G.R. No.

150806 January 28, 2008

EUFEMIA ALMEDA and ROMEL ALMEDA, petitioners,
vs.
BATHALA MARKETING INDUSTRIES, INC., respondent.
D E C I S I O N
NACHURA, J .:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, of the Decision
1
of the Court of Appeals (CA), dated September 3,
2001, in CA-G.R. CV No. 67784, and its Resolution
2
dated November 19,
2001. The assailed Decision affirmed with modification the Decision
3
of the
Regional Trial Court (RTC), Makati City, Branch 136, dated May 9, 2000 in
Civil Case No. 98-411.
Sometime in May 1997, respondent Bathala Marketing Industries, Inc., as
lessee, represented by its president Ramon H. Garcia, renewed its
Contract of Lease
4
with Ponciano L. Almeda (Ponciano), as lessor,
husband of petitioner Eufemia and father of petitioner Romel Almeda.
Under the said contract, Ponciano agreed to lease a portion of the Almeda
Compound, located at 2208 Pasong Tamo Street, Makati City, consisting
of 7,348.25 square meters, for a monthly rental of P1,107,348.69, for a
term of four (4) years from May 1, 1997 unless sooner terminated as
provided in the contract.
5
The contract of lease contained the following
pertinent provisions which gave rise to the instant case:
SIXTH - It is expressly understood by the parties hereto that the
rental rate stipulated is based on the present rate of assessment
on the property, and that in case the assessment should hereafter
be increased or any new tax, charge or burden be imposed by
authorities on the lot and building where the leased premises are
located, LESSEE shall pay, when the rental herein provided
becomes due, the additional rental or charge corresponding to the
portion hereby leased; provided, however, that in the event that the
present assessment or tax on said property should be reduced,
LESSEE shall be entitled to reduction in the stipulated rental,
likewise in proportion to the portion leased by him;
SEVENTH - In case an extraordinary inflation or devaluation of
Philippine Currency should supervene, the value of Philippine peso
at the time of the establishment of the obligation shall be the basis
of payment;
6

During the effectivity of the contract, Ponciano died. Thereafter,
respondent dealt with petitioners. In a letter
7
dated December 29, 1997,
petitioners advised respondent that the former shall assess and collect
Value Added Tax (VAT) on its monthly rentals. In response, respondent
contended that VAT may not be imposed as the rentals fixed in the
contract of lease were supposed to include the VAT therein, considering
that their contract was executed on May 1, 1997 when the VAT law had
long been in effect.
8

On January 26, 1998, respondent received another letter from petitioners
informing the former that its monthly rental should be increased by 73%
pursuant to condition No. 7 of the contract and Article 1250 of the Civil
Code. Respondent opposed petitioners' demand and insisted that there
was no extraordinary inflation to warrant the application of Article 1250 in
light of the pronouncement of this Court in various cases.
9

Respondent refused to pay the VAT and adjusted rentals as demanded by
petitioners but continued to pay the stipulated amount set forth in their
contract.
On February 18, 1998, respondent instituted an action for declaratory relief
for purposes of determining the correct interpretation of condition Nos. 6
and 7 of the lease contract to prevent damage and prejudice.
10
The case
was docketed as Civil Case No. 98-411 before the RTC of Makati.
On March 10, 1998, petitioners in turn filed an action for ejectment,
rescission and damages against respondent for failure of the latter to
vacate the premises after the demand made by the former.
11
Before
respondent could file an answer, petitioners filed a Notice of
Dismissal.
12
They subsequently refiled the complaint before the
Metropolitan Trial Court of Makati; the case was raffled to Branch 139 and
was docketed as Civil Case No. 53596.
Petitioners later moved for the dismissal of the declaratory relief case for
being an improper remedy considering that respondent was already in
breach of the obligation and that the case would not end the litigation and
settle the rights of the parties. The trial court, however, was not persuaded,
and consequently, denied the motion.
After trial on the merits, on May 9, 2000, the RTC ruled in favor of
respondent and against petitioners. The pertinent portion of the decision
reads:
WHEREFORE, premises considered, this Court renders judgment
on the case as follows:
1) declaring that plaintiff is not liable for the payment of Value-
Added Tax (VAT) of 10% of the rent for [the] use of the leased
premises;
2) declaring that plaintiff is not liable for the payment of any rental
adjustment, there being no [extraordinary] inflation or devaluation,
as provided in the Seventh Condition of the lease contract, to
justify the same;
3) holding defendants liable to plaintiff for the total amount
of P1,119,102.19, said amount representing payments erroneously
made by plaintiff as VAT charges and rental adjustment for the
months of January, February and March, 1999; and
4) holding defendants liable to plaintiff for the amount
of P1,107,348.69, said amount representing the balance of
plaintiff's rental deposit still with defendants.
SO ORDERED.
13

The trial court denied petitioners their right to pass on to respondent the
burden of paying the VAT since it was not a new tax that would call for the
application of the sixth clause of the contract. The court, likewise, denied
their right to collect the demanded increase in rental, there being no
extraordinary inflation or devaluation as provided for in the seventh clause
of the contract. Because of the payment made by respondent of the rental
adjustment demanded by petitioners, the court ordered the restitution by
the latter to the former of the amounts paid, notwithstanding the well-
established rule that in an action for declaratory relief, other than a
declaration of rights and obligations, affirmative reliefs are not sought by or
awarded to the parties.
Petitioners elevated the aforesaid case to the Court of Appeals which
affirmed with modification the RTC decision. The fallo reads:
WHEREFORE, premises considered, the present appeal is
DISMISSED and the appealed decision in Civil Case No. 98-411 is
hereby AFFIRMED with MODIFICATION in that the order for the
return of the balance of the rental deposits and of the amounts
representing the 10% VAT and rental adjustment, is hereby
DELETED.
No pronouncement as to costs.
SO ORDERED.
14

The appellate court agreed with the conclusions of law and the application
of the decisional rules on the matter made by the RTC. However, it found
that the trial court exceeded its jurisdiction in granting affirmative relief to
the respondent, particularly the restitution of its excess payment.
Petitioners now come before this Court raising the following issues:
I.
WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE
IS APPLICABLE TO THE CASE AT BAR.
II.
WHETHER OR NOT THE DOCTRINE ENUNCIATED IN FILIPINO
PIPE AND FOUNDRY CORP. VS. NAWASA CASE, 161 SCRA 32
AND COMPANION CASES ARE (sic) APPLICABLE IN THE CASE
AT BAR.
III.
WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN THE
CASE OF DEL ROSARIO VS. THE SHELL COMPANY OF THE
PHILIPPINES, 164 SCRA 562, THE HONORABLE COURT OF
APPEALS SERIOUSLY ERRED ON A QUESTION OF LAW.
IV.
WHETHER OR NOT THE FINDING OF THE HONORABLE
COURT OF APPEALS THAT RESPONDENT IS NOT LIABLE TO
PAY THE 10% VALUE ADDED TAX IS IN ACCORDANCE WITH
THE MANDATE OF RA 7716.
V.
WHETHER OR NOT DECLARATORY RELIEF IS PROPER
SINCE PLAINTIFF-APPELLEE WAS IN BREACH WHEN THE
PETITION FOR DECLARATORY RELIEF WAS FILED BEFORE
THE TRIAL COURT.
In fine, the issues for our resolution are as follows: 1) whether the action
for declaratory relief is proper; 2) whether respondent is liable to pay 10%
VAT pursuant to Republic Act (RA) 7716; and 3) whether the amount of
rentals due the petitioners should be adjusted by reason of extraordinary
inflation or devaluation.
Declaratory relief is defined as an action by any person interested in a
deed, will, contract or other written instrument, executive order or
resolution, to determine any question of construction or validity arising from
the instrument, executive order or regulation, or statute, and for a
declaration of his rights and duties thereunder. The only issue that may be
raised in such a petition is the question of construction or validity of
provisions in an instrument or statute. Corollary is the general rule that
such an action must be justified, as no other adequate relief or remedy is
available under the circumstances.
15

Decisional law enumerates the requisites of an action for declaratory relief,
as follows: 1) the subject matter of the controversy must be a deed, will,
contract or other written instrument, statute, executive order or regulation,
or ordinance; 2) the terms of said documents and the validity thereof are
doubtful and require judicial construction; 3) there must have been no
breach of the documents in question; 4) there must be an actual justiciable
controversy or the "ripening seeds" of one between persons whose
interests are adverse; 5) the issue must be ripe for judicial determination;
and 6) adequate relief is not available through other means or other forms
of action or proceeding.
16

It is beyond cavil that the foregoing requisites are present in the instant
case, except that petitioners insist that respondent was already in breach
of the contract when the petition was filed.
We do not agree.
After petitioners demanded payment of adjusted rentals and in the months
that followed, respondent complied with the terms and conditions set forth
in their contract of lease by paying the rentals stipulated therein.
Respondent religiously fulfilled its obligations to petitioners even during the
pendency of the present suit. There is no showing that respondent
committed an act constituting a breach of the subject contract of lease.
Thus, respondent is not barred from instituting before the trial court the
petition for declaratory relief.
Petitioners claim that the instant petition is not proper because a separate
action for rescission, ejectment and damages had been commenced
before another court; thus, the construction of the subject contractual
provisions should be ventilated in the same forum.
We are not convinced.
It is true that in Panganiban v. Pilipinas Shell Petroleum Corporation
17
we
held that the petition for declaratory relief should be dismissed in view of
the pendency of a separate action for unlawful detainer. However, we
cannot apply the same ruling to the instant case. In Panganiban, the
unlawful detainer case had already been resolved by the trial court before
the dismissal of the declaratory relief case; and it was petitioner in that
case who insisted that the action for declaratory relief be preferred over the
action for unlawful detainer. Conversely, in the case at bench, the trial
court had not yet resolved the rescission/ejectment case during the
pendency of the declaratory relief petition. In fact, the trial court, where the
rescission case was on appeal, itself initiated the suspension of the
proceedings pending the resolution of the action for declaratory relief.
We are not unmindful of the doctrine enunciated in Teodoro, Jr. v.
Mirasol
18
where the declaratory relief action was dismissed because the
issue therein could be threshed out in the unlawful detainer suit. Yet,
again, in that case, there was already a breach of contract at the time of
the filing of the declaratory relief petition. This dissimilar factual milieu
proscribes the Court from applying Teodoro to the instant case.
Given all these attendant circumstances, the Court is disposed to entertain
the instant declaratory relief action instead of dismissing it, notwithstanding
the pendency of the ejectment/rescission case before the trial court. The
resolution of the present petition would write finis to the parties' dispute, as
it would settle once and for all the question of the proper interpretation of
the two contractual stipulations subject of this controversy.
Now, on the substantive law issues.
Petitioners repeatedly made a demand on respondent for the payment of
VAT and for rental adjustment allegedly brought about by extraordinary
inflation or devaluation. Both the trial court and the appellate court found
no merit in petitioners' claim. We see no reason to depart from such
findings.
As to the liability of respondent for the payment of VAT, we cite with
approval the ratiocination of the appellate court, viz.:
Clearly, the person primarily liable for the payment of VAT is the
lessor who may choose to pass it on to the lessee or absorb the
same. Beginning January 1, 1996, the lease of real property in the
ordinary course of business, whether for commercial or residential
use, when the gross annual receipts exceed P500,000.00, is
subject to 10% VAT. Notwithstanding the mandatory payment of
the 10% VAT by the lessor, the actual shifting of the said tax
burden upon the lessee is clearly optional on the part of the lessor,
under the terms of the statute. The word "may" in the statute,
generally speaking, denotes that it is directory in nature. It is
generally permissive only and operates to confer discretion. In this
case, despite the applicability of the rule under Sec. 99 of the
NIRC, as amended by R.A. 7716, granting the lessor the option to
pass on to the lessee the 10% VAT, to existing contracts of lease
as of January 1, 1996, the original lessor, Ponciano L. Almeda did
not charge the lessee-appellee the 10% VAT nor provided for its
additional imposition when they renewed the contract of lease in
May 1997. More significantly, said lessor did not actually collect a
10% VAT on the monthly rental due from the lessee-appellee after
the execution of the May 1997 contract of lease. The inevitable
implication is that the lessor intended not to avail of the option
granted him by law to shift the 10% VAT upon the lessee-appellee.
x x x.
19

In short, petitioners are estopped from shifting to respondent the burden of
paying the VAT.
Petitioners' reliance on the sixth condition of the contract is, likewise,
unavailing. This provision clearly states that respondent can only be held
liable for new taxes imposed after the effectivity of the contract of lease,
that is, after May 1997, and only if they pertain to the lot and the building
where the leased premises are located. Considering that RA 7716 took
effect in 1994, the VAT cannot be considered as a "new tax" in May 1997,
as to fall within the coverage of the sixth stipulation.
Neither can petitioners legitimately demand rental adjustment because of
extraordinary inflation or devaluation.
Petitioners contend that Article 1250 of the Civil Code does not apply to
this case because the contract stipulation speaks of extraordinary inflation
or devaluation while the Code speaks of extraordinary inflation or deflation.
They insist that the doctrine pronounced in Del Rosario v. The Shell
Company, Phils. Limited
20
should apply.
Essential to contract construction is the ascertainment of the intention of
the contracting parties, and such determination must take into account the
contemporaneous and subsequent acts of the parties. This intention, once
ascertained, is deemed an integral part of the contract.
21

While, indeed, condition No. 7 of the contract speaks of "extraordinary
inflation or devaluation" as compared to Article 1250's "extraordinary
inflation or deflation," we find that when the parties used the term
"devaluation," they really did not intend to depart from Article 1250 of the
Civil Code. Condition No. 7 of the contract should, thus, be read in
harmony with the Civil Code provision.
That this is the intention of the parties is evident from petitioners'
letter
22
dated January 26, 1998, where, in demanding rental adjustment
ostensibly based on condition No. 7, petitioners made explicit reference to
Article 1250 of the Civil Code, even quoting the law verbatim. Thus, the
application of Del Rosario is not warranted. Rather, jurisprudential rules on
the application of Article 1250 should be considered.
Article 1250 of the Civil Code states:
In case an extraordinary inflation or deflation of the currency
stipulated should supervene, the value of the currency at the time
of the establishment of the obligation shall be the basis of payment,
unless there is an agreement to the contrary.
Inflation has been defined as the sharp increase of money or credit, or
both, without a corresponding increase in business transaction. There is
inflation when there is an increase in the volume of money and credit
relative to available goods, resulting in a substantial and continuing rise in
the general price level.
23
In a number of cases, this Court had provided a
discourse on what constitutes extraordinary inflation, thus:
[E]xtraordinary inflation exists when there is a decrease or increase
in the purchasing power of the Philippine currency which is unusual
or beyond the common fluctuation in the value of said currency,
and such increase or decrease could not have been reasonably
foreseen or was manifestly beyond the contemplation of the parties
at the time of the establishment of the obligation.
24

The factual circumstances obtaining in the present case do not make out a
case of extraordinary inflation or devaluation as would justify the
application of Article 1250 of the Civil Code. We would like to stress that
the erosion of the value of the Philippine peso in the past three or four
decades, starting in the mid-sixties, is characteristic of most currencies.
And while the Court may take judicial notice of the decline in the
purchasing power of the Philippine currency in that span of time, such
downward trend of the peso cannot be considered as the extraordinary
phenomenon contemplated by Article 1250 of the Civil Code. Furthermore,
absent an official pronouncement or declaration by competent authorities
of the existence of extraordinary inflation during a given period, the effects
of extraordinary inflation are not to be applied.
25

WHEREFORE, premises considered, the petition is DENIED. The Decision
of the Court of Appeals in CA-G.R. CV No. 67784, dated September 3,
2001, and its Resolution dated November 19, 2001, are AFFIRMED.
SO ORDERED.



































G.R. No. 126911 April 30, 2003
PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and JOSE ABAD, LEONOR
ABAD, SABINA ABAD, JOSEPHINE "JOSIE" BEATA ABAD-ORLINA,
CECILIA ABAD, PIO ABAD, DOMINIC ABAD, TEODORA
ABAD, respondents.
CARPIO MORALES, J .:
The present petition for review assails the decision of the Court of Appeals
affirming that of the Regional Trial Court of Iloilo City, Branch 30, finding
petitioner Philippine Deposit Insurance Corporation (PDIC) liable, as
statutory insurer, for the value of 20 Golden Time Deposits belonging to
respondents Jose Abad, Leonor Abad, Sabina Abad, Josephine "Josie"
Beata Abad-Orlina, Cecilia Abad, Pio Abad, Dominic Abad, and Teodora
Abad at the Manila Banking Corporation (MBC), Iloilo Branch.
Prior to May 22, 1997, respondents had, individually or jointly with each
other, 71 certificates of time deposits denominated as "Golden Time
Deposits" (GTD) with an aggregate face value of P1,115,889.96.
1

On May 22, 1987, a Friday, the Monetary Board (MB) of the Central Bank
of the Philippines, now Bangko Sentral ng Pilipinas, issued Resolution
505
2
prohibiting MBC to do business in the Philippines, and placing its
assets and affairs under receivership. The Resolution, however, was not
served on MBC until Tuesday the following week, or on May 26, 1987,
when the designated Receiver took over.
3

On May 25, 1987, the next banking day following the issuance of the MB
Resolution, respondent Jose Abad was at the MBC at 9:00 a.m. for the
purpose of pre-terminating the 71 aforementioned GTDs and re-depositing
the fund represented thereby into 28 new GTDs in denominations of
P40,000.00 or less under the names of herein respondents individually or
jointly with each other.
4
Of the 28 new GTDs, Jose Abad pre-terminated 8
and withdrew the value thereof in the total amount of P320,000.00.
5

Respondents thereafter filed their claims with the PDIC for the payment of
the remaining 20 insured GTDs.
6

On February 11, 1988, PDIC paid respondents the value of 3 claims in the
total amount of P120,000.00. PDIC, however, withheld payment of the 17
remaining claims after Washington Solidum, Deputy Receiver of MBC-
Iloilo, submitted a report to the PDIC
7
that there was massive conversion
and substitution of trust and deposit accounts on May 25, 1987 at MBC-
Iloilo.
8
The pertinent portions of the report stated:
xxx xxx xxx
On May 25, 1987 (Monday) or a day prior to the official
announcement and take-over by CB of the assets and liabilities of
The Manila Banking Corporation, the Iloilo Branch was found to
have recorded an unusually heavy movements in terms of volume
and amount for all types of deposits and trust accounts. It appears
that the impending receivership of TMBC was somehow already
known to many depositors on account of the massive withdrawals
paid on this day which practically wiped out the branch's entire
cash position. . . .
xxx xxx xxx
. . . The intention was to maximize the availment of PDIC coverage
limited to P40,000 by spreading out big accounts to as many
certificates under various nominees. . . .
9

xxx xxx xxx
Because of the report, PDIC entertained serious reservation in recognizing
respondents' GTDs as deposit liabilities of MBC-Iloilo. Thus, on August 30,
1991, it filed a petition for declaratory relief against respondents with the
Regional Trial Court (RTC) of Iloilo City, for a judicial declaration
determination of the insurability of respondents' GTDs at MBC-Iloilo.
10

In their Answer filed on October 24, 1991 and Amended Answer
11
filed on
January 9, 1992, respondents set up acounterclaim against PDIC whereby
they asked for payment of their insured deposits.
12

In its Decision of February 22, 1994,
13
Branch 30 of the Iloilo RTC declared
the 20 GTDs of respondents to be deposit liabilities of MBC, hence, are
liabilities of PDIC as statutory insurer. It accordingly disposed as follows:
WHEREFORE, premises considered, judgment is hereby
rendered:
1. Declaring the 28 GTDs of the Abads which were issued by the
TMBC-Iloilo on May 25, 1987 as deposits or deposit liabilities of the
bank as the term is defined under Section 3 (f) of R.A. No. 3591, as
amended;
2. Declaring PDIC, being the statutory insurer of bank deposits,
liable to the Abads for the value of the remaining 20 GTDs, the
other 8 having been paid already by TMBC Iloilo on May 25,1987;
3. Ordering PDIC to pay the Abads the value of said 20 GTDs less
the value of 3 GTDs it paid on February 11, 1988, and the amounts
it may have paid the Abads pursuant to the Order of this Court
dated September 8, 1992;
4. Ordering PDIC to pay immediately the Abads the balance of its
admitted liability as contained in the aforesaid Order of September
8, 1992, should there be any, subject to liquidation when this case
shall have been finally decide; and
5. Ordering PDIC to pay legal interest on the remaining insured
deposits of the Abads from February 11, 1988 until they are fully
paid.
SO ORDERED.
On appeal, the Court of Appeals, by the assailed Decision of October 21,
1996,
14
affirmed the trial court's decision except as to the award of legal
interest which it deleted.
Hence, PDIC's present Petition for Review which sets forth this lone
assignment of error:
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE
HOLDING OF THE TRIAL COURT THAT THE AMOUNT REPRESENTED
IN THE FACES OF THE SO CALLED "GOLDEN TIME DEPOSITS" WERE
INSURED DEPOSITS EVEN AS THEY WERE MERE DERIVATIVES OF
RESPONDENTS' PREVIOUS ACCOUNT BALANCES WHICH WERE
PRE-TERMINATED/TERMINATED AT THE TIME THE MANILA BANKING
CORPORATION WAS ALREADY IN SERIOUS FINANCIAL DISTRESS.
In its supplement to the petition, PDIC adds the following assignment of
error:
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE
HOLDING OF THE TRIAL COURT ORDERING PETITIONER TO PAY
RESPONDENTS' CLAIMS FOR PAYMENT OF INSURED DEPOSITS
FOR THE REASON THAT AN ACTION FOR DECLARATORY RELIEF
DOES NOT ESSENTIALLY ENTAIL AN EXECUTORY PROCESS AS THE
ONLY RELIEF THAT SHOULD HAVE BEEN GRANTED BY THE TRIAL
COURT IS A DECLARATION OF THE RIGHTS AND DUTIES OF
PETITIONER UNDER R.A. 3591, AS AMENDED, PARTICULARLY
SECTION 3(F) THEREOF AS CONSIDERED AGAINST THE
SURROUNDING CIRCUMSTANCES OF THE MATTER IN ISSUE
SOUGHT TO BE CONSTRUED WITHOUT PREJUDICE TO OTHER
MATTERS THAT NEED TO BE CONSIDERED BY PETITIONER IN THE
PROCESSING OF RESPONDENTS' CLAIMS.
Under its charter,
15
PDIC (hereafter petitioner) is liable only for deposits
received by a bank "in the usual course of business."
16
Being of the firm
conviction that, as the reported May 25, 1987 bank transactions were so
massive, hence, irregular, petitioner essentially seeks a judicial declaration
that such transactions were not made "in the usual course of business"
and, therefore, it cannot be made liable for deposits subject thereof.
17

Petitioner points that as MBC was prohibited from doing further business
by MB Resolution 505 as of May 22, 1987, all transactions subsequent to
such date were not done "in the usual course of business."
Petitioner further posits that there was no consideration for the 20 GTDs
subject of respondents' claim. In support of this submission, it states that
prior to March 25, 1987, when the 20 GTDs were made, MBC had been
experiencing liquidity problems, e.g., at the start of banking operations on
March 25, 1987, it had only P2,841,711.90 cash on hand and at the end of
the day it was left with P27,805.81 consisting mostly of mutilated bills and
coins.
18
Hence, even if respondents had wanted to convert the face
amounts of the GTDs to cash, MBC could not have complied with it.
Petitioner theorizes that after MBC had exhausted its cash and could no
longer sustain further withdrawal transactions, it instead issued new GTDs
as "payment" for the pre-terminated GTDs of respondents to make sure
that all the newly-issued GTDs have face amounts which are within the
statutory coverage of deposit insurance.
Petitioner concludes that since no cash was given by respondents and
none was received by MBC when the new GTDs were transacted, there
was no consideration therefor and, thus, they were not validly transacted
"in the usual course of business" and no liability for deposit insurance was
created.
19

Petitioner's position does not persuade.
While the MB issued Resolution 505 on May 22, 1987, a copy thereof was
served on MBC only on May 26, 1987. MBC and its clients could be given
the benefit of the doubt that they were not aware that the MB resolution
had been passed, given the necessity of confidentiality of placing a
banking institution under receivership.
20

The evident implication of the law, therefore, is that the
appointment of a receiver may be made by the Monetary Board
without notice and hearing but its action is subject to judicial inquiry
to insure the protection of the banking institution. Stated otherwise,
due process does not necessarily require a prior hearing; a hearing
or an opportunity to be heard may be subsequent to the
closure. One can just imagine the dire consequences of a prior
hearing: bank runs would be the order of the day, resulting in panic
and hysteria. In the process, fortunes may be wiped out, and
disillusionment will run the gamut of the entire banking community.
(Emphasis supplied).
21

Mere conjectures that MBC had actual knowledge of its impending closure
do not suffice. The MB resolution could not thus have nullified respondents'
transactions which occurred prior to May 26, 1987.
That no actual money in bills and/or coins was handed by respondents to
MBC does not mean that the transactions on the new GTDs did not involve
money and that there was no consideration therefor. For the outstanding
balance of respondents' 71 GTDs in MBC prior to May 26, 1987
22
in the
amount of P1,115,889.15 as earlier mentioned was re-deposited by
respondents under 28 new GTDs. Admittedly, MBC had P2,841,711.90
cash on hand more than double the outstanding balance of
respondent's 71 GTDs at the start of the banking day on May 25, 1987.
Since respondent Jose Abad was at MBC soon after it opened at 9:00 a.m.
of that day, petitioner should not presume that MBC had no cash to cover
the new GTDs of respondents and conclude that there was no
consideration for said GTDs.
Petitioner having failed to overcome the presumption that the ordinary
course of business was followed,
23
this Court finds that the 28 new GTDs
were deposited "in the usual course of business" of MBC.
In its second assignment of error, petitioner posits that the trial court erred
in ordering it to pay the balance of the deposit insurance to respondents,
maintaining that the instant petition stemmed from a petition for declaratory
relief which does not essentially entail an executory process, and the only
relief that should have been granted by the trial court is a declaration of the
parties' rights and duties. As such, petitioner continues, no order of
payment may arise from the case as this is beyond the office of declaratory
relief proceedings.
24

Without doubt, a petition for declaratory relief does not essentially entail an
executory process. There is nothing in its nature, however, that prohibits a
counterclaim from being set-up in the same action.
25

Now, there is nothing in the nature of a special civil action for
declaratory relief that proscribes the filing of a counterclaim based
on the same transaction, deed or contract subject of the complaint.
A special civil action is after all not essentially different from an
ordinary civil action, which is generally governed by Rules 1 to 56
of the Rules of Court, except that the former deals with a special
subject matter which makes necessary some special regulation.
But the identity between their fundamental nature is such that the
same rules governing ordinary civil suits may and do apply to
special civil actions if not inconsistent with or if they may serve to
supplement the provisions of the peculiar rules governing special
civil actions.
26

Petitioner additionally submits that the issue of determining the amount of
deposit insurance due respondents was never tried on the merits since the
trial dwelt only on the "determination of the viability or validity of the
deposits" and no evidence on record sustains the holding that the amount
of deposit due respondents had been finally determined.
27
This issue was
not raised in the court a quo, however, hence, it cannot be raised for the
first time in the petition at bar.
28

Finally, petitioner faults respondents for availing of the statutory limits of
the PDIC law, presupposing that, based on the conduct of respondent Jose
Abad on March 25, 1987, he and his co respondents "somehow knew" of
the impending closure of MBC. Petitioner ascribes bad faith to respondent
Jose Abad in transacting the questioned deposits, and seeks to disqualify
him from availing the benefits under the law. 29
Good faith is presumed. This, petitioner failed to overcome since it offered
mere presumptions as evidence of bad faith.
WHEREFORE, the assailed decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.




G.R. No. 169466 May 9, 2007
DEPARTMENT OF BUDGET AND MANAGEMENT, represented by
SECRETARY ROMULO L. NERI, PHILIPPINE NATIONAL POLICE,
represented by POLICE DIRECTOR GENERAL ARTURO L. LOMIBAO,
NATIONAL POLICE COMMISSION, represented by CHAIRMAN
ANGELO T. REYES, AND CIVIL SERVICE COMMISSION, represented
by CHAIRPERSON KARINA C. DAVID, Petitioners,
vs.
MANILAS FINEST RETIREES ASSOCIATION, INC., represented by
P/COL. FELICISIMO G. LAZARO (RET.), AND ALL THE OTHER INP
RETIREES, Respondents.
D E C I S I O N
GARCIA, J .:
Assailed and sought to be set aside in this petition for review on certiorari
under Rule 45 of the Rules of Court are the following issuances of the
Court of Appeals (CA) in CA-G.R. CV No. 78203, to wit:
1. Decision
1
dated July 7, 2005 which affirmed in toto the decision
of the Regional Trial Court of Manila, Branch 32, in Civil Case No.
02-103702, a suit for declaratory relief, declaring the herein
respondents entitled to the same retirement benefits accorded
upon retirees of the Philippine National Police (PNP) under
Republic Act (R.A.) No. 6975, as amended by R.A. No. 8551, and
ordering the herein petitioners to implement the proper adjustments
on respondents retirement benefits; and
2. Resolution
2
dated August 24, 2005 which denied the petitioners
motion for reconsideration.
The antecedent facts:
In 1975, Presidential Decree (P.D.) No. 765 was issued constituting the
Integrated National Police (INP) to be composed of the Philippine
Constabulary (PC) as the nucleus and the integrated police forces as
components thereof. Complementing P.D. No. 765 was P.D. No.
1184
3
dated August 26, 1977 (INP Law, hereinafter) issued to
professionalize the INP and promote career development therein.
On December 13, 1990, Republic Act (R.A.) No. 6975, entitled "AN ACT
ESTABLISHING THE PHILIPPINE NATIONAL POLICE UNDER A
REORGANIZED DEPARTMENT OF THE INTERIOR AND LOCAL
GOVERNMENT, AND FOR OTHER PURPOSES," hereinafter referred to
as PNP Law, was enacted. Under Section 23 of said law, the Philippine
National Police (PNP) would initially consist of the members of the INP,
created under P.D. No. 765, as well as the officers and enlisted personnel
of the PC. In part, Section 23 reads:
SEC. 23. Composition. Subject to the limitation provided for in this Act,
the Philippine National Police, hereinafter referred to as the PNP, is hereby
established, initially consisting of the members of the police forces who
were integrated into the Integrated National Police (INP) pursuant to
Presidential Decree No. 765, and the officers and enlisted personnel of the
Philippine Constabulary (PC).
A little less than eight (8) years later, or on February 25, 1998, R.A. No.
6975 was amended by R.A. No. 8551, otherwise known as the
"PHILIPPINE NATIONAL POLICE REFORM AND REORGANIZATION
ACT OF 1998." Among other things, the amendatory law reengineered the
retirement scheme in the police organization. Relevantly, PNP personnel,
under the new law, stood to collect more retirement benefits than what INP
members of equivalent rank, who had retired under the INP Law, received.
The INP retirees illustrated the resulting disparity in the retirement benefits
between them and the PNP retirees as follows:
4

Retirement Rank Monthly Pension Difference
INP PNP INP PNP
Corporal SPO3 P 3,225.00
P
11,310.00
P 8,095.00
Captain P. Sr. Insp. P 5,248.00
P
15,976.00
P10,628.00
Brig.
Gen.
P. Chief
Supt.
P
10,054.24
P
18,088.00
P 8,033.76
Hence, on June 3, 2002, in the Regional Trial Court (RTC) of Manila, all
INP retirees, spearheaded by the Manilas Finest Retirees Association,
Inc., or the MFRAI (hereinafter collectively referred to as the INP Retirees),
filed a petition for declaratory relief,
5
thereunder impleading, as
respondents, the Department of Budget and Management (DBM), the
PNP, the National Police Commission (NAPOLCOM), the Civil Service
Commission (CSC) and the Government Service Insurance System
(GSIS). Docketed in the RTC as Civil Case No. 02-103702, which was
raffled to Branch 22 thereof, the petition alleged in gist that INP retirees
were equally situated as the PNP retirees but whose retirement benefits
prior to the enactment of R.A. No. 6975, as amended by R.A. No. 8551,
were unconscionably and arbitrarily excepted from the higher rates and
adjusted benefits accorded to the PNP retirees. Accordingly, in their
petition, the petitioning INP retirees pray that a
DECLARATORY JUDGMENT be rendered in their favor, DECLARING with
certainty that they, as INP-retirees, are truly absorbed and equally
considered as PNP-retirees and thus, entitled to enjoy the SAME or
IDENTICAL retirement benefits being bestowed to PNP-retirees by virtue
of said PNP Law or Republic Act No. 6975, as amended by Republic Act
8551, with the corollary mandate for the respondents-government agencies
to effect the immediate adjustment on their previously received disparate
retirement benefits, retroactive to its effectivity, and with due payment
thereof.
The GSIS moved to dismiss the petition on grounds of lack of jurisdiction
and cause of action. On the other hand, the CSC, DBM, NAPOLCOM and
PNP, in their respective answers, asserted that the petitioners could not
claim the more generous retirement benefits under R.A. No. 6975 because
at no time did they become PNP members, having retired prior to the
enactment of said law. DBM, NAPOLCOM and PNP afterwards filed their
respective pre-trial briefs.
The ensuing legal skirmish is not relevant to the disposition of the instant
case. The bottom line is that, on March 21, 2003, the RTC came out with
its decision
6
holding that R.A. No. 6975, as amended, did not abolish the
INP but merely provided for the absorption of its police functions by the
PNP, and accordingly rendered judgment for the INP retirees, to wit:
WHEREFORE, this Court hereby renders JUDGMENT DECLARING the
INP Retirees entitled to the same or identical retirement benefits and such
other benefits being granted, accorded and bestowed upon the PNP
Retirees under the PNP Law (RA No. 6975, as amended).
The respondents Government Departments and Agencies shall
IMMEDIATELY EFFECT and IMPLEMENT the proper adjustments on the
INP Retirees retirement and such other benefits, RETROACTIVE to its
date of effectivity, and RELEASE and PAY to the INP Retirees the due
payments of the amounts.
SO ORDERED.
On April 2, 2003, the trial court issued what it denominated as Supplement
to the Decision whereunder it granted the GSIS motion to dismiss and
thus considered the basic petition as withdrawn with respect to the latter.
From the adverse decision of the trial court, the remaining respondents,
namely, DBM, PNP, NAPOLCOM and CSC, interposed an appeal to the
CA whereat their appellate recourse was docketed as CA-G.R. CV No.
78203.
As stated at the threshold hereof, the CA, in its decision of July 7,
2005,
7
affirmed that of the trial court upholding the entitlement of the INP
retirees to the same or identical retirement benefits accorded upon PNP
retirees under R.A. No. 6975, as amended.
Their motion for reconsideration having been denied by the CA in` its
equally assailed resolution of August 24, 2005,
8
herein petitioners are now
with this Court via the instant recourse on their singular submission that -
THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN LAW
IN AFFIRMING THE DECISION OF THE TRIAL COURT
NOTWITHSTANDING THAT IT IS CONTRARY TO LAW AND
ESTABLISHED JURISPRUDENCE.
We DENY.
In the main, it is petitioners posture that R.A. No. 6975 clearly abolished
the INP and created in its stead a new police force, the PNP. Prescinding
therefrom, petitioners contend that since the PNP is an organization
entirely different from the INP, it follows that INP retirees never became
PNP members. Ergo, they cannot avail themselves of the retirement
benefits accorded to PNP members under R.A. No. 6975 and its
amendatory law, R.A. No. 8551.
A flashback at history is proper.
As may be recalled, R.A. No. 6975 was enacted into law on December 13,
1990, or just about four (4) years after the 1986 Edsa Revolution toppled
down the dictatorship regime. Egged on by the current sentiment of the
times generated by the long period of martial rule during which the police
force, the PC-INP, had a military character, being then a major service of
the Armed Forces of the Philippines, and invariably moved by a fresh
constitutional mandate for the establishment of one police force which
should be national in scope and, most importantly, purely civilian in
character,
9
Congress enacted R.A. No. 6975 establishing the PNP and
placing it under the Department of Interior and Local Government. To
underscore the civilian character of the PNP, R.A. No. 6975 made it
emphatically clear in its declaration of policy the following:
Section 2. Declaration of policy - It is hereby declared to be the policy of
the State to promote peace and order, ensure public safety and further
strengthen local government capability aimed towards the effective delivery
of the basic services to the citizenry through the establishment of a highly
efficient and competent police force that is national in scope and civilian in
character. xxx.
The police force shall be organized, trained and equipped primarily for the
performance of police functions. Its national scope and civilian character
shall be paramount. No element of the police force shall be military nor
shall any position thereof be occupied by active members of the [AFP].
(Emphasis and word in bracket supplied.)
Pursuant to Section 23, supra, of R.A. No. 6975, the PNP initially consisted
of the members of the police forces who were integrated into the INP by
virtue of P.D. No. 765, while Section 86
10
of the same law provides for the
assumption by the PNP of the police functions of the INP and its
absorption by the former, including its appropriations, funds, records,
equipment, etc., as well as its personnel.
11
And to govern the statutes
implementation, Section 85 of the Act spelled out the following absorption
phases:
Phase I Exercise of option by the uniformed members of the [PC], the PC
elements assigned with the Narcotics Command, CIS, and the personnel
of the technical services of the AFP assigned with the PC to include the
regular CIS investigating agents and the operatives and agents of the
NAPOLCOM Inspection. Investigation and Intelligence Branch, and the
personnel of the absorbed National Action Committee on Anti-Hijacking
(NACAH) of the Department of National Defense to be completed within six
(6) months from the date of the effectivity of this Act. At the end of this
phase, all personnel from the INP, PC, AFP Technical Services, NACAH,
and NAPOLCOM Inspection, Investigation and Intelligence Branch shall
have been covered by official orders assigning them to the PNP, Fire and
Jail Forces by their respective units.
Phase II Approval of the table of organization and equipment of all
bureaus and offices created under this Act, preparation and filling up of
their staffing pattern, transfer of assets to the [DILG] and organization of
the Commission, to be completed within twelve (12) months from the
effectivity date hereof. At the end of this phase, all personnel to be
absorbed by the [DILG] shall have been issued appointment papers, and
the organized Commission and the PNP shall be fully operational.
The PC officers and enlisted personnel who have not opted to join the PNP
shall be reassigned to the Army, Navy or Air Force, or shall be allowed to
retire under existing AFP rules and regulations. Any PC-INP officer or
enlisted personnel may, within the twelve-month period from the effectivity
of this Act, retire and be paid retirement benefits corresponding to a
position two (2) ranks higher than his present grade, subject to the
conditions that at the time he applies for retirement, he has rendered at
least twenty (20) years of service and still has, at most, twenty-four (24)
months of service remaining before the compulsory retirement age as
provided by existing law for his office.
Phase III Adjustment of ranks and establishment of one (1) lineal roster
of officers and another for non-officers, and the rationalization of
compensation and retirement systems; taking into consideration the
existing compensation schemes and retirement and separation benefit
systems of the different components of the PNP, to ensure that no member
of the PNP shall suffer any diminution in basic longevity and incentive
pays, allowances and retirement benefits due them before the creations of
the PNP, to be completed within eighteen (18) months from the effectivity
of this Act. xxx.
Upon the effectivity of this Act, the [DILG] Secretary shall exercise
administrative supervision as well as operational control over the
transferred, merged and/or absorbed AFP and INP units. The incumbent
Director General of the PC-INP shall continue to act as Director General of
the PNP until replaced . (Emphasis and words in brackets supplied.)
From the foregoing, it appears clear to us that the INP was never, as
posited by the petitioners, abolished or terminated out of existence by R.A.
No. 6975. For sure, nowhere in R.A. No. 6975 does the words "abolish" or
"terminate" appear in reference to the INP. Instead, what the law provides
is for the "absorption," "transfer," and/or "merger" of the INP, as well as the
other offices comprising the PC-INP, with the PNP. To "abolish" is to do
away with, to annul, abrogate or destroy completely;
12
to "absorb" is to
assimilate, incorporate or to take in.
13
"Merge" means to cause to combine
or unite to become legally absorbed or extinguished by merger
14
while
"transfer" denotes movement from one position to another. Clearly,
"abolition" cannot be equated with "absorption."
True it is that Section 90
15
of R.A. No. 6975 speaks of the INP "[ceasing] to
exist" upon the effectivity of the law. It ought to be stressed, however, that
such cessation is but the logical consequence of the INP being absorbed
by the PNP.1a\^/phi1.net
Far from being abolished then, the INP, at the most, was merely
transformed to become the PNP, minus of course its military character and
complexion.
Even the petitioners effort at disclosing the legislative intent behind the
enactment of R.A. No. 6975 cannot support their theory of abolition.
Rather, the Senate and House deliberations on the bill that eventually
became R.A. No. 6975 reveal what has correctly been held by the CA in its
assailed decision: that the PNP was precisely created to erase the stigma
spawned by the militarization of the police force under the PC-INP
structure. The rationale behind the passage of R.A. No. 6975 was
adequately articulated by no less than the sponsor
16
of the corresponding
House bill in his sponsorship speech, thus:
By removing the police force from under the control and supervision of
military officers, the bill seeks to restore and underscore the civilian
character of police work - an otherwise universal concept that was
muddled up by the martial law years.
Indeed, were the legislative intent was for the INPs abolition such that
nothing would be left of it, the word "abolish" or what passes for it could
have easily found its way into the very text of the law itself, what with the
abundant use of the word during the legislative deliberations. But as can
be gleaned from said deliberations, the lawmakers concern centered on
the fact that if the entire PC-INP corps join the PNP, then the PC-INP will
necessarily be abolished, for who then would be its members? Of more
consequence, the lawmakers were one in saying that there should never
be two national police agencies at the same time.
With the conclusion herein reached that the INP was not in fact abolished
but was merely transformed to become the PNP, members of the INP
which include the herein respondents are, therefore, not excluded from
availing themselves of the retirement benefits accorded to PNP retirees
under Sections 74
17
and 75
18
of R.A. No. 6975, as amended by R.A. No.
8551. It may be that respondents were no longer in the government service
at the time of the enactment of R.A. No. 6975. This fact, however, without
more, would not pose as an impediment to the respondents entitlement to
the new retirement scheme set forth under the aforecited sections. As
correctly ratiocinated by the CA to which we are in full accord:
For sure, R.A. No. 6975 was not a retroactive statute since it did not
impose a new obligation to pay the INP retirees the difference between
what they received when they retired and what would now be due to them
after R.A. No. 6975 was enacted. Even so, that did not render the RTCs
interpretation of R.A. No. 6975 any less valid. The [respondents]
retirement prior to the passage of R.A. No. 6975 did not exclude them from
the benefits provided by R.A. No. 6975, as amended by R.A. No. 8551,
since their membership in the INP was an antecedent fact that nonetheless
allowed them to avail themselves of the benefits of the subsequent laws.
R.A. No. 6975 considered them as PNP members, always referring to their
membership and service in the INP in providing for their retirement
benefits.
19

Petitioners maintain, however, that NAPOLCOM Resolution No.
8,
20
particularly Section 11
21
thereof, bars the payment of any differential in
retirement pay to officers and non-officers who are already retired prior to
the effectivity of R.A. No. 6975.
The contention does not commend itself for concurrence.
Under the amendatory law (R.A. No. 8551), the application of rationalized
retirement benefits to PNP members who have meanwhile retired before
its (R.A. No. 8551) enactment was not prohibited. In fact, its Section
38
22
explicitly states that the rationalized retirement benefits schedule and
program "shall have retroactive effect in favor of PNP members and
officers retired or separated from the time specified in the law." To us, the
aforesaid provision should be made applicable to INP members who had
retired prior to the effectivity of R.A. No. 6975. For, as afore-held, the INP
was, in effect, merely absorbed by the PNP and not abolished.
Indeed, to bar payment of retirement pay differential to INP members who
were already retired before R.A. No. 6975 became effective would even
run counter to the purpose of NAPOLCOM Resolution No. 8 itself, as
expressed in its preambulatory clause, which is to rationalize the
retirement system of the PNP taking into consideration existing retirement
and benefit systems (including R.A. No. 6975 and P.D. No. 1184) of the
different components thereof "to ensure that no member of the PNP shall
suffer any diminution in the retirement benefits due them before the
creation of the PNP."
23

Most importantly, the perceived restriction could not plausibly preclude the
respondents from asserting their entitlement to retirement benefits adjusted
to the level when R.A. No. 6975 took effect. Such adjustment hews with
the constitutional warrant that "the State shall, from time to time, review to
upgrade the pensions and other benefits due to retirees of both the
government and private sectors,"
24
and the implementing mandate under
the Senior Citizens Law
25
that "to the extent practicable and feasible,
retirement benefits xxx shall be upgraded to be at par with the current
scale enjoyed by those in actual service."1awphi1.nt
Certainly going for the respondents in their bid to enjoy the same
retirement benefits granted to PNP retirees, either under R.A. No. 6975 or
R.A. No. 8551, is Section 34 of the latter law which amended Section 75 of
R.A. No. 6975 by adding thereto the following proviso:
Section 75. Retirement benefits. x x x: Provided, finally, That retirement
pay of the officers/non-officers of the PNP shall be subject to adjustments
based on the prevailing scale of base pay of police personnel in the active
service.
Then, too, is the all familiar rule that:
Retirement laws should be liberally construed in favor of the retiree
because their intention is to provide for his sustenance and hopefully, even
comfort, when he no longer has the stamina to continue earning his
livelihood. The liberal approach aims to achieve the humanitarian purposes
of the law in order that efficiency, security and well-being of government
employees may be enhanced.
26

The petitioners parlay the notion of prospective application of statutes,
noting in this regard that R.A. No. 6975, as amended, cannot be applied
retroactively, there being no provision to that effect.
We are not persuaded.
As correctly found by the appellate court, R.A. No. 6975 itself contextually
provides for its retroactive application to cover those who had retired prior
to its effectivity. In this regard, we invite attention to the three (3) phases of
implementation under Section 85 for the absorption and continuation in the
service of, among others, the INP members under the newly-established
PNP.
In a further bid to scuttle respondents entitlement to the desired retirement
benefits, the petitioners fault the trial court for ordering the immediate
adjustments of the respondents retirement benefits when the basic petition
filed before it was one for declaratory relief. To the petitioners, such
petition does not essentially entail an executory process, the only relief
proper under that setting being a declaration of the parties rights and
duties.
Petitioners above posture is valid to a point. However, the execution of
judgments in a petition for declaratory relief is not necessarily indefensible.
In Philippine Deposit Insurance Corporation[PDIC] v. Court of
Appeals,
27
wherein the Court affirmed the order for the petitioners therein to
pay the balance of the deposit insurance to the therein respondents, we
categorically ruled:
Now, there is nothing in the nature of a special civil action for declaratory
relief that proscribes the filing of a counterclaim based on the same
transaction, deed or contract subject of the complaint. A special civil action
is after all not essentially different from an ordinary civil action, which is
generally governed by Rules 1 to 56 of the Rules of Court, except that the
former deals with a special subject matter which makes necessary some
special regulation. But the identity between their fundamental nature is
such that the same rules governing ordinary civil suits may and do apply to
special civil actions if not inconsistent with or if they may serve to
supplement the provisions of the peculiar rules governing special civil
actions.
28

Similarly, in Matalin Coconut Co., Inc. v. Municipal Council of Malabang,
Lanao del Sur:
29
the Court upheld the lower courts order for a party to
refund the amounts paid by the adverse party under the municipal
ordinance therein questioned, stating:
x x x Under Sec. 6 of Rule 64, the action for declaratory relief may be
converted into an ordinary action and the parties allowed to file such
pleadings as may be necessary or proper, if before the final termination of
the case "a breach or violation of an ordinance, should take place." In
the present case, no breach or violation of the ordinance occurred. The
petitioner decided to pay "under protest" the fees imposed by the
ordinance. Such payment did not affect the case; the declaratory relief
action was still proper because the applicability of the ordinance to future
transactions still remained to be resolved, although the matter could also
be threshed out in an ordinary suit for the recovery of taxes paid . In its
petition for declaratory relief, petitioner-appellee alleged that by reason of
the enforcement of the municipal ordinance by respondents it was forced
to pay under protest the fees imposed pursuant to the said ordinance, and
accordingly, one of the reliefs prayed for by the petitioner was that the
respondents be ordered to refund all the amounts it paid to respondent
Municipal Treasurer during the pendency of the case. The inclusion of said
allegation and prayer in the petition was not objected to by the respondents
in their answer. During the trial, evidence of the
payments made by the petitioner was introduced. Respondents were thus
fully aware of the petitioner's claim for refund and of what would happen if
the ordinance were to be declared invalid by the court.
The Court sees no reason for treating this case differently from PDIC and
Matalin.1awphi1.nt This disposition becomes all the more appropriate considering
that the respondents, as petitioners in the RTC, pleaded for the immediate
adjustment of their retirement benefits which, significantly, the herein
petitioners, as respondents in the same court, did not object to. Being
aware of said prayer, the petitioners then already knew the logical
consequence if, as it turned out, a declaratory judgment is rendered in the
respondents favor.
At bottom then, the trial courts judgment forestalled multiplicity of suits
which, needless to stress, would only entail a long and arduous process.
Considering their obvious advanced years, the respondents can hardly
afford another protracted proceedings. It is thus for this Court to already
write finis to this case.
WHEREFORE, the instant petition is DENIED and the assailed decision
and resolution of the CA, respectively dated July 7, 2005 and August 24,
2005, are AFFIRMED.
No costs.
SO ORDERED.




























G.R. No. 170656 August 15, 2007
THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY and
BAYANI FERNANDO as Chairman of the Metropolitan Manila
Development Authority, petitioners,
vs.
VIRON TRANSPORTATION CO., INC., respondent.
x --------------------------------------------- x
G.R. No. 170657 August 15, 2007
HON. ALBERTO G. ROMULO, Executive Secretary, the
METROPOLITAN MANILA DEVELOPMENT AUTHORITY and BAYANI
FERNANDO as Chairman of the Metropolitan Manila Development
Authority,petitioners,
vs.
MENCORP TRANSPORTATION SYSTEM, INC., respondent.
D E C I S I O N
CARPIO MORALES, J .:
The following conditions in 1969, as observed by this Court:
Vehicles have increased in number. Traffic congestion has moved
from bad to worse, from tolerable to critical. The number of people
who use the thoroughfares has multiplied x x x,
1

have remained unchecked and have reverberated to this day. Traffic jams
continue to clog the streets of Metro Manila, bringing vehicles to a standstill
at main road arteries during rush hour traffic and sapping peoples
energies and patience in the process.
The present petition for review on certiorari, rooted in the traffic congestion
problem, questions the authority of the Metropolitan Manila Development
Authority (MMDA) to order the closure of provincial bus terminals along
Epifanio de los Santos Avenue (EDSA) and major thoroughfares of Metro
Manila.
Specifically challenged are two Orders issued by Judge Silvino T. Pampilo,
Jr. of the Regional Trial Court (RTC) of Manila, Branch 26 in Civil Case
Nos. 03-105850 and 03-106224.
The first assailed Order of September 8, 2005,
2
which resolved a motion
for reconsideration filed by herein respondents, declared Executive Order
(E.O.) No. 179, hereafter referred to as the E.O., "unconstitutional as it
constitutes an unreasonable exercise of police power." The second
assailed Order of November 23, 2005
3
denied petitioners motion for
reconsideration.
The following facts are not disputed:
President Gloria Macapagal Arroyo issued the E.O. on February 10, 2003,
"Providing for the Establishment of Greater Manila Mass Transport
System," the pertinent portions of which read:
WHEREAS, Metro Manila continues to be the center of
employment opportunities, trade and commerce of the
Greater Metro Manila area;
WHEREAS, the traffic situation in Metro Manila has
affected the adjacent provinces of Bulacan, Cavite,
Laguna, and Rizal, owing to the continued movement of
residents and industries to more affordable and
economically viable locations in these provinces;
WHEREAS, the Metropolitan Manila Development
Authority (MMDA) is tasked to undertake measures to ease
traffic congestion in Metro Manila and ensure the
convenient and efficient travel of commuters within its
jurisdiction;
WHEREAS, a primary cause of traffic congestion in Metro
Manila has been the numerous buses plying the streets
that impedes [sic] the flow of vehicles and commuters due
to the inefficient connectivity of the different transport
modes;
WHEREAS, the MMDA has recommended a plan to
decongest traffic by eliminating the bus terminals now
located along major Metro Manila thoroughfares and
providing more convenient access to the mass transport
system to the commuting public through the provision of
mass transport terminal facilities that would integrate the
existing transport modes, namely the buses, the rail-based
systems of the LRT, MRT and PNR and to facilitate and
ensure efficient travel through the improved connectivity of
the different transport modes;
WHEREAS, the national government must provide the
necessary funding requirements to immediately implement
and render operational these projects; and extent to MMDA
such other assistance as may be warranted to ensure their
expeditious prosecution.
NOW, THEREFORE, I, GLORIA MACAPAGAL-
ARROYO, President of the Philippines, by virtue of the
powers vested in me by law, do hereby order:
Section 1. THE PROJ ECT. The project shall be identified
as GREATER MANILA TRANSPORT SYSTEM Project.
Section 2. PROJ ECT OBJ ECTIVES. In accordance with
the plan proposed by MMDA, the project aims to develop
four (4) interim intermodal mass transport terminals to
integrate the different transport modes, as well as those
that shall hereafter be developed, to serve the commuting
public in the northwest, north, east, south, and southwest of
Metro Manila. Initially, the project shall concentrate on
immediately establishing the mass transport terminals for
the north and south Metro Manila commuters as hereinafter
described.
Section 3. PROJ ECT IMPLEMENTING AGENCY.
The Metropolitan Manila Development Authority
(MMDA), is hereby designated as the implementing
Agency for the project. For this purpose, MMDA is directed
to undertake such infrastructure development work as may
be necessary and, thereafter, manage the project until it
may be turned-over to more appropriate agencies, if found
suitable and convenient. Specifically, MMDA shall have the
following functions and responsibilities:
a) Cause the preparation of the Master Plan
for the projects, including the designs and
costing;
b) Coordinate the use of the land and/or
properties needed for the project with the
respective agencies and/or entities owning
them;
c) Supervise and manage the construction
of the necessary structures and facilities;
d) Execute such contracts or agreements
as may be necessary, with the appropriate
government agencies, entities, and/or
private persons, in accordance with existing
laws and pertinent regulations, to facilitate
the implementation of the project;
e) Accept, manage and disburse such funds
as may be necessary for the construction
and/or implementation of the projects, in
accordance with prevailing accounting and
audit polices and practice in government.
f) Enlist the assistance of any national
government agency, office or department,
including local government units,
government-owned or controlled
corporations, as may be necessary;
g) Assign or hire the necessary personnel
for the above purposes; and
h) Perform such other related functions as
may be necessary to enable it to
accomplish the objectives and purposes of
this Executive Order.
4
(Emphasis in the
original; underscoring supplied)
As the above-quoted portions of the E.O. noted, the primary cause of traffic
congestion in Metro Manila has been the numerous buses plying the
streets and the inefficient connectivity of the different transport
modes;
5
and the MMDA had "recommended a plan to decongest traffic by
eliminating the bus terminals now located along major Metro Manila
thoroughfares and providing more and convenient access to the mass
transport system to the commuting public through the provision of mass
transport terminal facilities"
6
which plan is referred to under the E.O. as
the Greater Manila Mass Transport System Project (the Project).
The E.O. thus designated the MMDA as the implementing agency for the
Project.
Pursuant to the E.O., the Metro Manila Council (MMC), the governing
board and policymaking body of the MMDA, issued Resolution No. 03-07
series of 2003
7
expressing full support of the Project. Recognizing the
imperative to integrate the different transport modes via the establishment
of common bus parking terminal areas, the MMC cited the need to remove
the bus terminals located along major thoroughfares of Metro Manila.
8

On February 24, 2003, Viron Transport Co., Inc. (Viron), a domestic
corporation engaged in the business of public transportation with a
provincial bus operation,
9
filed a petition for declaratory relief
10
before the
RTC
11
of Manila.
In its petition which was docketed as Civil Case No. 03-105850, Viron
alleged that the MMDA, through Chairman Fernando, was "poised to issue
a Circular, Memorandum or Order closing, or tantamount to closing, all
provincial bus terminals along EDSA and in the whole of the Metropolis
under the pretext of traffic regulation."
12
This impending move, it stressed,
would mean the closure of its bus terminal in Sampaloc, Manila and two
others in Quezon City.
Alleging that the MMDAs authority does not include the power to direct
provincial bus operators to abandon their existing bus terminals to thus
deprive them of the use of their property, Viron asked the court to construe
the scope, extent and limitation of the power of the MMDA to regulate
traffic under R.A. No. 7924, "An Act Creating the Metropolitan Manila
Development Authority, Defining its Powers and Functions, Providing
Funds Therefor and For Other Purposes."
Viron also asked for a ruling on whether the planned closure of provincial
bus terminals would contravene the Public Service Act and related laws
which mandate public utilities to provide and maintain their own terminals
as a requisite for the privilege of operating as common carriers.
13

Mencorp Transportation System, Inc. (Mencorp), another provincial bus
operator, later filed a similar petition for declaratory relief
14
against
Executive Secretary Alberto G. Romulo and MMDA Chairman Fernando.
Mencorp asked the court to declare the E.O. unconstitutional and illegal for
transgressing the possessory rights of owners and operators of public land
transportation units over their respective terminals.
Averring that MMDA Chairman Fernando had begun to implement a plan
to close and eliminate all provincial bus terminals along EDSA and in the
whole of the metropolis and to transfer their operations to common bus
terminals,
15
Mencorp prayed for the issuance of a temporary restraining
order (TRO) and/or writ of preliminary injunction to restrain the impending
closure of its bus terminals which it was leasing at the corner of EDSA and
New York Street in Cubao and at the intersection of Blumentritt, Laon Laan
and Halcon Streets in Quezon City. The petition was docketed as Civil
Case No. 03-106224 and was raffled to Branch 47 of the RTC of Manila.
Mencorps petition was consolidated on June 19, 2003 with Virons petition
which was raffled to Branch 26 of the RTC, Manila.
Mencorps prayer for a TRO and/or writ of injunction was denied as was its
application for the issuance of a preliminary injunction.
16

In the Pre-Trial Order
17
issued by the trial court, the issues were narrowed
down to whether 1) the MMDAs power to regulate traffic in Metro Manila
included the power to direct provincial bus operators to abandon and close
their duly established and existing bus terminals in order to conduct
business in a common terminal; (2) the E.O. is consistent with the Public
Service Act and the Constitution; and (3) provincial bus operators would be
deprived of their real properties without due process of law should they be
required to use the common bus terminals.
Upon the agreement of the parties, they filed their respective position
papers in lieu of hearings.
By Decision
18
of January 24, 2005, the trial court sustained the
constitutionality and legality of the E.O. pursuant to R.A. No. 7924, which
empowered the MMDA to administer Metro Manilas basic services
including those of transport and traffic management.
The trial court held that the E.O. was a valid exercise of the police power of
the State as it satisfied the two tests of lawful subject matter and lawful
means, hence, Virons and Mencorps property rights must yield to police
power.
On the separate motions for reconsideration of Viron and Mencorp, the trial
court, by Order of September 8, 2005, reversed its Decision, this time
holding that the E.O. was "an unreasonable exercise of police power"; that
the authority of the MMDA under Section (5)(e) of R.A. No. 7924 does not
include the power to order the closure of Virons and Mencorps existing
bus terminals; and that the E.O. is inconsistent with the provisions of the
Public Service Act.
Petitioners motion for reconsideration was denied by Resolution of
November 23, 2005.
Hence, this petition, which faults the trial court for failing to rule that: (1) the
requisites of declaratory relief are not present, there being no justiciable
controversy in Civil Case Nos. 03-105850 and 03-106224; and (2) the
President has the authority to undertake or cause the implementation of
the Project.
19

Petitioners contend that there is no justiciable controversy in the cases for
declaratory relief as nothing in the body of the E.O. mentions or orders the
closure and elimination of bus terminals along the major thoroughfares of
Metro Manila. Viron and Mencorp, they argue, failed to produce any letter
or communication from the Executive Department apprising them of an
immediate plan to close down their bus terminals.
And petitioners maintain that the E.O. is only an administrative directive to
government agencies to coordinate with the MMDA and to make available
for use government property along EDSA and South Expressway corridors.
They add that the only relation created by the E.O. is that between the
Chief Executive and the implementing officials, but not between third
persons.
The petition fails.
It is true, as respondents have pointed out, that the alleged deficiency of
the consolidated petitions to meet the requirement of justiciability was not
among the issues defined for resolution in the Pre-Trial Order of January
12, 2004. It is equally true, however, that the question was repeatedly
raised by petitioners in their Answer to Virons petition,
20
their Comment of
April 29, 2003 opposing Mencorps prayer for the issuance of a TRO,
21
and
their Position Paper of August 23, 2004.
22

In bringing their petitions before the trial court, both respondents pleaded
the existence of the essential requisites for their respective petitions for
declaratory relief,
23
and refuted petitioners contention that a justiciable
controversy was lacking.
24
There can be no denying, therefore, that the
issue was raised and discussed by the parties before the trial court.
The following are the essential requisites for a declaratory relief petition:
(a) there must be a justiciable controversy; (b) the controversy must be
between persons whose interests are adverse; (c) the party seeking
declaratory relief must have a legal interest in the controversy; and (d) the
issue invoked must be ripe for judicial determination.
25

The requirement of the presence of a justiciable controversy is satisfied
when an actual controversy or theripening seeds thereof exist between the
parties, all of whom are sui juris and before the court, and the declaration
sought will help in ending the controversy.
26
A question becomes justiciable
when it is translated into a claim of right which is actually contested.
27

In the present cases, respondents resort to court was prompted by the
issuance of the E.O. The 4th Whereas clause of the E.O. sets out in clear
strokes the MMDAs plan to "decongest traffic by eliminating the bus
terminals now located along major Metro Manila thoroughfares and
providing more convenient access to the mass transport system to the
commuting public through the provision of mass transport terminal facilities
x x x." (Emphasis supplied)
Section 2 of the E.O. thereafter lays down the immediate establishment of
common bus terminals for north- and south-bound commuters. For this
purpose, Section 8 directs the Department of Budget and Management to
allocate funds of not more than one hundred million pesos (P100,000,000)
to cover the cost of the construction of the north and south terminals. And
the E.O. was made effective immediately.
The MMDAs resolve to immediately implement the Project, its denials to
the contrary notwithstanding, is also evident from telltale circumstances,
foremost of which was the passage by the MMC of Resolution No. 03-07,
Series of 2003 expressing its full support of the immediate implementation
of the Project.
Notable from the 5th Whereas clause of the MMC Resolution is the plan to
"remove the bus terminals located along major thoroughfares of Metro
Manila and an urgent need to integrate the different transport modes." The
7th Whereas clause proceeds to mention the establishment of the North
and South terminals.
As alleged in Virons petition, a diagram of the GMA-MTS North Bus/Rail
Terminal had been drawn up, and construction of the terminal is already in
progress. The MMDA, in its Answer
28
and Position Paper,
29
in fact affirmed
that the government had begun to implement the Project.
It thus appears that the issue has already transcended the boundaries of
what is merely conjectural or anticipatory.lawphil
Under the circumstances, for respondents to wait for the actual issuance
by the MMDA of an order for the closure of respondents bus terminals
would be foolhardy for, by then, the proper action to bring would no longer
be for declaratory relief which, under Section 1, Rule 63
30
of the Rules of
Court, must be brought before there is a breach or violation of rights.
As for petitioners contention that the E.O. is a mere administrative
issuance which creates no relation with third persons, it does not
persuade. Suffice it to stress that to ensure the success of the Project for
which the concerned government agencies are directed to coordinate their
activities and resources, the existing bus terminals owned, operated or
leased by third persons like respondents would have to be eliminated; and
respondents would be forced to operate from the common bus terminals.
It cannot be gainsaid that the E.O. would have an adverse effect on
respondents. The closure of their bus terminals would mean, among other
things, the loss of income from the operation and/or rentals of stalls
thereat. Precisely, respondents claim a deprivation of their constitutional
right to property without due process of law.
Respondents have thus amply demonstrated a "personal and substantial
interest in the case such that [they have] sustained, or will sustain, direct
injury as a result of [the E.O.s] enforcement."
31
Consequently, the
established rule that the constitutionality of a law or administrative
issuance can be challenged by one who will sustain a direct injury as a
result of its enforcement has been satisfied by respondents.
On to the merits of the case.
Respondents posit that the MMDA is devoid of authority to order the
elimination of their bus terminals under the E.O. which, they argue, is
unconstitutional because it violates both the Constitution and the Public
Service Act; and that neither is the MMDA clothed with such authority
under R.A. No. 7924.
Petitioners submit, however, that the real issue concerns the Presidents
authority to undertake or to cause the implementation of the Project. They
assert that the authority of the President is derived from E.O. No. 125,
"Reorganizing the Ministry of Transportation and Communications Defining
its Powers and Functions and for Other Purposes," her residual power
and/or E.O. No. 292, otherwise known as the Administrative Code of 1987.
They add that the E.O. is also a valid exercise of the police power.
E.O. No. 125,
32
which former President Corazon Aquino issued in the
exercise of legislative powers, reorganized the then Ministry (now
Department) of Transportation and Communications. Sections 4, 5, 6 and
22 of E.O. 125, as amended by E.O. 125-A,
33
read:
SECTION 4. Mandate. The Ministry shall be the primary policy,
planning, programming, coordinating, implementing,
regulating and administrative entity of the Executive Branch of
the government in the promotion, development and regulation
of dependable and coordinated networks of transportation and
communication systems as well as in the fast, safe, efficient and
reliable postal, transportation and communications services.
To accomplish such mandate, the Ministry shall have the following
objectives:
(a) Promote the development of dependable and
coordinated networks of transportation and
communications systems;
(b) Guide government and private investment in
the development of the countrys intermodal
transportation and communications systems in
a most practical, expeditious, and orderly fashion
for maximum safety, service, and cost
effectiveness; (Emphasis and underscoring
supplied)
x x x x
SECTION 5. Powers and Functions. To accomplish its mandate,
the Ministry shall have the following powers and functions:
(a) Formulate and recommend national policies and
guidelines for the preparation and implementation
of integrated and comprehensive transportation and
communications systems at the national, regional
and local levels;
(b) Establish and administer comprehensive
and integrated programs for transportation and
communications, and for this purpose, may call on
any agency, corporation, or organization, whether
public or private, whose development programs
include transportation and communications as an
integral part thereof, to participate and assist in the
preparation and implementation of such program;
(c) Assess, review and provide direction to
transportation and communications research and
development programs of the government in
coordination with other institutions concerned;
(d) Administer all laws, rules and regulations in
the field of transportation and communications;
(Emphasis and underscoring supplied)
x x x x
SECTION 6. Authority and Responsibility. The authority and
responsibility for the exercise of the mandate of the Ministry
and for the discharge of its powers and functions shall
be vested in the Minister of Transportation and
Communications, hereinafter referred to as the Minister, who
shall have supervision and control over the Ministry and shall be
appointed by the President. (Emphasis and underscoring supplied)
SECTION 22. Implementing Authority of Minister. The Minister
shall issue such orders, rules, regulations and other
issuances as may be necessary to ensure the effective
implementation of the provisions of this Executive Order.
(Emphasis and underscoring supplied)
It is readily apparent from the abovequoted provisions of E.O. No. 125, as
amended, that the President, then possessed of and exercising legislative
powers, mandated the DOTC to be the primary policy, planning,
programming, coordinating, implementing, regulating and administrative
entity to promote, develop and regulate networks of transportation and
communications. The grant of authority to the DOTC includes the power
toestablish and administer comprehensive and integrated programs for
transportation and communications.
As may be seen further, the Minister (now Secretary) of the DOTC is
vested with the authority and responsibility to exercise the mandate given
to the department. Accordingly, the DOTC Secretary is authorized to issue
such orders, rules, regulations and other issuances as may be necessary
to ensure the effective implementation of the law.
Since, under the law, the DOTC is authorized to establish and administer
programs and projects for transportation, it follows that the President may
exercise the same power and authority to order the implementation of the
Project, which admittedly is one for transportation.
Such authority springs from the Presidents power of control over all
executive departments as well as the obligation for the faithful execution of
the laws under Article VII, Section 17 of the Constitution which provides:
SECTION 17. The President shall have control of all the executive
departments, bureaus and offices. He shall ensure that the laws be
faithfully executed.
This constitutional provision is echoed in Section 1, Book III of the
Administrative Code of 1987. Notably, Section 38, Chapter 37, Book IV of
the same Code defines the Presidents power of supervision and control
over the executive departments, viz:
SECTION 38. Definition of Administrative Relationships. Unless
otherwise expressly stated in the Code or in other laws defining the
special relationships of particular agencies, administrative
relationships shall be categorized and defined as follows:
(1) Supervision and Control. Supervision and control
shall include authority to act directlywhenever a specific
function is entrusted by law or regulation to a subordinate;
direct the performance of duty; restrain the commission of acts;
review, approve, reverse or modify acts and decisions of
subordinate officials or units; determine priorities in the execution
of plans and programs. Unless a different meaning is explicitly
provided in the specific law governing the relationship of particular
agencies the word "control" shall encompass supervision and
control as defined in this paragraph. x x x (Emphasis and
underscoring supplied)
Thus, whenever a specific function is entrusted by law or regulation to a
subordinate, the President may act directly or merely direct the
performance of a duty.
34

Respecting the Presidents authority to order the implementation of the
Project in the exercise of the police power of the State, suffice it to stress
that the powers vested in the DOTC Secretary to establish and administer
comprehensive and integrated programs for transportation and
communications and to issue orders, rules and regulations to implement
such mandate (which, as previously discussed, may also be exercised by
the President) have been so delegated for the good and welfare of the
people. Hence, these powers partake of the nature of police power.
Police power is the plenary power vested in the legislature to make, ordain,
and establish wholesome and reasonable laws, statutes and ordinances,
not repugnant to the Constitution, for the good and welfare of the
people.
35
This power to prescribe regulations to promote the health,
morals, education, good order or safety, and general welfare of the people
flows from the recognition that salus populi est suprema lex the welfare
of the people is the supreme law.
While police power rests primarily with the legislature, such power may be
delegated, as it is in fact increasingly being delegated.
36
By virtue of a valid
delegation, the power may be exercised by the President and
administrative boards
37
as well as by the lawmaking bodies of municipal
corporations or local governments under an express delegation by the
Local Government Code of 1991.
38

The authority of the President to order the implementation of the Project
notwithstanding, the designation of the MMDA as the implementing agency
for the Project may not be sustained. It is ultra vires, there being no legal
basis therefor.
It bears stressing that under the provisions of E.O. No. 125, as amended, it
is the DOTC, and not the MMDA, which is authorized to establish and
implement a project such as the one subject of the cases at bar. Thus, the
President, although authorized to establish or cause the implementation of
the Project, must exercise the authority through the instrumentality of
the DOTC which, by law, is the primary implementing and administrative
entity in the promotion, development and regulation of networks of
transportation, and the one so authorized to establish and implement a
project such as the Project in question.
By designating the MMDA as the implementing agency of the Project, the
President clearly overstepped the limits of the authority conferred by law,
rendering E.O. No. 179 ultra vires.
In another vein, the validity of the designation of MMDA flies in the
absence of a specific grant of authority to it under R.A. No. 7924.
To recall, R.A. No. 7924 declared the Metropolitan Manila area
39
as a
"special development and administrative region" and placed the
administration of "metro-wide" basic services affecting the region under the
MMDA.
Section 2 of R.A. No. 7924 specifically authorizes the MMDA to perform
"planning, monitoring and coordinative functions, and in the process
exercise regulatory and supervisory authority over the delivery of metro-
wide services," including transport and traffic management.
40
Section 5 of
the same law enumerates the powers and functions of the MMDA as
follows:
(a) Formulate, coordinate and regulate the implementation
of medium and long-term plans and programs for the
delivery of metro-wide services, land use and physical
development within Metropolitan Manila, consistent with
national development objectives and priorities;
(b) Prepare, coordinate and regulate the implementation of
medium-term investment programs for metro-wide services
which shall indicate sources and uses of funds for priority
programs and projects, and which shall include the
packaging of projects and presentation to funding
institutions;
(c) Undertake and manage on its own metro-wide
programs and projects for the delivery of specific services
under its jurisdiction, subject to the approval of the Council.
For this purpose, MMDA can create appropriate project
management offices;
(d) Coordinate and monitor the implementation of such
plans, programs and projects in Metro Manila; identify
bottlenecks and adopt solutions to problems of
implementation;
(e) The MMDA shall set the policies concerning traffic
in Metro Manila, and shall coordinate and regulate the
implementation of all programs and projects
concerning traffic management, specifically pertaining
to enforcement, engineering and education. Upon
request, it shall be extended assistance and cooperation,
including but not limited to, assignment of personnel, by all
other government agencies and offices concerned;
(f) Install and administer a single ticketing system, fix,
impose and collect fines and penalties for all kinds of
violations of traffic rules and regulations, whether
moving or non-moving in nature, and confiscate and
suspend or revoke drivers licenses in the enforcement of
such traffic laws and regulations, the provisions of RA 4136
and PD 1605 to the contrary notwithstanding. For this
purpose, the Authority shall impose all traffic laws and
regulations in Metro Manila, through its traffic operation
center, and may deputize members of the PNP, traffic
enforcers of local government units, duly licensed security
guards, or members of non-governmental organizations to
whom may be delegated certain authority, subject to such
conditions and requirements as the Authority may impose;
and
(g) Perform other related functions required to achieve the
objectives of the MMDA, including the undertaking of
delivery of basic services to the local government units,
when deemed necessary subject to prior coordination with
and consent of the local government unit concerned."
(Emphasis and underscoring supplied)
The scope of the function of MMDA as an administrative, coordinating and
policy-setting body has been settled inMetropolitan Manila Development
Authority (MMDA) v. Bel-Air Village Association, Inc.
41
In that case, the
Court stressed:
Clearly, the scope of the MMDAs function is limited to the delivery
of the seven (7) basic services. One of these is transport and
traffic management which includes the formulation and monitoring
of policies, standards and projects to rationalize the existing
transport operations, infrastructure requirements, the use of
thoroughfares and promotion of the safe movement of persons and
goods. It also covers the mass transport system and the
institution of a system of road regulation, the administration of all
traffic enforcement operations, traffic engineering services and
traffic education programs, including the institution of a single
ticketing system in Metro Manila for traffic violations. Under this
service, the MMDA is expressly authorized to "to set the policies
concerning traffic" and "coordinate and regulate the implementation
of all traffic management programs." In addition, the MMDA may
install and administer a single ticketing system," fix, impose and
collect fines and penalties for all traffic violations.
It will be noted that the powers of the MMDA are limited to the
following acts: formulation, coordination, regulation,
implementation, preparation, management, monitoring, setting of
policies, installation of a system and administration. There is no
syllable in R.A. No. 7924 that grants the MMDA police power, let
alone legislative power. Even the Metro Manila Council has not
been delegated any legislative power. Unlike the legislative
bodies of the local government units, there is no provision in
R.A. No. 7924 that empowers the MMDA or its Council to
enact ordinances, approve resolutions and appropriate
funds for the general welfare of the inhabitants of Metro
Manila. The MMDA is, as termed in the charter itself, a
development authority. It is an agency created for the
purpose of laying down policies and coordinating with the
various national government agencies, peoples
organizations, non-governmental organizations and the
private sector for the efficient and expeditious delivery of
basic services in the vast metropolitan area. All its functions
are administrative in nature and these are actually summed up
in the charter itself, viz:
SECTION 2. Creation of the Metropolitan Manila Development
Authority. . . .
The MMDA shall perform planning, monitoring and
coordinative functions, and in the process exercise
regulatory and supervisory authority over the delivery
of metro-wide services within Metro Manila, without
diminution of the autonomy of the local government units
concerning purely local matters.
42
(Emphasis and
underscoring supplied)
In light of the administrative nature of its powers and functions, the MMDA
is devoid of authority to implement the Project as envisioned by the E.O;
hence, it could not have been validly designated by the President to
undertake the Project. It follows that the MMDA cannot validly order the
elimination of respondents terminals.
Even the MMDAs claimed authority under the police power must
necessarily fail in consonance with the above-quoted ruling in MMDA v.
Bel-Air Village Association, Inc. and this Courts subsequent ruling
in Metropolitan Manila Development Authority v. Garin
43
that the MMDA is
not vested with police power.
Even assuming arguendo that police power was delegated to the MMDA,
its exercise of such power does not satisfy the two tests of a valid police
power measure, viz: (1) the interest of the public generally, as
distinguished from that of a particular class, requires its exercise; and (2)
the means employed are reasonably necessary for the accomplishment of
the purpose and not unduly oppressive upon individuals.
44
Stated
differently, the police power legislation must be firmly grounded on public
interest and welfare and a reasonable relation must exist between the
purposes and the means.
As early as Calalang v. Williams,
45
this Court recognized that traffic
congestion is a public, not merely a private, concern. The Court therein
held that public welfare underlies the contested statute authorizing the
Director of Public Works to promulgate rules and regulations to regulate
and control traffic on national roads.
Likewise, in Luque v. Villegas,
46
this Court emphasized that public welfare
lies at the bottom of any regulatory measure designed "to relieve
congestion of traffic, which is, to say the least, a menace to public
safety."
47
As such, measures calculated to promote the safety and
convenience of the people using the thoroughfares by the regulation of
vehicular traffic present a proper subject for the exercise of police power.
Notably, the parties herein concede that traffic congestion is a public
concern that needs to be addressed immediately. Indeed, the E.O. was
issued due to the felt need to address the worsening traffic congestion in
Metro Manila which, the MMDA so determined, is caused by the increasing
volume of buses plying the major thoroughfares and the inefficient
connectivity of existing transport systems. It is thus beyond cavil that the
motivating force behind the issuance of the E.O. is the interest of the public
in general.
Are the means employed appropriate and reasonably necessary for the
accomplishment of the purpose. Are they not duly oppressive?
With the avowed objective of decongesting traffic in Metro Manila, the E.O.
seeks to "eliminate[e] the bus terminals now located along major Metro
Manila thoroughfares and provid[e] more convenient access to the mass
transport system to the commuting public through the provision of mass
transport terminal facilities x x x."
48
Common carriers with terminals along
the major thoroughfares of Metro Manila would thus be compelled to close
down their existing bus terminals and use the MMDA-designated common
parking areas.
In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc.,
49
two city
ordinances were passed by the Sangguniang Panlungsod of Lucena,
directing public utility vehicles to unload and load passengers at the
Lucena Grand Central Terminal, which was given the exclusive franchise
to operate a single common terminal. Declaring that no other terminals
shall be situated, constructed, maintained or established inside or within
the city of Lucena, thesanggunian declared as inoperable all temporary
terminals therein.
The ordinances were challenged before this Court for being
unconstitutional on the ground that, inter alia, the measures constituted an
invalid exercise of police power, an undue taking of private property, and a
violation of the constitutional prohibition against monopolies.
Citing De la Cruz v. Paras
50
and Lupangco v. Court of Appeals,
51
this Court
held that the assailed ordinances were characterized by overbreadth, as
they went beyond what was reasonably necessary to solve the traffic
problem in the city. And it found that the compulsory use of the Lucena
Grand Terminal was unduly oppressive because it would subject its users
to fees, rentals and charges.
The true role of Constitutional Law is to effect an equilibrium
between authority and liberty so that rights are exercised within the
framework of the law and the laws are enacted with due deference
to rights.
A due deference to the rights of the individual thus requires a more
careful formulation of solutions to societal problems.
From the memorandum filed before this Court by petitioner, it is
gathered that the Sangguniang Panlungsod had identified the
cause of traffic congestion to be the indiscriminate loading and
unloading of passengers by buses on the streets of the city proper,
hence, the conclusion that the terminals contributed to the
proliferation of buses obstructing traffic on the city streets.
Bus terminals per se do not, however, impede or help impede the
flow of traffic. How the outright proscription against the
existence of all terminals, apart from that franchised to
petitioner, can be considered as reasonably necessary to
solve the traffic problem, this Court has not been enlightened.
If terminals lack adequate space such that bus drivers are
compelled to load and unload passengers on the streets instead of
inside the terminals, then reasonable specifications for the size of
terminals could be instituted, with permits to operate the same
denied those which are unable to meet the specifications.
In the subject ordinances, however, the scope of the
proscription against the maintenance of terminals is so
broad that even entities which might be able to provide
facilities better than the franchised terminal are barred from
operating at all. (Emphasis and underscoring supplied)
As in Lucena, this Court fails to see how the prohibition against the
existence of respondents terminals can be considered a reasonable
necessity to ease traffic congestion in the metropolis. On the contrary, the
elimination of respondents bus terminals brings forth the distinct possibility
and the equally harrowing reality of traffic congestion in the common
parking areas, a case of transference from one site to another.
Less intrusive measures such as curbing the proliferation of "colorum"
buses, vans and taxis entering Metro Manila and using the streets for
parking and passenger pick-up points, as respondents suggest, might even
be more effective in easing the traffic situation. So would the strict
enforcement of traffic rules and the removal of obstructions from major
thoroughfares.
As to the alleged confiscatory character of the E.O., it need only to be
stated that respondents certificates of public convenience confer no
property right, and are mere licenses or privileges.
52
As such, these must
yield to legislation safeguarding the interest of the people.
Even then, for reasons which bear reiteration, the MMDA cannot order the
closure of respondents terminals not only because no authority to
implement the Project has been granted nor legislative or police power
been delegated to it, but also because the elimination of the terminals does
not satisfy the standards of a valid police power measure.
Finally, an order for the closure of respondents terminals is not in line with
the provisions of the Public Service Act.
Paragraph (a), Section 13 of Chapter II of the Public Service Act (now
Section 5 of Executive Order No. 202, creating the Land Transportation
Franchising and Regulatory Board or LFTRB) vested the Public Service
Commission (PSC, now the LTFRB) with "x x x jurisdiction, supervision
and control over all public services and their franchises, equipment and
other properties x x x."
Consonant with such grant of authority, the PSC was empowered to
"impose such conditions as to construction, equipment,
maintenance, service, or operation as the public interests and
convenience may reasonably require"
53
in approving any franchise or
privilege.
Further, Section 16 (g) and (h) of the Public Service Act
54
provided that the
Commission shall have the power, upon proper notice and hearing in
accordance with the rules and provisions of this Act, subject to the
limitations and exceptions mentioned and saving provisions to the contrary:
(g) To compel any public service to furnish safe, adequate, and
proper service as regards the manner of furnishing the same as
well as the maintenance of the necessary material and equipment.
(h) To require any public service to establish, construct,
maintain, and operate any reasonable extension of its existing
facilities, where in the judgment of said Commission, such
extension is reasonable and practicable and will furnish sufficient
business to justify the construction and maintenance of the same
and when the financial condition of the said public service
reasonably warrants the original expenditure required in making
and operating such extension.(Emphasis and underscoring
supplied)
The establishment, as well as the maintenance of vehicle parking areas or
passenger terminals, is generally considered a necessary service to be
provided by provincial bus operators like respondents, hence, the
investments they have poured into the acquisition or lease of suitable
terminal sites. Eliminating the terminals would thus run counter to the
provisions of the Public Service Act.
This Court commiserates with the MMDA for the roadblocks thrown in the
way of its efforts at solving the pestering problem of traffic congestion in
Metro Manila. These efforts are commendable, to say the least, in the face
of the abominable traffic situation of our roads day in and day out. This
Court can only interpret, not change, the law, however. It needs only to be
reiterated that it is the DOTC as the primary policy, planning,
programming, coordinating, implementing, regulating and administrative
entity to promote, develop and regulate networks of transportation and
communications which has the power to establish and administer a
transportation project like the Project subject of the case at bar.
No matter how noble the intentions of the MMDA may be then, any plan,
strategy or project which it is not authorized to implement cannot pass
muster.
WHEREFORE, the Petition is, in light of the foregoing
disquisition, DENIED. E.O. No. 179 is declared NULL and VOID for
being ultra vires.






































G.R. No. 175527 December 8, 2008
HON. GABRIEL LUIS QUISUMBING, HON. ESTRELLA P. YAPHA,
HON. VICTORIA G. COROMINAS, HON. RAUL D. BACALTOS
(Members of the Sangguniang Panlalawigan of Cebu), petitioners,
vs.
HON. GWENDOLYN F. GARCIA (In her capacity as Governor of the
Province of Cebu), HON. DELFIN P. AGUILAR (in his capacity as
Director IV (Cluster Director) of COA), Cluster IV Visayas Local
Government Sector, HON. HELEN S. HILAYO (In her capacity as
Regional Cluster Director of COA), and HON. ROY L. URSAL (In his
capacity as Regional Legal and Adjudication Director of
COA), respondents.
D E C I S I O N
TINGA, J .:
Gabriel Luis Quisumbing (Quisumbing), Estrella P. Yapha, Victoria G.
Corominas, and Raul D. Bacaltos (Bacaltos), collectively petitioners, assail
the Decision
1
of the Regional Trial Court (RTC) of Cebu City, Branch 9, in
Civil Case No. CEB-31560, dated July 11, 2006, which declared that under
the pertinent provisions of Republic Act No. 7160 (R.A. No. 7160), or the
Local Government Code, and Republic Act No. 9184 (R.A. No. 9184), or
the Government Procurement Reform Act, respondent Cebu Provincial
Governor Gwendolyn F. Garcia (Gov. Garcia), need not secure the prior
authorization of the Sangguniang Panlalawigan before entering into
contracts committing the province to monetary obligations.
The undisputed facts gathered from the assailed Decision and the
pleadings submitted by the parties are as follows:
The Commission on Audit (COA) conducted a financial audit on the
Province of Cebu for the period ending December 2004. Its audit team
rendered a report, Part II of which states: "Several contracts in the total
amount ofP102,092,841.47 were not supported with a Sangguniang
Panlalawigan resolution authorizing
the Provincial Governor to enter into a contract, as required under Section
22 of R.A. No. 7160."
2
The audit team then recommended that,
"Henceforth, the local chief executive must secure a sanggunian resolution
authorizing the former to enter into a contract as provided under Section 22
of R.A. No. 7160."
3

Gov. Garcia, in her capacity as the Provincial Governor of Cebu, sought
the reconsideration of the findings and recommendation of the COA.
However, without waiting for the resolution of the reconsideration sought,
she instituted an action for Declaratory Relief before the RTC of Cebu City,
Branch 9. Impleaded as respondents were Delfin P. Aguilar, Helen S.
Hilayo and Roy L. Ursal in their official capacities as Cluster Director IV,
Regional Cluster Director and Regional Legal and Adjudication Director of
the COA, respectively. The Sangguniang Panlalawigan of the Province of
Cebu, represented by Vice-Governor Gregorio Sanchez, Jr., was also
impleaded as respondent.
Alleging that the infrastructure contracts
4
subject of the audit report
complied with the bidding procedures provided under R.A. No. 9184 and
were entered into pursuant to the general and/or supplemental
appropriation ordinances passed by the Sangguniang Panlalawigan, Gov.
Garcia alleged that a separate authority to enter into such contracts was no
longer necessary.
On the basis of the parties respective memoranda, the trial court rendered
the assailed Decision dated July 11, 2006, declaring that Gov. Garcia need
not secure prior authorization from the Sangguniang Panlalawigan of Cebu
before entering into the questioned contracts. The dispositive portion of the
Decision provides:
WHEREFORE, premises considered, this court hereby renders
judgment in favor of Petitioner and against the Respondent COA
officials and declares that pursuant to Sections 22 paragraph in
relation to Sections 306 and 346 of the Local Government Code
and Section 37 of the Government Procurement Reform Act, the
Petitioner Governor of Cebu need not secure prior authorization by
way of a resolution from theSangguniang Panlalawigan of the
Province of Cebu before she enters into a contract involving
monetary obligations on the part of the Province of Cebu when
there is a prior appropriation ordinance enacted.
Insofar as Respondent Sangguniang Panlalawigan, this case is
hereby dismissed.
5

In brief, the trial court declared that the Sangguniang Panlalawigan does
not have juridical personality nor is it vested by R.A. No. 7160 with
authority to sue and be sued. The trial court accordingly dismissed the
case against respondent members of the Sangguniang Panlalawigan. On
the question of the remedy of declaratory relief being improper because a
breach had already been committed, the trial court held that the case
would ripen into and be treated as an ordinary civil action. The trial court
further ruled that it is only when the contract (entered into by the local chief
executive) involves obligations which are not backed by prior ordinances
that the prior authority of thesanggunian concerned is required. In this
case, the Sangguniang Panlalawigan of Cebu had already given its prior
authorization when it passed the appropriation ordinances which
authorized the expenditures in the questioned contracts.
The trial court denied the motion for reconsideration
6
filed by Quisumbing,
Bacaltos, Carmiano Kintanar, Jose Ma. Gastardo, and Agnes Magpale, in
their capacities as members of the Sangguniang Panlalawigan of Cebu, in
an Order
7
dated October 25, 2006.
In the Petition for Review
8
dated November 22, 2006, petitioners insisted
that the RTC committed reversible error in granting due course to Gov.
Garcias petition for declaratory relief despite a breach of the law subject of
the petition having already been committed. This breach was allegedly
already the subject of a pending investigation by the Deputy Ombudsman
for the Visayas. Petitioners further maintained that prior authorization from
theSangguniang Panlalawigan should be secured before Gov. Garcia
could validly enter into contracts involving monetary obligations on the part
of the province.
Gov. Garcia, in her Comment
9
dated April 10, 2007, notes that the RTC
had already dismissed the case against the members of the Sangguniang
Panlalawigan of Cebu on the ground that they did not have legal
personality to sue and be sued. Since the COA officials also named as
respondents in the petition for declaratory relief neither filed a motion for
reconsideration nor appealed the RTC Decision, the said Decision became
final and executory. Moreover, only two of the members of
the Sangguniang Panlalawigan, namely, petitioners Quisumbing and
Bacaltos, originally named as respondents in the petition for declaratory
relief, filed the instant petition before the Court.
Respondent Governor insists that at the time of the filing of the petition for
declaratory relief, there was not yet any breach of R.A. No. 7160. She
further argues that the questioned contracts were executed after a public
bidding in implementation of specific items in the regular or supplemental
appropriation ordinances passed by theSangguniang Panlalawigan. These
ordinances allegedly serve as the authorization required under R.A. No.
7160, such that the obtention of another authorization becomes not only
redundant but also detrimental to the speedy delivery of basic services.
Gov. Garcia also claims that in its Comment to the petition for declaratory
relief, the Office of the Solicitor General (OSG) took a stand supportive of
the governors arguments. The OSGs official position allegedly binds the
COA.
Expressing gratitude for having been allowed by this Court to file a
comment on the petition, respondent COA officials in their
Comment
10
dated March 8, 2007, maintain that Sections 306 and 346 of
R.A. No. 7160 cannot be considered exceptions to Sec. 22(c) of R.A. No.
7160. Sec. 346 allegedly refers to disbursements which must be made in
accordance with an appropriation ordinance without need of approval from
the sanggunian concerned. Sec. 306, on the other hand, refers to the
authorization for the effectivity of the budget and should not be mistaken
for the specific authorization by the Sangguniang Panlalawigan for the
local chief executive to enter into contracts under Sec. 22(c) of R.A. No.
7160.
The question that must be resolved by the Court should allegedly be
whether the appropriation ordinance referred to in Sec. 346 in relation to
Sec. 306 of R.A. No. 7160 is the same prior authorization required under
Sec. 22(c) of the same law. To uphold the assailed Decision would
allegedly give the local chief executive unbridled authority to enter into any
contract as long as an appropriation ordinance or budget has been passed
by the sanggunianconcerned.
Respondent COA officials also claim that the petition for declaratory relief
should have been dismissed for the failure of Gov. Garcia to exhaust
administrative remedies, rendering the petition not ripe for judicial
determination.
The OSG filed a Comment
11
dated March 12, 2007, pointing out that the
instant petition raises factual issues warranting its denial. For instance,
petitioners, on one hand, claim that there was no appropriation ordinance
passed for 2004 but only a reenacted appropriations ordinance and that
the unauthorized contracts did not proceed from a public bidding pursuant
to R.A. No. 9184. Gov. Garcia, on the other hand, claims that the contracts
were entered into in compliance with the bidding procedures in R.A. No.
9184 and pursuant to the general and/or supplemental appropriations
ordinances passed by the Sangguniang Panlalawigan. She further asserts
that there were ordinances allowing the expenditures made.
On the propriety of the action for declaratory relief filed by Gov. Garcia, the
OSG states in very general terms that such an action must be brought
before any breach or violation of the statute has been committed and may
be treated as an ordinary action only if the breach occurs after the filing of
the action but before the termination thereof. However, it does not say in
this case whether such recourse is proper.
Nonetheless, the OSG goes on to discuss that Sec. 323 of R.A. No. 7160
allows disbursements for salaries and wages of existing positions, statutory
and contractual obligations and essential operating expenses authorized in
the annual and supplemental budgets of the preceding year (which are
deemed reenacted in case the sanggunianconcerned fails to pass the
ordinance authorizing the annual appropriations at the beginning of the
ensuing fiscal year). Contractual obligations not included in the preceding
years annual and supplemental budgets allegedly require the prior
approval or authorization of the local sanggunian.
In their Consolidated Reply
12
dated August 8, 2007, petitioners insist that
the instant petition raises only questions of law not only because the
parties have agreed during the proceedings before the trial court that the
case involves purely legal questions, but also because there is no dispute
that the Province of Cebu was operating under a reenacted budget in
2004.
They further defend their standing to bring suit not only as members of
the sanggunian whose powers Gov. Garcia has allegedly usurped, but also
as taxpayers whose taxes have been illegally spent. Petitioners plead
leniency in the Courts ruling regarding their legal standing, as this case
involves a matter of public policy.
Petitioners finally draw attention to the OSGs seeming change of heart
and adoption of their argument that Gov. Garcia has violated R.A. No.
7160.
It should be mentioned at the outset that a reading of the OSGs
Comment
13
on the petition for declaratory relief indeed reveals its view that
Sec. 22(c) of R.A. No. 7160 admits of exceptions. It maintains, however,
that the said law is clear and leaves no room for interpretation, only
application. Its Comment on the instant petition does not reflect a change
of heart but merely an amplification of its original position.
Although we agree with the OSG that there are factual matters that have
yet to be settled in this case, the records disclose enough facts for the
Court to be able to make a definitive ruling on the basic legal arguments of
the parties.
The trial courts pronouncement that "the parties in this case all agree that
the contracts referred to in the above findings are contracts entered into
pursuant to the bidding procedures allowed in Republic Act No. 9184 or the
Government Procurement Reform Acti.e., public bidding, and negotiated
bid. The biddings were made pursuant to the general and/or supplemental
appropriation ordinances passed by the Sangguniang Panlalawigan of
Cebu x x x"
14
is clearly belied by the Answer
15
filed by petitioners herein.
Petitioners herein actually argue in their Answer that the contracts subject
of the COAs findings did not proceed from a public bidding. Further, there
was no budget passed in 2004. What was allegedly in force was the
reenacted 2003 budget.
16

Gov. Garcias contention that the questioned contracts complied with the
bidding procedure in R.A. No. 9184 and were entered into pursuant to the
general and supplemental appropriation ordinances allowing these
expenditures is diametrically at odds with the facts as presented by
petitioners in this case. It is notable, however, that while Gov. Garcia
insists on the existence of appropriation ordinances which allegedly
authorized her to enter into the questioned contracts, she does not
squarely deny that these ordinances pertain to the previous years budget
which was reenacted in 2004.
Thus, contrary to the trial courts finding, there was no agreement among
the parties with regard to the operative facts under which the case was to
be resolved. Nonetheless, we can gather from Gov. Garcias silence on the
matter and the OSGs own discussion on the effect of a reenacted budget
on the local chief executives ability to enter into contracts, that during the
year in question, the Province of Cebu was indeed operating under a
reenacted budget.
Note should be taken of the fact that Gov. Garcia, both in her petition for
declaratory relief and in her Comment on the instant petition, has failed to
point out the specific provisions in the general and supplemental
appropriation ordinances copiously mentioned in her pleadings which
supposedly authorized her to enter into the questioned contracts.
Based on the foregoing discussion, there appear two basic premises from
which the Court can proceed to discuss the question of whether prior
approval by the Sangguniang Panlalawigan was required before Gov.
Garcia could have validly entered into the questioned contracts. First, the
Province of Cebu was operating under a reenacted budget in
2004. Second, Gov. Garcia entered into contracts on behalf of the
province while this reenacted budget was in force.
Sec. 22(c) of R.A. No. 7160 provides:
Sec. 22. Corporate Powers.(a) Every local government unit, as a
corporation, shall have the following powers:
x x x
(c) Unless otherwise provided in this Code, no contract may be
entered into by the local chief executive in behalf of the local
government unit without prior authorization by
the sanggunian concerned. A legible copy of such contract shall be
posted at a conspicuous place in the provincial capitol or the city,
municipal or barangay hall.
As it clearly appears from the foregoing provision, prior authorization by
the sanggunian concerned is required before the local chief executive may
enter into contracts on behalf of the local government unit.
Gov. Garcia posits that Sections 306 and 346 of R.A. No. 7160 are the
exceptions to Sec. 22(c) and operate to allow her to enter into contracts on
behalf of the Province of Cebu without further authority from
the Sangguniang Panlalawigan other than that already granted in the
appropriation ordinance for 2003 and the supplemental ordinances which,
however, she did not care to elucidate on.
The cited provisions state:
Sec. 306. Definition of Terms.When used in this Title, the term:
(a) "Annual Budget" refers to a financial plan embodying the
estimates of income and expenditures for one (1) fiscal year;
(b) "Appropriation" refers to an authorization made by ordinance,
directing the payment of goods and services from local government
funds under specified conditions or for specific purposes;
(c) "Budget Document" refers to the instrument used by the local
chief executive to present a comprehensive financial plan to
the sanggunian concerned;
(d) "Capital Outlays" refers to appropriations for the purchase of
goods and services, the benefits of which extend beyond the fiscal
year and which add to the assets of the local government unit
concerned, including investments in public utilities such as public
markets and slaughterhouses;
(e) "Continuing Appropriation" refers to an appropriation available
to support obligations for a specified purpose or projects, such as
those for the construction of physical structures or for the
acquisition of real property or equipment, even when these
obligations are incurred beyond the budget year;
(f) "Current Operating Expenditures" refers to appropriations for the
purchase of goods and services for the conduct of normal
government operations within the fiscal year, including goods and
services that will be used or consumed during the budget year;
(g) "Expected Results" refers to the services, products, or benefits
that will accrue to the public, estimated in terms of performance
measures or physical targets;
(h) "Fund" refers to a sum of money, or other assets convertible to
cash, set aside for the purpose of carrying out specific activities or
attaining certain objectives in accordance with special regulations,
restrictions, or limitations, and constitutes an independent fiscal
and accounting entity;
(i) "Income" refers to all revenues and receipts collected or
received forming the gross accretions of funds of the local
government unit;
(j) "Obligations" refers to an amount committed to be paid by the
local government unit for any lawful act made by an accountable
officer for and in behalf of the local government unit concerned;
(k) "Personal Services" refers to appropriations for the payment of
salaries, wages and other compensation of permanent, temporary,
contractual, and casual employees of the local government unit;
(l) "Receipts" refers to income realized from operations and
activities of the local government or are received by it in the
exercise of its corporate functions, consisting of charges for
services rendered, conveniences furnished, or the price of a
commodity sold, as well as loans, contributions or aids from other
entities, except provisional advances for budgetary purposes; and
(m) "Revenue" refers to income derived from the regular system of
taxation enforced under authority of law or ordinance and, as such,
accrue more or less regularly every year.
x x x
Sec. 346. Disbursements of Local Funds and Statement of
Accounts.Disbursements shall be made in accordance with the
ordinance authorizing the annual or supplemental appropriations
without the prior approval of the sanggunian concerned. Within
thirty (3) days after the close of each month, the local accountant
shall furnish the sanggunian with such financial statements as may
be prescribed by the COA. In the case of the year-end statement of
accounts, the period shall be sixty (60) days after the thirty-first
(31
st
) of December.
Sec. 306 of R.A. No. 7160 merely contains a definition of terms. Read in
conjunction with Sec. 346, Sec. 306 authorizes the local chief executive to
make disbursements of funds in accordance with the ordinance authorizing
the annual or supplemental appropriations. The "ordinance" referred to in
Sec. 346 pertains to that which enacts the local government units budget,
for which reason no further authorization from the local council is required,
the ordinance functioning, as it does, as the legislative authorization of the
budget.
17

To construe Sections 306 and 346 of R.A. No. 7160 as exceptions to Sec.
22(c) would render the requirement of prior sanggunian authorization
superfluous, useless and irrelevant. There would be no instance when
such prior authorization would be required, as in contracts involving the
disbursement of appropriated funds. Yet, this is obviously not the effect
Congress had in mind when it required, as a condition to the local chief
executives representation of the local government unit in business
transactions, the prior authorization of the sanggunianconcerned. The
requirement was deliberately added as a measure of check and balance,
to temper the authority of the local chief executive, and in recognition of the
fact that the corporate powers of the local government unit are wielded as
much by its chief executive as by its council.
18
However, as will be
discussed later, the sanggunianauthorization may be in the form of an
appropriation ordinance passed for the year which specifically covers the
project, cost or contract to be entered into by the local government unit.
The fact that the Province of Cebu operated under a reenacted budget in
2004 lent a complexion to this case which the trial court did not apprehend.
Sec. 323 of R.A. No. 7160 provides that in case of a reenacted budget,
"only the annual appropriations for salaries and wages of existing
positions, statutory and contractual obligations, and essential operating
expenses authorized in the annual and supplemental budgets for the
preceding year shall be deemed reenacted and disbursement of funds
shall be in accordance therewith."
19

It should be observed that, as indicated by the word "only" preceding the
above enumeration in Sec. 323, the items for which disbursements may be
made under a reenacted budget are exclusive. Clearly, contractual
obligations which were not included in the previous years annual and
supplemental budgets cannot be disbursed by the local government unit. It
follows, too, that new contracts entered into by the local chief executive
require the prior approval of the sanggunian.
We agree with the OSG that the words "disbursement" and "contract"
separately referred to in Sec. 346 and 22(c) of R.A. No. 7160 should be
understood in their common signification. Disbursement is defined as "To
pay out, commonly from a fund. To make payment in settlement of a debt
or account payable."
20
Contract, on the other hand, is defined by our Civil
Code as "a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some
service."
21

And so, to give life to the obvious intendment of the law and to avoid a
construction which would render Sec. 22(c) of R.A. No. 7160
meaningless,
22
disbursement, as used in Sec. 346, should be understood
to pertain to payments for statutory and contractual obligations which
the sanggunian has already authorized thru ordinances enacting the
annual budget and are therefore already subsisting obligations of the local
government unit. Contracts, as used in Sec. 22(c) on the other hand, are
those which bind the local government unit to new obligations, with their
corresponding terms and conditions, for which the local chief executive
needs prior authority from the sanggunian.
Elsewhere in R.A. No. 7160 are found provisions which buttress the stand
taken by petitioners against Gov. Garcias seemingly heedless actions.
Sec. 465, Art. 1, Chapter 3 of R.A. No. 7160 states that the provincial
governor shall "[r]epresent the province in all its business transactions
and sign in its behalf all bonds, contracts, and obligations, and such
other documents upon authority of the Sangguniang Panlalawiganor
pursuant to law or ordinances." Sec. 468, Art. 3 of the same chapter also
establishes the sanggunians power, as the provinces legislative body, to
authorize the provincial governor to negotiate and contract loans, lease
public buildings held in a proprietary capacity to private parties, among
other things.
The foregoing inexorably confirms the indispensability of the sanggunians
authorization in the execution of contracts which bind the local government
unit to new obligations. Note should be taken of the fact that R.A. No. 7160
does not expressly state the form that the authorization by
the sanggunian has to take. Such authorization may be done by resolution
enacted in the same manner prescribed by ordinances, except that the
resolution need not go through a third reading for final consideration unless
the majority of all the members of the sangguniandecides otherwise.
23

As regards the trial courts pronouncement that R.A. No. 9184 does not
require the head of the procuring entity to secure a resolution from
the sanggunian concerned before entering into a contract, attention should
be drawn to the very same provision upon which the trial court based its
conclusion. Sec. 37 provides: "The Procuring Entity shall issue the Notice
to Proceed to the winning bidder not later than seven (7) calendar
days from the date of approval of the contract by the appropriate
authority x x x."
R.A. No. 9184 establishes the law and procedure for public procurement.
Sec. 37 thereof explicitly makes the approval of the appropriate authority
which, in the case of local government units, is the sanggunian, the point of
reference for the notice to proceed to be issued to the winning bidder. This
provision, rather than being in conflict with or providing an exception to
Sec. 22(c) of R.A. No. 7160, blends seamlessly with the latter and even
acknowledges that in the exercise of the local government units corporate
powers, the chief executive acts merely as an instrumentality of the local
council. Read together, the cited provisions mandate the local chief
executive to secure the sanggunians approval before entering into
procurement contracts and to transmit the notice to proceed to the winning
bidder not later than seven (7) calendar days therefrom.
Parenthetically, Gov. Garcias petition for declaratory relief should have
been dismissed because it was instituted after the COA had already found
her in violation of Sec. 22(c) of R.A. No. 7160.
One of the important requirements for a petition for declaratory relief under
Sec. 1, Rule 63 of the Rules of Court is that it be filed before breach or
violation of a deed, will, contract, other written instrument, statute,
executive order, regulation, ordinance or any other governmental
regulation.
In Martelino v. National Home Mortgage Finance Corporation,
24
we held
that the purpose of the action is to secure an authoritative statement of the
rights and obligations of the parties under a statute, deed, contract, etc., for
their guidance in its enforcement or compliance and not to settle issues
arising from its alleged breach. It may be entertained only before the
breach or violation of the statute, deed, contract, etc. to which it refers.
Where the law or contract has already been contravened prior to the filing
of an action for declaratory relief, the court can no longer assume
jurisdiction over the action. Under such circumstances, inasmuch as a
cause of action has already accrued in favor of one or the other party,
there is nothing more for the court to explain or clarify, short of a judgment
or final order.
Thus, the trial court erred in assuming jurisdiction over the action despite
the fact that the subject thereof had already been breached by Gov. Garcia
prior to the filing of the action. Nonetheless, the conversion of the petition
into an ordinary civil action is warranted under Sec. 6, Rule 63
25
of the
Rules of Court.
Erroneously, however, the trial court did not treat the COA report as a
breach of the law and proceeded to resolve the issues as it would have in
a declaratory relief action. Thus, it ruled that prior authorization is not
required if there exist ordinances which authorize the local chief executive
to enter into contracts. The problem with this ruling is that it fails to take
heed of the incongruent facts presented by the parties. What the trial court
should have done, instead of deciding the case based merely on the
memoranda submitted by the parties, was to conduct a full-blown trial to
thresh out the facts and make an informed and complete decision.
As things stand, the declaration of the trial court to the effect that no prior
authorization is required when there is a prior appropriation ordinance
enacted does not put the controversy to rest. The question which should
have been answered by the trial court, and which it failed to do was
whether, during the period in question, there did exist ordinances
(authorizing Gov. Garcia to enter into the questioned contracts) which
rendered the obtention of another authorization from the Sangguniang
Panlalawigan superfluous. It should also have determined the character of
the questioned contracts, i.e., whether they were, as Gov. Garcia claims,
mere disbursements pursuant to the ordinances supposedly passed by
the sanggunian or, as petitioners claim, new contracts which obligate the
province without the provincial boards authority.
It cannot be overemphasized that the paramount consideration in the
present controversy is the fact that the Province of Cebu was operating
under a re-enacted budget in 2004, resulting in an altogether different set
of rules as directed by Sec. 323 of R.A. 7160. This Decision, however,
should not be so construed as to proscribe any and all contracts entered
into by the local chief executive without formal sanggunian authorization. In
cases, for instance, where the local government unit operates under an
annual as opposed to a re-enacted budget, it should be acknowledged that
the appropriation passed by the sanggunian may validly serve as the
authorization required under Sec. 22(c) of R.A. No. 7160. After all, an
appropriation is an authorization made by ordinance, directing the payment
of goods and services from local government funds under specified
conditions or for specific purposes. The appropriation covers the
expenditures which are to be made by the local government unit, such as
current operating expenditures
26
and capital outlays.
27

The question of whether a sanggunian authorization separate from the
appropriation ordinance is required should be resolved depending on the
particular circumstances of the case. Resort to the appropriation ordinance
is necessary in order to determine if there is a provision therein which
specifically covers the expense to be incurred or the contract to be entered
into. Should the appropriation ordinance, for instance, already contain in
sufficient detail the project and cost of a capital outlay such that all that the
local chief executive needs to do after undergoing the requisite public
bidding is to execute the contract, no further authorization is required, the
appropriation ordinance already being sufficient.
On the other hand, should the appropriation ordinance describe the
projects in generic terms such as "infrastructure projects," "inter-municipal
waterworks, drainage and sewerage, flood control, and irrigation systems
projects," "reclamation projects" or "roads and bridges," there is an obvious
need for a covering contract for every specific project that in turn requires
approval by the sanggunian. Specific sanggunian approval may also be
required for the purchase of goods and services which are neither
specified in the appropriation ordinance nor encompassed within the
regular personal services and maintenance operating expenses.
In view of the foregoing, the instant case should be treated as an ordinary
civil action requiring for its complete adjudication the confluence of all
relevant facts. Guided by the framework laid out in this Decision, the trial
court should receive further evidence in order to determine the nature of
the questioned contracts entered into by Gov. Garcia, and the existence of
ordinances authorizing her acts.
WHEREFORE, the petition is GRANTED IN PART. The Decision dated
July 11, 2006, of the Regional Trial Court of Cebu City, Branch 9, in Civil
Case No. CEB-31560, and its Order dated October 25, 2006,
are REVERSED andSET ASIDE. The case is REMANDED to the court a
quo for further proceedings in accordance with this Decision. No
pronouncement as to costs.
SO ORDERED.























G.R. No. 172457 December 24, 2008
CJH DEVELOPMENT CORPORATION, petitioner,
vs.
BUREAU OF INTERNAL REVENUE, BUREAU OF CUSTOMS, and
DISTRICT COLLECTOR OF CUSTOMS EDWARD O.
BALTAZAR, respondents.
D E C I S I O N
TINGA, J .:
Before us is a petition for review on certiorari
1
seeking the reversal of the
orders dated 14 October 2005
2
and 04 April 2006
3
of the Regional Trial
Court (RTC) of Baguio City, Branch 5. The RTC dismissed the petition for
declaratory relief filed by petitioner CJH Development Corporation (CJH).
This petition was brought directly to this Court since it involves a pure
question of law in accordance with Rule 50 of the 1997 Revised Rules of
Court.
Proclamation No. 420 (the Proclamation) was issued by then President
Fidel V. Ramos to create a Special Economic Zone (SEZ) in a portion of
Camp John Hay in Baguio City. Section 3
4
of the Proclamation granted to
the newly created SEZ the same incentives then already enjoyed by the
Subic SEZ. Among these incentives are the exemption from the payment
of taxes, both local and national, for businesses located inside the SEZ,
and the operation of the SEZ as a special customs territory providing for
tax and duty free importations of raw materials, capital and equipment.
5

In line with the Proclamation, the Bureau of Internal Revenue (BIR) issued
Revenue Regulations No. 12-97
6
while the Bureau of Customs (BOC)
issued Customs Administrative Order No. 2-98.
7
The two issuances
provided the rules and regulations to be implemented within the Camp
John Hay SEZ. Subsequently, however, Section 3 of
the Proclamation was declared unconstitutional in part by the Court en
banc in John Hay Peoples Alternative Coalition v. Lim,
8
when it ruled that:
WHEREORE, the second sentence of Section 3 of Proclamation
No. 420 is hereby declared NULL and VOID and is accordingly
declared of no legal force and effect. Public respondents are
hereby enjoined from implementing the aforesaid void provision.
Proclamation No. 420, without the invalidated portion, remains
valid and effective.
9

The decision attained finality when the Court en banc denied the motion for
reconsideration through a resolution dated 29 March 2005.
10

While the motion for reconsideration was pending with the Court, on 16
January 2004 the Office of the City Treasurer of Baguio sent a demand
letter
11
which stated that:
In view of the Supreme Court decision dated October 24, 2003 on
G.R. No. 119775, declaring null and void Section 3 of Proclamation
420 on applicable incentives of Special Economic Zones, we are
sending you updated statements of real property taxes due on real
estate properties declared under the names of the Bases
Conversion and Development Authority and Camp John Hay
Development Corporation totalingP101,935,634.17 inclusive of
penalties, as of January 10, 2004.
May we request for the immediate settlement of the above
indebtedness, otherwise this office shall be constrained to hold the
processing of your business permit pursuant to Section 2 C c.1 of
Tax Ordinance 2000-001 of Baguio City.
Five months later, on 26 May 2005, the BOC followed suit and
demanded
12
of CJH the payment ofP71,983,753.00 representing the duties
and taxes due on all the importations made by CJH from 1998 to 2004. For
its part, the BIR sent a letter dated 23 May 2005 to CJH wherein it treated
CJH as an ordinary corporation subject to the regular corporate income tax
as well as to the Value Added Tax of 1997.
13

CJH questioned the retroactive application by the BOC of the decision of
this Court in G.R. No. 119775. It claimed that the assessment was null and
void because it violated the non-retroactive principle under the Tariff and
Customs Code.
14

The Office of the Solicitor General (OSG) filed a motion to dismiss.
15
The
OSG claimed that the remedy of declaratory relief is inapplicable because
an assessment is not a proper subject of such petition. It further alleged
that there are administrative remedies which were available to CJH.
In an Order
16
dated 28 June 2005, the RTC dropped the City of Baguio as
a party to the case. The remaining parties were required to submit their
respective memoranda. On 14 October 2005, the RTC rendered its
assailed order.
17
It held that the decision in G.R. No. 119775 applies
retroactively because the tax exemption granted by Proclamation No. 420
is null and void from the beginning. The RTC also ruled that the petition for
declaratory relief is not the appropriate remedy. A judgment of the court
cannot be the proper subject of a petition for declaratory relief; the
enumeration in Rule 64 is exclusive. Moreover, the RTC held that
Commonwealth Act No. 55 (CA No. 55) which proscribes the use of
declaratory relief in cases where a taxpayer questions his tax liability is still
in force and effect.
CJH filed a motion for reconsideration but the RTC denied it.
18
Hence this
petition, which, as earlier stated, was filed directly to this Court, raising as it
does only pure questions of law.
There are two issues raised in this petition, one procedural and the other
substantive. First, is the remedy of declaratory relief proper in this case?
Second, can the decision in G.R. No. 119775 be applied retroactively?
The requisites for a petition for declaratory relief to prosper are: (1) there
must be a justiciable controversy; (2) the controversy must be between
persons whose interests are adverse; (3) the party seeking declaratory
relief must have a legal interest in the controversy; and (4) the issue
involved must be ripe for judicial determination.
19

CJH alleges that CA No. 55
20
has already been repealed by the Rules of
Court; thus, the remedy of declaratory relief against the assessment made
by the BOC is proper. It cited the commentaries of Moran allegedly to the
effect that declaratory relief lies against assessments made by the BIR and
BOC. Yet in National Dental Supply Co. v. Meer,
21
this Court held that:
From the opinion of the former Chief Justice Moran may be
deduced that the failure to incorporate the above proviso [CA No.
55] in section 1, rule 66, [now Rule 64] is not due to an intention to
repeal it but rather to the desire to leave its application to the sound
discretion of the court, which is the sole arbiter to determine
whether a case is meritorious or not. And even if it be desired to
incorporate it in rule 66, it is doubted if it could be done under the
rule-making power of the Supreme Court considering that the
nature of said proviso is substantive and not adjective, its purpose
being to lay down a policy as to the right of a taxpayer to contest
the collection of taxes on the part of a revenue officer or of the
Government. With the adoption of said proviso, our law-making
body has asserted its policy on the matter, which is to prohibit a
taxpayer to question his liability for the payment of any tax that may
be collected by the Bureau of Internal Revenue. As this Court well
said, quoting from several American cases, "The Government may
fix the conditions upon which it will consent to litigate the validity of
its original taxes..." "The power of taxation being legislative, all
incidents are within the control of the Legislature." In other words, it
is our considered opinion that the proviso contained in
Commonwealth Act No. 55 is still in full force and effect and bars
the plaintiff from filing the present action.
22
(Emphasis supplied)
(Citations omitted.)
As a substantive law that has not been repealed by another statute, CA
No. 55 is still in effect and holds sway. Precisely, it has removed from the
courts jurisdiction over petitions for declaratory relief involving tax
assessments. The Court cannot repeal, modify or alter an act of the
Legislature.
Moreover, the proper subject matter of a declaratory relief is a deed, will,
contract, or other written instrument, or the construction or validity of
statute or ordinance.
23
CJH hinges its petition on the demand letter or
assessment sent to it by the BOC. However, it is really not the demand
letter which is the subject matter of the petition. Ultimately, this Court is
asked to determine whether the decision of the Court en banc in G.R. No.
119775 has a retroactive effect. This approach cannot be countenanced. A
petition for declaratory relief cannot properly have a court decision as its
subject matter. In Tanda v. Aldaya,
24
we ruled that:
x x x [A] court decision cannot be interpreted as included within the
purview of the words "other written instrument," as contended by
appellant, for the simple reason that the Rules of Court already
provide[s] for the ways by which an ambiguous or doubtful decision
may be corrected or clarified without need of resorting to the
expedient prescribed by Rule 66 [now Rule 64].
25

There are other remedies available to a party who is not agreeable to a
decision whether it be a question of law or fact. If it involves a decision of
an appellate court, the party may file a motion for reconsideration or new
trial in order that the defect may be corrected.
26
In case of ambiguity of the
decision, a party may file a motion for a clarificatory judgment.
27
One of the
requisites of a declaratory relief is that the issue must be ripe for judicial
determination. This means that litigation is inevitable
28
or there is no
adequate relief available in any other form or proceeding.
29

However, CJH is not left without recourse. The Tariff and Customs Code
(TCC) provides for the administrative and judicial remedies available to a
taxpayer who is minded to contest an assessment, subject of course to
certain reglementary periods. The TCC provides that a protest can be
raised provided that payment first be made of the amount due.
30
The
decision of the Collector can be reviewed by the Commissioner of Customs
who can approve, modify or reverse the
decision or action of the Collector.
31
If the party is not satisfied with the
ruling of the Commissioner, he may file the necessary appeal to the Court
of Tax Appeals.
32
Afterwards, the decision of the Court of Tax Appeals can
be appealed to this Court.
With the foregoing disquisition on the first issue, there is no need to delve
into the second issue at this juncture. It should be noted though, as
admitted by CJH in its Certificate of Non-Forum Shopping,
33
that even
before the filing of this petition, it already had a pending petition for review
with this Court, docketed as G.R. No. 169234
34
and entitled, Camp John
Hay Development Corporation v. Central Board of Assessment Appeals, et
al. That case emanated from assessments made in 2002 for real estate
taxes on CJH by the City of Baguio. Said assessments were duly
challenged before the Local Board of Assessment Appeals, the Central
Board of Assessment Appeals and the Court of Tax Appeals. The petition
in G.R. No. 169234 was filed with this Court in September 2005, or after
our 2003 Decision in John Hay Peoples Alternative Coalition had attained
finality. CJH therein raised the same question of law, as in this case,
whether the doctrine of operative fact applies to G.R. No. 119775. Clearly,
the Court in G.R. No. 169234 is better positioned to resolve that question
of law, there being no antecedent jurisdictional defects that would preclude
the Court from squarely deciding that particular issue. CJH is free to
reiterate this current point of clarification as it litigates the petition in G.R.
No. 169234.
WHEREFORE, the Petition is DENIED.
SO ORDERED.



























G.R. No. 144570 September 21, 2005
VIVENCIO V. JUMAMIL, Petitioners,
vs.
JOSE J. CAFE, GLICERIO L. ALERIA, RUDY G. ADLAON,
DAMASCENO AGUIRRE, RAMON PARING, MARIO ARGUELLES,
ROLANDO STA. ANA, NELLIE UGDANG, PEDRO ATUEL, RUBY
BONSOBRE, RUTH FORNILLOS, DANIEL GATCHALIAN, RUBEN
GUTIERREZ, JULIET GATCHALIAN, ZENAIDA POBLETE, ARTHUR
LOUDY, LILIAN LU, ISABEL MEJIA, EDUARDO ARGUELLES, LAO SUI
KIEN, SAMUEL CONSOLACION, DR. ARTURO MONTERO, DRA.
LILIOSA MONTERO, PEDRO LACIA, CIRILA LACIA, EVELYN
SANGALANG, DAVID CASTILLO, ARSENIO SARMIENTO, ELIZABETH
SY, METODIO NAVASCA, HELEN VIRTUDAZO, IRENE LIMBAGA,
SYLVIA BUSTAMANTE, JUANA DACALUS, NELLIE RICAMORA,
JUDITH ESPINOSA, PAZ KUDERA, EVELYN PANES, AGATON
BULICATIN, PRESCILLA GARCIA, ROSALIA OLITAO, LUZVIMINDA
AVILA, GLORIA OLAIR, LORITA MENCIAS, RENATO ARIETA, EDITHA
ACUZAR, LEONARDA VILLACAMPA, ELIAS JARDINICO, BOBINO
NAMUAG, FELIMON NAMUAG, EDGAR CABUNOC, HELEN
ARGUELLES, HELEN ANG, FELECIDAD PRIETO, LUISITO GRECIA,
LILIBETH PARING, RUBEN CAMACHO, ROSALINDA LALUNA, LUZ
YAP, ROGELIO LAPUT, ROSEMARIE WEE, TACOTCHE RANAIN,
AVELINO DELOS REYES and ROGASIANO OROPEZA, Respondent.
D E C I S I O N
CORONA, J .:
In this petition for review on certiorari under Rule 45 of the Rules of Court,
petitioner Vivencio V. Jumamil seeks to reverse the decision of the Court of
Appeals dated July 24, 2000
1
in CA-G.R. CV No. 35082, the dispositive
portion of which read:
With the foregoing, the assailed Decision of Branch 4, Regional Trial Court
of Panabo Davao dated 26 November 1990 in Sp. Civil Action No. 89-1 is
hereby AFFIRMED.
2

The Regional Trial Court dismissed petitioners petition for declaratory
relief with prayer for preliminary injunction and writ of restraining order, and
ordered the petitioner to pay attorneys fees in the amount of P1,000 to
each of the 57 private respondents.
3

The factual antecedents follow.
In 1989, petitioner Jumamil
4
filed before the Regional Trial Court (RTC) of
Panabo, Davao del Norte a petition for declaratory relief with prayer for
preliminary injunction and writ of restraining order against public
respondents Mayor Jose J. Cafe and the members of the Sangguniang
Bayan of Panabo, Davao del Norte. He questioned the constitutionality of
Municipal Resolution No. 7, Series of 1989 (Resolution No. 7).
Resolution No. 7, enacting Appropriation Ordinance No. 111, provided for
an initial appropriation of P765,000 for the construction of stalls around a
proposed terminal fronting the Panabo Public Market
5
which was destroyed
by fire.
Subsequently, the petition was amended due to the passage of Resolution
No. 49, series of 1989 (Resolution No. 49), denominated as Ordinance No.
10, appropriating a further amount of P1,515,000 for the construction of
additional stalls in the same public market.
6

Prior to the passage of these resolutions, respondent Mayor Cafe had
already entered into contracts with those who advanced and deposited
(with the municipal treasurer) from their personal funds the sum of P40,000
each. Some of the parties were close friends and/or relatives of the public
respondents.
7
The construction of the stalls which petitioner sought to stop
through the preliminary injunction in the RTC was nevertheless finished,
rendering the prayer therefor moot and academic. The leases of the stalls
were then awarded by public raffle which, however, was limited to those
who had deposited P40,000 each.
8
Thus, the petition was amended anew
to include the 57 awardees of the stalls as private respondents.
9

Petitioner alleges that Resolution Nos. 7 and 49 were unconstitutional
because they were:
passed for the business, occupation, enjoyment and benefit of private
respondents who deposited the amount ofP40,000.00 for each stall, and
with whom also the mayor had a prior contract to award the would be
constructed stalls to all private respondents. As admitted by public
respondents some of the private respondents are close friends and/or
relatives of some of the public respondents which makes the questioned
acts discriminatory. The questioned resolutions and ordinances did not
provide for any notice of publication that the special privilege and
unwarranted benefits conferred on the private respondents maybe (sic)
availed of by anybody who can deposit the amount of P40,000.00.
10

Neither was there any prior notice or publication pertaining to contracts
entered into by public and private respondents for the construction of stalls
to be awarded to private respondents that the same can be availed of by
anybody willing to deposit P40,000.00.
11

In this petition, petitioner prays for the reversal of the decision of the Court
of Appeals (CA) and a declaration of the unconstitutionality, illegality and
nullity of the questioned resolutions/ordinances and lease contracts
entered into by the public and private respondents; for the declaration of
the illegality of the award of the stalls during the pendency of this action
and for the re-raffling and award of the stalls in a manner that is fair and
just to all interested applicants;
12
for the issuance of an order to the local
government to admit any and all interested persons who can deposit the
amount of P40,000 for a stall and to order a re-raffling for the award of the
stalls to the winners of the re-raffle; for the nullification of the award of
attorneys fees to private respondents on the ground that it was erroneous
and unmeritorious; and for the award of damages in favor of petitioner in
the form of attorneys fees.
13

At the outset, we must point out that the issue of the constitutionality of the
questioned resolutions was never ruled upon by both the RTC and the CA.
It appears that on May 21, 1990, both parties agreed
14
to await the
decision in CA G.R. SP No. 20424,
15
which involved similar facts, issues
and parties. The RTC, consequently, deferred the resolution of the pending
petition. The appellate court eventually rendered its decision in that case
finding that the petitioners were not entitled to the declaratory relief prayed
for as they had no legal interest in the controversy. Upon elevation to the
Supreme Court as UDK Case No. 9948, the petition for review on certiorari
was denied for being insufficient in form and substance.
16

The RTC, after receipt of the entry of the SC judgment,
17
dismissed the
pending petition on November 26, 1990. It adopted the ruling in CA G.R.
SP No. 20424:
x x x x x x x x x
We find petitioners aforesaid submission utterly devoid of merit. It is, to
say the least, questionable whether or not a special civil action for
declaratory relief can be filed in relation to a contract by persons who are
not parties thereto. Under Sec. 1 of Rule 64 of the Rules of Court, any
person interested under a deed, will, contract, or other written instruments
may bring an action to determine any question of the contract, or validly
arising under the instrument for a declaratory (sic) of his rights or duties
thereunder. Since contracts take effect only between the parties (Art. 1311)
it is quite plain that one who is not a party to a contract can not have the
interest in it that the rule requires as a basis for declaratory reliefs (PLUM
vs. Santos, 45 SCRA 147).
Following this ruling, the petitioners were not parties in the agreement for
the award of the market stalls by the public respondents, in the public
market of Panabo, Davao, and since the petitioners were not parties to the
award of the market stalls and whose rights are never affected by merely
stating that they are taxpayers, they have no legal interest in the
controversy and they are not, therefore, entitled to bring an action for
declaratory relief.
18

WHEREFORE, the petition of the petitioners as taxpayers being without
merit and not in consonance with law, is hereby ordered DISMISSED.
As to the counterclaim for damages, the same not having been actually
and fully proven, the Court gives no award as to the same. It is not amiss
to state here that the petitioners agreed to be bound by the outcome of
Special Civil Case No. 89-10.
However, for unnecessarily dragging into Court the fifty-seven (57) private
respondents who are bonafide businessmen and stall holders in the public
market of Panabo, it is fitting and proper for the petitioners to be ordered
payment of attorneys fees.
Accordingly, the herein petitioners are ordered to pay ONE THOUSAND
(P1,000.00) PESOS EACH to the 57 private respondents, as attorneys
fees, jointly and severally, and for them to pay the costs of this suit.
SO ORDERED.
19

From this adverse decision, petitioner again appealed to the Court of
Appeals in CA-G.R. CV No. 35082 which is now before us for review.
The appellate court, yet again, affirmed the RTC decision and held that:
Res judicata does not set in a case dismissed for lack of capacity to sue,
because there has been no determination on the merits. Neither does the
law of the case apply. However, the court a quo took judicial notice of the
fact that petitioners agreed to be bound by the outcome of Special Civil
Case No. 89-10. Allegans contraria non est audiendus. (He is not to be
heard who alleges things contradictory to each other.) It must be here
observed that petitioners-appellants were the ones who manifested that it
would be practical to await the decision of the Supreme Court in their
petition for certiorari, for after all the facts, circumstances and issues in that
case, are exactly the same as in the case that is here appealed. Granting
that they may evade such assumption, a careful evaluation of the case
would lead Us to the same conclusion: that the case for declaratory relief is
dismissible. As enumerated by Justice Regalado in his "Remedial Law
Compendium", the requisites of an action for declaratory relief are:
(a) The subject matter of the controversy must be a deed, will, contract or
other written instrument, statute, executive order or regulation, or
ordinance;
(b) The terms of said documents and the validity thereof are doubtful and
require judicial construction;
(c) There must have been no breach of the documents in question;
(d) There must be an actual justiciable controversy or the "ripening seeds"
of one between persons whose interests are adverse;
(e) The issue must be ripe for judicial determination; and
(f) Adequate relief is not available through other means or other forms of
action or proceeding.
In Tolentino vs. Board of Accountancy, et al, 90 Phil. 83, 88, the Supreme
Court ratiocinated the requisites of justiciability of an action for declaratory
relief by saying that the court must be "satisfied that an actual controversy,
or the ripening seeds of one, exists between parties, all of whom are sui
juris and before the court, and that the declaration sought will be a practical
help in ending the controversy."
The petition must show "an active antagonistic assertion of a legal right on
one side and a denial thereof on the other concerning a real, and not a
mere theoretical question or issue. The question is whether the facts
alleged a substantial controversy between parties having adverse legal
interests, of sufficient immediacy and reality to warrant the issuance of a
declaratory relief. In GSISEA and GSISSU vs. Hon. Alvendia etc. and
GSIS, 108 Phil. 505, the Supreme Court ruled a declaratory relief improper
or unnecessary when it appears to be a moot case, since it seeks to get a
judgment on a pretended controversy, when in reality there is none.
In Kawasaki Port Service Corporation vs. Amores, 199 SCRA 230,
citing Dy Poco vs. Commissioner of Immigration, et al., 16 SCRA 618, the
rule was stated: "where a declaratory judgment as to a disputed fact would
be determinative of issues rather than a construction of definite stated
rights, statuses and other relations, commonly expressed in a written
instrument, the case is not one for declaratory judgment."
Indeed, in its true light, the present petition for declaratory relief seems to
be no more than a request for an advisory opinion to which courts in this
and other jurisdiction have cast a definite aversion. The ordinances being
assailed are appropriation ordinances. The passage of the ordinances
were pursuant to the public purpose of constructing market stalls. For the
exercise of judicial review, the governmental act being challenged must
have had an adverse effect on the person challenging it, and the person
challenging the act, must have "standing" to challenge, i.e., in the
categorical and succinct language of Justice Laurel, he must have a
"personal and substantial interest in the case such that he has sustained,
or will sustain, direct injury as a result of its enforcement." Standing is a
special concern in constitutional law because in some cases suits are
brought not by parties who have been personally injured by the operation
of a law or by official action taken, but by concerned citizens, taxpayers or
voters who actually sue in the public interest. Hence the question in
standing is whether such parties have "alleged such a personal stake in
the outcome of the controversy as to assure that concrete adverseness
which sharpens the presentation of issues upon which the court largely
depends for illumination of difficult constitutional questions.
A careful analysis of the records of the case at bar would disclose that
petitioners-appellants have suffered no wrong under the terms of the
ordinances being assailed and, naturally need no relief in the form they
now seek to obtain. Judicial exercise cannot be exercised in vacuo. The
policy of the courts is to avoid ruling on a constitutional question and to
presume that the acts of the political departments are valid in the absence
of a clear and unmistakable showing to the contrary. To doubt is to sustain.
The issue is not the ordinances themselves, but the award of the market
stalls to the private respondents on the strength of the contracts
individually executed by them with Mayor Cafe. To reiterate, a person who
is not a party to a contract cannot file a petition for declaratory relief and
seek judicial interpretation of such contract (Atlas Consolidated Mining
Corp. vs. Court of Appeals, 182 SCRA 166). Not having established
their locus standi, we see no error committed by the court a quo warranting
reversal of the appealed decision.
With the foregoing, the assailed Decision of Branch 4, Regional Trial Court
of Panabo Davao dated 26 November 1990 in Sp. Civil Action No. 89-1 is
hereby AFFIRMED.
SO ORDERED.
20

Thus, both the RTC and the CA dismissed the case on the ground of
petitioners lack of legal standing and the parties agreement to be bound
by the decision in CA G.R. SP. No. 20424.
The issues to be resolved are the following:
(1) whether the parties were bound by the outcome in CA G.R. SP. No.
20424;
(2) whether petitioner had the legal standing to bring the petition for
declaratory relief;
(3) whether Resolution Nos. 7 and 49 were unconstitutional; and
(4) whether petitioner should be held liable for damages.
Locus Standi and the
Constitutionality Issue
We will first consider the second issue. The petition for declaratory relief
challenged the constitutionality of the subject resolutions. There is an
unbending rule that courts will not assume jurisdiction over a constitutional
question unless the following requisites are satisfied: (1) there must be an
actual case calling for the exercise of judicial review; (2) the question
before the Court must be ripe for adjudication; (3) the person challenging
the validity of the act must have standing to do so; (4) the question of
constitutionality must have been raised at the earliest opportunity, and (5)
the issue of constitutionality must be the very lis mota of the case.
21

Legal standing or locus standi is a partys personal and substantial interest
in a case such that he has sustained or will sustain direct injury as a result
of the governmental act being challenged. It calls for more than just a
generalized grievance. The term "interest" means a material interest, an
interest in issue affected by the decree, as distinguished from mere interest
in the question involved, or a mere incidental interest.
22
Unless a persons
constitutional rights are adversely affected by the statute or ordinance, he
has no legal standing.
The CA held that petitioner had no standing to challenge the two
resolutions/ordinances because he suffered no wrong under their terms. It
also concluded that "the issue (was) not the ordinances themselves but the
award of the market stalls to the private respondents on the strength of the
contracts individually executed by them with Mayor Cafe." Consequently, it
ruled that petitioner, who was not a party to the lease contracts, had no
standing to file the petition for declaratory relief and seek judicial
interpretation of the agreements.
We do not agree. Petitioner brought the petition in his capacity as taxpayer
of the Municipality of Panabo, Davao del Norte
23
and not in his personal
capacity. He was questioning the official acts of the public respondents in
passing the ordinances and entering into the lease contracts with private
respondents. A taxpayer need not be a party to the contract to challenge
its validity.
24
Atlas Consolidated Mining & Development Corporation v.
Court of Appeals
25
cited by the CA does not apply because it involved
contracts between two private parties.
Parties suing as taxpayers must specifically prove sufficient interest in
preventing the illegal expenditure of
money raised by taxation.
26
The expenditure of public funds by an officer of
the State for the purpose of executing an unconstitutional act constitutes a
misapplication of such
funds.
27
The resolutions being assailed were appropriations ordinances.
Petitioner alleged that these ordinances were "passed for the business,
occupation, enjoyment and benefit of private respondents"
28
(that is,
allegedly for the private benefit of respondents) because even before they
were passed, respondent Mayor Cafe and private respondents had already
entered into lease contracts for the construction and award of the market
stalls.
29
Private respondents admitted they deposited P40,000 each with
the municipal treasurer, which amounts were made available to the
municipality during the construction of the stalls. The deposits, however,
were needed to ensure the speedy completion of the stalls after the public
market was gutted by a series of fires.
30
Thus, the award of the stalls was
necessarily limited only to those who advanced their personal funds for
their construction.
31

Petitioner did not seasonably allege his interest in preventing the illegal
expenditure of public funds or the specific injury to him as a result of the
enforcement of the questioned resolutions and contracts. It was only in the
"Remark to Comment" he filed in this Court did he first assert that "he
(was) willing to engage in business and (was) interested to occupy a
market stall."
32
Such claim was obviously an afterthought.
Be that as it may, we have on several occasions relaxed the application of
these rules on legal standing:
In not a few cases, the Court has liberalized the locus standi requirement
when a petition raises an issue of transcendental significance or
paramount importance to the people. Recently, after holding that the IBP
had no locus standi to bring the suit, the Court in IBP v. Zamora
nevertheless entertained the Petition therein. It noted that "the IBP has
advanced constitutional issues which deserve the attention of this Court in
view of their seriousness, novelty and weight as precedents."
33

o O o
Objections to a taxpayer's suit for lack of sufficient personality, standing or
interest are procedural matters. Considering the importance to the public of
a suit assailing the constitutionality of a tax law, and in keeping with the
Court's duty, specially explicated in the 1987 Constitution, to determine
whether or not the other branches of the Government have kept
themselves within the limits of the Constitution and the laws and that they
have not abused the discretion given to them, the Supreme Court may
brush aside technicalities of procedure and take cognizance of the suit.
34

o O o
There being no doctrinal definition of transcendental importance, the
following determinants formulated by former Supreme Court Justice
Florentino P. Feliciano are instructive: (1) the character of the funds or
other assets involved in the case; (2) the presence of a clear case of
disregard of a constitutional or statutory prohibition by the public
respondent agency or instrumentality of the government; and (3) the lack
of any other party with a more direct and specific interest in raising the
questions being raised.
35

But, even if we disregard petitioners lack of legal standing, this petition
must still fail. The subject resolutions/ordinances appropriated a total
of P2,280,000 for the construction of the public market stalls. Petitioner
alleges that these ordinances were discriminatory because, even prior to
their enactment, a decision had already been made to award the market
stalls to the private respondents who deposited P40,000 each and who
were either friends or relatives of the public respondents. Petitioner asserts
that "there (was) no publication or invitation to the public that this contract
(was) available to all who (were) interested to own a stall and (were) willing
to depositP40,000."
36
Respondents, however, counter that the "public
respondents act of entering into this agreement was authorized by
the Sangguniang Bayan of Panabo per Resolution No. 180 dated October
10, 1988"
37
and that "all the people interested were invited to participate in
investing their savings."
38

We note that the foregoing was a disputed fact which the courts below did
not resolve because the case was dismissed on the basis of petitioners
lack of legal standing. Nevertheless, petitioner failed to prove the subject
ordinances and agreements to be discriminatory. Considering that he was
asking this Court to nullify the acts of the local political department of
Panabo, Davao del Norte, he should have clearly established that such
ordinances operated unfairly against those who were not notified and who
were thus not given the opportunity to make their deposits. His
unsubstantiated allegation that the public was not notified did not suffice.
Furthermore, there was the time-honored presumption of regularity of
official duty, absent any showing to the contrary.
39
And this is not to
mention that:
The policy of the courts is to avoid ruling on constitutional questions and to
presume that the acts of the political departments are valid, absent a clear
and unmistakable showing to the contrary. To doubt is to sustain. This
presumption is based on the doctrine of separation of powers. This means
that the measure had first been carefully studied by the legislative and
executive departments and found to be in accord with the Constitution
before it was finally enacted and approved.
40

Therefore, since petitioner had no locus standi to
question the ordinances, there is no need for us to discuss the
constitutionality of said enactments.
Were the Parties Bound by the
Outcome in CA G.R. SP. No. 20424?
Adverting to the first issue, we observe that petitioner was the one who
wanted the parties to await the decision of the Supreme Court in UDK
Case No. 9948 since the facts and issues in that case were similar to this.
Petitioner, having expressly agreed to be bound by our decision in the
aforementioned case, should be reined in by the dismissal order we
issued, now final and executory. In addition to the fact that nothing
prohibits parties from committing to be bound by the results of another
case, courts may take judicial notice of a judgment in another case as long
as the parties give
their consent or do not object.
41
As opined by Justice Edgardo L. Paras:
A court will take judicial notice of its own acts and records in the same
case, of facts established in prior proceedings in the same case, of the
authenticity of its own records of another case between the same parties,
of the files of related cases in the same court, and of public records on file
in the same court. In addition, judicial notice will be taken of the record,
pleadings or judgment of a case in another court between the same parties
or involving one of the same parties, as well as of the record of another
case between different parties in the same court.
42

Damages
Finally, on the issue of damages, petitioner asserts that he impleaded the
57 respondents in good faith since the award of the stalls to them was
made during the pendency of the action.
43
Private respondents refute this
assertion and argue that petitioner filed this action in bad faith and with the
intention of harassing them inasmuch as he had already filed CA G.R. SP.
No. 20424 even before then.
44
The RTC, affirmed by the CA, held that
petitioner should pay attorneys fees "for unnecessarily dragging into Court
the 57 private respondents who (were) bonafide businessmen and stall
holders in the public market of Panabo."
45

We do not agree that petitioner should be held liable for damages. It is not
sound public policy to put a premium on the right to litigate where such
right is exercised in good faith, albeit erroneously.
46
The alleged bad faith
of petitioner was never established. The special circumstances in Article
2208 of the Civil Code justifying the award of attorneys fees are not
present in this case.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No.
35082 is hereby AFFIRMED with theMODIFICATION that the award of
attorney's fees to private respondents is deleted.
Costs against petitioner.
SO ORDERED.


























G.R. No. 159357 April 28, 2004
Brother MARIANO "MIKE" Z. VELARDE, petitioner,
vs.
SOCIAL JUSTICE SOCIETY, respondent.
DECISION
PANGANIBAN, J .:
A decision that does not conform to the form and substance required by
the Constitution and the law is void and deemed legally inexistent. To be
valid, decisions should comply with the form, the procedure and the
substantive requirements laid out in the Constitution, the Rules of Court
and relevant circulars/orders of the Supreme Court. For the guidance of
the bench and the bar, the Court hereby discusses these forms,
procedures and requirements.
The Case
Before us is a Petition for Review
1
under Rule 45 of the Rules of Court,
assailing the June 12, 2003 Decision
2
and July 29, 2003 Order
3
of the
Regional Trial Court (RTC) of Manila (Branch 49).
4

The challenged Decision was the offshoot of a Petition for Declaratory
Relief
5
filed before the RTC-Manila by herein Respondent Social Justice
Society (SJS) against herein Petitioner Mariano "Mike" Z. Velarde, together
with His Eminence, Jaime Cardinal Sin, Executive Minister Erao Manalo,
Brother Eddie Villanueva and Brother Eliseo F. Soriano as co-respondents.
The Petition prayed for the resolution of the question "whether or not the
act of a religious leader like any of herein respondents, in endorsing the
candidacy of a candidate for elective office or in urging or requiring the
members of his flock to vote for a specified candidate, is violative of the
letter or spirit of the constitutional provisions x x x."
6

Alleging that the questioned Decision did not contain a statement of facts
and a dispositive portion, herein petitioner filed a Clarificatory Motion and
Motion for Reconsideration before the trial court. Soriano, his co-
respondent, similarly filed a separate Motion for Reconsideration. In
response, the trial court issued the assailed Order, which held as follows:
"x x x [T]his Court cannot reconsider, because what it was asked to
do, was only to clarify a Constitutional provision and to declare
whether acts are violative thereof. The Decision did not make a
dispositive portion because a dispositive portion is required only in
coercive reliefs, where a redress from wrong suffered and the
benefit that the prevailing party wronged should get. The step that
these movants have to take, is direct appeal under Rule 45 of the
Rules of Court, for a conclusive interpretation of the Constitutional
provision to the Supreme Court."
7

The Antecedent Proceedings
On January 28, 2003, SJS filed a Petition for Declaratory Relief ("SJS
Petition") before the RTC-Manila against Velarde and his aforesaid co-
respondents. SJS, a registered political party, sought the interpretation of
several constitutional provisions,
8
specifically on the separation of church
and state; and a declaratory judgment on the constitutionality of the acts of
religious leaders endorsing a candidate for an elective office, or urging or
requiring the members of their flock to vote for a specified candidate.
The subsequent proceedings were recounted in the challenged Decision in
these words:
"x x x. Bro. Eddie Villanueva submitted, within the original period
[to file an Answer], a Motion to Dismiss. Subsequently, Executive
Minister Erao Manalo and Bro. Mike Velarde, filed their Motions to
Dismiss. While His Eminence Jaime Cardinal L. Sin, filed a
Comment and Bro. Eli Soriano, filed an Answer within the extended
period and similarly prayed for the dismissal of the Petition. All
sought the dismissal of the Petition on the common grounds that it
does not state a cause of action and that there is no justiciable
controversy. They were ordered to submit a pleading by way of
advisement, which was closely followed by another Order denying
all the Motions to Dismiss. Bro. Mike Velarde, Bro. Eddie
Villanueva and Executive Minister Erao Manalo moved to
reconsider the denial. His Eminence Jaime Cardinal L. Sin, asked
for extension to file memorandum. Only Bro. Eli Soriano complied
with the first Order by submitting his Memorandum. x x x.
"x x x the Court denied the Motions to Dismiss, and the Motions for
Reconsideration filed by Bro. Mike Velarde, Bro. Eddie Villanueva
and Executive Minister Erao Manalo, which raised no new
arguments other than those already considered in the motions to
dismiss x x x."
9

After narrating the above incidents, the trial court said that it had
jurisdiction over the Petition, because "in praying for a determination as to
whether the actions imputed to the respondents are violative of Article II,
Section 6 of the Fundamental Law, [the Petition] has raised only a question
of law."
10
It then proceeded to a lengthy discussion of the issue raised in
the Petition the separation of church and state even tracing, to some
extent, the historical background of the principle. Through its discourse, the
court a quo opined at some point that the "[e]ndorsement of specific
candidates in an election to any public office is a clear violation of the
separation clause."
11

After its essay on the legal issue, however, the trial court failed to include a
dispositive portion in its assailed Decision. Thus, Velarde and Soriano filed
separate Motions for Reconsideration which, as mentioned earlier, were
denied by the lower court.
Hence, this Petition for Review.
12

This Court, in a Resolution
13
dated September 2, 2003, required SJS and
the Office of the Solicitor General (OSG) to submit their respective
comments. In the same Resolution, the Court gave the other parties --
impleaded as respondents in the original case below --the opportunity to
comment, if they so desired.
On April 13, 2004, the Court en banc conducted an Oral Argument.
14

The Issues
In his Petition, Brother Mike Velarde submits the following issues for this
Courts resolution:
"1. Whether or not the Decision dated 12 June 2003 rendered by
the court a quo was proper and valid;
"2. Whether or not there exists justiceable controversy in herein
respondents Petition for declaratory relief;
"3. Whether or not herein respondent has legal interest in filing the
Petition for declaratory relief;
"4. Whether or not the constitutional question sought to be resolved
by herein respondent is ripe for judicial determination;
"5. Whether or not there is adequate remedy other than the
declaratory relief; and,
"6. Whether or not the court a quo has jurisdiction over the Petition
for declaratory relief of herein respondent."
15

During the Oral Argument, the issues were narrowed down and classified
as follows:
"A. Procedural Issues
"Did the Petition for Declaratory Relief raise a justiciable
controversy? Did it state a cause of action? Did respondent have
any legal standing to file the Petition for Declaratory Relief?
"B. Substantive Issues
"1. Did the RTC Decision conform to the form and
substance required by the Constitution, the law and the
Rules of Court?
"2. May religious leaders like herein petitioner, Bro. Mike
Velarde, be prohibited from endorsing candidates for public
office? Corollarily, may they be banned from campaigning
against said candidates?"
The Courts Ruling
The Petition of Brother Mike Velarde is meritorious.
Procedural Issues:
Requisites of Petitions for Declaratory Relief
Section 1 of Rule 63 of the Rules of Court, which deals with petitions for
declaratory relief, provides in part:
"Section 1. Who may file petition.- Any person interested under a
deed, will, contract or other written instrument, whose rights are
affected by a statute, executive order or regulation, ordinance, or
any other governmental regulation may, before breach or violation
thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a
declaration of his rights or duties thereunder."
Based on the foregoing, an action for declaratory relief should be filed by a
person interested under a deed, a will, a contract or other written
instrument, and whose rights are affected by a statute, an executive order,
a regulation or an ordinance. The purpose of the remedy is to interpret or
to determine the validity of the written instrument and to seek a judicial
declaration of the parties rights or duties thereunder.
16
The essential
requisites of the action are as follows: (1) there is a justiciable controversy;
(2) the controversy is between persons whose interests are adverse; (3)
the party seeking the relief has a legal interest in the controversy; and (4)
the issue is ripe for judicial determination.
17

Justiciable Controversy
Brother Mike Velarde contends that the SJS Petition failed to allege, much
less establish before the trial court, that there existed a justiciable
controversy or an adverse legal interest between them; and that SJS had a
legal right that was being violated or threatened to be violated by petitioner.
On the contrary, Velarde alleges that SJS premised its action on mere
speculations, contingent events, and hypothetical issues that had not yet
ripened into an actual controversy. Thus, its Petition for Declaratory Relief
must fail.
A justiciable controversy refers to an existing case or controversy that is
appropriate or ripe for judicial determination, not one that is conjectural or
merely anticipatory.
18
The SJS Petition for Declaratory Relief fell short of
this test. It miserably failed to allege an existing controversy or dispute
between the petitioner and the named respondents therein. Further, the
Petition did not sufficiently state what specific legal right of the petitioner
was violated by the respondents therein; and what particular act or acts of
the latter were in breach of its rights, the law or the Constitution.
As pointed out by Brother Eliseo F. Soriano in his Comment,
19
what exactly
has he done that merited the attention of SJS? He confesses that he does
not know the answer, because the SJS Petition (as well as the assailed
Decision of the RTC) "yields nothing in this respect." His Eminence, Jaime
Cardinal Sin, adds that, at the time SJS filed its Petition on January 28,
2003, the election season had not even started yet; and that, in any event,
he has not been actively involved in partisan politics.
An initiatory complaint or petition filed with the trial court should contain "a
plain, concise and direct statement of the ultimate facts on which the party
pleading relies for his claim x x x."
20
Yet, the SJS Petition stated no
ultimate facts.
Indeed, SJS merely speculated or anticipated without factual moorings
that, as religious leaders, the petitioner and his co-respondents below had
endorsed or threatened to endorse a candidate or candidates for elective
offices; and that such actual or threatened endorsement "will enable [them]
to elect men to public office who [would] in turn be forever beholden to their
leaders, enabling them to control the government"[;]
21
and "pos[ing] a clear
and present danger of serious erosion of the peoples faith in the electoral
process[;] and reinforc[ing] their belief that religious leaders determine the
ultimate result of elections,"
22
which would then be violative of the
separation clause.
Such premise is highly speculative and merely theoretical, to say the least.
Clearly, it does not suffice to constitute a justiciable controversy. The
Petition does not even allege any indication or manifest intent on the part
of any of the respondents below to champion an electoral candidate, or to
urge their so-called flock to vote for, or not to vote for, a particular
candidate. It is a time-honored rule that sheer speculation does not give
rise to an actionable right.
Obviously, there is no factual allegation that SJS rights are being
subjected to any threatened, imminent and inevitable violation that should
be prevented by the declaratory relief sought. The judicial power and duty
of the courts to settle actual controversies involving rights that are legally
demandable and enforceable
23
cannot be exercised when there is no
actual or threatened violation of a legal right.
All that the 5-page SJS Petition prayed for was "that the question raised in
paragraph 9 hereof be resolved."
24
In other words, it merely sought an
opinion of the trial court on whether the speculated acts of religious leaders
endorsing elective candidates for political offices violated the constitutional
principle on the separation of church and state. SJS did not ask for a
declaration of its rights and duties; neither did it pray for the stoppage of
any threatened violation of its declared rights. Courts, however, are
proscribed from rendering an advisory opinion.
25

Cause of Action
Respondent SJS asserts that in order to maintain a petition for declaratory
relief, a cause of action need not be alleged or proven. Supposedly, for
such petition to prosper, there need not be any violation of a right, breach
of duty or actual wrong committed by one party against the other.
Petitioner, on the other hand, argues that the subject matter of an action
for declaratory relief should be a deed, a will, a contract (or other written
instrument), a statute, an executive order, a regulation or an ordinance. But
the subject matter of the SJS Petition is "the constitutionality of an act of a
religious leader to endorse the candidacy of a candidate for elective office
or to urge or require the members of the flock to vote for a specified
candidate."
26
According to petitioner, this subject matter is "beyond the
realm of an action for declaratory relief."
27
Petitioner avers that in the
absence of a valid subject matter, the Petition fails to state a cause of
action and, hence, should have been dismissed outright by the court a quo.
A cause of action is an act or an omission of one party in violation of the
legal right or rights of another, causing injury to the latter.
28
Its essential
elements are the following: (1) a right in favor of the plaintiff; (2) an
obligation on the part of the named defendant to respect or not to violate
such right; and (3) such defendants act or omission that is violative of the
right of the plaintiff or constituting a breach of the obligation of the former to
the latter.
29

The failure of a complaint to state a cause of action is a ground for its
outright dismissal.
30
However, in special civil actions for declaratory relief,
the concept of a cause of action under ordinary civil actions does not
strictly apply. The reason for this exception is that an action for declaratory
relief presupposes that there has been no actual breach of the instruments
involved or of rights arising thereunder.
31
Nevertheless, a breach or
violation should be impending, imminent or at least threatened.
A perusal of the Petition filed by SJS before the RTC discloses no explicit
allegation that the former had any legal right in its favor that it sought to
protect. We can only infer the interest, supposedly in its favor, from its bare
allegation that it "has thousands of members who are citizens-taxpayers-
registered voters and who are keenly interested in a judicial clarification of
the constitutionality of the partisan participation of religious leaders in
Philippine politics and in the process to insure adherence to the
Constitution by everyone x x x."
32

Such general averment does not, however, suffice to constitute a legal
right or interest. Not only is the presumed interest not personal in
character; it is likewise too vague, highly speculative and uncertain.
33
The
Rules require that the interest must be material to the issue and affected
by the questioned act or instrument, as distinguished from simple curiosity
or incidental interest in the question raised.
34

To bolster its stance, SJS cites the Corpus Juris Secundum and submits
that the "[p]laintiff in a declaratory judgment action does not seek to
enforce a claim against [the] defendant, but seeks a judicial declaration of
[the] rights of the parties for the purpose of guiding [their] future conduct,
and the essential distinction between a declaratory judgment action and
the usual action is that no actual wrong need have been committed or
loss have occurred in order to sustain the declaratory judgment action,
although there must be no uncertainty that the loss will occur or that the
asserted rights will be invaded."
35

SJS has, however, ignored the crucial point of its own reference that
there must be no uncertainty that the loss will occur or that the asserted
rights will be invaded. Precisely, as discussed earlier, it merely conjectures
that herein petitioner (and his co-respondents below) might actively
participate in partisan politics, use "the awesome voting strength of its
faithful flock [to] enable it to elect men to public office x x x, enabling [it] to
control the government."
36

During the Oral Argument, though, Petitioner Velarde and his co-
respondents below all strongly asserted that they had not in any way
engaged or intended to participate in partisan politics. They all firmly
assured this Court that they had not done anything to trigger the issue
raised and to entitle SJS to the relief sought.
Indeed, the Court finds in the Petition for Declaratory Relief no single
allegation of fact upon which SJS could base a right of relief from the
named respondents. In any event, even granting that it sufficiently asserted
a legal right it sought to protect, there was nevertheless no certainty that
such right would be invaded by the said respondents. Not even the alleged
proximity of the elections to the time the Petition was filed below (January
28, 2003) would have provided the certainty that it had a legal right that
would be jeopardized or violated by any of those respondents.
Legal Standing
Legal standing or locus standi has been defined as a personal and
substantial interest in the case, such that the party has sustained or will
sustain direct injury as a result of the challenged act.
37
Interest means a
material interest in issue that is affected by the questioned act or
instrument, as distinguished from a mere incidental interest in the question
involved.
38

Petitioner alleges that "[i]n seeking declaratory relief as to the
constitutionality of an act of a religious leader to endorse, or require the
members of the religious flock to vote for a specific candidate, herein
Respondent SJS has no legal interest in the controversy";
39
it has failed to
establish how the resolution of the proffered question would benefit or
injure it.
Parties bringing suits challenging the constitutionality of a law, an act or a
statute must show "not only that the law [or act] is invalid, but also that
[they have] sustained or [are] in immediate or imminent danger of
sustaining some direct injury as a result of its enforcement, and not merely
that [they] suffer thereby in some indefinite way."
40
They must demonstrate
that they have been, or are about to be, denied some right or privilege to
which they are lawfully entitled, or that they are about to be subjected to
some burdens or penalties by reason of the statute or act complained of.
41

First, parties suing as taxpayers must specifically prove that they have
sufficient interest in preventing the illegal expenditure of money raised by
taxation.
42
A taxpayers action may be properly brought only when there is
an exercise by Congress of its taxing or spending power.
43
In the present
case, there is no allegation, whether express or implied, that taxpayers
money is being illegally disbursed.
Second, there was no showing in the Petition for Declaratory Relief that
SJS as a political party or its members as registered voters would be
adversely affected by the alleged acts of the respondents below, if the
question at issue was not resolved. There was no allegation that SJS had
suffered or would be deprived of votes due to the acts imputed to the said
respondents. Neither did it allege that any of its members would be denied
the right of suffrage or the privilege to be voted for a public office they are
seeking.
Finally, the allegedly keen interest of its "thousands of members who are
citizens-taxpayers-registered voters" is too general
44
and beyond the
contemplation of the standards set by our jurisprudence. Not only is the
presumed interest impersonal in character; it is likewise too vague, highly
speculative and uncertain to satisfy the requirement of standing.
45

Transcendental Importance
In any event, SJS urges the Court to take cognizance of the Petition, even
sans legal standing, considering that "the issues raised are of paramount
public interest."
In not a few cases, the Court has liberalized the locus standi requirement
when a petition raises an issue of transcendental significance or
paramount importance to the people.
46
Recently, after holding that the IBP
had nolocus standi to bring the suit, the Court in IBP v.
Zamora
47
nevertheless entertained the Petition therein. It noted that "the
IBP has advanced constitutional issues which deserve the attention of this
Court in view of their seriousness, novelty and weight as precedents."
48

Similarly in the instant case, the Court deemed the constitutional issue
raised in the SJS Petition to be of paramount interest to the Filipino people.
The issue did not simply concern a delineation of the separation between
church and state, but ran smack into the governance of our country. The
issue was both transcendental in importance and novel in nature, since it
had never been decided before.
The Court, thus, called for Oral Argument to determine with certainty
whether it could resolve the constitutional issue despite the barren
allegations in the SJS Petition as well as the abbreviated proceedings in
the court below. Much to its chagrin, however, counsels for the parties --
particularly for Respondent SJS -- made no satisfactory allegations or
clarifications that would supply the deficiencies hereinabove discussed.
Hence, even if the Court would exempt this case from the stringent locus
standi requirement, such heroic effort would be futile because the
transcendental issue cannot be resolved anyway.
Proper Proceedings Before the Trial Court
To prevent a repetition of this waste of precious judicial time and effort, and
for the guidance of the bench and the bar, the Court reiterates
the elementary procedure
49
that must be followed by trial courts in the
conduct of civil cases.
50

Prefatorily, the trial court may -- motu proprio or upon motion of the
defendant -- dismiss a complaint
51
(or petition, in a special civil action) that
does not allege the plaintiffs (or petitioners) cause or causes of action.
52
A
complaint or petition should contain "a plain, concise and direct statement
of the ultimate facts on which the party pleading relies for his claim or
defense."
53
It should likewise clearly specify the relief sought.
54

Upon the filing of the complaint/petition and the payment of the requisite
legal fees, the clerk of court shall forthwith issue the corresponding
summons to the defendants or the respondents, with a directive that the
defendant answer
55
within 15 days, unless a different period is fixed by the
court.
56
The summons shall also contain a notice that if such answer is not
filed, the plaintiffs/petitioners shall take a judgment by default and may be
granted the relief applied for.
57
The court, however, may -- upon such
terms as may be just -- allow an answer to be filed after the time fixed by
the Rules.
58

If the answer sets forth a counterclaim or cross-claim, it must be answered
within ten (10) days from service.
59
A reply may be filed within ten (10)
days from service of the pleading responded to.
60

When an answer fails to tender an issue or admits the material allegations
of the adverse partys pleading, the court may, on motion of that party,
direct judgment on such pleading (except in actions for declaration of
nullity or annulment of marriage or for legal separation).
61
Meanwhile, a
party seeking to recover upon a claim, a counterclaim or crossclaim -- or to
obtain a declaratory relief -- may, at any time after the answer thereto has
been served, move for a summary judgment in its favor.
62
Similarly, a party
against whom a claim, a counterclaim or crossclaim is asserted -- or a
declaratory relief sought -- may, at any time, move for a summary
judgment in its favor.
63
After the motion is heard, the judgment sought shall
be rendered forthwith if there is a showing that, except as to the amount of
damages, there is no genuine issue as to any material fact; and that the
moving party is entitled to a judgment as a matter of law.
64

Within the time for -- but before -- filing the answer to the complaint or
petition, the defendant may file a motion to dismiss based on any of the
grounds stated in Section 1 of Rule 16 of the Rules of Court. During the
hearing of the motion, the parties shall submit their arguments on the
questions of law, and their evidence on the questions of fact.
65
After the
hearing, the court may dismiss the action or claim, deny the motion, or
order the amendment of the pleadings. It shall not defer the resolution of
the motion for the reason that the ground relied upon is not indubitable. In
every case, the resolution shall state clearly and distinctly the reasons
therefor.
66

If the motion is denied, the movant may file an answer within the balance
of the period originally prescribed to file an answer, but not less than five
(5) days in any event, computed from the receipt of the notice of the denial.
If the pleading is ordered to be amended, the defendant shall file an
answer within fifteen (15) days, counted from the service of the amended
pleading, unless the court provides a longer period.
67

After the last pleading has been served and filed, the case shall be set for
pretrial,
68
which is a mandatory proceeding.
69
A plaintiffs/ petitioners (or its
duly authorized representatives) non-appearance at the pretrial, if without
valid cause, shall result in the dismissal of the action with prejudice, unless
the court orders otherwise. A similar failure on the part of the defendant
shall be a cause for allowing the plaintiff/petitioner to present evidenceex
parte, and the court to render judgment on the basis thereof.
70

The parties are required to file their pretrial briefs; failure to do so shall
have the same effect as failure to appear at the pretrial.
71
Upon the
termination thereof, the court shall issue an order reciting in detail the
matters taken up at the conference; the action taken on them, the
amendments allowed to the pleadings; and the agreements or admissions,
if any, made by the parties regarding any of the matters considered.
72
The
parties may further avail themselves of any of the modes of discovery,
73
if
they so wish.
Thereafter, the case shall be set for trial,
74
in which the parties shall
adduce their respective evidence in support of their claims and/or
defenses. By their written consent or upon the application of either party, or
on its own motion, the court may also order any or all of the issues to be
referred to a commissioner, who is to be appointed by it or to be agreed
upon by the parties.
75
The trial or hearing before the commissioner shall
proceed in all respects as it would if held before the court.
76

Upon the completion of such proceedings, the commissioner shall file with
the court a written report on the matters referred by the parties.
77
The
report shall be set for hearing, after which the court shall issue an order
adopting, modifying or rejecting it in whole or in part; or recommitting it with
instructions; or requiring the parties to present further evidence before the
commissioner or the court.
78

Finally, a judgment or final order determining the merits of the case shall
be rendered. The decision shall be in writing, personally and directly
prepared by the judge, stating clearly and distinctly the facts and the law
on which it is based, signed by the issuing magistrate, and filed with the
clerk of court.
79

Based on these elementary guidelines, let us examine the proceedings
before the trial court in the instant case.
First, with respect to the initiatory pleading of the SJS. Even a cursory
perusal of the Petition immediately reveals its gross inadequacy. It
contained no statement of ultimate facts upon which the petitioner relied for
its claim. Furthermore, it did not specify the relief it sought from the court,
but merely asked it to answer a hypothetical question.
Relief, as contemplated in a legal action, refers to a specific coercive
measure prayed for as a result of a violation of the rights of a plaintiff or a
petitioner.
80
As already discussed earlier, the Petition before the trial court
had no allegations of fact
81
or of any specific violation of the petitioners
rights, which the respondents had a duty to respect. Such deficiency
amounted to a failure to state a cause of action; hence, no coercive relief
could be sought and adjudicated. The Petition evidently lacked substantive
requirements and, we repeat, should have been dismissed at the outset.
Second, with respect to the trial court proceedings. Within the period set to
file their respective answers to the SJS Petition, Velarde, Villanueva and
Manalo filed Motions to Dismiss; Cardinal Sin, a Comment; and Soriano,
within a priorly granted extended period, an Answer in which he likewise
prayed for the dismissal of the Petition.
82
SJS filed a Rejoinder to the
Motion of Velarde, who subsequently filed a Sur-Rejoinder. Supposedly,
there were "several scheduled settings, in which the "[c]ourt was apprised
of the respective positions of the parties."
83
The nature of such settings --
whether pretrial or trial hearings -- was not disclosed in the records. Before
ruling on the Motions to Dismiss, the trial court issued an Order
84
dated
May 8, 2003, directing the parties to submit their memoranda. Issued
shortly thereafter was another Order
85
dated May 14, 2003, denying all the
Motions to Dismiss.
In the latter Order, the trial court perfunctorily ruled:
"The Court now resolves to deny the Motions to Dismiss, and after
all the memoranda are submitted, then, the case shall be deemed
as submitted for resolution."
86

Apparently, contrary to the requirement of Section 2 of Rule 16 of the
Rules of Court, the Motions were not heard. Worse, the Order purportedly
resolving the Motions to Dismiss did not state any reason at all for their
denial, in contravention of Section 3 of the said Rule 16. There was not
even any statement of the grounds relied upon by the Motions; much less,
of the legal findings and conclusions of the trial court.
Thus, Velarde, Villanueva and Manalo moved for reconsideration. Pending
the resolution of these Motions for Reconsideration, Villanueva filed a
Motion to suspend the filing of the parties memoranda. But instead of
separately resolving the pending Motions fairly and squarely, the trial court
again transgressed the Rules of Court when it immediately proceeded to
issue its Decision, even before tackling the issues raised in those Motions.
Furthermore, the RTC issued its "Decision" without allowing the parties to
file their answers. For this reason, there was no joinder of the issues. If
only it had allowed the filing of those answers, the trial court would have
known, as the Oral Argument revealed, that the petitioner and his co-
respondents below had not committed or threatened to commit the act
attributed to them (endorsing candidates) -- the act that was supposedly
the factual basis of the suit.
Parenthetically, the court a quo further failed to give a notice of the Petition
to the OSG, which was entitled to be heard upon questions involving the
constitutionality or validity of statutes and other measures.
87

Moreover, as will be discussed in more detail, the questioned Decision of
the trial court was utterly wanting in the requirements prescribed by the
Constitution and the Rules of Court.
All in all, during the loosely abbreviated proceedings of the case, the trial
court indeed acted with inexplicable haste, with total ignorance of the law --
or, worse, in cavalier disregard of the rules of procedure -- and with grave
abuse of discretion.
Contrary to the contentions of the trial judge and of SJS, proceedings for
declaratory relief must still follow the process described above -- the
petition must state a cause of action; the proceedings must undergo the
procedure outlined in the Rules of Court; and the decision must adhere to
constitutional and legal requirements.
First Substantive Issue:
Fundamental Requirements of a Decision
The Constitution commands that "[n]o decision shall be rendered by any
court without expressing therein clearly and distinctly the facts and the law
on which it is based. No petition for review or motion for reconsideration of
a decision of the court shall be refused due course or denied without
stating the basis therefor."
88

Consistent with this constitutional mandate, Section 1 of Rule 36 of the
Rules on Civil Procedure similarly provides:
"Sec. 1. Rendition of judgments and final orders. A judgment or
final order determining the merits of the case shall be in writing
personally and directly prepared by the judge, stating clearly and
distinctly the facts and the law on which it is based, signed by him
and filed with the clerk of court."
In the same vein, Section 2 of Rule 120 of the Rules of Court on Criminal
Procedure reads as follows:
"Sec. 2. Form and contents of judgments. -- The judgment must be
written in the official language, personally and directly prepared by
the judge and signed by him and shall contain clearly and distinctly
a statement of the facts proved or admitted by the accused and the
law upon which the judgment is based.
"x x x x x x x x x."
Pursuant to the Constitution, this Court also issued on January 28, 1988,
Administrative Circular No. 1, prompting all judges "to make complete
findings of facts in their decisions, and scrutinize closely the legal aspects
of the case in the light of the evidence presented. They should avoid the
tendency to generalize and form conclusions without detailing the facts
from which such conclusions are deduced."
In many cases,
89
this Court has time and time again reminded "magistrates
to heed the demand of Section 14, Article VIII of the Constitution." The
Court, through Chief Justice Hilario G. Davide Jr. in Yao v. Court of
Appeals,
90
discussed at length the implications of this provision and strongly
exhorted thus:
"Faithful adherence to the requirements of Section 14, Article VIII of the
Constitution is indisputably a paramount component of due process and
fair play. It is likewise demanded by the due process clause of the
Constitution. The parties to a litigation should be informed of how it was
decided, with an explanation of the factual and legal reasons that led to the
conclusions of the court. The court cannot simply say that judgment is
rendered in favor of X and against Y and just leave it at that without any
justification whatsoever for its action. The losing party is entitled to know
why he lost, so he may appeal to the higher court, if permitted, should he
believe that the decision should be reversed. A decision that does not
clearly and distinctly state the facts and the law on which it is based leaves
the parties in the dark as to how it was reached and is precisely prejudicial
to the losing party, who is unable to pinpoint the possible errors of the court
for review by a higher tribunal. More than that, the requirement is an
assurance to the parties that, in reaching judgment, the judge did so
through the processes of legal reasoning. It is, thus, a safeguard against
the impetuosity of the judge, preventing him from deciding ipse dixit.
Vouchsafed neither the sword nor the purse by the Constitution but
nonetheless vested with the sovereign prerogative of passing judgment on
the life, liberty or property of his fellowmen, the judge must ultimately
depend on the power of reason for sustained public confidence in the
justness of his decision."
In People v. Bugarin,
91
the Court also explained:
"The requirement that the decisions of courts must be in writing
and that they must set forth clearly and distinctly the facts and the
law on which they are based serves many functions. It is intended,
among other things, to inform the parties of the reason or reasons
for the decision so that if any of them appeals, he can point out to
the appellate court the finding of facts or the rulings on points of
law with which he disagrees. More than that, the requirement is an
assurance to the parties that, in reaching judgment, the judge did
so through the processes of legal reasoning. x x x."
Indeed, elementary due process demands that the parties to a litigation be
given information on how the case was decided, as well as an explanation
of the factual and legal reasons that led to the conclusions of the court.
92

In Madrid v. Court of Appeals,
93
this Court had instructed magistrates to
exert effort to ensure that their decisions would present a comprehensive
analysis or account of the factual and legal findings that would substantially
address the issues raised by the parties.
In the present case, it is starkly obvious that the assailed Decision contains
no statement of facts -- much less an assessment or analysis thereof -- or
of the courts findings as to the probable facts. The assailed Decision
begins with a statement of the nature of the action and the question or
issue presented. Then follows a brief explanation of the constitutional
provisions involved, and what the Petition sought to achieve. Thereafter,
the ensuing procedural incidents before the trial court are tracked. The
Decision proceeds to a full-length opinion on the nature and the extent of
the separation of church and state. Without expressly stating the final
conclusion she has reached or specifying the relief granted or denied, the
trial judge ends her "Decision" with the clause "SO ORDERED."
What were the antecedents that necessitated the filing of the Petition?
What exactly were the distinct facts that gave rise to the question sought to
be resolved by SJS? More important, what were the factual findings and
analysis on which the trial court based its legal findings and conclusions?
None were stated or implied. Indeed, the RTCs Decision cannot be upheld
for its failure to express clearly and distinctly the facts on which it was
based. Thus, the trial court clearly transgressed the constitutional directive.
The significance of factual findings lies in the value of the decision as a
precedent. How can it be so if one cannot apply the ruling to similar
circumstances, simply because such circumstances are unknown?
Otherwise stated, how will the ruling be applied in the future, if there is no
point of factual comparison?
Moreover, the court a quo did not include a resolutory or dispositive portion
in its so-called Decision. The importance of such portion was explained in
the early case Manalang v. Tuason de Rickards,
94
from which we quote:
"The resolution of the Court on a given issue as embodied in the
dispositive part of the decision or order is the investitive or
controlling factor that determines and settles the rights of the
parties and the questions presented therein, notwithstanding the
existence of statements or declaration in the body of said order that
may be confusing."
The assailed Decision in the present case leaves us in the dark as to its
final resolution of the Petition. To recall, the original Petition was for
declaratory relief. So, what relief did the trial court grant or deny? What
rights of the parties did it conclusively declare? Its final statement says,
"SO ORDERED." But what exactly did the court order? It had the temerity
to label its issuance a "Decision," when nothing was in fact decided.
Respondent SJS insists that the dispositive portion can be found in the
body of the assailed Decision. It claims that the issue is disposed of and
the Petition finally resolved by the statement of the trial court found on
page 10 of its 14-page Decision, which reads: "Endorsement of specific
candidates in an election to any public office is a clear violation of the
separation clause."
95

We cannot agree.
In Magdalena Estate, Inc. v. Caluag,
96
the obligation of the party imposed
by the Court was allegedly contained in the text of the original Decision.
The Court, however, held:
"x x x The quoted finding of the lower court cannot supply
deficiencies in the dispositive portion. It is a mere opinion of the
court and the rule is settled that where there is a conflict between
the dispositive part and the opinion, the former must prevail over
the latter on the theory that the dispositive portion is the final order
while the opinion is merely a statement ordering nothing." (Italics in
the original)
Thus, the dispositive portion cannot be deemed to be the statement quoted
by SJS and embedded in the last paragraph of page 10 of the assailed 14-
page Decision. If at all, that statement is merely an answer to a
hypothetical legal question and just a part of the opinion of the trial court. It
does not conclusively declare the rights (or obligations) of the parties to the
Petition. Neither does it grant any -- much less, the proper -- relief under
the circumstances, as required of a dispositive portion.
Failure to comply with the constitutional injunction is a grave abuse of
discretion amounting to lack or excess of jurisdiction. Decisions or orders
issued in careless disregard of the constitutional mandate are a patent
nullity and must be struck down as void.
97

Parts of a Decision
In general, the essential parts of a good decision consist of the following:
(1) statement of the case; (2) statement of facts; (3) issues or assignment
of errors; (4) court ruling, in which each issue is, as a rule, separately
considered and resolved; and, finally, (5) dispositive portion.
The ponente may also opt to include an introduction or a prologue as well
as an epilogue, especially in cases in which controversial or novel issues
are involved.
98

An introduction may consist of a concise but comprehensive statement of
the principal factual or legal issue/s of the case. In some cases --
particularly those concerning public interest; or involving complicated
commercial, scientific, technical or otherwise rare subject matters -- a
longer introduction or prologue may serve to acquaint readers with the
specific nature of the controversy and the issues involved. An epilogue
may be a summation of the important principles applied to the resolution of
the issues of paramount public interest or significance. It may also lay
down an enduring philosophy of law or guiding principle.
Let us now, again for the guidance of the bench and the bar, discuss the
essential parts of a good decision.
1. Statement of the Case
The Statement of the Case consists of a legal definition of the nature of the
action. At the first instance, this part states whether the action is a civil
case for collection, ejectment, quieting of title, foreclosure of mortgage, and
so on; or, if it is a criminal case, this part describes the specific charge --
quoted usually from the accusatory portion of the information -- and the
plea of the accused. Also mentioned here are whether the case is being
decided on appeal or on a petition for certiorari, the court of origin, the
case number in the trial court, and the dispositive portion of the assailed
decision.
In a criminal case, the verbatim reproduction of the criminal information
serves as a guide in determining the nature and the gravity of the offense
for which the accused may be found culpable. As a rule, the accused
cannot be convicted of a crime different from or graver than that charged.
Also, quoting verbatim the text of the information is especially important
when there is a question on the sufficiency of the charge, or on whether
qualifying and modifying circumstances have been adequately alleged
therein.
To ensure that due process is accorded, it is important to give a short
description of the proceedings regarding the plea of the accused. Absence
of an arraignment, or a serious irregularity therein, may render the
judgment void, and further consideration by the appellate court would be
futile. In some instances, especially in appealed cases, it would also be
useful to mention the fact of the appellants detention, in order to dispose
of the preliminary query -- whether or not they have abandoned their
appeal by absconding or jumping bail.
Mentioning the court of origin and the case number originally assigned
helps in facilitating the consolidation of the records of the case in both the
trial and the appellate courts, after entry of final judgment.
Finally, the reproduction of the decretal portion of the assailed decision
informs the reader of how the appealed case was decided by the court a
quo.
2. Statement of Facts
There are different ways of relating the facts of the case. First, under the
objective or reportorial method, the judge summarizes -- without comment -
- the testimony of each witness and the contents of each
exhibit. Second,under the synthesis method, the factual theory of the
plaintiff or prosecution and then that of the defendant or defense is
summarized according to the judges best light. Third, in the subjective
method, the version of the facts accepted by the judge is simply narrated
without explaining what the parties versions are. Finally, through a
combination of objective and subjective means, the testimony of each
witness is reported and the judge then formulates his or her own version of
the facts.
In criminal cases, it is better to present both the version of the prosecution
and that of the defense, in the interest of fairness and due process. A
detailed evaluation of the contentions of the parties must follow. The
resolution of most criminal cases, unlike civil and other cases, depends to
a large extent on the factual issues and the appreciation of the evidence.
The plausibility or the implausibility of each version can sometimes be
initially drawn from a reading of the facts. Thereafter, the bases of the court
in arriving at its findings and conclusions should be explained.
On appeal, the fact that the assailed decision of the lower court fully,
intelligently and correctly resolved all factual and legal issues involved may
partly explain why the reviewing court finds no reason to reverse the
findings and conclusions of the former. Conversely, the lower courts
patent misappreciation of the facts or misapplication of the law would aid in
a better understanding of why its ruling is reversed or modified.
In appealed civil cases, the opposing sets of facts no longer need to be
presented. Issues for resolution usually involve questions of law, grave
abuse of discretion, or want of jurisdiction; hence, the facts of the case are
often undisputed by the parties. With few exceptions, factual issues are not
entertained in non-criminal cases. Consequently, the narration of facts by
the lower court, if exhaustive and clear, may be reproduced; otherwise, the
material factual antecedents should be restated in the words of the
reviewing magistrate.
In addition, the reasoning of the lower court or body whose decision is
under review should be laid out, in order that the parties may clearly
understand why the lower court ruled in a certain way, and why the
reviewing court either finds no reason to reverse it or concludes otherwise.
3. Issues or Assignment of Errors
Both factual and legal issues should be stated. On appeal, the assignment
of errors, as mentioned in the appellants brief, may be reproduced in toto
and tackled seriatim, so as to avoid motions for reconsideration of the final
decision on the ground that the court failed to consider all assigned errors
that could affect the outcome of the case. But when the appellant presents
repetitive issues or when the assigned errors do not strike at the main
issue, these may be restated in clearer and more coherent terms.
Though not specifically questioned by the parties, additional issues may
also be included, if deemed important for substantial justice to be
rendered. Note that appealed criminal cases are given de novo review, in
contrast to noncriminal cases in which the reviewing court is generally
limited to issues specifically raised in the appeal. The few exceptions are
errors of jurisdiction; questions not raised but necessary in arriving at a just
decision on the case; or unassigned errors that are closely related to those
properly assigned, or upon which depends the determination of the
question properly raised.
4. The Courts Ruling
This part contains a full discussion of the specific errors or issues raised in
the complaint, petition or appeal, as the case may be; as well as of other
issues the court deems essential to a just disposition of the case. Where
there are several issues, each one of them should be separately
addressed, as much as practicable. The respective contentions of the
parties should also be mentioned here. When procedural questions are
raised in addition to substantive ones, it is better to resolve the former
preliminarily.
5. The Disposition or Dispositive Portion
In a criminal case, the disposition should include a finding of innocence or
guilt, the specific crime committed, the penalty imposed, the participation of
the accused, the modifying circumstances if any, and the civil liability and
costs. In case an acquittal is decreed, the court must order the immediate
release of the accused, if detained, (unless they are being held for another
cause) and order the director of the Bureau of Corrections (or wherever the
accused is detained) to report, within a maximum of ten (10) days from
notice, the exact date when the accused were set free.
In a civil case as well as in a special civil action, the disposition should
state whether the complaint or petition is granted or denied, the specific
relief granted, and the costs. The following test of completeness may be
applied.First, the parties should know their rights and
obligations. Second, they should know how to execute the decision under
alternative contingencies. Third, there should be no need for further
proceedings to dispose of the issues.Fourth, the case should be
terminated by according the proper relief. The "proper relief" usually
depends upon what the parties seek in their pleadings. It may declare their
rights and duties, command the performance of positive prestations, or
order them to abstain from specific acts. The disposition must also
adjudicate costs.
The foregoing parts need not always be discussed in sequence. But they
should all be present and plainly identifiable in the decision. Depending on
the writers character, genre and style, the language should be fresh and
free-flowing, not necessarily stereotyped or in a fixed form; much less
highfalutin, hackneyed and pretentious. At all times, however, the decision
must be clear, concise, complete and correct.
Second Substantive Issue:
Religious Leaders Endorsement
of Candidates for Public Office
The basic question posed in the SJS Petition -- WHETHER
ENDORSEMENTS OF CANDIDACIES BY RELIGIOUS LEADERS IS
UNCONSTITUTIONAL -- undoubtedly deserves serious consideration. As
stated earlier, the Court deems this constitutional issue to be of paramount
interest to the Filipino citizenry, for it concerns the governance of our
country and its people. Thus, despite the obvious procedural
transgressions by both SJS and the trial court, this Court still called for Oral
Argument, so as not to leave any doubt that there might be room to
entertain and dispose of the SJS Petition on the merits.
Counsel for SJS has utterly failed, however, to convince the Court that
there are enough factual and legal bases to resolve the paramount issue.
On the other hand, the Office of the Solicitor General has sided with
petitioner insofar as there are no facts supporting the SJS Petition and the
assailed Decision.
We reiterate that the said Petition failed to state directly the ultimate facts
that it relied upon for its claim. During the Oral Argument, counsel for SJS
candidly admitted that there were no factual allegations in its Petition for
Declaratory Relief. Neither were there factual findings in the assailed
Decision. At best, SJS merely asked the trial court to answer a hypothetical
question. In effect, it merely sought an advisory opinion, the rendition of
which was beyond the courts constitutional mandate and jurisdiction.
99

Indeed, the assailed Decision was rendered in clear violation of the
Constitution, because it made no findings of facts and final disposition.
Hence, it is void and deemed legally inexistent. Consequently, there is
nothing for this Court to review, affirm, reverse or even just modify.
Regrettably, it is not legally possible for the Court to take up, on the merits,
the paramount question involving a constitutional principle. It is a time-
honored rule that "the constitutionality of a statute [or act] will be passed
upon only if, and to the extent that, it is directly and necessarily involved in
a justiciable controversy and is essential to the protection of the rights of
the parties concerned."
100

WHEREFORE, the Petition for Review of Brother Mike Velarde
is GRANTED. The assailed June 12, 2003 Decision and July 29, 2003
Order of the Regional Trial Court of Manila (Branch 49) are
hereby DECLARED NULL AND VOID and thus SET ASIDE. The SJS
Petition for Declaratory Relief is DISMISSED for failure to state a cause of
action.
Let a copy of this Decision be furnished the Office of the Court
Administrator to evaluate and recommend whether the trial judge may,
after observing due process, be held administratively liable for rendering a
decision violative of the Constitution, the Rules of Court and relevant
circulars of this Court. No costs.
SO ORDERED.




































G.R. No. L-5101 November 28, 1953
ANGELES S. SANTOS, petitioner-appellant,
vs.
PATERIO AQUINO, as Municipal Mayor of Malabon, THE MUNICIPAL
COUNCIL OF MALABON, A.A. OLIVEROS, as Municipal Treasurer of
Malabon, Province of Rizal, respondents-appellees.
Arsenio Paez for appellant.
Ireneo V. Bernardo for appellees.
PADILLA, J .:
This action purports to obtain a declaratory relief but the prayer of the
petition seeks to have Ordinance No. 61, series of 1946, and Ordinance
No. 10, series of 1947, of the Municipality of Malabon, Province of Rizal,
declared null and void; to prevent the collection of surcharges and
penalties for failure to pay the taxes imposed by the ordinances referred to,
except for such failure from and after the taxpayer shall have been served
with the notice of the effectivity of the ordinances; and to enjoin the
respondents, their agents and all other persons acting for and in their
behalf from enforcing the ordinances referred to and from making any
collection thereunder. Further, petitioner prays for such other remedy and
relief as may be deemed just and equitable and asks that costs be taxed
against the respondents.
The petitioner is the manager of a theater known as "Cine Concepcion,"
located and operated in the Municipality of Malabon, Province of Rizal, and
the respondents are the Municipal Mayor, the Municipal Council and the
Municipal Treasurer, of Malabon. The petitioner avers that Ordinance No.
61, series of 1946, adopted by the Municipal Council of Malabon on 8
December 1946, imposes a license tax of P1,000 per annum on the said
theater in addition to a license tax on all tickets sold in theaters and
cinemas in Malabon, pursuant to the Ordinance No. 58, series of 1946,
adopted on the same date as Ordinance No. 61, the same series; that prior
to 8 December 1946 the municipal license tax paid by the petitioner on
"Cine Concepcion" was P180, pursuant to the Ordinance No. 9, series of
1945; that on 6 December 1947, the Municipal Council of Malabon adopted
Ordinance No. 10, series of 1947, imposing a graduated municipal license
tax on theaters and cinematographs from P200 to P9,000 per annum; that
the ordinance was submitted for approval to the Department of Finance,
which reduced the rate of taxes provided therein, and the ordinance with
the reduced rate of taxes was approved on 3 November 1948; that notice
of reduction of the tax rate and approval by the Department of Finance of
said graduated municipal license tax provided for in said Ordinance No. 10,
as reduced, was served on the petitioner on 12 February 1949 when the
respondent Municipal Treasurer presented a bill for collection thereof; that
Ordinance No. 61, series of 1946, is ultra vires and repugnant to the
provisions of the Constitution on taxation; that its approval was not in
accordance with law; that Ordinance No. 10, series of 1947, is all null and
void, because the Department of Finance that approved it acted in excess
and against the powers granted it by law, and is unjust, oppressive and
confiscatory; and that the adoption of both ordinances was the result of
prosecution of the petitioner by the respondents because from 20 July
1946 to 8 December 1947, or within a period of less than one and a half
years, the Municipal Council of Malabon adopted four ordinances
increasing the taxes on cinematographs and theaters and imposing a
penalty of 20 per cent surcharges for late payment.
A motion to dismiss was filed by the Assistant Provincial Fiscal of Rizal, but
upon suggestion of the Court at the hearing thereof, the respondents were
prevailed upon to file their answer.
In their answer the respondents allege that both ordinances adopted by the
Municipal Council of Malabon are notultra vires, the same not being under
any of the exceptions provided for in section 3 of Commonwealth Act No.
472; that the ordinances were adopted pursuant to the policy enunciated
by the Secretary of the Interior in a circular issued on 20 June 1946 which
in substance suggested and urged the municipal councils to increase their
revenues and not to rely on the National Government which was not in a
position to render any help and to make such increase dependent upon the
taxpayer's ability to pay; that both ordinances assailed by the petitioner
had been submitted to, and approved by, the Department of Finance, as
required by section 4 of Commonwealth Act No. 472, and took effect on 1
January 1947 and 1 January 1948, respectively; that the petitioner had
filed a protest with the Secretary of Finance against such increase of taxes,
as fixed by the municipal ordinances in question but the Department of
Finance although reducing the amount of taxes imposed in Ordinance No.
10, series of 1947, and changing the date of effectivity of both ordinances,
upheld the legality thereof; and that the petitioner brought this action for
declaratory relief with the evident purpose of evading payment of the
unpaid balance of taxes due from the "Cine Concepcion." By way of
special defense the respondents allege that the petition does not state
facts sufficient to constitute a cause of action; that the Court has no
jurisdiction over the subject matter of the petition for declaratory relief; that
the petitioner should have paid under protests the taxes imposed by the
ordinances in question on "Cine Concepcion" and after payment thereof
should bring an action under section 1579 of the Revised Administrative
Code; that this being an action for declaratory relief, the Provincial Fiscal of
Rizal should have been notified thereof but the petitioner failed to do so;
that the petition does not join all the necessary parties and, therefore, a
judgment rendered in the case will not terminate the uncertainty or the
controversy that is sought to be settled and determined.
After hearing the Court rendered judgment holding that the ordinances in
question are valid and constitutional and dismissing the petition with costs
against the petitioner. The latter has appealed.
This is not an action for declaratory relief, because the terms of the
ordinances assailed are not ambiguous or of doubtful meaning which
require a construction thereof by the Court. And granting that the validity or
legality of an ordinance may be drawn in question in an action for
declaratory relief, such relief must be asked before a violation of the
ordinance be committed.
1
When this action was brought on 12 May 1949,
payment of the municipal license taxes imposed by both ordinances, the
tax rate of the last having been reduced by the Department of Finance,
was already due, and the prayer of the petition shows that the petitioner
had not paid them. In those circumstances the petitioner cannot bring an
action for declaratory relief.
Angeles S. Santos, the petitioner, does not aver nor does he testify that he
is the owner or part-owner of "Cine-Concepcion." He alleges that he is only
the manager thereof. For that reason he is not an interested party. He has
no interest in the theater known as "Cine Concepcion" which may be
affected by the municipal ordinances in question and for that reason he is
not entitled to bring this action either for declaratory relief or for prohibition,
which apparently is the purpose of the action as may be gleaned from the
prayer of the petition. The rule that actions must be brought in the name of
the real party in interest
2
applies to actions brought under Rule 66 for
declaratory relief.
3
The fact that he is the manager of the theater does not
make him a real party in interest.
4

Nevertheless, laying aside these procedural defects, we are of the opinion
and so hold that under Commonwealth Act No. 472 the Municipal Council
of Malabon is authorized and empowered to adopt the ordinances in
question, and there being no showing, as the evidence does not show, that
the rate of the municipal taxes therein provided is excessive, unjust,
oppressive and confiscatory, their validity and legality must be upheld. The
rate of the taxes in both ordinances, to wit: P1,000 a year for "Class A
Cinematographs having orchestra, balcony and loge seats" in Ordinance
No. 61, series of 1946,
5
and P2,000 for each theater or cinematograph with
gross annual receipts amounting to P130,000 or more in Ordinance No.
10, series of 1947,
6
under which the "Cine Concepcion" falls, is not
excessive but fair and just. It is far from being oppressive and confiscatory.
Pursuant to said Commonwealth Act if the increase of the municipal taxes
is more than 50 per cent over the previous ones already in existence, the
Municipal Council adopting such increase must submit it for approval to the
Department of Finance which, although it cannot increase it, may reduce it
and may approve it as reduced, or may disapprove it. It is contended that
as only municipal councils are authorized by law to adopt ordinances, after
the reduction by the Department of Finance of the tax rate imposed in
Ordinance No. 10, series of 1947, duly adopted by the Municipal Council of
Malabon, the latter should adopt another ordinance accepting or fixing the
rate tax as reduced by the Department of Finance. The contention is
without merit, because the rate of taxes imposed in theaters or
cinematographs in Ordinance No. 10, series of 1947, was the only one
reduced by the Department of Finance and the reduction was for the
benefit of the taxpayer as it was very much lower than the rate fixed by the
Municipal Council. The authority and discretion to fix the amount of the tax
was exercised by the Municipal Council of Malabon when it fixed the same
at P9,000 a year. Certainly, the Municipal Council of Malabon that fixed the
tax at P9,000 a year also approved the tax at P2,000 a year, this being
very much less than that fixed in the ordinance. The power and discretion
exercised by the Municipal Council of Malabon when it fixed the tax at
P9,000 a year must be deemed to have been exercised also by it when the
Department of Finance reduced it to P2,000 a year, for the greater includes
the lesser. The adoption of another ordinance fixing the tax at P2,000 a
year would be an idle ceremony and waste of time. Moreover, it must be
borne in mind that municipal councils are not constitutional bodies but
creatures of the Congress. The latter may even abolish or replace them
with other government instrumentalities. Commonwealth Act No. 472
grants to the Department of Finance the authority to disapprove, implied in
the power to approve, an ordinance imposing a tax which is more than 50
per cent of the existing tax, or to reduce it, also implied in the same power.
This, of course, is to forestall abuse of power by the municipal councils. If
the Congress has granted to the Department of Finance the power to
reduce such tax, implied in the power to approve or disapprove, there
seems to be no cogent reason for requiring the municipal council
concerned to adopt another ordinance fixing the tax as reduced by the
Department of Finance. Therefore, the action of the Department of Finance
in approving Ordinance No. 10, series of 1947, at a reduced rate, is not
excess of the powers granted it by law. The evidence does not show that
the adoption of the ordinances in question by the Municipal Council of
Malabon was the result of persecution of the petitioner.
The judgment appealed from is affirmed, with costs against the appellant.



G.R. No. L-11357 May 31, 1962
FELIPE B. OLLADA, etc., petitioner-appellant,
vs.
CENTRAL BANK OF THE PHILIPPINES, respondent-appellee.
Antonio V. Sanchez as amicus curiae.
Felipe B. Ollada for and in his own behalf as petitioner-appellant.
Nat. M. Balboa for respondent-appellee.
DIZON, J .:
Felipe B. Ollada is a certified public accountant, having passed the
examination given by the Board of Accountancy, and is duly qualified to
practice his profession. On July 22, 1952, his name was placed in the rolls
of certified public accountants authorized and accredited to practice
accountancy in the office of the Central Bank of the Philippines. In
December, 1955, by reason of a requirement of the Import-Export
Department of said bank that CPAs submit to an accreditation under oath
before they could certify financial statements of their clients applying for
import dollar allocations with its office, Ollada's previous accreditation was
nullified.
Pursuant to the new requirement, the Import-Export Department of the
Central Bank issued APPLICATION FOR ACCREDITATION OF
CERTIFIED PUBLIC ACCOUNTANTS (CB-IED Form No. 5) and
ACCREDITATION CARD FOR CERTIFIED PUBLIC ACCOUNTANTS
(CB-IED, Form No. 6) for CPAs to accomplish under oath. Assailing said
accreditation requirement on the ground that it was (a) an unlawful
invasion of the jurisdiction of the Board of Accountancy, (b) in excess of
the powers of the Central Bank and (c) unconstitutional in that it unlawfully
restrained the legitimate pursuit of one's trade, Ollada, for himself and
allegedly on behalf of numerous other CPAs, filed a petition for Declaratory
Relief in the Court of First Instance of Manila to nullify said accreditation
requirement.
On April 16, 1956 the Central Bank filed a motion to dismiss the petition for
Declaratory Relief for lack of cause of action. Its main contention was that
the Central Bank has the responsibility of administering the Monetary
Banking System of the Republic and is authorized to prepare and issue,
through its Monetary Board, rules and regulations to make effective the
discharge of such responsibility; that the accreditation requirement alleged
in the petition was issued in the exercise of such power and authority; that
the purpose of such requirement is not to regulate the practice of
accountancy in the Philippines but only the manner in which certified public
accountants should transact business with the Central Bank.
On May 3, 1956, petitioner Ollada applied for a writ of preliminary
injunction to restrain the respondent Central Bank of the Philippines from
enforcing the accreditation requirement aforesaid until final adjudication of
the case. In a memorandum submitted by said respondent opposing the
issuance of the writ, it manifested that it was willing to delete paragraph 13
from its CB-IED Form No. 5 (Application for accreditation of certified public
accountants), which required CPAs to answer the query whether they
agreed, if accredited with the Import-Export Department, Central Bank of
the Philippines, to follow strictly the rules and regulations promulgated by
the Philippine Institute of Accountants and, if not, to state their reasons
therefor, and that it was also willing to modify paragraph 14 of the same
form to read as follows:
14. Do you agree, if accredited with the Import-Export Department,
to follow strictly the rules and regulations of the Central Bank of the
Philippines concerning the practice of your profession as CPA, with
reference to its importing licensing functions which may hereinafter
be promulgated and which are not inconsistent with the rules and
regulations promulgated by the Board of Accountancy of the
Philippines, and to give written notice(s) of any change(s) in your
professional status as practitioner, or the name and style under
which you practice your profession as Certified Public
Accountant(s)? . . . If not, state your reasons: . . .
On May 22, 1956 the trial court required respondent to submit within ten
days from notice, proof that it had deleted paragraph 13 and modified
paragraph 14 of its CB-IED Form No. 5, as manifested in its memorandum,
otherwise the writ of preliminary injunction prayed for by petitioner would
be granted. Having complied with said order by submitting CB-ID Form No.
5 (formerly CB-IED Form No. 5) showing that paragraph 13 of CB-IED
Form No. 5 had been deleted, and paragraph 14 thereof had been
modified, the court, on June 27, 1956, denied the petition for preliminary
injunction. On June 29, 1956, petitioner filed a motion for reconsideration
alleging that, despite the deletion of paragraph 13 from respondent's CB-
IED Form No. 5, it was still enforcing the rules and regulations of the
Philippine Institute of Accountants in its CB-IED Form No. 6
(ACCREDITATION CARD FOR CERTIFIED PUBLIC ACCOUNTANTS)
which was still a part of the questioned accreditation requirement. All this
notwithstanding, however, on July 5, 1956 petitioner, in the interests of its
clients, filed his application for accreditation with the CB under protest.1wph 1. t
On July 7, 1956, the court reconsidered its previous order and issued
another granting the petition for the writ of preliminary injunction upon the
filing of a bond in the sum of P2,000.00 on the ground that CPAs applying
for accreditation with respondent were still required to execute under oath
CB-IED Form No. 6 (Accreditation card for certified public accountants) to
be governed by the rules and regulations of the Philippine Institute of
Accountants. In a motion for the reconsideration of this last order,
respondent stated that CB-IED Form No. 6 of its Import-Export Department
had been modified by CB-ID Form No. 6 wherein the requirement that the
applicant should sign a statement under oath has been eliminated, and
that, upon accreditation, a CPA would be governed by the rules and
regulations of the Central Bank and not by those of the Philippine Institute
of Accountants. The modified form (CB-ID Form No. 6) read as follows:
I/We hereby agree to be governed by your rules and regulations
relating to the practice of my/our profession as Certified Public
Accountant(s), particularly Memorandum to Accredited CPAs No. 1
of the Central Bank of the Philippines dated June 15, 1956. Please
recognize my/our certification(s) of exhibit(s), of statement(s),
schedule(s), or other form(s) of accountancy work issued in behalf
of my/our clients under the following signature(s).
Consequently, on July 12, 1956, the court set aside its order of July 7,
1956 granting the writ of preliminary injunction.
Finally, on July 31, 1956, the lower court, resolving the motion to dismiss
filed by respondent, dismissed the complaint. The order to that effect says,
in part, the following:
The only issue in this case is whether or not the respondent
Central Bank of the Philippines has the authority under its charter
to require petitioner and all other certified public accountants to
accredit themselves before they can transact business with
respondent's Import and Export Department.
This Court is of the opinion that the respondent is not barred from
promulgating internal rules and regulations necessary to carry out
its purpose pursuant to the charter creating it provided, however,
that such rules and regulations are not contrary to law, public
morals or public policy.
The only objectionable features of respondent's aforementioned
requirement have already been eliminated by said respondent
having deleted from its CB-IED Form No. 5, known as Application
for Accreditation of Certified Public Accountants (Annex B of
petitioner's Petition), paragraph 13 and modified paragraph 14
thereof, as well as by modifying CB-IED Form No. 6 known as
Accreditation Card for Certified Public Accountants (Annex C of
Petitioner's Petition).
It appears, therefore, that after respondent had eliminated said
objectionable features, the petition for declaratory relief has
become groundless and should be dismissed.
Upon motion of petitioner, We issued a resolution dated November 5, 1956
granting a writ of preliminary injunction restraining respondent from
requiring CPAs to comply with the accreditation requirement of its Import-
Export Department, on the ground that there was nothing in the record
showing that the same was issued by its Monetary Board or by someone
else duly authorized by the latter.
The main issue involved in this appeal is whether upon the facts alleged in
the petition for Declaratory Relief and others elicited from the parties and
made of record by them prior to the issuance of the order appealed from,
this case was properly dismissed.
The Monetary Board of the Central Bank has authority to prepare and
issue such rules and regulations it may consider necessary for the effective
discharge of the responsibilities and exercise of the powers assigned to it
and to the Central Bank under the provisions of Section 1 (a), Republic Act
No. 265. The Governor of the Central Bank is also authorized to delegate
his power to represent the Bank "to other officers of the Bank upon his own
responsibility" (See. 17[d], Rep. Act 265).
To implement its authority to temporarily suspend or restrict sales of
exchange by the Central Bank and subject all transactions in gold and
foreign exchange to license by the latter (Sec. 74, Rep. Act 265), the
Monetary Board, approved Resolution No. 1528, Minutes No. 80 dated
August 30, 1955 authorizing the Import-Export Department to revise quota
allocations and to prepare revised procedures for the determination of
violations of Central Bank Import-Export regulations. Among the revised
procedures adopted by the aforesaid Department was its accreditation
system, the purpose of which was to correct certain irregularities
committed by some CPAs in their certification of the financial statements of
their clients applying for dollar allocations.
As held by the lower court, "the only objectionable feature of respondent's
aforementioned requirement had already been eliminated . . . from its CB-
IED Form No. 5" and that CB-IED form No. 6 had also been modified. For
this reason, the court held that "the petition for declaratory relief has
become groundless" and, as a result, ordered its dismissal.
Without deciding the question of whether the petition under consideration
has, in reality "become groundless", we believe that, upon the facts
appearing of record, said petition was correctly dismissed.
As stated heretofore, in connection with the motion to dismiss filed by
respondent, petitioner filled a written opposition in which he alleged that his
petition
has sufficiently alleged ultimate facts which violated his right as a
duly qualified and accredited Certified Public Accountant by the
Board of Accountancy (which is the only Government body with
absolute powers to regulate the practice of CPAs), and in addition
to such allegations, he has also alleged that by virtue of the
violation of his right and that of numerous CPAs, he has suffered
serious injury in that the questioned requirement which is
collaterally attacked by this action (in the honest belief of the
petitioner that the same) is an unlawful restraint of the fee pursuit
and practice of petitioner's profession as a CPA; and also that the
action of the respondent Central Bank of the Philippines
complained of, is also an unlawful invasion into the exclusive
jurisdiction of the Board of Accountancy as the sole body vested by
our laws to lay down rules and regulations for the practice of public
accountancy in the Philippines. . . .
In order to dismiss an action under the aforecited ground,
Sutherland, Code of Pleadings, Practice and Form, 167, has laid
down the essential test which should serve as the controlling guide
in determining whether a petition states a cause of action, to wit:
1. Does the complaint show the plaintiff suffered an injury?
2. Is it an injury the law recognizes as a wrong?
3. Is the defendant liable for the alleged wrong?
4. If the defendant is liable, to what extent is he liable and
what will be the legal remedy from such injury?
(Sutherland, Code of Pleadings, supra.)
It is clear from the allegations of the petition that the petitioner has
sufficiently stated facts to satisfy the foregoing requisites of a
pleading in order that petitioner's action should be given due
course by this Court.
Petitioner submits that the respondent's requirement complained of
(CB-IED Forms Nos. 5 and 6) is an act of constituting a violation of
the Constitution and also a violation of the petitioners right to freely
practice his profession anywhere and in any government office in
the Philippines .... It is undisputed that the only body that can
regulate the practice of accountancy in the Philippines is the Board
of Accountancy. The action thus of the respondent in requiring the
accreditation of CPAs before they can practice with the Central
Bank of the Philippines is an unlawful invasion into the exclusive
jurisdiction of the said Board of Accountancy.Why was petitioner's
right as a CPA violated by the respondent? Because the
respondent's placing of a ban to CPAs including the petitioner with
respect to certification of financial statements of their clients
applying for dollar(s) allocation in the Central Bank of the
Philippines has resulted in the unlawful restraint in the practice of
CPAs in the office of the Central Bank of the Philippines.
(Emphasis supplied.) (Rec. on Appeal, pp. 17, 18-20.)
Again, in his brief petitioner reiterates the same view in the following
language:
On April 20, 1956, petitioner-appellant filed his opposition to
respondent's motion to dismiss on the simple and fundamental
ground that, from its face, the complaint's allegations of facts make
clear showing ofpetitioner's rights having been violated by
respondent, and that the (petitioner) has suffered serious injury
therefrom that such injury is recognized by law as a wrong, and
that the respondent is liable therefrom to a great extent. (Emphasis
supplied.) (Petitioner's brief, p. 5.)
Petitioner commenced this action as, and clearly intended it to be one for
Declaratory Relief under the provisions of Rule 66 of the Rules of Court.
On the question of when a special civil action of this nature would prosper,
we have already held that the complaint for declaratory relief will not
prosper if filed after a contract, statute or right has been breached or
violated. In the present case such is precisely the situation arising from the
facts alleged in the petition for declaratory relief. As vigorously claimed by
petitioner himself, respondent had already invaded or violated his right and
caused him injury all these giving him a complete cause of action
enforceable in an appropriate ordinary civil action or proceeding. The
dismissal of the action was, therefore, proper in the light of our ruling in De
Borja vs. Villadolid, 47 O.G. (5) p. 2315, and Samson vs. Andal, G.R. No.
L-3439, July 31, 1951, where we held that an action for declaratory relief
should be filed before there has been a breach of a contract, statutes or
right, and that it is sufficient to bar such action, that there had been a
breach which would constitute actionable violation. The rule is that an
action for Declaratory Relief is proper only if adequate relief is not available
through the means of other existing forms of action or proceeding (1 C.J.S.
1027-1028).
WHEREFORE, the order of dismissal appealed from is hereby affirmed,
without prejudice to the aggrieved party seeking relief in another
appropriate action. The writ of preliminary injunction issued by Us on
November 5, 1956 is hereby set aside, and the motion for contempt filed
by petitioner on September 30, 1957 is denied. With costs against
appellant.


































G.R. No. L-58340 July 16, 1991
KAWASAKI PORT SERVICE CORPORATION, NAIKAI SHIPPING CO.
LTD., NAIKAI TUG BOAT SERVICE CO., THE PORT SERVICE
CORPORATION, LICENSED LAND SEA PILOTS ASSOCIATION,
HAYAKOMA UNYU K.K., TOKYO KISEN COMPANY, LTD., OMORI
KAISOTEN, LTD., TOHOKU UNYU CO., LTD. AND SEITETSU UNYU
CO., LTD., petitioners,
vs.
THE HON. AUGUSTO M. AMORES, Judge of Br. XXIV, Court of First
Instance of Manila, and C.F. SHARP & CO., INC., respondents.
Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioners.
Chuidian Law Office for private respondent.
BIDIN, J .:p
This is a petition for certiorari seeking to set aside the orders of the then
Court of First Instance of Manila, *Branch XXIV in Civil Case No. 132077:
(a) dated July 13, 1981 denying the special appearances of petitioners as
defendants in said case to question the court's jurisdiction over the
persons of the defendants and (b) dated September 22, 1981, denying the
motion for reconsideration of said order.
The antecedents of this case are as follows:
On May 7, 1980, the private respondent C.F. Sharp & Co., Inc. filed a
complaint for injunction and/or declaratory relief in the then Court of First
Instance of Manila against seventy-nine (79) Japanese corporations as
defendants, among which are the petitioners herein. Said complaint was
docketed as Civil Case No. 132077. The complaint alleges, among others,
that the plaintiff is a corporation organized and existing under the laws of
the Philippines; that there is another corporation organized under the law
of Japan with the corporate name C.F. Sharp Kabushiki Kaisha; that the
plaintiff and C.F. Sharp Kabushiki Kaisha are in all respects separate and
distinct from each other; that C.F. Sharp Kabushiki Kaisha appears to have
incurred obligations to several creditors amongst which are defendants,
also foreign corporations organized and existing under the laws of Japan;
that due to financial difficulties, C.F. Sharp Kabushiki Kaisha failed and/or
refused to pay its creditors; and that in view of the failure and/or refusal of
said C.F. Sharp Kabushiki Kaisha to pay its alleged obligations to
defendants, the latter have been demanding or have been attempting to
demand from C.F. Sharp & Co., Inc., the payment of the alleged
obligations to them of C.F. Sharp Kabushiki Kaisha, notwithstanding that
C.F. Sharp & Co., Inc. is a corporation separate and distinct from that of
C.F. Sharp Kabushiki Kaisha and that the former had no participation
whatsoever or liability in connection with the transactions between the
latter and the defendants.
As alleged in the complaint, the private respondent prayed for injunctive
relief against the petitioners' demand from the private respondent for the
payment of C.F. Sharp Kabushiki Kaisha's liabilities to the petitioners.
As an alternative to injunction, the private respondent prayed that a judicial
declaration be made that, as a separate and independent corporation, it is
not liable for the obligations and liabilities of C.F. Sharp Kabushiki Kaisha.
Since the defendants are non-residents, without business addresses in the
Philippines but in Japan, the private respondent prayed for leave of court to
effect extraterritorial service of summons.
On June 11, 1980, the respondent judge issued an order authorizing the
private respondent to effect extraterritorial service of summons on
defendants therein.
Subsequently, private respondent filed an urgent ex-parte motion dated
June 23, 1980 for Extraterritorial Service of Summons Upon Defendants by
registered mail with return cards pursuant to Section 17 of Rule 14 of the
Rules of Court.
Acting on said motion, the respondent judge issued an order dated June
30, 1980 granting the motion and authorizing extraterritorial service of
summons upon defendants to be effected by registered mail with return
cards.
On March 11, 1981, five of the petitioners, Kawasaki Port Service
Corporation, Naikai Shipping Co., Ltd., Naikai Tug Boat Service Co., Ltd.,
The Port Service Corporation and Licensed Land Sea Pilots Association
filed their "Special Appearance to Question Jurisdiction of This Honorable
Court Over Persons of Defendants" contending that the lower court does
not and cannot acquire jurisdiction over the persons of defendants on the
grounds that private respondent's action does not refer to its personal
status; that the action does not have for subject matter property
contemplated in Section 17 of Rule 14 of the Rules of Court, that the action
does not pray that defendants be excluded from any interest or property in
the Philippines; that no property of the defendants has been attached; that
the action is in personam; and that the action does not fall within any of the
four cases mentioned in Section 17, Rule 14 of the Rules of Court.
On March 17, 1981, another three of herein petitioners, Hayakoma Unyu
K.K., Tokyo Kisen Company, Ltd. and Omori Kaisoten, Ltd. also filed their
special appearance adopting the same arguments as that of the first five.
On April 28, 1981, the two other petitioners, Tohoku Unyu Co., Ltd. and
Seitetsu Unyu Co., Ltd., filed their "Special Appearance to Question the
Jurisdiction of the Honorable Court" over their persons adopting in toto as
theirs the "Special Appearance" dated March 11, 1981 of Kawasaki Port
Service.
On July 13, 1981, the respondent Court issued its order denying said
special appearances. The motion for reconsideration of said order filed by
the petitioners was also denied on September 22, 1981.
Hence, the present petition.
After the required pleadings were filed, the First Division of this Court, in
the resolution of April 14, 1982, gave due course to the petition and
required both parties to submit simultaneous memoranda within thirty (30)
days from notice. Both parties complied by submitting the required
memoranda.
The main issue in this case is whether or not private respondent's
complaint for injunction and/or declaratory relief is within the purview of the
provisions of Section 17, Rule 14 of the Rules of Court.
The petitioners contend that the respondent judge acted contrary to the
provisions of Section 17 of Rule 14 for the following reasons: (1) private
respondent's prayer for injunction, as a consequence of its alleged non-
liability to the petitioners for debts of C.F. Sharp Kabushiki Kaisha of
Japan, conclusively establishes that private respondent's cause of action
does not affect its status; (2) the respondent court cannot take jurisdiction
of actions against the petitioners as they are non-residents and own no
property within the state; (3) the petitioners have not as yet claimed a lien
or interest in the property within the Philippines at the time the action was
filed which is a requirement under Section 17 of Rule 14; (4) extra-
territorial service on a non-resident defendant is authorized, among others,
when the subject of the action is property within the Philippines in which
the relief demanded consists in excluding defendant from any interest
therein; and (5) inasmuch as the reliefs prayed for by the private
respondent in the complaint are in personam, service by registered mail
cannot be availed of because Section 17 of Rule 14 authorized this mode
of service only in actions in rem or quasi in rem.
For its part, the private respondent countered that (1) the action refers to
its status because the basic issue presented to the lower court for
determination is its status as a corporation which has a personality that is
separate, distinct and independent from the personality of another
corporation, i.e., C.F. Sharp Kabushiki Kaisha of Japan; (2) under Section
17 of Rule 14, the subject matter or property involved in the action does
not have to belong to the defendants. The provisions of said section
contemplate of a situation where the property belongs to the plaintiff but
the defendant has a claim over said property, whether that claim be actual
or contingent; (3) the prayer of the plaintiff that the defendants be excluded
from any interest in the properties of the plaintiff within the Philippines has
the effect of excluding the defendants from the properties of the plaintiff in
the Philippines for the purpose of answering for the debts of C.F. Sharp
Kabushiki Kaisha of Japan to the defendants in accordance with Section
17 of Rule 14; and (4) the action before the lower court is an action quasi
in rem as the remedies raised in the complaint affect the personal status of
the plaintiff as a separate, distinct and independent corporation and relates
to the properties of the plaintiff in the Philippines over which the petitioners
have or claim an interest, actual or contingent.
The petition is impressed with merit.
Section 17, Rule 14 of the Rules of Court provides:
Section 17. Extraterritorial service. When the defendant
does not reside and is not found in the Philippines and the
action affects the personal status of the plaintiff or relates
to, or the subject of which is, property within the
Philippines, in which the defendant has or claims a lien or
interest, actual or contingent, or in which the relief
demanded consists, wholly or in part, in excluding the
defendant from any interest therein, or the property of the
defendant has been attached within the Philippines, service
may, by leave of court, be effected out of the Philippines by
personal service as under section 7; or by publication in a
newspaper of general circulation in such places and for
such times as the court may order, in which case a copy of
the summons and order of the court shall be sent by
registered mail to the last known address of the defendant,
or in any other manner the court may deem sufficient. Any
order granting such leave shall specify a reasonable time,
which shall not be less than sixty (60) days after notice,
within which the defendant must answer.
This Court had ruled that extraterritorial service of summons is proper only
in four (4) instances, namely: "(1) when the action affects the personal
status of the plaintiffs: (2) when the action relates to, or the subject of
which is, property within the Philippines, in which the defendant has or
claims a lien or interest, actual or contingent; (3) when the relief demanded
in such action consists, wholly or in part, in excluding the defendant from
any interest in property located in the Philippines; and (4) when the
defendant non-resident's property has been attached within the
Philippines." (De Midgely v. Ferandos, 64 SCRA 23 [1975]; The Dial
Corporation v. Soriano, 161 SCRA 737 [1988]).
In the case at bar, private respondent has two (2) alternative principal
causes of action, to wit: either for declaratory relief or for injunction.
Allegedly, in both cases, the status of the plaintiff is not only affected but is
the main issue at hand.
As defined, "Status means a legal personal relationship, not temporary in
nature nor terminable at the mere will of the parties, with which third
persons and the state are concerned" (Holzer v. Deutsche Reichsbahn
Gesellschaft, 290 NYS 181; cited in 40 Words and Phrases, 129,
Permanent Edition).
It is easy to see in the instant case, that what is sought is a declaration not
only that private respondent is a corporation for there is no dispute on that
matter but also that it is separate and distinct from C.F. Sharp Kabushiki
Kaisha and therefore, not liable for the latter's indebtedness. It is evident
that monetary obligations does not, in any way, refer to status, lights and
obligations. Obligations are more or less temporary, but status is relatively
permanent. But more importantly, as cited in the case of (Dy Poco v.
Commissioner of Immigration, et al., 16 SCRA 618 [1966]), the prevailing
rule is that "where a declaratory judgment as to a disputed fact would be
determinative of issues rather than a construction of definite stated rights,
status and other relations, commonly expressed in written instrument, the
case is not one for declaratory judgment." Thus, considering the nature of
a proceeding for declaratory judgment, wherein relief may be sought only
to declare rights and not to determine or try issues, there is more valid
reason to adhere to the principle that a declaratory relief proceeding is
unavailable where judgment would have to be made, only after a judicial
investigation of disputed issues (ibid). In fact, private respondent itself
perceives that petitioners may even seek to pierce the veil of corporate
identity (Rollo, p. 63).
Private respondent alleges that most if not all, of the petitioners have
merely demanded or have attempted to demand from the former the
payment of the obligations of C.F. Sharp K.K., (Rollo, p. 63). Otherwise
stated, there is no action relating to or the subject of which are the
properties of the defendants in the Philippines for it is beyond dispute that
they have none in this jurisdiction nor can it be said that they have claimed
any lien or interest, actual or contingent over any property herein, for as
above stated, they merely demanded or attempted to demand from private
respondent payment of the monetary obligations of C.F. Sharp K.K., No
action in court has as yet ensued. Verily, the fact that C.F. Sharp
Philippines is an entity separate and distinct from C.F. Sharp K.K., is a
matter of defense that can be raised by the former at the proper time.
Finally, the alternative relief sought is injunction, that is to enjoin petitioners
from demanding from private respondent the payment of the obligations of
C.F. Sharp K.K., It was not prayed that petitioners be excluded from any
property located in the Philippines, nor was it alleged, much less shown,
that the properties of the defendants, if any, have been attached.
Hence, as ruled by this Court, where the complaint does not involve the
personal status of plaintiff, nor any property in the Philippines in which
defendants have or claim an interest, or which the plaintiff has attached,
but purely an action for injunction, it is a personal action as well as an
action in personam, not an action in rem orquasi in rem. As a personal
action, personal or substituted service of summons on the defendants, not
extraterritorial service, is necessary to confer jurisdiction on the court. In an
action for injunction, extra-territorial service of summons and complaint
upon the non-resident defendants cannot subject them to the processes of
the regional trial courts which are powerless to reach them outside the
region over which they exercise their authority. Extra-territorial service of
summons will not confer on the court jurisdiction or Power to compel them
to obey its orders (Dial Corporation v. Soriano, 161 SCRA 738
[1988] citing Section 3-a Interim Rules of Court, Section 21, subpar. 1, BP
Blg. 129).
Considering that extra-territorial service of summons on the petitioners was
improper, the same was null and void.
WHEREFORE, the petition is Granted and the questioned orders dated
July 13, 1981 and September 22, 1981 of the respondent Judge, are
Reversed and Set Aside.
SO ORDERED.