[G.R. No.

170251, June 01 : 2011]

CELIA S. VDA. DE HERRERA, PETITIONER, VS. EMELITA BERNARDO, EVELYN BERNARDO AS GUARDIAN OF ERLYN, CRISLYN AND
CRISANTO BERNARDO,* RESPONDENTS.
DECISION
PERALTA, J.:
[1]

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the Decision and Resolution[2] of the
Court of Appeals (CA) in CA-G.R. SP No. 73674.
The antecedents are as follows:
Respondents heirs of Crisanto S. Bernardo, represented by Emelita Bernardo, filed a complaint before the Commission on the Settlement of Land
Problems (COSLAP) against Alfredo Herrera (Alfredo) for interference, disturbance, unlawful claim, harassment and trespassing over a portion of a
parcel of land situated at Barangay Dalig, Cardona, Rizal, with an area of 7,993 square meters. The complaint was docketed as COSLAP Case No. 99221.
Respondents claimed that said parcel of land was originally owned by their predecessor-in-interest, Crisanto Bernardo, and was later on acquired by
Crisanto S. Bernardo. The parcel of land was later on covered by Tax Declaration No. CD-006-0828 under the name of the respondents.
Petitioner, on the other hand, alleged that the portion of the subject property consisting of about 700 square meters was bought by Diosdado Herrera,
Alfredo's father, from a certain Domingo Villaran. Upon the death of Diosdado Herrera, Alfredo inherited the 700-square-meter lot.
The COSLAP, in a Resolution[3] dated December 6, 1999, ruled that respondents have a rightful claim over the subject property. Consequently, a
motion for reconsideration and/or reopening of the proceedings was filed by Alfredo. The COSLAP, in an Order[4] dated August 21, 2002, denied the
motion and reiterated its Order dated December 6, 1999. Aggrieved, petitioner Celia S. Vda. de Herrera, as the surviving spouse of Alfredo, filed a
petition for certiorari with the CA.[5] The CA, Twelfth Division, in its Decision dated April 28, 2005, dismissed the petition and affirmed the resolution of
the COSLAP. The CA ruled that the COSLAP has exclusive jurisdiction over the present case and, even assuming that the COSLAP has no jurisdiction
over the land dispute of the parties herein, petitioner is already estopped from raising the issue of jurisdiction because Alfredo failed to raise the issue of
lack of jurisdiction before the COSLAP and he actively participated in the proceedings before the said body. Petitioner filed a motion for reconsideration,
which was denied by the CA in a Resolution dated October 17, 2005.
Hence, petitioner elevated the case to this Court via Petition for Review on Certiorari under Rule 45 of the Rules of Court, with the following issues:
I
WHETHER OR NOT COSLAP HAD JURISDICTION TO DECIDE THE QUESTION OF OWNERSHIP.
II
WHETHER OR NOT THE ISSUANCE OF A TORRENS TITLE IN THE NAME OF THE PETITIONER'S HUSBAND IN 2002 RENDERED THE INSTANT
CONTROVERSY ON THE ISSUE OF OWNERSHIP OVER THE SUBJECT PROPERTY MOOT AND ACADEMIC. [6]
Petitioner averred that the COSLAP has no adjudicatory powers to settle and decide the question of ownership over the subject land. Further, the
present case cannot be classified as explosive in nature as the parties never resorted to violence in resolving the controversy. Petitioner submits that it is
the Regional Trial Court which has jurisdiction over controversies relative to ownership of the subject property.
Respondents, on the other hand, alleged that the COSLAP has jurisdiction over the present case. Further, respondents argued that petitioner is
estopped from questioning the jurisdiction of the COSLAP by reason of laches due to Alfredo's active participation in the actual proceedings before the
COSLAP. Respondents said that Alfredo's filing of the Motion for Reconsideration and/or Reopening of the proceedings before the COSLAP is indicative
of his conformity with the questioned resolution of the COSLAP.
The main issue for our resolution is whether the COSLAP has jurisdiction to decide the question of ownership between the parties.
The petition is meritorious.
The COSLAP was created by virtue of Executive Order (E.O.) No. 561, issued on September 21, 1979 by then President Ferdinand E. Marcos. It is an
administrative body established as a means of providing a mechanism for the expeditious settlement of land problems among small settlers, landowners
and members of the cultural minorities to avoid social unrest.
Section 3 of E.O. No. 561 specifically enumerates the instances when the COSLAP can exercise its adjudicatory functions:
Section 3. Powers and Functions. - The Commission shall have the following powers and functions:
xxxx
2. Refer and follow up for immediate action by the agency having appropriate jurisdiction any land problem or dispute referred to the Commission:
Provided, That the Commission may, in the following cases, assume jurisdiction and resolve land problems or disputes which are critical and
explosive in nature considering, for instance, the large number of the parties involved, the presence or emergence of social tension or unrest,
or other similar critical situations requiring immediate action:
(a) Between occupants/squatters and pasture lease agreement holders or timber concessionaires;
(b) Between occupants/squatters and government reservation grantees;
(c) Between occupants/squatters and public land claimants or applicants;
(d) Petitions for classification, release and/or subdivision of lands of the public domain; and
(e) Other similar land problems of grave urgency and magnitude.[7]
Administrative agencies, like the COSLAP, are tribunals of limited jurisdiction that can only wield powers which are specifically granted to it by its
enabling statute.[8] Under Section 3 of E.O. No. 561, the COSLAP has two options in acting on a land dispute or problem lodged before it, to wit: (a)
refer the matter to the agency having appropriate jurisdiction for settlement/resolution; or (b) assume jurisdiction if the matter is one of those enumerated
in paragraph 2 (a) to (e) of the law, if such case is critical and explosive in nature, taking into account the large number of parties involved, the presence
or emergence of social unrest, or other similar critical situations requiring immediate action. In resolving whether to assume jurisdiction over a case or to
refer the same to the particular agency concerned, the COSLAP has to consider the nature or classification of the land involved, the parties to the case,
the nature of the questions raised, and the need for immediate and urgent action thereon to prevent injuries to persons and damage or destruction to
property. The law does not vest jurisdiction on the COSLAP over any land dispute or problem.[9]
In the instant case, the COSLAP has no jurisdiction over the subject matter of respondents' complaint. The present case does not fall under any of the
cases enumerated under Section 3, paragraph 2 (a) to (e) of E.O. No. 561. The dispute between the parties is not critical and explosive in nature, nor
does it involve a large number of parties, nor is there a presence or emergence of social tension or unrest. It can also hardly be characterized as

involving a critical situation that requires immediate action.

It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or government agency, over the nature and subject matter of a petition or
complaint is determined by the material allegations therein and the character of the relief prayed for, irrespective of whether the petitioner or complainant
is entitled to any or all such reliefs.[10]
Respondents' cause of action before the COSLAP pertains to their claim of ownership over the subject property, which is an action involving title to or
possession of real property, or any interest therein,[11]the jurisdiction of which is vested with the Regional Trial Courts or the Municipal Trial Courts
depending on the assessed value of the subject property. [12]
The case of Banaga v. Commission on the Settlement of Land Problems,[13] applied by the CA and invoked by the respondents, is inapplicable to the
present case. Banaga involved parties with conflicting free patent applications over a parcel of public land and pending with the Bureau of Lands.
Because of the Bureau of Land's inaction within a considerable period of time on the claims and protests of the parties and to conduct an investigation,
the COSLAP assumed jurisdiction and resolved the conflicting claims of the parties. The Court held that since the dispute involved a parcel of public land
on a free patent issue, the COSLAP had jurisdiction over that case. In the present case, there is no showing that the parties have conflicting free patent
applications over the subject parcel of land that would justify the exercise of the COSLAP's jurisdiction.
Since the COSLAP has no jurisdiction over the action, all the proceedings therein, including the decision rendered, are null and void.[14] A judgment
issued by a quasi-judicial body without jurisdiction is void. It cannot be the source of any right or create any obligation. [15] All acts performed pursuant to it
and all claims emanating from it have no legal effect.[16] Having no legal effect, the situation is the same as it would be as if there was no judgment at all.
It leaves the parties in the position they were before the proceedings. [17]
Respondents' allegation that petitioner is estopped from questioning the jurisdiction of the COSLAP by reason of laches does not hold water. Petitioner
is not estopped from raising the jurisdictional issue, because it may be raised at any stage of the proceedings, even on appeal, and is not lost by waiver
or by estoppel.[18] The fact that a person attempts to invoke unauthorized jurisdiction of a court does not estop him from thereafter challenging its
jurisdiction over the subject matter, since such jurisdiction must arise by law and not by mere consent of the parties.[19]
In Regalado v. Go,[20] the Court held that laches should be clearly present for the Sibonghanoy[21]doctrine to apply, thus:
Laches is defined as the "failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or
should have been done earlier, it is negligence or omission to assert a right within a reasonable length of time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it."
The ruling in People v. Regalario that was based on the landmark doctrine enunciated inTijam v. Sibonghanoy on the matter of jurisdiction by estoppel is
the exception rather than the rule. Estoppel by laches may be invoked to bar the issue of lack of jurisdiction only in cases in which the factual milieu is
analogous to that in the cited case. In such controversies, laches should have been clearly present; that is, lack of jurisdiction must have been raised so
belatedly as to warrant the presumption that the party entitled to assert it had abandoned or declined to assert it.
In Sibonghanoy, the defense of lack of jurisdiction was raised for the first time in a motion to dismiss filed by the Surety almost 15 years after the
questioned ruling had been rendered. At several stages of the proceedings, in the court a quo as well as in the Court of Appeals, the Surety invoked the
jurisdiction of the said courts to obtain affirmative relief and submitted its case for final adjudication on the merits. It was only when the adverse decision
was rendered by the Court of Appeals that it finally woke up to raise the question of jurisdiction. [22]
The factual settings attendant in Sibonghanoy are not present in the case at bar that would justify the application of estoppel by laches against the
petitioner. Here, petitioner assailed the jurisdiction of the COSLAP when she appealed the case to the CA and at that time, no considerable period had
yet elapsed for laches to attach. Therefore, petitioner is not estopped from assailing the jurisdiction of the COSLAP. Additionally, no laches will even
attach because the judgment is null and void for want of jurisdiction. [23]
Anent the issuance of OCT No. M-10991 in favor of petitioner's husband Alfredo Herrerra in 2002, respondents alleged that there was fraud,
misrepresentation and bad faith in the issuance thereof. Thus, respondents are now questioning the legality of OCT No. M-10991, an issue which this
Court cannot pass upon in this present petition. It is a rule that the validity of a Torrens title cannot be assailed collaterally.[24] Section 48 of Presidential
Decree No. 1529 provides that:
Certificate not Subject to Collateral Attack. A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or canceled,
except in a direct proceeding in accordance with law.
The issue of the validity of the Title was brought only during the proceedings before this Court as said title was issued in the name of petitioner's
husband only during the pendency of the appeal before the CA. The issue on the validity of title, i.e., whether or not it was fraudulently issued, can only
be raised in an action expressly instituted for that purpose[25] and the present appeal before us, is simply not the direct proceeding contemplated by law.
WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals, dated April 28, 2005 and October 17, 2005,
respectively, in CA-G.R. SP No. 73674 are REVERSED and SET ASIDE. The Decision and Order of the Commission on the Settlement of Land
Problems, dated December 6, 1999 and August 21, 2002, respectively, in COSLAP Case No. 99-221, are declared NULL and VOID for having been
issued without jurisdiction.
SO ORDERED.
Carpio, (Chairperson), Nachura, Peralta, Abad, and Mendoza, JJ.

[G.R. No. 179558, June 01 : 2011]

ASIATRUST DEVELOPMENT BANK, PETITIONER, VS. FIRST AIKKA DEVELOPMENT, INC. AND UNIVAC
DEVELOPMENT, INC., RESPONDENTS.
DECISION
NACHURA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of Appeals (CA)
Decision[1] dated June 28, 2007 and Resolution[2]dated August 29, 2007 in CA-G.R. SP No. 97408.
The Facts
Respondents First Aikka Development, Inc. (FADI) and Univac Development, Inc. (UDI) are domestic corporations engaged
in the construction and/or development of roads, bridges, infrastructure projects, subdivisions, housing, land, memorial
parks, and other industrial and commercial projects for the government or any private entity or individual.[3]In the course of
their business, FADI and UDI availed of separate loan accommodations or credit lines with petitioner Asiatrust Development
Bank.[4]The aggregate amount of the loan obtained by respondents was P 114,000,000.00. Respondents religiously and

faithfully complied with their loan obligations, but during the Asian Financial Crisis, which directly and adversely affected
mainly the construction and real estate industry, respondents could not pay their obligations in cash.[5] This prompted
respondents to negotiate with petitioner for different modes of payment that the former might avail of. Petitioner thus agreed
that respondents assign the receivables of their various contracts to sell involving the lots in the residential subdivision
projects they were developing, instead of paying in cash.[6]
Notwithstanding the above agreement, petitioner insisted on collecting the loan per the loan documents. Petitioner claimed
that respondents were already in default and demanded the payment of P 145,830,220.95. Respondents denied that they
were in default because of the assignment of their receivables to petitioner. Respondents contested petitioners claim and
demanded for an accounting to determine the correct and true amount of their obligations.[7]
On May 10, 2006, respondents filed a consolidated Petition for Corporate Rehabilitation with Prayer for Suspension of
Payments[8]with the Regional Trial Court (RTC) of Baguio City, Branch 59. The case was docketed as Civil Case No. 6267-R.
Respondents alleged that they were unable to pay their loan based on the claim of petitioner. Though they have sufficient
assets to pay their loan, respondents averred that they were not liquid. They also stated that they were threatened by
petitioner with various cases aimed at disrupting the operations of respondents which might eventually lead to the cessation
of their business.[9] Respondents prayed that an order be issued staying the enforcement of any and all claims of their
creditors, investors, and suppliers, whether for money or otherwise, against petitioner, their guarantors, and sureties.[10] By
way of rehabilitation, respondents also sought the determination of the true and correct amount of their loan obligation with
petitioner.[11]
On May 16, 2006, the RTC issued an Order,[12] the pertinent portions of which read:
After an examination of the contents of the petition setting forth with sufficient particularity and material facts pursuant to
Section 2 of Rule 4 of the Interim Rules of Procedures (sic) of Corporate Rehabilitation and the supporting documents
attached thereto and finding the same to be sufficient in form and substance, the Court hereby:
ORDERS STAYING enforcement of all claims whether for money or otherwise and whether such enforcement is by court
action or otherwise, against the debtors (herein petitioners)[, their] guarantors and [sureties] not solidarily liable with the
debtors. In particular[,] ASIATRUST BANK BE STAYED from proceeding with the foreclosure and auction sale of the
mortgaged properties;
2. APPOINTS PATRICK V. CAOILE as interim rehabilitation receiver with a bond of two million ( P2,000,000.00) pesos;
xxxx
7. FIXES the initial hearing on the petition on June 29, 2006 at 11:00 oclock (sic) in the morning.[13]
On June 2, 2006, Robert Cuchado, an officer of petitioner, went to Baguio City to secure a copy of the petition for
rehabilitation but failed to do so because, at that time, the personnel of the rehabilitation court were attending the Judicial
Service Training. Petitioner then tried to secure a copy of the petition through the sheriff of the RTC of La Trinidad, Benguet.
The rehabilitation court, however, required petitioner to file a motion to that effect, together with a written document
authorizing the sheriff to secure a copy thereof. On June 9, 2006, the rehabilitation court issued an Order granting the
motion filed by petitioner and gave it a certified true copy of the petition.[14]
On the day of the initial hearing, petitioner, through its counsel Atty. Mario C. Lorenzo (Atty. Lorenzo), went to court with a
Motion for Leave of Court to Admit Opposition to Rehabilitation Petition[15] with the attached Opposition to Petition for
Rehabilitation.[16] In an Order[17] dated July 17, 2006, the RTC denied the motion and explained:
Under par. 9 of the Stay Order[,] all creditors, etc., were given ten (10) days before the initial hearing to file their comment
or opposition to the petition and putting them on notice that failure to do so will bar them from participating in the
proceedings.
It is only on June 29, 2006, the date of the initial hearing that Asiatrust filed its Motion with Leave to Admit Opposition. The
motion partakes of the nature of a motion for extension of time to file pleading which is a prohibited pleading under Rule 3(e)
of the Interim Rules of Procedure on Corporate Rehabilitation.[18]
On July 31, 2006, when the case was called for hearing, Enrico J. Ong (Ong) appeared as representative of petitioner
because the latters counsel could not go to court due to the cancellation of his flight as a result of bad weather. The
rehabilitation court recognized the appearance of Ong only to inform the court that the counsel for petitioner could not attend
the hearing. There being no other oppositors or creditors in court despite due notices, the rehabilitation court terminated the
initial hearing and directed the rehabilitation receiver to evaluate respondents rehabilitation plan and then report the
results thereof to the court.[19]
On October 13, 2006, the rehabilitation receiver called for a conference and presented the draft of the rehabilitation report to
petitioner, represented by Atty. Lorenzo and Ong, and to respondents. Petitioner filed a manifestation and motion in court
calling its attention to the alleged refusal of the receiver to hear its side. Petitioner thus asked for judicial assistance to
enable it to actively participate in the rehabilitation proceedings and protect its interest. The receiver finalized and later on
filed his evaluation report in court. He recommended the approval of the rehabilitation plan.[20]
On December 5, 2006, the RTC issued an Order,[21] the pertinent portions of which read:
On the same ground under Rule 3 of the Interim Rules, the Motion of Oppositor Asiatrust to participate in the Rehabilitation
Proceedings is DENIED. This pleading partakes of a [P]etition for Relief which is also a prohibited pleading under par. d of
Rule 3 of the same rule. Moreover, the motion has also the purpose to reconsider the courts ruling in denying the
admission of their opposition to the [P]etition for Rehabilitation.

It must be stressed that under par. 9 of the Stay Order, All creditors, etc., were given ten (10) days before the initial
hearing to file their comment or opposition to the petition and putting them on notice that failure to do so will bar
them from participating in the proceedings.
As to the Rehabilitation Report and the Integrated Revised Rehabilitation Plan and Schedule of the petitioners, the court,
after a careful and thorough examination and review of the report, it is its considered judgment that the rehabilitation of the
debtor is feasible and hereby APPROVES the Rehabilitation Report and the REVISED REHABILITATION PLAN.
xxxx
WHEREFORE, premises all duly considered, the Motion of Asiatrust to participate in the Rehabilitation Proceedings is hereby
DENIED, the Rehabilitation Report and the Integrated Revised Rehabilitation Plan of Receiver Patrick Caoile is APPROVED and
the Notice of the Appearance of the Cabato Law Office as collaborating counsel for Oppositor Asiatrust is NOTED.
The court appointed Receiver shall submit his report every three (3) months and a yearly report on the status of the progress
of the rehabilitation and the implementation and monitoring of the same.
SO ORDERED.[22]
Aggrieved, petitioner elevated the case to the CA via a Petition for Review[23] under Rule 43 of the Rules of Court.
On June 28, 2007, the appellate court affirmed the above RTC Orders. The appellate court emphasized that petitioners
failure to participate in the rehabilitation proceedings was due to its own fault. First, petitioner failed to file on time its
opposition to the petition for rehabilitation and still failed to present good reason for it to be belatedly admitted. Second, on
the date of the second hearing, its counsel failed to go to court allegedly due to the cancellation of his flight, which, to the
mind of the court, was inexcusable. Lastly, instead of filing a comment to the rehabilitation proceedings, petitioner filed a
motion to participate in the rehabilitation proceedings, which is a prohibited pleading. The CA thus concluded that petitioner
was given every opportunity to be heard in the rehabilitation proceedings, but it failed to avail of these remedies. On the
propriety of the joint petition for rehabilitation, the CA opined that the Interim Rules of Procedure on Corporate Rehabilitation
(the Rules) contains no prohibition. Finally, the CA stressed that rehabilitation proceedings are non-adversarial and summary
in nature which, therefore, necessitate the proper observance of the period and procedures provided for by law and the
Rules.[24]
The Issues
Undaunted, petitioner comes before this Court, raising the following errors:
A.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERRORS OF LAW WHEN IT FAILED TO RULE
THAT PETITIONER WAS UNJUSTLY DEPRIVED OF ITS PROPERTY WITHOUT DUE PROCESS OF LAW WHEN IT WAS NOT
ALLOWED TO PROVE THE TRUE AND CORRECT AMOUNT OF THE LOAN OBLIGATIONS OWING TO IT BY THE RESPONDENTS
BASED ON A MERE TECHNICALITY, IN BLATANT DISREGARD OF THE APPLICABLE LAWS AND DECISIONS OF THIS
HONORABLE COURT.
B.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERRORS OF LAW WHEN IT AFFIRMED THE
APPROVAL OF THE REHABILITATION PLAN DESPITE THE REHABILITATION COURTS FAILURE TO CONDUCT A
CLARIFICATORY HEARING TO RESOLVE THE UNSETTLED ISSUE ON THE AMOUNT OF INDEBTEDNESS OF PRIVATE
RESPONDENTS AND THE REHABILITATION RECEIVERS FAILURE TO MAKE A CREDIBLE AND INDEPENDENT
INVESTIGATION ON THE AMOUNT OF INDEBTEDNESS OF RESPONDENT CORPORATIONS, THEREBY DEVIATING FROM THE
USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS.
C.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERRORS OF LAW WHEN IT INEXPLICABLY
AFFIRMED THE REHABILITATION COURTS APPROVAL OF THE CONSOLIDATEDPETITION FOR REHABILITATION, DESPITE
THE SUBSTANTIAL EVIDENCE SHOWING THAT THEPETITION WAS FILED IN THE WRONG VENUE INSOFAR AS RESPONDENT
UNIVAC DEVELOPMENT IS CONCERNED AND WAS FATALLY DEFECTIVE ON ITS FACE.
D.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW WHEN IT REFUSED TO
RULE ON THE SUBSTANTIAL AND FORMAL DEFECTS OF THE REHABILITATION PLAN ON THE PRETEXT THAT THE
REHABILITATION COURTS APPROVAL OF THE RESPONDENTS REHABILITATION IS BINDING ON IT, DESPITE THE
ABSENCE OF SUBSTANTIAL EVIDENCE THAT WOULD SUPPORT THE DECISION OF THE REHABILITATION COURT.
E.
WHETHER OR NOT THE HONORABLE COURTS EXERCISE OF ITS DISCRETIONARY REVIEW POWERS IS WARRANTED
UNDER THE CIRCUMSTANCES. [25]
Petitioners Arguments

Petitioner avers that it was denied due process when the rehabilitation court refused to admit its opposition to the petition for
rehabilitation and to comment on the rehabilitation plan.[26] It explains that the late submission of the opposition was brought
about by the baseless and unfounded requirements imposed by the court.[27] Considering that there are valid and substantial
grounds for the dismissal of the petition for rehabilitation, petitioner insists that its comment and opposition should have
been admitted by the rehabilitation court. Petitioner points out that while the court denied its motion for leave to admit its
opposition, it (the court) allowed the Securities and Exchange Commission to submit its comment long after the prescribed
period.[28]
Petitioner adds that the rehabilitation courts unwarranted refusal to recognize the appearance of its duly authorized
representative constitutes a denial of its right to due process.[29] Petitioner also insists that mere delay in the submission of
the comment on the petition for rehabilitation does not warrant the denial of petitioners right to participate in the
rehabilitation proceedings. It likewise assails the rehabilitation courts jurisdiction over UDI, whose principal place of
business is in Pasig City, which is beyond the jurisdiction of the RTC of Baguio City. It, thus, challenges the consolidated
petition for rehabilitation.[30] Moreover, petitioner avers that respondents failed to show that they had adequate capital to
sustain their operations during the interim period of corporate rehabilitation.[31] Lastly, petitioner denies that it is estopped
from assailing the rehabilitation plan as it already received payment from respondents based on the rehabilitation plan. It
clarifies that it accepted the check payments subject to the outcome of this case.[32]
Respondents Arguments
Respondents, on the other hand, aver that the petition is legally infirm as there are no special important reasons for the
Court to exercise its sound judicial discretion to review the assailed CA Decision.[33]They also argue that petitioners
failure to participate in the rehabilitation proceedings could be attributed to its counsels own slackness and disregard for
the rules.[34] On the issue of the rehabilitation courts jurisdiction, respondents counter that petitioner could no longer
assail it as petitioner actively participated and continues to participate in the rehabilitation proceedings, including the receipt
of payments in accordance with the approved rehabilitation plan.[35] They explain that in the Orders dated May 16, 2006, the
rehabilitation court held that the petition is sufficient in form and substance; July 17, 2006, the rehabilitation court denied
petitioners motion for leave to admit its comment on the petition for rehabilitation; and July 31, 2006, the court declared
that there is merit in the petition which was given due course. Petitioners failure to assail the above orders rendered
them final and immutable. Respondents thus opine that petitioner could no longer assail them in this petition for review.[36]
Respondents likewise insist that petitioner could no longer participate in the rehabilitation proceedings because of its failure
to file its comment on the petition. In other words, respondents said, the filing of the comment on the petition is a condition
precedent to the filing of the comment on the rehabilitation plan.[37] On the amount of the loan obligation, respondents claim
that there was a valid basis and there was a determination of the true and correct amount thereof.[38]
The Courts Ruling
Though the rehabilitation proceedings had gone as far as the approval and the subsequent implementation of the
rehabilitation plan, we must confront the issue of the rehabilitation courts jurisdiction to hear and decide the case insofar
as respondent UDI is concerned. A perusal of petitioners pleadings clearly shows that it had repeatedly raised the
jurisdictional question. The courts below, however, ignored this issue as they did not recognize petitioners right to
participate in the rehabilitation proceedings.
While it is true that petitioner had been asking the rehabilitation and appellate courts that it be allowed to participate,
contrary to respondents contention, the same did not amount to estoppel that would bar it from questioning the
rehabilitation courts jurisdiction. It is well-settled that the courts jurisdiction may be assailed at any stage of the
proceedings, even for the first time on appeal. The reason is that jurisdiction is conferred by law, and lack of it affects the
very authority of the court to take cognizance of and to render judgment on the action.[39] In its Opposition to the petition for
rehabilitation, petitioner already questioned the courts jurisdiction over UDI. On appeal to the CA, it again raised the
same issue, but it failed to obtain a favorable decision. We cannot, therefore, say that petitioner slept on its rights. It is not
estopped from raising the jurisdictional issue even at this stage. In any event, even if petitioner had not raised the issue of
jurisdiction, the reviewing court would still not be precluded from ruling on the matter of jurisdiction.
Neither can estoppel be imputed to petitioner for its receipt of payments made by respondents in accordance with the
rehabilitation plan. It has been established that in its letters to respondents, petitioner explained that it received payments
subject to the results of its appeal. Besides, it is a basic rule that estoppel does not confer jurisdiction on a tribunal that has
none over the cause of action or subject matter of the case.[40]
Records show that the Petition for Corporate Rehabilitation with Prayer for Suspension of Payments[41]was filed by two
corporations, namely, FADI and UDI. Respondent FADI is a real estate corporation duly organized and existing under and by
virtue of Philippine laws, with principal place of business in Baguio City.[42] Respondent UDI, on the other hand, is a real
estate corporation with principal place of business in Pasig City.[43] Respondents explain in their petition that they filed the
consolidated petition because they availed of separate but intertwined loan obligations or credit lines, and that they have
interlocking directors, owners, and officers. As such, a full and complete settlement of the loan obligations will involve the
two corporations and, consequently, the rehabilitation of one will entail the rehabilitation of the other.[44]
We find that the consolidation of the petitions involving these two separate entities is not proper.
Although FADI and UDI have interlocking directors, owners, and officers and intertwined loans, the two corporations are
separate, each with a personality distinct from the other. To be sure, in determining the feasibility of rehabilitation, the court
evaluates the assets and liabilities of each of these corporations separately and not jointly with other corporations.
Moreover, Section 2, Rule 3 of the Rules, the rule applicable at the time of the filing of the petition, provides:
Sec. 2. Venue. Petitions for rehabilitation pursuant to these Rules shall be filed in the Regional Trial Court having
jurisdiction over the territory where the debtors principal office is located.

Considering that UDIs principal office is located in Pasig City, the petition should have been filed with the RTC in Pasig
City and not in Baguio City. The latter court cannot, therefore, take cognizance of the rehabilitation petition insofar as UDI is
concerned for lack of jurisdiction.
This error, however, will not result in the dismissal of the entire petition since the RTC of Baguio City had jurisdiction over the
petition of FADI in accordance with the above-quoted provision of the Rules.
On the issue of whether the rehabilitation court, as affirmed by the CA, correctly denied petitioners prayer to participate
in the rehabilitation proceedings because of the belated filing of its Comment/Opposition to respondents petition for
rehabilitation, we answer in the negative.
The Court promulgated the Rules in order to provide a remedy for summary and non-adversarial rehabilitation proceedings of
distressed but viable corporations.[45] These Rules are to be construed liberally to obtain for the parties a just, expeditious,
and inexpensive disposition of the case.[46] To be sure, strict compliance with the rules of procedure is essential to the
administration of justice. Nonetheless, technical rules of procedure are mere tools designed to facilitate the attainment of
justice. Their strict and rigid application should be relaxed when they hinder rather than promote substantial
justice.[47] Otherwise stated, strict application of technical rules of procedure should be shunned when they hinder rather
than promote substantial justice.[48]
In this case, instead of filing its opposition to the petition for rehabilitation at least ten days before the date of the initial
hearing as required by the Rules, petitioner filed a Motion for Leave of Court to Admit Opposition to Rehabilitation
Petition[49] with the attached Opposition to Petition for Rehabilitation[50] on the date of the initial hearing. Because the
pleading was not filed on time, the RTC denied the motion. While the court has the discretion whether or not to admit the
opposition belatedly filed by petitioner, it is our considered opinion that the RTC gravely abused its discretion when it refused
to grant the motion, even as the factual circumstances of the case require that the Rules be liberally construed in the interest
of justice.
Admittedly, petitioner is respondents major creditor. The parties even explained that the new payment scheme adopted
in the approved rehabilitation plan maintained the same scheme as that stipulated in the contracts between respondents and
their creditors except that of petitioner. In other words, respondents could pay the other creditors in the same manner as
that stipulated in their contracts but could not abide by the terms of their contracts with petitioner.
Moreover, petitioner and respondents differ in their assessment and computation of the latters obligations to the former.
Petitioner claims that respondents owe it P145,830,220.95, while the latter only admit a total obligation of P24,202,015. This
disparity in the parties claims makes it more important for the rehabilitation court to have given petitioner the
opportunity to be heard. Besides, in their petition before the RTC, respondents sought the determination of the true and
correct amount of their loan with petitioner.[51] We consider this as a compelling reason for the liberal interpretation of the
Rules, and the rehabilitation court should have admitted petitioners comment on the petition for rehabilitation and
allowed petitioner to participate in the proceedings.
Time and again, we have held that cases should, as much as possible, be resolved on the merits, not on mere technicalities.
In cases where we dispense with the technicalities, we do not mean to undermine the force and effectivity of the periods set
by law. In those rare cases where we did not stringently apply the procedural rules, there always existed a clear need to
prevent the commission of a grave injustice, as in the present case.[52] Our judicial system and the courts have always tried
to maintain a healthy balance between the strict enforcement of procedural laws and the guarantee that every litigant be
given the full opportunity for the just and proper disposition of his cause.[53]
Corporate rehabilitation connotes the restoration of the debtor to a position of successful operation and solvency, if it is
shown that its continued operation is economically feasible and its creditors can recover by way of the present value of
payments projected in the rehabilitation plan, more if the corporation continues as a going concern than if it is immediately
liquidated.[54]
Rehabilitation proceedings in our jurisdiction have equitable and rehabilitative purposes. On the one hand, they attempt to
provide for the efficient and equitable distribution of an insolvent debtors remaining assets to its creditors; and on the
other, to provide debtors with a fresh start by relieving them of the weight of their outstanding debts and permitting
them to reorganize their affairs.[55] The purpose of rehabilitation proceedings is to enable the company to gain a new Lease
on life and thereby allow creditors to be paid their claims from its earnings.[56]
The determination of the true and correct amount due petitioner is important in assessing whether FADI may be successfully
rehabilitated. It is thus necessary that petitioner be given the opportunity to be heard by the rehabilitation court. The court
should admit petitioners comment on or opposition to FADIs petition for rehabilitation and allow petitioner to
participate in the rehabilitation proceedings to determine if indeed FADI could maintain its corporate existence. A remand of
the case to the rehabilitation court is, therefore, imperative. To be sure, the successful rehabilitation of a distressed
corporation will benefit its debtors, creditors, employees, and the economy in general.[57]
As much as we would like to honor the rehabilitation plan approved by the rehabilitation court, particularly because it has
already been partially implemented, we cannot sustain the decision of the court, as affirmed by the CA, if we are to ensure
that rehabilitation is indeed feasible. It is especially important in this case to hear petitioner, as the major creditor of the
distressed corporation, since it is a banking institution.
Banks are entities engaged in the lending of funds obtained through deposits from the public. They borrow the publics
excess money and lend out the same. Banks, therefore, redistribute wealth in the economy by channeling idle savings to
profitable investments.[58] Banks operate (and earn income) by extending credit facilities financed primarily by deposits from
the public. They plough back the bulk of said deposits into the economy in the form of loans. Since banks deal with the
publics money, their viability depends largely on their ability to return those deposits on demand. For this reason,
banking is undeniably imbued with public interest. Consequently, much importance is given to sound lending practices and
good corporate governance.[59]

WHEREFORE , premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated June 28,
2007 and Resolution dated August 29, 2007 in CA-G.R. SP No. 97408 are SET ASIDE. Consequently, the Order of the RTC
dated July 17, 2006 and those issued subsequent thereto are hereby NULLIFIED.
We REMAND the records of the case pertaining to the petition for rehabilitation of First Aikka Development, Inc. to the
Regional Trial Court of Baguio City, Branch 59, for further proceedings. The court is ORDERED to admit petitioner Asiatrust
Development Banks Comment/Opposition to the petition for rehabilitation and to allow petitioner to participate in said
proceedings.
The Regional Trial Court of Baguio City, Branch 59, is likewise ORDERED to DISMISS the petition for rehabilitation of Univac
Development, Inc. for lack of jurisdiction.
SO ORDERED .
Carpio, J., Chairperson, Nachura, Peralta, Abad, and Mendoza, JJ., Concur.

[G.R. No. 192649, March 09 : 2011]

HOME GUARANTY CORPORATION, PETITIONER, VS. R-II BUILDERS INC., AND NATIONAL HOUSING AUTHORITY,
RESPONDENTS.
DECISION

PEREZ, J.:
Primarily assailed in this petition for review filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure, is the Decision
dated 21 January 2010 rendered by the Former Fifteenth Division of the Court of Appeals (CA) in CA-G.R. SP No.
111153,[1] the dispositive portion of which states as follows:
WHEREFORE, the petition for certiorari and prohibition is hereby DENIED.
The assailed Orders, dated March 3, 2009 and September 29, 2009, of the Regional Trial Court of Manila, Branch 22 are
hereby AFFIRMED.
Consequently, the injunction earlier issued on December 4, 2009, restraining the proceedings in Civil Case No. 05-113407, is
hereby DISSOLVED.[2]
The Facts
On 19 March 1993, a Joint Venture Agreement (JVA) was entered into between respondents National Housing Authority
(NHA) and R-II Builders, Inc. (R-II Builders) for the implementation of the Smokey Mountain Development and Reclamation
Project (SMDRP). Amended and restated on 21 February 1994[3] and 11 August 1994,[4] the JVA was aimed at implementing
a two-phase conversion of the Smokey Mountain Dumpsite "into a habitable housing project inclusive of the reclamation of
the area across Radial Road 10 (R-10)".[5] By the terms of the JVA, R-II Builders, as developer, was entitled to own 79
hectares of reclaimed land and the 2.3 hectare commercial area at the Smokey Mountain. Aslandowner/implementing
agency, NHA, on the other hand, was entitled to own the 2,992 temporary housing units agreed to be built in the premises,
the cleared and fenced incinerator site consisting of 5 hectares, 3,520 units of permanent housing to be awarded to qualified
on site residents, the industrial area consisting of 3.2 hectares and the open spaces, roads and facilities within the Smokey
Mountain Area.[6]
On 26 September 1994, NHA and R-II Builders, alongside petitioner Housing Guaranty Corporation (HGC) as guarantor and
the Philippine National Bank (PNB) as trustee, entered into an Asset Pool Formation Trust Agreement which provided the
mechanics for the implementation of the project.[7] To back the project, an Asset Pool was created composed of the following
assets: (a) the 21.2 hectare Smokey Mountain Site in Tondo, Manila; (b) the 79-hectare Manila Bay foreshore property in the
name of the NHA; (c) the Smokey Mountain Project Participation Certificates (SMPPCs) to be issued, or their money
proceeds; (d) disposable assets due to R-II Builders and/or its proceeds as defined in the JVA; (e) the resulting values
inputted by R-II Builders for pre-implementation activities and some start-up works amounting to P300,000,000.00; (f) the
2,992 temporary housing facilities/units to be constructed by R-II Builders; and, (g) all pertinent documents and records of
the project.[8]
On the same date, the parties likewise executed a Contract of Guaranty whereby HGC, upon the call made by PNB and
conditions therein specified, undertook to redeem the regular SMPPCs upon maturity and to pay the simple interest thereon
to the extent of 8.5% per annum.[9] The foregoing agreements led to the securitization of the project through the issuance
of 5,216 SMPPCs upon the Asset Pool, with a par value of 1 Million each, classified and to be redeemed by the trustee or, in
case of call on its guaranty, by HGC, in the following order of priority:
a) Regular SMPPCs worth P2.519 Billion, issued for value to the general public at specified interests and maturity dates.
These were to be redeemed by the PNB which was obliged to exhaust all liquid assets of the Asset Pool before calling on the
HGC guarantee;
b) Special SMPPCs worth P1.403 Billion, issued exclusively to the NHA for conveyance of the Smokey Mountain Site and
Manila Bay foreshore property to the Asset Pool, redeemable upon turnover of the developed project; and
c) Subordinated SMPPCs worth P1.294 Billion, issued exclusively to R-II Builders for its rights and interests in the JVA,
redeemable with the turnover of all residual values, assets and properties remaining in the Asset Pool after both the Regular
and Special SMPPCs are redeemed and all the obligations of the Asset Pool are settled.[10]

Subsequent to R-II Builders' infusion of P300 Million into the project, the issuance of the SMPPCs and the termination of
PNB's services on 29 January 2001, NHA, R-II Builders and HGC agreed on the institution of Planters Development Bank
(PDB) as trustee on 29 January 2001.[11] By 24 October 2002, however, all the Regular SMPPCs issued had reached maturity
and, unredeemed, already amounted to an aggregate face value of P2.513 Billion. The lack of liquid assets with which to
effect redemption of the regular SMPPCs prompted PDB to make a call on HGC's guaranty and to execute in the latter's favor
a Deed of Assignment and Conveyance (DAC) of the entire Asset Pool, consisting of: (a) 105 parcels of land comprising the
Smokey Mountain Site and the Reclamation Area, with a total area of 539,471.47 square meters, and all the buildings and
improvements thereon; (b) shares of stock of Harbour Centre Port Terminal, Inc. (HCPTI); and, (c) other documents.[12]
On 1 September 2005, R-II Builders filed the complaint against HGC and NHA which was docketed as Civil Case No. 05113407 before Branch 24 of the Manila Regional Trial Court, a Special Commercial Court (SCC). Contending that HGC's
failure to redeem the outstanding regular SMPPCs despite obtaining possession of the Asset Pool ballooned the stipulated
interests and materially prejudiced its stake on the residual values of the Asset Pool, R-II Builders alleged, among other
matters, that the DAC should be rescinded since PDB exceeded its authority in executing the same prior to HGC's redemption
and payment of the guaranteed SMPPCs; that while the estimated value of Asset Pool amounted to P5,919,716,618.62 as of
30 June 2005, its total liabilities was estimated at P2,796,019,890.41; and, that with the cessation of PDB's functions as
a trustee and HGC's intention to use the Asset Pool to settle its obligations to the Social Security System (SSS), it was best
qualified to be appointed as newtrustee in the event of the resolution of the DAC. Assessed docket fees corresponding to an
action incapable of pecuniary estimation, the complaint sought the grant of the following reliefs: (a) a temporary restraining
order/preliminary and permanent injunction, enjoining disposition/s of the properties in the Asset Pool; (b) the resolution or,
in the alternative, the nullification of the DAC; (c) R-II Builders' appointment as trustee pursuant to Rule 98 of the Rules of
Court; (d) HGC's rendition of an accounting of the assets and the conveyance thereof in favor of R-II Builders; and, (e)
P500,000.00 in attorney's fees.[13]
On 26 October 2005, Branch 24 of the Manila RTC issued the writ of preliminary injunction sought by R-II Builders which,
upon the challenge thereto interposed by HGC, was later affirmed by the CA in the 17 December 2007 decision rendered in
CA-G.R. SP No. 98953.[14] Having filed its answer to the complaint, in the meantime, HGC went on to move for the conduct
of a preliminary hearing on its affirmative defenses which included such grounds as lack of jurisdiction, improper venue and
the then pendency before this Court of G.R. No. 164537, entitled Francisco Chavez vs. National Housing Authority, et al., a
case which challenged, among other matters, the validity of the JVA and its subsequent amendments.[15] On 2 August 2007,
R-II Builders, in turn, filed a motion to admit[16] itsAmended and Supplemental Complaint which deleted the prayer for
resolution of the DAC initially prayed for in its original complaint. In lieu thereof, said pleading introduced causes of action
for conveyance of title to and/or possession of the entire Asset Pool, for NHA to pay the Asset Pool the sum of
P1,803,729,757.88 representing the cost of the changes and additional works on the project and for an increased indemnity
for attorney's fees in the sum of P2,000,000.00.[17]
Consistent with its joint order dated 2 January 2008 which held that R-II Builders' complaint was an ordinary civil action and
not an intra-corporate controversy,[18] Branch 24 of the Manila RTC issued a clarificatory order dated 1 February 2008 to the
effect, among other matters, that it did not have the authority to hear the case.[19] As a consequence, the case was reraffled to respondent Branch 22 of the Manila RTC (respondent RTC) which subsequently issued the 19 May 2008 order
which, having determined that the case is a real action, admitted the aforesaid Amended and Supplemental
Complaint, subject to R-II Builders' payment of the "correct and appropriate" docket fees.[20] On 15 August 2008, however,
R-II Builders filed a motion to admit it Second Amended Complaint, on the ground that its previous Amended and
Supplemental Complaint had not yet been admitted in view of the non-payment of the correct docket fees
therefor.[21] Said Second Amended Complaint notably resurrected R-II Builders' cause of action for resolution of the DAC,
deleted its causes of action for accounting and conveyance of title to and/or possession of the entire Asset Pool, reduced the
claim for attorney's fees to P500,000.00, sought its appointment as Receiver pursuant to Rule 59 of the Rules of Court and,
after an inventory in said capacity, prayed for approval of the liquidation and distribution of the Asset Pool in accordance with
the parties' agreements.[22]
On 2 September 2008, HGC filed its opposition to the admission of R-II Builders' Second Amended Complaint on the ground
that respondent RTC had no jurisdiction to act on the case until payment of the correct docket fees and that said pleading
was intended for delay and introduced a new theory inconsistent with the original complaint and the Amended and
Supplemental Complaint. Claiming that R-II Builders had defied respondent court's 19 May 2008 order by refusing to pay
the correct docket fees, HGC additionally moved for the dismissal of the case pursuant to Section 3, Rule 17 of the 1997
Rules of Civil Procedure.[23] On 24 November 2008, R-II Builders also filed an Urgent Ex-Parte Motion for Annotation of Lis
Pendens on the titles of the properties in the Asset Pool, on the ground that HGC had sold and/or was intending to dispose of
portions thereof, in violation of the writ of preliminary injunction issued in the premises.[24] Finding that jurisdiction over the
case was already acquired upon payment of the docket fees for the original complaint and that the Second Amended
Complaint was neither intended for delay nor inconsistent with R-II Builders' previous pleadings, respondent RTC issued its
first assailed order dated 3 March 2009 which: (a) denied HGC's motion to dismiss; (b) granted R-II Builders' motion to
admit its Second Amended Complaint; and, (c) noted R-II Builders'Urgent Ex-Parte Motion for Annotation of Lis Pendens, to
which the attention of the Manila Register of Deeds was additionally called.[25]
Undaunted, HGC filed its 22 March 2009 motion for reconsideration of the foregoing order, arguing that: (a) the case is real
action and the docket fees paid by R-II Builders were grossly insufficient because the estimated value of properties in
the Asset Pool exceeds P5,000,000,000.00; (b) a complaint cannot be amended to confer jurisdiction when the court had
none; (c) the RTC should have simply denied the Urgent Ex-Parte Motion for Annotation of Lis Pendens instead of rendering
an advisory opinion thereon. In addition, HGC faulted R-II Builders with forum shopping, in view of its 10 September 2008
filing of the complaint docketed as Civil Case No. 08-63416 before Branch 91 of the Quezon City RTC, involving a claim for
receivables from the NHA.[26] In turn, R-II Builders opposed the foregoing motion[27] and, on the theory that the Asset
Pool was still in danger of dissipation, filed an urgent motion to resolve its application for the appointment of a receiver and
submitted its nominees for said position.[28]
On 29 September 2009, respondent RTC issued its second assailed order which (a) denied HGC's motion for reconsideration;
(b) granted R-II Builders' application for appointment of receiver and, for said purpose: [i] appointed Atty. Danilo Concepcion
as Receiver and, [ii] directed R-II Builders to post a bond in the sum of P10,000,000.00.[29] Imputing grave abuse of
discretion against the RTC for not dismissing the case and for granting R-II Builders' application for receivership, HGC filed
the Rule 65 petition for certiorari and prohibition docketed as CA-G.R. SP No. 111153 before the CA[30] which, thru its Former
Special Fifteenth Division, rendered the herein assailed 21 January 2010 decision,[31] upon the following findings and
conclusions:

a) Irrespective of whether it is real or one incapable of pecuniary estimation, the action commenced by R-II Builders
indubitably falls squarely within the jurisdiction of respondent RTC;
b) From the allegations of R-II Builders' original complaint and amended complaint the character of the relief primarily
sought, i.e., the declaration of nullity of the DAC, the action before respondent RTC is one where the subject matter is
incapable of pecuniary estimation;
c) R-II Builders need not pay any deficiency in the docket fees considering its withdrawal of its Amended and Supplemental
Complaint;
d) A receiver may be appointed without formal hearing, particularly when it is within the interest of both parties and does not
result in the delay of any government infrastructure projects or economic development efforts;
e) Respondent RTC's act of calling the attention of the Manila Registrar of Deeds to R-II Builders' Urgent Ex-Parte Motion for
Annotation of Lis Pendens is well-within its residual power to act on matters before it; and
f) The withdrawal of R-II Builders' Amended and Supplemental Complaint discounted the forum shopping imputed against it
by HGC.[32]
HGC's motion for reconsideration of the foregoing decision[33] was denied for lack of merit in the CA's resolution dated 21
June 2010, hence, this petition.
The Issues
HGC urges the affirmative of the following issues in urging the grant of its petition, to wit:
"Did the Honorable Court of
Appeals Seriously Err When It
Failed to Rule That:
I. The Regional Trial Court a quo had no jurisdiction to proceed with the case considering that:
(1) the original court was without authority to hear the case and;
(2) despite an unequivocal order from the trial court a quo, Private Respondent (R-II Builders) failed and
refused to pay the correct and proper docket fees, whether it be for a real or personal action, based on the
values of the properties or claims subject of the complaints.
II. Since the Honorable Court of Appeals had characterized the case as a personal action, the action before the
Regional Trial Court a quo should have been dismissed for improper venue.
III. The order appointing a receiver was made with grave abuse of discretion as amounting to lack of
jurisdiction for having been issued under the following circumstances:
(1) It was made without a hearing and without any evidence of its necessity;
(2) It was unduly harsh and totally unnecessary in view of other available remedies, especially considering that
Petitioner HGC is conclusively presumed to be solvent;
(3) It effectively prevented the performance of HGC's functions in recovering upon its guaranty exposure and
was in contravention of Presidential Decree Nos. 385 and 1818, Republic Act No. 8927 and Supreme Court
Circular Nos. 2-91, 13-93, 68-94 and Administrative Circular No. 11-00."[34]
Acting on HGC's motion for resolution of its application for a temporary restraining order and/or preliminary injunction,[35] the
Court issued the resolution dated 23 August 2010, enjoining the enforcement of respondent RTC's assailed orders.[36]
The Court's Ruling
We find the petition impressed with merit.
Jurisdiction is defined as the authority to hear and determine a cause or the right to act in a case.[37] In addition to being
conferred by the Constitution and the law,[38] the rule is settled that a court's jurisdiction over the subject matter is
determined by the relevant allegations in the complaint,[39] the law in effect when the action is filed,[40] and the character of
the relief sought irrespective of whether the plaintiff is entitled to all or some of the claims asserted.[41] Consistent with
Section 1, Rule 141 of the Revised Rules of Court which provides that the prescribed fees shall be paid in full "upon the filing
of the pleading or other application which initiates an action or proceeding", the well-entrenched rule is to the effect that a
court acquires jurisdiction over a case only upon the payment of the prescribed filing and docket fees.[42]
The record shows that R-II Builders' original complaint dated 23 August 2005 was initially docketed as Civil Case No. 05113407 before Branch 24 of the Manila, a designated Special Commercial Court.[43] With HGC's filing of a motion for a
preliminary hearing on the affirmative defenses asserted in its answer[44] and R-II Builders' filing of its Amended and
Supplemental Complaint dated 31 July 2007,[45]said court issued an order dated 2 January 2008 ordering the re-raffle of the
case upon the finding that the same is not an intra-corporate dispute.[46] In a clarificatory order dated 1 February
2008,[47] the same court significantly took cognizance of its lack of jurisdiction over the case in the following wise:
At the outset, it must be stated that this Court is a designated Special Commercial Court tasked to try and hear, among
others, intra-corporate controversies to the exclusion of ordinary civil cases.
When the case was initially assigned to this Court, it was classified as an intra-corporate case. However, in the ensuing
proceedings relative to the affirmative defences raised by defendants, even the plaintiff conceded that the case is not an
intra-corporate controversy or even if it is, this Court is without authority to hear the same as the parties are all housed in
Quezon City.

Thus, the more prudent course to take was for this Court to declare that it does not have the authority to hear the complaint
it being an ordinary civil action. As to whether it is personal or civil, this Court would rather leave the resolution of the same
to Branch 22 of this Court. (Italics supplied).
We find that, having squarely raised the matter in its Rule 65 petition for certiorari and prohibition docketed as CA-G.R. SP
No. 111153,[48] HGC correctly faults the CA for not finding that Branch 24 of the Manila RTC had no authority to order the
transfer of the case to respondent RTC.[49] Being outside the jurisdiction of Special Commercial Courts, the rule is settled
that cases which are civil in nature, like the one commenced by R-II Builders, should be threshed out in a regular
court.[50] With its acknowledged lack of jurisdiction over the case, Branch 24 of the Manila RTC should have ordered the
dismissal of the complaint, since a court without subject matter jurisdiction cannot transfer the case to another
court.[51] Instead, it should have simply ordered the dismissal of the complaint, considering that the affirmative defenses for
which HGC sought hearing included its lack of jurisdiction over the case.
Calleja v. Panday,[52] while on facts the other way around, i.e., a branch of the RTC exercising jurisdiction over a subject
matter within the Special Commercial Court's authority, dealt squarely with the issue:
Whether a branch of the Regional Trial Court which has no jurisdiction to try and decide a case has authority to remand the
same to another co-equal Court in order to cure the defects on venue and jurisdiction.
Calleja ruled on the issue, thus:
Such being the case, RTC Br. 58 did not have the requisite authority or power to order the transfer of the case to another
branch of the Regional Trial Court. The only action that RTC-Br. 58 could take on the matter was to dismiss the petition for
lack of jurisdiction.
Certainly, the pronouncement of Br. 24, the Special Commercial Court, in its Joint Order of 2 January 2008 that the case is
not an intracorporate controversy, amplified in its Order of 1 February 2008 that it "does not have the authority to hear the
complaint it being an ordinary civil action" is incompatible with the directive for the re-raffle of the case and to "leave the
resolution of the same to Branch 22 of this Court." Such a directive is an exercise of authority over the case, which authority
it had in the same breath declared it did not have. What compounds the jurisdictional error is the fact that at the time of its
surrender of jurisdiction, Br. 24 had already acted on the case and had in fact, on 26 October 2005, issued the writ of
preliminary injunction sought by herein respondent R-II Builders. At that point, there was absolutely no reason which could
justify a re-raffle of the case considering that the order that was supposed to have caused the re-raffle was not an inhibition
of the judge but a declaration of absence of jurisdiction. So faulty was the order of re-raffle that it left the impression that
its previously issued preliminary injunction remained effective since the case from which it issued was not dismissed but
merely transferred to another court. A re-raffle which causes a transfer of the case involves courts with the same subject
matter jurisdiction; it cannot involve courts which have different jurisdictions exclusive of the other. More apt in this case, a
re-raffle of a case cannot cure a jurisdictional defect.
Prescinding from the foregoing considerations, and to show that the proceedings below was error upon error, we find that the
CA also gravely erred in not ruling that respondent RTC's (Branch 22, the regular court) jurisdiction over the case was
curtailed by R-II Builders' failure to pay the correct docket fees. In other words, the jurisdictionally flawed transfer of the
case from Branch 24, the SCC to Branch 22, the regular court, is topped by another jurisdictional defect which is the nonpayment of the correct docket fees. In its order dated 19 May 2008 which admitted R-II Builders' Amended and
Supplemental Complaint, respondent RTC distinctly ruled that the case was a real action and ordered the re-computation and
payment of the correct docket fees.[53] In patent circumvention of said order, however, R-II Builders filed its 14 August 2008
motion to admit its Second Amended Complaint which effectively deleted its causes of action for accounting and conveyance
of title to and/or possession of the entire Asset Pool and, in addition to reducing the claim for attorney's fees and seeking its
appointment as a receiver, reinstated its cause of action for resolution of the DAC.[54] Acting on said motion as well as the
opposition and motion to dismiss interposed by HGC,[55] respondent RTC ruled as follows in its assailed 3 March 2009
order,[56] to wit:
1. The docket fees of the original complaint has been paid, thus, the Court already acquired jurisdiction over the instant
case. The admission of the Amended and Supplemental Complaint, is subject to the payment of docket fees pursuant to the
Order of this Court dated May 18, 2008. The non-payment of the docket fees stated in the Order dated May 18, 2008 will
result only in the non-admission of the Amended and Supplemental Complaint, which means that the Original Complaint
remains. However, since the Amended and Supplemental Complaint is being withdrawn and in lieu thereof a new Amended
Complaint is sought to be admitted, there is no more need to pay the docket fees as provided for in the said Order.
2. It is settled that once jurisdiction is acquired and vested in a Court, said Court maintains its jurisdiction until judgment is
had (Aruego, Jr., et al. vs. CA). Such acquired jurisdiction is not lost by the amendment of a pleading that raises
additional/new cause(s) of action. The jurisdiction of a Court is not even lost even if the additional docket fees are required
by reason of the amendment.
Indeed, the Supreme Court held in PNOC vs. Court of Appeals (G.R. No. 107518, October 8, 1998) that:
"Its failure to pay the docket fee corresponding to its increased claim for damages under the amended complaint
should not be considered as having curtailed the lower court's jurisdiction. Pursuant to the ruling in Sun Insurance Office,
Ltd. (SIOL) v. Asuncion, the unpaid docket fees should be considered as a lien on the judgment even though private
respondent specified the amount of P600,000.00 as its claim for damages in its amended complaint.
Thus, even on the assumption that additional docket fees are required as a consequence of any amended complaint, its nonpayment will not result in the court's loss of jurisdiction over the case.[57]
Distinctly, the principal reference remained to be the "original complaint," in which R-II Builders itself submitted that the
case "is a real action as it affects title and possession of real property or interest therein." It was precisely this submission
which was the basis of the conclusion of the SCC court, Br. 24 that the case is not an intra-corporate controversy and
therefore is outside its authority.
We see from the assailed Order that the regular court accepted the case on the reason that "the docket fees of the original
complaint has been paid," so that, furthermore, the Amended and Supplemental Complaint may be admitted "subject to the
payment of docket fees." When the required fees were not paid, the court considered it as resulting in the non-admission of

the Amended and Supplemental Complaint such that "the original complaint remains." That remaining original complaint can
then be amended by "a new Amended Complaint" which is no longer subject to the conditions attached to the unadmitted
Amended and Supplemental Complaint.
The Order of 3 March 2009, with its logic and reason, is wholly unacceptable.
In upholding the foregoing order as well as its affirmance in respondent RTC's 29 September 2009 order,[58] the CA ruled that
the case - being one primarily instituted for the resolution/nullification of the DAC - involved an action incapable of pecuniary
estimation. While it is true, however, that R-II Builder's continuing stake in the Asset Pool is "with respect only to its residual
value after payment of all the regular SMPPCs holders and the Asset Pool creditors",[59] the CA failed to take into account the
fact that R-II Builders' original complaint and Amended and Supplemental Complaint both interposed causes of action for
conveyance and/or recovery of possession of the entire Asset Pool. Indeed, in connection with its second cause of action for
appointment as trustee in its original complaint,[60] R-II Builders distinctly sought the conveyance of the entire Asset
Pool[61] which it consistently estimated to be valued at P5,919,716,618.62 as of 30 June 2005.[62] In its opposition to HGC's
motion to dismiss, R-II Builders even admitted that the case is a real action as it affects title to or possession of real property
or an interest therein.[63] With R-II Builders' incorporation of a cause of action for conveyance of title to and/or possession of
the entire Asset Pool in its Amended and Supplemental Complaint,[64]on the other hand, no less than respondent RTC, in its
19 May 2008 order, directed the assessment and payment of docket fees corresponding to a real action.
Admittedly, this Court has repeatedly laid down the test in ascertaining whether the subject matter of an action is incapable
of pecuniary estimation by determining the nature of the principal action or remedy sought. While a claim is, on the one
hand, considered capable of pecuniary estimation if the action is primarily for recovery of a sum of money, the action is
considered incapable of pecuniary estimation where the basic issue is something other than the right to recover a sum of
money, the money claim being only incidental to or merely a consequence of, the principal relief sought.[65] To our mind, the
application of foregoing test does not, however, preclude the further classification of actions into personal actions and real
action, for which appropriate docket fees are prescribed. In contrast to personal actions where the plaintiff seeks the
recovery of personal property, the enforcement of a contract, or the recovery of damages, real actions are those which affect
title to or possession of real property, or interest therein.[66] While personal actions should be commenced and tried where
the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in
the case of a non-resident defendant where he may be found, at the election of the plaintiff,[67] the venue for real actions is
the court of the place where the real property is located.[68]
Although an action for resolution and/or the nullification of a contract, like an action for specific performance, fall squarely
into the category of actions where the subject matter is considered incapable of pecuniary estimation,[69] we find that the
causes of action for resolution and/or nullification of the DAC was erroneously isolated by the CA from the other causes of
action alleged in R-II Builders' original complaint and Amended and Supplemental Complaint which prayed for the
conveyance and/or transfer of possession of the Asset Pool. In Gochan v. Gochan,[70] this Court held that an action for
specific performance would still be considered a real action where it seeks the conveyance or transfer of real property, or
ultimately, the execution of deeds of conveyance of real property. More to the point is the case of Ruby Shelter Builders and
Realty Development Corporation v. Hon. Pablo C. Formaran III[71]where, despite the annulment of contracts sought in the
complaint, this Court upheld the directive to pay additional docket fees corresponding to a real action in the following wise, to
wit:
x x x [I]n Siapno v. Manalo, the Court disregarded the title/denomination of therein plaintiff Manalo's amended petition as
one for Mandamus with Revocation of Title and Damages; and adjudged the same to be a real action, the filing fees for which
should have been computed based on the assessed value of the subject property or, if there was none, the estimated value
thereof. The Court expounded in Siapno that:
In his amended petition, respondent Manalo prayed that NTA's sale of the property in dispute to Standford East Realty
Corporation and the title issued to the latter on the basis thereof, be declared null and void. In a very real sense, albeit the
amended petition is styled as one for"Mandamus with Revocation of Title and Damages", it is, at bottom, a suit to recover
from Standford the realty in question and to vest in respondent the ownership and possession thereof. In short, the amended
petition is in reality an action in res or a real action. Our pronouncement in Fortune Motors (Phils.), Inc. vs. Court of
Appeals is instructive. There, we said:
A prayer for annulment or rescission of contract does not operate to efface the true objectives and nature of the action which
is to recover real property. (Inton, et al., v. Quintan,81 Phil. 97, 1948)
An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a private sale of real
property. (Muoz v. Llamas, 87 Phil. 737, 1950).
While it is true that petitioner does not directly seek the recovery of title or possession of the property in question, his action
for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building which,
under the law, is considered immovable property, the recovery of which is petitioner's primary objective. The prevalent
doctrine is that an action for the annulment or rescission of a sale of real property does not operate to efface the
fundamental and prime objective and nature of the case, which is to recover said real property. It is a real action.[72]
Granted that R-II Builders is not claiming ownership of the Asset Pool because its continuing stake is, in the first place,
limited only to the residual value thereof, the conveyance and/or transfer of possession of the same properties sought in the
original complaint and Amended and Supplemental Complaintboth presuppose a real action for which appropriate docket fees
computed on the basis of the assessed or estimated value of said properties should have been assessed and paid. In
support of its original complaint's second cause of action for appointment as trustee and conveyance of the properties in
theAsset Pool, R-II Builders distinctly alleged as follows:
5.12. As the Court-appointed Trustee, R-II Builders shall have and exercise the same powers, rights and duties as if [it] had
been originally appointed, having the principal duty of redeeming and buying back the Regular SMPPC's and thereafter
liquidating the Asset Pool, which are also the end goals of the Agreement.
5.12.1. R-II Builders, as the Trustee, shall have the power and right to invest, transfer, convey or assign any of the assets of
the Asset Pool, whether funds, receivables, real or personal property, in exchange for shares of stocks, bonds, securities, real
or personal properties of any kind, class or nature, provided that any such investment, transfer, conveyance or assignment
shall not impair the value of the Asset Pool.

5.12.2. R-II Builders, as the Trustee, shall have the power and right to sell, change, assign or otherwise dispose of any
stocks, bonds, securities, real or personal properties or other assets constituting the Asset Pool.
5.12. 3. R-II Builders, as the Trustee, shall have the power and right to enter into lease agreements as lessor or any other
related contract for the benefit of the Asset Pool; and
5.12.4. It is understood that the aforecited powers and rights of R-II Builders as the court-appointed Trustee, are nonexclusive; and is deemed to include all the rights and powers necessary and incidental to achieve the goals and objectives of
the Agreement.[73]
From the foregoing allegations in its original complaint, it cannot be gainsaid that R-II Builders was unquestionably seeking
possession and control of the properties in the Asset Pool which predominantly consisted of real properties. Having admitted
that "the case is a real action as it affects title to or possession of real property or (an) interest therein",[74] R-II Builders
emphasized the real nature of its action by seeking the grant of the following main reliefs in the Amended and Supplemental
Complaint it subsequently filed, to wit:
5. After trial on the merits, render judgment:
(i) Declaring the annulment of the Deed of Assignment and conveyance executed by PDB in favor of HGC; or in the
alternative, declaring the nullity of the said instrument;
(ii) Appointing R-II Builders as the Trustee of the Asset Pool Properties, with powers and responsibilities including but not
limited to those stated in 5.12.1, 5.12.2, 5.12.3 and 5.12.4 herein and those spelled out in the Re-Stated Smokey Mountain
Asset Pool Formation Trust Agreement;
(iii) Ordering HGC to render an accounting of all properties of the Asset Pool transferred thereto under the Deed of
Assignment and Conveyance and thereafter convey title to and/or possession of the entire Asset Pool to R-II Builders as the
Trustee thereof which assets consist of, but is not limited to the following:
(a) 105 parcels of land comprising the Smokey Mountain Site, and, the Reclamation Area, consisting of the 539,471.47
square meters, and all the buildings and improvements thereon, with their corresponding certificates of title;
(b) shares of stock of Harbour Center Port Terminal, Inc. which are presently registered in the books of the said company in
the name of PDB for the account of the Smokey Mountain Asset Pool; and
(c) other documents as listed in Annex E of the Contract of Guaranty.
(iv) Ordering NHA to pay the Asset Pool the amount of Php1,803,729,757.88 including the direct and indirect cost thereon as
may be found by this Honorable Court to be due thereon;
(v) Making the injunction permanent;
(vi) Ordering HGC and the NHA to pay Attorney's fees in the amount of P2,000,000 and the costs of suit.[75]
For failure of R-II Builders to pay the correct docket fees for its original complaint or, for that matter, itsAmended and
Supplemental Complaint as directed in respondent RTC's 19 May 2008 order, it stands to reason that jurisdiction over the
case had yet to properly attach. Applying the rule that "a case is deemed filed only upon payment of the docket fee
regardless of the actual date of filing in court" in the landmark case of Manchester Development Corporation v. Court of
Appeals,[76] this Court ruled that jurisdiction over any case is acquired only upon the payment of the prescribed docket fee
which is both mandatory and jurisdictional. To temper said ruling, the Court subsequently issued the following guidelines
in Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion,[77] viz.:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee,
that vests a trial court with jurisdiction over the subject matter or nature of the action. Where the filing of the initiatory
pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time
but in no case beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered
filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee within a
reasonable time but also in no case beyond its applicable prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the
prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the same
has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall
be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the
additional fee.
True to the foregoing guidelines, respondent RTC admitted R-II Builder's Amended and Supplemental Complaint and directed
the assessment and payment of the appropriate docket fees in the order dated 19 May 2008. Rather than complying with
said directive, however, R-II Builders manifested its intent to evade payment of the correct docket fees by withdrawing
its Amended and Supplemental Complaintand, in lieu thereof, filed its Second Amended Complaint which deleted its cause of
action for accounting and conveyance of title to and/or possession of the entire Asset Pool, reduced its claim for attorney's
fees, sought its appointment as Receiver and prayed for the liquidation and distribution of the Asset Pool.[78] In upholding the
admission of said Second Amended Complaint in respondent RTC's assailed 3 March 2009 Order, however, the CA clearly lost
sight of the fact that a real action was ensconced in R-II Builders' original complaint and that the proper docket fees had yet
to be paid in the premises. Despite the latter's withdrawal of its Amended and Supplemental Complaint, it cannot, therefore,
be gainsaid that respondent RTC had yet to acquire jurisdiction over the case for non-payment of the correct docket fees.
In the 15 February 2011 Resolution issued in the case of David Lu v. Paterno Lu Ym, Sr.,[79] this Court, sitting En Banc, had
occasion to rule that an action for declaration of nullity of share issue, receivership and corporate dissolution is one where
the value of the subject matter is incapable of pecuniary estimation. Subsequent to the trial court's rendition of a decision on
the merits declared to be immediately executory and the CA's denial of their application for a writ of preliminary injunction
and/or temporary restraining order to enjoin enforcement of said decision, the defendants questioned the sufficiency of the

docket fees paid a quo which supposedly failed take into consideration the value of the shares as well as the real properties
involved for which the plaintiff additionally caused notices of lis pendens to be annotated. Finding that defendants were
already estopped in questioning the jurisdiction of the trial court on the ground of non-payment of the correct docket fees,
the Court discounted intent to defraud the government on the part of the plaintiff who can, at any rate, be required to pay
the deficiency which may be considered a lien on the judgment that may be rendered, without automatic loss of the
jurisdiction already acquired, in the first instance, by the trial court.
The factual and legal milieus of the case at bench could not, however, be more different. While R-II Builders styled its
original complaint and Amended and Supplemental Complaint as one primarily for the resolution and/or declaration of the
DAC, it simultaneously and unmistakably prayed for the conveyance, possession and control of the Asset Pool. Alongside the
fact that HGC has consistently questioned the sufficiency of the docket fees paid by R-II Builders, estoppel cannot be said to
have set in since, the lapse of more than five years from the commencement of the complaint notwithstanding, it appears
that the case has yet to be tried on the merits. Having admitted that its original complaint partook the nature of a real
action and having been directed to pay the correct docket fees for itsAmended and Supplemental Complaint, R-II Builders is,
furthermore, clearly chargeable with knowledge of the insufficiency of the docket fees it paid. Unmistakably manifesting its
intent to evade payment of the correct docket fees, moreover, R-II Builders withdrew its Amended and Supplemental
Complaintafter its admission and, in lieu thereof, filed its' Second Amended Complaint on the ground that said earlier
pleading cannot be considered admitted in view of its non-payment of the docket and other fees it was directed to pay. In so
doing, however, R-II Builders conveniently overlooked the fact that the very same argument could very well apply to its
original complaint for which - given its admitted nature as a real action - the correct docket fees have also yet to be paid.
The importance of filing fees cannot be over-emphasized for they are intended to take care of court expenses in the handling
of cases in terms of costs of supplies, use of equipment, salaries and fringe benefits of personnel, and others, computed as to
man-hours used in the handling of each case. The payment of said fees, therefore, cannot be made dependent on the result
of the action taken without entailing tremendous losses to the government and to the judiciary in particular.[80] For nonpayment of the correct docket fees which, for real actions, should be computed on the basis of the assessed value of the
property, or if there is none, the estimated value thereof as alleged by the claimant,[81]respondent RTC should have denied
admission of R-II Builders' Second Amended Complaint and ordered the dismissal of the case. Although a catena of decisions
rendered by this Court eschewed the application of the doctrine laid down in the Manchester case,[82] said decisions had been
consistently premised on the willingness of the party to pay the correct docket fees and/or absence of intention to evade
payment of the correct docket fees. This cannot be said of R-II Builders which not only failed to pay the correct docket fees
for its original complaint and Amended and Supplemental Complaint but also clearly evaded payment of the same by filing
its Second Amended Complaint.
By itself, the propriety of admitting R-II Builders' Second Amended Complaint is also cast in dubious light when viewed
through the prism of the general prohibition against amendments intended to confer jurisdiction where none has been
acquired yet. Although the policy in this jurisdiction is to the effect that amendments to pleadings are favored and liberally
allowed in the interest of justice, amendment is not allowed where the court has no jurisdiction over the original complaint
and the purpose of the amendment is to confer jurisdiction upon the court.[83] Hence, with jurisdiction over the case yet to
properly attach, HGC correctly fault the CA for upholding respondent RTC's admission of R-II Builders'Second Amended
Complaint despite non-payment of the docket fees for its original complaint andAmended and Supplemental Complaint as
well as the clear intent to evade payment thereof.
With the determination of the jurisdictional necessity of the dismissal of the complaint of R-II Builders docketed as Civil Case
No. 05-113407, first before Br. 24 and later before Br. 22 both of the RTC of Manila, we no longer find any reason to go into
a discussion of the remaining issues HGC proffers for resolution. In view, particularly, of its non-acquisition of jurisdiction
over the case, respondent RTC clearly had no authority to grant the receivership sought by R-II Builders. It needs pointing
out though that the prayer for receivership clearly indicates that the R-II Builders sought the transfer of possession of
property consisting of the assets of the JVA from HGC to the former's named Receiver. As already noted, said transfer of
possession was sought by respondent R-II Builders since the very start, overtly at the first two attempts, covertly in the last,
the successive amendments betraying the deft maneuverings to evade payment of the correct docket fees.
WHEREFORE, premises considered, the assailed Decision dated 21 January 2010 is REVERSED andSET ASIDE. In lieu
thereof, another is entered NULLIFYING the regular court's, RTC Branch 22's Orders dated 3 March 2009 and 29 September
2009 as well as the SCC's, RTC Branch 24's Order dated 26 October 2005 which was rendered void by the SCC's subsequent
declaration of absence of authority over the case. The complaint of R-II Builders docketed as Civil Case No. 05-113407 first
before Br. 24 and thereafter before Br. 22 both of the RTC of Manila is hereby DISMISSED.
SO ORDERED.
Corona, C.J., (Chairperson), Velasco, Jr., Leonardo De-Castro, and Del Castillo, JJ., concur.

G.R. No. 165777

July 25, 2011

CEFERINA DE UNGRIA [DECEASED], substituted by her HEIRS, represented by LOLITA UNGRIA SAN JUAN-JAVIER, and RHODORA R.
PELOMIDA as their Attorney-in-fact, Petitioner,
vs.
THE HONORABLE COURT OF APPEALS, THE HONORABLE REGIONAL TRIAL COURT OF GENERAL SANTOS CITY, BRANCH 35, ROSARIO
DIDELES VDA. DE CASTOR, NEPTHALIE CASTOR ITUCAS, FEROLYN CASTOR FACURIB, RACHEL DE CASTOR, LEA CASTOR DOLLOLOSA,
and ROSALIE CASTOR BENEDICTO,Respondents.
DECISION
PERALTA, J.:
Assailed in this petition for review on certiorari are the Decision1 dated May 26, 2004 and the Resolution2 dated September 17, 2004 of the Court of
Appeals (CA) in CA-G.R. SP No. 60764.
On August 26, 1999, respondents Rosario Dideles Vda. de Castor (Rosario), Nepthalie Castor Itucas, Ferolyn Castor Facurib (Ferolyn), Rachel De
Castor, Lea Castor Dollolosa and Rosalie Castor Benedicto, filed with the Regional Trial Court (RTC) of General Santos City a Complaint3 for ownership,
possession and damages, and alternative causes of action either to declare two documents as patent nullities, and/or for recovery of Rosario's conjugal
share with damages or redemption of the subject land against petitioner Ceferina de Ungria, defendants Avelino Gumban, Dolores Cagaitan, Zacasio

Poutan, PO1 Jonas Montales, Ignacio Olarte and alias Dory. Respondent Rosario is the surviving wife of the late Fernando Castor, while the rest of the
respondents are their legitimate children. The documents they sought to annul are (1) the Deed of Transfer of Rights and Interest including
Improvements thereon dated October 3, 1960 allegedly executed by Fernando in favor of Eugenio de Ungria, petitioner's father; and (2) the Affidavit of
Relinquishment dated November 23, 1960 executed by Eugenio in favor of petitioner.
Petitioner Ceferina filed a Motion to Dismiss4 (Ex-Abundante Ad Cautelam) on the following grounds: (1) the claim or demand has been extinguished by
virtue of the valid sale of Lot No. 1615 to Eugenio; (2) the action is barred by extraordinary acquisitive prescription; (3) the action is barred by laches;
and (4) plaintiff failed to state a cause of action, or filed the case prematurely for failure to resort to prior barangay conciliation proceedings.
Petitioner also filed an Addendum to the Motion to Dismiss5 raising the following additional grounds: (1) plaintiffs have no legal capacity to sue; and (2)
the court has no jurisdiction over the case for failure of plaintiffs to pay the filing fee in full. Respondents filed their Opposition thereto.
On November 19, 1999, the RTC issued an Order6 denying the motion to dismiss, to wit:
After the motion to dismiss and its addendum have been received, it is now ripe for resolution. One of the grounds alleged in the complaint is for the
recovery of conjugal share on Lot No. 1615, of Pls-209 D with damages.
It is alleged that the late Fernando Castor and Rosario Dideles Vda. de Castor were married on September 15, 1952, and the application to the land was
dated January 17, 1952 and the patent was issued by the President on November 19, 1954.
The said land was sold to the defendant on October 3, 1960 (Annex C) and an Affidavit of Relinquishment dated November 23, 1960 which was made a
part thereof as Annex "D." Considering the marriage of September 15, 1992, the said land became conjugal as of the date of the marriage and,
therefore, thereof belongs to the wife, Rosario Dideles Vda. de Castor.
Thus, considering the above, the motion to dismiss is DENIED.7
Petitioner Ceferina filed a Motion for Reconsideration,8 which the RTC denied in an Order9 dated February 4, 2000.
Petitioner filed an Omnibus Motion10 asking the RTC to resolve the issues of (1) whether or not the complaint should be dismissed or expunged from the
records pursuant to Supreme Court (SC) Circular No. 7; (2) reconsidering the findings contained in the Order dated February 4, 2000; and (3) holding in
abeyance the submission of the answer to the complaint.
Pending resolution of the motion, respondents filed a Motion to Allow11 them to continue prosecuting this case as indigent litigants.
On March 8, 2000, the RTC resolved the Omnibus Motion in an Order12 that read in this wise:
On the omnibus motion regarding filing fees, the plaintiffs asserted in its motion that they are charging defendant actual and compensatory damages
such as are proved during the hearing of this case. So also are attorneys fees and moral damages, all to be proved during the hearing of this case.
Since there was no hearing yet, they are not in a possession (sic) to determine how much is to be charged.
At any rate, if after hearing the Clerk of Court determine that the filing fees is still insufficient, considering the total amount of the claim, the Clerk of Court
should determine and, thereafter, if any amount is found due, he must require the private respondent to pay the same x x x.
As to the second issue, the same has already been decided in its order dated February 4, 2000.
WHEREFORE, premises considered, the omnibus motion is DENIED.
The defendant shall file their answer within fifteen (15) days from receipt of this order. 13
From this Order, petitioner filed a motion for reconsideration and clarification on whether plaintiffs should be allowed to continue prosecuting the case as
indigent litigants.
On March 30, 2000, the RTC issued a Clarificatory Order14 reading as follows:
As has been said, the plaintiff asserted in its motion that they are charging defendants actual and compensatory damages as has been proved during
the hearing of this case. So also are attorney's fees and moral damages all to be proved during the hearing of this case.
Since there was no hearing yet, they are not in a possession (sic) to determine how much is to be charged.
At any rate, after hearing, the Clerk of Court determines that the filing fee is still insufficient, the same shall be considered as lien on the judgment that
may be entered.
As to the motion seeking from the Honorable Court allowance to allow plaintiff to continue prosecuting this case as indigent litigants, suffice it to say that
the same is already provided for in this order.
WHEREFORE, the defendants shall file their answer within fifteen (15) days from receipt of this Order. 15
In an Order dated May 31, 2000, the RTC again denied petitioner's motion for reconsideration.
Petitioner filed with the CA a petition for certiorari and prohibition with prayer for the issuance of a temporary restraining order and/or writ of preliminary
injunction. Petitioner sought the nullification of the Order dated November 19, 1999 and the subsequent orders issued by the RTC thereto for having
been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Respondents filed their Comment thereto.
In a Decision dated May 26, 2004, the CA dismissed the petition. The CA found that SC Circular No. 7 would not apply where the amount of damages or
value of the property was immaterial; that the Circular could be applied only in cases where the amount claimed or the value of the personal property
was determinative of the court's jurisdiction citing the case of Tacay v. RTC of Tagum, Davao del Norte. 16 The CA found that respondents had paid the
corresponding docket fees upon the filing of the complaint, thus, the RTC had acquired jurisdiction over the case despite the failure to state the amount
of damages claimed in the body of the complaint or in the prayer thereof. The CA found that the RTC did not commit grave abuse of discretion
amounting to lack of jurisdiction when it denied petitioner's motion to dismiss. It noted that the RTC's Clarificatory Order dated March 30, 2000, which
stated that "if after hearing the Clerk of Court determines that the filing fee is still insufficient, the same shall be considered as lien on the judgment that
may be entered" was in accordance with the rule laid down in Sun Insurance Office, Ltd. v. Asuncion. 17 The CA proceeded to state that a judicious

examination of the complaint pointed to a determination of the respective rights and interests of the parties over the property based on the issues
presented therein which could only be determined in a full-blown trial on the merits of the case.
Petitioner filed a Motion for Reconsideration, which the CA denied in a Resolution dated September 17, 2004. The CA ruled, among others, that the
defenses of acquisitive prescription and laches were likewise unavailing. It found that the subject property is covered by a Torrens title (OCT No. V19556); thus, it is axiomatic that adverse, notorious and continuous possession under a claim of ownership for the period fixed by law is ineffective
against a Torrens title; that unless there are intervening rights of third persons which may be affected or prejudiced by a decision directing the return of
the lot to petitioner, the equitable defense of laches will not apply as against the registered owner.
Hence, this petition for review on certiorari where petitioner raises the following assignment of errors:
THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT TRIAL COURT COMMITTED GRAVE ABUSE OF DISCRETION IN
DENYING PETITIONER'S MOTION TO DISMISS DESPITE RESPONDENTS' NON-PAYMENT OF THE CORRECT DOCKET FEES.
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE ACTION OF PRIVATE RESPONDENTS IS BARRED BY LACHES AND
EXTRAORDINARY ACQUISITIVE PRESCRIPTION.18
We find the petition without merit.
Preliminarily, although not raised as an issue in this petition, we find it necessary to discuss the issue of jurisdiction over the subject matter of this case.
Respondents' complaint was filed in 1999, at the time Batas Pambansa Blg. (BP) 129, the Judiciary Reorganization Act of 1980, was already amended
by Republic Act (RA) No. 7691, An Act Expanding the Jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts, amending for the purpose BP Blg. 129.19 Section 1 of RA 7691, amending BP Blg. 129, provides that the RTC shall exercise exclusive original
jurisdiction on the following actions:
Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization Act of 1980," is hereby amended to read as
follows:
Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction:
(1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;
(2) In all civil actions which involve the title to, or possession of, real property, or any interest therein, where the assessed value of the property involved
exceeds Twenty Thousand Pesos (P20,000.00) or for civil actions in Metro Manila, where such value exceeds Fifty Thousand Pesos (P50,000.00),
except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon the Metropolitan Trial
Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts; x x x
Section 3 of RA No. 7691 expanded the exclusive original jurisdiction of the first level courts, thus:
Section 3. Section 33 of the same law (BP Blg. 129) is hereby amended to read as follows:
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil Cases. Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:
xxxx
(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property, or any interest therein where the assessed value
of the property or interest therein does not exceed Twenty Thousand Pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value
does not exceed Fifty Thousand Pesos (P50,000.00) exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses and costs:
Provided, That in cases of land not declared for taxation purposes, the value of such property shall be determined by the assessed value of the adjacent
lots.
Respondents filed their Complaint with the RTC; hence, we would first determine whether the RTC has jurisdiction over the subject matter of this case
based on the above-quoted provisions.
The Complaint filed by respondents in the RTC was for ownership, possession and damages, and alternative causes of action either to declare two
documents as patent nullities and/or for recovery of conjugal share on the subject land with damages or redemption of the subject land. In their
Complaint, respondents claimed that Rosario and Fernando are the registered owners of the subject land with an assessed value of P12,780.00; that the
couple left the cultivation and enjoyment of the usufruct of the subject land to Fernando's mother and her second family to augment their means of
livelihood; that respondent Rosario and Fernando thought that when the latter's mother died in 1980, the subject land was in the enjoyment of the
second family of his mother, but later learned that the subject land was leased by petitioner Ceferina; that sometime in August 1999, respondents
learned of the existence of the Deed of Transfer of Rights and Interest including Improvements thereon dated October 3, 1960, where Fernando had
allegedly transferred his rights and interests on the subject land in favor of Eugenio, petitioner Ceferina's father, as well as an Affidavit of Relinquishment
dated November 23, 1960 executed by Eugenio in favor of petitioner Ceferina; that Fernando's signature in the Deed of Transfer was not his but a
forgery; and the Affidavit of Relinquishment was also void as it was a direct result of a simulated Deed of Transfer.
Respondents prayed that they be declared as absolute and lawful owners of the subject land and to order petitioner and the other defendants to vacate
the premises and restore respondents to its possession and enjoyment therefore. On their second cause of action, they prayed that the Deed of Transfer
of Rights and Interest Including Improvements Thereon be declared as a forgery, purely simulated and without any consideration; hence, inexistent, void
ab initio and/or a patent nullity, as well as the Affidavit of Relinquishment which was the direct result of the Deed of Transfer. Respondents also prayed
in the alternative that if the Deed be finally upheld as valid, to order petitioner to reconvey to respondent Rosario the undivided one-half portion of the
subject land as conjugal owner thereof and to account and reimburse her of its usufruct; and/or to allow them to redeem the subject land.
It would appear that the first cause of action involves the issue of recovery of possession and interest of the parties over the subject land which is a real
action. Respondents alleged that the assessed value of the subject land was P12,780.00 based on Tax Declaration No. 15272. Thus, since it is a real
action with an assessed value of less than P20,000.00, the case would fall under the jurisdiction of the MTC as provided under the above-quoted
Section 33 (3) of BP 129, as amended.
Notably, however, respondents in the same Complaint filed alternative causes of action assailing the validity of the Deed of Transfer of Rights and
Interest executed by Fernando in favor of petitioner's father. Respondents also sought for the reconveyance to respondent Rosario of the undivided onehalf portion of the subject land as conjugal owner thereof in case the Deed of Transfer of Rights and Interest will be upheld as valid; and/or for
redemption of the subject land. Clearly, this is a case of joinder of causes of action which comprehends more than the issue of possession of, or any

interest in the real property under contention, but includes an action to annul contracts and reconveyance which are incapable of pecuniary estimation
and, thus, properly within the jurisdiction of the RTC.20
In Singson v. Isabela Sawmill,21 we held that:
In determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court has adopted the criterion of first
ascertaining the nature of the principal action or remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable of
pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance would depend on the amount of the claim.
However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a
consequence of, the principal relief sought, this Court has considered such actions as cases where the subject of the litigation may not be estimated in
terms of money, and are cognizable exclusively by courts of first instance (now Regional Trial Courts).22
Thus, respondents correctly filed their Complaint with the RTC.
It is a settled rule in this jurisdiction that when an action is filed in court, the complaint must be accompanied by the payment of the requisite docket and
filing fees.23 It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial
court with jurisdiction over the subject matter or nature of the action. 24
Section 7(b)(1) of Rule 141 of the Rules of Court provides:
SEC. 7. Clerks of Regional Trial Courts. - (a) For filing an action or a permissive counter-claim or money claim against an estate not based on judgment,
or for filing with leave of court a third-party, fourth-party, etc. complaint, or a complaint-in-intervention, and for all clerical services in the same, if the totalsum claimed, exclusive of interest, or the stated value of the property in litigation, is:
xxxx
(b) For filing:
1. Actions where the value of the subject matter
cannot be estimated ........ P400.00
2. x x x
In a real action, the assessed value of the property, or if there is none, the estimated value thereof shall be alleged by the claimant and shall be the basis
in computing the fees.25
Since we find that the case involved the annulment of contract which is not susceptible of pecuniary estimation, thus, falling within the jurisdiction of the
RTC, the docket fees should not be based on the assessed value of the subject land as claimed by petitioner in their memorandum, but should be based
on Section 7(b)(1) of Rule 141. A perusal of the entries in the Legal Fees Form attached to the records would reflect that the amount of P400.00 was
paid to the Clerk of Court, together with the other fees, as assessed by the Clerk of Court. Thus, upon respondents' proof of payment of the assessed
fees, the RTC has properly acquired jurisdiction over the complaint. Jurisdiction once acquired is never lost, it continues until the case is terminated. 26
Notably, petitioners claim that the RTC did not acquire jurisdiction in this case is premised on her contention that respondents violated SC Circular No. 7
issued on March 24, 1998 requiring that all complaints must specify the amount of damages sought not only in the body of the pleadings but also in the
prayer to be accepted and admitted for filing. Petitioner argues that respondents alleged in paragraph 13 of their Complaint that:
(T)he reasonable rental for the use of the [subject] land is P2,000.00 per hectare, every crop time, once every four months, or P6,000.00 a year per
hectare; that defendants in proportion and length of time of their respective occupancy is and/or are jointly and severally liable to plaintiffs of the produce
thereby in the following proportions, viz: (a) for defendant Ceferina de Ungria for a period of time claimed by her as such; (b) for defendants Dolores
Cagautan, a certain alias "Dory," and PO1 Jonas Montales, of an undetermined area, the latter having entered the area sometime in 1998 and
defendant alias "Dory," only just few months ago; that defendant Ignacio Olarte and Zacasio Puutan of occupying about one-half hectare each.27
and in their prayer asked:
x x x Ordering the defendants, jointly and severally, in proportion to the length and area of their respective occupancy, to pay reasonable rentals to the
plaintiffs in the proportion and amount assessed in paragraph 13 of the First Cause of Action.
xxxx
(a) Ordering the defendants, jointly and severally, to pay plaintiffs actual and compensatory damages such as are proved during the hearing of this case;
(b) Ordering the defendants, jointly and severally, to pay plaintiffs attorneys' fees and moral damages, all to be proved during the hearing of this case.28
Thus, the RTC should have dismissed the case, since respondents did not specify the amount of damages in their prayer.
We are not persuaded.
SC Circular No. 7 was brought about by our ruling in Manchester Development Corporation v. Court of Appeals, 29where we held that a pleading which
does not specify in the prayer the amount of damages being asked for shall not be accepted or admitted, or shall otherwise be expunged from the
record; and that the Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee.
However, in Sun Insurance Office, Ltd. v. Asuncion, 30 we laid down the following guidelines in the payment of docket fees, to wit:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with
jurisdiction over the subject matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the
court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and unless the
filing fee prescribed therefor is paid. The court may also allow payment of said fee within a reasonable time but also in no case beyond its applicable
prescriptive or reglementary period.

3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee but,
subsequently, the judgment awards a claim not specified in the pleading, or if specified the same has been left for determination by the court, the
additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly-authorized deputy to
enforce said lien and assess and collect the additional fee.
Subsequently, in Heirs of Bertuldo Hinog v. Melicor,31 we said:
Furthermore, the fact that private respondents prayed for payment of damages "in amounts justified by the evidence" does not call for the dismissal of
the complaint for violation of SC Circular No. 7, dated March 24, 1988 which required that all complaints must specify the amount of damages sought not
only in the body of the pleadings but also in the prayer in order to be accepted and admitted for filing. Sun Insurance effectively modified SC Circular No.
7 by providing that filing fees for damages and awards that cannot be estimated constitute liens on the awards finally granted by the trial court.
x x x judgment awards which were left for determination by the court or as may be proven during trial would still be subject to additional filing fees which
shall constitute a lien on the judgment. It would then be the responsibility of the Clerk of Court of the trial court or his duly-authorized deputy to enforce
said lien and assess and collect the additional fees. 32
A reading of the allegations in the complaint would show that the amount of the rental due can only be determined after a final judgment, since there is a
need to show supporting evidence when the petitioner and the other defendants started to possess the subject land. Thus, we find no reversible error
committed by the CA when it ruled that there was no grave abuse of discretion committed by the RTC in issuing its Order dated March 30, 2000, where
the RTC stated that "since there was no hearing yet, respondents are not in a position to determine how much is to be charged and that after hearing,
the Clerk of Court determines that the filing fee is still insufficient, the same shall be considered as lien on the judgment that may be entered."
Petitioner claims that the action is barred by extraordinary acquisitive prescription and laches. Petitioner contends that she took possession of the land in
the concept of an owner, open, exclusive, notorious and continuous since 1952 through her predecessor-in-interest, Eugenio, and by herself up to the
present; that the late Fernando and private respondents had never taken possession of the land at any single moment; and that, granting without
admitting that the transfer of rights between Fernando and Eugenio was null and void for any reason whatsoever, petitioner's possession of the land had
already ripened into ownership after the lapse of 30 years from August 1952 by virtue of the extraordinary acquisitive prescription.
We are not persuaded.
It is a well-entrenched rule in this jurisdiction that no title to registered land in derogation of the rights of the registered owner shall be acquired by
prescription or adverse possession.33 Prescription is unavailing not only against the registered owner but also against his hereditary successors. 34 In this
case, the parcel of land subject of this case is a titled property, i.e., titled in the name of the late Fernando Castor, married to Rosario Dideles.
Petitioner claims that respondent had impliedly admitted the fact of sale by Fernando to Eugenio in August 1952, but only according to respondents, the
sale was null and void because it violated the provisions of the Public Land Act. Petitioner argues that the application of Fernando, dated January 17,
1952, was not the homestead application referred to in Sections 118 and 124 of the Public Land Act; and that Fernando's application was only as settler,
or for the allocation of the subject land to him vice the original settler Cadiente.
Such argument does not persuade.
The trial in this case has not yet started as in fact no answer has yet been filed. We find that these issues are factual which must be resolved at the trial
of this case on the merits wherein both parties will be given ample opportunity to prove their respective claims and defenses.
Anent petitioner's defense of laches, the same is evidentiary in nature and cannot be established by mere allegations in the pleadings. Without solid
evidentiary basis, laches cannot be a valid ground to dismiss respondents' complaint. 35 Notably, the allegations of respondents in their petition filed
before the RTC which alleged among others:
7. That sometime between the years 1965 to 1970, defendant Ceferina de Ungria, accompanied by Miss Angela Jagna-an, appeared in the residence of
plaintiff Rosario Dideles Vda. de Castor in Bo.1, Banga, South Cotabato, and requested her to sign a folded document with her name only appearing
thereon, telling her that it has something to do with the land above-described, of which she refused telling her that she better return it to the person who
requested her to do so (referring to her mother-in-law), more so that her husband was out at that time;
8. That when the matter was brought home to Fernando Castor, the latter just commented that [his] mother desires the land above-described to be sold
to defendant Ceferina de Ungria which however he was opposed to do so even as they occasionally come into heated arguments everytime this
insistence on the same subject propped up;
9. That even after the death of the mother of the late Fernando Castor in Bo. Bula, City of General Santos, sometime in 1980, the latter and his surviving
wife thought all the while that the land above-described was in the enjoyment of his late mother's family with his 2nd husband; that it was only after
sometime when plaintiff Rosario Dideles Vda. de Castor heard that the land above-described had even been leased by defendant Ceferina de Ungria
with the Stanfilco and Checkered farm;
10. That sometime in 1997, defendant Ceferina de Ungria sent overtures to plaintiffs through Ester Orejana, who is the half sister-in-law of plaintiff
Rosario Dideles Vda. de Castor that she desires to settle with them relating to the land above-described; that the overtures developed into defendant
Ceferina de Ungria meeting for the purpose plaintiff Ferolyn Castor Facurib where the negotiation continued with Lolita Javier as attorney-in-fact after
defendant Ceferina de Ungria left to reside in Manila and which resulted later to the attorney-in-fact offering the plaintiffs P100,000.00 to quitclaim on
their rights over the said land, which offer, however, was refused by plaintiffs as so [insignificant] as compared to the actual value of the same land; that
in that negotiation, defendant Ceferina de Ungria was challenged to show any pertinent document to support her claim on the land in question and
where she meekly answered by saying at the time that she does not have any of such document;
x x x x36
would not conclusively establish laches.1avvphil Thus, it is necessary for petitioners to proceed to trial and present controverting evidence to prove the
elements of laches.
WHEREFORE, the petition for review is DENIED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice

[G.R. No. 183789 : August 24, 2011]

POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION, PETITIONER, VS. POZZOLANIC PHILIPPINES INCORPORATED,
RESPONDENT.
DECISION
PEREZ, J.:

The Case

This petition[1] for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assails (1) the Decision[2] dated 30 April 2008 of the Regional
Trial Court of Quezon City, Branch 96, upholding the validity of respondent's right of first refusal and holding such right binding on petitioner, and (2) the
Order[3] dated 27 June 2008 of the same court, denying petitioner's Motion for Reconsideration and Supplemental Motion for Reconsideration of the 30
April 2008 Decision of the trial court in Civil Case No. Q-00-40731.
The Antecedents

Petitioner Power Sector Assets and Liabilities Management Corporation (PSALM) is a government-owned and controlled corporation created by virtue of
Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act (EPIRA) of 2001.[4] Its principal purpose is to manage the orderly
sale, disposition, and privatization of the National Power Corporation's (NPC's) generation assets, real estate and other disposable assets, and
Independent Power Producer (IPP) contracts, with the objective of liquidating all NPC financial obligations and stranded contract costs in an optimal
manner.[5]
Respondent Pozzolanic Philippines Incorporated (Pozzolanic) is the local subsidiary of Pozzolanic Australia Pty. Ltd. (Pozzolanic Australia),[6] an
Australian corporation which claims to have perfected the techniques in the processing of fly ash for use in the making of cement.[7]
In 1986, Pozzolanic Australia won the public bidding for the purchase of the fly ash generated by NPC's power plant in Batangas.[8] Pozzolanic Australia
then negotiated with NPC for a long-term contract for the purchase of all fly ash to be produced by NPC's future power plants. NPC accepted Pozzolanic
Australia's offer and they entered into a long-term contract, dated 20 October 1987, denominated as "Contract for the Purchase of Fly Ash of Batangas
Coal-Fired Thermal Power Plant Luzon" (the Batangas Contract).[9]
Under Article I of the contract, NPC, referred to therein as the "CORPORATION," granted Pozzolanic Australia, the "PURCHASER," a right of first
refusal to purchase the fly ash generated by the coal-fired plants that may be put up by NPC in the future. The specific provision of the contract states:
PURCHASER has first option to purchase Fly Ash under similar terms and conditions as herein contained from the second unit of Batangas Coal-Fired
Thermal Plant that the CORPORATION may construct. PURCHASER may also exercise the right of first refusal to purchase fly ash from any new coalfired plants which will be put up by CORPORATION.[10]

In 1988, while the necessary clearances and approvals were being obtained by Pozzolanic Australia in connection with the operation of its fly ash
business in the Philippines, its major stockholders decided that it would be more advantageous for the company to organize a Philippine corporation and
to assign to such corporation Pozzolanic Australia's rights to the commercial use of fly ash in the Philippines. Accordingly, in April 1989, respondent
Pozzolanic was formally incorporated to take over Pozzolanic Australia's business in the Philippines.[11] Respondent then commenced to exercise its
rights under the Batangas contract in June, 1989.[12]
In 1998, the Masinloc Coal-Fired Thermal Power Plant (Masinloc Plant) started operations to provide power for NPC. Late that year, respondent began
the installation of its fly ash processing equipment in the Masinloc Plant and began off taking the fly ash produced therein. [13]
Subsequently, on 15 February 1999, NPC and respondent, on an interim basis and prior to the conduct of a public bidding for the contract to purchase
the Masinloc Plant's fly ash, executed a contract whereby respondent was given the right to purchase the said fly ash for a period of one year.[14] The
fourth and fifth "WHEREAS" clauses of the contract provide:
WHEREAS, under the `Contract for the Purchase of the Fly Ash of Batangas Coal-Fired Thermal Power Plant' dated 20 October 1987, PURCHASER
was granted the right of first refusal over any and all fly ash that may be produced by any of NPC's coal-fired power plants in the Philippines;
WHEREAS, NPC intends to bid out the long term contract for the Fly Ash that may be produced by the (Masinloc Coal Fired Thermal Power) Plant
subject to the second paragraph of Article I of the original contract between the parties which was signed on 20 October 1987 giving PURCHASER the
right of first refusal.[15]

In October 1999, the Sual Coal-Fired Power Plant started providing electricity in the Luzon region. [16]NPC thereafter caused to be published in the
Philippine Star and the Manila Bulletin[17] an "Invitation to Pre-Qualify and to Bid," inviting all interested buyers to pre-qualify for the purchase of fly ash
from the Masinloc and/or Sual Power Plants.[18]
As a result, respondent sent letters to NPC calling its attention to respondent's right of first refusal under the Batangas Contract. It also demanded that
any tender documents to be issued in connection with the bidding on the right to purchase the Masinloc and Sual Plants' fly ash include notices
informing prospective bidders of respondent's right of first refusal.
In a letter dated 7 March 2000, NPC informed respondent that it had decided to defer indefinitely the bidding on the right to purchase the Masinloc
Plant's fly ash and to proceed first with the bidding on the right to purchase the Sual Plant's fly ash. Thus, on 7 April 2000, NPC released the tender
documents for the bidding on the Sual Plant's fly ash, which tender documents made no reference to respondent's right of first refusal.[19]
This prompted respondent to file a complaint[20] (later amended[21]) with the trial court praying that NPC be ordered to allow Pozzolanic to exercise its
right of first refusal by permitting it to match the price and terms offered by the winning bidder and by awarding the contract for the purchase of the Sual
Plant's fly ash to Pozzolanic if it matches the price and terms offered by said winning bidder. [22]
While the case was pending before the lower court, NPC decided to also dispose of the fly ash from the Masinloc Plant through public bidding, without

allowing respondent to exercise its right of first refusal. Thus, respondent filed a Supplementary Complaint [23], dated 8 August 2002, praying for the same
reliefs as those prayed for in the amended complaint earlier filed, but as regards the Masinloc Plant. [24]
Meanwhile, on 4 June 2001, Congress enacted the EPIRA (RA 9136) which created PSALM. This resulted in the filing of a Second Supplementary
Complaint, dated 5 March 2003, impleading petitioner PSALM as a necessary and indispensable party. [25]
The litigation became more complicated when petitioner, NPC, and the Department of Energy entered into a Memorandum of Agreement with the
Provincial Government of Zambales and several local government units of Zambales, pursuant to which the Provincial Government of Zambales was
awarded the exclusive right to withdraw the fly ash from the Masinloc Plant. [26] With this development, respondent filed a Third Supplementary Complaint
seeking the annulment of the aforesaid Memorandum of Agreement and other documents related thereto. [27] This complaint was dismissed by the trial
court on the ground of forum shopping, it appearing that the Province of Zambales, et al. had previously filed a case against respondent and NPC,
claiming exclusive right to withdraw the fly ash of the Masinloc Plant. [28]
Respondent appealed the order of dismissal to the Court of Appeals.
On 18 July 2007, while the appeal was pending, respondent and the Provincial Government of Zambales executed an "Agreement"[29] (the Masinloc
Contract) by virtue of which the Province of Zambales awarded to respondent the exclusive right to withdraw the fly ash from the Masinloc Power Plant.
Respondent then moved for the dismissal of its appeal in the Court of Appeals. As a result, the assailed Order of the trial court dismissing respondent's
Third Supplementary Complaint became final.[30]
Also, previously, on 30 March 2005, respondent and NPC entered into a "Purchase Agreement for the Purchase of Fly Ash of Sual Coal-Fired Thermal
Power Plant"[31] (the Sual Contract) whereby NPC awarded to respondent the exclusive right to withdraw the fly ash from the Sual Plant. [32]
As a result, NPC filed, on 4 February 2008, a Motion to Dismiss[33] the Complaint against it on the ground that the issues between it and respondent had
become moot and academic. This is in view of the Purchase Agreement executed by NPC and respondent for the fly ash of the Sual Plant and the
Agreement between respondent and the Provincial Government of Zambales with respect to the fly ash of the Masinloc Plant. [34]
During the hearing on NPC's Motion to Dismiss held on 7 February 2008, the trial court ordered herein petitioner PSALM and respondent Pozzolanic to
comment on the Motion. Petitioner, through counsel, manifested that in addition to commenting on the Motion to Dismiss, it would also like to challenge,
through a position paper, the validity of respondent's right of first refusal.[35]
Respondent herein interposed no objection to the Motion to Dismiss.[36] On the other hand, in its Comment[37] dated 14 February 2008, petitioner
asserted that the following issues should first be resolved before a resolution on the Motion to Dismiss may be had:
1.

whether or not fly ash, which is/are [sic] not yet existing, can be considered assets of the government, the disposition of which is subject to
government rules particularly public bidding;

2.

whether or not the alleged right of first refusal of plaintiff is not contrary to law; and

3.

whether or not PSALM is bound by the said alleged right.[38]

Petitioner thus prayed that resolution on the Motion to Dismiss be held in abeyance pending determination of the issues concerning respondent's alleged
right of first refusal.
Pursuant to its manifestation in open court during the 7 February 2008 hearing on NPC's Motion to Dismiss, petitioner submitted its Position Paper[39] on
29 February 2008 raising the same issues as those in its Comment to NPC's Motion to Dismiss. Petitioner prayed that the complaint against it be
dismissed and that respondent's right of first refusal contained in the second paragraph, Article 1 of the Batangas Contract be declared void ab initio for
being contrary to law and public policy.
In an Order[40] dated 17 March 2008, the trial court dismissed in toto the Amended Complaint and the First Supplementary Complaint. The Second
Supplementary Complaint was PARTIALLY DISMISSED insofar
as it refers to herein respondent's complaint against NPC only. Thus, on 30 April 2008, the trial court rendered the herein assailed Decision declaring
respondent's right of first refusal valid and binding on petitioner. The Motion for Reconsideration and Supplemental Motion for Reconsideration filed by
petitioner seeking a reversal of the decision of the trial court were both denied for lack of merit.[41]
Hence, this petition.
The Issues

Petitioner PSALM prays for the reversal of the challenged decision on the following grounds:
1.

THE TRIAL COURT WAS DIVESTED OF JURISDICTION AFTER IT ISSUED THE ORDER DATED 17 MARCH 2008 DISMISSING WITH
PREJUDICE THE AMENDED COMPLAINT AND THE FIRST SUPPLEMENTARY COMPLAINT. THUS, THE "DECISION" DATED 30 APRIL
2008 RENDERED SUBSEQUENT TO SUCH DISMISSAL IS NULL AND VOID; AND

2.

EVEN ASSUMING THAT THE TRIAL COURT WAS NOT DIVESTED OF JURISDICTION, THE RIGHT OF FIRST REFUSAL IS NOT VALID,
AND THEREFORE, WITHOUT BINDING EFFECT, FOR BEING CONTRARY TO PUBLIC POLICY.

The Court's Ruling

On whether or not the trial court

was divested of jurisdiction
Petitioner contends that by virtue of the Order of the trial court dated 17 March 2008, respondent's Amended Complaint was dismissed with prejudice;
and, since no motion for reconsideration or appeal was filed by any of the parties in the lower court, the Order attained finality. Thus, petitioner argues,
the trial court can no longer take any further action since it had lost all power or authority over the case. The Order of dismissal effectively deprived it of

jurisdiction.[42]
We cannot subscribe to petitioner's argument. Petitioner is barred by the doctrine of estoppel from challenging the lower court's authority to render the
30 April 2008 Decision since it was petitioner itself which called for the exercise of such authority. In its Comment to NPC's Motion to Dismiss, it raised
the following issues:
1.

whether or not fly ash, which is/are [sic] not yet existing, can be considered assets of the government, the disposition of which is subject to
government rules particularly public bidding;

2.

whether or not the alleged right of first refusal of plaintiff is not contrary to law; and

3.

whether or not PSALM is bound by the said alleged right.

Then, again, in its Position Paper, it reiterated the aforesaid issues and petitioned the trial court to dismiss herein respondent's complaint against it and
to invalidate respondent's right of first refusal as contained in the Batangas Contract. Clearly, petitioner invoked the court's jurisdiction by seeking to
obtain a definite pronouncement from it. Having thus called upon the court to settle the issues it has raised, petitioner cannot now repudiate that same
jurisdiction it has invoked in the first place.
This Court has consistently held that "a party cannot invoke the jurisdiction of a court to secure affirmative relief against his opponent and after obtaining
or failing to obtain such relief, repudiate or question that same jurisdiction." [43] The Supreme Court frowns upon the undesirable practice of a party
submitting his case for decision and then accepting the judgment only if favorable, and attacking it for lack of jurisdiction if adverse.[44] If a party invokes
the jurisdiction of a court, he cannot thereafter challenge the court's jurisdiction in the same case. To rule otherwise would amount to speculating on the
fortune of litigation, which is against the policy of the Court.[45]
Petitioner maintains that it had tried to prevent the current situation wherein a decision was rendered by the trial court without a standing complaint.
According to petitioner, in its Comment to NPC's Motion to Dismiss, it prayed for a deferral of the court's action on the Motion until after the resolution of
the issues it has raised. Thus, petitioner claims, it cannot be faulted for the lower court's own procedural lapse in dismissing the Amended Complaint
despite petitioner's prayer.[46]
Again, we cannot sustain petitioner's contention.
It must be noted that petitioner did not raise the foregoing argument in its Comment on NPC's Motion to Dismiss. Neither was it mentioned in the
Position Paper it filed before the trial court. Not even in its Motion for Reconsideration of the herein challenged Decision did petitioner discuss the issue.
The matter was raised for the first time in its Supplemental Motion for Reconsideration, thereby giving credence to respondent's contention that the
same was just an afterthought[47] on the part of petitioner.
If petitioner's claim is to be accepted as true, it should have raised the issue regarding the trial court's jurisdiction at the very first opportunity, which was,
at the time of its receipt of the 17 March 2008 Order dismissing the Amended and First Supplementary Complaints in toto and only partially dismissing
the Second Supplementary Complaint wherein petitioner was impleaded. At that point, petitioner should have been forewarned that the proceedings, as
against it, have not been terminated. Then, too, as far as the issues it raised in its Comment and Position Paper were concerned, no pronouncement
had, as yet, been made by the court at the time. Obviously, there were still matters that needed to be resolved by the court. Thus, if petitioner truly
believed that the court had lost its jurisdiction after it dismissed the Amended Complaint, it should have questioned the 17 March 2008 Order of the court
which failed to completely dispose of the case. Instead, it waited for the court to issue the questioned Decision, and only then did petitioner broach the
subject. Clearly, under the circumstances, petitioner is estopped from questioning the court's jurisdiction.
On the validity of respondent's
right of first refusal
We hold the right of first refusal granted to respondent in the Batangas Contract invalid for being contrary to public policy as the same violates the
requirement of competitive public bidding in the award of government contracts, for the following reasons:
One: The grant to respondent of the right of first refusal constitutes an unauthorized provision in the contract that was entered into pursuant to the
bidding.
By respondent's own admission, the right of first refusal granted to it was "contractually bargained for and acquired from NPC" [48] after it won the public
bidding for the purchase of the fly ash produced by the Batangas Power Plant. [49] This clearly indicates that the right of first refusal was not included in
the bid documents presented to the other bidders who participated in the bidding. As a result, the contract signed by NPC and respondent is different
from that which was bidded out.
It has been held that the three principles in public bidding are: (1) the offer to the public; (2) an opportunity for competition; and (3) a basis for the exact
comparison of bids. A regulation of the matter which excludes any of these factors destroys the distinctive character of the system and thwarts the
purpose of its adoption.[50]
Thus, in the case of Agan, Jr. v. Philippine International Air Terminals Co., Inc.[51] (PIATCO), the Supreme Court declared as null and void, for being
contrary to public policy, the Concession Agreement entered into by the government with PIATCO because it contained provisions that substantially
departed from the draft Concession Agreement included in the bid documents.[52]
Also, in Commission on Audit v. Link Worth International, Inc.,[53] the Court affirmed the respective decisions of the trial court and the Court of Appeals
annulling the award of a procurement contract to a bidder whose technical proposal varied from the bid specifications. It appears that during the postqualification stage, the Bids and Awards Committee of the Commission on Audit considered some factors in the verification and validation of the winning
bidder's proposal which were extraneous to and not included in the bid documents. [54] Thus, the Court emphasized that the function of post-qualification
is to verify, inspect and test whether the technical specifications of the goods offered comply with the requirements of the contract and the bidding
documents. It does not give occasion for the procuring entity to arbitrarily exercise its discretion and brush aside the very requirements it specified as
vital components of the goods it bids out.[55]
In Caltex (Philippines), Inc., et al. v. Delgado Brothers, Inc. et al.,[56] the Supreme Court likewise affirmed a decision of the trial court declaring as null and
void the amendment to an arrastre contract for the reason that the same was done without public bidding. Citing the appealed decision, the Court held
that:
x x x the said agreement of June 1, 1951 executed and entered into without previous public bidding, is null and void, and can not adversely affect the
rights of third parties, x x x and of the public in general. x x x the due execution of a contract after public bidding is a limitation upon the right of the

contracting parties to alter or amend it without another public bidding, for otherwise what would a public bidding be good for if after the execution of a
contract after public bidding, the contracting parties may alter or amend the contract, or even cancel it, at their will? Public biddings are held for the
protection of the public, and to give the public the best possible advantages by means of open competition between the bidders. He who bids or offers
the best terms is awarded the contract subject of the bid, and it is obvious that such protection and best possible advantages to the public will disappear
if the parties to a contract executed after public bidding may alter or amend it without another previous public bidding. [57]

Finally, in Information Technology Foundation of the Philippines v. Commission on Elections,[58] the Court nullified the award by the Commission on
Elections (COMELEC) of a contract for the automation of the counting and canvassing of the ballots in the 2004 elections on the ground, among others,
that it permitted the winning bidder to change and alter the subject of the contract, in effect allowing a substantive amendment without public
bidding.[59] Said the Supreme Court therein: "it is contrary to the very concept of public bidding to permit a variance between the conditions under which
the bids are invited and those under which proposals are submitted and approved; or, as in this case, the conditions under which the bid is won and
those under which the awarded contract will be complied with. The substantive amendment of the contract bidded out, without any public bidding after the bidding process had been concluded - is violative of the public policy on public biddings, x x x. The whole point in going through the public
bidding exercise was completely lost. The very rationale of public bidding was totally subverted by the Commission."[60]
By its very nature, public bidding aims to protect public interest by giving the public the best possible advantages through open competition. Thus,
competition must be legitimate, fair and honest. In the field of government contract law, competition requires not only bidding upon a common standard,
a common basis, upon the same thing, the same subject matter, and the same undertaking, but also that it be legitimate, fair and honest and not
designed to injure or defraud the government.[61] An essential element of a publicly bidded contract is that "all bidders must be on equal footing, not
simply in terms of application of the procedural rules and regulations imposed by the relevant government agency, but more importantly, on the contract
bidded upon. Each bidder must be able to bid on the same thing." [62]
As pointed out by the Court in Agan, if the winning bidder is allowed to later include or modify certain provisions in the contract awarded such that the
contract is altered in any material respect, then the essence of fair competition in the public bidding is destroyed. A public bidding would be a farce if,
after the contract is awarded, the winning bidder may modify the contract and include provisions which are favorable to it that were not previously made
available to the other bidders.[63] The government cannot enter into a contract with the highest bidder and incorporate substantial provisions beneficial to
him, not included or contemplated in the terms and specifications upon which the bids were invited. [64]
Aside from protecting public interest by giving the public the best possible advantages through open competition, "[a]nother self-evident purpose of
public bidding is to avoid or preclude suspicion of favoritism and anomalies in the execution of public contracts." [65] Such bias or partiality and
irregularities may be validly presumed if, as in this case, after a contract has been awarded, the parties carry out changes or make amendments thereto
which gives the winning bidder an edge or advantage over the other bidders who participated in the bidding, or which makes the signed contract
unfavorable to the government. Thus, there can be no substantial or material change to the parameters of the project, including the essential terms and
conditions of the contract bidded upon, after the contract award. [66]
The Court acknowledges that a winning bidder is not precluded from modifying or amending certain provisions of the contract bidded upon. However,
such changes must not constitute substantial or material amendments that would alter the basic parameters of the contract and would constitute a denial
to the other bidders of the opportunity to bid on the same terms. Hence, the determination of whether or not a modification or amendment of a contract
bidded out constitutes a substantial amendment rests on whether the contract, when taken as a whole, would contain substantially different terms and
conditions that would have the effect of altering the technical and/or financial proposals previously submitted by other bidders. The alteration and
modifications in the contract executed between the government and the winning bidder must be such as to render such executed contract to be an
entirely different contract from the one that was bidded upon. [67]
The grant of the right of first refusal in this case did not only substantially amend the terms of the contract bidded upon, so that resultantly, the other
bidders thereto were deprived of the terms and opportunities granted to respondent after it won the public auction, it so altered the bid terms - the very
admission by all parties that the disposal of fly ash must be through public bidding - by effectively barring any and all true biddings in the future. The
grant of first refusal was a grant to respondent of the right to buy fly ash in all coal-fired plants of NPC. Proceeding from the afore-cited jurisprudence,
the Batangas Contract is, consequently, a nullity.
Two: The right to buy fly ash precedes and is the basis of the right of first refusal, and the consequent right cannot be acquired together with and at the
same time as the precedent right.
The right of first refusal has long been recognized, both legally and jurisprudentially, as valid in our jurisdiction. It is significant to note, however, that in
those cases where the right of refusal is upheld by both law and jurisprudence, the party in whose favor the right is granted has an interest on the object
over which the right of first refusal is to be exercised. In those instances, the grant of the right of first refusal is a means to protect such interest.
Thus, Presidential Decree (P.D.) No. 1517,[68] as amended by P.D. No. 2016,[69] grants to qualified tenants of land in areas declared as urban land
reform zones, the right of first refusal to purchase the same within a reasonable time and at a reasonable price.[70] The same right is accorded by
Republic Act No. 7279[71] (Urban Development and Housing Act of 1992) to qualified beneficiaries of socialized housing, with respect to the land they are
occupying. Accordingly, in Valderama v. Macalde,[72] Paraaque Kings Enterprises, Inc. v. Court of Appeals,[73] and Conculada v. Court of
Appeals,[74] the Supreme Court sustained the tenant's right of first refusal pursuant to P.D. 1517.
In Polytechnic University of the Philippines v. Court of Appeals [75] and Polytechnic University of the Philippines v. Golden Horizon Realty Corporation[76],
this Court upheld the right of refusal of therein respondent private corporations concerning lots they are leasing from the government.
In the case of Republic v. Sandiganbayan, [77] the Presidential Commission on Good Government (PCGG) sought to exercise its right of first refusal as a
stockholder of Eastern Telecommunications Philippines, Inc. (ETPI), a corporation sequestered by the PCGG, to purchase ETPI shares being sold by
another stockholder to a non-stockholder. While the Court recognized that PCGG had a right of first refusal with respect to ETPI's shares,[78] it
nevertheless did not sustain such right on the ground that the same was not seasonably exercised. [79]
Finally, in Litonjua v. L & R Corporation,[80] the Supreme Court recognized the validity and enforceability of a stipulation in a mortgage contract granting
the mortgagee the right of first refusal should the mortgagor decide to sell the property subject of the mortgage.
In all the foregoing cases, the party seeking to exercise the right has a vested interest in, if not a right to, the subject of the right of first refusal. Thus, on
account of such interest, a tenant (with respect to the land occupied), a lessee (vis- -vis the property leased), a stockholder (as regards shares of
stock), and a mortgagor (in relation to the subject of the mortgage), are all granted first priority to buy the property over which they have an interest in the
event of its sale. Even in the JG Summit Case,[81]which case was heavily relied upon by the lower court in its decision and by respondent in support of its
arguments, the right of first refusal to the corporation's shares of stock - later exchanged for the right to top - granted to KAWASAKI was based on the
fact that it was a shareholder in the joint venture for the construction, operation, and management of the Philippine Shipyard and Engineering
Corporation (PHILSECO).

In the case at bar, however, there is no basis whatsoever for the grant to respondent of the right of first refusal with respect to the fly ash of NPC power
plants since the right to purchase at the time of bidding is that which is precisely the bidding subject, not yet existent much more vested in respondent.
KAWASAKI's situation is different from that of respondent in that the former has an established interest in the shares subject of the right of first refusal.
In the words of the Court in that case: "KAWASAKI is not a mere non-bidder. It is a PARTNER in the joint venture x x x."[82] (Emphasis supplied).
Further, in the JG Summit Case,[83] what was involved was not merely a right to match but a right to top by five percent (5%) the highest bid for the
shares subject of the public bidding.[84] Undoubtedly, such an arrangement is truly advantageous to the government. Here, aside from respondent not
having a vested interest in the subject matter of the public bidding, its right of first refusal allows it to merelymatch the highest bid offered at the public
auction. This agreement clearly makes a farce of the bidding process, as the government will merely go through the motion of holding a public bidding
and declaring a highest bidder only to award the contract to respondent, who did not even participate in the bidding.
It is significant to note that, in the tender documents for the bidding of the fly ash of the Masinloc Power Plant, NPC gave respondent the opportunity to
top the highest bid by fifteen percent (15%). Respondent protested this, however, as an infringement upon its alleged right of first refusal to purchase the
Masinloc fly ash, as supposedly guaranteed by the Batangas Contract. [85]
In effect, therefore, in asserting its right of first refusal, what respondent is asking is that it be given undue advantage over any other party interested to
purchase the fly ash of NPC's power plants. Obviously, this cannot be countenanced. It is inherent in public biddings that there shall be a fair competition
among the bidders. The specifications in such biddings provide the common ground or basis for the bidders. The specifications should, accordingly,
operate equally or indiscriminately upon all bidders.[86]
It should also be pointed out that while respondent maintains that it never sought to disallow the public bidding of the fly ash in question, the records of
this case, nevertheless, disclose that the right to withdraw the fly ash of the Sual and Masinloc Plants was awarded to respondent without the benefit of
a public auction.[87] Thus, the grant to respondent of the right of first refusal in the Batangas Contract paved the way for respondent to obtain the right to
withdraw fly ash from the aforementioned power plants without public bidding. The second and third "WHEREAS" clauses of the Sual Contract are
particularly telling on this score:
WHEREAS, in the Contract for the Purchase of Fly Ash of BCFTPP provides for the "Right of First Refusal" to PURCHASER to purchase fly ash from
any new coal-fired plants which will be put up by NPC;
WHEREAS, NPC owns the fly ash generated by the two (2) units of 1,200 MW Sual Coal-Fired Thermal Power Plant (SCFTPP) located at Barangay
Pangascasan, Sual, Pangasinan, hereinafter referred to as the Plant; [88]

With respect to the Masinloc Plant, it will be recalled that the right to
withdraw the fly ash from the same was the subject of the Third Supplementary Complaint, filed by respondent before the trial court to enforce the right
of first refusal provision in the Batangas Contract, which complaint was, however, dismissed on the ground of forum shopping. Nevertheless, while the
order of dismissal was on appeal in the Court of Appeals, the right to withdraw the fly ash of the Masinloc Plant was granted to respondent by the
Provincial Government of Zambales, by virtue of which, respondent moved for the dismissal of its appeal, thereby resulting in the finality of the order of
dismissal of the trial court.
It can be easily deduced from the foregoing that the Masinloc Contract was likewise sourced from respondent's supposed right of first refusal, thereby
giving respondent preferential right to the fly ash of the Masinloc Plant and allowing it to withdraw the Plant's fly ash without having to go through a
public bidding. Had the Masinloc Contract not been drafted, it is clear that respondent's complaint for the enforcement of the provision granting it the
right of first refusal would have continued. The Masinloc Contract, then, is a virtual recognition of respondent's alleged right of first refusal.
The rationale behind the requirement of a public bidding, as a mode of awarding government contracts, is to ensure that the people get maximum
benefits and quality services from the contracts. More significantly, strict compliance with the requirement of public bidding echoes the call for
transparency in government transactions and accountability of public officers. Public biddings are intended to minimize occasions for corruption and
temptations to abuse discretion on the part of government authorities in awarding contracts. [89]
Based on the afore-quoted "WHEREAS" clauses of the Sual Contract, the right to purchase the fly ash from the Sual Plant was granted to respondent,
without having to undergo a public auction, on the basis of its right of first refusal embodied in the Batangas Contract. This negates respondent's claim
that the right of first refusal granted to it does not preclude a public bidding. The right of first refusal provision was used to subvert the rule that all
government contracts should be awarded after competitive public bidding. This demonstrates the iniquity of allowing the provision to prevail over
requirements of public policy. Thus, the evil precisely sought to be prevented by the requirement of public bidding came to pass in this case: the Sual
and Masinloc Contracts were awarded to respondent without any public bidding having been conducted.
Three: The right of first refusal is against the public policy that contracts must be awarded through public bidding.
Respondent would have us sustain its right of first refusal on the ground that Article 1159 of the New Civil Code provides that "obligations arising from
contracts have the force of law between the contracting parties and should be complied with in good faith." Hence, respondent argues, the Batangas
Contract is binding upon NPC and respondent and their respective successors-in-interest.[90]
True, it is a fundamental rule that contracts, once perfected, bind both contracting parties and a contract freely entered into should be respected since a
contract is the law between the parties.[91]However, it must be understood that contracts are not the only source of law that govern the rights and
obligations between parties. More specifically, no contractual stipulation may contradict law, morals, good customs, public order or public policy.[92]
The principle of party autonomy in contracts is not an absolute principle. The rule in Article 1306 of our Civil Code is that the contracting parties may
establish such stipulations as they may deem convenient provided they are not contrary to law, morals, good customs, public order or public policy.
Thus, counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of applicable laws, especially
provisions relating to matters affected with public policy, are deemed written into the contract. Put a little differently, the governing principle is that parties
may not contract away applicable provisions of law, especially peremptory provisions dealing with matters heavily impressed with public interest.[93]
In this jurisdiction, public bidding is the established procedure in the grant of government contracts. The award of public contracts through public bidding
is a matter of public policy.[94]
Public policy has been defined as that principle under which freedom of contract or private dealing is restricted for the good of the community.[95] Under
the principles relating to the doctrine of public policy, as applied to the law of contracts, courts of justice will not recognize or uphold a transaction when

its object, operation, or tendency is calculated to be prejudicial to the public welfare, to sound morality or to civic honesty. [96]
Consistent with the principle that public auction in the conferment of government contract involves public policy, Congress enacted various laws
governing the procedure in the conduct of public bidding and prescribing policies and guidelines therefor. With respect to the disposal of government
assets and property, of particular application in this case are Circular Nos. 86-264[97] and 89-296[98] of the Commission on Audit, dated 16 October 1986
and 27 January 1989, respectively. Both circulars provide that the divestment or disposal of government property shall be undertaken primarily through
public auction.[99]
Respondent puts forth the argument that fly ash is a waste product[100] and therefore cannot be considered as an asset of the government within the
contemplation of the laws governing disposal of government property.
The peculiarity of fly ash as property of the government is that, from its inception, it is already a residual product. Unlike the government properties
subject of P.D. 1445[101] and the Government Auditing and Accounting Manual, fly ash is not property previously utilized by the government in its
operations which has become unserviceable. Justifiably, the government did not foresee the possibility of any use for and, much less, of deriving profit
from it. Hence, the lack of a specific law governing its disposal and its non-inclusion in existing laws on the divestment of government property. There is
no doubt, however that fly ash is property - and more importantly, asset - of the government. Fly ash is produced by power plants owned by the
government and both the government and respondent derive profit from it. Besides, the fact that respondent is fighting tooth and nail for the right to
withdraw the same from NPC's power plants is indubitable proof of its value. Its sale is, therefore, subject to the rules on the disposal of government
assets and property. Applicable laws form part of, and are read into, contracts without need for any express reference thereto; more so, to a government
contract which is imbued with public interest.[102]
In the case of Ongsiako v. Gamboa,[103] this Court declared that an agreement is against public policy if it is injurious to the interests of the public,
contravenes some established interest of society, violates some public statute, is against good morals, tends to interfere with the public welfare or
safety, or, as it is sometimes put, if it is at war with the interests of society and is in conflict with the morals of the time.[104]
Thus, respondent's right of first refusal cannot take precedence over the dictates of public policy.
The right of first refusal of respondent being invalid, it follows that it has no binding effect. It does not create an obligation on the part of petitioner to
acknowledge the same. Neither does it confer a preferential right upon respondent to the fly ash of NPC's power plants.
How, then, does the invalidation of respondent's right of first refusal affect the Sual and Masinloc Contracts which were executed pursuant to such right?
As discussed above, the right of first refusal granted to respondent in the Batangas Contract paved the way for the award to respondent of the Sual
Contract without any public bidding having been conducted therefor. In a long line of cases, this Court has pronounced that government contracts shall
not be entered into or renewed without public bidding.[105] Thus, the Supreme Court has struck down contracts and agreements entered into in violation
of this requirement.
In the case of National Food Authority v. Court of Appeals,[106] the Court ruled against the legality of negotiated security contracts awarded by the
National Food Authority (NFA) to several private security agencies in default of a public bidding. According to the Court, the NFA's manifest reluctance to
hold a public bidding and award a contract to the winning bidder smacks of favoritism and partiality toward the security agencies to whom it awarded the
negotiated contracts and cannot be countenanced.[107]
Likewise, in Manila International Airport Authority v. Mabunay,[108] the Supreme Court dismissed a petition for review seeking the annulment of a decision
of the lower court declaring that under the laws and regulations, it is necessary for the Manila International Airport Authority to contract for security
services through public bidding. The Court reiterated the basic principle that in the execution of all government contracts, public bidding is the accepted
method for arriving at a fair and reasonable price. [I]t ensures that overpricing and favoritism, and other anomalous practices are eliminated or
minimized.[109]
In Chavez v. Public Estates Authority,[110] the Amended Joint Venture Agreement (JVA) entered into between the Public Estates Authority and the Amari
Coastal Bay and Development Corporation (AMARI) was declared null and void ab initio because it, among others, sought to convey to AMARI, a private
entity, reclaimed public lands without the benefit of a public bidding. The Court cited Section 79 of Presidential Decree (P.D.) No. 1445, otherwise known
as the Government Auditing Code, which requires the government to sell valuable government property through public bidding. [111] The Court stated
further that the Commission on Audit implements Section 79 of the Government Auditing Code through Circular No. 89-296[112] dated 27 January 1989.
This circular emphasizes that government assets must be disposed of only through public auction.[113] In denying respondents' Second Motions for
Reconsideration and sustaining the invalidity of the Amended JVA, this Court reiterated that the JVA is a negotiated contract which clearly contravenes
Section 79 of P.D. 1445.[114]
Section 79 of P.D. 1445 and COA Circular No. 89-296, among others, were also relied upon by the Supreme Court in declaring as inexistent and void ab
initio the Compromise Agreement between the Philippine National Construction Corporation and Radstock Securities Limited in the case of Strategic
Alliance Development Corporation v. Radstock Securities Limited.[115] Under the Compromise Agreement in that case, the PNCC shall dispose of
substantial parcels of land, by way of dacion en pago, in favor of Radstock, a private corporation incorporated in the British Virgin Islands.[116] Citing the
aforementioned case of Chavez v. Public Estates Authority,[117] the Court echoed the necessity of a public bidding for the disposal of government
properties.[118]
Finally, in Gana v. Triple Crown Services Inc.,[119] the Supreme Court declared as null and void the negotiated contract for janitorial and maintenance
services between the Manila International Airport Authority (MIAA) and Goodline Staffers & Allied Services, Inc. According to the Supreme Court, the
constitutional right of Olongapo Maintenance Services, Inc. (OMSI) and Triple Crown Services, Inc. (TCSI), the incumbent service contractors, to equal
protection of the law was violated by MIAA and its general manager when no public bidding was called precisely because the latter were going to award
the subject service contracts through negotiation. Worse, the Court continued, the acts of MIAA and Ganasmack of arbitrariness and discrimination as
they not only did not call for the required public bidding but also did not even accord OMSI and TCSI the opportunity to submit their proposals in a public
bidding.[120]
By the very language of the Sual Contract, the same was entered pursuant to respondent's right of first refusal and in consideration of respondent's
conformity to withdraw its complaint against NPC. The pertinent provisions of the Sual Contract are herein below quoted:
WHEREAS, NPC and PURCHASER [Pozzolanic] entered into a Contract for the Purchase of Fly Ash of Batangas Coal Fired Thermal Power Plant
(BCFTPP) on October 20, 1987 and Contract for the Purchase of Fly Ash of Masinloc Coal Fired Thermal Power Plant (MCFTPP) dated February 10,
1999;
WHEREAS, in the Contract for the Purchase of Fly Ash of BCFTPP provided for the `Right of First Refusal' to PURCHASER to purchase fly ash
from any new coal-fired plants which will be put up by NPC;

WHEREAS, NPC owns the fly ash generated by the two (2) units of 1,200 MW Sual Coal-Fired Thermal Power Plant (SCFTPP) located at Barangay
Pangascasan, Sual, Pangasinan, hereinafter referred to as the Plant;
XXX

WHEREAS, PURCHASER filed a case for Specific Performance with Injunction under Civil Case No. Q-00-40731 before the Branch 90 of the Regional
Trial Court of Quezon City and which Court issued a Preliminary Injunction against NPC on the public bidding and sale of Fly Ash of MCFTPP and Sual
Coal Fired Thermal Power Plant (SCFTPP);
WHEREAS, in a letter dated December 2, 2004, NPC and PURCHASER have agreed that in order to settle the issue, NPC fully recognizes and
honors the `Right of First Refusal' of PURCHASER to the fly ash produced at SCFTPP in lieu of the fly ash produced at MCFTPP;
WHEREAS, in consideration of NPC's recognition of the `Right of First Refusal' in said letter dated 2 December 2004 and the execution of this
Purchase Agreement, PURCHASER waives any and all claims to the fly ash produced at MCFTPP and arising out of its rights under the `Contract for
the Purchase of Fly Ash of the Masinloc Coal-Fired Thermal Power Plant' dated February 10, 1999;
XXX

ARTICLE VI
WAIVER
NPC hereby fully recognizes and honors the `Right of First Refusal' of PURCHASER to the fly ash produced at SCFTPP in lieu of the fly ash
produced at the Masinloc Plant.
XXX

It is agreed that within thirty (30) days from and after execution of this Agreement, NPC and PURCHASER will jointly, together with PSALM
Corporation move for the dismissal, with prejudice of Civil Case No. Q-00-40731 at the Regional Trial Court, Branch 90 of Quezon City.
The pertinent `Motion' for the dismissal of Civil Case No. Q-00-40731, to be filed in Branch 90 of the Regional Trial Court of Quezon City, or before any
other Court who may then be hearing the above case, shall include therein a complete textual copy of this Purchase Agreement, duly signed by all the
parties hereto, which shall become an integral part of the compromise, for the dismissal of the said case, to be approved by the Trial Court.
X X X[121] (Emphases supplied).

Based on the foregoing, the Sual Contract is clearly a negotiated contract by virtue of which, NPC awards to respondent the right to withdraw the fly
ash of the Sual Plant - without public bidding - in exchange for which, respondent (1) waives its rights to the fly ash of the Masinloc Plant and (2)
consents to withdraw its case against NPC. As a result, the Sual Contract is invalid for failure to comply with the rules on public bidding.
The foregoing principles on the necessity of a public bidding for all government contracts obviously apply to the Masinloc Contract as well, the same
being a public contract since one of the parties thereto is a government entity. While its terms do not expressly provide that the same was executed
pursuant to the right of first refusal granted to respondent under the Batangas Contract, the circumstances under which it was drafted, as narrated
above, clearly indicate that the Masinloc Contract is a recognition of the challenged right of first refusal. The case filed by respondent for the recognition
and enforcement of its right of first refusal was settled only after the execution of the Masinloc Contract, pursuant to which, respondent was awarded the
exclusive right to withdraw the fly ash of the Masinloc Power Plant without the benefit of a public bidding.
As adverted to above, the disposal of NPC power plants' fly ash is governed by COA Circular Nos. 86-264 and 89-296.[122] These circulars direct that
public auction shall be the primary mode of disposal of assets of the government and sale through negotiation shall be resorted to only in case of failure
of public auction.[123] For failure to abide by the requirement of a public bidding in the disposal of government assets, this Court is left with no option but
to likewise declare the Sual and Masinloc Contracts null and void.
In conclusion, this Court stresses that although a right of first refusal is a contractual prerogative recognized by both law and jurisprudence, the grant of
such right in this case is invalid for being contrary to public policy.
WHEREFORE, we GRANT the petition for review on certiorari. The Decision dated 30 April 2008 and Order dated 27 June 2008 of the Regional Trial
Court of Quezon City, Branch 96 in Civil Case No. Q-00-40731 are hereby REVERSED AND SET ASIDE. Further, the Batangas, Sual and Masinloc
Contracts are hereby declared NULL AND VOID for being contrary to law and public policy. Petitioner is hereby ordered to conduct a bidding of the right
to purchase the fly ash produced by the Batangas, Masinloc and Sual Power Plants within thirty (30) days from the finality of this Decision.
SO ORDERED.
Carpio, (Chairperson), Velasco, Jr.* Peralta,** and Mendoza, JJ., *** concur.
Endnotes:
[G.R. No. 173085 : January 19, 2011]
PHILIPPINE VETERANS BANK, Petitioner, v. BASES CONVERSION DEVELOPMENT AUTHORITY, LAND BANK OF THE PHILIPPINES,
ARMANDO SIMBILLO, CHRISTIAN MARCELO, ROLANDO DAVID, RICARDO BUCUD, PABLO SANTOS, AGRIFINA ENRIQUEZ, CONRADO
ESPELETA, CATGERUBE CASTRO, CARLITO MERCADO AND ALFREDO SUAREZ, Respondents.
DECISION

ABAD, J.:

This case is about the authority of the court in an expropriation case to adjudicate questions of ownership of the subject properties where such questions
involve the determination of the validity of the issuance to the defendants of Certificates of Land Ownership Awards (CLOAs) and Emancipation Patents
(EPs), questions that fall within the jurisdiction of the Department of Agrarian Reform Adjudication Board (DARAB).chanrobles|lawlibrary
The Facts and the Case

In late 2003 respondent Bases Conversion Development Authority (BCDA), a government corporation, filed several expropriation actions before the
various branches of the Regional Trial Court (RTC) of Angeles City, for acquisition of lands needed for the construction of the Subic-Clark-Tarlac
Expressway Project. Ten of these cases were raffled to Branch 58 of the court [1] and it is these that are the concern of the present
petition.chanrobles|lawlibrary
The defendants in Branch 58 cases were respondents Armando Simbillo, Christian Marcelo, Rolando David, Ricardo Bucud, Pablo Santos, Agrifina
Enriquez, Conrado Espeleta, Catgerube Castro, Carlito Mercado, and Alfredo Suarez. They were the registered owners of the expropriated lands that
they acquired as beneficiaries of the comprehensive agrarian reform program. Another defendant was Land Bank of the Philippines, the mortgagee of
the lands by virtue of the loans it extended for their acquisition. The lands in these cases were located in Porac and Floridablanca,
Pampanga.chanrobles|lawlibrary
On learning of the expropriation cases before Branch 58, petitioner Philippine Veterans Bank (PVB) filed motions to intervene in all the cases with
attached complaints-in-intervention, a remedy that it adopted in similar cases with the other branches. PVB alleged that the covered properties actually
belonged to Belmonte Agro-Industrial Development Corp. which mortgaged the lands to PVB in 1976. PVB had since foreclosed on the mortgages and
bought the same at public auction in 1982. Unfortunately, the bank had been unable to consolidate ownership in its name.chanrobles|lawlibrary
But, in its order of August 18, 2004,[2] Branch 58 denied PVB's motion for intervention on the ground that the intervention amounts to a third-party
complaint that is not allowed in expropriation cases and that the intervention would delay the proceedings in the cases before it. Besides, said Branch
58, PVB had a pending action for annulment of the titles issued to the individual defendants and this was pending before Branch 62 of the
court.chanrobles|lawlibrary
PVB filed its motion for reconsideration but Branch 58 denied the same, prompting the bank to file a petition for certiorari with the Court of Appeals
(CA).[3] On January 26, 2006 the CA rendered a decision, dismissing the petition for lack of merit.[4] It also denied in a resolution dated June 2,
2006[5]PVB's motion for reconsideration.chanrobles|lawlibrary
Meanwhile, on April 3, 2006 Branch 58 issued separate decisions in all 10 cases before it, granting the expropriation of the subject properties. The court
noted the uncertainty as to the ownership of such properties but took no action to grant BCDA's prayer in its complaint that it determine the question of
ownership of the same pursuant to Section 9, Rule 67 of the Revised Rules of Civil Procedure.[6]
The Issue Presented

The issue presented in this case is whether or not the CA erred in holding that PVB was not entitled to intervene in the expropriation cases before
Branch 58 of the Angeles City RTC.chanrobles|lawlibrary
The Court's Ruling

PVB maintains that in deciding the case, the RTC and the CA ignored Section 9, Rule 67 of the 1997 Rules of Civil Procedure, which authorizes the
court adjudicating the expropriation case to hear and decide conflicting claims regarding the ownership of the properties involved while the
compensation for the expropriated property is in the meantime deposited with the court. Section 9 provides:chanrobles|virtuallawlibrary
Sec. 9. Uncertain ownership; conflicting claims. - If the ownership of the property taken is uncertain, or there are conflicting claims to any
part thereof, the court may order any sum or sums awarded as compensation for the property to be paid to the court for the benefit of the
person adjudged in the same proceeding to be entitled thereto. But the judgment shall require the payment of the sum or sums awarded to
either the defendant or the court before the plaintiff can enter upon the property, or retain it for the public use or purpose if entry has already
been made.

PVB's point regarding the authority of the court in expropriation cases to hear and adjudicate conflicting claims over the ownership of the lands involved
in such cases is valid. But such rule obviously cannot apply to PVB for the following reasons:chanrobles|virtuallawlibrary
1. At the time PVB tried to intervene in the expropriation cases, its conflict with the farmer beneficiaries who held CLOAs, EPs, or TCTs emanating from
such titles were already pending before Angeles City RTC Branch 62, a co-equal branch of the same court. Branch 58 had no authority to pre-empt
Branch 62 of its power to hear and adjudicate claims that were already pending before it.chanrobles|lawlibrary
2. Of course, subsequently, after the CA dismissed PVB's petition on January 26, 2006, the latter filed a motion for reconsideration, pointing out that it
had in the meantime already withdrawn the actions it filed with Branch 62 after learning from the decision of the Supreme Court in Department of
Agrarian Reform v. Cuenca,[7] that jurisdiction over cases involving the annulment of CLOAs and EPs were vested by Republic Act 6657 in the
DARAB.[8]
PVB now points out that, since there was no longer any impediment in RTC Branch 58 taking cognizance of its motion for intervention and adjudicating
the parties' conflicting claims over the expropriated properties, the CA was in error in not reconsidering its decision.chanrobles|lawlibrary
But PVB's withdrawal of its actions from Branch 62 cannot give Branch 58 comfort. As PVB itself insists, jurisdiction over the annulment of the individual
defendants' CLOAs and EPs (which titles if annulled would leave PVB's titles to the lands unchallenged) lies with the DARAB. Branch 58 would still have
no power to adjudicate the issues of ownership presented by the PVB's intervention.chanrobles|lawlibrary
Actually, PVB's remedy was to secure an order from Branch 58 to have the proceeds of the expropriation deposited with that branch in the meantime,
pending adjudication of the issues of ownership of the expropriated lands by the DARAB. Section 9 above empowers the court to order payment to itself
of the proceeds of the expropriation whenever questions of ownership are yet to be settled. There is no reason why this rule should not be applied even
where the settlement of such questions is to be made by another tribunal.chanrobles|lawlibrary

WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of Appeals dated January 26, 2006 and its resolution dated June
2, 2006 in CA-G.R. SP 88144.chanrobles|lawlibrary
SO ORDERED.
Carpio, J., (Chairperson), Nachura, Peralta, and Mendoza, JJ., concur.
[G.R. No. 176579 : June 28, 2011]
WILSON P. GAMBOA, PETITIONER, VS. FINANCE SECRETARY MARGARITO B. TEVES, FINANCE UNDERSECRETARY JOHN P. SEVILLA,
AND COMMISSIONER RICARDO ABCEDE OF THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG) IN THEIR CAPACITIES AS
CHAIR AND MEMBERS, RESPECTIVELY, OF THE PRIVATIZATION COUNCIL, CHAIRMAN ANTHONI SALIM OF FIRST PACIFIC CO., LTD. IN
HIS CAPACITY AS DIRECTOR OF METRO PACIFIC ASSET HOLDINGS INC., CHAIRMAN MANUEL V. PANGILINAN OF PHILIPPINE LONG
DISTANCE TELEPHONE COMPANY (PLDT) IN HIS CAPACITY AS MANAGING DIRECTOR OF FIRST PACIFIC CO., LTD., PRESIDENT
NAPOLEON L. NAZARENO OF PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, CHAIR FE BARIN OF THE SECURITIES EXCHANGE
COMMISSION, AND PRESIDENT FRANCIS LIM OF THE PHILIPPINE STOCK EXCHANGE, RESPONDENTS.
PABLITO V. SANIDAD AND ARNO V. SANIDAD, PETITIONERS-IN-INTERVENTION.
DECISION

CARPIO, J.:

The Case

This is an original petition for prohibition, injunction, declaratory relief and declaration of nullity of the sale of shares of stock of Philippine
Telecommunications Investment Corporation (PTIC) by the government of the Republic of the Philippines to Metro Pacific Assets Holdings, Inc. (MPAH),
an affiliate of First Pacific Company Limited (First Pacific).
The Antecedents

The facts, according to petitioner Wilson P. Gamboa, a stockholder of Philippine Long Distance Telephone Company (PLDT), are as follows:[1]
On 28 November 1928, the Philippine Legislature enacted Act No. 3436 which granted PLDT a franchise and the right to engage in telecommunications
business. In 1969, General Telephone and Electronics Corporation (GTE), an American company and a major PLDT stockholder, sold 26 percent of the
outstanding common shares of PLDT to PTIC. In 1977, Prime Holdings, Inc. (PHI) was incorporated by several persons, including Roland Gapud and
Jose Campos, Jr. Subsequently, PHI became the owner of 111,415 shares of stock of PTIC by virtue of three Deeds of Assignment executed by PTIC
stockholders Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 shares of stock of PTIC held by PHI were sequestered by the Presidential
Commission on Good Government (PCGG). The 111,415 PTIC shares, which represent about 46.125 percent of the outstanding capital stock of PTIC,
were later declared by this Court to be owned by the Republic of the Philippines.[2]
In 1999, First Pacific, a Bermuda-registered, Hong Kong-based investment firm, acquired the remaining 54 percent of the outstanding capital stock of
PTIC. On 20 November 2006, the Inter-Agency Privatization Council (IPC) of the Philippine Government announced that it would sell the 111,415 PTIC
shares, or 46.125 percent of the outstanding capital stock of PTIC, through a public bidding to be conducted on 4 December 2006. Subsequently, the
public bidding was reset to 8 December 2006, and only two bidders, Parallax Venture Fund XXVII (Parallax) and Pan-Asia Presidio Capital, submitted
their bids. Parallax won with a bid of P25.6 billion or US$510 million.
Thereafter, First Pacific announced that it would exercise its right of first refusal as a PTIC stockholder and buy the 111,415 PTIC shares by matching
the bid price of Parallax. However, First Pacific failed to do so by the 1 February 2007 deadline set by IPC and instead, yielded its right to PTIC itself
which was then given by IPC until 2 March 2007 to buy the PTIC shares. On 14 February 2007, First Pacific, through its subsidiary, MPAH, entered into
a Conditional Sale and Purchase Agreement of the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, with the Philippine
Government for the price of P25,217,556,000 or US$510,580,189. The sale was completed on 28 February 2007.
Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of 46.125 percent of PTIC shares is actually an indirect sale of 12 million
shares or about 6.3 percent of the outstanding common shares of PLDT. With the sale, First Pacific's common shareholdings in PLDT increased
from 30.7 percent to 37 percent, thereby increasing the common shareholdings of foreigners in PLDT to about 81.47 percent. This violates
Section 11, Article XII of the 1987 Philippine Constitution which limits foreign ownership of the capital of a public utility to not more than 40 percent. [3]
On the other hand, public respondents Finance Secretary Margarito B. Teves, Undersecretary John P. Sevilla, and PCGG Commissioner Ricardo
Abcede allege the following relevant facts:
On 9 November 1967, PTIC was incorporated and had since engaged in the business of investment holdings. PTIC held 26,034,263 PLDT common
shares, or 13.847 percent of the total PLDT outstanding common shares. PHI, on the other hand, was incorporated in 1977, and became the owner of
111,415 PTIC shares or 46.125 percent of the outstanding capital stock of PTIC by virtue of three Deeds of Assignment executed by Ramon Cojuangco
and Luis Tirso Rivilla. In 1986, the 111,415 PTIC shares held by PHI were sequestered by the PCGG, and subsequently declared by this Court as part
of the ill-gotten wealth of former President Ferdinand Marcos. The sequestered PTIC shares were reconveyed to the Republic of the Philippines in
accordance with this Court's decision[4] which became final and executory on 8 August 2006.
The Philippine Government decided to sell the 111,415 PTIC shares, which represent 6.4 percent of the outstanding common shares of stock of PLDT,
and designated the Inter-Agency Privatization Council (IPC), composed of the Department of Finance and the PCGG, as the disposing entity. An
invitation to bid was published in seven different newspapers from 13 to 24 November 2006. On 20 November 2006, a pre-bid conference was held, and
the original deadline for bidding scheduled on 4 December 2006 was reset to 8 December 2006. The extension was published in nine different
newspapers.
During the 8 December 2006 bidding, Parallax Capital Management LP emerged as the highest bidder with a bid of P25,217,556,000. The government
notified First Pacific, the majority owner of PTIC shares, of the bidding results and gave First Pacific until 1 February 2007 to exercise its right of first

refusal in accordance with PTIC's Articles of Incorporation. First Pacific announced its intention to match Parallax's bid.
On 31 January 2007, the House of Representatives (HR) Committee on Good Government conducted a public hearing on the particulars of the then
impending sale of the 111,415 PTIC shares. Respondents Teves and Sevilla were among those who attended the public hearing. The HR Committee
Report No. 2270 concluded that: (a) the auction of the government's 111,415 PTIC shares bore due diligence, transparency and conformity with existing
legal procedures; and (b) First Pacific's intended acquisition of the government's 111,415 PTIC shares resulting in First Pacific's 100%
ownership of PTIC will not violate the 40 percent constitutional limit on foreign ownership of a public utility since PTIC holds only 13.847
percent of the total outstanding common shares of PLDT.[5] On 28 February 2007, First Pacific completed the acquisition of the 111,415 shares of
stock of PTIC.
Respondent Manuel V. Pangilinan admits the following facts: (a) the IPC conducted a public bidding for the sale of 111,415 PTIC shares or 46 percent of
the outstanding capital stock of PTIC (the remaining 54 percent of PTIC shares was already owned by First Pacific and its affiliates); (b) Parallax offered
the highest bid amounting to P25,217,556,000; (c) pursuant to the right of first refusal in favor of PTIC and its shareholders granted in PTIC's Articles of
Incorporation, MPAH, a First Pacific affiliate, exercised its right of first refusal by matching the highest bid offered for PTIC shares on 13 February 2007;
and (d) on 28 February 2007, the sale was consummated when MPAH paid IPC P25,217,556,000 and the government delivered the certificates for the
111,415 PTIC shares. Respondent Pangilinan denies the other allegations of facts of petitioner.
On 28 February 2007, petitioner filed the instant petition for prohibition, injunction, declaratory relief, and declaration of nullity of sale of the 111,415
PTIC shares. Petitioner claims, among others, that the sale of the 111,415 PTIC shares would result in an increase in First Pacific's common
shareholdings in PLDT from 30.7 percent to 37 percent, and this, combined with Japanese NTT DoCoMo's common shareholdings in PLDT, would
result to a total foreign common shareholdings in PLDT of 51.56 percent which is over the 40 percent constitutional limit.[6][ ]Petitioner asserts:
If and when the sale is completed, First Pacific's equity in PLDT will go up from 30.7 percent to 37.0 percent of its common - or voting- stockholdings, x x
x. Hence, the consummation of the sale will put the two largest foreign investors in PLDT - First Pacific and Japan's NTT DoCoMo, which is the world's
largest wireless telecommunications firm, owning 51.56 percent of PLDT common equity. x x x With the completion of the sale, data culled from the
official website of the New York Stock Exchange (www.nyse.com) showed that those foreign entities, which own at least five percent of common equity,
will collectively own 81.47 percent of PLDT's common equity. x x x
x x x as the annual disclosure reports, also referred to as Form 20-K reports x x x which PLDT submitted to the New York Stock Exchange for the period
2003-2005, revealed that First Pacific and several other foreign entities breached the constitutional limit of 40 percent ownership as early as 2003. x x
x"[7]

Petitioner raises the following issues: (1) whether the consummation of the then impending sale of 111,415 PTIC shares to First Pacific violates the
constitutional limit on foreign ownership of a public utility; (2) whether public respondents committed grave abuse of discretion in allowing the sale of the
111,415 PTIC shares to First Pacific; and (3) whether the sale of common shares to foreigners in excess of 40 percent of the entire subscribed common
capital stock violates the constitutional limit on foreign ownership of a public utility.[8]
On 13 August 2007, Pablito V. Sanidad and Arno V. Sanidad filed a Motion for Leave to Intervene and Admit Attached Petition-in-Intervention. In the
Resolution of 28 August 2007, the Court granted the motion and noted the Petition-in-Intervention.
Petitioners-in-intervention "join petitioner Wilson Gamboa x x x in seeking, among others, to enjoin and/or nullify the sale by respondents of the 111,415
PTIC shares to First Pacific or assignee." Petitioners-in-intervention claim that, as PLDT subscribers, they have a "stake in the outcome of the
controversy x x x where the Philippine Government is completing the sale of government owned assets in [PLDT], unquestionably a public utility, in
violation of the nationality restrictions of the Philippine Constitution."
The Issue

This Court is not a trier of facts. Factual questions such as those raised by petitioner, [9] which indisputably demand a thorough examination of the
evidence of the parties, are generally beyond this Court's jurisdiction. Adhering to this well-settled principle, the Court shall confine the resolution of the
instant controversy solely on the threshold and purely legal issue of whether the term "capital" in Section 11, Article XII of the Constitution refers to the
total common shares only or to the total outstanding capital stock (combined total of common and non-voting preferred shares) of PLDT, a public utility.
The Ruling of the Court

The petition is partly meritorious.

Petition for declaratory relief
treated as petition for mandamus
At the outset, petitioner is faced with a procedural barrier. Among the remedies petitioner seeks, only the petition for prohibition is within the original
jurisdiction of this court, which however is not exclusive but is concurrent with the Regional Trial Court and the Court of Appeals. The actions for
declaratory relief,[10] injunction, and annulment of sale are not embraced within the original jurisdiction of the Supreme Court. On this ground alone, the
petition could have been dismissed outright.
While direct resort to this Court may be justified in a petition for prohibition,[11] the Court shall nevertheless refrain from discussing the grounds in support
of the petition for prohibition since on 28 February 2007, the questioned sale was consummated when MPAH paid IPC P25,217,556,000 and the
government delivered the certificates for the 111,415 PTIC shares.
However, since the threshold and purely legal issue on the definition of the term "capital" in Section 11, Article XII of the Constitution has far-reaching
implications to the national economy, the Court treats the petition for declaratory relief as one for mandamus. [12]
In Salvacion v. Central Bank of the Philippines,[13] the Court treated the petition for declaratory relief as one for mandamus considering the grave
injustice that would result in the interpretation of a banking law. In that case, which involved the crime of rape committed by a foreign tourist against a
Filipino minor and the execution of the final judgment in the civil case for damages on the tourist's dollar deposit with a local bank, the Court declared
Section 113 of Central Bank Circular No. 960, exempting foreign currency deposits from attachment, garnishment or any other order or process of any
court, inapplicable due to the peculiar circumstances of the case. The Court held that "injustice would result especially to a citizen aggrieved by a foreign
guest like accused x x x" that would "negate Article 10 of the Civil Code which provides that `in case of doubt in the interpretation or application of laws,
it is presumed that the lawmaking body intended right and justice to prevail.'" The Court therefore required respondents Central Bank of the Philippines,
the local bank, and the accused to comply with the writ of execution issued in the civil case for damages and to release the dollar deposit of the accused

to satisfy the judgment.

In Alliance of Government Workers v. Minister of Labor,[14] the Court similarly brushed aside the procedural infirmity of the petition for declaratory relief
and treated the same as one for mandamus. In Alliance, the issue was whether the government unlawfully excluded petitioners, who were government
employees, from the enjoyment of rights to which they were entitled under the law. Specifically, the question was: "Are the branches, agencies,
subdivisions, and instrumentalities of the Government, including government owned or controlled corporations included among the four `employers'
under Presidential Decree No. 851 which are required to pay their employees x x x a thirteenth (13th) month pay x x x ?" The Constitutional principle
involved therein affected all government employees, clearly justifying a relaxation of the technical rules of procedure, and certainly requiring the
interpretation of the assailed presidential decree.
In short, it is well-settled that this Court may treat a petition for declaratory relief as one for mandamus if the issue involved has far-reaching implications.
As this Court held in Salvacion:
The Court has no original and exclusive jurisdiction over a petition for declaratory relief. However, exceptions to this rule have been
recognized. Thus, where the petition has far-reaching implications and raises questions that should be resolved, it may be treated as one for
mandamus.[15] (Emphasis supplied)

In the present case, petitioner seeks primarily the interpretation of the term "capital" in Section 11, Article XII of the Constitution. He prays that this Court
declare that the term "capital" refers to common shares only, and that such shares constitute "the sole basis in determining foreign equity in a public
utility." Petitioner further asks this Court to declare any ruling inconsistent with such interpretation unconstitutional.
The interpretation of the term "capital" in Section 11, Article XII of the Constitution has far-reaching implications to the national economy. In fact, a
resolution of this issue will determine whether Filipinos are masters, or second class citizens, in their own country. What is at stake here is whether
Filipinos or foreigners will have effective control of the national economy. Indeed, if ever there is a legal issue that has far-reaching implications to the
entire nation, and to future generations of Filipinos, it is the threshhold legal issue presented in this case.
The Court first encountered the issue on the definition of the term "capital" in Section 11, Article XII of the Constitution in the case of Fernandez v.
Cojuangco, docketed as G.R. No. 157360.[16] That case involved the same public utility (PLDT) and substantially the same private respondents. Despite
the importance and novelty of the constitutional issue raised therein and despite the fact that the petition involved a purely legal question, the Court
declined to resolve the case on the merits, and instead denied the same for disregarding the hierarchy of courts. [17] There, petitioner Fernandez assailed
on a pure question of law the Regional Trial Court's Decision of 21 February 2003 via a petition for review under Rule 45. The Court's Resolution,
denying the petition, became final on 21 December 2004.
The instant petition therefore presents the Court with another opportunity to finally settle this purely legal issue which is of transcendental importance to
the national economy and a fundamental requirement to a faithful adherence to our Constitution. The Court must forthwith seize such opportunity, not
only for the benefit of the litigants, but more significantly for the benefit of the entire Filipino people, to ensure, in the words of the Constitution, "a selfreliant and independent national economy effectively controlled by Filipinos."[18] Besides, in the light of vague and confusing positions taken by
government agencies on this purely legal issue, present and future foreign investors in this country deserve, as a matter of basic fairness, a categorical
ruling from this Court on the extent of their participation in the capital of public utilities and other nationalized businesses.
Despite its far-reaching implications to the national economy, this purely legal issue has remained unresolved for over 75 years since the 1935
Constitution. There is no reason for this Court to evade this ever recurring fundamental issue and delay again defining the term "capital," which appears
not only in Section 11, Article XII of the Constitution, but also in Section 2, Article XII on co-production and joint venture agreements for the development
of our natural resources,[19] in Section 7, Article XII on ownership of private lands,[20] in Section 10, Article XII on the reservation of certain investments to
Filipino citizens,[21] in Section 4(2), Article XIV on the ownership of educational institutions, [22] and in Section 11(2), Article XVI on the ownership of
advertising companies.[23]
Petitioner has locus standi

There is no dispute that petitioner is a stockholder of PLDT. As such, he has the right to question the subject sale, which he claims to violate the
nationality requirement prescribed in Section 11, Article XII of the Constitution. If the sale indeed violates the Constitution, then there is a possibility that
PLDT's franchise could be revoked, a dire consequence directly affecting petitioner's interest as a stockholder.
More importantly, there is no question that the instant petition raises matters of transcendental importance to the public. The fundamental and threshold
legal issue in this case, involving the national economy and the economic welfare of the Filipino people, far outweighs any perceived impediment in the
legal personality of the petitioner to bring this action.
In Chavez v. PCGG,[24] the Court upheld the right of a citizen to bring a suit on matters of transcendental importance to the public, thus:

In Taada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the enforcement
of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a citizen and as such is
interested in the execution of the laws, he need not show that he has any legal or special interest in the result of the action. In the aforesaid
case, the petitioners sought to enforce their right to be informed on matters of public concern, a right then recognized in Section 6, Article IV of the 1973
Constitution, in connection with the rule that laws in order to be valid and enforceable must be published in the Official Gazette or otherwise effectively
promulgated. In ruling for the petitioners' legal standing, the Court declared that the right they sought to be enforced `is a public right recognized by no
less than the fundamental law of the land.'
Legaspi v. Civil Service Commission, while reiterating Taada, further declared that `when a mandamus proceeding involves the assertion of a
public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general
`public' which possesses the right.'
Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract for the
development, management and operation of the Manila International Container Terminal, `public interest [was] definitely involved considering the
important role [of the subject contract] . . . in the economic development of the country and the magnitude of the financial consideration
involved.' We concluded that, as a consequence, the disclosure provision in the Constitution would constitute sufficient authority for upholding the
petitioner's standing. (Emphasis supplied)

Clearly, since the instant petition, brought by a citizen, involves matters of transcendental public importance, the petitioner has the requisite locus standi.

Definition of the Term "Capital" in

Section 11, Article XII of the 1987 Constitution

Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution mandates the Filipinization of public utilities, to wit:
Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of
the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is
owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither
shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when
the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign
investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and
managing officers of such corporation or association must be citizens of the Philippines. (Emphasis supplied)

The above provision substantially reiterates Section 5, Article XIV of the 1973 Constitution, thus:
Section 5. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of
the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of the capital of which
is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither
shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the National
Assembly when the public interest so requires. The State shall encourage equity participation in public utilities by the general public. The participation of
foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in the capital thereof. (Emphasis
supplied)

The foregoing provision in the 1973 Constitution reproduced Section 8, Article XIV of the 1935 Constitution, viz:
Section 8. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of
the Philippines or to corporations or other entities organized under the laws of the Philippines sixty per centum of the capital of which is
owned by citizens of the Philippines, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty
years. No franchise or right shall be granted to any individual, firm, or corporation, except under the condition that it shall be subject to amendment,
alteration, or repeal by the Congress when the public interest so requires. (Emphasis supplied)

Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional Commission, reminds us that the Filipinization provision in the 1987
Constitution is one of the products of the spirit of nationalism which gripped the 1935 Constitutional Convention.[25] The 1987 Constitution "provides for
the Filipinization of public utilities by requiring that any form of authorization for the operation of public utilities should be granted only to `citizens of the
Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such
citizens.'The provision is [an express] recognition of the sensitive and vital position of public utilities both in the national economy and for
national security."[26] The evident purpose of the citizenship requirement is to prevent aliens from assuming control of public utilities, which may be
inimical to the national interest.[27] This specific provision explicitly reserves to Filipino citizens control of public utilities, pursuant to an overriding
economic goal of the 1987 Constitution: to "conserve and develop our patrimony" [28] and ensure "a self-reliant and independent national
economy effectively controlled by Filipinos."[29]
Any citizen or juridical entity desiring to operate a public utility must therefore meet the minimum nationality requirement prescribed in Section 11, Article
XII of the Constitution. Hence, for a corporation to be granted authority to operate a public utility, at least 60 percent of its "capital" must be owned by
Filipino citizens.
The crux of the controversy is the definition of the term "capital." Does the term "capital" in Section 11, Article XII of the Constitution refer to common
shares or to the total outstanding capital stock (combined total of common and non-voting preferred shares)?
Petitioner submits that the 40 percent foreign equity limitation in domestic public utilities refers only to common shares because such shares are entitled
to vote and it is through voting that control over a corporation is exercised. Petitioner posits that the term "capital" in Section 11, Article XII of the
Constitution refers to "the ownership of common capital stock subscribed and outstanding, which class of shares alone, under the corporate set-up of
PLDT, can vote and elect members of the board of directors." It is undisputed that PLDT's non-voting preferred shares are held mostly by Filipino
citizens.[30] This arose from Presidential Decree No. 217,[31] issued on 16 June 1973 by then President Ferdinand Marcos, requiring every applicant of a
PLDT telephone line to subscribe to non-voting preferred shares to pay for the investment cost of installing the telephone line. [32]
Petitioners-in-intervention basically reiterate petitioner's arguments and adopt petitioner's definition of the term "capital."[33]Petitioners-in-intervention
allege that "the approximate foreign ownership of common capital stock of PLDT x x x already amounts to at least 63.54% of the total outstanding
common stock," which means that foreigners exercise significant control over PLDT, patently violating the 40 percent foreign equity limitation in public
utilities prescribed by the Constitution.
Respondents, on the other hand, do not offer any definition of the term "capital" in Section 11, Article XII of the Constitution. More importantly, private
respondents Nazareno and Pangilinan of PLDT do not dispute that more than 40 percent of the common shares of PLDT are held by foreigners.
In particular, respondent Nazareno's Memorandum, consisting of 73 pages, harps mainly on the procedural infirmities of the petition and the supposed
violation of the due process rights of the "affected foreign common shareholders." Respondent Nazareno does not deny petitioner's allegation of
foreigners' dominating the common shareholdings of PLDT. Nazareno stressed mainly that the petition "seeks to divest foreign common
shareholders purportedly exceeding 40% of the total common shareholdings in PLDT of their ownership over their shares." Thus, "the foreign
natural and juridical PLDT shareholders must be impleaded in this suit so that they can be heard."[34] Essentially, Nazareno invokes denial of due
process on behalf of the foreign common shareholders.
While Nazareno does not introduce any definition of the term "capital," he states that "among the factual assertions that need to be established to
counter petitioner's allegations is the uniform interpretation by government agencies (such as the SEC), institutions and corporations (such
as the Philippine National Oil Company-Energy Development Corporation or PNOC-EDC) of including both preferred shares and common
shares in "controlling interest" in view of testing compliance with the 40% constitutional limitation on foreign ownership in public utilities."[35]
Similarly, respondent Manuel V. Pangilinan does not define the term "capital" in Section 11, Article XII of the Constitution. Neither does he refute
petitioner's claim of foreigners holding more than 40 percent of PLDT's common shares. Instead, respondent Pangilinan focuses on the procedural flaws

of the petition and the alleged violation of the due process rights of foreigners. Respondent Pangilinan emphasizes in his Memorandum (1) the absence
of this Court's jurisdiction over the petition; (2) petitioner's lack of standing; (3) mootness of the petition; (4) non-availability of declaratory relief; and (5)
the denial of due process rights. Moreover, respondent Pangilinan alleges that the issue should be whether "owners of shares in PLDT as well as
owners of shares in companies holding shares in PLDT may be required to relinquish their shares in PLDT and in those companies without any law
requiring them to surrender their shares and also without notice and trial."
Respondent Pangilinan further asserts that "Section 11, [Article XII of the Constitution] imposes no nationality requirement on the shareholders
of the utility company as a condition for keeping their shares in the utility company." According to him, "Section 11 does not authorize taking one
person's property (the shareholder's stock in the utility company) on the basis of another party's alleged failure to satisfy a requirement that is a condition
only for that other party's retention of another piece of property (the utility company being at least 60% Filipino-owned to keep its franchise)."[36]
The OSG, representing public respondents Secretary Margarito Teves, Undersecretary John P. Sevilla, Commissioner Ricardo Abcede, and Chairman
Fe Barin, is likewise silent on the definition of the term "capital." In its Memorandum [37] dated 24 September 2007, the OSG also limits its discussion on
the supposed procedural defects of the petition, i.e. lack of standing, lack of jurisdiction, non-inclusion of interested parties, and lack of basis for
injunction. The OSG does not present any definition or interpretation of the term "capital" in Section 11, Article XII of the Constitution. The OSG contends
that "the petition actually partakes of a collateral attack on PLDT's franchise as a public utility," which in effect requires a "full-blown trial where all the
parties in interest are given their day in court."[38]
Respondent Francisco Ed Lim, impleaded as President and Chief Executive Officer of the Philippine Stock Exchange (PSE), does not also define the
term "capital" and seeks the dismissal of the petition on the following grounds: (1) failure to state a cause of action against Lim; (2) the PSE allegedly
implemented its rules and required all listed companies, including PLDT, to make proper and timely disclosures; and (3) the reliefs prayed for in the
petition would adversely impact the stock market.
In the earlier case of Fernandez v. Cojuangco, petitioner Fernandez who claimed to be a stockholder of record of PLDT, contended that the term
"capital" in the 1987 Constitution refers to shares entitled to vote or the common shares. Fernandez explained thus:
The forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of shares of stock entitled to vote,
i.e., common shares, considering that it is through voting that control is being exercised. x x x
Obviously, the intent of the framers of the Constitution in imposing limitations and restrictions on fully nationalized and partially nationalized activities is
for Filipino nationals to be always in control of the corporation undertaking said activities. Otherwise, if the Trial Court's ruling upholding respondents'
arguments were to be given credence, it would be possible for the ownership structure of a public utility corporation to be divided into one percent (1%)
common stocks and ninety-nine percent (99%) preferred stocks. Following the Trial Court's ruling adopting respondents' arguments, the common shares
can be owned entirely by foreigners thus creating an absurd situation wherein foreigners, who are supposed to be minority shareholders, control the
public utility corporation.
xxxx
Thus, the 40% foreign ownership limitation should be interpreted to apply to both the beneficial ownership and the controlling interest.
xxxx
Clearly, therefore, the forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of shares of stock
entitled to vote, i.e., common shares. Furthermore, ownership of record of shares will not suffice but it must be shown that the legal and beneficial
ownership rests in the hands of Filipino citizens. Consequently, in the case of petitioner PLDT, since it is already admitted that the voting interests of
foreigners which would gain entry to petitioner PLDT by the acquisition of SMART shares through the Questioned Transactions is equivalent to 82.99%,
and the nominee arrangements between the foreign principals and the Filipino owners is likewise admitted, there is, therefore, a violation of Section 11,
Article XII of the Constitution.
Parenthetically, the Opinions dated February 15, 1988 and April 14, 1987 cited by the Trial Court to support the proposition that the meaning of the word
"capital" as used in Section 11, Article XII of the Constitution allegedly refers to the sum total of the shares subscribed and paid-in by the shareholder
and it allegedly is immaterial how the stock is classified, whether as common or preferred, cannot stand in the face of a clear legislative policy as stated
in the FIA which took effect in 1991 or way after said opinions were rendered, and as clarified by the above-quoted Amendments. In this regard, suffice it
to state that as between the law and an opinion rendered by an administrative agency, the law indubitably prevails. Moreover, said Opinions are merely
advisory and cannot prevail over the clear intent of the framers of the Constitution.
In the same vein, the SEC's construction of Section 11, Article XII of the Constitution is at best merely advisory for it is the courts that finally determine
what a law means.[39]

On the other hand, respondents therein, Antonio O. Cojuangco, Manuel V. Pangilinan, Carlos A. Arellano, Helen Y. Dee, Magdangal B. Elma, Mariles
Cacho-Romulo, Fr. Bienvenido F. Nebres, Ray C. Espinosa, Napoleon L. Nazareno, Albert F. Del Rosario, and Orlando B. Vea, argued that the term
"capital" in Section 11, Article XII of the Constitution includes preferred shares since the Constitution does not distinguish among classes of stock, thus:
16. The Constitution applies its foreign ownership limitation on the corporation's "capital," without distinction as to classes of shares. x x x
In this connection, the Corporation Code - which was already in force at the time the present (1987) Constitution was drafted - defined outstanding
capital stock as follows:
Section 137. Outstanding capital stock defined. - The term "outstanding capital stock", as used in this Code, means the total shares of stock issued
under binding subscription agreements to subscribers or stockholders, whether or not fully or partially paid, except treasury shares.

Section 137 of the Corporation Code also does not distinguish between common and preferred shares, nor exclude either class of shares, in determining
the outstanding capital stock (the "capital") of a corporation. Consequently, petitioner's suggestion to reckon PLDT's foreign equity only on the basis of
PLDT's outstanding common shares is without legal basis. The language of the Constitution should be understood in the sense it has in common use.
xxxx
17. But even assuming that resort to the proceedings of the Constitutional Commission is necessary, there is nothing in the Record of the Constitutional
Commission (Vol. III) - which petitioner misleadingly cited in the Petition x x x - which supports petitioner's view that only common shares should form the
basis for computing a public utility's foreign equity.

xxxx
18. In addition, the SEC - the government agency primarily responsible for implementing the Corporation Code, and which also has the responsibility of
ensuring compliance with the Constitution's foreign equity restrictions as regards nationalized activities x x x - has categorically ruled that both common
and preferred shares are properly considered in determining outstanding capital stock and the nationality composition thereof. [40]

We agree with petitioner and petitioners-in-intervention. The term "capital" in Section 11, Article XII of the Constitution refers only to shares of stock
entitled to vote in the election of directors, and thus in the present case only to common shares, [41]and not to the total outstanding capital stock
comprising both common and non-voting preferred shares.
The Corporation Code of the Philippines[42] classifies shares as common or preferred, thus:
Sec. 6. Classification of shares. - The shares of stock of stock corporations may be divided into classes or series of shares, or both, any of which classes
or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation: Provided, That no share may be
deprived of voting rights except those classified and issued as "preferred" or "redeemable" shares, unless otherwise provided in this Code:
Provided, further, That there shall always be a class or series of shares which have complete voting rights. Any or all of the shares or series of shares
may have a par value or have no par value as may be provided for in the articles of incorporation: Provided, however, That banks, trust companies,
insurance companies, public utilities, and building and loan associations shall not be permitted to issue no-par value shares of stock.
Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the corporation in case of liquidation and
in the distribution of dividends, or such other preferences as may be stated in the articles of incorporation which are not violative of the provisions of this
Code: Provided, That preferred shares of stock may be issued only with a stated par value. The Board of Directors, where authorized in the articles of
incorporation, may fix the terms and conditions of preferred shares of stock or any series thereof: Provided, That such terms and conditions shall be
effective upon the filing of a certificate thereof with the Securities and Exchange Commission.
Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the holder of such shares shall not be liable to the
corporation or to its creditors in respect thereto: Provided; That shares without par value may not be issued for a consideration less than the value of five
(P5.00) pesos per share: Provided, further, That the entire consideration received by the corporation for its no-par value shares shall be treated as
capital and shall not be available for distribution as dividends.
A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional or legal requirements.
Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to every other
share.
Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall nevertheless be
entitled to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another corporation or other corporations;
7. Investment of corporate funds in another corporation or business in accordance with this Code; and
8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in this Code shall be
deemed to refer only to stocks with voting rights.

Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the corporation. [43]This is exercised through his
vote in the election of directors because it is the board of directors that controls or manages the corporation. [44] In the absence of provisions in the
articles of incorporation denying voting rights to preferred shares, preferred shares have the same voting rights as common shares. However, preferred
shareholders are often excluded from any control, that is, deprived of the right to vote in the election of directors and on other matters, on the theory that
the preferred shareholders are merely investors in the corporation for income in the same manner as bondholders. [45] In fact, under the Corporation
Code only preferred or redeemable shares can be deprived of the right to vote.[46] Common shares cannot be deprived of the right to vote in any
corporate meeting, and any provision in the articles of incorporation restricting the right of common shareholders to vote is invalid. [47]
Considering that common shares have voting rights which translate to control, as opposed to preferred shares which usually have no voting rights, the
term "capital" in Section 11, Article XII of the Constitution refers only to common shares. However, if the preferred shares also have the right to vote in
the election of directors, then the term "capital" shall include such preferred shares because the right to participate in the control or management of the
corporation is exercised through the right to vote in the election of directors. In short, the term "capital" in Section 11, Article XII of the Constitution
refers only to shares of stock that can vote in the election of directors.
This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of Filipino citizens the control and management of
public utilities. As revealed in the deliberations of the Constitutional Commission, "capital" refers to the voting stock or controlling interest of a
corporation, to wit:
MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60-40 in Section 3, 60-40 in Section 9
and 2/3-1/3 in Section 15.
MR. VILLEGAS. That is right.
MR. NOLLEDO. In teaching law, we are always faced with this question: "Where do we base the equity requirement, is it on the authorized capital stock,
on the subscribed capital stock, or on the paid-up capital stock of a corporation"? Will the Committee please enlighten me on this?
MR. VILLEGAS. We have just had a long discussion with the members of the team from the UP Law Center who provided us a draft. The phrase that is
contained here which we adopted from the UP draft is "60 percent of voting stock."

MR. NOLLEDO. That must be based on the subscribed capital stock, because unless declared delinquent, unpaid capital stock shall be entitled to vote.
MR. VILLEGAS. That is right.
MR. NOLLEDO. Thank you.
With respect to an investment by one corporation in another corporation, say, a corporation with 60-40 percent equity invests in another corporation
which is permitted by the Corporation Code, does the Committee adopt the grandfather rule?
MR. VILLEGAS. Yes, that is the understanding of the Committee.
MR. NOLLEDO. Therefore, we need additional Filipino capital?
MR. VILLEGAS. Yes.[48]
xxxx
MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.
MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase "voting stock or controlling interest."
MR. AZCUNA. Hence, without the Davide amendment, the committee report would read: "corporations or associations at least sixty percent of whose
CAPITAL is owned by such citizens."
MR. VILLEGAS. Yes.
MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the capital to be owned by citizens.
MR. VILLEGAS. That is right.
MR. AZCUNA. But the control can be with the foreigners even if they are the minority. Let us say 40 percent of the capital is owned by them,
but it is the voting capital, whereas, the Filipinos own the nonvoting shares. So we can have a situation where the corporation is controlled by
foreigners despite being the minority because they have the voting capital. That is the anomaly that would result here.
MR. BENGZON. No, the reason we eliminated the word "stock" as stated in the 1973 and 1935 Constitutions is that according to
Commissioner Rodrigo, there are associations that do not have stocks. That is why we say "CAPITAL."
MR. AZCUNA. We should not eliminate the phrase "controlling interest."
MR. BENGZON. In the case of stock corporations, it is assumed.[49] (Emphasis supplied)

Thus, 60 percent of the "capital" assumes, or should result in, "controlling interest" in the corporation. Reinforcing this interpretation of the term
"capital," as referring to controlling interest or shares entitled to vote, is the definition of a "Philippine national" in the Foreign Investments Act of
1991,[50] to wit:
SEC. 3. Definitions. - As used in this Act:
a. The term "Philippine national" shall mean a citizen of the Philippines; or a domestic partnership or association wholly owned by citizens of the
Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding
and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the
Philippines under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by
Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty
percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own
stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to
vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of
Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall be considered a "Philippine national."
(Emphasis supplied)

In explaining the definition of a "Philippine national," the Implementing Rules and Regulations of the Foreign Investments Act of 1991 provide:
b. "Philippine national" shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by the citizens of the Philippines;
or a corporation organized under the laws of the Philippines of which at least sixty percent [60%] of the capital stock outstanding and entitled
to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation benefits, where
the trustee is a Philippine national and at least sixty percent [60%] of the fund will accrue to the benefit of the Philippine nationals; Provided, that where a
corporation its non-Filipino stockholders own stocks in a Securities and Exchange Commission [SEC] registered enterprise, at least sixty percent [60%]
of the capital stock outstanding and entitled to vote of both corporations must be owned and held by citizens of the Philippines and at least sixty percent
[60%] of the members of the Board of Directors of each of both corporation must be citizens of the Philippines, in order that the corporation shall be
considered a Philippine national. The control test shall be applied for this purpose.
Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding capital stock whether fully
paid or not, but only such stocks which are generally entitled to vote are considered.
For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the required
Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks, the voting rights of
which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or Philippine nationals.
Individuals or juridical entities not meeting the aforementioned qualifications are considered as non-Philippine nationals. (Emphasis supplied)

Mere legal title is insufficient to meet the 60 percent Filipino-owned "capital" required in the Constitution. Full beneficial ownership of 60 percent of the
outstanding capital stock, coupled with 60 percent of the voting rights, is required. The legal and beneficial ownership of 60 percent of the outstanding
capital stock must rest in the hands of Filipino nationals in accordance with the constitutional mandate. Otherwise, the corporation is "considered as nonPhilippine national[s]."
Under Section 10, Article XII of the Constitution, Congress may "reserve to citizens of the Philippines or to corporations or associations at least sixty per
centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments." Thus, in
numerous laws Congress has reserved certain areas of investments to Filipino citizens or to corporations at least sixty percent of the "capital" of which
is owned by Filipino citizens. Some of these laws are: (1) Regulation of Award of Government Contracts or R.A. No. 5183; (2) Philippine Inventors
Incentives Act or R.A. No. 3850; (3) Magna Carta for Micro, Small and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping
Development Act or R.A. No. 7471; (5) Domestic Shipping Development Act of 2004 or R.A. No. 9295; (6) Philippine Technology Transfer Act of 2009 or
R.A. No. 10055; and (7) Ship Mortgage Decree or P.D. No. 1521. Hence, the term "capital" in Section 11, Article XII of the Constitution is also used in
the same context in numerous laws reserving certain areas of investments to Filipino citizens.
To construe broadly the term "capital" as the total outstanding capital stock, including both common and non-voting preferred shares, grossly
contravenes the intent and letter of the Constitution that the "State shall develop a self-reliant and independent national economy effectively
controlled by Filipinos." A broad definition unjustifiably disregards who owns the all-important voting stock, which necessarily equates to control of the
public utility.
We shall illustrate the glaring anomaly in giving a broad definition to the term "capital." Let us assume that a corporation has 100 common shares owned
by foreigners and 1,000,000 non-voting preferred shares owned by Filipinos, with both classes of share having a par value of one peso (P1.00) per
share. Under the broad definition of the term "capital," such corporation would be considered compliant with the 40 percent constitutional limit on foreign
equity of public utilities since the overwhelming majority, or more than 99.999 percent, of the total outstanding capital stock is Filipino owned. This is
obviously absurd.
In the example given, only the foreigners holding the common shares have voting rights in the election of directors, even if they hold only 100 shares.
The foreigners, with a minuscule equity of less than 0.001 percent, exercise control over the public utility. On the other hand, the Filipinos, holding more
than 99.999 percent of the equity, cannot vote in the election of directors and hence, have no control over the public utility. This starkly circumvents the
intent of the framers of the Constitution, as well as the clear language of the Constitution, to place the control of public utilities in the hands of Filipinos. It
also renders illusory the State policy of an independent national economy effectively controlled by Filipinos.
The example given is not theoretical but can be found in the real world, and in fact exists in the present case.
Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of directors. PLDT's Articles of Incorporation expressly state
that "the holders of Serial Preferred Stock shall not be entitled to vote at any meeting of the stockholders for the election of directors or for
any other purpose or otherwise participate in any action taken by the corporation or its stockholders, or to receive notice of any meeting of
stockholders."[51]
On the other hand, holders of common shares are granted the exclusive right to vote in the election of directors. PLDT's Articles of Incorporation[52] state
that "each holder of Common Capital Stock shall have one vote in respect of each share of such stock held by him on all matters voted upon by the
stockholders, and the holders of Common Capital Stock shall have the exclusive right to vote for the election of directors and for all other
purposes."[53]
In short, only holders of common shares can vote in the election of directors, meaning only common shareholders exercise control over PLDT.
Conversely, holders of preferred shares, who have no voting rights in the election of directors, do not have any control over PLDT. In fact, under PLDT's
Articles of Incorporation, holders of common shares have voting rights for all purposes, while holders of preferred shares have no voting right for any
purpose whatsoever.
It must be stressed, and respondents do not dispute, that foreigners hold a majority of the common shares of PLDT. In fact, based on PLDT's 2010
General Information Sheet (GIS),[54] which is a document required to be submitted annually to the Securities and Exchange Commission, [55] foreigners
hold 120,046,690 common shares of PLDT whereas Filipinos hold only 66,750,622 common shares. [56] In other words, foreigners hold 64.27% of the
total number of PLDT's common shares, while Filipinos hold only 35.73%. Since holding a majority of the common shares equates to control, it is clear
that foreigners exercise control over PLDT. Such amount of control unmistakably exceeds the allowable 40 percent limit on foreign ownership of public
utilities expressly mandated in Section 11, Article XII of the Constitution.
Moreover, the Dividend Declarations of PLDT for 2009, [57] as submitted to the SEC, shows that per share the SIP[58]preferred shares earn a pittance in
dividends compared to the common shares. PLDT declared dividends for the common shares at P70.00 per share, while the declared dividends for the
preferred shares amounted to a measly P1.00 per share. [59]So the preferred shares not only cannot vote in the election of directors, they also have very
little and obviously negligible dividend earning capacity compared to common shares.
As shown in PLDT's 2010 GIS,[60] as submitted to the SEC, the par value of PLDT common shares is P5.00 per share, whereas the par value of
preferred shares is P10.00 per share. In other words, preferred shares have twice the par value of common shares but cannot elect directors and have
only 1/70 of the dividends of common shares. Moreover, 99.44% of the preferred shares are owned by Filipinos while foreigners own only a minuscule
0.56% of the preferred shares.[61] Worse, preferred shares constitute 77.85% of the authorized capital stock of PLDT while common shares constitute
only 22.15%.[62]This undeniably shows that beneficial interest in PLDT is not with the non-voting preferred shares but with the common shares, blatantly
violating the constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership in a public utility.
The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipinos in accordance with the constitutional
mandate. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is constitutionally required
for the State's grant of authority to operate a public utility. The undisputed fact that the PLDT preferred shares, 99.44% owned by Filipinos, are nonvoting and earn only 1/70 of the dividends that PLDT common shares earn, grossly violates the constitutional requirement of 60 percent Filipino control
and Filipino beneficial ownership of a public utility.
In short, Filipinos hold less than 60 percent of the voting stock, and earn less than 60 percent of the dividends, of PLDT. This directly
contravenes the express command in Section 11, Article XII of the Constitution that "[n]o franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to x x x corporations x x x organized under the laws of the Philippines, at least sixty per centum of
whose capital is owned by such citizens x x x."
To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of shares exercises the sole right to vote in the election of directors,
and thus exercise control over PLDT; (2) Filipinos own only 35.73% of PLDT's common shares, constituting a minority of the voting stock, and thus do

not exercise control over PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no voting rights; (4) preferred shares earn only 1/70 of the
dividends that common shares earn;[63] (5) preferred shares have twice the par value of common shares; and (6) preferred shares constitute 77.85% of
the authorized capital stock of PLDT and common shares only 22.15%. This kind of ownership and control of a public utility is a mockery of the
Constitution.
Incidentally, the fact that PLDT common shares with a par value of P5.00 have a current stock market value of P2,328.00 per share,[64] while PLDT
preferred shares with a par value of P10.00 per share have a current stock market value ranging from only P10.92 to P11.06 per share,[65] is a glaring
confirmation by the market that control and beneficial ownership of PLDT rest with the common shares, not with the preferred shares.
Indisputably, construing the term "capital" in Section 11, Article XII of the Constitution to include both voting and non-voting shares will result in the
abject surrender of our telecommunications industry to foreigners, amounting to a clear abdication of the State's constitutional duty to limit control of
public utilities to Filipino citizens. Such an interpretation certainly runs counter to the constitutional provision reserving certain areas of investment to
Filipino citizens, such as the exploitation of natural resources as well as the ownership of land, educational institutions and advertising businesses. The
Court should never open to foreign control what the Constitution has expressly reserved to Filipinos for that would be a betrayal of the Constitution and
of the national interest. The Court must perform its solemn duty to defend and uphold the intent and letter of the Constitution to ensure, in the words of
the Constitution, "a self-reliant and independent national economy effectively controlled by Filipinos."
Section 11, Article XII of the Constitution, like other provisions of the Constitution expressly reserving to Filipinos specificareas of investment, such as
the development of natural resources and ownership of land, educational institutions and advertising business, is self-executing. There is no need for
legislation to implement these self-executing provisions of the Constitution. The rationale why these constitutional provisions are self-executing was
explained in Manila Prince Hotel v. GSIS,[66] thus:
x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now is that all
provisions of the constitution are self-executing. If the constitutional provisions are treated as requiring legislation instead of self-executing, the
legislature would have the power to ignore and practically nullify the mandate of the fundamental law. This can be cataclysmic. That is why the prevailing
view is, as it has always been, that -. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-executing. . . . Unless the contrary is clearly
intended, the provisions of the Constitution should be considered self-executing, as a contrary rule would give the legislature discretion to
determine when, or whether, they shall be effective. These provisions would be subordinated to the will of the lawmaking body, which could make
them entirely meaningless by simply refusing to pass the needed implementing statute. (Emphasis supplied)

In Manila Prince Hotel, even the Dissenting Opinion of then Associate Justice Reynato S. Puno, later Chief Justice, agreed that constitutional provisions
are presumed to be self-executing. Justice Puno stated:
Courts as a rule consider the provisions of the Constitution as self-executing, rather than as requiring future legislation for their enforcement. The reason
is not difficult to discern. For if they are not treated as self-executing, the mandate of the fundamental law ratified by the sovereign people can
be easily ignored and nullified by Congress. Suffused with wisdom of the ages is the unyielding rule that legislative actions may give breath
to constitutional rights but congressional inaction should not suffocate them.
Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests, searches and seizures, the rights of a person under custodial
investigation, the rights of an accused, and the privilege against self-incrimination. It is recognized that legislation is unnecessary to enable courts to
effectuate constitutional provisions guaranteeing the fundamental rights of life, liberty and the protection of property. The same treatment is accorded to
constitutional provisions forbidding the taking or damaging of property for public use without just compensation. (Emphasis supplied)

Thus, in numerous cases,[67] this Court, even in the absence of implementing legislation, applied directly the provisions of the 1935, 1973 and 1987
Constitutions limiting land ownership to Filipinos. In Soriano v. Ong Hoo,[68] this Court ruled:
x x x As the Constitution is silent as to the effects or consequences of a sale by a citizen of his land to an alien, and as both the citizen and the alien
have violated the law, none of them should have a recourse against the other, and it should only be the State that should be allowed to intervene and
determine what is to be done with the property subject of the violation. We have said that what the State should do or could do in such matters is a
matter of public policy, entirely beyond the scope of judicial authority. (Dinglasan, et al. vs. Lee Bun Ting, et al., 6 G. R. No. L-5996, June 27,
1956.) While the legislature has not definitely decided what policy should be followed in cases of violations against the constitutional
prohibition, courts of justice cannot go beyond by declaring the disposition to be null and void as violative of the Constitution. x x x
(Emphasis supplied)

To treat Section 11, Article XII of the Constitution as not self-executing would mean that since the 1935 Constitution, or over the last 75 years, not one of
the constitutional provisions expressly reserving specific areas of investments to corporations, at least 60 percent of the "capital" of which is owned by
Filipinos, was enforceable. In short, the framers of the 1935, 1973 and 1987 Constitutions miserably failed to effectively reserve to Filipinos specific
areas of investment, like the operation by corporations of public utilities, the exploitation by corporations of mineral resources, the ownership by
corporations of real estate, and the ownership of educational institutions. All the legislatures that convened since 1935 also miserably failed to enact
legislations to implement these vital constitutional provisions that determine who will effectively control the national economy, Filipinos or foreigners. This
Court cannot allow such an absurd interpretation of the Constitution.
This Court has held that the SEC "has both regulatory and adjudicative functions."[69] Under its regulatory functions, the SEC can be compelled by
mandamus to perform its statutory duty when it unlawfully neglects to perform the same. Under its adjudicative or quasi-judicial functions, the SEC can
be also be compelled by mandamus to hear and decide a possible violation of any law it administers or enforces when it is mandated by law to
investigate such violation.
Under Section 17(4)[70] of the Corporation Code, the SEC has the regulatory function to reject or disapprove the Articles of Incorporation of any
corporation where "the required percentage of ownership of the capital stock to be owned by citizens of the Philippines has not been complied
with as required by existing laws or the Constitution." Thus, the SEC is the government agency tasked with the statutory duty to enforce the
nationality requirement prescribed in Section 11, Article XII of the Constitution on the ownership of public utilities. This Court, in a petition for declaratory
relief that is treated as a petition for mandamus as in the present case, can direct the SEC to perform its statutory duty under the law, a duty that the
SEC has apparently unlawfully neglected to do based on the 2010 GIS that respondent PLDT submitted to the SEC.
Under Section 5(m) of the Securities Regulation Code, [71] the SEC is vested with the "power and function" to "suspend or revoke, after proper notice
and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by
law." The SEC is mandated under Section 5(d) of the same Code with the "power and function" to "investigate x x x the activities of persons to

ensure compliance" with the laws and regulations that SEC administers or enforces. The GIS that all corporations are required to submit to SEC
annually should put the SEC on guard against violations of the nationality requirement prescribed in the Constitution and existing laws. This Court can
compel the SEC, in a petition for declaratory relief that is treated as a petition for mandamus as in the present case, to hear and decide a possible
violation of Section 11, Article XII of the Constitution in view of the ownership structure of PLDT's voting shares, as admitted by respondents and as
stated in PLDT's 2010 GIS that PLDT submitted to SEC.
WHEREFORE, we PARTLY GRANT the petition and rule that the term "capital" in Section 11, Article XII of the 1987 Constitution refers only to shares of
stock entitled to vote in the election of directors, and thus in the present case only to common shares, and not to the total outstanding capital stock
(common and non-voting preferred shares). Respondent Chairperson of the Securities and Exchange Commission is DIRECTED to apply this definition
of the term "capital" in determining the extent of allowable foreign ownership in respondent Philippine Long Distance Telephone Company, and if there is
a violation of Section 11, Article XII of the Constitution, to impose the appropriate sanctions under the law.
SO ORDERED.
Corona, C.J., Join the dissent of J. Velasco.
Leonardo-De Castro, Brion, Peralta, Bersamin, Del Castillo, Villarama, Jr., Perez, Mendoza, and Sereno, JJ.,concur.
Velasco, Jr., J., I dissent. (please see dissenting opinion.)
Abad, J., see my dissenting opinio
[G.R. No. 196063 : December 14, 2011]
ORLANDO A. RAYOS, FE A. RAYOS-DELA PAZ, REPRESENTED BY DR. ANTONIO A. RAYOS, AND ENGR. MANUEL A. RAYOS,
PETITIONERS, VS. THE CITY OF MANILA, RESPONDENT.
RESOLUTION

CARPIO, J.:

The Case

This petition, captioned as a petition for review on certiorari and declaratory relief, [1] assails the Order of 6 January 2011[2] of the Regional Trial Court of
Manila, Branch 49, denying reconsideration of the trial court's Order of 11 March 2010[3] which denied the motion to dismiss filed by petitioners Orlando
A. Rayos, Fe A. Rayos Dela Paz, and Engr. Manuel A. Rayos.[4]cralaw

The Facts

The present case originated from a complaint for eminent domain filed by respondent City of Manila against Remedios V. De Caronongan, Patria R.
Serrano, Laureano M. Reyes, Paz B. Sison, Teofila B. Sison, Leticia R. Ventanilla, Rosalinda R. Barrozo (defendants), docketed as Civil Case No.
03108154.
In its Complaint,[5] the City of Manila alleged that it passed Ordinance No. 7949 authorizing the City Mayor to acquire "by expropriation, negotiation or by
any other legal means' the parcel of land co-owned by defendants, which is covered by TCT No. 227512 and with an area of 1,182.20 square meters.
The City of Manila offered to purchase the property at P1,000.00 per square meter.
In their Answer,[6] defendants conveyed their willingness to sell the property to the City of Manila, but at the price of P50,000.00 per square meter which
they claimed was the fair market value of the land at the time.
In the course of the proceedings, Laureano, one of the defendants, died on 1 December 2003 and was substituted by his son petitioner Manuel A.
Rayos. Meanwhile, petitioner Orlando A. Rayos intervened while petitioner Fe A. Rayos Dela Paz was added as a defendant.
On 7 December 2009, petitioners Orlando A. Rayos, Fe A. Rayos Dela Paz, and Engr. Manuel A. Rayos filed a Motion to Dismiss on the grounds that
(1) Ordinance No. 7949 is unconstitutional and (2) the cases of Lagcao v. Labra[7] and Jesus Is Lord Christian School Foundation, Inc. v. Municipality
(now City) of Pasig, Metro Manila[8] apply squarely to the present case.
On 11 March 2010, the trial court denied the motion to dismiss. The trial court ruled that the motion to dismiss did not show any compelling reason to
convince the court that the doctrine of stare decisisapplies. Petitioners failed to demonstrate how or why the facts in this case are similar with the cited
cases in order that the issue in this case be resolved in the same manner. The trial court disposed of the motion to dismiss in this wise:

In view of the foregoing, and after intense evaluation of the records on hand, the Motion to Dismiss cannot be granted.
In order to prevent further delay to the prejudice of all the proper parties in this case, continue with the trial for the determination of just compensation on
July 7, 2010 at one o'clock in the afternoon.
SO ORDERED.[9]

On 6 January 2011, the trial court denied the motion for reconsideration.
Petitioners filed with this Court the present petition reiterating the arguments in their motion to dismiss, namely, (1) Ordinance No. 7949 is
unconstitutional, and (2) the cases of Lacgao v. Labra[10]and Jesus Is Lord Christian School Foundation, Inc. v. Municipality (now City) of Pasig, Metro
Manila[11] apply squarely to this case.

The Ruling of the Court

We deny the petition.

An order denying a motion to dismiss is interlocutory and not appealable. [12] An order denying a motion to dismiss does not finally dispose of the case,
and in effect, allows the case to proceed until the final adjudication thereof by the court. As such, it is merely interlocutory in nature and thus, not
appealable.[13] Section 1(c), Rule 41 of the Rules of Court provides:

SECTION 1. Subject of appeal. - An appeal may be taken from a judgment or final order that completely disposes of the case, or of a particular matter
therein when declared by these Rules to be appealable.
No appeal may be taken from:
xxx
(c) An interlocutory order;
xxx
In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate special civil action under Rule
65.

Clearly, no appeal, under Rule 45 of the Rules of Court, may be taken from an interlocutory order. In case of denial of an interlocutory order, the
immediate remedy available to the aggrieved party is to file a special civil action for certiorari under Rule 65 of the Rules of Court.
In this case, since the trial court's order denying the motion to dismiss is not appealable, petitioners should have filed a petition for certiorari under Rule
65 to assail such order, and not a petition for review on certiorari under Rule 45 of the Rules of Court. For being a wrong remedy, the present petition
deserves outright dismissal.
Even if the Court treats the present petition as a petition for certiorari under Rule 65, which is the proper remedy to challenge the order denying the
motion to dismiss, the same must be dismissed for violation of the principle of hierarchy of courts. This well-settled principle dictates that petitioners
should file the petition for certiorari with the Court of Appeals, and not directly with this Court.
Indeed, this Court, the Court of Appeals and the Regional Trial Courts exercise concurrent jurisdiction to issue writs of certiorari, prohibition,
mandamus, quo warranto, habeas corpus and injunction.[14]However, such concurrence in jurisdiction does not give petitioners unbridled freedom of
choice of court forum.[15] In [Heirs of Bertuldo Hinog v. Melicor],[16] citing People v. Cuaresma,[17] the Court held:

This Court's original jurisdiction to issue writs of certiorari is not exclusive. It is shared by this Court with Regional Trial Courts and with the Court
of Appeals. This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the writs an absolute, unrestrained
freedom of choice of the court to which application therefor will be directed. There is after all a hierarchy of courts. That hierarchy is determinative of
the venue of appeals, and also serves as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for
that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level ("inferior') courts should be filed
with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Court's original jurisdiction
to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the
petition. This is [an] established policy. It is a policy necessary to prevent inordinate demands upon the Court's time and attention which are better
devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court's docket. (Emphasis supplied.)

In short, to warrant a direct recourse to this Court, petitioners must show exceptional and compelling reasons therefor, clearly and specifically set out in
the petition. This petitioners failed to do.
Petitioners merely rehashed the arguments in their motion to dismiss, which consist mainly of unsubstantiated allegations. Petitioners invoke the cases
of Lagcao v. Labra[18] and Jesus Is Lord Christian School Foundation, Inc. v. Municipality (now City) of Pasig, Metro Manila [19] in challenging the
constitutionality of Ordinance No. 7949 without, however, showing clearly the applicability and similarity of those cases to the present controversy.
Neither did petitioners explain why Ordinance No. 7949 is repugnant to the Constitution. Nor did petitioners specifically and sufficiently set forth any
extraordinary and important reason to justify direct recourse to this Court. [20]
Likewise, assuming the present petition is one for declaratory relief, [21] as can be gleaned from the caption of the petition, this Court has only appellate,
not original, jurisdiction over such a petition. While this Court may treat a petition for declaratory relief as one for prohibition[22] or mandamus, over which
this Court exercises original jurisdiction,[23] it must be stressed that this special treatment is undertaken only in cases with far reaching implications and
transcendental issues that need to be resolved.[24]
In the present case, there is absolutely nothing which shows that it has far-reaching implications and involves transcendental questions deserving of this
Court's treatment of the petition as one for prohibition or mandamus.cralaw
WHEREFORE, we DENY the petition.
SO ORDERED.
Carpio, (Chairperson), Brion,Perez, Sereno, and Reyes, JJ.

[G.R. No. 193247 : September 14, 2011]

SERGIO I. CARBONILLA, EMILIO Y. LEGASPI IV, AND ADONAIS Y. REJUSO, PETITIONERS, VS. BOARD OF AIRLINES REPRESENTATIVES
(MEMBER AIRLINES: ASIANA AIRLINES, CATHAY PACIFIC AIRWAYS, CHINA AIRLINES, CEBU PACIFIC AIRLINES, CHINA SOUTHERN
AIRLINES, CONTINENTAL MICRONESIA AIRLINES, EMIRATES, ETIHAD AIRWAYS, EVA AIR AIRWAYS, FEDERAL EXPRESS CORPORATION,
GULF AIR, JAPAN AIRLINES, AIR FRANCE-KLM ROYAL DUTCH AIRLINES, KOREAN AIR, KUWAIT AIRWAYS CORPORATION, LUFTHANSA
GERMAN AIRLINES, MALAYSIA AIRLINES, NORTHWEST AIRLINES, PHILIPPINE AIRLINES, INC., QANTAS AIRWAYS, LTD., QATAR
AIRLINES, ROYAL BRUNEI AIRLINES, SINGAPORE AIRLINES, SWISS INTERNATIONAL AIRLINES, LTD., SAUDI ARABIAN AIRLINES, AND
THAI INTERNATIONAL AIRWAYS), RESPONDENTS.
[G.R. NO. 194276]
OFFICE OF THE PRESIDENT, REPRESENTED BY HON. PAQUITO N. OCHOA,* IN HIS CAPACITY AS EXECUTIVE SECRETARY, DEPARTMENT
OF FINANCE, REPRESENTED BY HON. CESAR V. PURISIMA** IN HIS CAPACITY AS SECRETARY OF FINANCE, AND THE BUREAU OF
CUSTOMS, REPRESENTED BY HON. ANGELITO A. ALVAREZ**** IN HIS CAPACITY AS COMMISSIONER OF CUSTOMS, PETITIONERS, VS.
BOARD OF AIRLINES REPRESENTATIVES (MEMBER AIRLINES: ASIANA AIRLINES, CATHAY PACIFIC AIRWAYS, CHINA AIRLINES, CEBU
PACIFIC AIRLINES, CHINA SOUTHERN AIRLINES, CONTINENTAL MICRONESIA AIRLINES, EMIRATES, ETIHAD AIRWAYS, EVA AIR
AIRWAYS, FEDERAL EXPRESS CORPORATION, GULF AIR, JAPAN AIRLINES, AIR FRANCE-KLM ROYAL DUTCH AIRLINES, KOREAN AIR,
KUWAIT AIRWAYS CORPORATION, LUFTHANSA GERMAN AIRLINES, MALAYSIA AIRLINES, NORTHWEST AIRLINES, PHILIPPINE AIRLINES,
INC., QANTAS AIRWAYS, LTD., QATAR AIRLINES, ROYAL BRUNEI AIRLINES, SINGAPORE AIRLINES, SWISS INTERNATIONAL AIRLINES,
LTD., SAUDI ARABIAN AIRLINES, AND THAI INTERNATIONAL AIRWAYS), RESPONDENTS.
DECISION

CARPIO, J.:

The Cases

Before the Court are two petitions for review[1] assailing the Decision[2] promulgated on 9 July 2009 by the Court of Appeals in CA-G.R. SP No. 103250.
In G.R. No. 193247, petitioners Sergio I. Carbonilla, Emilio Y. Legaspi IV, and Adonais Y. Rejuso (Carbonilla, et al.) assail the Resolution[3] promulgated
on 5 August 2010 by the Court of Appeals in CA-G.R. SP No. 103250.
In G.R. No. 194276, petitioners Office of the President, represented by Paquito N. Ochoa in his capacity as Executive Secretary, Department of Finance,
represented by Cesar V. Purisima in his capacity as Secretary of Finance, and the Bureau of Customs (BOC), represented by Angelito A. Alvarez in his
capacity as Commissioner of Customs (Office of the President, et al.), assail the Resolution [4]promulgated on 26 October 2010 by the Court of Appeals
in CA-G.R. SP No. 103250.
The Antecedent Facts

The facts, as gathered from the assailed Decision of the Court of Appeals, are as follows:
The Bureau of Customs[5] issued Customs Administrative Order No. 1-2005 (CAO 1-2005) amending CAO 7-92.[6] The Department of
Finance[7] approved CAO 1-2005 on 9 February 2006. CAO 7-92 and CAO 1-2005 were promulgated pursuant to Section 3506[8] in relation to Section
608[9] of the Tariff and Customs Code of the Philippines (TCCP).
Petitioners Office of the President, et al. alleged that prior to the amendment of CAO 7-92, the BOC created on 23 April 2002 a committee to review the
overtime pay of Customs personnel in Ninoy Aquino International Airport (NAIA) and to propose its adjustment from the exchange rate of P25 to US$1 to
the then exchange rate of P55 to US$1. The Office of the President, et al. alleged that for a period of more than two years from the creation of the
committee, several meetings were conducted with the agencies concerned, including respondent Board of Airlines Representatives (BAR), to discuss
the proposed rate adjustment that would be embodied in an Amendatory Customs Administrative Order.
On the other hand, BAR alleged that it learned of the proposed increase in the overtime rates only sometime in 2004 and only through unofficial reports.
On 23 August 2004, BAR wrote a letter addressed to Edgardo L. De Leon, Chief, Bonded Warehouse Division, BOC-NAIA, informing the latter of its
objection to the proposed increase in the overtime rates. BAR further requested for a meeting to discuss the matter.
BAR wrote the Secretary of Finance on 31 January 2005 and 21 February 2005 reiterating its concerns against the issuance of CAO 1-2005. In a letter
dated 3 March 2005, the Acting District Collector of BOC informed BAR that the Secretary of Finance already approved CAO 1-2005 on 9 February
2005. As such, the increase in the overtime rates became effective on 16 March 2005. BAR still requested for an audience with the Secretary of Finance
which was granted on 12 October 2005.
The BOC then sent a letter to BAR's member airlines demanding payment of overtime services to BOC personnel in compliance with CAO 1-2005. The
BAR's member airlines refused and manifested their intention to file a petition with the Commissioner of Customs and/or the Secretary of Finance to
suspend the implementation of CAO 1-2005.
In a letter dated 31 August 2006,[10] Undersecretary Gaudencio A. Mendoza, Jr. (Usec. Mendoza), Legal and Revenue Operations Group, Department of
Finance informed BAR, through its Chairman Felix J. Cruz (Cruz), that they "find no valid ground to disturb the validity of CAO 1-2005, much less to
suspend its implementation or effectivity" and that its implementation effective 16 March 2005 is legally proper.
In separate letters both dated 4 December 2006,[11] Cruz requested the Office of the President and the Office of the Executive Secretary to review the
decision of Usec. Mendoza. Cruz manifested the objection of the International Airlines operating in the Philippines to CAO 1-2005. On 13 December
2006, Deputy Executive Secretary Manuel B. Gaite (Deputy Exec. Sec. Gaite) issued an Order [12]requiring BAR to pay its appeal fee and submit an
appeal memorandum within 15 days from notice. BAR paid the appeal fee and submitted its appeal memorandum on 19 January 2007.
The Decision of the Office of the President

In a Decision[13] dated 12 March 2007, the Office of the President denied the appeal of BAR and affirmed the Decision of the Department of Finance.
The Office of the President ruled that the BOC was merely exercising its rule-making or quasi-legislative power when it issued CAO 1-2005. The Office
of the President ruled that since CAO 1-2005 was issued in the exercise of BOC's rule-making or quasi-legislative power, its validity and constitutionality
may only be assailed through a direct action before the regular courts. The Office of the President further ruled that, assuming that BAR's recourse
before the Office of the President was proper and in order, the appeal was filed out of time because BAR received the letter-decision of the Secretary of
Finance on 4 September 2006 but it filed its appeal only on 4 December 2006, beyond the 30-day period provided under Administrative Order No. 18
dated 12 February 1987.
The Office of the President also ruled that the grounds raised by BAR, namely, (1) the failure to comply with the publication requirement; (2) that the
foreign exchange cannot be a basis for rate increase; and (3) that increase in rate was ill-timed, were already deliberated during the meetings held
between the BOC and the stakeholders and were also considered by the Secretary of Finance. The Office of the President further adopted the position
of the BOC that several public hearings and consultations were conducted by the BOC-NAIA Collection District, which were in substantial compliance
with Section 9, Chapter I, Book VII of the Administrative Code of 1987. BAR did not oppose the exchange rate used in CAO 7-92 which was the
exchange rate at that time and thus, the BOC-NAIA Collection District found it strange that BAR was questioning the fixing of the adjusted pay rates
which were lower than the rate provided under Section 3506 of the TCCP. The Office of the President ruled that there is a legal presumption that the
rates fixed by an administrative agency are reasonable, and that the fixing of the rates by the Government, through its authorized agents, involved the
exercise of reasonable discretion.
BAR filed a motion for reconsideration. In its Resolution[14] dated 14 March 2008, the Office of the President denied BAR's motion for reconsideration.
BAR filed a petition for review under Rule 45 before the Court of Appeals.
Petitioners Carbonilla, et al. filed an Omnibus Motion to Intervene before the Court of Appeals on the ground that as customs personnel, they would be
directly affected by the outcome of the case. Petitioners Carbonilla, et al. also adopted the Comment filed by the Office of the Solicitor General (OSG).
The Decision of the Court of Appeals

In its 26 February 2009 Resolution,[15] the Court of Appeals denied the motion for intervention filed by Carbonilla, et al. The Court of Appeals ruled that
the petition before it involved the resolution of whether the decision of the Office of the President was correctly rendered. The Court of Appeals held that
the intervenors' case was for collection of their unpaid overtime services and their interests could not be protected or addressed in the resolution of the
case. The Court of Appeals ruled that Carbonilla, et al. should pursue their case in a separate proceeding against the proper respondents.
Carbonilla, et al. filed a motion for reconsideration of the 26 February 2009 resolution.
Without resolving Carbonilla, et al.'s motion for reconsideration, the Court of Appeals promulgated the assailed 9 July 2009 Decision which set aside the
12 March 2007 Decision and 14 March 2008 Resolution of the Office of the President and declared Section 3506 of the TCCP, CAO 7-92 and CAO 12005 unenforceable against BAR.
Ruling that it could take cognizance of BAR's appeal, the Court of Appeals held that BAR could not be faulted for not filing a case before the Court of
Tax Appeals (CTA) because the Office of the President admitted that it preempted any action before the CTA. Deputy Exec. Sec. Gaite treated the
letters of BAR as an appeal and required it to pay appeal fee and to submit an appeal memorandum. The Court of Appeals further ruled that what the
Office of the President treated as a decision of the Department of Finance was merely an advisory letter dated 31 August 2006 and to treat it as a
decision from which an appeal could be taken and then rule that it was not perfected on time would deprive BAR of its right to due process.
The Court of Appeals further ruled that it has the power to resolve the constitutional issue raised against CAO 7-92 and CAO 1-2005. The Court of
Appeals ruled that Section 8, Article IX(B) of the Constitution prohibits an appointive public officer or employee from receiving additional, double or
indirect compensation, unless specifically authorized by law. The Court of Appeals ruled that Section 3506 of the TCCP only authorized payment of
additional compensation for overtime work, and thus, the payment of traveling and meal allowances under CAO 7-92 and CAO 1-2005 are
unconstitutional and could not be enforced against BAR members.
The Court of Appeals ruled that Section 3506 of the TCCP failed the completeness and sufficient standard tests to the extent that it attempted to cover
BAR members through CAO 7-92 and CAO 1-2005. The Court of Appeals ruled that the phrase "other persons served" did not provide for descriptive
terms and conditions that might be completely understood by the BOC. The Court of Appeals ruled that devoid of common distinguishable characteristic,
aircraft owners and operators should not have been lumped together with importers and shippers. The Court of Appeals also ruled that Section 3506 of
the TCCP failed the sufficient standard test because it does not contain adequate guidelines or limitations needed to map out the boundaries of the
delegate's authority.
The dispositive portion of the Court of Appeals' Decision reads:
WHEREFORE, the petition is GRANTED. Declaring Section 3506 of the TCCP as well as CAO 7-92 and CAO 1-2005 to be unenforceable as against
the petitioners, the appealed Decision dated March 12, 2007 and Resolution dated March 14, 2008 are hereby SET ASIDE.
SO ORDERED.[16]

Petitioners Carbonilla, et al. filed their motion for reconsideration of the 9 July 2009 Decision. In its 5 August 2010 Resolution, the Court of Appeals,
among others, denied Carbonilla, et al.'s motion for reconsideration.
Carbonilla, et al. came to this Court via a petition for review, docketed as G.R. No. 193247, on the following grounds:
I.

The Honorable Court of Appeals seriously erred in law in ruling that the Court of Tax Appeals did not have jurisdiction on the subject
controversy.

II.

The Honorable Court of Appeals seriously erred in law in ruling that Section 3506 of the TCCP failed the completeness and sufficient standard
tests.

III.

The Honorable Court of Appeals seriously erred in law in ruling that CAO 7-92 as amended by CAO 1-2005 as well as Section 3506 of the
TCCP are not enforceable against BAR's members.

IV.

The Honorable Court of Appeals seriously erred in law in not ruling that estoppel and/or laches should have prevented the BAR from
questioning CAO 1-2005.

V.

The Honorable Court of Appeals seriously erred in law in issuing the decision dated July 9, 2009 in denying petitioners' intervention and
motion for reconsideration dated August 3, 2009.[17]

The Office of the President, et al. also filed a motion for reconsideration dated 28 July 2009 assailing the 9 July 2009 Decision of the Court of Appeals.
Meanwhile, in a Resolution promulgated on 12 May 2010,[18] the Court of Appeals directed BAR to continue complying with the 12 March 2007 Decision
of the Office of the President. The Court of Appeals ruled that BAR unlawfully withheld the rightful overtime payment of BOC employees when it stopped
paying its obligations under CAO 7-92, as amended by CAO 1-2005, since the Court of Appeals' 9 July 2009 Decision had not attained finality pending
the resolution of the motion for reconsideration filed by the Office of the President, et al. BAR filed a motion for reconsideration dated 26 May 2010 for
the reversal of the 12 May 2010 Resolution of the Court of Appeals.
In a Resolution promulgated on 26 October 2010, the Court of Appeals granted BAR's 26 May 2010 motion for reconsideration and denied the 28 July
2009 motion for reconsideration of the Office of the President, et al.
The Office of the President, et al. filed a petition for review before this Court, docketed as G.R. No. 194276, raising the following grounds:
I. The Court of Appeals erred in giving due course to respondents BAR and its member airlines' petition for review because it had no jurisdiction over the
issues raised therein by respondents, to wit:
1.

CAO No. 1-2005 is invalid as the increased overtime pay rates and meal and transportation allowances fixed therein are unreasonable and
confiscatory; and

2.

The act of the Bureau of Customs charging and/or collecting from BAR's member airlines the cost of the overtime pay and meal and
transportation allowances of Bureau of Customs (BOC) personnel in connection with the discharge of their government duties, functions and
responsibilities is legally impermissible and, therefore, invalid.

These issues involve the validity and collection of money charges authorized by the Customs Law and thus the Court of Tax Appeals (CTA) has
exclusive jurisdiction thereof.
I.

Granting arguendo that the Court of Appeals has jurisdiction over the said issues raised by the BAR and its member airlines, the Court of
Appeals should have dismissed their petition for review filed under Rule 45 of the Rules of Court on the following grounds:
1.

A petition for review under Ruled 43 of the Rules of Court cannot be filed to question the quasi-legislative or rule-making power of
the Commissioner of Customs;

2.

BAR's appeal to the Office of the President questioning the 31 August 2006 Decision of the Department of Finance (DOF), finding
that CAO No. 1-2005 is valid, was filed out of time;

3.

Some of respondents BAR member airlines' country managers who executed the verification and certification of non-forum shopping
of their petition for review did not have the necessary authorization of the said member airlines for them to execute the same; and

4.

Administrative procedural due process was observed in the promulgation by the Commissioner of Customs of the questioned CAO
No. 1-2005.

II.

Respondents BAR and its member airlines are guilty of laches and estoppel and thus are effectively barred from questioning the authority of
the Commissioner of Customs to promulgate pursuant to Section 608 in relation to Section 3506 of the Tariff and Customs Code (TCCP), as
amended, not only CAO No. 1-2005, but also CAO No. 7-92.

III.

The Court of Appeals erred in going beyond the issues raised by respondents BAR and its member airlines not only in the pleadings filed by
them in the proceedings below but also in their petition for review.

IV.

Section 3506 of the TCCP, CAO No. 1-2005 and CAO No. 7-92 are valid. Said law and its implementing regulations neither constitute undue
delegation of legislative power nor authorize overpayment of BOC personnel. [19]

The Issues

For resolution in these cases are the following issues:

1.

Whether the Court of Appeals committed a reversible error in denying the intervention of Carbonilla, et al.;

2.

Whether the Court of Appeals has jurisdiction over BAR's petition;

3.

Whether BAR's appeal before the Office of the President was filed on time;

4.

Whether the officers of some of BAR's member airlines who executed the verification and certification of non-forum shopping have the
necessary authorization to execute them;

5.

Whether BAR was guilty of laches and/or estoppel; and

6.

Whether the Court of Appeals committed a reversible error in declaring Section 3506 of the TCCP, CAO 7-92, and CAO 1-2005 unenforceable
against BAR.

The Ruling of this Court

The petition in G.R. No. 193247 has no merit while the petition in G.R. No. 194276 is meritorious.
Intervention in G.R. No. 193247

On the matter of the intervention of Carbonilla, et al., Section 1, Rule 19 of the 1997 Rules of Civil Procedure provides:
Section 1. Who may intervene. - A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest
against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer
thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or
prejudice the adjudication of the rights of the original parties, and whether or not the intervenor's rights may be fully protected in a separate proceeding.

Intervention is not a matter of right but it may be permitted by the courts when the applicant shows facts which satisfy the requirements authorizing
intervention.[20] In G.R. No. 193247, the Court of Appeals denied Carbonilla, et al.'s motion for intervention in its 26 February 2009 Resolution on the
ground that the case was for collection of unpaid overtime services and thus should be pursued in a separate proceeding against the proper
respondents. A reading of the Carbonilla, et al.'s Omnibus Motion[21] supports the ground invoked by the Court of Appeals in denying the motion. The
Omnibus Motion states:
1.

The said movants-intervenors all held offices or were stationed at the Ninoy Aquino International Airport [NAIA] and who have all been
rendering overtime services thereat for so many years.

2.

Movant-Intervenor Carbonilla has retired from government service last September 2007 without his being paid the additional rates set by CAO
No. 1-2005 which became effective on March 16, 2007. The effectivity and implementation of the said CAO No. 1-2005 is the main issue in
this case.

3.

Thus, it is noteworthy to mention that all the movants-intervenors all rendered overtime services since March 16, 2005 or for all the time
material to the issue in this case.

4.

Movants-Intervenors urgently need their respective [differential]/back payments representing overtime services rendered from 16 March 2005
to the present pursuant to the implementation of CAO No. 1-2005.

5.

Said differential/back payments pursuant to CAO No. 1-2005 would be of great help to the movants-intervenors considering that as of 24
January 2008, herein movants-intervenors were stripped of their respective overtime duties by the District Collector of Customs at NAIA for
reasons only known to the latter.

6.

The full implementation of CAO No. 1-2005 would not only benefit the cause and financial needs of herein movants-intervenors but also that of
the other 900 or so employees of the Bureau of Customs-NAIA who are rendering overtime services thereat up to the present. [22]

Clearly, Carbonilla, et al. were really after the payment of their differential or back payments for services rendered. Hence, the Court of Appeals correctly
denied the motion for intervention.
It should be stressed that the allowance or disallowance of a motion for intervention is addressed to the sound discretion of the courts. [23] The permissive
tenor of the Rules of Court shows the intention to give the courts the full measure of discretion in allowing or disallowing the intervention.[24] Once the
courts have exercised this discretion, it could not be reviewed by certiorari or controlled by mandamus unless it could be shown that the discretion was
exercised in an arbitrary or capricious manner.[25]Carbonilla, et al. failed to show that the Court of Appeals rendered its resolution in an arbitrary or
capricious manner.
In addition, Carbonilla, et al. admitted in their petition that their motion for reconsideration of the 26 February 2009 Resolution of the Court of Appeals
had been denied in open court during the oral arguments held by the Court of Appeals on 16 December 2009. [26] Carbonilla, et al. did not act on the
denial of this motion but only pursued their motion for reconsideration of the 9 July 2009 Decision of the Court of Appeals. Hence, the denial of
Carbonilla, et al.'s motion for intervention had already attained finality.
Having ruled against the right of Carbonilla, et al. to intervene, we see no reason to rule on the other issues they raise unless raised in G.R. No. 194276.
We now discuss the issues raised in G.R. No. 194276.
Jurisdiction of the Court of Appeals

The Office of the President, et al. argue that the Court of Appeals should have denied BAR's petition because it had no jurisdiction over the issues
raised, involving the validity and collection of money charges authorized by Customs Law, which are under the jurisdiction of the CTA.
We do not agree.
The jurisdiction of the Court of Appeals over BAR's petition stems from Section 1 in relation to Section 3, Rule 43 of the 1997 Rules of Civil Procedure
which states that appeals from "awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi
judicial functions[,]" which includes the Office of the President, may be taken to the Court of Appeals. BAR's petition for review to the Court of Appeals
from the 12 March 2007 Decision and 14 March 2008 Resolution of the Office of the President falls within the jurisdiction of the Court of Appeals.
As noted by the Court of Appeals, the Office of the President took cognizance of Cruz's letter dated 4 December 2006 requesting for a review of the 31
August 2006 letter of Usec. Mendoza. Deputy Exec. Sec. Gaite required BAR to pay the appeal fee and submit its appeal memorandum. Thereafter, the
Office of the President issued its 12 March 2007 Decision affirming the decision of the Department of Finance and then denied BAR's motion for
reconsideration in its 14 March 2008 Resolution. BAR's only recourse is to file a petition for review before the Court of Appeals under Rule 43 of the
1997 Rules on Civil Procedure. The exercise by the Court of Appeals of its appellate jurisdiction over the decision of the Office of the President is

entirely distinct from the issue of whether BAR committed a procedural error in elevating the case before the Office of the President instead of filing its
appeal before the CTA.
Timeliness of the Appeal before the Office of the President

The Court of Appeals ruled that the question of whether BAR's appeal before the Office of the President was filed on time was rendered academic when
BAR paid the appeal fee and submitted its appeal memorandum on time. The Court of Appeals held that Deputy Exec. Sec. Gaite could not validly
require BAR to perfect its appeal in his 13 December 2006 Order and then rule, after its perfection, that the appeal was not filed on time. The Court of
Appeals ruled that the 13 December 2006 Order of Deputy Exec. Sec. Gaite stopped BAR from pursuing any recourse with the CTA. The Court of
Appeals further ruled that the Office of the President did not explain how the 31 August 2006 letter of Usec. Mendoza became a decision of the
Secretary of Finance when it was only an advisory letter.
We do not agree with the Court of Appeals.
The Office of the President is not precluded from issuing the assailed decision in the same way that this Court is not proscribed from accepting a petition
before it, requiring the payment of docket fees, directing the respondent to comment on the petition, and after studying the case, from ruling that the
petition was filed out of time or that it lacks merit.
However, Cruz's 4 December 2006 letters to then President Gloria Macapagal Arroyo and then Exec. Sec. Eduardo Ermita are not in the nature of an
appeal provided for under Administrative Order No. 18, series of 1987 (AO 18).[27] Section 1 of AO 18 provides that an appeal to the Office of the
President shall be taken within 30 days from receipt by the aggrieved party of the decision, resolution or order complained of or appealed from. Section 2
of AO 18 cites caption, docket number of the case as presented in the office of origin, and addresses of the parties. Section 3 mentions pauper litigants.
In sum, the appeal provided under AO 18 refers to adversarial cases. It does not refer to a review of administrative rules and regulations, as what BAR
asked the Office of the President to do in this case. BAR, in writing the Office of the President, was exhausting its administrative remedies. BAR could
still go to the regular courts after the Office of the President acted on its request for a review of Usec. Mendoza's 31 August 2006 letter. The decision of
the Office of the President did not foreclose BAR's remedy to bring the matter to the regular courts.
BAR is assailing the issuance and implementation of CAO 1-2005. CAO 1-2005 is an amendment to CAO 7-92. CAO 7-92 was issued "[b]y authority of
Section 608, in relation to Section 3506, of the Tariff and Customs Code of the Philippines x x x." On this score, we do not agree with the Office of the
President that BAR, instead of filing an appeal before its office, should have filed an appeal before the CTA in accordance with Section 7 of Republic Act
No. 9282[28] (RA 9282) which reads:
Section 7. Jurisdiction. - The CTA shall exercise:
(a) Exclusive appellate jurisdiction, to review by appeal, as herein provided:
xxxx
4. Decisions of the Commissioner of Customs in vases involving liability for customs duties, fees and other money charges, seizure, detention or release
of property affected, fines forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by
the Bureau of Customs.

Under Section 11 of RA 9282, an appeal to the CTA should be taken within 30 days from receipt of the assailed decision or ruling.
However, Section 2313, Book II of Republic Act No. 1937 (RA 1937)[29] provides:
Section 2313. Review of Commissioner. - The person aggrieved by the decision or action of the Collector in any matter presented upon protest or by his
action in any case of seizure may, within fifteen (15) days after notification on writing by the Collector of his action or decision, file a written notice to the
Collector with a copy furnished to the Commissioner of his intention to appeal the action or decision of the Collector to the Commissioner. Thereupon the
Collector shall forthwith transmit all the records of the proceedings to the Commissioner, who shall approve, modify or reverse the action or decision of
the Collector and take such steps and make such orders as may be necessary to give effect to his decision. Provided, That when an appeal is filed
beyond the period herein prescribed, the same shall be deemed dismissed.
If in any seizure proceedings, the Collector renders a decision adverse to the Government, such decision shall automatically be reviewed by the
Commissioner and the records of the case shall be elevated within five (5) days from the promulgation of the decision of the Collector. The
Commissioner shall render a decision on the automatic appeal within thirty (30) days from receipts of the records of the case. If the Collector's decision
is reversed by the Commissioner, the decision of the Commissioner shall be final and executory. However, if the Collector's decision is affirmed, or if
within thirty (30) days from receipt of the record of the case by the Commissioner no decision is rendered of the decision involves imported articles
whose published value is five million pesos (P5,000,000) or more, such decision shall be deemed automatically appealed to the Secretary of Finance
and the records of the proceedings shall be elevated within five (5) days from the promulgation of the decision of the Commissioner or of the Collector
under appeal, as the case may be. Provided, further, That if the decision of the Commissioner or of the Collector under appeal, as the case may be, is
affirmed by the Secretary of Finance, or if within thirty (30) days from receipt of the records of the proceedings by the Secretary of Finance, no decision
is rendered, the decision of the Secretary of Finance, or of the Commissioner, or of the Collector under appeal, as the case may be, shall become final
and executory.
xxxx

Section 2402 of RA 1937 further provides:

Section 2402. Review by Court of Appeals. - The party aggrieved by a ruling of the Commissioner in any matter brought before him upon protest or by
his action or ruling in any case of seizure may appeal to the Court of Tax Appeals, in the manner and within the period prescribed by law and
regulations.

Clearly, what is appealable to the CTA are cases involving protest or seizure, which is not the subject of BAR's appeal in these cases. BAR's actions,
including seeking an audience with the Secretary of Finance,[30] as well as writing to the Executive Secretary and the Office of the President, are part of
the administrative process to question the validity of the issuance of an administrative regulation, that is, of CAO 1-2005, entitled Amendments to
Customs Administrative Order No. 7-92 (Rules and Regulations Governing the Overtime Pay and Other Compensations Related Thereto Due to
Customs Personnel at the NAIA).

CAO 1-2005 was issued pursuant to Section 608 of the TCCP which provides:
Section 608. Commissioner to Make Rules and Regulations. - The Commissioner shall, subject to the approval of the Secretary of Finance, promulgate
all rules and regulations necessary to enforce the provisions of this Code. x x x

The jurisdiction over the validity and constitutionality of rules and regulations issued by the Commissioner under Section 608 of the TCCP lies before the
regular courts. It is not within the jurisdiction of the Office of the President or the CTA. Hence, the Office of the President erred in holding that BAR's
appeal was filed late because BAR can still raise the issue before the regular courts.
Verification and Certification
of Non-Forum Shopping

The Office of the President, et al. allege that the Court of Appeals should have dismissed the petition because of BAR's failure to comply fully with the
requirements of verification and certification of non-forum shopping.
We agree with the Court of Appeals in its liberal interpretation of the Rules. Verification of a pleading is a formal, not jurisdictional, requirement.[31] The
requirement is simply a condition affecting the form of the pleading and non-compliance with the requirement does not render the pleading fatally
defective.[32]
As regards the certification of non-forum shopping, this Court may relax the rigid application of the rules to afford the parties the opportunity to fully
ventilate their cases on the merits.[33] This is in line with the principle that cases should be decided only after giving all parties the chance to argue their
causes and defenses.[34] Technicality and procedural imperfections should not serve as basis of decisions and should not be used to defeat the
substantive rights of the other party.[35]
Estoppel and Laches

The Office of the President, et al. allege that BAR is guilty of estoppel and laches because it did not question CAO 7-92 which had been in effect since
1992. The Office of the President, et al. argue that a direct attack of CAO 1-2005 is a collateral attack of CAO 7-92 since CAO 7-92 is the main
administrative regulation enacted to implement Section 3506 of the TCCP.
The argument has no merit.
BAR is not questioning the validity of CAO 7-92 or Section 3506 of the TCCP. BAR is questioning the validity of CAO 1-2005 on the following grounds:
(1) that it was approved in violation of BAR's right to due process because its approval did not comply with the required publication notice under Section
9(2), Chapter I, Book VII, of the Administrative Code of the Philippines; (2) that CAO 1-2005 inappropriately based its justification on the declining value
of the Philippine peso versus the U.S. dollar when services of the BOC are rendered without spending any foreign currency; and (3) that the increase in
BOC rates aggravates the already high operating cost paid by the airlines which are still reeling from the impact of consecutive negative events such as
SARS, Iraqi war, avian flu and the unprecedented increase in fuel prices. BAR's objection to CAO 1-2005 could not be considered a direct attack on
CAO 7-92 because BAR was merely objecting to the amendments to CAO 7-92. BAR did not question the validity of CAO 7-92 itself. Even during the
pendency of these cases before the Court of Appeals, BAR members continued to pay the rates prescribed under CAO 7-92. It was only upon the
promulgation of the Court of Appeals' Decision declaring CAO 7-92 and CAO 1-2005 unconstitutional that BAR recommended to its members to stop
paying the charges imposed by the BOC.
Hence, BAR is not estopped from questioning CAO 1-2005 on the ground alone that it did not question the validity of CAO 7-92.
Constitutionality of CAO 7-92, CAO 1-2005
and Section 3506 of the TCCP

The Office of the President, et al. allege that the Court of Appeals acted beyond its jurisdiction when it passed upon the validity of CAO 7-92 and Section
3506 of the TCCP.
We do not agree with the Office of the President, et al.
Section 8, Rule 51 of the 1997 Rules of Civil Procedure also states:
Section 8. Questions that may be decided. - No error which does not affect the jurisdiction over the subject matter or the validity of the judgment
appealed from or the proceedings therein, will be considered unless stated in the assignment of errors, or closely related to or dependent on an
assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors.

The Court of Appeals deemed it necessary to rule on the issue for the proper determination of these cases. The Court has ruled that the Court of
Appeals is imbued with sufficient authority and discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration
is necessary in arriving at a complete and just resolution of the case or to serve the interests of justice or to avoid dispensing piecemeal
justice.[36] Further, while it is true that the issue of constitutionality must be raised at the first opportunity, this Court, in the exercise of sound discretion,
can take cognizance of the constitutional issues raised by the parties in accordance with Section 5(2)(a), Article VII of the 1987 Constitution.[37]
The Court has further ruled:
When an administrative regulation is attacked for being unconstitutional or invalid, a party may raise its unconstitutionality or invalidity on every occasion
that the regulation is being enforced. For the Court to exercise its power of judicial review, the party assailing the regulation must show that the question
of constitutionality has been raised at the earliest opportunity. This requisite should not be taken to mean that the question of constitutionality must be
raised immediately after the execution of the state action complained of. That the question of constitutionality has not been raised before is not a valid
reason for refusing to allow it to be raised later. A contrary rule would mean that a law, otherwise unconstitutional, would lapse into constitutionality by
the mere failure of the proper party to promptly file a case to challenge the same. [38]

Section 3506 of the TCCP provides:

Section 3506. Assignment of Customs Employees to Overtime Work. - Customs employees may be assigned by a Collector to do overtime work at rates
fixed by the Commissioner of Customs when the service rendered is to be paid by the importers, shippers or other persons served. The rates to be fixed
shall not be less than that prescribed by law to be paid to employees of private enterprise.

We do not agree with the Court of Appeals in excluding airline companies, aircraft owners, and operators from the coverage of Section 3506 of the
TCCP. The term "other persons served" refers to all other persons served by the BOC employees. Airline companies, aircraft owners, and operators are
among other persons served by the BOC employees. As pointed out by the OSG, the processing of embarking and disembarking from aircrafts of
passengers, as well as their baggages and cargoes, forms part of the BOC functions. BOC employees who serve beyond the regular office hours are
entitled to overtime pay for the services they render.
The Court of Appeals ruled that, applying the principle of ejusdem generis, airline companies, aircraft owners, and operators are not in the same
category as importers and shippers because an importer "brings goods to the country from a foreign country and pays custom duties" while a shipper is
"one who ships goods to another; one who engages the services of a carrier of goods; one who tenders goods to a carrier for transportation." However,
airline passengers pass through the BOC to declare whether they are bringing goods that need to be taxed. The passengers cannot leave the airport of
entry without going through the BOC. Clearly, airline companies, aircraft owners, and operators are among the persons served by the BOC under
Section 3506 of the TCCP.
The overtime pay of BOC employees may be paid by any of the following: (1) all the taxpayers in the country; (2) the airline passengers; and (3) the
airline companies which are expected to pass on the overtime pay to passengers. If the overtime pay is taken from all taxpayers, even those who do not
travel abroad will shoulder the payment of the overtime pay. If the overtime pay is taken directly from the passengers or from the airline companies, only
those who benefit from the overtime services will pay for the services rendered. Here, Congress deemed it proper that the payment of overtime services
shall be shouldered by the "other persons served" by the BOC, that is, the airline companies. This is a policy decision on the part of Congress that is
within its discretion to determine. Such determination by Congress is not subject to judicial review.
We do not agree with the Court of Appeals that Section 3506 of the TCCP failed the completeness and sufficient standard tests. Under the first test, the
law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate, the only thing he will have to
do is to enforce it.[39] The second test requires adequate guidelines or limitations in the law to determine the boundaries of the delegate's authority and
prevent the delegation from running riot.[40] Contrary to the ruling of the Court of Appeals, Section 3506 of the TCCP complied with these requirements.
The law is complete in itself that it leaves nothing more for the BOC to do: it gives authority to the Collector to assign customs employees to do overtime
work; the Commissioner of Customs fixes the rates; and it provides that the payments shall be made by the importers, shippers or other persons served.
Section 3506 also fixed the standard to be followed by the Commissioner of Customs when it provides that the rates shall not be less than that
prescribed by law to be paid to employees of private enterprise.
Contrary to the ruling of the Court of Appeals, BOC employees rendering overtime services are not receiving double compensation for the overtime pay,
travel and meal allowances provided for under CAO 7-92 and CAO 1-2005. Section 3506 provides that the rates shall not be less than that prescribed by
law to be paid to employees of private enterprise. The overtime pay, travel and meal allowances are payment for additional work rendered after regular
office hours and do not constitute double compensation prohibited under Section 8, Article IX(B) of the 1987 Constitution [41] as they are in fact authorized
by law or Section 3506 of the TCCP.
BAR raises the alleged failure of BOC to publish the required notice of public hearing and to conduct public hearings to give all parties the opportunity to
be heard prior to the issuance of CAO 1-2005 as required under Section 9(2), Chapter I, Book VII of the Administrative Code of the Philippines. Section
9(2) provides:
Sec. 9. Public Participation. - (1) If not otherwise required by law, an agency shall, as far as practicable, publish or circulate notices of proposed rules
and afford interested parties the opportunity to submit their views prior to the adoption of any rule.
(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been published in a newspaper of general circulation at
least two (2) weeks before the first hearing thereon.
(3) In cases of opposition, the rules on contested cases shall be observed.

BAR's argument has no merit.

The BOC created a committee to re-evaluate the proposed increase in the rate of overtime pay and for two years, several meetings were conducted with
the agencies concerned to discuss the proposal. BAR and the Airline Operators Council participated in these meetings and discussions. Hence,
BAR cannot claim that it was denied due process in the imposition of the increase of the overtime rate. CAO 1-2005 was published in the Manila
Standard, a newspaper of general circulation in the Philippines on 18 February 2005[42] and while it was supposed to take effect on 5 March 2005, or 15
days after its publication, the BOC-NAIA still deferred BAR's compliance until 16 March 2005.
WHEREFORE, we DENY the petition in G.R. No. 193247. We GRANT the petition in G.R. No. 194276 and SET ASIDE the 9 July 2009 Decision and 26
October 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 103250. Petitioner Bureau of Customs is DIRECTED to implement CAO 1-2005
immediately.
SO ORDERED.
Carpio, (Chairperson), Brion,Del Castillo,*** Perez, and Sereno, JJ.
[G.R. Nos. 156556-57 : October 04, 2011]
ENRIQUE U. BETOY, PETITIONER, VS. THE BOARD OF DIRECTORS, NATIONAL POWER CORPORATION, RESPONDENT.
DECISION

PERALTA, J.:

Before this Court is a special civil action for certiorari[1] and supplemental petition for mandamus,[2]specifically assailing National Power Board
Resolutions No. 2002-124 and No. 2002-125, as well as Sections 11, 34, 38, 48, 52 and 63 of Republic Act (R.A.) No. 9136, otherwise known as

the Electric Power Industry Reform Act of 2001 (EPIRA). Also assailed is Rule 33 of the Implementing Rules and Regulations (IRR) of the EPIRA.
The facts of the case are as follows:
On June 8, 2001, the EPIRA was enacted by Congress with the goal of restructuring the electric power industry and privatization of the assets of the
National Power Corporation (NPC).
Pursuant to Section 48[3] of the EPIRA, a new National Power Board of Directors (NPB) was created. On February 27, 2002, pursuant to Section 77 [4] of
the EPIRA, the Secretary of the Department of Energy promulgated the IRR.
On the other hand, Section 63 of the EPIRA provides for separation benefits to officials and employees who would be affected by the restructuring of the
electric power industry and the privatization of the assets of the NPC, to wit:
Section 63. Separation Benefits of Officials and Employees of Affected Agencies. -National Government employees displaced or separated from the
service as a result of the restructuring of the electricity industry and privatization of NPC assets pursuant to this Act, shall be entitled to
either a separation pay and other benefits in accordance with existing laws, rules or regulations or be entitled to avail of the privileges
provided under a separation plan which shall be one and one-half month salary for every year of service in the government: Provided,
however, That those who avail of such privileges shall start their government service anew if absorbed by any government-owned successor company.
In no case shall there be any diminution of benefits under the separation plan until the full implementation of the restructuring and privatization.
Displaced or separated personnel as a result of the privatization, if qualified, shall be given preference in the hiring of the manpower requirements of the
privatized companies. x x x[5]

Rule 33[6] of the IRR provided for the coverage and the guidelines for the separation benefits to be given to the employees affected.
On November 18, 2002, pursuant to Section 63 of the EPIRA and Rule 33 of the IRR, the NPB passed NPB Resolution No. 2002-124[7] which, among
others, resolved that all NPC personnel shall be legally terminated on January 31, 2003 and shall be entitled to separation benefits. On the same day,
the NPB passed NPB Resolution No. 2002-125[8] which created a transition team to manage and implement the separation program.
As a result of the foregoing NPB Resolutions, petitioner Enrique U. Betoy, together with thousands of his co-employees from the NPC were terminated.
Hence, herein petition for certiorari with petitioner praying for the grant of the following reliefs from this Court, to wit:
1. Declaring National Power Board Resolution Nos. 2002-124 and 2002-125 and its Annex "B" Null and Void, the fact [that] it was done with
extraordinary haste and in secrecy without the able participation of the Napocor Employees Consolidated Union (NECU) to represent all career civil
service employees on issues affecting their rights to due process, equity, security of tenure, social benefits accrued to them, and as well as the
disclosure of public transaction provisions of the 1987 Constitution because during its proceeding the National Power Board had acted with grave abuse
of discretion and disregarding constitutional and statutory injunctions on removal of public servants and non-diminution of social benefits accrued to
separated employees, thus, amounting to excess of jurisdiction;
2. Striking down Section 11, Section 48 and Section 52 of RA 9136 (EPIRA) for being violative of Section 13, Article VII of the 1987 Constitution and,
therefore, unconstitutional;
3. Striking Section 34 of RA 9136 (EPIRA) for being exorbitant display of State Power and was not premised on the welfare of the FILIPINO PEOPLE or
principle of salus populi est suprema lex;
4. Striking down Section 38 for RA 9136 (EPIRA) for being a prelude to Charter Changewithout a valid referendum for ratification of the entire voter
citizens of the Philippine Republic;
5. Striking down all other provisions of RA 9136 (EPIRA) found repugnant to the 1987 Constitution;
6. Striking down all provisions of the Implementing Rules and Regulations (IRR) of the EPIRA found repugnant to the 1987 Constitution;
7. Striking down Section 63 of RA 9136 (EPIRA) for classifying such provisions in the same vein with Proclamation No. 50 used against MWSS
employees and its failure to classify which condition comes first whether the restructuring effecting total reorganization of the electric power industry
making NPC financially viable or the privatization of NPC assets where manpower reduction or sweeping/lay-off or termination of career civil service
employees follows the disposal of NPC assets. This is a clear case of violation of the EQUAL PROTECTION CLAUSE, therefore, unconstitutional;
8. Striking down Rule 33 of the Implementing Rules [and] Regulations (IRR) for disregarding the constitutional and statutory injunction on arbitrary
removal of career civil service employees; and
9. For such other reliefs deemed equitable with justice and fairness to more than EIGHT THOUSAND (8,000) EMPLOYEES of the National Power
Corporation (NPC) whose fate lies in the sound disposition of the Honorable Supreme Court.[9]

In addition, petitioner also filed a supplemental petition for mandamus praying for his reinstatement.
The petition is without merit.
Before anything else, this Court shall first tackle whether it was proper for petitioner to directly question the constitutionality of the EPIRA before this
Court.
Section 5(1) and (2), Article VIII of the 1987 Constitution provides that:
SECTION 5. The Supreme Court shall have the following powers:
1. Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and over petitions for certiorari, prohibition,
mandamus, quo warranto, and habeas corpus.
2. Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the rules of court may provide, final judgments and orders of lower
courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order,
instruction, ordinance, or regulation is in question.[10]

Based on the foregoing, this Court's jurisdiction to issue writs of certiorari, prohibition, mandamus,quo warranto, and habeas corpus, while concurrent
with that of the Regional Trial Courts and the Court of Appeals, does not give litigants unrestrained freedom of choice of forum from which to seek such
relief. [11] The determination of whether the assailed law and its implementing rules and regulations contravene the Constitution is within the jurisdiction
of regular courts. The Constitution vests the power of judicial review or the power to declare a law, treaty, international or executive agreement,
presidential decree, order, instruction, ordinance, or regulation in the courts, including the Regional Trial Courts. [12]
It has long been established that this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts, or
where exceptional and compelling circumstances justify availment of a remedy within and call for the exercise of our primary jurisdiction.[13] Thus, herein
petition should already be dismissed at the outset; however, since similar petitions have already been resolved by this Court tackling the validity of NPB
Resolutions No. 2002-124 and No. 2002-125, as well as the constitutionality of certain provisions of the EPIRA, this Court shall disregard the procedural
defect.
Validity of NPB Resolutions No. 2002-124 and No. 2002-125
The main issue raised by petitioner deals with the validity of NPB Resolutions No. 2002-124 and No. 2002-125.
In NPC Drivers and Mechanics Association (NPC DAMA) v. National Power Corporation (NPC),[14] this Court had already ruled that NPB Resolutions No.
2002-124 and No. 2002-125 are void and of no legal effect.
NPC Drivers involved a special civil action for Injunction seeking to enjoin the implementation of the same assailed NPB Resolutions. Petitioners therein
put in issue the fact that the NPB Resolutions were not concluded by a duly constituted Board of Directors since no quorum in accordance with Section
48 of the EPIRA existed. In addition, petitioners therein argued that the assailed NPB Resolutions cannot be given legal effect as it failed to comply with
Section 47 of the EPIRA which required the endorsement of the Joint Congressional Power Commission and the President of the Philippines. Ruling in
favor of petitioners therein, this Court ruled that NPB Resolutions No. 2002-124 and No. 2002-125 are void and of no legal effect for failure to comply
with Section 48 of the EPIRA, to wit:
We agree with petitioners. In enumerating under Section 48 those who shall compose the National Power Board of Directors, the legislature has vested
upon these persons the power to exercise their judgment and discretion in running the affairs of the NPC. Discretion may be defined as "the act or the
liberty to decide according to the principles of justice and one's ideas of what is right and proper under the circumstances, without willfulness or favor.
Discretion, when applied to public functionaries, means a power or right conferred upon them by law of acting officially in certain circumstances,
according to the dictates of their own judgment and conscience, uncontrolled by the judgment or conscience of others. It is to be presumed that in
naming the respective department heads as members of the board of directors, the legislature chose these secretaries of the various executive
departments on the basis of their personal qualifications and acumen which made them eligible to occupy their present positions as department heads.
Thus, the department secretaries cannot delegate their duties as members of the NPB, much less their power to vote and approve board resolutions,
because it is their personal judgment that must be exercised in the fulfilment of such responsibility.
xxxx
In the case at bar, it is not difficult to comprehend that in approving NPB Resolutions No. 2002-124 and No. 2002-125, it is the representatives of the
secretaries of the different executive departments and not the secretaries themselves who exercised judgment in passing the assailed Resolution, as
shown by the fact that it is the signatures of the respective representatives that are affixed to the questioned Resolutions. This, to our mind, violates the
duty imposed upon the specifically enumerated department heads to employ their own sound discretion in exercising the corporate powers of the NPC.
Evidently, the votes cast by these mere representatives in favor of the adoption of the said Resolutions must not be considered in determining whether
or not the necessary number of votes was garnered in order that the assailed Resolutions may be validly enacted. Hence, there being only three valid
votes cast out of the nine board members, namely those of DOE Secretary Vincent S. Perez, Jr.; Department of Budget and Management Secretary
Emilia T. Boncodin; and NPC OIC-President Rolando S. Quilala,NPB Resolutions No. 2002-124 and No. 2002-125 are void and are of no legal
effect.[15]

However, a supervening event occurred in NPC Drivers when it was brought to this Court's attention that NPB Resolution No. 2007-55 was promulgated
on September 14, 2007 confirming and adopting the principles and guidelines enunciated in NPB Resolutions No. 2002-124 and No. 2002-125.
On December 2, 2009, this Court promulgated a Resolution[16] clarifying the amount due the individual employees of NPC in view of NPB Resolution No.
2007-55. In said Resolution, this Court clarified the exact date of the legal termination of each class of NPC employees, thus:
From all these, it is clear that our ruling, pursuant to NPB Resolution No. 2002-124, covers all employees of the NPC and not only the 16 employees as
contended by the NPC. However, as regards their right to reinstatement, or separation pay in lieu of reinstatement, pursuant to a validly approved
Separation Program, plus backwages, wage adjustments, and other benefits, the same shall be computed from the date of legal termination as stated in
NPC Circular No. 2003-09, to wit:
a) The legal termination of key officials, i.e., the Corporate Secretary, Vice-Presidents and Senior Vice-Presidents who were appointed under NP Board
Resolution No. 2003-12, shall be at the close of office hours of January 31, 2003.
b) The legal termination of personnel who availed of the early leavers' scheme shall be on the last day of service in NPC but not beyond January 15,
2003.
c) The legal termination of personnel who were no longer employed in NPC after June 26, 2001 shall be the date of actual separation in NPC.
d) For all other NPC personnel, their legal termination shall be at the close of office hours/shift schedule of February 28, 2003.[17]

As to the validity of NPB Resolution No. 2007-55, this Court ruled that the same will have a prospective effect, to wit:
What then is the effect of the approval of NPB Resolution No. 2007-55 on 14 September 2007? The approval of NPB Resolution No. 2007-55,
supposedly by a majority of the National Power Board as designated by law, that adopted, confirmed and approved the contents of NPB Resolutions No.
2002-124 and No. 2002-125 will have a prospective effect, not a retroactive effect. The approval of NPB Resolution No. 2007-55 cannot ratify and
validate NPB Resolutions No. 2002-124 and No. 2002-125 as to make the termination of the services of all NPC personnel/employees on 31 January
2003 valid, because said resolutions were void.

The approval of NPB Resolution No. 2007-55 on 14 September 2007 means that the services of all NPC employees have been legally
terminated on this date. All separation pay and other benefits to be received by said employees will be deemed cut on this date. The computation
thereof shall, therefore, be from the date of their illegal termination pursuant to NPB Resolutions No. 2002-124 and No. 2002-125 as clarified by NPB
Resolution No. 2003-11 and NPC Resolution No. 2003-09 up to 14 September 2007. Although the validity of NPB Resolution No. 2007-55 has not yet
been passed upon by the Court, same has to be given effect because NPB Resolution No. 2007-55 enjoys the presumption of regularity of official acts.
The presumption of regularity of official acts may be rebutted by affirmative evidence of irregularity or failure to perform a duty. Thus, until and unless
there is clear and convincing evidence that rebuts this presumption, we have no option but to rule that said resolution is valid and effective
as of 14 September 2007.[18]

Based on the foregoing, this Court concluded that the computation of the amounts due the employees who were terminated and/or separated as a result
of, or pursuant to, the nullified NPB Board Resolutions No. 2002-124 and No. 2002-125 shall be from their date of illegal termination up to September
14, 2007 when NPB Resolution No. 2007-55 was issued.
Thus, the resolution of the validity of NPB Board Resolutions No. 2002-124 and No. 2002-125 is, therefore, moot and academic in view of the Court's
pronouncements in NPC Drivers.
Anent the question of the constitutionality of Section 63 of RA 9136, as well as Rule 33 of the IRR, this Court finds that the same is without merit.
A reorganization involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions. [19] It
could result in the loss of one's position through removal or abolition of an office. However, for a reorganization for the purpose of economy or to make
the bureaucracy more efficient to be valid, it must pass the test of good faith; otherwise, it is void ab initio.[20]
It is undisputed that NPC was in financial distress and the solution found by Congress was to pursue a policy towards its privatization. The privatization
of NPC necessarily demanded the restructuring of its operations. To carry out the purpose, there was a need to terminate employees and re-hire some
depending on the manpower requirements of the privatized companies. The privatization and restructuring of the NPC was, therefore, done in good faith
as its primary purpose was for economy and to make the bureaucracy more efficient.
In Freedom from Debt Coalition v. Energy Regulatory Commission,[21] this Court discussed why there was a need for a shift towards the privatization and
restructuring of the electric power industry, to wit:
One of the landmark pieces of legislation enacted by Congress in recent years is the EPIRA. It established a new policy, legal structure and regulatory
framework for the electric power industry.
The new thrust is to tap private capital for the expansion and improvement of the industry as the large government debt and the highly capital-intensive
character of the industry itself have long been acknowledged as the critical constraints to the program. To attract private investment, largely foreign, the
jaded structure of the industry had to be addressed. While the generation and transmission sectors were centralized and monopolistic, the distribution
side was fragmented with over 130 utilities, mostly small and uneconomic. The pervasive flaws have caused a low utilization of existing generation
capacity; extremely high and uncompetitive power rates; poor quality of service to consumers; dismal to forgettable performance of the government
power sector; high system losses; and an inability to develop a clear strategy for overcoming these shortcomings.
Thus, the EPIRA provides a framework for the restructuring of the industry, including the privatization of the assets of the National Power Corporation
(NPC), the transition to a competitive structure, and the delineation of the roles of various government agencies and the private entities. The law ordains
the division of the industry into four (4) distinct sectors, namely: generation, transmission, distribution and supply. Corollarily, the NPC generating plants
have to be privatized and its transmission business spun off and privatized thereafter. [22]

Petitioner argues that bad faith is clearly manifested as the reorganization has an eye to replace current favorite less competent appointees. In addition,
petitioner contends that qualifications and behavioral aspect were being set aside. [23]
Section 2 of R.A. No. 6656[24] cites certain circumstances showing bad faith in the removal of employees as a result of any reorganization, thus:
Sec. 2. No officer or employee in the career service shall be removed except for a valid cause and after due notice and hearing. A valid cause for
removal exist when, pursuant to a bona fide reorganization, a position has been abolished or rendered redundant or there is a need to merge, divide, or
consolidate positions in order to meet the exigencies of the service, or other lawful causes allowed by the Civil Service Law. The existence of any or
some of the following circumstances may be considered as evidence of bad faith in the removals made as a result of the reorganization, giving rise to a
claim for reinstatement or reappointment by an aggrieved party:
a) Where there is a significant increase in the number of positions in the new staffing pattern of the department or agency concerned;
b) Where an office is abolished and another performing substantially the same functions is created;
c) Where incumbents are replaced by those less qualified in terms of status of appointment, performance and merit;
d) Where there is a reclassification of offices in the department or agency concerned and the reclassified offices perform substantially the same
functions as the original offices; and
e) Where the removal violates the order of separation provided in Section 3 hereof.

The Solicitor General, however, argues that petitioner has not shown any circumstance to prove that the restructuring of NPC was done in bad faith. We
agree.
Petitioner's allegation that the reorganization was merely undertaken to accommodate new appointees is at most speculative and bereft of any evidence
on record. It is settled that bad faith must be duly proved and not merely presumed. It must be proved by clear and convincing evidence,[25] which is
absent in the case at bar.
In addition, petitioner has no legal or vested right to be reinstated as Section 63 of the EPIRA as well as Section 5, Rule 33 of the IRR clearly state that
the displaced or separated personnel as a result of the privatization, if qualified, shall be given preference in the hiring of the manpower requirements of
the privatized companies. Clearly, the law only speaks of preference and by no stretch of the imagination can the same amount to a legal right to the
position. Undoubtedly, not all the terminated employees will be re-hired by the selection committee as the manpower requirement of the privatized
companies will be different. As correctly observed by the Solicitor General, the selection of employees for purposes of re-hiring them necessarily entails
the exercise of discretion or judgment.[26] Such being the case, petitioner, cannot, by way of mandamus, compel the selection committee to include him
in the re-hired employees, more so, since there is no evidence showing that said committee acted with grave abuse of discretion or that the re-hired
employees were merely accommodated and not qualified.

Validity of Sections 11, 48, and 52 of RA 9136

Petitioner argues that Sections 11,[27] 48,[28] and 52[29] of the EPIRA are unconstitutional for violating Section 13, Article VII of the 1987 Constitution.
Section 13, Article VII of the 1987 Constitution provides:
Sec. 13. The President, Vice-President, the Members of the Cabinet, and their deputies or assistants shall not, unless otherwise provided in this
Constitution, hold any other officeor employment during their tenure. They shall not, during said tenure, directly or indirectly practice any other
profession, participate in any business, or be financially interested in any contract with, or in any franchise, or special privilege granted by the
Government or any subdivision, agency, or instrumentality thereof, including government-owned or controlled corporations or their subsidiaries. They
shall strictly avoid conflict of interest in the conduct of their office.
x x x x.[30]

In Civil Liberties Union v. Executive Secretary,[31] this Court explained that the prohibition contained in Section 13, Article VII of the 1987 Constitution
does not apply to posts occupied by the Executive officials specified therein without additional compensation in an ex-officio capacity as provided by law
and as required by the primary function of said official's office, to wit:
The prohibition against holding dual or multiple offices or employment under Section 13, Article VII of the Constitution must not, however, be construed
as applying to posts occupied by the Executive officials specified therein without additional compensation in anex-officio capacity as provided by law and
as required by the primary functions of said officials' office. The reason is that these posts do not comprise "any other office" within the contemplation of
the constitutional prohibition but are properly an imposition of additional duties and functions on said officials. To characterize these posts otherwise
would lead to absurd consequences, among which are: The President of the Philippines cannot chair the National Security Council reorganized under
Executive Order No. 115 (December 24, 1986). Neither can the Vice-President, the Executive Secretary, and the Secretaries of National Defence,
Justice, Labor and Employment and Local Government sit in this Council, which would then have no reason to exist for lack of a chairperson and
members. The respective undersecretaries and assistant secretaries, would also be prohibited.
xxxx
The term "primary" used to describe "functions" refers to the order of importance and thus means chief or principal function. The term is not restricted to
the singular but may refer to the plural. The additional duties must not only be closely related to, but must be required by the official's primary functions.
Examples of designations to positions by virtue of one's primary functions are the Secretaries of Finance and Budget, sitting as members of the
Monetary Board, and the Secretary of Transportation and Communications, acting as Chairman of the Maritime Industry Authority and the Civil
Aeronautics Board.[32]

The designation of the members of the Cabinet to form the NPB does not violate the prohibition contained in our Constitution as the privatization and
restructuring of the electric power industry involves the close coordination and policy determination of various government agencies. Section 2 of the
EPIRA clearly shows that the policy toward privatization would involve financial, budgetary and environmental concerns as well as coordination with local
government units, to wit:
SECTION 2. Declaration of Policy. - It is hereby declared the policy of the State:
(a) To ensure and accelerate the total electrification of the country;
(b) To ensure the quality, reliability, security and affordability of the supply of electric power;
(c) To ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to achieve greater
operational and economic efficiency and enhance the competitiveness of Philippine products in the global market;
(d) To enhance the inflow of private capital and broaden the ownership base of the power generation, transmission and distribution sectors;
(e) To ensure fair and non-discriminatory treatment of public and private sector entities
in the process of restructuring the electric power industry;
(f) To protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power;
(g) To assure socially and environmentally compatible energy sources and infrastructure;
(h) To promote the utilization of indigenous and new and renewable energy resources in power generation in order to reduce dependence on imported
energy;
(i) To provide for an orderly and transparent privatization of the assets and liabilities of the National Power Corporation (NPC);
(j) To establish a strong and purely independent regulatory body and system to ensure consumer protection and enhance the competitive operation of
the electricity market; and
(k) To encourage the efficient use of energy and other modalities of demand side management.

As can be gleaned from the foregoing enumeration, the restructuring of the electric power industry inherently involves the participation of various
government agencies. In Civil Liberties, this Court explained that mandating additional duties and functions to Cabinet members which are not
inconsistent with those already prescribed by their offices or appointments by virtue of their special knowledge, expertise and skill in their respective
executive offices, is a practice long-recognized in many jurisdictions. It is a practice justified by the demands of efficiency, policy direction, continuity and
coordination among the different offices in the Executive Branch in the discharge of its multifarious tasks of executing and implementing laws affecting
national interest and general welfare and delivering basic services to the people. [33]
The production and supply of energy is undoubtedly one of national interest and is a basic commodity expected by the people. This Court, therefore,
finds the designation of the respective members of the Cabinet, as ex-officio members of the NPB, valid.
This Court is not unmindful, however, that Section 48 of the EPIRA is not categorical in proclaiming that the concerned Cabinet secretaries compose the
NPB Board only in an ex-officio capacity. It is only in Section 52 creating the Power Sector Assets and Liabilities Management Corporation (PSALM) that
they are so designated in an ex-officio capacity. Sections 4 and 6 of the EPIRA provides:
Section 4. TRANSCO Board of Directors.
All the powers of the TRANSCO shall be vested in and exercised by a Board of Directors. The Board shall be composed of a Chairman and six (6)
members. The Secretary of the DOF shall be the ex-officio Chairman of the Board. The other members of the TRANSCO Board shall include the
Secretary of the DOE, the Secretary of the DENR, the President of TRANSCO, and three (3) members to be appointed by the President of the
Philippines, each representing Luzon, Visayas and Mindanao, one of whom shall be the President of PSALM.

x x x x.
Section 6. PSALM Board of Directors.
PSALM shall be administered, and its powers and functions exercised, by a Board of Directors which shall be composed of the Secretary of the DOF as
the Chairman, and the Secretary of the DOE, the Secretary of the DBM, the Director-General of the NEDA, the Secretary of the DOJ, the Secretary of
the DTI and the President of the PSALM as ex-officio members thereof.

Nonetheless, this Court agrees with the contention of the Solicitor General that the constitutional prohibition was not violated, considering that the
concerned Cabinet secretaries were merely imposed additional duties and their posts in the NPB do not constitute "any other office" within the
contemplation of the constitutional prohibition.
The delegation of the said official to the respective Board of Directors were designation by Congress of additional functions and duties to the officials
concerned, i.e., they were designated as members of the Board of Directors. Designation connotes an imposition of additional duties, usually by law,
upon a person already in the public service by virtue of an earlier appointment. [34] Designation does not entail payment of additional benefits or grant
upon the person so designated the right to claim the salary attached to the position. Without an appointment, a designation does not entitle the officer to
receive the salary of the position. The legal basis of an employee's right to claim the salary attached thereto is a duly issued and approved appointment
to the position, and not a mere designation.[35]
Hence, Congress specifically intended that the position of member of the Board of NPB shall be ex-officio or automatically attached to the respective
offices of the members composing the board. It is clear from the wordings of the law that it was the intention of Congress that the subject posts will be
adjunct to the respective offices of the official designated to such posts.
The foregoing discussion, notwithstanding, the concerned officials should not receive any additional compensation pursuant to their designation as ruled
in Civil Liberties, thus:
The ex-officio position being actually and in legal contemplation part of the principal office, it follows that the official concerned has no right to receive
additional compensation for his services in the said position. The reason is that these services are already paid for and covered by the compensation
attached to his principal office. It should be obvious that if, say, the Secretary of Finance attends a meeting of the Monetary Board as an exofficiomember thereof, he is actually and in legal contemplation performing the primary function of his principal office in defining policy in monetary and
banking matters, which come under the jurisdiction of his department. For such attendance, therefore, he is not entitled to collect any extra
compensation, whether it be in the form of a per diem or an honorarium or an allowance, or some other such euphemism. By whatever name it is
designated, such additional compensation is prohibited by the Constitution.

In relation thereto, Section 14 of the EPIRA provides:

SEC. 14. Board Per Diems and Allowances. - The members of the Board shall receive per diem for each regular or special meeting of the board actually
attended by them and, upon approval of the Secretary of the Department of Finance, such other allowances as the Board may prescribe.

Section 14 relates to Section 11 which sets the composition of the TRANSCO Board naming the Secretary of the Department of Finance as the ex
officio Chairman of the Board. The other members of the TRANSCO Board include the Secretary of the Department of Energy and the Secretary of the
Department of Environment and Natural Resources. However, considering the constitutional prohibition, it is clear that such emoluments or additional
compensation to be received by the members of the NPB do not apply and should not be received by those covered by the constitutional
prohibition, i.e., the Cabinet secretaries. It is to be noted that three of the members of the NPB are to be appointed by the President, who would be
representing the interests of those in Luzon, Visayas, and Mindanao, who may be entitled to such honorarium or allowance if they do not fall within the
constitutional prohibition.
Hence, the said cabinet officials cannot receive any form of additional compensation by way of per diems and allowances. Moreover, any amount
received by them in their capacity as members of the Board of Directors should be reimbursed to the government, since they are prohibited from
collecting additional compensation by the Constitution.
These interpretations are consistent with the fundamental rule of statutory construction that a statute is to be read in a manner that would breathe life
into it, rather than defeat it, [36] and is supported by the criteria in cases of this nature that all reasonable doubts should be resolved in favor of the
constitutionality of a statute.[37]
Constitutionality of Section 34[38] of the EPIRA
The Constitutionality of Section 34 of the EPIRA has already been passed upon by this Court in Gerochi v. Department of Energy,[39] to wit:
Finally, every law has in its favor the presumption of constitutionality, and to justify its nullification, there must be a clear and unequivocal breach of the
Constitution and not one that is doubtful, speculative, or argumentative. Indubitably, petitioners failed to overcome this presumption in favor of the
EPIRA. We find no clear violation of the Constitution which would warrant a pronouncement that Sec. 34 of the EPIRA and Rule 18 of its IRR are
unconstitutional and void.[40]

In Gerochi, this Court ruled that the Universal Charge is not a tax but an exaction in the exercise of the State's police power. The Universal Charge is
imposed to ensure the viability of the country's electric power industry.
Petitioner argues that the imposition of a universal charge to address the stranded debts and contract made by the government through the NCC-IPP
contracts or Power Utility-IPP contracts or simply the bilateral agreements or contracts is an added burden to the electricity-consuming public on their
monthly power bills. It would mean that the electricity-consuming public will suffer in carrying this burden for the errors committed by those in power who
runs the affairs of the State. This is an exorbitant display of State Power at the expense of its people. [41]
It is basic that the determination of whether or not a tax is excessive oppressive or confiscatory is an issue which essentially involves a question of fact
and, thus, this Court is precluded from reviewing the same.
Validity of Section 38[42] of the EPIRA

Petitioner argues that the abolishment of the ERB and its replacement of a very powerful quasi-judicial body named the Energy Regulatory Commission
(ERC), pursuant to Section 38 up to Section 43 of the EPIRA or RA 9136, which is tasked to dictate the day-to-day affairs of the entire electric power
industry, seems a prelude to Charter Change. Petitioner submits that under the 1987 Constitution, there are only three constitutionally-recognized
Commissions, they are: the Civil Service Commission (CSC), the Commission on Audit (COA) and the Commission on Elections (COMELEC).[43]
Petitioner's argument that the creation of the ERC seems to be a prelude to charter change is flimsy and finds no support in law. This Court cannot
subscribe to petitioner's thesis that "in order for the newly-enacted RA 9136 or EPIRA to become a valid law, we should have to call first a referendum to
amend or totally change the People's Charter."[44]
In any case, the constitutionality of the abolition of the ERB and the creation of the ERC has already been settled in Kapisanan ng mga Kawani ng
Energy Regulatory Board v. Commissioner Fe Barin,[45]to wit:
All laws enjoy the presumption of constitutionality. To justify the nullification of a law, there must be a clear and unequivocal breach of the Constitution.
KERB failed to show any breach of the Constitution.
A public office is created by the Constitution or by law or by an officer or tribunal to which the power to create the office has been delegated by the
legislature. The power to create an office carries with it the power to abolish. President Corazon C. Aquino, then exercising her legislative powers,
created the ERB by issuing Executive Order No. 172 on 8 May 1987.
The question of whether a law abolishes an office is a question of legislative intent. There should not be any controversy if there is an explicit declaration
of abolition in the law itself. Section 38 of RA 9136 explicitly abolished the ERB. x x x[46]

Moreover, in Kapisanan, this Court ruled that because of the expansion of the ERC's functions and concerns, there was a valid abolition of the ERB. [47]
Validity of Section 63[48]
Contrary to petitioner's argument, Section 63 of the EPIRA and Section 33 of the IRR of the EPIRA did not impair the vested rights of NPC personnel to
claim benefits under existing laws. Neither does the EPIRA cut short the years of service of the employees concerned. If an employee availed of the
separation pay and other benefits in accordance with existing laws or the superior separation pay under the NPC restructuring plan, it is but logical that
those who availed of such privilege will start their government service anew if they will later be employed by any government-owned successor company
or government instrumentality.
It is to be noted that this Court ruled in the case of Herrera v. National Power Corporation, [49] that Section 63 of the EPIRA precluded the receipt by the
terminated employee of both separation and retirement benefits under the Government Service Insurance System (GSIS) organic law, or
Commonwealth Act (C.A.) No. 186. [50]
However, it must be clarified that this Court's pronouncements in
Herrera that separated and retired employees of the NPC "are not entitled to receive retirement benefits under C.A. No. 186," referred only to the
gratuity benefits granted by R.A. No. 1616, [51] which was to be paid by NPC as the last employer. It did not proscribe the payment of retirement benefits
to qualified retirees under R.A. No. 660, [52] Presidential Decree (P.D.) No. 1146, [53] R.A. No. 8291, [54] and other GSIS and social security laws.
The factual and procedural antecedents of Herrera reveal that it arose from a case between NPC and several of its separated employees who were
asking additional benefits from NPC under R.A. No. 1616 after receiving from the former separation benefits under Section 63 of R.A. No. 9136.
Unable to resolve the issue with its former employees amicably, NPC filed a petition for declaratory relief, docketed as Civil Case SCA No. Q-0350681, [55] before the Regional Trial Court of Quezon City, raising the issue of whether or not the employees of NPC are entitled to receive retirement
benefits under R.A. No. 1616 over and above the separation benefits granted by R.A. No. 9136. [56]
Under R.A. No. 1616, a gratuity benefit is given to qualified retiring members of the GSIS, which is payable by the last employer. In addition to said
gratuity benefits, the qualified employee shall also be entitled to a refund of retirement premiums paid, consisting of personal contributions of the
employee plus interest, and government share without interest, payable by the GSIS. It effectively amended Section 12 (c) of C.A. No. 186, as follows:
(c) Retirement is likewise allowed to any official or employee, appointive or elective, regardless of age and employment status, who has rendered a total
of at least twenty years of service, the last three years of which are continuous. The benefit shall, in addition to the return of his personal contributions
with interest compounded monthly and the payment of the corresponding employer's premiums described in subsection (a) of Section five hereof,
without interest, be only a gratuity equivalent to one month's salary for every year of the first twenty years of service, plus one and one-half
months' salary for every year of service over twenty but below thirty years and two months' salary for every year of service over thirty years
in case of employees based on the highest rate received and in case of elected officials on the rates of pay as provided by law. This gratuity is
payable on the rates of pay as provided by law. This gratuity is payable by the employer or officer concerned which is hereby authorized to
provide the necessary appropriation or pay the same from any unexpended items of appropriations or savings in its appropriations. Officials
and employees retired under this Act shall be entitled to the commutation of the unused vacation and sick leave, based on the highest rate received,
which they may have to their credit at the time of retirement. x x x [57] (Emphasis supplied.)

After trial, the RTC rendered a Decision ruling against the NPC employees, the decretal portion of which reads:
WHEREFORE, premises considered, Republic Act No. 9136 DID NOT SPECIFICALLY AUTHORIZE the National Power Corporation to grant retirement
benefits under Republic Act No. 1616 in addition to separation pay under Republic Act No. 9136.
SO ORDERED. [58]

Petitioners therein then sought recourse directly to this Court on a pure question of law. In the preparatory statement of the Petition for Review
on Certiorari, [59] it is apparent that the case was limited only to the interpretation of Section 63 of R.A. No. 9136, in relation to R.A. No. 1616, on the
matter of retirement benefits, to wit:
This is a case of first impression limited to the interpretation of Section 63, R.A. 9136 (EPIRA), granting separation pay to terminated NAPOCOR
employees, in relation to R.A. 1616, on the matter of retirement benefits. Respondents NAPOCOR and DEPARTMENT OF BUDGET AND
MANAGEMENT erroneously contend that the entitlement to the separation pay under R.A. 9136 forfeits the retirement benefit under R.A. 1616.
Petitioners most respectfully submit that since R.A. 9136 and R.A. 1616 are not inconsistent with each other and they have distinct noble purposes,

entitlement to separation pay will not disqualify the separated employee who is qualified to retire from receiving retirement benefits allowed under
another law. x x x[60]

However, in the Decision dated December 18, 2009, it was held that petitioners therein were not only entitled to receive retirement benefits under R.A.
No. 1616 but also were "not entitled to receive retirement benefits under Commonwealth Act No. 186, as amended," which, in effect, might lead to the
conclusion that the declaration encompassed all other benefits granted by C.A. No. 186 to its qualified members.
In relation to R.A. No. 1616, Herrera should have affected only the payment of gratuity benefits by NPC, being the last employer, to its separated
employees. It was even categorically stated that petitioners therein were "entitled to a refund of their contributions to the retirement fund, and the
monetary value of any accumulated vacation and sick leaves," [61] which is clearly congruous to the mandate of R.A. No. 1616. The matter of availment
of retirement benefits of qualified employees under any other law to be paid by the GSIS should not and was not covered by the decision. In the first
place, it was never an issue.
In the case of Santos v. Servier Philippines, Inc., [62] citing Aquino v. National Labor Relations Commission, [63] We declared that the receipt of retirement
benefits does not bar the retiree from receiving separation pay. Separation pay is a statutory right designed to provide the employee with the
wherewithal during the period that he/she is looking for another employment. On the other hand,retirement benefits are intended to help the employee
enjoy the remaining years of his life, lessening the burden of worrying about his financial support, and are a form of reward for his loyalty and service to
the employer. A separation pay is given during one's employable years, while retirement benefits are given during one's unemployable years. Hence,
they are not mutually exclusive. [64]
Even in the deliberations of Congress during the passage of R.A. No. 9136, it was manifest that it was not the intention of the law to infringe upon the
vested rights of NPC personnel to claim benefits under existing laws. To assure the worried and uneasy NPC employees, Congress guaranteed their
entitlement to a separation pay to tide them over in the meantime. [65] More importantly, to further allay the fears of the NPC employees, especially those
who were nearing retirement age, Congress repeatedly assured them in several public and congressional hearings that on top of their separation
benefits, they would still receive their retirement benefits, as long as they would qualify and meet the requirements for its entitlement.
The transcripts of the Public Consultative Meeting on the Power Bill held on February 16, 2001, disclose the following:
xxxx
THE CHAIRMAN (SEN. J. OSMENA). Well, the other labor representation here is Mr. Anguluan.
MR. ANGULUAN: Yes, Your Honor.
THE CHAIRMAN (SEN. J. OSMENA). Okay. Will you present your paper?
MR. ANGULUAN: We have prepared a paper which we have sent to the honorable members of the Bicam. x x x.
THE CHAIRMAN (SEN. J. OSMENA). I don't think anyone is going to deprive you of your rights under the law. You will enjoy all your
rights. You will receive retirement benefits, separation pay, and all of the rights that are provided to you by law. What we have objected to in the
Senate is retirement benefits higher than what everybody else gets, like 150 percent or subject to the approval of the board which means sky is the limit.
So, we have objected to that. But what you are entitled to under the law, you will get under the law and nobody will deprive you of that.[66]

A year later, on February 12, 2002, the Joint Congressional Power Commission was held. The transcripts of the hearing bare the following:
xxxx
THE CHAIRMAN (REP. BADELLES). They will still be subject to the same conditions. Meaning, NPC has the discretion whether to reabsorb or hire back
those that avail of the separation benefits.
SEN. OSMENA (J). No. But they are not being - - the plants are not being sold, so they are - but what we are giving them is a special concession of
retiring early.
No, okay. You consider . . .
THE CHAIRMAN (REP. BADELLES). We are not speaking of retirement here, we are speaking of their separation benefits . . .
SEN. OSMENA (J). Okay, separation benefits.
THE CHAIRMAN (REP. BADELLES). Precisely, if they are considered terminated.
SEN. OSMENA (J). All right. Separation . . .
THE CHAIRMAN (REP. BADELLES). A retirement plan is a different program thanseparation.
SEN. OSMENA (J). Separation benefits, okay.
THE CHAIRMAN (REP. BADELLES). All right. [67]

Thus, it is clear that a separation pay at the time of the reorganization of the NPC and retirement benefits at the appropriate future time are two separate
and distinct entitlements. Stated otherwise, a retirement plan is a different program from a separation package.
There is a whale of a difference between R.A. No. 1616 and C.A. No. 186, together with its amendatory laws. They have different legal bases,
different sources of funds and differentintents.
In R.A. No. 1616, which is the subject issue in Herrera, the retirees are entitled to gratuity benefits to be paid by the last employer and refund of
premiums to be paid by the GSIS. On the other hand,retirement benefits under C.A. No. 186, as amended by R.A. No. 8291, are to be paid by the GSIS.
Stated otherwise, under R.A. No. 1616, what would be paid by the last employer, NPC, would begratuity benefits, and GSIS would merely refund the
retirement premiums consisting of personal contributions of the employee plus interest, and the employer's share without interest. Under C.A. No. 186,

as amended, it is the GSIS who would pay the qualified employees their retirement benefits.
Indeed, with several amendments to C.A. No. 186,[68] the Court finds it necessary to clarify Herrera and categorically declare that it affected only those
seeking benefits under R.A. No. 1616. [69] It could not have meant to affect those employees who retired, and who will retire, under the different
amendatory laws of C.A. No. 186 like R.A. No. 660, [70] P.D. No. 1146 [71] and R.A. No. 8291. [72]
At any rate, entitlement of qualified employees to receive separation pay and retirement benefits is not proscribed by the 1987 Constitution. Section 8 of
Article IX (B) of the 1987 Constitution reads:
SEC. 8. No elective or appointive public officer or employee shall receive additional, double or indirect compensation, unless specifically authorized by
law, nor accept without the consent of the Congress, any present, emolument, office, or title of any kind from any foreign government.
Pensions or gratuities shall not be considered as additional, double, or indirect compensation. [73]

Moreover, retirement benefits under C.A. No. 186 are not even considered as compensation. Section 2 (e) of C.A. No. 186 categorically states that ?
Benefits granted by this Act by virtue of such life or retirement insurance shall not be considered as compensation or emolument. [74]

Under the GSIS law, the retired employees earned their vested right under their contract of insurance after they religiously paid premiums to GSIS.
Under the contract, GSIS is bound to pay the retirement benefits as it received the premiums from the employees and NPC.
In Marasigan v. Cruz, [75] this Court ratiocinated that:
A retirement law such as C.A. 186 and amendatory laws is in the nature of acontract between the government and its employees. When an
employee joins the government service, he has a right to expect that after rendering the required length of service and fulfilled the conditions stated in
the laws on retirement, he would be able to enjoy the benefits provided in said laws. He regularly pays the dues prescribed therefore.It would be cruel
to deny him the benefits he had been expecting at the end of his service by imposing conditions for his retirement, which are not found in the
law. It is believed to be a legal duty as well as a moral obligation on the part of the government to honor its commitments to its employees
when as in this case, they have met all the conditions prescribed by law and are therefore entitled to receive their retirement benefits. [76]

Thus, where the employee retires and meets the eligibility requirements, he acquires a vested right to benefits that is protected by the due process
clause. Retirees enjoy a protected property interest whenever they acquire a right to immediate payment under pre-existing law. Thus, a pensioner
acquires a vested right to benefits that have become due as provided under the terms of the public employees' pension statute. No law can deprive such
person of his pension rights without due process of law, that is, without notice and opportunity to be heard. [77] Verily, when an employee has complied
with the statutory requirements to be entitled to receive his retirement benefits, his right to retire and receive what is due him by virtue thereof becomes
vested and may not thereafter be revoked or impaired.
Moreover, Section 63 of the EPIRA law, if misinterpreted as proscribing payment of retirement benefits under the GSIS law, would be unconstitutional as
it would be violative of Section 10, Article III of the 1987 Constitution [78] or the provision on non-impairment of contracts.
In view of the fact that separation pay and retirement benefits are different entitlements, as they have different legal bases, different sources of funds,
and different intents, the "exclusiveness of benefits" rule provided under R.A. No. 8291 is not applicable. Section 55 of R.A. No. 8291 states: "Whenever
other laws provide similar benefits for the same contingencies covered by this Act, the member who qualifies to the benefits shall have the option to
choose which benefits will be paid to him."
Accordingly, the Court declares that separated, displaced, retiring, and retired employees of NPC are legally entitled to the retirement benefits pursuant
to the intent of Congress and as guaranteed by the GSIS laws. Thus, the Court reiterates:
1] that the dispositive portion in Herrera holding that separated and retired employees "are not entitled to receive retirement benefits under
Commonwealth Act No. 186," referred only to the gratuity benefits under R.A. No. 1616, which was to be paid by NPC, being the last employer;
2] that it did not proscribe the payment of the retirement benefits to qualified retirees under R.A. No. 660, P.D. No. 1146, R.A. No. 8291, and other GSIS
and social security laws; and
3] that separated, rehired, retiring, and retired employees should receive, and continue to receive, the retirement benefits to which they are legally
entitled.
Petition for Mandamus
As for petitioner's prayer that he be reinstated, suffice it to state that the issue has been rendered moot by the Decision and Resolutions of this Court in
the case of NPC Drivers and Mechanics Association (NPC DAMA) v. National Power Corporation (NPC)[79] and by the above disquisitions.
In Conclusion
While we commend petitioner's attempt to argue against the privatization of the NPC, it is not the proper subject of herein petition. Petitioner belabored
on alleging facts to prove his point which, however, go into policy decisions which this Court must not delve into less we violate separation of powers.
The wisdom of the privatization of the NPC cannot be looked into by this Court as it would certainly violate this guarded principle. The wisdom and
propriety of legislation is not for this Court to pass upon.[80] Every law has in its favor the presumption of constitutionality, and to justify its nullification,
there must be a clear and unequivocal breach of the Constitution, and not one that is doubtful, speculative or argumentative.[81]
As in National Power Corporation Employees Consolidated Union (NECU) v. National Power Corporation (NPC),[82] this Court held:
Whether the State's policy of privatizing the electric power industry is wise, just, or expedient is not for this Court to decide. The formulation of State
policy is a legislative concern. Hence, the primary judge of the necessity, adequacy, wisdom, reasonableness and expediency of any law is primarily the
function of the legislature.[83]

WHEREFORE, premises considered and subject to the above disquisitions, the Petition for Certiorariand the Supplemental Petition for Mandamus
are Dismissed for lack of merit.

SO ORDERED.
Corona, C.J., Carpio, Velasco, Jr., Leonardo-De Castro, Brion, Bersamin, Del Castillo, Abad, Villarama, Jr., Perez, Mendoza, Sereno, Reyes,
and Perlas-Bernabe, JJ., concur.
Endnotes:
[G.R. No. 185535 : January 31, 2011]
MANILA INTERNATIONAL AIRPORT AUTHORITY, PETITIONER, VS. REYNALDO (REYMUNDO[1]) AVILA, CALIXTO AGUIRRE, AND SPS.
ROLANDO AND ANGELITA QUILANG, RESPONDENTS.
DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 filed by the Manila International Airport Authority(MIAA) seeking to reverse and set aside the June
16, 2008 Decision[2] of the Court of Appeals (CA) in CA-G.R. SP No. 97536 which annulled the August 7, 2006[3] and the November 13, 2006[4] Resolutions
of the Regional Trial Court of Pasay City, Branch 117 (RTC), in Civil Case No. 05-0399-CFM.cralaw
From the records, it appears that in June 1968, the late Tereso Tarrosa (Tarrosa) leased a 4,618 square meter parcel of land located along the MIAA
Road in Pasay City from its owner, MIAA. Before the expiration of the lease sometime in 1993, Tarrosa filed a case against MIAA to allow him to
exercise his pre-emptive right to renew the lease contract. Finding that Tarrosa violated certain provisions of its contract with MIAA, the trial court
dismissed the case. Tarrosa appealed before the CA but to no avail. When Tarrosa passed away, he was substituted by his estate represented by his
heirs' attorney-in-fact, Annie Balilo (Balilo). On June 9, 1998, the CA decision became final and executory.cralaw [5]
Thereafter, MIAA sent letters of demand to the heirs asking them to vacate the subject land. Unheeded, MIAA instituted an ejectment suit against the
Estate of Tarrosa (Estate) before the Metropolitan Trial Court of Pasay City, Branch 47 (MeTC), docketed as Civil Case No. 64-04-CFM. On February
18, 2005, the MeTC rendered its decision[6] ordering the Estate and all persons claiming rights under it to vacate the premises, peacefully return
possession thereof to MIAA and pay rentals, attorney's fees and costs of suit.cralaw
The Estate, through Balilo, appealed the case to the RTC, where it was docketed as Civil Case No. 05-0399-CFM. In its July 22, 2005 Decision,[7] the
RTC gave due course to the appeal and affirmed the MeTC decision in toto.
The Estate then filed a motion for reconsideration while MIAA sought the correction of a clerical error in the MeTC decision as well as the issuance of a
writ of execution. On September 20, 2005, the RTC issued an omnibus order[8] denying the Estate's motion for reconsideration, granting MIAA's motion
to correct a clerical error and granting the motion for the issuance of a writ of execution.
On the strength of the writ of execution issued by the RTC, a notice to vacate was served on the occupants of the subject premises. The RTC Sheriff
partially succeeded in evicting the Estate, Balilo and some other occupants. Still, others remained in the premises.[9]
Among the remaining occupants were respondents Calixto E. Aguirre (Aguirre), Reymundo Avila (Avila), and spouses Rolando and Angelita
Quilang (Quilangs), who filed separate special appearances with motions to quash the writ of execution. [10] In essence, all of them interposed that they
were not covered by the writ of execution because they did not derive their rights from the Estate since they entered the subject premises only after the
expiration of the lease contract between MIAA and Tarrosa. They further stated that the subject premises had already been set aside as a government
housing project by virtue of Presidential Proclamation No. 595 (Proclamation No. 595).[11]
On May 5, 2006, the RTC granted the motion to quash filed by the remaining occupants, including Avila and the Quilangs.
On August 4, 2006, the RTC denied the motion to quash filed by Aguirre. In its August 4, 2006 Resolution,[12] the RTC stated:
It is important to emphasize at this juncture that during the ocular inspection conducted by this court (Thru Presiding Judge, Henrick F. Gingoyon),
records reveal that the area occupied by Mr. Calixto Aguirre, as he claimed, is more or less 1,000 square meters. Thus, citing the provision of the law
pertaining to qualified occupants or beneficiaries who can avail of the privilege, the area alone possessed by Mr. Calixto Aguirre will not qualify as
beneficiary under Republic Act 7279. Moreover, the result of the ocular inspection revealedthat the area is used by Mr. Calixto Aguirre as business
establishment and in fact some of them were even subject for lease.
Therefore, from the very nature of the utilization of the property the same is beyond doubt not covered and the same is contrary to the letter and spirit of
the aforementioned Presidential Proclamation No. 595.
WHEREFORE, premises considered, the instant Motion to Quash Writ of Execution and Set Aside Judgment filed by Mr. Calixto Aguirre is hereby
DENIED for lack of merit.
SO ORDERED. (underscoring supplied)[13]

On August 7, 2006, a similar finding was made with regard to Avila and the Quilangs when the RTC resolved MIAA's motion for reconsideration. In its
August 7, 2006 Resolution, the RTC likewise wrote:
Unfortunately, however, the result of the ocular inspection revealed that some of the 28 Oppositors, namely: Mr. REYMUNDO AVILA; SPS. ROLANDO
QUILANG AND ANGELITA QUILANG; ROMEO CAGAS; JEANETTE LOPEZ, are using the property subject to this case not as family dwelling but
rather utilized as business establishments. Thus, the said occupancy is not covered under Republic Act 7279 in order to be considered qualified
beneficiaries. Relatedly, therefore that the Writ of Execution cannot be implemented against the afore-named persons on the ground that they are
qualified beneficiaries under Presidential Proclamation No. 595 in relation to the provision of Republic Act 7279 is unwarranted under the circumstances.
It is important to emphasize at this juncture that during the ocular inspection conducted by this court (Thru Presiding Judge, Henrick F. Gingoyon),
records reveal that the area occupied by Mr. REYNALDO (REYMUNDO) AVILA, is occupying more or less 500 square meters and the same is actually

use[d] as an apartment for lease/ rent; Sps. ROLANDO AND ANGELITA QUILANG; is occupying the premises by virtue of the rights vested by their
father, Calixto Aguirre, and also utilizing the property for rent; ROMEO CAGAS AND JEANNETE LOPEZ are tenants of Calixto Aguirre.
Thus, citing the provision of the law pertaining to qualified occupants or beneficiaries who can avail of the privilege, the area alone possessed by Mr.
Reynaldo (Reymundo) Avila; Sps. Rolando and Angelita Quilang will not qualify as beneficiaries under Republic Act 7279. Moreover, the area as shown
in the result of the ocular inspection is used by them as business establishment and in fact some of them were even subject for lease.
Therefore, from the very nature of the utilization of the property the same is beyond doubt not covered and the same is contrary to the letter and spirit of
the aforementioned Presidential Proclamation No. 595 in relation to Republic Act 7279.
WHEREFORE, premises considered, the Order dated May 5, 2006 is hereby MODIFIED in so far as Oppositors REYNALDO (REYMUNDO) AVILA;
Sps. ROLANDO QUILANG and ANGELITA QUILANG; ROMEO CAGAS AND JEANETTE LOPEZ are concerned. Let the corresponding Writ of
Execution against the afore-mentioned persons be issued.
SO ORDERED. (underscoring supplied)[14]

The above findings were reiterated in the assailed RTC's Joint Resolution dated November 13, 2006 which denied the separate motions for
reconsideration of the respondents.
On account of this, Aguirre, Avila and the Quilangs went to the CA on certiorari questioning the propriety of the RTC's disposition, more particularly, its
finding that they were not qualified beneficiaries under Proclamation No. 595.
On June 16, 2008, the CA rendered the subject decision annulling the RTC resolutions dated August 7, 2006 and November 13, 2006. According to the
CA, there was a grave abuse of discretion on the part of the RTC in ruling that respondents could not invoke Proclamation No. 595 because the
mandate to determine the same rested with the National Housing Authority (NHA). Thus:
X x x. As provided in said Proclamation No. 595, the National Housing Authority (NHA), under the supervision of the Housing and Urban Development
Coordinating Council (HUDCC) and in coordination with the MIAA, shall be the agency primarily responsible for the administration and disposition of the
lots subject thereof in favor of the bona fide occupants therein, pursuant to the provisions of Sections 8, 9 and 12 of Republic Act 7279 and other
pertinent laws.[15]

In a related case, MIAA also went to the CA on certiorari questioning the RTC's grant of another motion to quash its writ of execution filed by other
remaining occupants. Said occupants are not parties in this case. The case was docketed as CA-G.R. SP No. 96477.[16] In said case, taking note that
the occupants themselves admitted that they had entered the subject premises without the permission of either the MIAA or the Estate, the CA ruled that
the said occupants were mere trespassers or squatters who had no right to possess the same. Accordingly, the writ of execution issued in the ejectment
case could be enforced against them even though they were not named parties in the ejectment suit. Some of the occupants/aggrieved parties therein,
namely, Alejandro Aguirre (son of Calixto Aguirre) and Norberto Aguirre (brother of Calixto Aguirre), came to this Court via a petition for review but it was
summarily denied for having been filed out of time and for their failure to show any reversible error on the part of the CA. The denial became final and
executory on July 23, 2009.cralaw [17]
Going back to the June 16, 2008 CA Decision, MIAA comes now to this Court questioning its annulment of the RTC resolutions by raising the following:
ISSUES:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT PUBLIC RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHEN HE ARROGATED UPON HIMSELF THE DETERMINATION THAT
PRIVATE RESPONDENTS ARE NOT QUALIFIED BENEFICIARIES UNDER PROCLAMATION NO. 595
WHETHER OR NOT A NAKED CLAIM OF POTENTIAL QUALIFIED BENEFICIARIES OF A SOCIALIZED HOUSING PROGRAM PREVAIL OVER
THE RIGHTS OF THE PERSON WITH PRIOR PHYSICAL POSSESSION AND A BETTER RIGHT OVER THE DISPUTED REAL PROPERTY[18]

The Court finds the petition meritorious.

As mentioned earlier, the controversy stemmed from an ejectment suit filed by MIAA against the Estate represented by Balilo wherein the MeTC ordered
the eviction of the Estate, Balilo and all those claiming rights under them.
The MeTC decision was affirmed by the RTC. Eventually, the Estate, Balilo and some occupants were evicted. [19] Respondents Aguirre, Avila and the
Quilangs, together with some other remaining occupants, filed their separate special appearances and sought to quash the RTC's writ of execution.
They claimed that they did not derive their right to occupy the premises from the Estate or from Balilo but rather from Proclamation No. 595 as they were
potential beneficiaries of the same. In its opposition, the MIAA submitted documents prepared and signed by Balilo showing that the respondents were
tenants of Tarrosa or Balilo.[20] The RTC, through its then Presiding Judge, the late Henrick F. Gingoyon(Judge Gingoyon), conducted an ocular
inspection on the premises. Judge Jesus B. Mupas, who took over from Judge Gingoyon, reproduced the findings of the latter in his August 4, 2006
Resolution.[21]
The same finding was reached with respect to Avila and the Quilangs in the August 7, 2006 Resolution of the RTC[22] and reiterated in its Joint
Resolution dated November 13, 2006 which dismissed the separate motions for reconsideration of the respondents.
Going over the RTC's findings and disposition, the Court is of the considered view that it acted well within its jurisdiction. It is settled in ejectment suits
that a defendant's claim of ownership over a disputed property will not divest the first level courts of their summary jurisdiction. Thus, even if the
pleadings raise the issue of ownership, the court may still pass on the same although only for the purpose of determining the question of possession.
Any adjudication with regard to the issue of ownership is only provisional and will not bar another action between the same parties which may involve the
title to the land. This doctrine is but a necessary consequence of the nature of ejectment cases where the only issue up for adjudication is the physical or
material possession over the real property.[23]
Granting that their occupation of the subject premises was not derived from either Tarrosa or Balilo, the postulation of the respondents makes them
mere trespassers or squatters acquiring no vested right whatsoever to the subject property. [24] Thus, to thwart the decision of the court, they claim that
they were potential beneficiaries of Proclamation No. 595. Certainly, this bare anticipation on their part should not be permitted to defeat the right of
possession by the owner, MIAA. Juxtaposed against the evidence adduced by the MIAA showing that respondents were once tenants of either Tarrosa

or Balilo, respondents' bare claim that they could be beneficiaries of Proclamation No. 595 cannot be given any consideration.
At any rate, as earlier stated, the ruling on the inapplicability of Proclamation No. 595 is only provisional and will certainly not bar the NHA or any other
agency of the government tasked to implement Proclamation No. 595, from making a determination of respondents' qualifications as beneficiaries,[25] in
another action.
In Pajuyo v. CA,[26] the very case relied upon by the respondents and later cited by the CA in its assailed decision, the Court reiterated that the
determination of the rights of claimants to public lands is distinct from the determination of who has better right of physical possession. While it was held
therein that the CA erred in making a premature determination of the rights of the parties under Proclamation No. 137, it was emphasized that the courts
should expeditiously resolve the issue of physical possession to prevent disorder and breaches of peace.
WHEREFORE, the petition is GRANTED. The June 16, 2008 Decision of the CA in CA-G.R. SP No. 97536 is hereby REVERSED and SET ASIDE and
another judgment entered reinstating the August 7, 2006 and the November 13, 2006 Resolutions of the Regional Trial Court of Pasay City, Branch
117, in Civil Case No. 05-0399-CFM.cralaw
SO ORDERED.
Carpio, (Chairperson), Nachura, Peralta, and Abad, JJ., concur.