "befriend" other users who are total
strangers; 48

(3) The sheer number of "Friends" one user has, usually by the hundreds;
and

(4) A user's Facebook friend can "share" 49 the former's post, or "tag" 50
others who are not Facebook friends with the former, despite its
being visible only to his or her own Facebook friends.

It is well to emphasize at this point that setting a post's or profile detail's privacy to
"Friends" is no assurance that it can no longer be viewed by another user who is not
Facebook friends with the source of the content. The user's own Facebook friend can
share said content or tag his or her own Facebook friend thereto, regardless of whether
the user tagged by the latter is Facebook friends or not with the former. Also, when the
post is shared or when a person is tagged, the respective Facebook friends of the person
who shared the post or who was tagged can view the post, the privacy setting of which
was set at "Friends."

To illustrate, suppose A has 100 Facebook friends and B has 200. A and B are not
Facebook friends. If C, A's Facebook friend, tags B in A's post, which is set at "Friends,"
the initial audience of 100 (A's own Facebook friends) is dramatically increased to 300
(A's 100 friends plus B's 200 friends or the public, depending upon B's privacy setting).
As a result, the audience who can view the post is effectively expanded — and to a very
large extent.

This, along with its other features and uses, is confirmation of Facebook's proclivity
towards user interaction and socialization rather than seclusion or privacy, as it
encourages broadcasting of individual user posts. In fact, it has been said that OSNs have
facilitated their users' self-tribute, thereby resulting into the "democratization of fame."
51 Thus, it is suggested, that a profile, or even a post, with visibility set at "Friends Only"
cannot easily, more so automatically, be said to be "very private," contrary to petitioners'
argument.

As applied, even assuming that the photos in issue are visible only to the sanctioned
students' Facebook friends, respondent STC can hardly be taken to task for the perceived
privacy invasion since it was the minors' Facebook friends who showed the pictures to
Tigol. Respondents were mere recipients of what were posted. They did not resort to any
unlawful means of gathering the information as it was voluntarily given to them by
persons who had legitimate access to the said posts. Clearly, the fault, if any, lies with the
friends of the minors. Curiously enough, however, neither the minors nor their parents
imputed any violation of privacy against the students who showed the images to
Escudero.

Furthermore, petitioners failed to prove their contention that respondents reproduced and
broadcasted the photographs. In fact, what petitioners attributed to respondents as an act
of offensive disclosure was no more than the actuality that respondents appended said
photographs in their memorandum submitted to the trial court in connection with Civil
Case No. CEB-38594. 52 These are not tantamount to a violation of the minor's
informational privacy rights, contrary to petitioners' assertion.

In sum, there can be no quibbling that the images in question, or to be more precise, the
photos of minor students scantily clad, are personal in nature, likely to affect, if
indiscriminately circulated, the reputation of the minors enrolled in a conservative
institution. However, the records are bereft of any evidence, other than bare assertions
that they utilized Facebook's privacy settings to make the photos visible only to them or
to a select few. Without proof that they placed the photographs subject of this case within
the ambit of their protected zone of privacy, they cannot now insist that they have an
expectation of privacy with respect to the photographs in question.

Had it been proved that the access to the pictures posted were limited to the original
uploader, through the "Me Only" privacy setting, or that the user's contact list has been
screened to limit access to a select few, through the "Custom" setting, the result may have
been different, for in such instances, the intention to limit access to the particular post,
instead of being broadcasted to the public at large or all the user's friends en masse,
becomes more manifest and palpable.

On Cyber Responsibility

It has been said that "the best filter is the one between your children's ears." 53 This
means that self-regulation on the part of OSN users and internet consumers in general is
the best means of avoiding privacy rights violations. 54 As a cyberspace community
member, one has to be proactive in protecting his or her own privacy. 55 It is in this
regard that many OSN users, especially minors, fail. Responsible social networking or
observance of the "netiquettes" 56 on the part of teenagers has been the concern of many
due to the widespread notion that teenagers can sometimes go too far since they generally
lack the people skills or general wisdom to conduct themselves sensibly in a public
forum. 57

Respondent STC is clearly aware of this and incorporating lessons on good cyber
citizenship in its curriculum to educate its students on proper online conduct may be most
timely. Too, it is not only STC but a number of schools and organizations have already
deemed it important to include digital literacy and good cyber citizenship in their
respective programs and curricula in view of the risks that the children are exposed to
every time they participate in online activities. 58 Furthermore, considering the
complexity of the cyber world and its pervasiveness, as well as the dangers that these
children are wittingly or unwittingly exposed to in view of their unsupervised activities in
cyberspace, the participation of the parents in disciplining and educating their children
about being a good digital citizen is encouraged by these institutions and organizations.
In fact, it is believed that "to limit such risks, there's no substitute for parental
involvement and supervision." 59

As such, STC cannot be faulted for being steadfast in its duty of teaching its students to
be responsible in their dealings and activities in cyberspace, particularly in OSNs, when it
enforced the disciplinary actions specified in the Student Handbook, absent a showing
that, in the process, it violated the students' rights.
OSN users should be aware of the risks that they expose themselves to whenever they
engage in cyberspace activities. Accordingly, they should be cautious enough to control
their privacy and to exercise sound discretion regarding how much information about
themselves they are willing to give up. Internet consumers ought to be aware that, by
entering or uploading any kind of data or information online, they are automatically and
inevitably making it permanently available online, the perpetuation of which is outside
the ambit of their control. Furthermore, and more importantly, information, otherwise
private, voluntarily surrendered by them can be opened, read, or copied by third parties
who may or may not be allowed access to such.

It is, thus, incumbent upon internet users to exercise due diligence in their online dealings
and activities and must not be negligent in protecting their rights. Equity serves the
vigilant. Demanding relief from the courts, as here, requires that claimants themselves
take utmost care in safeguarding a right which they allege to have been violated. These
are indispensable. We cannot afford protection to persons if they themselves did nothing
to place the matter within the confines of their private zone. OSN users must be mindful
enough to learn the use of privacy tools, to use them if they desire to keep the information
private, and to keep track of changes in the available privacy settings, such as those of
Facebook, especially because Facebook is notorious for changing these settings and the
site's layout often.

In finding that respondent STC and its officials did not violate the minors' privacy rights,
We find no cogent reason to disturb the findings and case disposition of the court a quo.

In light of the foregoing, the Court need not belabor the other assigned errors.

WHEREFORE, premises considered, the petition is hereby DENIED. The Decision

dated July 27, 2012 of the Regional Trial Court, Branch 14 in Cebu City in SP. Proc. No.
19251-CEB is hereby AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

Peralta, Villarama, Jr., Reyes and Jardeleza, JJ., concur.

||| (Vivares v. St. Theresa's College, G.R. No. 202666, [September 29, 2014])
 THIRD DIVISION

[G.R. No. 211356. September 29, 2014.]

CRISOSTOMO B. AQUINO, petitioner, vs. MUNICIPALITY OF

MALAY, AKLAN, represented by HON. MAYOR JOHN P. YAP,
SANGGUNIANG BAYAN OF MALAY, AKLAN, represented by
HON. EZEL FLORES, DANTE PASUGUIRON, ROWEN
AGUIRRE, WILBEC GELITO, JUPITER GALLENERO, OFFICE
OF THE MUNICIPAL ENGINEER, OFFICE OF THE
MUNICIPAL TREASURER, BORACAY PNP CHIEF, BORACAY
FOUNDATION, INC., represented by NENETTE GRAF,
MUNICIPAL AUXILIARY POLICE, and JOHN and JANE DOES,
respondents.

DECISION

VELASCO, JR., J : p

Nature of the Case

Before the Court is a Petition for Review on Certiorari challenging the Decision 1 and
the Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 120042 dated August
13, 2013 and February 3, 2014, respectively. The assailed rulings denied Crisostomo
Aquino's Petition for Certiorari for not being the proper remedy to question the issuance
and implementation of Executive Order No. 10, Series of 2011 (EO 10), ordering the
demolition of his hotel establishment.

The Facts

Petitioner is the president and chief executive officer of Boracay Island West Cove
Management Philippines, Inc. (Boracay West Cove). On January 7, 2010, the company
applied for a zoning compliance with the municipal government of Malay, Aklan. 2
While the company was already operating a resort in the area, the application sought the
issuance of a building permit covering the construction of a three-storey hotel over a
parcel of land measuring 998 sq.m. located in Sitio Diniwid, Barangay Balagab, Boracay
Island, Malay, Aklan, which is covered by a Forest Land Use Agreement for Tourism
Purposes (FLAgT) issued by the Department of Environment and Natural Resources
(DENR) in favor of Boracay West Cove.
Through a Decision on Zoning dated January 20, 2010, the Municipal Zoning
Administrator denied petitioner's application on the ground that the proposed
construction site was within the "no build zone" demarcated in Municipal Ordinance
2000-131 (Ordinance). 3 As provided in the Ordinance:

SECTION 2. Definition of Terms. — As used in this Ordinance, the following

words, terms and phrases shall mean as follows:

xxx xxx xxx

(b) No Build Zone — the space twenty-five (25) meters from the edge of the
mean high water mark measured inland;

xxx xxx xxx

SECTION 3. No building or structure of any kind whether temporary or

permanent shall be allowed to be set up, erected or constructed on the beaches
around the Island of Boracay and in its offshore waters. During the conduct of
special activities or special events, the Sangguniang Bayan may, through a
Resolution, authorize the Office of the Mayor to issue Special Permits for
construction of temporary structures on the beach for the duration of the
special activity as embodied in the Resolution.

In due time, petitioner appealed the denial action to the Office of the Mayor on February
1, 2010.TAacHE

On May 13, 2010, petitioner followed up his appeal through a letter but no action was
ever taken by the respondent mayor. On April 5, 2011, however, a Notice of Assessment
was sent to petitioner asking for the settlement of Boracay West Cove's unpaid taxes and
other liabilities under pain of a recommendation for closure in view of its continuous
commercial operation since 2009 sans the necessary zoning clearance, building permit,
and business and mayor's permit. In reply, petitioner expressed willingness to settle the
company's obligations, but the municipal treasurer refused to accept the tendered
payment. Meanwhile, petitioner continued with the construction, expansion, and
operation of the resort hotel.

Subsequently, on March 28, 2011, a Cease and Desist Order was issued by the municipal
government, enjoining the expansion of the resort, and on June 7, 2011, the Office of the
Mayor of Malay, Aklan issued the assailed EO 10, ordering the closure and demolition of
Boracay West Cove's hotel.

EO 10 was partially implemented on June 10, 2011. Thereafter, two more instances
followed wherein respondents demolished the improvements introduced by Boracay
West Cove, the most recent of which was made in February 2014. caCSDT
Alleging that the order was issued and executed with grave abuse of discretion, petitioner
filed a Petition for Certiorari with prayer for injunctive relief with the CA. He argued
that judicial proceedings should first be conducted before the respondent mayor could
order the demolition of the company's establishment; that Boracay West Cove was
granted a FLAgT by the DENR, which bestowed the company the right to construct
permanent improvements on the area in question; that since the area is a forestland, it is
the DENR — and not the municipality of Malay, or any other local government unit for
that matter — that has primary jurisdiction over the area, and that the Regional Executive
Director of DENR-Region 6 had officially issued an opinion regarding the legal issues
involved in the present case; that the Ordinance admits of exceptions; and lastly, that it is
the mayor who should be blamed for not issuing the necessary clearances in the
company's favor.

In rebuttal, respondents contended that the FLAgT does not excuse the company from
complying with the Ordinance and Presidential Decree No. 1096 (PD 1096), otherwise
known as the National Building Code of the Philippines. Respondents also argued that
the demolition needed no court order because the municipal mayor has the express power
under the Local Government Code (LGC)to order the removal of illegally constructed
buildings.

Ruling of the Court of Appeals

In its assailed Decision dated August 13, 2013, the CA dismissed the petition solely on
procedural ground, i.e., the special writ of certiorari can only be directed against a
tribunal, board, or officer exercising judicial or quasi-judicial functions and since the
issuance of EO 10 was done in the exercise of executive functions, and not of judicial or
quasi-judicial functions, certiorari will not lie. Instead, the proper remedy for the
petitioner, according to the CA, is to file a petition for declaratory relief with the
Regional Trial Court.

Petitioner sought reconsideration but this was denied by the CA on February 3, 2014
through the challenged Resolution. Hence, the instant petition raising arguments on both
procedure and substance.

The Issues

Stripped to the essentials, the pivotal issues in the extant case are as follows:

1. The propriety under the premises of the filing of a petition for

certiorari instead of a petition for declaratory relief;

a. Whether or not declaratory relief is still available to petitioner;

 b. Whether or not the CA correctly ruled that the respondent mayor
was performing neither a judicial nor quasi-judicial function
when he ordered the closure and demolition of Boracay
West Cove's hotel;

2. Whether or not respondent mayor committed grave abuse of

discretion when he issued EO 10;

a. Whether or not petitioner's right to due process was violated

when the respondent mayor ordered the closure and
demolition of Boracay West Cove's hotel without first
conducting judicial proceedings;

b. Whether or not the LGU's refusal to issue petitioner the

necessary building permit and clearances was justified;

c. Whether or not petitioner's rights under the FLAgT prevail over

the municipal ordinance providing for a no-build zone; and

d. Whether or not the DENR has primary jurisdiction over the

controversy, not the LGU.

The Court's Ruling

We deny the petition.

Certiorari, not declaratory relief, is the proper remedy

a. Declaratory relief no longer viable

Resolving first the procedural aspect of the case, We find merit in petitioner's contention
that the special writ of certiorari, and not declaratory relief, is the proper remedy for
assailing EO 10. As provided under Sec. 1, Rule 63 of the Rules of Court: SIcEHC

SECTION 1. Who may file petition. — Any person interested under a deed,
will, contract or other written instrument, whose rights are affected by a
statute, executive order or regulation, ordinance or any other governmental
regulation may, before breach or violation thereof, bring an action in the
appropriate Regional Trial Court to determine any question of construction or
validity arising, and for a declaration of his rights or duties, thereunder. . . .
(emphasis added)

An action for declaratory relief presupposes that there has been no actual breach of the
instruments involved or of the rights arising thereunder. Since the purpose of an action
for declaratory relief is to secure an authoritative statement of the rights and obligations
of the parties under a statute, deed, or contract for their guidance in the enforcement
thereof, or compliance therewith, and not to settle issues arising from an alleged breach
thereof, it may be entertained before the breach or violation of the statute, deed or
contract to which it refers. A petition for declaratory relief gives a practical remedy for
ending controversies that have not reached the state where another relief is immediately
available; and supplies the need for a form of action that will set controversies at rest
before they lead to a repudiation of obligations, an invasion of rights, and a commission
of wrongs. 4

In the case at bar, the petition for declaratory relief became unavailable by EO 10's
enforcement and implementation. The closure and demolition of the hotel rendered futile
any possible guidelines that may be issued by the trial court for carrying out the
directives in the challenged EO 10. Indubitably, the CA erred when it ruled that
declaratory relief is the proper remedy given such a situation.

b. Petitioner correctly resorted to certiorari

On the propriety of filing a petition for certiorari, Sec. 1, Rule 65 of the Rules of Court
provides:

Section 1. Petition for certiorari. — When any tribunal, board or officer

exercising judicial or quasi-judicial functions has acted without or in excess of
its or his jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction, and there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with certainty
and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such incidental
reliefs as law and justice may require. . . .

For certiorari to prosper, the petitioner must establish the concurrence of the following
requisites, namely:

1. The writ is directed against a tribunal, board, or officer exercising

judicial or quasi-judicial functions;

2. Such tribunal, board, or officer has acted without or in excess of

jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction; and

3. There is no appeal or any plain speedy, and adequate remedy in the

ordinary course of law. 5
Guilty of reiteration, the CA immediately dismissed the Petition for Certiorari upon
determining that the first element is wanting — that respondent mayor was allegedly not
exercising judicial or quasi-judicial functions when he issued EO 10.

We are not persuaded.

The CA fell into a trap when it ruled that a mayor, an officer from the executive
department, exercises an executive function whenever he issues an Executive Order. This
is tad too presumptive for it is the nature of the act to be performed, rather than of the
office, board, or body which performs it, that determines whether or not a particular act is
a discharge of judicial or quasi-judicial functions. The first requirement for certiorari is
satisfied if the officers act judicially in making their decision, whatever may be their
public character. 6

It is not essential that the challenged proceedings should be strictly and technically
judicial, in the sense in which that word is used when applied to courts of justice, but it is
sufficient if they are quasi-judicial. 7 To contrast, a party is said to be exercising a
judicial function where he has the power to determine what the law is and what legal
rights of the parties are, and then undertakes to determine these questions and adjudicate
upon the rights of the parties, whereas quasi-judicial function is "a term which applies to
the actions, discretion, etc., of public administrative officers or bodies . . . required to
investigate facts or ascertain the existence of facts, hold hearings, and draw conclusions
from them as a basis for their official action and to exercise discretion of a judicial
nature." 8

In the case at bench, the assailed EO 10 was issued upon the respondent mayor's finding
that Boracay West Cove's construction, expansion, and operation of its hotel in Malay,
Aklan is illegal. Such a finding of illegality required the respondent mayor's exercise of
quasi-judicial functions, against which the special writ of certiorari may lie. Apropos
hereto is Our ruling in City Engineer of Baguio v. Baniqued: 9

There is no gainsaying that a city mayor is an executive official nor is the

matter of issuing demolition notices or orders not a ministerial one. In
determining whether or not a structure is illegal or it should be demolished,
property rights are involved thereby needing notices and opportunity to be
heard as provided for in the constitutionally guaranteed right of due process.
In pursuit of these functions, the city mayor has to exercise quasi-judicial
powers.

With the foregoing discussion, the CA erred in ruling that the respondent mayor was
merely exercising his executive functions, for clearly, the first requisite for the special
writ has been satisfied.
Aside from the first requisite, We likewise hold that the third element, i.e., the
unavailability of a plain, speedy, or adequate remedy, is also present herein. While it may
be argued that, under the LGC,Executive Orders issued by mayors are subject to review
by provincial governors, 10 this cannot be considered as an adequate remedy given the
exigencies of petitioner's predicament.

In a litany of cases, We have held that it is inadequacy, not the mere absence of all other
legal remedies and the danger of failure of justice without the writ, that must usually
determine the propriety of certiorari. A remedy is plain, speedy and adequate if it will
promptly relieve the petitioner from the injurious effects of the judgment, order, or
resolution of the lower court or agency. It is understood, then, that a litigant need not
mark time by resorting to the less speedy remedy of appeal in order to have an order
annulled and set aside for being patently void for failure of the trial court to comply with
the Rules of Court. 11

Before applying this doctrine, it must first be borne in mind that respondents in this case
have already taken measures towards implementing EO 10. In fact, substantial segments
of the hotel have already been demolished pursuant to the mayor's directive. It is then
understandable why petitioner prayed for the issuance of an injunctive writ — a
provisional remedy that would otherwise have been unavailable had he sought a reversal
from the office of the provincial governor of Aklan. Evidently, petitioner correctly saw
the urgent need for judicial intervention via certiorari.

In light of the foregoing, the CA should have proceeded to grab the bull by its horns and
determine the existence of the second element of certiorari — whether or not there was
grave abuse of discretion on the part of respondents.

Upon Our finding that a petition for certiorari under Rule 65 is the appropriate remedy,
We will proceed to resolve the core issues in view of the urgency of the reliefs prayed for
in the petition.

Respondents did not commit grave abuse of discretion

a. The hotel's classification as a nuisance

Article 694 of the Civil Code defines "nuisance" as any act, omission, establishment,
business, condition or property, or anything else that (1) injures or endangers the health
or safety of others; (2) annoys or offends the senses; (3) shocks, defies or disregards
decency or morality; (4) obstructs or interferes with the free passage of any public
highway or street, or any body of water; or (5) hinders or impairs the use of property. 12

In establishing a no build zone through local legislation, the LGU effectively made a
determination that constructions therein, without first securing exemptions from the local
council, qualify as nuisances for they pose a threat to public safety. No build zones are
intended for the protection of the public because the stability of the ground's foundation
is adversely affected by the nearby body of water. The ever present threat of high rising
storm surges also justifies the ban on permanent constructions near the shoreline. Indeed,
the area's exposure to potential geo-hazards cannot be ignored and ample protection to
the residents of Malay, Aklan should be afforded.

Challenging the validity of the public respondents' actuations, petitioner posits that the
hotel cannot summarily be abated because it is not a nuisance per se, given the hundred
million peso-worth of capital infused in the venture. Citing Asilo, Jr. v. People, 13
petitioner also argues that respondents should have first secured a court order before
proceeding with the demolition. SDTIaE

Preliminarily, We agree with petitioner's posture that the property involved cannot be
classified as a nuisance per se, but not for the reason he so offers. Property valuation,
after all, is not the litmus test for such a determination. More controlling is the property's
nature and conditions, which should be evaluated to see if it qualifies as a nuisance as
defined under the law.

As jurisprudence elucidates, nuisances are of two kinds: nuisance per se and nuisance per
accidens. The first is recognized as a nuisance under any and all circumstances, because
it constitutes a direct menace to public health or safety, and, for that reason, may be
abated summarily under the undefined law of necessity. The second is that which
depends upon certain conditions and circumstances, and its existence being a question of
fact, it cannot be abated without due hearing thereon in a tribunal authorized to decide
whether such a thing does in law constitute a nuisance. 14

In the case at bar, the hotel, in itself, cannot be considered as a nuisance per se since this
type of nuisance is generally defined as an act, occupation, or structure, which is a
nuisance at all times and under any circumstances, regardless of location or
surrounding. 15 Here, it is merely the hotel's particular incident — its location — and not
its inherent qualities that rendered it a nuisance. Otherwise stated, had it not been
constructed in the no build zone, Boracay West Cove could have secured the necessary
permits without issue. As such, petitioner is correct that the hotel is not a nuisance per se,
but to Our mind, it is still a nuisance per accidens.

b. Respondent mayor has the power to order the demolition of illegal

constructions

Generally, LGUs have no power to declare a particular thing as a nuisance unless such a
thing is a nuisance per se. 16 So it was held in AC Enterprises v. Frabelle Properties
Corp.: 17
 We agree with petitioner's contention that, under Section 447(a)(3)(i) of R.A.
No. 7160, otherwise known as the Local Government Code, the Sangguniang
Panglungsod is empowered to enact ordinances declaring, preventing or abating
noise and other forms of nuisance. It bears stressing, however, that the
Sangguniang Bayan cannot declare a particular thing as a nuisance per se and
order its condemnation. It does not have the power to find, as a fact, that a
particular thing is a nuisance when such thing is not a nuisance per se; nor
can it authorize the extrajudicial condemnation and destruction of that as a
nuisance which in its nature, situation or use is not such. Those things must
be determined and resolved in the ordinary courts of law. If a thing, be in
fact, a nuisance due to the manner of its operation, that question cannot be
determined by a mere resolution of the Sangguniang Bayan. (emphasis
supplied)

Despite the hotel's classification as a nuisance per accidens, however, We still find in this
case that the LGU may nevertheless properly order the hotel's demolition. This is
because, in the exercise of police power and the general welfare clause, 18 property
rights of individuals may be subjected to restraints and burdens in order to fulfil the
objectives of the government. Otherwise stated, the government may enact legislation
that may interfere with personal liberty, property, lawful businesses and occupations to
promote the general welfare. 19

One such piece of legislation is the LGC,which authorizes city and municipal
governments, acting through their local chief executives, to issue demolition orders.
Under existing laws, the office of the mayor is given powers not only relative to its
function as the executive official of the town; it has also been endowed with authority to
hear issues involving property rights of individuals and to come out with an effective
order or resolution thereon. 20 Pertinent herein is Sec. 444 (b) (3) (vi) of the LGC,which
empowered the mayor to order the closure and removal of illegally constructed
establishments for failing to secure the necessary permits, to wit:

Section 444. The Chief Executive: Powers, Duties, Functions and

Compensation. —

xxx xxx xxx

(b) For efficient, effective and economical governance the purpose of which is
the general welfare of the municipality and its inhabitants pursuant to Section
16 of this Code, the municipal mayor shall:

xxx xxx xxx

(3) Initiate and maximize the generation of resources and revenues, and
apply the same to the implementation of development plans, program
objectives and priorities as provided for under Section 18 of this Code,
 particularly those resources and revenues programmed for agro-
industrial development and country-wide growth and progress, and
relative thereto, shall:

xxx xxx xxx

(vi) Require owners of illegally constructed houses, buildings

or other structures to obtain the necessary permit, subject to
such fines and penalties as may be imposed by law or
ordinance, or to make necessary changes in the construction
of the same when said construction violates any law or
ordinance, or to order the demolition or removal of said
house, building or structure within the period prescribed by
law or ordinance. (emphasis supplied)

c. Requirements for the exercise of the power are present

i. Illegality of structures

In the case at bar, petitioner admittedly failed to secure the necessary permits, clearances,
and exemptions before the construction, expansion, and operation of Boracay Wet Cove's
hotel in Malay, Aklan. To recall, petitioner declared that the application for zoning
compliance was still pending with the office of the mayor even though construction and
operation were already ongoing at the same time. As such, it could no longer be denied
that petitioner openly violated Municipal Ordinance 2000-131, which provides:

SECTION 9. Permits and Clearances. —

(a) No building or structure shall be allowed to start construction unless a

Building Permit therefore has been duly issued by the Office of the
Municipal Engineer. Once issued, the building owner or any person in
charge of the construction shall display on the lot or on the building
undergoing construction a placard containing the Building Permit
Number and the date of its issue. The office of the Municipal Engineer
shall not issue any building permit unless:

1. The proposed construction has been duly issued a Zoning

Clearance by the Office of the Municipal Zoning Officer;

2. The proposed construction has been duly endorsed by the

Sangguniang Bayan through a Letter of Endorsement.

(b) Only buildings/structures which has complied with all the requirements for
its construction as verified to by the Building Inspector and the
Sangguniang Bayan shall be issued a Certificate of Occupancy by the
Office of the Municipal Engineer.
 (c) No Business or Mayor's Permit shall be issued to businesses being
undertaken on buildings or structures which were not issued a
certificate of Occupancy beginning January 2001 and thereafter.

xxx xxx xxx

SECTION 10. Penalties. —

xxx xxx xxx

(e) Any building, structure, or contraption erected in any public place within the
Municipality of Malay such as but not limited to streets, thoroughfares,
sidewalks, plazas, beaches or in any other public place are hereby declared as
nuisance and illegal structure. Such building structure or contraption shall be
demolished by the owner thereof or any of his authorized representative
within ten (10) days from receipt of the notice to demolish. Failure or
refusal on the part of the owner or any of his authorized representative to
demolish the illegal structure within the period herein above specified shall
automatically authorize the government of the Municipality of Malay to
demolish the same, gather and keep the construction materials of the
demolished structure. (emphasis supplied) CTcSIA

Petitioner cannot justify his position by passing the blame onto the respondent mayor and
the latter's failure to act on his appeal for this does not, in any way, imply that petitioner
can proceed with his infrastructure projects. On the contrary, this only means that the
decision of the zoning administrator denying the application still stands and that
petitioner acquired no right to construct on the no build zone. The illegality of the
construction cannot be cured by merely tendering payment for the necessary fees and
permits since the LGU's refusal rests on valid grounds.

Instead of taking the law into his own hands, petitioner could have filed, as an alternative,
a petition for mandamus to compel the respondent mayor to exercise discretion and
resolve the controversy pending before his office. There is indeed an exception to the rule
that matters involving judgment and discretion are beyond the reach of a writ of
mandamus, for such writ may be issued to compel action in those matters, when refused.
Whether or not the decision would be for or against petitioner would be for the
respondent mayor to decide, for while mandamus may be invoked to compel the exercise
of discretion, it cannot compel such discretion to be exercised in a particular way. 21
What would have been important was for the respondent mayor to immediately resolve
the case for petitioner to be able to go through the motions that the zoning clearance
application process entailed.

Alas, petitioner opted to defy the zoning administrator's ruling. He consciously chose to
violate not only the Ordinance but also Sec. 301 of PD 1096, laying down the
requirement of building permits, which provides:
 Section 301. Building Permits. — No person, firm or corporation, including
any agency or instrumentality of the government shall erect, construct, alter,
repair, move, convert or demolish any building or structure or cause the same
to be done without first obtaining a building permit therefor from the Building
Official assigned in the place where the subject building is located or the
building work is to be done.

This twin violation of law and ordinance warranted the LGU's invocation of Sec. 444 (b)
(3) (vi) of the LGC,which power is separate and distinct from the power to summarily
abate nuisances per se. Under the law, insofar as illegal constructions are concerned, the
mayor can, after satisfying the requirement of due notice and hearing, order their closure
and demolition.

ii. Observance of procedural due process rights

In the case at bench, the due process requirement is deemed to have been sufficiently
complied with. First, basic is the rule that public officers enjoy the presumption of
regularity in the performance of their duties. 22 The burden is on the petitioner herein to
prove that Boracay West Cove was deprived of the opportunity to be heard before EO 10
was issued. Regrettably, copies of the Cease and Desist Order issued by the LGU and of
the assailed EO 10 itself were never attached to the petition before this Court, which
documents could have readily shed light on whether or not petitioner has been accorded
the 10-day grace period provided in Section 10 of the Ordinance. In view of this fact, the
presumption of regularity must be sustained. Second, as quoted by petitioner in his
petition before the CA, the assailed EO 10 states that petitioner received notices from the
municipality government on March 7 and 28, 2011, requiring Boracay West Cove to
comply with the zoning ordinance and yet it failed to do so. 23 If such was the case, the
grace period can be deemed observed and the establishment was already ripe for closure
and demolition by the time EO 10 was issued in June. Third, the observance of the 10-
day allowance for the owner to demolish the hotel was never questioned by petitioner so
there is no need to discuss the same. Verily, the only grounds invoked by petitioner in
crying due process violation are (1) the absence of a court order prior to demolition and
(2) the municipal government's exercise of jurisdiction over the controversy instead of
the DENR. Therefore, it can no longer be belatedly argued that the 10-day grace period
was not observed because to entertain the same would result in the violation of the
respondents' own due process rights.

Given the presence of the requirements under Sec. 444 (b) (3) (vi) of the LGC,whether
the building constituted a nuisance per se or a nuisance per accidens becomes immaterial.
The hotel was demolished not exactly because it is a nuisance but because it failed to
comply with the legal requirements prior to construction. It just so happened that, in the
case at bar, the hotel's incident that qualified it as a nuisance per accidens — its being
constructed within the no build zone — further resulted in the non-issuance of the
necessary permits and clearances, which is a ground for demolition under the LGC.Under
the premises, a court order that is required under normal circumstances is hereby
dispensed with.

d. The FLAgT cannot prevail over the municipal ordinance and PD

1096

Petitioner next directs our attention to the following FLAgT provision:

VII. The SECOND PARTY may construct permanent and/or temporary

improvements or infrastructure in the FLAgT Area necessary and appropriate
for its development for tourism purposes pursuant to the approved SMP.
"Permanent Improvements" refer to access roads, and buildings or structures
which adhere to the ground in a fixed and permanent manner. On the other
hand, "Temporary Improvements" include those which are detachable from
the foundation or the ground introduced by the SECOND PARTY in the
FLAgT Area and which the SECOND PARTY may remove or dismantle
upon expiration or cancellation of this AGREEMENT . . . . 24

Taken in conjunction with the exceptions laid down in Sections 6 and 8 of the Ordinance,
petitioner argues that Boracay West Cove is exempted from securing permits from the
LGU. Said exceptions read:

SECTION 6. No building or structure shall be allowed to be constructed on a

slope Twenty Five Percent (25%) or higher unless provided with soil erosion
protective structures and authorized by the Department of Environment and
Natural Resources.

xxx xxx xxx

SECTION 8. No building or structure shall be allowed to be constructed on a

swamp or other water-clogged areas unless authorized by the Department of
Environment and Natural Resources.

According to petitioner, the fact that it was issued a FLAgT constitutes sufficient
authorization from the DENR to proceed with the construction of the three-storey hotel.

The argument does not persuade.

The rights granted to petitioner under the FLAgT are not unbridled. Forestlands, although
under the management of the DENR, are not exempt from the territorial application of
municipal laws, for local government units legitimately exercise their powers of
government over their defined territorial jurisdiction.
SITCEA
Furthermore, the conditions set forth in the FLAgT and the limitations circumscribed in
the ordinance are not mutually exclusive and are, in fact, cumulative. As sourced from
Sec. 447 (a) (5) (i) of the LGC:

Section 447. Powers, Duties, Functions and Compensation. —

(a) The sangguniang bayan, as the legislative body of the municipality, shall
enact ordinances, approve resolutions and appropriate funds for the
general welfare of the municipality and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate
powers of the municipality as provided for under Section 22 of this
Code, and shall:

xxx xxx xxx

(5) Approve ordinances which shall ensure the efficient and effective
delivery of the basic services and facilities as provided for under Section
17 of this Code, and in addition to said services and facilities, shall:

(i) Provide for the establishment, maintenance, protection,

and conservation of communal forests and watersheds, tree
parks, greenbelts, mangroves, and other similar forest
development projects . . . . (emphasis added)

Thus, aside from complying with the provisions in the FLAgT granted by the DENR, it
was incumbent on petitioner to likewise comply with the no build zone restriction under
Municipal Ordinance 2000-131, which was already in force even before the FLAgT was
entered into. On this point, it is well to stress that Sections 6 and 8 of the Ordinance do
not exempt petitioner from complying with the restrictions since these provisions
adverted to grant exemptions from the ban on constructions on slopes and swamps, not
on the no build zone.

Additionally, the FLAgT does not excuse petitioner from complying with PD 1096. As
correctly pointed out by respondents, the agreement cannot and will not amend or change
the law because a legislative act cannot be altered by mere contractual agreement. Hence,
petitioner has no valid reason for its failure to secure a building permit pursuant to Sec.
301 of the National Building Code.

e. The DENR does not have primary jurisdiction over the controversy

Lastly, in ascribing grave abuse of discretion on the part of the respondent mayor,
petitioner argued that the hotel site is a forestland under the primary jurisdiction of the
DENR. As such, the merits of the case should have been passed upon by the agency and
not by the LGU. In the alternative, petitioner explains that even if jurisdiction over the
matter has been devolved in favor of the LGU, the DENR still has the power of review
and supervision over the former's rulings. As cited by the petitioner, the LGC reads:

Section 17. Basic Services and Facilities. —

xxx xxx xxx

(b) Such basic services and facilities include, but are not limited to, the
following:

xxx xxx xxx

(2) For a Municipality:

xxx xxx xxx

(ii) Pursuant to national policies and subject to

supervision, control and review of the DENR,
implementation of community-based forestry projects
which include integrated social forestry programs and
similar projects; management and control of communal
forests with an area not exceeding fifty (50) square
kilometers; establishment of tree parks, greenbelts, and
similar forest development projects. (emphasis added)

Petitioner has made much of the fact that in line with this provision, the DENR Region 6
had issued an opinion favourable to petitioner. 25 To petitioner, the adverted opinion
effectively reversed the findings of the respondent mayor that the structure introduced
was illegally constructed.

We disagree. SHTcDE

In alleging that the case concerns the development and the proper use of the country's
environment and natural resources, petitioner is skirting the principal issue, which is
Boracay West Cove's non-compliance with the permit, clearance, and zoning
requirements for building constructions under national and municipal laws. He
downplays Boracay West Cove's omission in a bid to justify ousting the LGU of
jurisdiction over the case and transferring the same to the DENR. He attempts to blow the
issue out of proportion when it all boils down to whether or not the construction of the
three-storey hotel was supported by the necessary documentary requirements.

Based on law and jurisprudence, the office of the mayor has quasi-judicial powers to
order the closing and demolition of establishments. This power granted by the LGC,as
earlier explained, We believe, is not the same power devolved in favor of the LGU under
Sec. 17 (b) (2) (ii), as above-quoted, which is subject to review by the DENR. The fact
that the building to be demolished is located within a forestland under the administration
of the DENR is of no moment, for what is involved herein, strictly speaking, is not an
issue on environmental protection, conservation of natural resources, and the
maintenance of ecological balance, but the legality or illegality of the structure. Rather
than treating this as an environmental issue then, focus should not be diverted from the
root cause of this debacle — compliance.

Ultimately, the purported power of review by a regional office of the DENR over
respondents' actions exercised through an instrumentality of an ex-parte opinion, in this
case, finds no sufficient basis. At best, the legal opinion rendered, though perhaps
informative, is not conclusive on the courts and should be taken with a grain of salt.

WHEREFORE, in view of the foregoing, the petition is hereby DENIED for lack of
merit. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No.
120042 dated August 13, 2013 and February 3, 2014, respectively, are hereby
AFFIRMED.

SO ORDERED.

Peralta, Villarama, Jr., Reyes and Jardeleza, JJ., concur.

||| (Aquino v. Municipality of Malay, Aklan, G.R. No. 211356, [September 29, 2014])
 THIRD DIVISION

[G.R. No. 201001. November 10, 2014.]

MCMP CONSTRUCTION CORP., petitioner, vs. MONARK

EQUIPMENT CORP., respondent.

RESOLUTION

VELASCO, JR., J : p

For consideration of the Court is a Petition for Review on Certiorari dated April 20, 2012
1 filed by MCMP Construction Corp. under Rule 45 of the Rules of Court. The petition
seeks the reversal of the Decision dated October 14, 2011 2 and Resolution dated March
9, 2012 3 issued by the Court of Appeals (CA) in CA G.R. CV No. 91860 entitled
Monark Equipment Corporation v. MCMP Construction Corporation. The CA Decision
affirmed the Decision dated November 20, 2007 4 and Order dated April 28, 2008 5
issued by the Regional Trial Court, Branch 96 in Quezon City (RTC) in Civil Case No.
Q-02-47092 entitled Monark Equipment Corporation v. MCMP Construction
Corporation.

The facts of the case are as follows:

MCMP Construction Corporation (MCMP) leased heavy equipment from Monark

Equipment Corporation (Monark) for various periods in 2000, the lease covered by a
Rental Equipment Contract (Contract). Thus, Monark delivered five (5) pieces of heavy
equipment to the project site of MCMP in Tanay, Rizal and Llavac, Quezon, the delivery
evidenced by invoices as well as Documents Acknowledgment Receipt Nos. 04667 and
5706, received and signed by representatives of MCMP, namely, Jorge Samonte on
December 5, 2000 and Rose Takahashi on January 29, 2001, respectively. Notably, the
invoices state:

"Credit sales are payable within 30 days from the date of invoice. Customer
agrees to pay interest at 24% p.a. on all amounts. In addition, customer agrees to
pay a collection fee of 1% compounded monthly and 2% per month penalty
charge for late payment on amounts overdue. Customer agrees to pay a sum
equal to 25% of any amount due as attorney's fees in case of suit, and expressly
submit to the jurisdiction of the courts of Quezon City, Makati, Pasig or Manila,
Metro Manila, for any legal action arising from, this transactions."
Despite the lapse of the thirty (30)-day period indicated in the invoices, MCMP failed to
pay the rental fees. Upon demands made upon MCMP to pay the amount due, partial
payments were made in the amount of PhP100,000.00 on April 15, 2001 and
PhP100,000.00 on August 15, 2001. Further demands went unheeded. As of April 30,
2002, MCMP owed Monark the amount of PhP1,282,481.83, broken down as follows:

Principal Accumulated PhP765,380.33

Interest (2%) 253,226.17
2% Monthly Penalty Charge 253,226.17
Collection Fee (1%) 10,649.16
––––––––––––––
PhP1,282,481.83 6
=============

Thus, on June 18, 2002, Monark filed a suit for a Sum of Money with the RTC docketed
as Civil Case No. Q-02-47092. 7 In its Answer filed on July 5, 2002, 8 MCMP alleged in
defense that the complaint was premature as Monark has refused to give a detailed
breakdown of its claims. MCMP further averred that it had an agreement with Monark
that it would not be charged for the whole time that the leased equipment was in its
possession but rather only for the actual time that the equipment was used although still
on the project site. MCMP, however, admitted that this agreement was not contained in
the Contract.

During trial, Monark presented as one of its witnesses, Reynaldo Peregrino (Peregrino),
its Senior Account Manager. Peregrino testified that there were two (2) original copies of
the Contract, one retained by Monark, while the other was given to MCMP. He further
testified that Monark's copy had been lost and that diligent efforts to recover the copy
proved futile. Instead, Peregrino presented a photocopy of the Contract which he
personally had on file. MCMP objected to the presentation of secondary evidence to
prove the contents of the Contract arguing that there were no diligent efforts to search for
the original copy. Notably, MCMP did not present its copy of the Contract
notwithstanding the directive of the trial court to produce the same. 9

On November 20, 2007, the RTC issued its Decision finding for Monark as plaintiff, the
dispositive portion of which reads: cEAHSC

"WHEREFORE, in view of the foregoing findings and legal premises, judgment

is hereby rendered in favor of the plaintiff, and ordering the defendant to pay the
former:

1. PhP1,282,481.83 as balance for the rental fees of the subject heavy

equipments (sic) as of April 30, 2002, inclusive of the interests thereof;
 2. Twenty-Five percent (25%) of the total amount to be recovered as payment
for the attorney's fees; and,

3. The costs of suit.

SO ORDERED."

From this Decision of the RTC, MCMP filed a Motion for Reconsideration dated January
31, 2008 while Monark interposed a Motion for Clarification and/or Partial
Reconsideration. 10 On April 28, 2008, the RTC issued an Order, disposing as follows:

"WHEREFORE, in light of the foregoing, the Court finds no reversible error in

the assailed decision henceforth, the Motion for Reconsideration of defendant is
hereby DENIED for lack of merit. On the other hand, the plaintiff's Motion for
Clarification and/or Partial Reconsideration is hereby GRANTED for being
meritorious. Therefore, in the dispositive portion of the assailed decision dated
20 November 2007, the following should be included:

'The payment of interests, charges and fees due after April 30, 2002 and up to
the time when all the obligations of the defendant to the plaintiff shall have been
fully paid, computed in accordance with the stipulations entered into between
the parties under Exhibits "A" to "G", and uniformly stated in the following
wise:

Credit sales are payable within 30 days from the date of invoice.
Customer agrees to pay interest at 24% p.a. on all amounts. In addition,
customer agrees to pay a collection fee of 1% compounded monthly and
2% per month penalty charge for late payment on amounts overdue.
Customer agrees to pay a sum equal to 25% of any amount due as
attorney's fees in case of suit, and expressly submit to the jurisdiction of
the courts of Quezon City, Makati, Pasig or Manila, Metro Manila, for
any legal action arising from, this transactions.'

SO ORDERED."

Unsatisfied, MCMP appealed the RTC's Decision and Order to the Court of Appeals
(CA). Eventually, the appellate court, by a Decision dated October 14, 2011, affirmed in
toto the Decision and Order of the RTC. MCMP's motion for reconsideration of the CA
Decision was denied by the CA in its Resolution dated March 9, 2012.

Hence, the instant petition.

MCMP challenges the ruling of the CA arguing that the appellate court should have
disallowed the presentation of secondary evidence to prove the existence of the Contract,
following the Best Evidence Rule. MCMP specifically argues that based on the testimony
of Peregrino, Monark did not diligently search for the original copy of the Contract as
evidenced by the fact that: 1) the actual custodian of the document was not presented; 2)
the alleged loss was not even reported to management or the police; and 3) Monark only
searched for the original copy of the document for the purposes of the instant case.

Petitioner's contention is erroneous.

The Best Evidence Rule, a basic postulate requiring the production of the original
document whenever its contents are the subject of inquiry, is contained in Section 3 of
Rule 130 of the Rules of Court which provides:

"Section 3. Original document must be produced; exceptions. — When the

subject of inquiry is the contents of a document, no evidence shall be admissible
other than the original document itself, except in the following cases:

(a) When the original has been lost or destroyed, or cannot be produced in
court, without bad faith on the part of the offeror;

(b) When the original is in the custody or under the control of the party
against whom the evidence is offered, and the latter fails to produce it after
reasonable notice;

(c) When the original consists of numerous accounts or other documents which
cannot be examined in court without great loss of time and the fact sought to be
established from them is only the general result of the whole; and SECHIA

(d) When the original is a public record in the custody of a public officer or is
recorded in a public office. (Emphasis supplied)"

Relative thereto, Sections 5 and 6 of Rule 130 provide the relevant rules on the
presentation of secondary evidence to prove the contents of a lost document:

"Section 5. When original document is unavailable. — When the original

document has been lost or destroyed, or cannot be produced in court, the
offeror, upon proof of its execution or existence and the cause of its
unavailability without bad faith on his part, may prove its contents by a copy, or
by a recital of its contents in some authentic document, or by the testimony of
witnesses in the order stated. (4a)

Section 6. When original document is in adverse party's custody or control. —

If the document is in the custody or under the control of adverse party, he must
have reasonable notice to produce it. If after such notice and after satisfactory
proof of its existence, he fails to produce the document, secondary evidence
may be presented as in the case of its loss."
In Country Bankers Insurance Corporation v. Lagman, 11 the Court set down the
requirements before a party may present secondary evidence to prove the contents of the
original document whenever the original copy has been lost:

Before a party is allowed to adduce secondary evidence to prove the contents of

the original, the offeror must prove the following: (1) the existence or due
execution of the original; (2) the loss and destruction of the original or the
reason for its non-production in court; and (3) on the part of the offeror, the
absence of bad faith to which the unavailability of the original can be attributed.
The correct order of proof is as follows: existence, execution, loss, and contents.

In the instant case, the CA correctly ruled that the above requisites are present. Both the
CA and the RTC gave credence to the testimony of Peregrino that the original Contract in
the possession of Monark has been lost and that diligent efforts were exerted to find the
same but to no avail. Such testimony has remained uncontroverted. As has been
repeatedly held by this Court, "findings of facts and assessment of credibility of
witnesses are matters best left to the trial court." 12 Hence, the Court will respect the
evaluation of the trial court on the credibility of Peregrino.

MCMP, to note, contends that the Contract presented by Monark is not the contract that
they entered into. Yet, it has failed to present a copy of the Contract even despite the
request of the trial court for it to produce its copy of the Contract. 13 Normal business
practice dictates that MCMP should have asked for and retained a copy of their
agreement. Thus, MCMP's failure to present the same and even explain its failure, not
only justifies the presentation by Monark of secondary evidence in accordance with
Section 6 of Rule 130 of the Rules of Court,but it also gives rise to the disputable
presumption adverse to MCMP under Section 3 (e) of Rule 131 of the Rules of Court that
"evidence willfully suppressed would be adverse if produced."

Next, MCMP claims that the pieces of equipment were not actually delivered to it by
Monark. It bears pointing out, however, that the witnesses of MCMP itself, Jorge
Samonte, a Budget Supervisor of MCMP, and Engr. Horacio A. Martinez, Sr., General
Manager of MCMP, both acknowledged the delivery of the equipment to the project
sites. 14 Clearly, the contention of MCMP is false.

Evidently, the instant petition must be dismissed.

Nevertheless, the Court takes notice that the trial court imposed upon MCMP a 24% per
annum interest on the rental fees as well as a collection fee of 1% per month compounded
monthly and a 2% per month penalty charge. In all then, the effective interest rate foisted
upon MCMP is 60% per annum. On top of this, MCMP was assessed for attorney's fees
at the rate of 25% of the total amount due. These are exorbitant and unconscionable rates
and, following jurisprudence, must be equitably reduced.
In Macalinao v. Bank of the Philippine Islands, 15 the Court reduced the interest imposed
by the bank of 36% for being excessive and unconscionable:

". . . Nevertheless, it should be noted that this is not the first time that this Court
has considered the interest rate of 36% per annum as excessive and
unconscionable. We held in Chua vs. Timan:

The stipulated interest rates of 7% and 5% per month imposed on

respondents' loans must be equitably reduced to 1% per month or 12%
per annum. We need not unsettle the principle we had affirmed in a
plethora of cases that stipulated interest rates of 3% per month and
higher are excessive, iniquitous, unconscionable and exorbitant. Such
stipulations are void for being contrary to morals, if not against the law.
While C.B. Circular No. 905-82, which took effect on January 1, 1983,
effectively removed the ceiling on interest rates for both secured and
unsecured loans, regardless of maturity, nothing in the said circular
could possibly be read as granting carte blanche authority to lenders to
raise interest rates to levels which would either enslave their borrowers
or lead to a hemorrhaging of their assets. (Emphasis supplied.)

Since the stipulation on the interest rate is void, it is as if there was no express
contract thereon. Hence, courts may reduce the interest rate as reason and equity
demand.

The same is true with respect to the penalty charge. Notably, under the Terms
and Conditions Governing the Issuance and Use of the BPI Credit Card, it was
also stated therein that respondent BPI shall impose an additional penalty charge
of 3% per month. Pertinently, Article 1229 of the Civil Code states:

Art. 1229. The judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with by the
debtor. Even if there has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or unconscionable.

In exercising this power to determine what is iniquitous and unconscionable,

courts must consider the circumstances of each case since what may be
iniquitous and unconscionable in one may be totally just and equitable in
another."

In the more recent case of Pentacapital Investment Corporation v. Mahinay, 16 the Court
reduced the interest and penalties imposed in a contract as follows:

"Aside from the payment of the principal obligation of P1,936,800.00, the

parties agreed that respondent pay interest at the rate of 25% from February 17,
1997 until fully paid. Such rate, however, is excessive and thus, void. Since the
stipulation on the interest rate is void, it is as if there was no express contract
 thereon. To be sure, courts may reduce the interest rate as reason and equity
demand. In this case, 12% interest is reasonable.cDCSTA

The promissory notes likewise required the payment of a penalty charge of 3%

per month or 36% per annum. We find such rates unconscionable. This Court
has recognized a penalty clause as an accessory obligation which the parties
attach to a principal obligation for the purpose of ensuring the performance
thereof by imposing on the debtor a special prestation (generally consisting of
the payment of a sum of money) in case the obligation is not fulfilled or is
irregularly or inadequately fulfilled. However, a penalty charge of 3% per
month is unconscionable; hence, we reduce it to 1% per month or 12% per
annum, pursuant to Article 1229 of the Civil Code which states:

Art. 1229. The judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with by the
debtor. Even if there has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or unconscionable.

Lastly, respondent promised to pay 25% of his outstanding obligations as

attorney's fees in case of non-payment thereof. Attorney's fees here are in the
nature of liquidated damages. As long as said stipulation does not contravene
law, morals, or public order, it is strictly binding upon respondent. Nonetheless,
courts are empowered to reduce such rate if the same is iniquitous or
unconscionable pursuant to the above-quoted provision. This sentiment is
echoed in Article 2227 of the Civil Code, to wit:

Art. 2227. Liquidated damages, whether intended as an indemnity or a

penalty, shall be equitably reduced if they are iniquitous or
unconscionable.

Hence, we reduce the stipulated attorney's fees from 25% to 10%."

Following the above principles previously laid down by the Court, the interest and
penalty charges imposed upon MCMP must also be considered as iniquitous,
unconscionable and, therefore, void. As such, the rates may validly be reduced. Thus, the
interest rate of 24% per annum is hereby reduced to 12% per annum. Moreover, the
interest shall start to accrue thirty (30) days after receipt of the second set of invoices on
January 21, 2001, or March 1, 2001 in accordance with the provisions in the invoices
themselves.

Additionally, the penalty and collection charge of 3% per month, or 36% per annum, is
also reduced to 6% per annum. And the amount of attorney's fees is reduced from 25% of
the total amount due to 5%.
WHEREFORE, premises considered, the instant petition is hereby DENIED for lack of
merit with the MODIFICATION that the dispositive portion of the RTC's Decision
dated November 20, 2007, as amended in an Order dated April 28, 2008, should read:

WHEREFORE, in view of the foregoing findings and legal premises, judgment

is hereby rendered in favor of the plaintiff, and ordering the defendant to pay the
former:

1. PhP765,380.33 representing the unpaid rental fees;

2. Interest of 12% per annum on the unpaid rental fees to be computed from
March 1, 2001 17 until payment;

3. Penalty and collection charge of 6% per annum on the unpaid rental fees to
be computed from March 1, 2001;

4. Attorney's Fees of five percent (5%) of the total amount to be recovered; and,

5. The costs of suit.

SO ORDERED.

Villarama, Jr., Reyes, Perlas-Bernabe * and Jardeleza, JJ., concur.

(MCMP Construction Corp. v. Monark Equipment Corp., G.R. No. 201001 (Resolution),
|||

[November 10, 2014])

 THIRD DIVISION

[G.R. No. 203560. November 10, 2014.]

REPUBLIC OF THE PHILIPPINES, petitioner, vs. APOSTOLITA

SAN MATEO, BRIGIDA TAPANG, ROSITA ACCION, and
CELSO MERCADO, respondents.

DECISION

VELASCO, JR., J : p

The Case

Before this Court is a Petition for Review on Certiorari, seeking to reverse and set aside
the Decision of the Court of Appeals (CA), Seventeenth Division, dated September 14,
2012 in CA-G.R. CV No. 96390, which affirmed the Decision of the Regional Trial
Court (RTC) dated November 3, 2010 in LRC Case No. N-11398. The adverted RTC
Decision ordered the registration of the title over the subject lot in the name of the
respondents.

The Facts

The present case stemmed from a January 27, 1999 Petition for Registration of Title filed
by respondents Apostolita San Mateo, Brigida Tapang, Rosita Accion, and Celso
Mercado, filed before the RTC, Pasig City, Branch 127. Subject of the petition was a
12,896 square-meter parcel of land located in Ibayo, Napindan, Taguig City, and
described as Lot 3226, MCadm 590-D of the Conversion Plan AS-00-000233. 1

Respondents averred that the land used to be owned by their grandfather and predecessor-
in-interest, Leocadio Landrito (Leocadio). Leocadio's occupation of a 5,500 square-meter
portion of the property can be traced from Tax Declaration (TD) No. 3659, issued in
1948 under his name. 2 When Leocadio died, the property was inherited by his three
children, Crisanta, Amador, and Juanito. Both Juanito and Amador subsequently
mortgaged their share to Crisanta and her husband, and failed to settle their obligations.
Thus, in 2000 and 2001, the respective widows of Juanito and Amador executed waivers
of rights in favor of the respondents, the heirs of Crisanta. Respondents then executed an
extra-judicial settlement among themselves. 3 aSIATD

In support of the petition, attached were the following: the original tracing cloth plan AS-
00-000233, together with the blueprints, technical description of the land, in duplicate;
surveyor's certificate; deed of extra-judicial settlement of the estate of Leocadio; and
various TDs and tax receipts. 4

The case was set for initial hearing. The concerned government agencies, 5 as well as the
owners of the adjoining lots, were notified of the hearing. Moreover, the notice was
posted in several public places in Taguig City, and was published in People's Journal,
Taliba and the Official Gazette.

Globe Steel Corporation (GSC), represented by Kenneth Yu (Yu), New Donavel

Compound Neighborhood Association, Inc. (NDCNAI), and the Laguna Lake
Development Authority (LLDA), all registered their opposition to the petition. GSC
contended that the application might have encroached on its properties, because it owned
the adjoining parcels of land. NDCNAI argued that it had a better right of possession to
apply for registration of ownership, because the lot would have been unfit for human
habitation, were it not for the fillings introduced by the association to the lot. Moreover,
its members, who are informal settlers, are the actual occupants of the lot. LLDA, on the
other hand, claimed that the petition should be denied because the lot is located below the
reglementary lake elevation of 12.50 meters, and, thus, the lot forms part of the Laguna
Lake bed, and is considered inalienable and indisposable public land, and within the
jurisdiction of the LLDA. 6

In the meantime, on July 25, 2008, the Land Registration Authority (LRA) filed a report
and adjusted the area of the property to 12,776 square meters, to rectify a discrepancy in
the technical description.

Decision of the RTC

On November 3, 2010, the RTC rendered its Decision, 7 granting the petition for
registration. First, the RTC ruled that based on the TDs presented by the respondents, the
family and heirs of Leocadio had been in open, continuous, uninterrupted, exclusive, and
notorious possession of the subject lot since 1948. While the TDs are not conclusive
proof of ownership, the RTC said, they nevertheless constitute good indicia of possession
in the concept of owner, and a claim of title over the subject property. 8

The RTC further found that the lot is alienable. To support this finding, the RTC relied on
certifications of the Department of Natural Resources-South City Environment and
Natural Resources Office (DENR-South CENRO) and the LLDA. The DENR-South
CENRO submitted a report dated May 29, 2000, to the following effect: that Lot 3226
AS-00-000233, consisting of 12,896 square meters, is within the alienable and disposable
land, and is not reserved for military or naval purposes; that the lot was first declared in
1948 in a TD under the name of Leocadio; that presently, it is covered by TDs in the
name of the heirs of Crisanta; and that the land is a rice field, but is now occupied by
illegal occupants. 9 The LLDA, meanwhile, issued a certification dated October 2, 2000,
to the effect that based on a survey conducted on September 14, 2000, the subject
property is above the 12.50 meter elevation, and that its elevation ranges from 13.80
meters to 14.20 meters. 10 cDCEHa

Finding no legal obstacle to the registration of the property in the name of the
respondents, the RTC ordered its registration, thus:

WHEREFORE, premises considered, the Court hereby orders the registration of

the title of herein petitioners-applicants over the parcel of land, located at Ibayo,
Napindan, Taguig City, known as Lot 3226, MCadm. 590-D under AS-00-
000233, with an area of TWELVE THOUSAND SEVEN HUNDRED
SEVENTY SIX (12,776) SQUARE METERS.

After the finality of this Decision and payment of the corresponding taxes and
fees on the subject lot, let an order for the issuance of a decree issue.

SO ORDERED. 11

Decision of the CA

Petitioner Republic of the Philippines (Republic), through the Office of the Solicitor
General (OSG), filed an appeal before the CA, arguing that: first, the RTC did not acquire
jurisdiction over the case, because the notice of hearing failed to include the names of all
the owners of the adjoining properties; second, the respondents failed to prove their claim
of absolute ownership, because they failed to prove possession over the entire 12,896
square meters of land sought to be registered; and third, the respondents failed to show
that the land sought to be registered is part of the alienable and disposable part of the
public domain.

However, in the presently assailed Decision promulgated on September 14, 2012, the CA
rejected the claims of the Republic and affirmed the Decision of the RTC.

First, the CA found that since the proceedings for the registration of title is an action in
rem and not in personam, personal notice to all claimants of the res is not necessary to
give the court jurisdiction to deal with and dispose of the res. 12 Thus, the publication of
the petition for registration is sufficient to vest the trial court with jurisdiction.

Second, on the issue of whether the subject property was proved to be alienable, the CA
said that in registration proceedings, the best proofs that a land is alienable and
disposable are the certifications of the CENRO or the Provincial Environment and
Natural Resources Office (PENRO), and a certified true copy of the DENR's original
classification of the land. 13 Here, the DENR-South CENRO certification clearly stated
that the subject property is alienable and disposable.
Third, on the issue of possession, the CA upheld the finding of the RTC that the TDs
presented were sufficient to prove that the respondents have been in possession of the
subject property since 1948. 14 Thus, the CA disposed of the appeal in this wise: aAHTDS

WHEREFORE, in view of all the foregoing, the appeal is DENIED for lack
of merit. The decision dated November 3, 2010 of Branch 157, Regional Trial
Court of Pasig City in LRC Case No. N-11398 is hereby AFFIRMED. 15

Hence, the present Petition for Review on Certiorari.

The Issues

The issues set forth in the petition are:

I.

WHETHER THE TRIAL COURT ACQUIRED JURISDICTION OVER THE

CASE

II.

WHETHER THE RESPONDENTS HAVE POSSESSED THE PROPERTY

FOR THE LENGTH OF TIME REQUIRED BY LAW

III.

WHETHER RESPONDENTS PROVED THAT THE PROPERTY IS

ALIENABLE AND DISPOSABLE 16 cSaCDT

The Court's Ruling

The petition is impressed with merit.

The trial court properly acquired

jurisdiction over the case

We find without error the CA's characterization of the petition for registration as an
action in rem, as well as its ruling on the petition's compliance with the rules on notice
and publication. The CA correctly held that the RTC properly acquired jurisdiction over
the res, i.e., the subject property. As the CA found, the names of the owners of the
adjoining lots were indicated in respondents' Amended Petition on April 28, 1999, and
these persons have been properly notified of the proceedings. Moreover, there was proper
publication of the Notice of Initial Hearing, along with the technical description of the
property. Given that this is an action in rem, the publication of the notice is sufficient
notice to all claimants to the property.
The amendment of the technical description of the property, or the reduction of the area
from 12,896 to 12,776 square meters, does not require a republication of the technical
description, because the amended area was already included during the first publication.
As this Court held in Republic v. CA and Heirs of Luis Ribaya: 17

. . . only where the original survey plan is amended during the registration
proceedings, by the addition of land not previously included in the original plan,
should publication be made in order to confer jurisdiction on the court to order
the registration of the area added after the publication of the original plan.
Conversely, if the amendment does not involve an addition, but on the contrary,
a reduction of the original area that was published, no new publication is
required.

The amendment of the area was not a result of any substantial amendment in the property
to be covered by the petition for registration, but was done merely to conform to the
cadastral mapping of Taguig. 18 Suffice it to say, therefore, that the amendment did not
result in an addition of land not previously included in the original plan. Thus, no
republication is necessary.

Respondents have failed to prove

that the subject property is alienable
and disposable

However, on the issue of whether the respondents were able to prove that the subject
property is alienable and disposable, We find that the respondents failed to prove that the
property sought to be registered is indeed alienable and thus subject to registration.
Respondents merely relied on the certification of DENR-South CENRO to the effect that
the subject property is alienable. But as discussed below, this is insufficient, as
respondents failed to present any proof that the DENR Secretary approved such
certification. We rule that the CA's reliance solely on the DENR-South CENRO
certification constitutes reversible error on its part.DAESTI

Material to the resolution of this issue is this Court's ruling in Republic v. T.A.N.
Properties, Inc., 19 which, similar to the one at bar, is one for registration of property.
There, the Court said:

. . . The CENRO certificate covered the entire Lot 10705 with an area of
596,116 square meters which, as per DAO No. 38, series of 1990, is beyond the
authority of the CENRO to certify as alienable and disposable.

The Regional Technical Director, FMS-DENR, has no authority under DAO

Nos. 20 and 38 to issue certificates of land classification. Under DAO No. 20,
the Regional Technical Director, FMS-DENR:
 1. Issues original and renewal of ordinary minor products (OM) permits
except rattan;

2. Approves renewal of resaw/mini-sawmill permits;

3. Approves renewal of special use permits covering over five hectares

for public infrastructure projects; and

4. Issues renewal of certificates of registration for logs, poles, piles, and

lumber dealers.

Under DAO No. 38, the Regional Technical Director, FMS-DENR:

1. Issues original and renewal of ordinary minor [products] (OM)

permits except rattan;

2. Issues renewal of certificate of registration for logs, poles, and piles

and lumber dealers;

3. Approves renewal of resaw/mini-sawmill permits;

4. Issues public gratuitous permits for 20 to 50 cubic meters within

calamity declared areas for public infrastructure projects; and

5. Approves original and renewal of special use permits covering over

five hectares for public infrastructure projects.

Hence, the certification issued by the Regional Technical Director, FMS-

DENR, in the form of a memorandum to the trial court, has no probative value.
SHDAEC

Further, it is not enough for the PENRO or CENRO to certify that a land is
alienable and disposable. The applicant for land registration must prove
that the DENR Secretary had approved the land classification and released
the land of the public domain as alienable and disposable, and that the land
subject of the application for registration falls within the approved area per
verification through survey by the PENRO or CENRO. In addition, the
applicant for land registration must present a copy of the original
classification approved by the DENR Secretary and certified as a true copy
by the legal custodian of the official records. These facts must be established
to prove that the land is alienable and disposable. Respondent failed to do so
because the certifications presented by respondent do not, by themselves, prove
that the land is alienable and disposable. 20 (emphasis supplied)

Clearly, therefore, a CENRO certification that a certain property is alienable, without the
corresponding proof that the DENR Secretary had approved such certification, is
insufficient to support a petition for registration of land. Both certification and approval
are required to be presented as proofs that the land is alienable. Otherwise, the petition
must be denied. TCAHES

It is true, as cited by the respondent, that in Republic v. Vega, 21 the Court

granted a petition for registration even without the requisite DENR approval of the
CENRO certification. There, as in this case, the registrant merely presented a CENRO
certification that the land is alienable and disposable based on the evidence on record.
The Court instead applied the rule on substantial compliance, and said:

Indeed, the best proofs in registration proceedings that a land is alienable and
disposable are a certification from the CENRO or Provincial Environment and
Natural Resources Office (PENRO) and a certified true copy of the DENR's
original classification of the land. The Court, however, has nonetheless
recognized and affirmed applications for land registration on other substantial
and convincing evidence duly presented without any opposition from the LRA
or the DENR on the ground of substantial compliance.

Applying these precedents, the Court finds that despite the absence of a
certification by the CENRO and a certified true copy of the original
classification by the DENR Secretary, there has been substantial compliance
with the requirement to show that the subject land is indeed alienable and
disposable based on the evidence on record. 22

The Court immediately made clear, however, that the ruling in Vega is pro hac vice, and
is not to be considered an exception nor a departure from its ruling in T.A.N. Properties,
which applied the rule on strict compliance with the rules. The Court clarified:

It must be emphasized that the present ruling on substantial compliance applies

pro hac vice. It does not in any way detract from our rulings in Republic v.
T.A.N. Properties, Inc., and similar cases which impose a strict requirement to
prove that the public land is alienable and disposable, especially in this case
when the Decisions of the lower court and the Court of Appeals were rendered
prior to these rulings. To establish that the land subject of the application is
alienable and disposable public land, the general rule remains: all applications
for original registration under the Property Registration Decree must include
both (1) a CENRO or PENRO certification and (2) a certified true copy of the
original classification made by the DENR Secretary.

As an exception, however, the courts — in their sound discretion and based

solely on the evidence presented on record — may approve the application, pro
hac vice, on the ground of substantial compliance showing that there has been a
positive act of government to show the nature and character of the land and an
absence of effective opposition from the government. This exception shall only
apply to applications for registration currently pending before the trial court
prior to this Decision and shall be inapplicable to all future applications. 23
(emphasis in the original, citations omitted)
In Vega, the Court was mindful of the fact that the trial court rendered its decision on
November 13, 2003, way before the rule on strict compliance was laid down in T.A.N.
Properties on June 26, 2008. Thus, the trial court was merely applying the rule prevailing
at the time, which was substantial compliance. Thus, even if the case reached the
Supreme Court after the promulgation of T.A.N. Properties, the Court allowed the
application of substantial compliance, because there was no opportunity for the registrant
to comply with the Court's ruling in T.A.N. Properties, the trial court and the CA already
having decided the case prior to the promulgation of T.A.N. Properties.

In the case here, however, the RTC Decision was only handed down on November 23,
2010, when the rule on strict compliance was already in effect. Thus, there was ample
opportunity for the respondents to comply with the new rule, and present before the RTC
evidence of the DENR Secretary's approval of the DENR-South CENRO Certification.
This, they failed to do.

Respondents' invocation of the pro hac vice rule in Vega is severely misplaced. They
would have this Court rule in their favor simply because the Republic failed to present
countervailing evidence other than mere denials. 24 Such is not the import of the Vega
ruling. In Vega, aside from the certification from the CENRO, the registrants also
presented other evidence that the land sought to be registered is alienable. Here, it is the
DENR-South CENRO's certification that is the sole evidence presented by the
respondents to prove the land's alienability. That, by itself, is not sufficient. Respondents
cannot now claim that there is no sufficient evidence that the land is inalienable, when
their own evidence on alienability is wanting. TCaEAD

Respondents have proved their

possession of the subject property

Finally, on the issue of possession, suffice it to say that We find that to be a question of
fact, and thus, it is the trial court that is in the best position to evaluate whether the
evidence presented by the respondents is sufficient to prove their claim of possession
since 1948. We find no reversible error in the CA's affirmance of the RTC's reliance on
the tax declarations presented by the respondents.

In view, however, of the erroneous finding of the CA that the land is alienable, and the
failure of the respondents to provide the necessary evidence to support their allegation
that the land is indeed alienable, the assailed CA Decision must be reversed.

WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED. The
Decision of the Court of Appeals dated September 14, 2012 in CA-G.R. CV No. 96390
and the Decision of the Regional Trial Court dated November 3, 2010 in LRC Case No.
N-11398 are hereby REVERSED and SET ASIDE, and a new one entered DENYING
respondents' application for registration of title.
SO ORDERED.

Brion, * Villarama, Jr., Reyes and Perlas-Bernabe, ** JJ., concur.

||| (Republic v. San Mateo, G.R. No. 203560, [November 10, 2014])