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FIRST DIVISION

[G.R. No. 127913. September 13, 2001]

RIZAL
COMMERCIAL
CORPORATION, petitioner, vs. METRO
CORPORATION, respondent.

BANKING
CONTAINER

DECISION
KAPUNAN, J.:

Assailed in this petition for review on certiorari are the Decision, promulgated on 18
October 1996 and the Resolution, promulgated on 08 January 1997, of the Court of Appeals in
CA-G.R. SP No. 41294.
The facts of the case are as follows:
On 26 September 1990, Ley Construction Corporation (LEYCON) contracted a loan from
Rizal Commercial Banking Corporation (RCBC) in the amount of Thirty Million Pesos
(P30,000,000.00). The loan was secured by a real estate mortgage over a property, located in
Barrio Ugong, Valenzuela, Metro Manila (now Valenzuela City) and covered by TCT No. V17223. LEYCON failed to settle its obligations prompting RCBC to institute an extrajudicial
foreclosure proceedings against it. After LEYCONs legal attempts to forestall the action of
RBCB failed, the foreclosure took place on 28 December 1992 with RCBC as the highest bidder.
LEYCON promptly filed an action for Nullification of Extrajudicial Foreclosure Sale and
Damages against RCBC. The case, docketed as Civil Case No. 4037-V-93, was raffled to the
Regional Trial Court (RTC) of Valenzuela, Branch 172. Meanwhile, RCBC consolidated its
ownership over the property due to LEYCONs failure to redeem it within the 12-month
redemption period and TCT No. V-332432 was issued if favor of the bank. By virtue thereof,
RCBC demanded rental payments from Metro Container Corporation (METROCAN) which was
leasing the property from LEYCON.
On 26 May 1994, LEYCON filed an action for Unlawful Detainer, docketed as Civil Case
No. 6202, against METROCAN before the Metropolitan Trial Court (MeTC) of Valenzuela,
Branch 82.
On 27 May 1994, METROCAN filed a complaint for Interpleader, docketed as Civil Case
No. 4398-V-94 before the Regional Trial Court of Valenzuela, Metro Manila, Branch 75 against
LEYCON and RCBC to compel them to interplead and litigate their several claims among
themselves and to determine which among them shall rightfully receive the payment of monthly
rentals on the subject property. On 04 July 1995, during the pre-trial conference in Civil Case
No. 4398-V-94, the trial court ordered the dismissal of the case insofar as METROCAN and

LEYCON were concerned in view of an amicable settlement they entered by virtue of which
METROCAN paid back rentals to LEYCON.
On 31 October 1995, judgment was rendered in Civil Case No. 6202, which among other
things, ordered METROCAN to pay LEYCON whatever rentals due on the subject
premises. The MeTC decision became final and executory.
On 01 February 1996, METROCAN moved for the dismissal of Civil Case No. 4398-V-94
for having become moot and academic due to the amicable settlement it entered with LEYCON
on 04 July 1995 and the decision in Civil Case No. 6202 on 31 October 1995. LEYCON,
likewise, moved for the dismissal of the case citing the same grounds cited by METROCAN.
On 12 March 1996, the two motions were dismissed for lack of merit. The motions for
reconsideration filed by METROCAN and LEYCON were also denied prompting METROCAN
to seek relief from the Court of Appeals via a petition for certiorari and prohibition with prayer
for the issuance of a temporary restraining order and a writ of preliminary injunction. LEYCON,
as private respondent, also sought for the nullification of the RTC orders.
In its Decision, promulgated on 18 October 1996, the Court of Appeals granted the petition
and set aside the 12 March 1996 and 24 June 1996 orders of the RTC. The appellate court also
ordered the dismissal of Civil Case No. 4398-V-94. RCBCs motion for reconsideration was
denied for lack of merit in the resolution of 08 January 1997.
Hence, the present recourse.
RCBC alleged, that:
(1) THE DECISION OF THE METROPOLITAN TRIAL COURT IN THE EJECTMENT
CASE BETWEEN METROCAN AND LEYCON DOES NOT AND CANNOT RENDER
THE INTERPLEADER ACTION MOOT AND ACADEMIC.

(2) WHILE A PARTY WHO INITIATES AN INTERPLEADER ACTION MAY NOT BE


COMPELLED TO LITIGATE IF HE IS NO LONGER INTERESTED TO PURSUE
SUCH CAUSE OF ACTION, SAID PARTY MAY NOT UNILATERALLY CAUSE THE
DISMISSAL OF THE CASE AFTER THE ANSWER HAVE BEEN FILED. FURTHER,
THE DEFENDANTS IN AN INTERPLEADER SUIT SHOULD BE GIVEN FULL
OPPORTUNITY TO LITIGATE THEIR RESPECTIVE CLAIMS.[1]

We sustain the Court of Appeals.


Section 1, Rule 63 of the Revised Rules of Court provides:
[2]

Section 1. Interpleader when proper. - Whenever conflicting claims upon the same
subject matter are or may be made against a person, who claims no interest whatever
in the subject matter, or an interest which in whole or in part is not disputed by the
claimants, he may bring an action against the conflicting claimants to compel them to
interplead and litigate their several claims among themselves.
In the case before us, it is undisputed that METROCAN filed the interpleader action (Civil
Case No. 4398-V-94) because it was unsure which between LEYCON and RCBC was entitled to
receive the payment of monthly rentals on the subject property. LEYCON was claiming payment

of the rentals as lessor of the property while RCBC was making a demand by virtue of the
consolidation of the title of the property in its name.
It is also undisputed that LEYCON, as lessor of the subject property filed an action for
unlawful detainer (Civil Case No. 6202) against its lessee METROCAN. The issue in Civil Case
No. 6202 is limited to the question of physical or material possession of the premises. The issue
of ownership is immaterial therein and the outcome of the case could not in any way affect
conflicting claims of ownership, in this case between RCBC and LEYCON. This was made clear
when the trial court, in denying RCBC's "Motion for Inclusion x x x as an Indispensable Party"
declared that "the final determination of the issue of physical possession over the subject
premises between the plaintiff and the defendant shall not in any way affect RCBC's claims of
ownership over the said premises, since RCBC is neither a co-lessor or co-lessee of the same,
hence he has no legal personality to join the parties herein with respect to the issue of physical
possession vis--vis the contract of lease between the parties." As aptly pointed by the MeTC, the
issue in Civil Case No. 6202 is limited to the defendant LEYCON's breach of the provisions of
the Contract of Lease Rentals.
[3]

[4]

[5]

[6]

Hence, the reason for the interpleader action ceased when the MeTC rendered judgment in
Civil Case No. 6202 whereby the court directed METROCAN to pay LEYCON whatever rentals
due on the subject premises x x x. While RCBC, not being a party to Civil Case No. 6202, could
not be bound by the judgment therein, METROCAN is bound by the MeTC decision. When the
decision in Civil Case No. 6202 became final and executory, METROCAN has no other
alternative left but to pay the rentals to LEYCON. Precisely because there was already a judicial
fiat to METROCAN, there was no more reason to continue with Civil Case No. 4398-V94. Thus, METROCAN moved for the dismissal of the interpleader action not because it is no
longer interested but because there is no more need for it to pursue such cause of action.
It should be remembered that an action of interpleader is afforded to protect a person not
against double liability but against double vexation in respect of one liability. It requires, as an
indespensable requisite, that conflicting claims upon the same subject matter are or may be made
against the plaintiff-in-interpleader who claims no interest whatever in the subject matter or an
interest which in whole or in part is not disputed by the claimants. The decision in Civil Case
No. 6202 resolved the conflicting claims insofar as payment of rentals was concerned.
[7]

[8]

Petitioner is correct in saying that it is not bound by the decision in Civil Case No. 6202. It
is not a party thereto. However, it could not compel METROCAN to pursue Civil Case No.
4398-V-94. RCBC has other avenues to prove its claim. Is not bereft of other legal remedies. In
fact, he issue of ownership can very well be threshed out in Civil Case No. 4037-V-93, the case
for Nullification of Extrajudicial Foreclosure Sale and Damages filed by LEYCON against
RCBC.
WHEREFORE, the petition for review is DENIED and the Decision of the Court of
Appeals, promulgated on 18 October 1996, as well as its Resolution promulgated on 08 January
1997, are AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Pardo, and Ynares-Santiago, JJ., concur.
Puno, J., on official leave.

Republic
SUPREME
Manila

of

the

Philippines
COURT

SECOND DIVISION
G.R. No. 120060

March 9, 2000

CEBU
WOMAN'S
CLUB, petitioner,
vs.
LORETO D. DE LA VICTORIA, in his capacity as Presiding Judge of RTC, Br. 6, Cebu City,
CAMSAC International, Inc. & Phanuel Seoron, respondents.
BUENA, J.:
Petitioner seeks to set aside the Orders of the Regional Trial Court (RTC), dated March 9, 1995 and
April 11, 1995, in Civil Case No. CEB-17126, which dismissed its complaint for interpleader and
damages against private respondent CAMSAC International Inc. (hereinafter referred to as
"CAMSAC"), Arc Asia Philippines, Inc., Triple A Marketing Development Corporation, Trinidad
Patigayon, Signal Trading Corporation and Malayan Insurance Co., Inc., due to the pendency of two
other cases.
The present controversy started with the construction of the Cebu School of Midwifery Building
owned by petitioner. In a bidding held on January 7, 1994, the construction of the building was
awarded by petitioner to respondent CAMSAC represented by its President/General Manager,
Architect Catalino M. Salazar. The corresponding construction contract was executed between the
parties on January 26, 1994 with a stipulation on retention fee of ten (10%) percent to be deducted
by petitioner from all progress payments to the contractor, herein respondent CAMSAC, which shall
be released thirty (30) calendar days after inspection and acceptance by petitioner of the project and
the submission of a sworn statement by respondent CAMSAC that all obligations, including but not
limited to salaries, materials used and taxes due in connection with the construction have been duly
paid.
On February 4, 1994, respondent CAMSAC entered into a "Sub-Contract Agreement" with
respondent Seoron to undertake the construction of the subject building. After one year, respondent
Seoron filed a complaint for "sum of money with application for a writ of preliminary injunction"
against petitioner and respondent CAMSAC anchored on the "Sub-Contract Agreement" he entered
with the latter. Respondent Seoron sought to prevent petitioner from paying or releasing any
amount to respondent CAMSAC relative to the construction of the subject building in the event that
petitioner heeds CAMSAC's request for the release of the retention fee.
In the meantime, petitioner allegedly received demand-letters from the suppliers-creditors as well as
from respondent CAMSAC for the release of the 10% retention fee, hence, on February 22, 1995, it
filed before the trial court a complaint for interpleader and damages against respondent CAMSAC,
Arc Asia Philippines, Inc., Triple A Marketing Development Corporation, Trinidad Patigayon, Signal
Trading Corporation and Malayan Insurance Co, Inc., in order for them to interplead with one
another to determine their respective rights and claims on the retention fee.

On February 23, 1995, respondent CAMSAC filed an action for sum of money and damages against
petitioner 1for failure of the latter to release the 10% retention fee. On March 9, 1995, the trial court
issued the first assailed Order dismissing the complaint for interpleader to prevent multiplicity of
suits, as there are pending cases before the respondent court filed by respondent Seoron for sum
of money against petitioner and respondent CAMSAC which also involved the ten (10%) retention
fee. The trial court held:
As herein before-stated, there is already a pending case by Senoron against the herein plaintiff,
Camsac International Inc., and Catalino M. Salazar, as president of the Camsac and in his personal
capacity. Consequently, to give due course to this present action would indeed result in a multiplicity
of suits. Plaintiff's proper move here would be to file an answer, which it has not yet done up to
this point in time although it managed to file this complaint posthaste assert a counterclaim and/or
a cross claim, etc. in Civil Case No. CEB-17079. The other defendants herein may intervene therein
if they so desire to protect their respective interest in the same way that one of them, Arc Asia Phil.
Inc., had already filed its motion for intervention, dated March 6, 1995, in order that all their claims,
may be tried and decided in one proceeding.
WHEREFORE, the complaint for interpleader is hereby denied due course, and the same should be,
as it is hereby ordered dismissed.
SO ORDERED. 2
Petitioner filed a motion for reconsideration which was denied in the second assailed Order dated
April 11, 1995. Hence, petitioner's immediate resort to this Court by a petition for review
on certiorari raising the following issues:3
1. Respondent court acted with grave abuse of discretion, as it had no jurisdiction, to
exercise "due course" authority and to motu proprio dismiss petitioner's action for
interpleader.
2. Respondent court erred when it correlated the "allegation of fact" between the petitioner's
complaint in Civil Case No. CEB-17126 with that of the complaint in Civil Case No. CEB17079, and to thereafter issue baseless and unwarranted conclusions patently adverse to
petitioner.
3. Although no hearing has as yet been conducted and in what may amount to be a
judgment on the pleadings, respondent court's 9 March 1995 Order is replete with
"conclusions of fact and law" which, if allowed to remain unchallenged, may amount to a prejudgment of certain issues of fact and law that are yet to be substantiated.
Petitioner's direct resort to this Court is erroneous. Under the Rules of Court, a party may directly
appeal to the Supreme Court from a decision of the trial court only on pure questions of law. 4 The
case at bench does not involve pure questions of law as to entitle petitioner to seek immediate
redress from this court. A question of law arises when the doubt or difference arises as to what the
law is on a certain set of facts as distinguished from question of fact which occurs when the doubt or
difference arises as the truth or falsehood of the alleged facts. 5
A scrutiny of the issues raised in this case shows that it includes factual matters. The resolution of
the interpleader case necessitates a determination of whether the other pending cases relied upon
by the trial court in dismissing the former case involves the same matters covered by the latter
cases. There is a need to determine whether the pending civil cases arise out of the same facts and
circumstances as those involved in the interpleader case. As such, petitioner's direct resort to this

court must fail considering that this court is not a trier of facts. 6 Besides, in a petition for review
on certiorari, the trial judge should not even be made a party to the case as petitioner erroneously
did. 7
Petitioner's imputation of grave abuse of discretion to respondent court as alleged in its petition is a
vain attempt to justify its erroneous mode of challenging the trial court's decision. There is no
question that grave abuse of discretion or errors of jurisdiction may be corrected only by the special
civil action of certiorari. 8 Such special remedy does not avail in instances of error of judgment which
can be corrected by appeal or by a petition for review. 9 Since petitioner availed of the remedy under
Rule 45, recourse to Rule 65 cannot be allowed either as an add-on or as a substitute for appeal. 10
Verily, the alleged grave abuse of discretion and lack of jurisdiction raised in the petition is
misplaced. First, there is no question that the trial court has jurisdiction over the interpleader
case. Second, petitioner's claim that the trial court failed to observe the procedure for an interpleader
action does not constitute grave abuse of discretion for the extraordinary writ to issue. It is only an
error of judgment correctible by an ordinary appeal. The extraordinary writ does not issue to correct
errors of procedure or mistake in the findings and conclusions of the judge. 11Finally, on the
assumption that this is a proper subject of a certiorari case, petitioner should have observed the
hierarchy of courts and not seek an immediate recourse to the highest tribunal. The original
jurisdiction of the Court of Appeals over special civil actions for certiorari is concurrent with the
Supreme Court and the Regional Trial Court. 12
ACCORDINGLY, the petition is denied for lack of merit.

1wphi1.nt

SO ORDERED.
Bellosillo, Mendoza, Quisumbing and De Leon, Jr., JJ., concur.

THIRD DIVISION
G.R. No. 193494, March 07, 2014
LUI ENTERPRISES, INC., Petitioner, v. ZUELLIG PHARMA CORPORATION AND THE PHILIPPINE
BANK OF COMMUNICATIONS, Respondents.
DECISION
LEONEN, J.:
There should be no inexplicable delay in the filing of a motion to set aside order of default. Even when a
motion is filed within the required period, excusable negligence must be properly alleged and proven.
This is a petition for review on certiorari of the Court of Appeals decision 1 dated May 24, 2010 and
resolution2 dated August 13, 2010 in CAG.R. CV No. 88023. The Court of Appeals affirmed in toto the
Regional
Trial
Court
of
Makatis
decision 3 dated
July
4,
2006.
The

facts

as

established

from

the

pleadings

of

the

parties

are

as

follows:

chanRoblesvirtualLawlibrary

On March 9, 1995, Lui Enterprises, Inc. and Zuellig Pharma Corporation entered into a 10year contract of
lease4 over a parcel of land located in Barrio Tigatto, Buhangin, Davao City. The parcel of land was covered
by Transfer Certificate of Title No. T166476 and was registered under Eli L. Lui. 5
On January 10, 2003, Zuellig Pharma received a letter 6 from the Philippine Bank of Communications.
Claiming to be the new owner of the leased property, the bank asked Zuellig Pharma to pay rent directly to
it. Attached to the letter was a copy of Transfer Certificate of Title No. 336962 under the name of the
Philippine Bank of Communications. 7 Transfer Certificate of Title No. 336962 was derived from Transfer
Certificate
of
Title
No.
T166476. 8
Zuellig Pharma promptly informed Lui Enterprises of the Philippine Bank of Communications claim. On
January 28, 2003, Lui Enterprises wrote to Zuellig Pharma and insisted on its right to collect the leased
propertys
rent.9
Due to the conflicting claims of Lui Enterprises and the Philippine Bank of Communications over the rental
payments, Zuellig Pharma filed a complaint10 for interpleader with the Regional Trial Court of Makati. In its
complaint, Zuellig Pharma alleged that it already consigned in court P604,024.35 as rental payments. Zuellig
Pharma prayed that it be allowed to consign in court its succeeding monthly rental payments and that Lui
Enterprises and the Philippine Bank of Communications be ordered to litigate their conflicting claims. 11
The Philippine Bank of Communications filed its answer 12 to the complaint. On the other hand, Lui
Enterprises filed a motion to dismiss 13 on the ground that Zuellig Pharmas alleged representative did not
have authority to file the complaint for interpleader on behalf of the corporation. Under the secretarys
certificate14 dated May 6, 2003 attached to the complaint, Atty. Ana L.A. Peralta was only authorized to
initiate and represent [Zuellig Pharma] in the civil proceedings for consignation of rental payments to be
filed
against
Lui
Enterprises,
Inc.
and/or
[the
Philippine
Bank
of
Communications]. 15
According to Lui Enterprises, an earlier filed nullification of deed of dation in payment case pending with the
Regional Trial Court of Davao barred the filing of the interpleader case. 16 Lui Enterprises filed this nullification
case against the Philippine Bank of Communications with respect to several properties it dationed to the
bank in payment of its obligations. The property leased by Zuellig Pharma was among those allegedly
dationed
to
the
Philippine
Bank
of
Communications. 17
In the nullification of deed of dation in payment case, Lui Enterprises raised the issue of which corporation
had the better right over the rental payments. 18 Lui Enterprises argued that the same issue was involved in
the interpleader case. To avoid possible conflicting decisions of the Davao trial court and the Makati trial
court on the same issue, Lui Enterprises argued that the subsequently filed interpleader case be dismissed.
To support its argument, Lui Enterprises cited a writ of preliminary injunction 19 dated July 2, 2003 issued by
the Regional Trial Court of Davao, ordering Lui Enterprises and the Philippine Bank of Communications [to

maintain] status quo20 with respect to the rent. By virtue of the writ of preliminary injunction, Lui
Enterprises argued that it should continue collecting the rental payments from its lessees until the
nullification of deed of dation in payment case was resolved. The writ of preliminary injunction dated July 2,
2003 reads:
chanRoble svirtualLawlibrary

WHEREAS, on June 30, 2003, the Court issued an Order, a portion of which is quoted:
WHEREFORE, PREMISES CONSIDERED, let a Writ of Preliminary Injunction issue, restraining and enjoining
[the Philippine Bank of Communications], its agents or [representative], the Office of the Clerk of Court
Sheriff and all persons acting on their behalf, from conducting auction sale on the properties of [Lui
Enterprises] in EJFREM Case No. 627203 scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice,
Ecoland, Davao City, until the final termination of the case, upon plaintiff [sic] filing of a bond in the amount
of P1,000,000.00 to answer for damages that the enjoined parties may sustain by reason of the injunction if
the Court should finally decide that applicant is not entitled thereto.
WHEREAS,

that

plaintiff

posted

bond

of

P1,000,000.00

duly

approved

by

this

Court.

IT IS HEREBY ORDERED by the undersigned Judge that, until further orders, [the Philippine Bank of
Communications] and all [its] attorneys, representatives, agents and any other persons assisting [the bank],
are directed to restrain from conducting auction sale on the Properties of [Lui Enterprises] in EJFREM Case
No. 627203 scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice, Ecoland, Davao City, until the
final termination of the case.21
Zuellig Pharma filed its opposition22 to the motion to dismiss. It argued that the motion to dismiss should be
denied for having been filed late. Under Rule 16, Section 1 of the 1997 Rules of Civil Procedure, a motion to
dismiss should be filed within the required time given to file an answer to the complaint, which is 15 days
from service of summons on the defendant.23 Summons was served on Lui Enterprises on July 4, 2003. It
had until July 19, 2003 to file a motion to dismiss, but Lui Enterprises filed the motion only on July 23,
2003.24
As to Lui Enterprises claim that the interpleader case was filed without authority, Zuellig Pharma argued
that an action interpleader is a necessary consequence of the action for consignation.25Zuellig Pharma
consigned its rental payments because of the clearly conflicting claims of [Lui Enterprises] and [the
Philippine Bank of Communications].26 Since Atty. Ana L.A. Peralta was authorized to file a consignation
case,
this
authority
necessarily
included
an
authority
to
file
the
interpleader
case.
Nevertheless, Zuellig Pharma filed in court the secretarys certificate dated August 28, 2003, 27 which
expressly stated that Atty. Ana L.A. Peralta was authorized to file a consignation and interpleader case on
behalf
of
Zuellig
Pharma.28
With respect to the nullification of deed of dation in payment case, Zuellig Pharma argued that its pendency
did not bar the filing of the interpleader case. It was not a party to the nullification case. 29
As to the writ of preliminary injunction issued by the Regional Trial Court of Davao, Zuellig Pharma argued
that the writ only pertained to properties owned by Lui Enterprises. Under the writ of preliminary injunction,
the Regional Trial Court of Davao enjoined the July 3, 2003 auction sale of Lui Enterprises properties, the
proceeds of which were supposed to satisfy its obligations to the Philippine Bank of Communications. As
early as April 21, 2001, however, the Philippine Bank of Communications already owned the leased property
as evidenced by Transfer Certificate of Title No. 336962. Thus, the writ of preliminary injunction did not
apply
to
the
leased
property.30
Considering that Lui Enterprises filed its motion to dismiss beyond the 15day period to file an answer,
Zuellig
Pharma
moved
that
Lui
Enterprises
be
declared
in
default. 31
In its compliance32 dated September 15, 2003, the Philippine Bank of Communications [joined Zuellig
Pharma] in moving to declare [Lui Enterprises] in default, and in [moving for] the denial of [Lui Enterprises]
motion
to
dismiss.33
The Regional Trial Court of Makati found that Lui Enterprises failed to file its motion to dismiss within the
reglementary period. Thus, in its order 34 dated October 6, 2003, the trial court denied Lui Enterprises
motion
to
dismiss
and
declared
it
in
default. 35
Lui Enterprises did not move for the reconsideration of the order dated October 6, 2003. Thus, the Makati

trial

court

heard

the

interpleader

case

without

Lui

Enterprises

participation.

Despite having been declared in default, Lui Enterprises filed the manifestation with prayer 36 dated April 15,
2004. It manifested that the Regional Trial Court of Davao allegedly issued the order 37 dated April 1, 2004,
ordering all of Lui Enterprises lessees to observe status quo with regard to the rental payments 38 and
continue remitting their rental payments to Lui Enterprises while the nullification of deed of dation in
payment case was being resolved. The order dated April 1, 2004 of the Regional Trial Court of Davao
reads:
chanRoble svirtualLawlibrary

ORDER
Posed for Resolution is the Motion for Amendment of Order filed by [Lui Enterprises] on September 23, 2003
seeking for the preservation of status quo on the payment/remittance of rentals to [it] and the
disposal/construction
of
the
properties
subject
matter
of
this
case.
x

As elsewhere stated, [the Philippine Bank of Communications] did not oppose the instant motion up to the
present. In fact, during the hearing held on March 15, 2004, [the banks] counsel manifested in open court
that except for the rentals due from [Zuellig Pharma] which are the subject of a consignation suit before a
Makati Court, the other rental payments are continuously received by [Lui Enterprises].
There being no objection from [the Philippine Bank of Communications], and in order to protect the right of
[Lui Enterprises] respecting the subject of the action during the pendency of this case, this Court, in the
exercise
of
its
discretion
hereby
grants
the
motion.
Accordingly, consistent with the order of this Court dated June 30, 2003, the parties are hereby directed to
further observe status quo with regard to the rental payments owing or due from the lessees of the
properties subject of the first set of deeds of dacion and that the defendants are enjoined from disposing of
the properties located at Green Heights Village, Davao City until the case is finally resolved.
With the order dated April 1, 2004 issued by the Regional Trial Court of Davao as basis, Lui Enterprises
argued that Zuellig Pharma must remit its rental payments to it and prayed that the interpleader case be
dismissed.
The Regional Trial Court of Makati only noted the manifestation with prayer dated April 15, 2004. 39
It was only on October 21, 2004, or one year after the issuance of the order of default, that Lui Enterprises
filed a motion to set aside order of default 40 in the Makati trial court on the ground of excusable negligence.
Lui Enterprises argued that its failure to file a motion to dismiss on time was caused by the negligence of
[Lui Enterprises] former counsel.41 This negligence was allegedly excusable because [Lui Enterprises] was
prejudiced
and
prevented
from
fairly
presenting
[its]
case.42
For its allegedly meritorious defense, Lui Enterprises argued that the earlier filed nullification of deed of
dation in payment case barred the filing of the interpleader case. The two actions allegedly involved the
same parties and the same issue of which corporation had the better right over the rental payments. To
prevent the possibility of two courts x x x rendering conflicting rulings [on the same issue],43 Lui
Enterprises
argued
that
the
subsequently
filed
interpleader
case
be
dismissed.
Zuellig Pharma filed its opposition 44 to the motion to set aside order of default. It argued that a counsels
failure
to
file
a
timely
answer
was
inexcusable
negligence
which
bound
his
client.
Further, Zuellig Pharma argued that the pending case for nullification of deed of dation in payment [did] not
preclude [Zuellig Pharma] from seeking the relief prayed for in the [interpleader case]. 45
While the motion to set aside order of default was still pending for resolution, Lui Enterprises filed the
manifestation and motion to dismiss 46 dated April 21, 2005 in the Makati trial court. It manifested that the
Davao trial court issued another order47 dated April 18, 2005 in the nullification of deed of dation in payment
case. In this order, the Davao trial court directed the Philippine Bank of Communications to inform Zuellig
Pharma to pay rent to Lui Enterprises while the Davao trial courts order dated April 1, 2004 was subsisting.
The order dated April 18, 2005 of the Davao trial court reads:
chanRoblesvirtualLawlibrary

ORDER
Plaintiffs move for execution or implementation of the Order dated September 14, 2004. In substance, [Lui
Enterprises] seek[s] to compel the remittance in their favor of the rentals from [Zuellig Pharma], one of the
lessees alluded to in the September 14, 2004 Order whose rental payments must be remitted to and
collected by [Lui Enterprises]. [The Philippine Bank of Communications] did not submit any opposition.
It appears from the records that sometime in February 2003, after being threatened with a lawsuit coming
from [the Philippine Bank of Communications], [Zuellig Pharma] stopped remitting its rentals to [Lui
Enterprises] and instead, has reportedly deposited the monthly rentals before a Makati court for
consignation.
As aptly raised by the plaintiffs, a possible impasse may insist should the Makati Courts ruling be contrary to
or in conflict with the status quo order issued by this Court. To preclude this spectacle, Zuellig Pharma
should accordingly be advised with the import of the Order dated September 14, 2004, the salient portion of
which is quoted:
x x x prior to the institution of the instant case and by agreement of the parties, plaintiffs were given as
they did exercise the right to collect, receive and enjoy rental payments x x x.
Since the April 1, 2004 status quo order was a necessary implement of the writ of preliminary injunction
issued on June 30, 2003, it follows that plaintiffs right to collect and receive rental payments which he
enjoyed prior to the filing of this case, must be respected and protected and maintained until the case is
resolved. As such, all rentals due from the aboveenumerated lessees must be remitted to and collected by
the
Plaintiffs.
Status quo simply means the last actual peaceable uncontested status that preceded the actual controversy.
(Searth Commodities Corp. v. Court of Appeals, 207 SCRA 622).
As such, the [Philippine Bank of Communications] [is] hereby directed to forthwith inform [Zuellig Pharma]
of the April 1, 2004 status quo order and the succeeding September 14, 2004 Order, and consequently, for
the said lessee to remit all rentals due from February 23, 2003 and onwards to [Lui Enterprises] in the
meanwhile that the status quo order is subsisting.
In its manifestation and motion to dismiss, Lui Enterprises reiterated its prayer for the dismissal of the
interpleader case to prevent the possibility of [the Regional Trial Court, Branch 143, Makati City] and [the
Regional Trial Court, Branch 16, Davao City] rendering conflicting rulings [on the same issue of which
corporation
has
the
better
right
to
the
rental
payments].48
Without resolving the motion to set aside order of default, the Makati trial court denied the manifestation
with motion to dismiss dated April 21, 2005 on the ground that Lui Enterprises already lost its standing in
court.49
Lui Enterprises did not file any motion for reconsideration of the denial of the manifestation and motion to
dismiss
dated
April
21,
2005.
In its decision50 dated July 4, 2006, the Regional Trial Court of Makati ruled that Lui Enterprises [was]
barred from any claim in respect of the [rental payments] 51 since it was declared in default. Thus, according
to the trial court, there was no issue as to which corporation had the better right over the rental
payments.52 The trial court awarded the total consigned amount of P6,681,327.30 to the Philippine Bank of
Communications and ordered Lui Enterprises to pay Zuellig Pharma P50,000.00 in attorneys fees. 53
Lui

Enterprises

appealed

to

the

Court

of

Appeals. 54

The Court of Appeals found Lui Enterprises appellants brief insufficient. Under Rule 44, Section 13 of the
1997 Rules of Civil Procedure, an appellants brief must contain a subject index, page references to the
record, table of cases, textbooks and statutes cited, and the statement of issues, among others. However,
Lui
Enterprises
appellants
brief
did
not
contain
these
requirements. 55
As to the denial of Lui Enterprises motion to dismiss, the Court of Appeals sustained the trial court. The
Court of Appeals found that Lui Enterprises filed its motion to dismiss four days late. 56
With respect to Lui Enterprises motion to set aside order of default, the Court of Appeals found that Lui

Enterprises failed to show the excusable negligence that prevented it from filing its motion to dismiss on
time. On its allegedly meritorious defense, the Court of Appeals ruled that the nullification of deed of dation
in payment case did not bar the filing of the interpleader case, with Zuellig Pharma not being a party to the
nullification
case.57
On the award of attorneys fees, the Court of Appeals sustained the trial court since Zuellig Pharma x x x
was constrained to file the action for interpleader with consignation in order to protect its interests x x x. 58
Thus, in its decision59 promulgated on May 24, 2010, the Court of Appeals dismissed Lui Enterprises appeal
and
affirmed
in
toto
the
Regional
Trial
Court
of
Makatis
decision.
Lui

Enterprises

filed

motion

for

reconsideration. 60

The Court of Appeals denied Lui Enterprises motion for reconsideration in its resolution promulgated on
August
13,
2010.61 Hence,
this
petition.
In this petition for review on certiorari ,62 Lui Enterprises argued that the Court of Appeals applied the rules
of procedure strictly63 and dismissed its appeal on technicalities. According to Lui Enterprises, the Court of
Appeals should have taken a liberal stance and allowed its appeal despite the lack of subject index, page
references to the record, table of cases, textbooks and statutes cited, and the statement of issues in its
appellants
brief.64
Lui Enterprises also claimed that the trial court should have set aside the order of default since its failure to
file
a
motion
to
dismiss
on
time
was
due
to
excusable
negligence. 65
For its allegedly meritorious defense, Lui Enterprises argued that the pending nullification of deed of dation
in payment case barred the filing of the interpleader case. The nullification of deed of dation in payment
case and the interpleader case allegedly involved the same issue of which corporation had the better right to
the rent. To avoid conflicting rulings on the same issue, Lui Enterprises argued that the subsequently filed
interpleader
case
be
dismissed.66
No attorneys fees should have been awarded to Zuellig Pharma as argued by Lui Enterprises. Zuellig
Pharma filed the interpleader case despite its knowledge of the nullification of deed of dation in payment
case filed in the Davao trial court where the same issue of which corporation had the better right over the
rental payments was being litigated. Thus, Zuellig Pharma filed the interpleader case in bad faith for which it
was
not
entitled
to
attorneys
fees.67
The Philippine Bank of Communications filed its comment 68 on the petition for review on certiorari . It argued
that Lui Enterprises failed to raise any error of law and prayed that we affirm in toto the Court of Appeals
decision.
For Zuellig Pharma, it manifested that it was adopting the Philippine Bank of Communications arguments in
its
comment.69
The issues for our resolution are:

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I. Whether the Court of Appeals erred in dismissing Lui Enterprises appeal for lack of subject index, page
references to the record, table of cases, textbooks and statutes cited, and the statement of issues in Lui
Enterprises
appellants
brief;
II. Whether the Regional Trial Court of Makati erred in denying Lui Enterprises motion to set aside order of
default;
III. Whether the annulment of deed of dation in payment pending in the Regional Trial Court of Davao
barred the subsequent filing of the interpleader case in the Regional Trial Court of Makati; and
IV. Whether Zuellig Pharma was entitled to attorneys fees.
Lui Enterprises petition for review on certiorari is without merit. However, we delete the award of attorneys
fees.

I
Lui
rules
brief

Enterprises
on

did

the

not
contents

comply
of

the

with

the
appellants

Under Rule 50, Section 1, paragraph (f) of the 1997 Rules of Civil Procedure, the Court of Appeals may, on
its own motion or that of the appellee, dismiss an appeal should the appellants brief lack specific
requirements under Rule 44, Section 13, paragraphs (a), (c), (d), and (f):
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Section 1. Grounds for dismissal of appeal. An appeal may be dismissed by the Court of Appeals, on its
own
motion
or
on
that
of
the
appellee,
on
the
following
grounds:

chanRoblesvirtualLawlibrary

(f) Absence of specific assignment of errors in the appellants brief, or of page references to the record as
required in Section 13, paragraphs (a), (c), (d), and (f) of Rule 44.
These requirements are the subject index of the matter in brief, page references to the record, and a table
of cases alphabetically arranged and with textbooks and statutes cited:
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Section 13. Contents of the appellants brief. The appellants brief shall contain, in the order herein
indicated,
the
following:

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(a) A subject index of the matter in brief with a digest of the arguments and page references, and a table of
cases alphabetically arranged, textbooks and statutes cited with references to the pages where they are
cited;
x

(c) Under the heading Statement of the Case, a clear and concise statement of the nature of the action, a
summary of the proceedings, the appealed rulings and orders of the court, the nature of the controversy,
with
page
references
to
the
record;
(d) Under the heading Statement of Facts, a clear and concise statement in a narrative form of the facts
admitted by both parties and of those in controversy, together with the substance of the proof relating
thereto in sufficient detail to make it clearly intelligible, with page references to the record;
x

(f) Under the heading Argument, the appellants arguments on each assignment of error with page
references to the record. The authorities relied upon shall be cited by the page of the report at which the
case
begins
and
the
page
of
the
report
on
which
the
citation
is
found;
xxxx
Lui Enterprises appellants brief lacked a subject index, page references to the record, and table of cases,
textbooks and statutes cited. Under Rule 50, Section 1 of the 1997 Rules of Civil Procedure, the Court of
Appeals
correctly
dismissed
Lui
Enterprises
appeal.
Except for cases provided in the Constitution, 70 appeal is a purely statutory right.71 The right to appeal
must be exercised in the manner prescribed by law 72 and requires strict compliance with the Rules of Court
on appeals.73 Otherwise, the appeal shall be dismissed, and its dismissal shall not be a deprivation of due
process
of
law.
In Mendoza v. United Coconut Planters Bank, Inc., 74 this court sustained the Court of Appeals dismissal of
Mendozas appeal. Mendozas appellants brief lacked a subject index, assignment of errors, and page
references to the record. In De Liano v. Court of Appeals, 75 this court also sustained the dismissal of De
Lianos appeal. De Lianos appellants brief lacked a subject index, a table of cases and authorities, and page
references
to
the
record.

There are exceptions to this rule. In Philippine Coconut Authority v. Corona International, Inc., 76 the
Philippine Coconut Authoritys appellants brief lacked a clear and concise statement of the nature of the
action, a summary of the proceedings, the nature of the judgment, and page references to the record.
However, this court found that the Philippine Coconut Authority substantially complied with the Rules. Its
appellants brief apprise[d] [the Court of Appeals] of the essential facts and nature of the case as well as
the issues raised and the laws necessary [to dispose of the case]. 77 This court [deviated] from a rigid
enforcement of the rules78 and ordered the Court of Appeals to resolve the Philippine Coconut Authoritys
appeal.
In Go v. Chaves,79 Gos 17page appellants brief lacked a subject index. However, Go subsequently filed a
subject index. This court excused Gos procedural lapse since the appellants brief [consisted] only of 17
pages which [the Court of Appeals] may easily peruse to apprise it of [the case] and of the relief
sought.80 This court ordered the Court of Appeals to resolve Gos appeal in the interest of justice. 81
In Philippine Coconut Authority and Go, the appellants substantially complied with the rules on the contents
of
the
appellants
brief.
Thus,
this
court
excused
the
appellants
procedural
lapses.
In this case, Lui Enterprises did not substantially comply with the rules on the contents of the appellants
brief. It admitted that its appellants brief lacked the required subject index, page references to the record,
and table of cases, textbooks, and statutes cited. However, it did not even correct its admitted technical
omissions82 by filing an amended appellants brief with the required contents. 83 Thus, this case does not
allow a relaxation of the rules. The Court of Appeals did not err in dismissing Lui Enterprises appeal.
Rules on appeal are designed for the proper and prompt disposition of cases before the Court of
Appeals.84 With respect to the appellants brief, its required contents are designed to minimize the [Court
of Appeals] labor in [examining] the record upon which the appeal is heard and determined. 85
The subject index serves as the briefs table of contents. 86 Instead of [thumbing] through the [appellants
brief]87 every time the Court of Appeals Justice encounters an argument or citation, the Justice deciding the
case only has to refer to the subject index for the argument or citation he or she needs. 88 This saves the
Court of Appeals time in reviewing the appealed case. Efficiency allows the justices of the appellate court to
substantially
attend
to
this
case
as
well
as
other
cases.
Page references to the record guarantee that the facts stated in the appellants brief are supported by the
record.89 A statement of fact without a page reference to the record creates the presumption that it is
unsupported
by
the
record
and,
thus,
may
be
stricken
or
disregarded
altogether.90
As for the table of cases, textbooks, and statutes cited, this is required so that the Court of Appeals can
easily
verify
the
authorities
cited
for
accuracy
and
aptness. 91
Lui Enterprises appellants brief lacked a subject index, page references to the record, and a table of cases,
textbooks, and statutes cited. These requirements were designed to assist the appellate court in the
accomplishment of its tasks, and, overall, to enhance the orderly administration of justice.92This court will
not disregard rules on appeal in the guise of liberal construction.93 For this court to liberally construe the
Rules, the party must substantially comply with the Rules and correct its procedural lapses. 94 Lui Enterprises
failed
to
remedy
these
errors.
All told, the Court of Appeals did not err in dismissing Lui Enterprises appeal. It failed to comply with Rule
44, Section 13, paragraphs (a), (c), (d), and (f) of the 1997 Rules of Civil Procedure on the required
contents of the appellants brief.
II
Lui
failure
the
negligence

Enterprises
to
required

failed
answer
period

to
the
was

show
complaint
due
to

that

its
within
excusable

When a defendant is served with summons and a copy of the complaint, he or she is required to answer
within 15 days from the day he or she was served with summons. 95 The defendant may also move to dismiss

the

complaint

[w]ithin

the

time

for

but

before

filing

the

answer.96

Fifteen days is sufficient time for a defendant to answer with good defenses against the plaintiffs allegations
in the complaint. Thus, a defendant who fails to answer within 15 days from service of summons either
presents no defenses against the plaintiffs allegations in the complaint or was prevented from filing his or
her answer within the required period due to fraud, accident, mistake or excusable negligence. 97
In either case, the court may declare the defendant in default on plaintiffs motion and notice to
defendant.98 The court shall then try the case until judgment without defendants participation 99 and grant
the
plaintiff
such
relief
as
his
or
her
complaint
may
warrant. 100
A defendant declared in default loses his or her standing in court. 101 He or she is deprived of the right to
take part in the trial and forfeits his [or her] rights as a party litigant, 102 has no right to present evidence
[supporting his or her] allegations,103 and has no right to control the proceedings [or] crossexamine
witnesses.104 Moreover, he or she has no right to expect that [the court] would [act] upon [his or her
pleadings]105 or that he or she may [oppose] motions filed against him [or her]. 106
However, the defendant declared in default does not [waive] all of [his or her] rights. 107 He or she still has
the right to receive notice of subsequent proceedings.108 Also, the plaintiff must still present evidence
supporting
his
or
her
allegations
despite
the
default
of
[the
defendant].109
Default, therefore, is not meant to punish the defendant but to enforce the prompt filing of the answer to
the complaint. For a defendant without good defenses, default saves him or her the embarrassment of
openly appearing to defend the indefensible.110 As this court explained inGochangco v. The Court of First
Instance of Negros Occidental, Branch IV:111
It does make sense for a defendant without defenses, and who accepts the correctness of the specific
relief prayed for in the complaint, to forego the filing of the answer or any sort of intervention in the action
at all. For even if he did intervene, the result would be the same: since he would be unable to establish any
good defense, having none in fact, judgment would inevitably go against him. And this would be an
acceptable result, if not being in his power to alter or prevent it, provided that the judgment did not go
beyond or differ from the specific relief stated in the complaint. x x x.112 (Emphasis in the original)
On the other hand, for a defendant with good defenses, it would be unnatural for him [or her] not to set x x
x up [his or her defenses] properly and timely. 113 Thus, it must be presumed that some insuperable cause
prevented him [or her] from [answering the complaint].114 In which case, his or her proper remedy depends
on when he or she discovered the default and whether the default judgment was already rendered by the
trial
court.
After notice of the declaration of default but before the court renders the default judgment, the defendant
may file, under oath, a motion to set aside order of default. The defendant must properly show that his or
her failure to answer was due to fraud, accident, 115 mistake116 or excusable negligence.117 The defendant
must also have a meritorious defense. Rule 9, Section 3, paragraph (b) of the 1997 Rules of Civil Procedure
provides:
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Section

3. Default;

declaration

of.

(b) Relief from order of default. A party declared in default may at any time after notice thereof and before
judgment file a motion under oath to set aside the order of default upon proper showing that his failure to
answer was due to fraud, accident, mistake or excusable negligence and that he has a meritorious defense.
In such case, the order of default may be set aside on such terms and conditions as the judge may impose
in the interest of justice.
If the defendant discovers his or her default after judgment but prior to the judgment becoming final and
executory, he or she may file a motion for new trial under Rule 37, Section 1, paragraph (a) of the 1997
Rules of Civil Procedure.118 If he or she discovers his or her default after the judgment has become final and
executory, a petition for relief from judgment under Rule 38, Section 1 of the 1997 Rules of Civil Procedure
may
be
filed.119
Appeal is also available to the defendant declared in default. He or she may appeal the judgment for being
contrary to the evidence or to the law under Rule 41, Section 2 of the 1997 Rules of Civil Procedure. 120 He or

she

may do

so even

if

he

or she

did not file a petition

to

set

aside

order

of

default. 121

A petition for certiorari may also be filed if the trial court declared the defendant in default with grave abuse
of
discretion.122
The remedies of the motion to set aside order of default, motion for new trial, and petition for relief from
judgment are mutually exclusive, not alternative or cumulative. This is to compel defendants to remedy their
default at the earliest possible opportunity. Depending on when the default was discovered and whether a
default judgment was already rendered, a defendant declared in default may avail of only one of the three
remedies.
Thus, if a defendant discovers his or her default before the trial court renders judgment, he or she shall file
a motion to set aside order of default. If this motion to set aside order of default is denied, the defendant
declared in default cannot await the rendition of judgment, and he or she cannot file a motion for new trial
before the judgment becomes final and executory, or a petition for relief from judgment after the judgment
becomes
final
and
executory.
Also, the remedies against default become narrower and narrower as the trial nears judgment. The
defendant enjoys the most liberality from this court with a motion to set aside order of default, as he or she
has no default judgment to contend with, and he or she has the whole period before judgment to remedy his
or
her
default.
With a motion for new trial, the defendant must file the motion within the period for taking an appeal 123 or
within 15 days from notice of the default judgment. Although a default judgment has already been rendered,
the filing of the motion for new trial tolls the reglementary period of appeal, and the default judgment
cannot
be
executed
against
the
defendant.
A petition for relief from judgment is filed after the default judgment has become final and executory. Thus,
the filing of the petition for relief from judgment does not stay the execution of the default judgment unless
a
writ
of
preliminary
injunction
is
issued
pending
the
petitions
resolution. 124
Upon the grant of a motion to set aside order of default, motion for new trial, or a petition for relief from
judgment, the defendant is given the chance to present his or her evidence against that of plaintiffs. With
an appeal, however, the defendant has no right to present evidence on his or her behalf and can only appeal
the
judgment
for
being
contrary
to
plaintiffs
evidence
or
the
law.
Similar to an appeal, a petition for certiorari does not allow the defendant to present evidence on his or her
behalf. The defendant can only argue that the trial court committed grave abuse of discretion in declaring
him
or
her
in
default.
Thus, should a defendant prefer to present evidence on his or her behalf, he or she must file either a motion
to set aside order of default, motion for new trial, or a petition for relief from judgment.
In this case, Lui Enterprises had discovered its default before the Regional Trial Court of Makati rendered
judgment. Thus, it timely filed a motion to set aside order of default, raising the ground of excusable
negligence.
Excusable negligence is one which ordinary diligence and prudence could not have guarded against. 125 The
circumstances should be properly alleged and proved. In this case, we find that Lui Enterprises failure to
answer
within
the
required
period
is
inexcusable.
Lui Enterprises counsel filed its motion to dismiss four days late. It did not immediately take steps to
remedy its default and took one year from discovery of default to file a motion to set aside order of default.
In its motion to set aside order of default, Lui Enterprises only conveniently blamed its x x x counsel [for
the late filing of the answer] 126 without offering any excuse for the late filing. This is not excusable
negligence under Rule 9, Section 3, paragraph (b) 127 of the 1997 Rules of Civil Procedure. Thus, the Regional
Trial Court of Makati did not err in refusing to set aside the order of default.
Lui Enterprises argued that the Regional Trial Court of Makati should have been liberal in setting aside its
order of default. After it had been declared in default, Lui Enterprises filed several manifestations informing
the Makati trial court of the earlier filed nullification of deed of dation in payment case which barred the filing
of the interpleader case. Lui Enterprises president, Eli L. Lui, and counsel even flew in from Davao to Makati

to formally [manifest that] a [similar] action between [Lui Enterprises] and [the Philippine Bank of
Communications]128 was already pending in the Regional Trial Court of Davao. However, the trial court did
not
recognize
Lui
Enterprises
standing
in
court.
The general rule is that courts should proceed with deciding cases on the merits and set aside orders of
default as default judgments are frowned upon.129 As much as possible, cases should be decided with both
parties given every chance to fight their case fairly and in the open, without resort to technicality. 130
However, the basic requirements of Rule 9, Section 3, paragraph (b) of the 1997 Rules of Civil Procedure
must first be complied with. 131 The defendants motion to set aside order of default must satisfy three
conditions. First is the time element. The defendant must challenge the default order before judgment.
Second, the defendant must have been prevented from filing his answer due to fraud, accident, mistake or
excusable negligence. Third, he must have a meritorious defense. As this court held in SSS v. Hon.
Chaves:132
Procedural rules are not to be disregarded or dismissed simply because their nonobservance may have
resulted in prejudice to a partys substantive rights. Like all rules[,] they are to be followed, except only
when for the most persuasive of reasons they may be relaxed to relieve a litigant of an injustice not
commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed. x x
x.133
As discussed, Lui Enterprises never explained why its counsel failed to file the motion to dismiss on time. It
just argued that courts should be liberal in setting aside orders of default. Even assuming that it had a
meritorious defense and that its representative and counsel had to fly in from Davao to Makati to personally
appear and manifest in court its meritorious defense, Lui Enterprises must first show that its failure to
answer was due to fraud, accident, mistake or excusable negligence. This Lui Enterprises did not do.
Lui Enterprises argued that Zuellig Pharma filed the interpleader case to compel Lui Enterprises and the
Philippine Bank of Communications to litigate their claims. Thus, [d]eclaring the other claimant in default
would ironically defeat the very purpose of the suit.134 The Regional Trial Court of Makati should not have
declared
Lui
Enterprises
in
default.
Under Rule 62, Section 1 of the 1997 Rules of Civil Procedure, a person may file a special civil action for
interpleader if conflicting claims are made against him or her over a subject matter in which he or she has
no interest. The action is brought against the claimants to compel them to litigate their conflicting claims
among themselves. Rule 62, Section 1 of the 1997 Rules of Civil Procedure provides:
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Section 1. When interpleader proper. Whenever conflicting claims upon the same subject matter are or
may be made against a person who claims no interest whatever in the subject matter, or an interest which
in whole or in part is not disputed by the claimants, he may bring an action against the conflicting claimants
to compel them to interplead and litigate their several claims among themselves.
An interpleader complaint may be filed by a lessee against those who have conflicting claims over the rent
due for the property leased. 135 This remedy is for the lessee to protect him or her from double vexation in
respect of one liability.136 He or she may file the interpleader case to extinguish his or her obligation to pay
rent, remove him or her from the adverse claimants dispute, and compel the parties with conflicting claims
to
litigate
among
themselves.
In this case, Zuellig Pharma filed the interpleader case to extinguish its obligation to pay rent. Its purpose in
filing the interpleader case was not defeated137 when the Makati trial court declared Lui Enterprises in
default.
At any rate, an adverse claimant in an interpleader case may be declared in default. Under Rule 62, Section
5 of the 1997 Rules of Civil Procedure, a claimant who fails to answer within the required period may, on
motion, be declared in default. The consequence of the default is that the court may render judgment
barring [the defaulted claimant] from any claim in respect to the subject matter. 138The Rules would not have
allowed claimants in interpleader cases to be declared in default if it would ironically defeat the very
purpose
of
the
suit.139
The Regional Trial Court of Makati declared Lui Enterprises in default when it failed to answer the complaint
within the required period. Lui Enterprises filed a motion to set aside order of default without an acceptable

excuse why its counsel failed to answer the complaint. It failed to prove the excusable negligence. Thus, the
Makati trial court did not err in refusing to set aside the order of default.
III
The
payment
the
is

nullification
of
deed
case
did
not
bar
interpleader
case.
not
present
in

in

dation
filing

the
Litis
this

in
of
pendentia
case.

Lui Enterprises allegedly filed for nullification of deed of dation in payment with the Regional Trial Court of
Davao. It sought to nullify the deed of dation in payment through which the Philippine Bank of
Communications acquired title over the leased property. Lui Enterprises argued that this pending nullification
case barred the Regional Trial Court of Makati from hearing the interpleader case. Since the interpleader
case was filed subsequently to the nullification case, the interpleader case should be dismissed.
Under Rule 16, Section 1, paragraph (e) of the 1997 Rules of Civil Procedure, a motion to dismiss may be
filed on the ground of litis pendentia:
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Section 1. Grounds. Within the time for but before filing the answer to the complaint or pleading asserting
a claim, a motion to dismiss may be made on any of the following grounds:

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(e)

That

there

is

another

action

pending

between

the

same

x
parties

for

the

same

cause;

xxxx
Litis pendentia is Latin for a pending suit.140 It exists when another action is pending between the same
parties for the same cause of action x x x.141 The subsequent action is unnecessary and vexatious 142 and is
instituted
to
harass
the
respondent
[in
the
subsequent
action].143
The requisites of litis pendentia are:

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(1) Identity of parties or at least such as represent the same interest in both
actions;
(2) Identity of rights asserted and reliefs prayed for, the reliefs being
founded on the same facts; and
(3) The identity in the two cases should be such that the judgment that may
be rendered in one would, regardless of which party is successful,
amount to res judicata in the other.144
All

of

the

requisites

must

be

present. 145 Absent

one

requisite,

there

is

no litis

pendentia.146

In this case, there is no litis pendentia since there is no identity of parties in the nullification of deed of
dation in payment case and the interpleader case. Zuellig Pharma is not a party to the nullification case filed
in
the
Davao
trial
court.
There is also no identity of rights asserted and reliefs prayed for. Lui Enterprises filed the first case to nullify
the deed of dation in payment it executed in favor of the Philippine Bank of Communications. Zuellig Pharma
subsequently filed the interpleader case to consign in court the rental payments and extinguish its obligation
as lessee. The interpleader case was necessary and was not instituted to harass either Lui Enterprises or the
Philippine
Bank
of
Communications.
Thus,

the

pending

nullification

case

did

not

bar

the

filing

of

the

interpleader

case.

Lui Enterprises cited Progressive Development Corporation, Inc. v. Court of Appeals 147 as authority to set

aside the subsequently filed interpleader case. In this cited case, petitioner Progressive Development
Corporation, Inc. entered into a lease contract with Westin Seafood Market, Inc. The latter failed to pay rent.
Thus, Progressive Development Corporation, Inc. repossessed the leased premises, inventoried the movable
properties inside the leased premises, and scheduled the public sale of the inventoried properties as they
agreed
upon
in
their
lease
contract.
Westin Seafood Market, Inc. filed for forcible entry with damages against Progressive Development
Corporation, Inc. It subsequently filed an action for damages against Progressive Development Corporation
for
its
forcible
takeover
of
the
leased
premises.148
This court ordered the subsequently filed action for damages dismissed as the pending forcible entry with
damages
case
barred
the
subsequently
filed
damages
case.
Progressive Development Corporation, Inc. does not apply in this case. The action for forcible entry with
damages and the subsequent action for damages were filed by the same plaintiff against the same
defendant.
There
is
identity
of
parties
in
both
cases.
In this case, the nullification of deed of dation in payment case was filed by Lui Enterprises against the
Philippine Bank of Communications. The interpleader case was filed by Zuellig Pharma against Lui
Enterprises and the Philippine Bank of Communications. A different plaintiff filed the interpleader case
against Lui Enterprises and the Philippine Bank of Communications. Thus, there is no identity of parties, and
the
first
requisite
of litis
pendentia is
absent.
As discussed, Lui Enterprises filed the nullification of deed of dation in payment to recover ownership of the
leased premises. Zuellig Pharma filed the interpleader case to extinguish its obligation to pay rent. There is
no identity of reliefs prayed for, and the second requisite of litis pendentia is absent.
Since two requisites of litis pendentia are absent, the nullification of deed of dation in payment case did not
bar
the
filing
of
the
interpleader
case.
Lui Enterprises alleged that the Regional Trial Court of Davao issued a writ of preliminary injunction against
the Regional Trial Court of Makati. The Regional Trial Court of Davao allegedly enjoined the Regional Trial
Court of Makati from taking cognizance of the interpleader case. Lui Enterprises argued that the Regional
Trial Court of Makati should have respected the orders issued by the Regional Trial Court of Davao. 149 Lui
Enterprises cited Compania General de Tabacos de Filipinas v. Court of Appeals 150 where this court allegedly
held:
chanRoble svirtualLawlibrary

x x x [T]he issuance of the said writ by the RTC of Agoo, La Union not only seeks to enjoin Branch 9 of the
RTC of Manila from proceedingwith the foreclosure case but also has the effect of preempting the latters
order. x x x.151
Compania General de Tabacos de Filipinas is not an authority for the claim that a court can issue a writ of
preliminary injunction against a coequal court. The cited sentence was taken out of context. InCompania
General de Tabacos de Filipinas, this court held that the Regional Trial Court of Agoo had no power to issue a
writ of preliminary injunction against the Regional Trial Court of Manila. 152 A court cannot enjoin the
proceedings
of
a
coequal
court.
Thus, when this court said that the Regional Trial Court of Agoos writ of preliminary injunction not only
seeks to enjoin x x x [the Regional Trial Court of Manila] from proceeding with the foreclosure case but also
has the effect of preempting the latters orders,153 this court followed with [t]his we cannot
countenance.154
At any rate, the Regional Trial Court of Davaos order dated April 18, 2005 was not a writ of preliminary
injunction. It was a mere order directing the Philippine Bank of Communications to inform Zuellig Pharma to
pay rent to Lui Enterprises while the status quo order between Lui Enterprises and the Philippine Bank of
Communications was subsisting. The Regional Trial Court of Davao did not enjoin the proceedings before the
Regional Trial Court of Makati. The order dated April 18, 2005 provides:
chanRoblesvirtualLawlibrary

As such, [the Philippine Bank of Communications] [is] hereby directed to forthwith inform Zuellig Pharma
Corp., of the April 1, 2004 status quo order and the succeeding September 14, 2004 Order, and

consequently, for the said lessee to remit all rentals due from February 23, 2003 and onwards to plaintiff Lui
Enterprises, Inc., in the meanwhile that the status quo order is subsisting. 155
Thus, the Regional Trial Court of Davao did not enjoin the Regional Trial Court of Makati from hearing the
interpleader
case.
All told, the trial court did not err in proceeding with the interpleader case. The nullification of deed of dation
in payment case pending with the Regional Trial Court of Davao did not bar the filing of the interpleader case
with the Regional Trial Court of Makati.
IV
The

Court

of

Appeals

erred

in

awarding

attorneys

fees

In its ordinary sense, attorneys fees represent the reasonable compensation [a client pays his or her
lawyer] [for legal service rendered].156 In its extraordinary sense, attorneys fees [are] awarded x x x as
indemnity
for
damages
[the
losing
party
pays
the
prevailing
party].157
The award of attorneys fees is the exception rather than the rule. 158 It is not awarded to the prevailing party
as a matter of course.159 Under Article 2208 of the Civil Code, attorneys fees cannot be recovered in the
absence of stipulation, except under specific circumstances:
chanRoble svirtualLawlibrary

(1) When exemplary damages are awarded;


(2) When the defendants act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the
plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to
satisfy the plaintiffs plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and
skilled workers;
(8) In actions for indemnity under workmens compensation and employers
liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that
attorneys fees and expenses of litigation should be recovered. 160
Even if a party is compelled to litigate with third persons or to incur expenses to protect his [or her]
rights,161 attorneys fees will not be awarded if no bad faith could be reflected in a partys persistence in a
case.162
To award attorneys fees, the court must have factual, legal, [and] equitable justification.163 The court must
state the awards basis in its decision. 164 These rules are based on the policy that no premium should be
placed
on
the
right
to
litigate.165
In this case, the Court of Appeals awarded attorneys fees as [Zuellig Pharma] was compelled to litigate
with third persons or to incur expenses to protect [its] interest[s]. 166 This is not a compelling reason to
award attorneys fees. That Zuellig Pharma had to file an interpleader case to consign its rental payments
did not mean that Lui Enterprises was in bad faith in insisting that rental payments be paid to it. Thus, the
Court
of
Appeals
erred
in
awarding
attorneys
fees
to
Zuellig
Pharma.

All

told,

the

Court

of

Appeals

award

of

P50,000.00

as

attorneys

fees

must

be

deleted.

WHEREFORE, in view of the foregoing, the petition for review on certiorari is DENIED. The Court of
Appeals decision and resolution in CAG.R. CV No. 88023 are AFFIRMED with MODIFICATION. The award
of
P50,000.00
attorneys
fees
to
Zuellig
Pharma
Corporation
is DELETED.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

THIRD DIVISION
G.R. No. 136409

March 14, 2008

SUBHASH
C.
PASRICHA
and
vs.
DON LUIS DISON REALTY, INC., Respondent.

JOSEPHINE

A.

PASRICHA, Petitioners,

DECISION
NACHURA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of
the Decision1of the Court of Appeals (CA) dated May 26, 1998 and its Resolution 2 dated December
10, 1998 in CA-G.R. SP No. 37739 dismissing the petition filed by petitioners Josephine and
Subhash Pasricha.
The facts of the case, as culled from the records, are as follows:
Respondent Don Luis Dison Realty, Inc. and petitioners executed two Contracts of Lease 3 whereby
the former, as lessor, agreed to lease to the latter Units 22, 24, 32, 33, 34, 35, 36, 37 and 38 of the
San Luis Building, located at 1006 M.Y. Orosa cor. T.M. Kalaw Streets, Ermita, Manila. Petitioners, in
turn, agreed to pay monthly rentals, as follows:
For Rooms 32/35:
From March 1, 1991 to August 31, 1991 P5,000.00/P10,000.00
From September 1, 1991 to February 29, 1992 P5,500.00/P11,000.00
From March 1, 1992 to February 28, 1993 P6,050.00/P12,100.00
From March 1, 1993 to February 28, 1994 P6,655.00/P13,310.00
From March 1, 1994 to February 28, 1995 P7,320.50/P14,641.00
From March 1, 1995 to February 28, 1996 P8,052.55/P16,105.10
From March 1, 1996 to February 29, 1997 P8,857.81/P17,715.61
From March 1, 1997 to February 28, 1998 P9,743.59/P19,487.17
From March 1, 1998 to February 28, 1999 P10,717.95/P21,435.89
From March 1, 1999 to February 28, 2000 P11,789.75/P23,579.484

For Rooms 22 and 24:


Effective July 1, 1992 P10,000.00 with an increment of 10% every two years. 5
For Rooms 33 and 34:
Effective April 1, 1992 P5,000.00 with an increment of 10% every two years. 6
For Rooms 36, 37 and 38:
Effective when tenants vacate said premises P10,000.00 with an increment of 10% every two
years.7
Petitioners were, likewise, required to pay for the cost of electric consumption, water bills and the
use of telephone cables.8
The lease of Rooms 36, 37 and 38 did not materialize leaving only Rooms 22, 24, 32, 33, 34 and 35
as subjects of the lease contracts. 9 While the contracts were in effect, petitioners dealt with Francis
Pacheco (Pacheco), then General Manager of private respondent. Thereafter, Pacheco was
replaced by Roswinda Bautista (Ms. Bautista). 10 Petitioners religiously paid the monthly rentals until
May 1992.11 After that, however, despite repeated demands, petitioners continuously refused to pay
the stipulated rent. Consequently, respondent was constrained to refer the matter to its lawyer who,
in turn, made a final demand on petitioners for the payment of the accrued rentals amounting
to P916,585.58.12 Because petitioners still refused to comply, a complaint for ejectment was filed by
private respondent through its representative, Ms. Bautista, before the Metropolitan Trial Court
(MeTC) of Manila.13 The case was raffled to Branch XIX and was docketed as Civil Case No.
143058-CV.
Petitioners admitted their failure to pay the stipulated rent for the leased premises starting July until
November 1992, but claimed that such refusal was justified because of the internal squabble in
respondent company as to the person authorized to receive payment. 14 To further justify their nonpayment of rent, petitioners alleged that they were prevented from using the units (rooms) subject
matter of the lease contract, except Room 35. Petitioners eventually paid their monthly rent for
December 1992 in the amount of P30,000.00, and claimed that respondent waived its right to collect
the rents for the months of July to November 1992 since petitioners were prevented from using
Rooms 22, 24, 32, 33, and 34. 15 However, they again withheld payment of rents starting January
1993 because of respondents refusal to turn over Rooms 36, 37 and 38. 16 To show good faith and
willingness to pay the rents, petitioners alleged that they prepared the check vouchers for their
monthly rentals from January 1993 to January 1994. 17 Petitioners further averred in their Amended
Answer18 that the complaint for ejectment was prematurely filed, as the controversy was not referred
to the barangay for conciliation.
For failure of the parties to reach an amicable settlement, the pre-trial conference was terminated.
Thereafter, they submitted their respective position papers.
On November 24, 1994, the MeTC rendered a Decision dismissing the complaint for ejectment. 19 It
considered petitioners non-payment of rentals as unjustified. The court held that mere willingness to
pay the rent did not amount to payment of the obligation; petitioners should have deposited their
payment in the name of respondent company. On the matter of possession of the subject premises,
the court did not give credence to petitioners claim that private respondent failed to turn over

possession of the premises. The court, however, dismissed the complaint because of Ms. Bautistas
alleged lack of authority to sue on behalf of the corporation.
Deciding the case on appeal, the Regional Trial Court (RTC) of Manila, Branch 1, in Civil Case No.
94-72515, reversed and set aside the MeTC Decision in this wise:
WHEREFORE, the appealed decision is hereby reversed and set aside and another one is rendered
ordering defendants-appellees and all persons claiming rights under them, as follows:
(1) to vacate the leased premised (sic) and restore possession thereof to plaintiff-appellant;
(2) to pay plaintiff-appellant the sum of P967,915.80 representing the accrued rents in
arrears as of November 1993, and the rents on the leased premises for the succeeding
months in the amounts stated in paragraph 5 of the complaint until fully paid; and
(3) to pay an additional sum equivalent to 25% of the rent accounts as and for attorneys fees
plus the costs of this suit.
SO ORDERED.20
The court adopted the MeTCs finding on petitioners unjustified refusal to pay the rent, which is a
valid ground for ejectment. It, however, faulted the MeTC in dismissing the case on the ground of
lack of capacity to sue. Instead, it upheld Ms. Bautistas authority to represent respondent
notwithstanding the absence of a board resolution to that effect, since her authority was implied from
her power as a general manager/treasurer of the company.21
Aggrieved, petitioners elevated the matter to the Court of Appeals in a petition for review on
certiorari.22 On March 18, 1998, petitioners filed an Omnibus Motion 23 to cite Ms. Bautista for
contempt; to strike down the MeTC and RTC Decisions as legal nullities; and to conduct hearings
and ocular inspections or delegate the reception of evidence. Without resolving the aforesaid motion,
on May 26, 1998, the CA affirmed24 the RTC Decision but deleted the award of attorneys fees.25
Petitioners moved for the reconsideration of the aforesaid decision. 26 Thereafter, they filed several
motions asking the Honorable Justice Ruben T. Reyes to inhibit from further proceeding with the
case allegedly because of his close association with Ms. Bautistas uncle-in-law.27
In a Resolution28 dated December 10, 1998, the CA denied the motions for lack of merit. The
appellate court considered said motions as repetitive of their previous arguments, irrelevant and
obviously dilatory.29 As to the motion for inhibition of the Honorable Justice Reyes, the same was
denied, as the appellate court justice stressed that the decision and the resolution were not affected
by extraneous matters.30 Lastly, the appellate court granted respondents motion for execution and
directed the RTC to issue a new writ of execution of its decision, with the exception of the award of
attorneys fees which the CA deleted.31
Petitioners now come before this Court in this petition for review on certiorari raising the following
issues:
I.
Whether this ejectment suit should be dismissed and whether petitioners are entitled to
damages for the unauthorized and malicious filing by Rosario (sic) Bautista of this ejectment

case, it being clear that [Roswinda] whether as general manager or by virtue of her
subsequent designation by the Board of Directors as the corporations attorney-in-fact had
no legal capacity to institute the ejectment suit, independently of whether Director Pacanas
Order setting aside the SEC revocation Order is a mere scrap of paper.
II.
Whether the RTCs and the Honorable Court of Appeals failure and refusal to resolve the
most fundamental factual issues in the instant ejectment case render said decisions void on
their face by reason of the complete abdication by the RTC and the Honorable Justice
Ruben Reyes of their constitutional duty not only to clearly and distinctly state the facts and
the law on which a decision is based but also to resolve the decisive factual issues in any
given case.
III.
Whether the (1) failure and refusal of Honorable Justice Ruben Reyes to inhibit himself,
despite his admission by reason of his silence of petitioners accusation that the said
Justice enjoyed a $7,000.00 scholarship grant courtesy of the uncle-in-law of respondent
"corporations" purported general manager and (2), worse, his act of ruling against the
petitioners and in favor of the respondent "corporation" constitute an unconstitutional
deprivation of petitioners property without due process of law.32
In addition to Ms. Bautistas lack of capacity to sue, petitioners insist that respondent company has
no standing to sue as a juridical person in view of the suspension and eventual revocation of its
certificate of registration.33 They likewise question the factual findings of the court on the bases of
their ejectment from the subject premises. Specifically, they fault the appellate court for not finding
that: 1) their non-payment of rentals was justified; 2) they were deprived of possession of all the
units subject of the lease contract except Room 35; and 3) respondent violated the terms of the
contract by its continued refusal to turn over possession of Rooms 36, 37 and 38. Petitioners further
prayed that a Temporary Restraining Order (TRO) be issued enjoining the CA from enforcing its
Resolution directing the issuance of a Writ of Execution. Thus, in a Resolution 34 dated January 18,
1999, this Court directed the parties to maintain the status quo effective immediately until further
orders.
The petition lacks merit.
We uphold the capacity of respondent company to institute the ejectment case. Although the
Securities and Exchange Commission (SEC) suspended and eventually revoked respondents
certificate of registration on February 16, 1995, records show that it instituted the action for
ejectment on December 15, 1993. Accordingly, when the case was commenced, its registration was
not yet revoked.35 Besides, as correctly held by the appellate court, the SEC later set aside its earlier
orders of suspension and revocation of respondents certificate, rendering the issue moot and
academic.36
We likewise affirm Ms. Bautistas capacity to sue on behalf of the company despite lack of proof of
authority to so represent it. A corporation has no powers except those expressly conferred on it by
the Corporation Code and those that are implied from or are incidental to its existence. In turn, a
corporation exercises said powers through its board of directors and/or its duly authorized officers
and agents. Physical acts, like the signing of documents, can be performed only by natural persons
duly authorized for the purpose by corporate by-laws or by a specific act of the board of
directors.37 Thus, any person suing on behalf of the corporation should present proof of such

authority. Although Ms. Bautista initially failed to show that she had the capacity to sign the
verification and institute the ejectment case on behalf of the company, when confronted with such
question, she immediately presented the Secretarys Certificate 38 confirming her authority to
represent the company.
There is ample jurisprudence holding that subsequent and substantial compliance may call for the
relaxation of the rules of procedure in the interest of justice. 39 In Novelty Phils., Inc. v. Court of
Appeals,40 the Court faulted the appellate court for dismissing a petition solely on petitioners failure
to timely submit proof of authority to sue on behalf of the corporation. In Pfizer, Inc. v. Galan, 41 we
upheld the sufficiency of a petition verified by an employment specialist despite the total absence of
a board resolution authorizing her to act for and on behalf of the corporation. Lastly, in China
Banking Corporation v. Mondragon International Philippines, Inc, 42 we relaxed the rules of procedure
because the corporation ratified the managers status as an authorized signatory. In all of the above
cases, we brushed aside technicalities in the interest of justice. This is not to say that we disregard
the requirement of prior authority to act in the name of a corporation. The relaxation of the rules
applies only to highly meritorious cases, and when there is substantial compliance. While it is true
that rules of procedure are intended to promote rather than frustrate the ends of justice, and while
the swift unclogging of court dockets is a laudable objective, we should not insist on strict adherence
to the rules at the expense of substantial justice. 43 Technical and procedural rules are intended to
help secure, not suppress, the cause of justice; and a deviation from the rigid enforcement of the
rules may be allowed to attain that prime objective, for, after all, the dispensation of justice is the
core reason for the existence of courts.44
As to the denial of the motion to inhibit Justice Reyes, we find the same to be in order. First, the
motion to inhibit came after the appellate court rendered the assailed decision, that is, after Justice
Reyes had already rendered his opinion on the merits of the case. It is settled that a motion to inhibit
shall be denied if filed after a member of the court had already given an opinion on the merits of the
case, the rationale being that "a litigant cannot be permitted to speculate on the action of the court x
x x (only to) raise an objection of this sort after the decision has been rendered." 45 Second, it is
settled that mere suspicion that a judge is partial to one of the parties is not enough; there should be
evidence to substantiate the suspicion. Bias and prejudice cannot be presumed, especially when
weighed against a judges sacred pledge under his oath of office to administer justice without regard
for any person and to do right equally to the poor and the rich. There must be a showing of bias and
prejudice stemming from an extrajudicial source, resulting in an opinion on the merits based on
something other than what the judge learned from his participation in the case. 46 We would like to
reiterate, at this point, the policy of the Court not to tolerate acts of litigants who, for just about any
conceivable reason, seek to disqualify a judge (or justice) for their own purpose, under a plea of
bias, hostility, prejudice or prejudgment.47
We now come to the more substantive issue of whether or not the petitioners may be validly ejected
from the leased premises.
Unlawful detainer cases are summary in nature. In such cases, the elements to be proved and
resolved are the fact of lease and the expiration or violation of its terms. 48 Specifically, the essential
requisites of unlawful detainer are: 1) the fact of lease by virtue of a contract, express or implied; 2)
the expiration or termination of the possessors right to hold possession; 3) withholding by the lessee
of possession of the land or building after the expiration or termination of the right to possess; 4)
letter of demand upon lessee to pay the rental or comply with the terms of the lease and vacate the
premises; and 5) the filing of the action within one year from the date of the last demand received by
the defendant.49

It is undisputed that petitioners and respondent entered into two separate contracts of lease
involving nine (9) rooms of the San Luis Building. Records, likewise, show that respondent
repeatedly demanded that petitioners vacate the premises, but the latter refused to heed the
demand; thus, they remained in possession of the premises. The only contentious issue is whether
there was indeed a violation of the terms of the contract: on the part of petitioners, whether they
failed to pay the stipulated rent without justifiable cause; while on the part of respondent, whether it
prevented petitioners from occupying the leased premises except Room 35.
This issue involves questions of fact, the resolution of which requires the evaluation of the evidence
presented. The MeTC, the RTC and the CA all found that petitioners failed to perform their obligation
to pay the stipulated rent. It is settled doctrine that in a civil case, the conclusions of fact of the trial
court, especially when affirmed by the Court of Appeals, are final and conclusive, and cannot be
reviewed on appeal by the Supreme Court. 50 Albeit the rule admits of exceptions, not one of them
obtains in this case.51
To settle this issue once and for all, we deem it proper to assess the array of factual findings
supporting the courts conclusion.
The evidence of petitioners non-payment of the stipulated rent is overwhelming. Petitioners,
however, claim that such non-payment is justified by the following: 1) the refusal of respondent to
allow petitioners to use the leased properties, except room 35; 2) respondents refusal to turn over
Rooms 36, 37 and 38; and 3) respondents refusal to accept payment tendered by petitioners.
Petitioners justifications are belied by the evidence on record. As correctly held by the CA,
petitioners communications to respondent prior to the filing of the complaint never mentioned their
alleged inability to use the rooms. 52 What they pointed out in their letters is that they did not know to
whom payment should be made, whether to Ms. Bautista or to Pacheco. 53 In their July 26 and
October 30, 1993 letters, petitioners only questioned the method of computing their electric billings
without, however, raising a complaint about their failure to use the rooms. 54 Although petitioners
stated in their December 30, 1993 letter that respondent failed to fulfill its part of the
contract,55 nowhere did they specifically refer to their inability to use the leased rooms. Besides, at
that time, they were already in default on their rentals for more than a year.
If it were true that they were allowed to use only one of the nine (9) rooms subject of the contract of
lease, and considering that the rooms were intended for a business purpose, we cannot understand
why they did not specifically assert their right. If we believe petitioners contention that they had been
prevented from using the rooms for more than a year before the complaint for ejectment was filed,
they should have demanded specific performance from the lessor and commenced an action in
court. With the execution of the contract, petitioners were already in a position to exercise their right
to the use and enjoyment of the property according to the terms of the lease contract. 56 As borne out
by the records, the fact is that respondent turned over to petitioners the keys to the leased premises
and petitioners, in fact, renovated the rooms. Thus, they were placed in possession of the premises
and they had the right to the use and enjoyment of the same. They, likewise, had the right to resist
any act of intrusion into their peaceful possession of the property, even as against the lessor itself.
Yet, they did not lift a finger to protect their right if, indeed, there was a violation of the contract by the
lessor.
What was, instead, clearly established by the evidence was petitioners non-payment of rentals
because ostensibly they did not know to whom payment should be made. However, this did not
justify their failure to pay, because if such were the case, they were not without any remedy. They
should have availed of the provisions of the Civil Code of the Philippines on the consignation of
payment and of the Rules of Court on interpleader.

Article 1256 of the Civil Code provides:


Article 1256. If the creditor to whom tender of payment has been made refuses without just cause to
accept it, the debtor shall be released from responsibility by the consignation of the thing or sum
due.
Consignation alone shall produce the same effect in the following cases:
xxxx
(4) When two or more persons claim the same right to collect;
x x x x.
Consignation shall be made by depositing the things due at the disposal of a judicial authority, before
whom the tender of payment shall be proved in a proper case, and the announcement of the
consignation in other cases.57
In the instant case, consignation alone would have produced the effect of payment of the rentals.
The rationale for consignation is to avoid the performance of an obligation becoming more onerous
to the debtor by reason of causes not imputable to him. 58 Petitioners claim that they made a written
tender of payment and actually prepared vouchers for their monthly rentals. But that was insufficient
to constitute a valid tender of payment. Even assuming that it was valid tender, still, it would not
constitute payment for want of consignation of the amount. Well-settled is the rule that tender of
payment must be accompanied by consignation in order that the effects of payment may be
produced.59
Moreover, Section 1, Rule 62 of the Rules of Court provides:
Section 1. When interpleader proper. Whenever conflicting claims upon the same subject matter
are or may be made against a person who claims no interest whatever in the subject matter, or an
interest which in whole or in part is not disputed by the claimants, he may bring an action against the
conflicting claimants to compel them to interplead and litigate their several claims among
themselves.
Otherwise stated, an action for interpleader is proper when the lessee does not know to whom
payment of rentals should be made due to conflicting claims on the property (or on the right to
collect).60 The remedy is afforded not to protect a person against double liability but to protect him
against double vexation in respect of one liability.61
Notably, instead of availing of the above remedies, petitioners opted to refrain from making
payments.
Neither can petitioners validly invoke the non-delivery of Rooms 36, 37 and 38 as a justification for
non-payment of rentals. Although the two contracts embraced the lease of nine (9) rooms, the terms
of the contracts - with their particular reference to specific rooms and the monthly rental for each easily raise the inference that the parties intended the lease of each room separate from that of the
others. There is nothing in the contract which would lead to the conclusion that the lease of one or
more rooms was to be made dependent upon the lease of all the nine (9) rooms. Accordingly, the
use of each room by the lessee gave rise to the corresponding obligation to pay the monthly rental
lavvphil

for the same. Notably, respondent demanded payment of rentals only for the rooms actually
delivered to, and used by, petitioners.
It may also be mentioned that the contract specifically provides that the lease of Rooms 36, 37 and
38 was to take effect only when the tenants thereof would vacate the premises. Absent a clear
showing that the previous tenants had vacated the premises, respondent had no obligation to deliver
possession of the subject rooms to petitioners. Thus, petitioners cannot use the non-delivery of
Rooms 36, 37 and 38 as an excuse for their failure to pay the rentals due on the other rooms they
occupied.
1avvphil

In light of the foregoing disquisition, respondent has every right to exercise his right to eject the
erring lessees. The parties contracts of lease contain identical provisions, to wit:
In case of default by the LESSEE in the payment of rental on the fifth (5th) day of each month, the
amount owing shall as penalty bear interest at the rate of FOUR percent (4%) per month, to be paid,
without prejudice to the right of the LESSOR to terminate his contract, enter the premises, and/or
eject the LESSEE as hereinafter set forth;62
Moreover, Article 167363 of the Civil Code gives the lessor the right to judicially eject the lessees in
case of non-payment of the monthly rentals. A contract of lease is a consensual, bilateral, onerous
and commutative contract by which the owner temporarily grants the use of his property to another,
who undertakes to pay the rent therefor.64 For failure to pay the rent, petitioners have no right to
remain in the leased premises.
WHEREFORE, premises considered, the petition is DENIED and the Status Quo Order dated
January 18, 1999 is hereby LIFTED. The Decision of the Court of Appeals dated May 26, 1998 and
its Resolution dated December 10, 1998 in CA-G.R. SP No. 37739 are AFFIRMED.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

THIRD DIVISION
G.R. No. 181723

August 11, 2014

ELIZABETH
DEL
CARMEN, Petitioner,
vs.
SPOUSES RESTITUTO SABORDO and MIMA MAHILUM-SABORDO, Respondents.
DECISION
PERALTA, J.:
This treats of the petition for review on certiorari assailing the Decision and Resolution of the Court
of Appeals (CA), dated May 25, 2007 and January 24, 2008, respectively, in CA-G.R. CV No. 75013.
1

The factual and procedural antecedents of the case are as follows:


Sometime in 1961, the spouses Toribio and Eufrocina Suico (Suico spouses), along with several
business partners, entered into a business venture by establishing a rice and com mill at Mandaue
City, Cebu. As part of their capital, they obtained a loan from the Development Bank of the
Philippines (DBP), and to secure the said loan, four parcels of land owned by the Suico spouses,
denominated as Lots 506, 512, 513 and 514, and another lot owned by their business partner,
Juliana Del Rosario, were mortgaged. Subsequently, the Suico spouses and their business partners
failed to pay their loan obligations forcing DBP to foreclose the mortgage. After the Suico spouses
and their partners failed to redeem the foreclosed properties, DBP consolidated its ownership over
the same. Nonetheless, DBP later allowed the Suico spouses and Reginald and Beatriz Flores
(Flores spouses), as substitutes for Juliana Del Rosario, to repurchase the subject lots by way of a
conditional sale for the sum ofP240,571.00. The Suico and Flores spouses were able to pay the
downpayment and the first monthly amortization, but no monthly installments were made thereafter.
Threatened with the cancellation of the conditional sale, the Suico and Flores spouses sold their
rights over the said properties to herein respondents Restituto and Mima Sabordo, subject to the
condition that the latter shall pay the balance of the sale price. On September 3, 1974, respondents
and the Suico and Flores spouses executed a supplemental agreement whereby they affirmed that
what was actually sold to respondents were Lots 512 and 513, while Lots 506 and 514 were given to
them as usufructuaries. DBP approved the sale of rights of the Suico and Flores spouses in favor of
herein respondents. Subsequently, respondents were able to repurchase the foreclosed properties
of the Suico and Flores spouses.
On September 13, 1976, respondent Restituto Sabordo (Restituto) filed with the then Court of First
Instance of Negros Occidental an original action for declaratory relief with damages and prayer for a
writ of preliminary injunction raising the issue of whether or not the Suico spouses have the right to
recover from respondents Lots 506 and 514.
In its Decision dated December 17, 1986, the Regional Trial Court (RTC) of San Carlos City, Negros
Occidental, ruled in favor of the Suico spouses directing that the latter have until August 31, 1987
within which to redeem or buy back from respondents Lots 506 and 514.

On appeal, the CA, in its Decision in CA-G.R. CV No. 13785, dated April 24, 1990, modified the
RTC decision by giving the Suico spouses until October 31, 1990 within which to exercise their
option to purchase or redeem the subject lots from respondents by paying the sum of P127,500.00.
The dispositive portion of the CADecision reads as follows:
3

xxxx
For reasons given, judgment is hereby rendered modifying the dispositive portion of [the] decision of
the lower court to read:
1) The defendants-appellees are granted up to October 31, 1990 within which toexercise
their option to purchase from the plaintiff-appellant Restituto Sabordo and Mima Mahilum Lot
No. 506, covered by Transfer Certificate of Title No. T-102598 and Lot No. 514, covered by
Transfer Certificate of Title No. T-102599, both of Escalante Cadastre, Negros Occidental by
reimbursing or paying to the plaintiff the sum of ONE HUNDRED TWENTY-SEVEN
THOUSAND FIVE HUNDRED PESOS (P127,500.00);
2) Within said period, the defendants-appellees shall continue to have usufructuary rights on
the coconut trees on Lots Nos. 506 and 514, Escalante Cadastre, Negros Occidental;
3) The Writ of Preliminary Injunction dated August 12, 1977 shall be effective
untildefendants-appellees shall have exercised their option to purchase within said period by
paying or reimbursing to the plaintiff-appellant the aforesaid amount.
No pronouncement as to costs.
SO ORDERED.

In a Resolution dated February 13, 1991, the CA granted the Suico spouses an additional period of
90 days from notice within which to exercise their option to purchase or redeem the disputed lots.
5

In the meantime, Toribio Suico (Toribio) died leaving his widow, Eufrocina, and several others,
includingherein petitioner, as legal heirs. Later, they discovered that respondents mortgaged Lots
506 and 514 with Republic Planters Bank (RPB) as security for a loan which, subsequently, became
delinquent.
Thereafter, claiming that theyare ready with the payment of P127,500.00, but alleging that they
cannot determine as to whom such payment shall be made, petitioner and her co-heirs filed a
Complaint with the RTC of San Carlos City, Negros Occidental seeking to compel herein
respondents and RPB to interplead and litigate between themselves their respective interests on the
abovementioned sum of money. The Complaint also prayed that respondents be directed to
substitute Lots 506 and 514 with other real estate properties as collateral for their outstanding
obligation with RPB and that the latter be ordered toaccept the substitute collateral and release the
mortgage on Lots 506 and 514. Upon filing of their complaint, the heirs of Toribio deposited the
amount ofP127,500.00 with the RTC of San Carlos City, Branch 59.
6

1wphi1

Respondents filed their Answer with Counterclaim praying for the dismissal of the above Complaint
on the grounds that (1) the action for interpleader was improper since RPB isnot laying any claim on
the sum ofP127,500.00; (2) that the period withinwhich the complainants are allowed to purchase
Lots 506 and 514 had already expired; (3) that there was no valid consignation, and (4) that the case
is barred by litis pendenciaor res judicata.
7

On the other hand, RPB filed a Motion to Dismiss the subject Complaint on the ground that petitioner
and her co-heirs had no valid cause of action and that they have no primary legal right which is
enforceable and binding against RPB.
On December 5, 2001, the RTC rendered judgment, dismissing the Complaint of petitioner and her
co-heirs for lack of merit. Respondents' Counterclaim was likewise dismissed.
8

Petitioner and her co-heirs filed an appeal with the CA contending that the judicial deposit or
consignation of the amount of P127,500.00 was valid and binding and produced the effect of
payment of the purchase price of the subject lots.
In its assailed Decision, the CA denied the above appeal for lack of merit and affirmed the disputed
RTC Decision.
Petitioner and her co-heirs filed a Motion for Reconsideration, but it was likewise denied by the CA.
9

Hence, the present petition for review on certiorariwith a lone Assignment of Error, to wit:
THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE LOWER COURT
WHICH HELD THAT THE JUDICIAL DEPOSIT OF P127,500.00 MADE BY THE SUICOS WITH THE
CLERK OF COURT OF THE RTC, SAN CARLOS CITY, IN COMPLIANCE WITH THE FINAL AND
EXECUTORY DECISION OF THE COURT OF APPEALS IN CA-G.R. CV-13785 WAS NOT VALID.
10

Petitioner's main contention is that the consignation which she and her co-heirs made was a judicial
deposit based on a final judgment and, as such, does not require compliance with the requirements
of Articles 1256 and 1257 of the Civil Code.
11

12

The petition lacks merit. At the outset, the Court quotes withapproval the discussion of the CA
regarding the definition and nature of consignation, to wit: consignation [is] the act of depositing
the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to
accept payment, and it generally requires a prior tender of payment. It should be distinguished from
tender of payment which is the manifestation by the debtor to the creditor of his desire to comply
with his obligation, with the offer of immediate performance.Tender is the antecedent of
consignation, thatis, an act preparatory to the consignation, which is the principal, and from which
are derived the immediate consequences which the debtor desires or seeks to obtain. Tender of
payment may be extrajudicial, while consignation is necessarily judicial, and the priority of the first is
the attempt to make a private settlement before proceeding to the solemnities of consignation.
Tender and consignation, where validly made, produces the effect of payment and extinguishes the
obligation.
13

In the case of Arzaga v. Rumbaoa, which was cited by petitioner in support of his contention, this
Court ruled that the deposit made with the court by the plaintiff-appellee in the saidcase is
considered a valid payment of the amount adjudged, even without a prior tender of payment thereof
to the defendants-appellants,because the plaintiff-appellee, upon making such deposit, expressly
petitioned the court that the defendants-appellees be notified to receive the tender of payment.This
Court held that while "[t]he deposit, by itself alone, may not have been sufficient, but with the
express terms of the petition, there was full and complete offer of payment made directly to
defendants-appellants." In the instant case, however, petitioner and her co-heirs, upon making the
deposit with the RTC, did not ask the trial court that respondents be notified to receive the amount
that they have deposited. In fact, there was no tender of payment. Instead, what petitioner and her
co-heirs prayed for is thatrespondents and RPB be directed to interplead with one another to
determine their alleged respective rights over the consigned amount; that respondents be likewise
14

15

directed to substitute the subject lots with other real properties as collateral for their loan with RPB
and that RPB be also directed to accept the substitute real properties as collateral for the said loan.
Nonetheless,the trial court correctly ruled that interpleader is not the proper remedy because RPB
did notmake any claim whatsoever over the amount consigned by petitioner and her co-heirs with
the court.
In the cases of Del Rosario v. Sandico and Salvante v. Cruz, likewise cited as authority by
petitioner, this Court held that, for a consignation or deposit with the court of an amount due on a
judgment to be considered as payment, there must beprior tender to the judgment creditor who
refuses to accept it. The same principle was reiterated in the later case of Pabugais v. Sahijwani. As
stated above, tender of payment involves a positive and unconditional act by the obligor of offering
legal tender currency as payment to the obligee for the formers obligation and demanding that the
latter accept the same. In the instant case, the Court finds no cogent reason to depart from the
findings of the CA and the RTC that petitioner and her co-heirs failed to make a prior valid tender of
payment to respondents.
16

17

18

19

It is settled that compliance with the requisites of a valid consignation is mandatory. Failure to
comply strictly with any of the requisites will render the consignation void. One of these requisites is
a valid prior tender of payment.
20

21

Under Article 1256, the only instances where prior tender of payment is excused are: (1) when the
creditor is absent or unknown, or does not appear at the place of payment; (2) when the creditor is
incapacitated to receive the payment at the time it is due; (3) when, without just cause, the creditor
refuses to give a receipt; (4) when two or more persons claim the same right to collect; and (5) when
the title of the obligation has been lost. None of these instances are present in the instant case.
Hence, the fact that the subject lots are in danger of being foreclosed does not excuse petitioner and
her co-heirs from tendering payment to respondents, as directed by the court.
WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals, dated May 25,
2007, and its Resolution dated January 24, 2008, both in CA-G.R. CV No. 75013, are AFFIRMED.
SO ORDERED.

Republic
SUPREME COURT

of

the

Philippines

THIRD DIVISION
G.R. No. 144101 September 16, 2005
ANTONIO P. TAMBUNTING, JR. and COMMERCIAL HOUSE OF FINANCE, INC., Petitioners,
vs.
SPOUSES EMILIO SUMABAT and ESPERANZA BAELLO, Respondent.
DECISION
CORONA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court assails the February 11,
2000 decision of the Regional Trial Court (RTC) of Caloocan City, Branch 120, in Civil Case No. C16822.
This case involves a dispute over a parcel of land situated in Caloocan City covered by TCT No.
(87655) 18837. It was previously registered in the names of respondents, spouses Emilio Sumabat
and Esperanza Baello. On May 3, 1973, respondents mortgaged it to petitioner Antonio Tambunting,
Jr. to secure the payment of a P7,727.95 loan. In August 1976, respondents were informed that their
indebtedness had ballooned to P15,000 for their failure to pay the monthly amortizations. In May
1977, because respondents defaulted in their obligation, petitioner Commercial House of Finance,
Inc. (CHFI), as assignee of the mortgage, initiated foreclosure proceedings on the mortgaged
property but the same did not push through. It was restrained by the then Court of First Instance
(CFI) of Caloocan City, Branch 33 (now RTC Branch 123) in Civil Case No. C-6329, a complaint for
injunction filed by respondents against petitioners. However, the case was subsequently dismissed
for failure of the parties to appear at the hearing on November 9, 1977.
On March 16, 1979, respondents filed an action for declaratory relief with the CFI of Caloocan City,
Branch 33, seeking a declaration of the extent of their actual indebtedness. It was docketed as Civil
Case No. C-7496. Petitioners were declared in default for failure to file an answer within the
reglementary period. They moved for the dismissal of the action on the ground that its subject, the
mortgage deed, had already been breached prior to the filing of the action. The motion was denied
for having been filed out of time and petitioners had already been declared in default.
On January 8, 1981, the CFI rendered its decision. It fixed respondents liability at P15,743.83 and
authorized them to consign the amount to the court for proper disposition. In compliance with the
decision, respondents consigned the required amount on January 9, 1981.
In March 1995, respondents received a notice of sheriffs sale indicating that the mortgage had been
foreclosed by CHFI on February 8, 1995 and that an extrajudicial sale of the property would be held
on March 27, 1995.
On March 27, 1995, respondents instituted Civil Case No. C-16822, a petition for preliminary
injunction, damages and cancellation of annotation of encumbrance with prayer for the issuance of a
temporary restraining order, with the RTC of Caloocan City, Branch 120. However, the public auction
scheduled on that same day proceeded and the property was sold to CHFI as the highest bidder.
Respondents failed to redeem the property during the redemption period. Hence, title to the property

was consolidated in favor of CHFI and a new certificate of title (TCT No. 310191) was issued in its
name. In view of these developments, respondents amended their complaint to an action for
nullification of foreclosure, sheriffs sale and consolidation of title, reconveyance and damages.
On February 11, 2000, the RTC issued the assailed decision. It ruled that the 1981 CFI decision in
Civil Case No. C-7496 (fixing respondents liability at P15,743.83 and authorizing consignation) had
long attained finality. The mortgage was extinguished when respondents paid their indebtedness by
consigning the amount in court. Moreover, the ten-year period within which petitioners should have
foreclosed the property was already barred by prescription. They abused their right to foreclose the
property and exercised it in bad faith. As a consequence, the trial court nullified the foreclosure and
extrajudicial sale of the property, as well as the consolidation of title in CHFIs name in 1995. It then
ordered the register of deeds of Caloocan City to cancel TCT No. 310191 and to reconvey the
property to respondents. It also held petitioners liable for moral damages, exemplary damages and
attorneys fees.
Petitioners moved for a reconsideration of the trial courts decision but it was denied. Hence, this
petition.
Petitioners claim that the trial court erred when it affirmed the validity of the consignation. They insist
that the CFI was barred from taking cognizance of the action for declaratory relief since, petitioners
being already in default in their loan amortizations, there existed a violation of the mortgage deed
even before the institution of the action. Hence, the CFI could not have rendered a valid judgment in
Civil Case No. C-7496 and the consignation made pursuant to a void judgment was likewise void.
Respondents also fault the trial court for holding that their right to foreclose the property had already
prescribed.
True, the trial court erred when it ruled that the 1981 CFI decision in Civil Case No. C-7496 was
already final and executory.
An action for declaratory relief should be filed by a person interested under a deed, will, contract or
other written instrument, and whose rights are affected by a statute, executive order, regulation or
ordinance before breach or violation thereof. 1 The purpose of the action is to secure an authoritative
statement of the rights and obligations of the parties under a statute, deed, contract, etc. for their
guidance in its enforcement or compliance and not to settle issues arising from its alleged breach. 2 It
may be entertained only before the breach or violation of the statute, deed, contract, etc. to which it
refers.3 Where the law or contract has already been contravened prior to the filing of an action for
declaratory relief, the court can no longer assume jurisdiction over the action. 4 In other words, a
court has no more jurisdiction over an action for declaratory relief if its subject, i.e., the statute, deed,
contract, etc., has already been infringed or transgressed before the institution of the action. Under
such circumstances, inasmuch as a cause of action has already accrued in favor of one or the other
party, there is nothing more for the court to explain or clarify short of a judgment or final order.
Here, an infraction of the mortgage terms had already taken place before the filing of Civil Case No.
C-7496. Thus, the CFI lacked jurisdiction when it took cognizance of the case in 1979. And in the
absence of jurisdiction, its decision was void and without legal effect. As this Court held in Arevalo v.
Benedicto:5
Furthermore, the want of jurisdiction by a court over the subject-matter renders its judgment void and
a mere nullity, and considering that a void judgment is in legal effect no judgment, by which no rights
are divested, from which no rights can be obtained, which neither binds nor bars any one, and under
which all acts performed and all claims flowing out of are void, and considering further, that the
decision, for want of jurisdiction of the court, is not a decision in contemplation of law, and, hence,

can never become executory, it follows that such a void judgment cannot constitute a bar to another
case by reason of res judicata.
Nonetheless, the petition must fail.
Article 1142 of the Civil Code is clear. A mortgage action prescribes after ten years.
An action to enforce a right arising from a mortgage should be enforced within ten years from the
time the right of action accrues.6 Otherwise, it will be barred by prescription and the mortgage
creditor will lose his rights under the mortgage.
Here, petitioners right of action accrued in May 1977 when respondents defaulted in their obligation
to pay their loan amortizations. It was from that time that the ten-year period to enforce the right
under the mortgage started to run. The period was interrupted when respondents filed Civil Case No.
C-6329 sometime after May 1977 and the CFI restrained the intended foreclosure of the property.
However, the period commenced to run again on November 9, 1977 when the case was dismissed.
The respondents institution of Civil Case No. C-7496 in the CFI on March 16, 1979 did not interrupt
the running of the ten-year prescriptive period because, as discussed above, the court lacked
jurisdiction over the action for declaratory relief. All proceedings therein were without legal effect.
Thus, petitioners could have enforced their right under the mortgage, including its foreclosure, only
until November 7, 1987, the tenth year from the dismissal of Civil Case No. C-6329. Thereafter, their
right to do so was already barred by prescription.
The foreclosure held on February 8, 1995 was therefore some seven years too late. The same thing
can be said about the public auction held on March 27, 1995, the consolidation of title in CHFIs
favor and the issuance of TCT No. 310191 in its name. They were all void and did not exist in the
eyes of the law.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioners.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

SECOND DIVISION
G.R. No. 137538 September 3, 2001
OFFICE
OF
THE
OMBUDSMAN, petitioner,
vs.
HON. FRANCISCO B. IBAY, in his capacity as Presiding Judge of the Regional Trial Court,
Makati City, Branch 135, UNION BANK OF THE PHILIPPINES, and LOURDES T. MARQUEZ, in
her capacity as Branch Manager of UBP Julia Vargas Branch, respondents.
1wphi1.nt

RESOLUTION
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the Orders of public respondent dated August
19, 1998 and December 22, 1998, and to dismiss the proceedings in Civil Case No. 98-1585.
The factual antecedents of this case are as follows:

lawphil.net

Sometime in 1998, petitioner conducted an investigation on the alleged "scam" on the Public Estates
Authority-Amari Coastal Bay Development Corporation. The case, entitled Fact-Finding and
Intelligence Bureau vs. Amadeo Lagdameo, et al., was docketed as OMB-0-97-0411. Initial result of
the investigation revealed that the alleged anomaly was committed through the issuance of checks
which were subsequently deposited in several financial institutions. On April 29, 1998, petitioner
issued an Order directing private respondent Lourdes Marquez, branch manager of Union Bank of
the Philippines branch at Julia Vargas Avenue, Pasig City, to produce several bank documents for
inspection relative to Account Nos. 011-37270-5, 240-020718, 245-30317-3 and 245-303318-1,
reportedly maintained in the said branch. The documents referred to include bank account
application forms, signature cards, transactions history, bank statements, bank ledgers, debit and
credit memos, deposit and withdrawal slips, application for purchase of manager's checks, used
manager's checks and check microfilms. The inspection would be done "in camera" wherein the
bank records would be examined without bringing the documents outside the bank premises. Its
purpose was to identify the specific bank records prior to the issuance of the required information not
in any manner needed in or relevant to the investigation. 1
Private respondent failed to comply with petitioner's order. She explained that the subject accounts
pertain to International Corporate Bank (Interbank) which merged with Union Bank in 1994. She
added that despite diligent efforts, the bank could not identify these accounts since the checks were
issued in cash or bearer forms. She informed petitioner that she had to first verify from the Interbank
records in its archives the whereabouts of said accounts. 2
Petitioner found private respondent's explanation unacceptable. Petitioner reminded private
respondent that her acts constitute disobedience or resistance to a lawful order and is punishable as
indirect contempt under Section 3 (b), Rule 71 of the Revised Rules of Court, in relation to Section
15 (9) of R.A. 6770 (Ombudsman Act of 1989). The same might also constitute willful obstruction of
the lawful exercise of the functions of the Ombudsman, which is punishable under Section 36 of R.A.
6770. On June 16, 1998, petitioner issued an order to private respondent to produce the requested

bank documents for "in camera" inspection. In the event of her failure to comply as directed, private
respondent was ordered to show cause why she should not be cited for contempt and why she
should not be charged for obstruction. 3
Instead of complying with the order of petitioner, private respondent filed a petition for declaratory
relief with an application for temporary restraining order and/or preliminary injunction before the
Regional Trial Court of Makati City, Branch 135, presided by respondent Judge Francisco Ibay. The
petition was docketed as Civil Case No. 98-1585. In her petition, private respondent averred that
under Sections 2 and 3 of R.A. 1405 (Law on Secrecy of Bank Deposits), she had the legal
obligation not to divulge any information relative to all deposits of whatever nature with banks in the
Philippines. But petitioner's Order cited Section 15 (8) of R.A. 6770 stating that the Ombudsman had
the power to examine and have access to bank accounts and records. Private respondents,
therefore, sought a definite ruling and/or guidelines as regards her rights as well as petitioner's
power to inspect bank deposits under the cited provisions of law. Meanwhile, private respondent filed
with this Court a petition for certiorari and prohibition, assailing petitioner's order to institute indirect
contempt proceedings against her.4
Petitioner moved to dismiss the aforesaid petition for declaratory relief on the ground that the RTC
has no jurisdiction over the subject matter thereof. In an order dated August 19, 1998, now being
assailed, public respondent denied petitioner's motion to dismiss. Petitioner then filed an ex-parte
motion for extended ruling. On December 22, 1998, public respondent issued an order declaring that
it has jurisdiction over the case since it is an action for declaratory relief under Rule 63 of the Rules
of Court.
Seasonably, petitioner filed before this Court the instant petition assailing the Orders dated August
19, 1998 and December 22, 1998 of public respondent on the ground that public respondent
assumed jurisdiction over the case and issued orders with grave abuse of discretion and clear lack
of jurisdiction. Petitioner sought the nullification of the impugned orders, the immediate dismissal of
Civil Case No. 98-1585, and the prohibition of public respondent from exercising jurisdiction on the
investigation being conducted by petitioner in the alleged PEA-AMARI land "scam".
The only question raised by petitioner for resolution is whether or not public respondent acted
without jurisdiction and/or with grave abuse of discretion in entertaining the cited petition for
declaratory relief.
Petitioner contends that the RTC of Makati City lacks jurisdiction over the petition for declaratory
relief. It asserts that respondent judge should have dismissed the petition outright in view of Section
14 of R.A. 6770.
lawphil.net

Section 14 of R.A. 6770 provides:

lawphil.net

Restrictions. No writ of injunction shall be issued by any court to delay an investigation


being conducted by the Ombudsman under this Act, unless there is a prima facie evidence
that the subject matter of the investigation is outside the jurisdiction of the Office of the
Ombudsman.
No court shall hear any appeal or application for remedy against the decision or findings of
the Ombudsman, except the Supreme Court, on pure question of law.
Petitioner's invocation of the aforequoted statutory provision is misplaced. The special civil action of
declaratory relief falls under the exclusive jurisdiction of the Regional Trial Court. 5 It is not among the
actions within the original jurisdiction of the Supreme Court even if only questions of law are

involved.6 Similarly, the Rules of Court is explicit that such action shall be brought before the
appropriate Regional Trial Court. Section 1, Rule 63 of the Rules of Court provides:
Section 1. Who may file petition. Any person interested under a deed, will, contract or other
written instrument, whose rights are affected by a statute, executive order or regulation,
ordinance, or any other governmental regulation may, before breach or violation thereof,
bring an action in the appropriate Regional Trial Court to determine any question of
construction or validity arising, and for a declaration of his rights or duties, thereunder.
xxx

xxx

xxx

The requisites of an action for declaratory relief are: (1) there must be a justiciable controversy must
be between persons whose interests are adverse; (3) that the party seeking the relief has a legal
interest in the controversy; and (4) that the issue is ripe for judicial determination. 7 In this case, the
controversy concerns the extent of the power of petitioner to examine bank accounts under Section
15 (8) of R.A. 6770 vis--vis the duty of banks under Republic Act 1405 not to divulge any
information relative to deposits of whatever nature. The interests of the parties are adverse
considering the antagonistic assertion of a legal right on one hand, that is the power of Ombudsman
to examine bank deposits, and on the other, the denial thereof apparently by private respondent who
refused to allow petitioner to inspect in camera certain bank accounts. The party seeking relief,
private respondent herein, asserts a legal interest in the controversy. The issue invoked is ripe for
judicial determination as litigation is inevitable. Note that petitioner has threatened private
respondent with "indirect contempt" and "obstruction" charges should the latter not comply with its
order.
Circumstances considered, we hold that public respondent has jurisdiction to take cognizance of the
petition for declaratory relief. Nor can it be said that public respondent gravely abused its discretion
in doing so. We are thus constrained to dismiss the instant petition for lack of merit.
In any event, the relief being sought by private respondent in her action for declaratory relief before
the RTC of Makati City has been squarely addressed by our decision in Marquez vs. Desierto.8 In
that case, we ruled that before an in camera inspection of bank accounts may be allowed, there
must be a pending case before a court of competent jurisdiction. Further, the account must be
clearly identified, and the inspection limited to the subject matter of the pending case before the
court of competent jurisdiction. The bank personnel and the account holder must be notified to be
present during the inspection, and such inspection may cover only the account identified in the
pending case. In the present case, since there is no pending litigation yet before a court of
competent authority, but only an investigation by the Ombudsman on the so-called "scam", any order
for the opening of the bank account for inspection is clearly premature and legally unjustified.
1wphi1.nt

WHEREFORE, the instant petition is DISMISSED.


SO ORDERED.

Republic
SUPREME COURT

of

the

Philippines

EN BANC
G.R. No. 161400 September 2, 2005
ZENAIDA ORTEGA, represented by Her Attorney-in Fact OCTAVIO ALVAREZ and/or ZEMVE
ORTEGA
ALVAREZ, Petitioners,
vs.
THE QUEZON CITY GOVERNMENT, THE NATIONAL HOUSING AUTHORITY & THE NATIONAL
HOME MORTGAGE CORP., Respondent.
DECISION
CARPIO MORALES, J.:
Petitioner Zenaida Ortega comes directly to this Court assailing the validity of Quezon City
Ordinance No. SP 1304, Series of 2003, and praying that the following agencies, National Housing
Authority (NHA), Housing and Land Use Regulatory Board (HLURB), Department of Environment
and Natural Resources Bureau of Land Management, National Home Mortgage Financing
Corporation, and Home Insurance Guarantee Corporation, be restrained from implementing the said
ordinance.
Proposed Ordinance No. 2002-07 (PO 2002-07) was filed on January 10, 2002 before the City
Council. PO 2002-07 sought to approve "the Subdivision Plan of Samahang Kapitbahayan ng
Barangay Vasra (Samahang Kapitbahayan), a Socialized Housing Project (B.P. Blg. 220) with
seventeen (17) lots (Community Mortgage Program) containing [a total] area of Six Hundred Sixty
Seven (667) square meters, covered by Original Certificate of Title No. 735, owned by the City
Government of Quezon City (Vendor) located at a portion of [an] easement [in] Barangay Vasra,
Quezon City, Metro Manila, as applied for by the Samahang Kapitbahayan ng Barangay Vasra
(Vendee) subject to the conditions prescribed under Quezon City Ordinance No. SP-56, S-93 and
Batas Pambansa Blg. 220."1
Proposed Resolution No. 2003-13 (PR 2003-13) was subsequently filed on January 20, 2002 to
complement PO 2002-07. The proposed resolution sought to authorize Quezon City Mayor Feliciano
R. Belmonte to enter into a contract to sell a portion of an easement located at Barangay Vasra,
Quezon City with the SAMAHANG KAPITBAHAYAN to be represented by its President, through the
Community Mortgage Program (CMP) of the National Home Mortgage Finance Corporation
(NHMFC).2
On August 5, 2003, the Quezon City government enacted Ordinance No. SP-1304, Series of 2003
(the ordinance), which is being challenged in the present petition, 3 reclassifying "as residential or
converted from its original classification to residential for distribution or for sale to its informal
settlers" a "parcel of land which may be considered an accretion/excess lot and previously
conceived and referred to in Proposed Ordinance No. 2002-07 and Proposed [Resolution] 2002-13
as portion of [an] easement situated between Block 14, Psd-39577 of the original subdivision plan
and Culiat Creek, Barangay Vasra, Quezon City."4
The provisions of the assailed ordinance read:

SECTION 1. A parcel of land which may be considered an accretion/excess lot and previously
conceived and referred to in proposed ordinance no. PO 2002-07 and proposed ordinance no. PO
2002-13 as portion of easement, situated between Block 14. Psd-39577 of the original subdivision
plan and Culiat Creek, Barangay Vasra, Quezon City, is hereby classified as residential or converted
from its original classification to residential for distribution or for sale to its informal settlers.
SECTION 2. This Ordinance shall take effect immediately upon its approval. 5
Petitioner, who claims to be the rightful owner of the land subject of the ordinance, alleges that in
enacting the ordinance, her various letter-protests to the City Council against proposed Resolutions
No. 2002-13, 2002-07 and 2002-239 6 were not heeded in the City Council, thus violating her
constitutional rights to due process and equal protection of the law.
Petitioner further claims that the lot referred to in the ordinance overlaps her properties as their
technical descriptions in Transfer Certificates of Title Nos. RT-70472 (296026) and N-152137 issued
in her name show;7and that assuming that there exists accretion or easement of the Culiat Creek,
she, being the owner of the adjoining land, is the rightful owner thereof following Articles 457 8 and
Article 6209 of the Civil Code.
Petitioner likewise claims that the intended beneficiaries under the proposed ordinance and
resolution are not informal settlers as required under City Ordinance No. SP-56, Series of 1993, 10 but
lessees of her properties who had been ordered ejected after she filed several unlawful detainer
cases against them.11
By Comment12 filed on April 14, 2004, the Quezon City Government, through the Office of the City
Attorney, alleges that the present petition is premature and raises questions of fact which entail
reception of evidence; and that petitioner has not yet established her right of ownership over the
property referred to in the ordinance, whereas its clear right thereover is evidenced by Original
Certificate of Title No. 735 issued in its name.13
The NHA, by Comment14 filed on May 17, 2004, prayed for the dismissal of the petition, pointing out
that the petition is actually one for declaratory relief under Section 1, Rule 63 of the Rules of Court
over which this Court has no original jurisdiction.
The NHMFC, by Comment15 filed on June 17, 2004, alleged that it is not a party to any of the
transactions with any of the parties in the present case. It nevertheless adopted the comment of the
Quezon City government that the petition is premature and alleges facts which still need to be
proven.16
The petition must be dismissed.
Article VIII, Section 5 of the Constitution provides:
SECTION 5. The Supreme Court shall have the following powers:
xxx
(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.
x x x (Emphasis and underscoring supplied).
This Court can thus only review, revise, reverse, modify on appeal or certiorari final judgments and
orders oflower courts in all cases in which the constitutionality or validity of, among other things, an
ordinance is in question. Foremost, therefore, is that there must be first a final judgment rendered by
an inferior court17 before this Court can assume jurisdiction over a case of this nature.
Verily, this Court does not conduct original and full trial of a main factual issue like what petitioner is
raising in the present petition. 18 It does not analyze or weigh evidence brought before it at the first
instance, otherwise, it would preempt the primary function of the lower court to try the case on the
merits, receive evidence, and decide the case definitively. 19 Its jurisdiction in cases which assail the
validity of an ordinance is limited to reviewing or revising final judgments or orders of lower courts
and applying the law based on their findings of facts brought before it. 20
In another vein, if this petition was to be considered as one for declaratory relief, as observed by the
OSG, it is not embraced within the original jurisdiction of this Court. 21 Rule 63 of the Rules of Court
provides:
SECTION 1. Who may file petition. Any person interested under a deed, will, contract or other
written instrument, or whose rights are affected by a statute, executive order or
regulation, ordinance, or any other government regulation may, before breach or violation
thereof, bring an action in the appropriate Regional Trial Court to determine any question of
construction or validity arising from, and for a declaration of his rights or duties, thereunder.
An action for the reformation of an instrument, or to quiet title to real property or remove clouds
therefrom, or to consolidate ownership under Article 1607 of the Civil Code may be brought under
this Rule.
xxx
SEC. 4. Local government ordinances. In any action involving the validity of a local government
ordinance, the corresponding prosecutor or attorney of the local government unit involved shall be
similarly notified and entitled to be heard. (Emphasis and underscoring supplied)
Respecting petitioners contention that since the ordinance violates national laws, the present
petition delves on questions of law over which this Court has original jurisdiction, 22 the same fails.
As reflected above, petitioners assertion that the invalidity of the ordinance is premised on her claim
that she has a better right to the parcel of land referred to in the ordinance is a factual issue.
At all events, even if this petition delves on questions of law, there is no statutory or jurisprudential
basis for according to this Court original and exclusive jurisdiction over declaratory relief which
advances only questions of law.23
Finally, while a petition for declaratory relief may be treated as one for prohibition if it has far
reaching implications and raises questions that need to be resolved, 24 there is no allegation of facts
by petitioner tending to show that she is entitled to such a writ. The judicial policy must thus remain

that this Court will not entertain direct resort to it, except when the redress sought cannot be
obtained in the proper courts or when exceptional and compelling circumstances warrant availment
of a remedy within and calling for the exercise of this Courts primary jurisdiction. 25
WHEREFORE, the petition is hereby DISMISSED.
Costs against the petitioner.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

THIRD DIVISION
G.R. No. 126911

April 30, 2003

PHILIPPINE
DEPOSIT
INSURANCE
CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and JOSE ABAD, LEONOR ABAD, SABINA ABAD,
JOSEPHINE "JOSIE" BEATA ABAD-ORLINA, CECILIA ABAD, PIO ABAD, DOMINIC ABAD,
TEODORA ABAD, respondents.
CARPIO MORALES, J.:
The present petition for review assails the decision of the Court of Appeals affirming that of the
Regional Trial Court of Iloilo City, Branch 30, finding petitioner Philippine Deposit Insurance
Corporation (PDIC) liable, as statutory insurer, for the value of 20 Golden Time Deposits belonging
to respondents Jose Abad, Leonor Abad, Sabina Abad, Josephine "Josie" Beata Abad-Orlina, Cecilia
Abad, Pio Abad, Dominic Abad, and Teodora Abad at the Manila Banking Corporation (MBC), Iloilo
Branch.
Prior to May 22, 1997, respondents had, individually or jointly with each other, 71 certificates of time
deposits denominated as "Golden Time Deposits" (GTD) with an aggregate face value of
P1,115,889.96.1
On May 22, 1987, a Friday, the Monetary Board (MB) of the Central Bank of the Philippines, now
Bangko Sentral ng Pilipinas, issued Resolution 505 2 prohibiting MBC to do business in the
Philippines, and placing its assets and affairs under receivership. The Resolution, however, was not
served on MBC until Tuesday the following week, or on May 26, 1987, when the designated
Receiver took over.3
On May 25, 1987, the next banking day following the issuance of the MB Resolution, respondent
Jose Abad was at the MBC at 9:00 a.m. for the purpose of pre-terminating the 71 aforementioned
GTDs and re-depositing the fund represented thereby into 28 new GTDs in denominations of
P40,000.00 or less under the names of herein respondents individually or jointly with each other. 4 Of
the 28 new GTDs, Jose Abad pre-terminated 8 and withdrew the value thereof in the total amount of
P320,000.00.5
Respondents thereafter filed their claims with the PDIC for the payment of the remaining 20 insured
GTDs.6
On February 11, 1988, PDIC paid respondents the value of 3 claims in the total amount of
P120,000.00. PDIC, however, withheld payment of the 17 remaining claims after Washington
Solidum, Deputy Receiver of MBC-Iloilo, submitted a report to the PDIC 7 that there was massive
conversion and substitution of trust and deposit accounts on May 25, 1987 at MBC-Iloilo. 8 The
pertinent portions of the report stated:
xxx

xxx

xxx

On May 25, 1987 (Monday) or a day prior to the official announcement and take-over by CB
of the assets and liabilities of The Manila Banking Corporation, the Iloilo Branch was found to
have recorded an unusually heavy movements in terms of volume and amount for all types
of deposits and trust accounts. It appears that the impending receivership of TMBC was
somehow already known to many depositors on account of the massive withdrawals paid on
this day which practically wiped out the branch's entire cash position. . . .
xxx

xxx

xxx

. . . The intention was to maximize the availment of PDIC coverage limited to P40,000 by
spreading out big accounts to as many certificates under various nominees. . . . 9
xxx

xxx

xxx

Because of the report, PDIC entertained serious reservation in recognizing respondents' GTDs as
deposit liabilities of MBC-Iloilo. Thus, on August 30, 1991, it filed a petition for declaratory relief
against respondents with the Regional Trial Court (RTC) of Iloilo City, for a judicial declaration
determination of the insurability of respondents' GTDs at MBC-Iloilo. 10
In their Answer filed on October 24, 1991 and Amended Answer 11 filed on January 9, 1992,
respondents set up acounterclaim against PDIC whereby they asked for payment of their insured
deposits.12
In its Decision of February 22, 1994, 13 Branch 30 of the Iloilo RTC declared the 20 GTDs of
respondents to be deposit liabilities of MBC, hence, are liabilities of PDIC as statutory insurer. It
accordingly disposed as follows:
WHEREFORE, premises considered, judgment is hereby rendered:
1. Declaring the 28 GTDs of the Abads which were issued by the TMBC-Iloilo on May 25,
1987 as deposits or deposit liabilities of the bank as the term is defined under Section 3 (f) of
R.A. No. 3591, as amended;
2. Declaring PDIC, being the statutory insurer of bank deposits, liable to the Abads for the
value of the remaining 20 GTDs, the other 8 having been paid already by TMBC Iloilo on
May 25,1987;
3. Ordering PDIC to pay the Abads the value of said 20 GTDs less the value of 3 GTDs it
paid on February 11, 1988, and the amounts it may have paid the Abads pursuant to the
Order of this Court dated September 8, 1992;
4. Ordering PDIC to pay immediately the Abads the balance of its admitted liability as
contained in the aforesaid Order of September 8, 1992, should there be any, subject to
liquidation when this case shall have been finally decide; and
5. Ordering PDIC to pay legal interest on the remaining insured deposits of the Abads from
February 11, 1988 until they are fully paid.
SO ORDERED.

On appeal, the Court of Appeals, by the assailed Decision of October 21, 1996, 14 affirmed the trial
court's decision except as to the award of legal interest which it deleted.
Hence, PDIC's present Petition for Review which sets forth this lone assignment of error:
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE HOLDING OF THE TRIAL
COURT THAT THE AMOUNT REPRESENTED IN THE FACES OF THE SO CALLED "GOLDEN
TIME DEPOSITS" WERE INSURED DEPOSITS EVEN AS THEY WERE MERE DERIVATIVES OF
RESPONDENTS'
PREVIOUS
ACCOUNT
BALANCES
WHICH
WERE
PRETERMINATED/TERMINATED AT THE TIME THE MANILA BANKING CORPORATION WAS
ALREADY IN SERIOUS FINANCIAL DISTRESS.
In its supplement to the petition, PDIC adds the following assignment of error:
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE HOLDING OF THE TRIAL
COURT ORDERING PETITIONER TO PAY RESPONDENTS' CLAIMS FOR PAYMENT OF
INSURED DEPOSITS FOR THE REASON THAT AN ACTION FOR DECLARATORY RELIEF DOES
NOT ESSENTIALLY ENTAIL AN EXECUTORY PROCESS AS THE ONLY RELIEF THAT SHOULD
HAVE BEEN GRANTED BY THE TRIAL COURT IS A DECLARATION OF THE RIGHTS AND
DUTIES OF PETITIONER UNDER R.A. 3591, AS AMENDED, PARTICULARLY SECTION 3(F)
THEREOF AS CONSIDERED AGAINST THE SURROUNDING CIRCUMSTANCES OF THE
MATTER IN ISSUE SOUGHT TO BE CONSTRUED WITHOUT PREJUDICE TO OTHER MATTERS
THAT NEED TO BE CONSIDERED BY PETITIONER IN THE PROCESSING OF RESPONDENTS'
CLAIMS.
Under its charter,15 PDIC (hereafter petitioner) is liable only for deposits received by a bank "in the
usual course of business."16 Being of the firm conviction that, as the reported May 25, 1987 bank
transactions were so massive, hence, irregular, petitioner essentially seeks a judicial declaration that
such transactions were not made "in the usual course of business" and, therefore, it cannot be made
liable for deposits subject thereof. 17
Petitioner points that as MBC was prohibited from doing further business by MB Resolution 505 as
of May 22, 1987, all transactions subsequent to such date were not done "in the usual course of
business."
Petitioner further posits that there was no consideration for the 20 GTDs subject of respondents'
claim. In support of this submission, it states that prior to March 25, 1987, when the 20 GTDs were
made, MBC had been experiencing liquidity problems, e.g., at the start of banking operations on
March 25, 1987, it had only P2,841,711.90 cash on hand and at the end of the day it was left with
P27,805.81 consisting mostly of mutilated bills and coins. 18 Hence, even if respondents had wanted
to convert the face amounts of the GTDs to cash, MBC could not have complied with it.
Petitioner theorizes that after MBC had exhausted its cash and could no longer sustain further
withdrawal transactions, it instead issued new GTDs as "payment" for the pre-terminated GTDs of
respondents to make sure that all the newly-issued GTDs have face amounts which are within the
statutory coverage of deposit insurance.
Petitioner concludes that since no cash was given by respondents and none was received by MBC
when the new GTDs were transacted, there was no consideration therefor and, thus, they were not
validly transacted "in the usual course of business" and no liability for deposit insurance was
created.19

Petitioner's position does not persuade.


While the MB issued Resolution 505 on May 22, 1987, a copy thereof was served on MBC only on
May 26, 1987. MBC and its clients could be given the benefit of the doubt that they were not aware
that the MB resolution had been passed, given the necessity of confidentiality of placing a banking
institution under receivership.20
The evident implication of the law, therefore, is that the appointment of a receiver may be
made by the Monetary Board without notice and hearing but its action is subject to judicial
inquiry to insure the protection of the banking institution. Stated otherwise, due process does
not necessarily require a prior hearing; a hearing or an opportunity to be heard may
be subsequent to the closure. One can just imagine the dire consequences of a prior
hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the
process, fortunes may be wiped out, and disillusionment will run the gamut of the entire
banking community. (Emphasis supplied).21
Mere conjectures that MBC had actual knowledge of its impending closure do not suffice. The MB
resolution could not thus have nullified respondents' transactions which occurred prior to May 26,
1987.
That no actual money in bills and/or coins was handed by respondents to MBC does not mean that
the transactions on the new GTDs did not involve money and that there was no consideration
therefor. For the outstanding balance of respondents' 71 GTDs in MBC prior to May 26, 1987 22 in the
amount of P1,115,889.15 as earlier mentioned was re-deposited by respondents under 28 new
GTDs. Admittedly, MBC had P2,841,711.90 cash on hand more than double the outstanding
balance of respondent's 71 GTDs at the start of the banking day on May 25, 1987. Since
respondent Jose Abad was at MBC soon after it opened at 9:00 a.m. of that day, petitioner should
not presume that MBC had no cash to cover the new GTDs of respondents and conclude that there
was no consideration for said GTDs.
Petitioner having failed to overcome the presumption that the ordinary course of business was
followed,23 this Court finds that the 28 new GTDs were deposited "in the usual course of business" of
MBC.
In its second assignment of error, petitioner posits that the trial court erred in ordering it to pay the
balance of the deposit insurance to respondents, maintaining that the instant petition stemmed from
a petition for declaratory relief which does not essentially entail an executory process, and the only
relief that should have been granted by the trial court is a declaration of the parties' rights and duties.
As such, petitioner continues, no order of payment may arise from the case as this is beyond the
office of declaratory relief proceedings.24
Without doubt, a petition for declaratory relief does not essentially entail an executory process. There
is nothing in its nature, however, that prohibits a counterclaim from being set-up in the same action. 25
Now, there is nothing in the nature of a special civil action for declaratory relief that
proscribes the filing of a counterclaim based on the same transaction, deed or contract
subject of the complaint. A special civil action is after all not essentially different from an
ordinary civil action, which is generally governed by Rules 1 to 56 of the Rules of Court,
except that the former deals with a special subject matter which makes necessary some
special regulation. But the identity between their fundamental nature is such that the same
rules governing ordinary civil suits may and do apply to special civil actions if not inconsistent

with or if they may serve to supplement the provisions of the peculiar rules governing special
civil actions.26
Petitioner additionally submits that the issue of determining the amount of deposit insurance due
respondents was never tried on the merits since the trial dwelt only on the "determination of the
viability or validity of the deposits" and no evidence on record sustains the holding that the amount of
deposit due respondents had been finally determined. 27 This issue was not raised in the court a quo,
however, hence, it cannot be raised for the first time in the petition at bar.28
Finally, petitioner faults respondents for availing of the statutory limits of the PDIC law, presupposing
that, based on the conduct of respondent Jose Abad on March 25, 1987, he and his co respondents
"somehow knew" of the impending closure of MBC. Petitioner ascribes bad faith to respondent Jose
Abad in transacting the questioned deposits, and seeks to disqualify him from availing the benefits
under the law. 29
Good faith is presumed. This, petitioner failed to overcome since it offered mere presumptions as
evidence of bad faith.
WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.

SUPREME
Manila

COURT

EN BANC
G.R. No. 169466

May 9, 2007

DEPARTMENT OF BUDGET AND MANAGEMENT, represented by SECRETARY ROMULO L.


NERI, PHILIPPINE NATIONAL POLICE, represented by POLICE DIRECTOR GENERAL
ARTURO L. LOMIBAO, NATIONAL POLICE COMMISSION, represented by CHAIRMAN
ANGELO T. REYES, AND CIVIL SERVICE COMMISSION, represented by CHAIRPERSON
KARINA
C.
DAVID, Petitioners,
vs.
MANILAS FINEST RETIREES ASSOCIATION, INC., represented by P/COL. FELICISIMO G.
LAZARO (RET.), AND ALL THE OTHER INP RETIREES, Respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this petition for review on certiorari under Rule 45 of the Rules
of Court are the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 78203, to wit:
1. Decision1 dated July 7, 2005 which affirmed in toto the decision of the Regional Trial Court
of Manila, Branch 32, in Civil Case No. 02-103702, a suit for declaratory relief, declaring the
herein respondents entitled to the same retirement benefits accorded upon retirees of the
Philippine National Police (PNP) under Republic Act (R.A.) No. 6975, as amended by R.A.
No. 8551, and ordering the herein petitioners to implement the proper adjustments on
respondents retirement benefits; and
2. Resolution2 dated August
reconsideration.

24, 2005

which denied

the petitioners motion

for

The antecedent facts:


In 1975, Presidential Decree (P.D.) No. 765 was issued constituting the Integrated National Police
(INP) to be composed of the Philippine Constabulary (PC) as the nucleus and the integrated police
forces as components thereof. Complementing P.D. No. 765 was P.D. No. 1184 3 dated August 26,
1977 (INP Law, hereinafter) issued to professionalize the INP and promote career development
therein.
On December 13, 1990, Republic Act (R.A.) No. 6975, entitled "AN ACT ESTABLISHING THE
PHILIPPINE NATIONAL POLICE UNDER A REORGANIZED DEPARTMENT OF THE INTERIOR
AND LOCAL GOVERNMENT, AND FOR OTHER PURPOSES," hereinafter referred to as PNP Law,
was enacted. Under Section 23 of said law, the Philippine National Police (PNP) would initially
consist of the members of the INP, created under P.D. No. 765, as well as the officers and enlisted
personnel of the PC. In part, Section 23 reads:
SEC. 23. Composition. Subject to the limitation provided for in this Act, the Philippine National
Police, hereinafter referred to as the PNP, is hereby established, initially consisting of the members
of the police forces who were integrated into the Integrated National Police (INP) pursuant to

Presidential Decree No. 765, and the officers and enlisted personnel of the Philippine Constabulary
(PC).
A little less than eight (8) years later, or on February 25, 1998, R.A. No. 6975 was amended by R.A.
No. 8551, otherwise known as the "PHILIPPINE NATIONAL POLICE REFORM AND
REORGANIZATION ACT OF 1998." Among other things, the amendatory law reengineered the
retirement scheme in the police organization. Relevantly, PNP personnel, under the new law, stood
to collect more retirement benefits than what INP members of equivalent rank, who had retired under
the INP Law, received.
The INP retirees illustrated the resulting disparity in the retirement benefits between them and the
PNP retirees as follows:4
Retirement Rank

Monthly Pension

INP

PNP

INP

PNP

Corporal

SPO3

P 3,225.00

P 11,310.00 P 8,095.00

Captain

P. Sr. Insp.

P 5,248.00

P 15,976.00 P10,628.00

Brig. Gen. P. Chief Supt.

Difference

P 10,054.24 P 18,088.00 P 8,033.76

Hence, on June 3, 2002, in the Regional Trial Court (RTC) of Manila, all INP retirees, spearheaded
by the Manilas Finest Retirees Association, Inc., or the MFRAI (hereinafter collectively referred to as
the INP Retirees), filed a petition for declaratory relief, 5 thereunder impleading, as respondents, the
Department of Budget and Management (DBM), the PNP, the National Police Commission
(NAPOLCOM), the Civil Service Commission (CSC) and the Government Service Insurance System
(GSIS). Docketed in the RTC as Civil Case No. 02-103702, which was raffled to Branch 22 thereof,
the petition alleged in gist that INP retirees were equally situated as the PNP retirees but whose
retirement benefits prior to the enactment of R.A. No. 6975, as amended by R.A. No. 8551, were
unconscionably and arbitrarily excepted from the higher rates and adjusted benefits accorded to the
PNP retirees. Accordingly, in their petition, the petitioning INP retirees pray that a
DECLARATORY JUDGMENT be rendered in their favor, DECLARING with certainty that they, as
INP-retirees, are truly absorbed and equally considered as PNP-retirees and thus, entitled to enjoy
the SAME or IDENTICAL retirement benefits being bestowed to PNP-retirees by virtue of said PNP
Law or Republic Act No. 6975, as amended by Republic Act 8551, with the corollary mandate for the
respondents-government agencies to effect the immediate adjustment on their previously received
disparate retirement benefits, retroactive to its effectivity, and with due payment thereof.
The GSIS moved to dismiss the petition on grounds of lack of jurisdiction and cause of action. On
the other hand, the CSC, DBM, NAPOLCOM and PNP, in their respective answers, asserted that the
petitioners could not claim the more generous retirement benefits under R.A. No. 6975 because at
no time did they become PNP members, having retired prior to the enactment of said law. DBM,
NAPOLCOM and PNP afterwards filed their respective pre-trial briefs.
The ensuing legal skirmish is not relevant to the disposition of the instant case. The bottom line is
that, on March 21, 2003, the RTC came out with its decision 6 holding that R.A. No. 6975, as
amended, did not abolish the INP but merely provided for the absorption of its police functions by the
PNP, and accordingly rendered judgment for the INP retirees, to wit:

WHEREFORE, this Court hereby renders JUDGMENT DECLARING the INP Retirees entitled to the
same or identical retirement benefits and such other benefits being granted, accorded and bestowed
upon the PNP Retirees under the PNP Law (RA No. 6975, as amended).
The respondents Government Departments and Agencies shall IMMEDIATELY EFFECT and
IMPLEMENT the proper adjustments on the INP Retirees retirement and such other benefits,
RETROACTIVE to its date of effectivity, and RELEASE and PAY to the INP Retirees the due
payments of the amounts.
SO ORDERED.
On April 2, 2003, the trial court issued what it denominated as Supplement to the Decision
whereunder it granted the GSIS motion to dismiss and thus considered the basic petition as
withdrawn with respect to the latter.
From the adverse decision of the trial court, the remaining respondents, namely, DBM, PNP,
NAPOLCOM and CSC, interposed an appeal to the CA whereat their appellate recourse was
docketed as CA-G.R. CV No. 78203.
As stated at the threshold hereof, the CA, in its decision of July 7, 2005, 7 affirmed that of the trial
court upholding the entitlement of the INP retirees to the same or identical retirement benefits
accorded upon PNP retirees under R.A. No. 6975, as amended.
Their motion for reconsideration having been denied by the CA in` its equally assailed resolution of
August 24, 2005,8 herein petitioners are now with this Court via the instant recourse on their singular
submission that THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN LAW IN AFFIRMING THE
DECISION OF THE TRIAL COURT NOTWITHSTANDING THAT IT IS CONTRARY TO LAW AND
ESTABLISHED JURISPRUDENCE.
We DENY.
In the main, it is petitioners posture that R.A. No. 6975 clearly abolished the INP and created in its
stead a new police force, the PNP. Prescinding therefrom, petitioners contend that since the PNP is
an organization entirely different from the INP, it follows that INP retirees never became PNP
members. Ergo, they cannot avail themselves of the retirement benefits accorded to PNP members
under R.A. No. 6975 and its amendatory law, R.A. No. 8551.
A flashback at history is proper.
As may be recalled, R.A. No. 6975 was enacted into law on December 13, 1990, or just about four
(4) years after the 1986 Edsa Revolution toppled down the dictatorship regime. Egged on by the
current sentiment of the times generated by the long period of martial rule during which the police
force, the PC-INP, had a military character, being then a major service of the Armed Forces of the
Philippines, and invariably moved by a fresh constitutional mandate for the establishment of one
police force which should be national in scope and, most importantly, purely civilian in
character,9 Congress enacted R.A. No. 6975 establishing the PNP and placing it under the
Department of Interior and Local Government. To underscore the civilian character of the PNP, R.A.
No. 6975 made it emphatically clear in its declaration of policy the following:

Section 2. Declaration of policy - It is hereby declared to be the policy of the State to promote peace
and order, ensure public safety and further strengthen local government capability aimed towards
the effective delivery of the basic services to the citizenry through the establishment of a highly
efficient and competent police force that is national in scope and civilian in character. xxx.
The police force shall be organized, trained and equipped primarily for the performance of police
functions. Its national scope and civilian character shall be paramount. No element of the police
force shall be military nor shall any position thereof be occupied by active members of the [AFP].
(Emphasis and word in bracket supplied.)
Pursuant to Section 23, supra, of R.A. No. 6975, the PNP initially consisted of the members of the
police forces who were integrated into the INP by virtue of P.D. No. 765, while Section 86 10 of the
same law provides for the assumption by the PNP of the police functions of the INP and its
absorption by the former, including its appropriations, funds, records, equipment, etc., as well as its
personnel.11 And to govern the statutes implementation, Section 85 of the Act spelled out the
following absorption phases:
Phase I Exercise of option by the uniformed members of the [PC], the PC elements assigned with
the Narcotics Command, CIS, and the personnel of the technical services of the AFP assigned with
the PC to include the regular CIS investigating agents and the operatives and agents of the
NAPOLCOM Inspection. Investigation and Intelligence Branch, and the personnel of the absorbed
National Action Committee on Anti-Hijacking (NACAH) of the Department of National Defense to be
completed within six (6) months from the date of the effectivity of this Act. At the end of this phase, all
personnel from the INP, PC, AFP Technical Services, NACAH, and NAPOLCOM Inspection,
Investigation and Intelligence Branch shall have been covered by official orders assigning them to
the PNP, Fire and Jail Forces by their respective units.
Phase II Approval of the table of organization and equipment of all bureaus and offices created
under this Act, preparation and filling up of their staffing pattern, transfer of assets to the [DILG] and
organization of the Commission, to be completed within twelve (12) months from the effectivity date
hereof. At the end of this phase, all personnel to be absorbed by the [DILG] shall have been issued
appointment papers, and the organized Commission and the PNP shall be fully operational.
The PC officers and enlisted personnel who have not opted to join the PNP shall be reassigned to
the Army, Navy or Air Force, or shall be allowed to retire under existing AFP rules and regulations.
Any PC-INP officer or enlisted personnel may, within the twelve-month period from the effectivity of
this Act, retire and be paid retirement benefits corresponding to a position two (2) ranks higher than
his present grade, subject to the conditions that at the time he applies for retirement, he has
rendered at least twenty (20) years of service and still has, at most, twenty-four (24) months of
service remaining before the compulsory retirement age as provided by existing law for his office.
Phase III Adjustment of ranks and establishment of one (1) lineal roster of officers and another for
non-officers, and the rationalization of compensation and retirement systems; taking into
consideration the existing compensation schemes and retirement and separation benefit systems of
the different components of the PNP, to ensure that no member of the PNP shall suffer any
diminution in basic longevity and incentive pays, allowances and retirement benefits due them
before the creations of the PNP, to be completed within eighteen (18) months from the effectivity of
this Act. xxx.
Upon the effectivity of this Act, the [DILG] Secretary shall exercise administrative supervision as well
as operational control over the transferred, merged and/or absorbed AFP and INP units. The

incumbent Director General of the PC-INP shall continue to act as Director General of the PNP until
replaced . (Emphasis and words in brackets supplied.)
From the foregoing, it appears clear to us that the INP was never, as posited by the petitioners,
abolished or terminated out of existence by R.A. No. 6975. For sure, nowhere in R.A. No. 6975 does
the words "abolish" or "terminate" appear in reference to the INP. Instead, what the law provides is
for the "absorption," "transfer," and/or "merger" of the INP, as well as the other offices comprising the
PC-INP, with the PNP. To "abolish" is to do away with, to annul, abrogate or destroy completely; 12 to
"absorb" is to assimilate, incorporate or to take in. 13"Merge" means to cause to combine or unite to
become legally absorbed or extinguished by merger 14 while "transfer" denotes movement from one
position to another. Clearly, "abolition" cannot be equated with "absorption."
True it is that Section 90 15 of R.A. No. 6975 speaks of the INP "[ceasing] to exist" upon the effectivity
of the law. It ought to be stressed, however, that such cessation is but the logical consequence of the
INP being absorbed by the PNP.
1a\^/phi1.net

Far from being abolished then, the INP, at the most, was merely transformed to become the PNP,
minus of course its military character and complexion.
Even the petitioners effort at disclosing the legislative intent behind the enactment of R.A. No. 6975
cannot support their theory of abolition. Rather, the Senate and House deliberations on the bill that
eventually became R.A. No. 6975 reveal what has correctly been held by the CA in its assailed
decision: that the PNP was precisely created to erase the stigma spawned by the militarization of the
police force under the PC-INP structure. The rationale behind the passage of R.A. No. 6975 was
adequately articulated by no less than the sponsor 16 of the corresponding House bill in his
sponsorship speech, thus:
By removing the police force from under the control and supervision of military officers, the bill seeks
to restore and underscore the civilian character of police work - an otherwise universal concept that
was muddled up by the martial law years.
Indeed, were the legislative intent was for the INPs abolition such that nothing would be left of it, the
word "abolish" or what passes for it could have easily found its way into the very text of the law itself,
what with the abundant use of the word during the legislative deliberations. But as can be gleaned
from said deliberations, the lawmakers concern centered on the fact that if the entire PC-INP corps
join the PNP, then the PC-INP will necessarily be abolished, for who then would be its members? Of
more consequence, the lawmakers were one in saying that there should never be two national police
agencies at the same time.
With the conclusion herein reached that the INP was not in fact abolished but was merely
transformed to become the PNP, members of the INP which include the herein respondents are,
therefore, not excluded from availing themselves of the retirement benefits accorded to PNP retirees
under Sections 7417 and 7518 of R.A. No. 6975, as amended by R.A. No. 8551. It may be that
respondents were no longer in the government service at the time of the enactment of R.A. No.
6975. This fact, however, without more, would not pose as an impediment to the respondents
entitlement to the new retirement scheme set forth under the aforecited sections. As correctly
ratiocinated by the CA to which we are in full accord:
For sure, R.A. No. 6975 was not a retroactive statute since it did not impose a new obligation to pay
the INP retirees the difference between what they received when they retired and what would now
be due to them after R.A. No. 6975 was enacted. Even so, that did not render the RTCs
interpretation of R.A. No. 6975 any less valid. The [respondents] retirement prior to the passage of

R.A. No. 6975 did not exclude them from the benefits provided by R.A. No. 6975, as amended by
R.A. No. 8551, since their membership in the INP was an antecedent fact that nonetheless allowed
them to avail themselves of the benefits of the subsequent laws. R.A. No. 6975 considered them as
PNP members, always referring to their membership and service in the INP in providing for their
retirement benefits. 19
Petitioners maintain, however, that NAPOLCOM Resolution No. 8, 20 particularly Section 1121 thereof,
bars the payment of any differential in retirement pay to officers and non-officers who are already
retired prior to the effectivity of R.A. No. 6975.
The contention does not commend itself for concurrence.
Under the amendatory law (R.A. No. 8551), the application of rationalized retirement benefits to PNP
members who have meanwhile retired before its (R.A. No. 8551) enactment was not prohibited. In
fact, its Section 3822explicitly states that the rationalized retirement benefits schedule and program
"shall have retroactive effect in favor of PNP members and officers retired or separated from the
time specified in the law." To us, the aforesaid provision should be made applicable to INP members
who had retired prior to the effectivity of R.A. No. 6975. For, as afore-held, the INP was, in effect,
merely absorbed by the PNP and not abolished.
Indeed, to bar payment of retirement pay differential to INP members who were already retired
before R.A. No. 6975 became effective would even run counter to the purpose of NAPOLCOM
Resolution No. 8 itself, as expressed in its preambulatory clause, which is to rationalize the
retirement system of the PNP taking into consideration existing retirement and benefit systems
(including R.A. No. 6975 and P.D. No. 1184) of the different components thereof "to ensure that no
member of the PNP shall suffer any diminution in the retirement benefits due them before the
creation of the PNP."23
Most importantly, the perceived restriction could not plausibly preclude the respondents from
asserting their entitlement to retirement benefits adjusted to the level when R.A. No. 6975 took
effect. Such adjustment hews with the constitutional warrant that "the State shall, from time to time,
review to upgrade the pensions and other benefits due to retirees of both the government and
private sectors,"24 and the implementing mandate under the Senior Citizens Law 25 that "to the extent
practicable and feasible, retirement benefits xxx shall be upgraded to be at par with the current scale
enjoyed by those in actual service."
1awphi1.nt

Certainly going for the respondents in their bid to enjoy the same retirement benefits granted to PNP
retirees, either under R.A. No. 6975 or R.A. No. 8551, is Section 34 of the latter law which amended
Section 75 of R.A. No. 6975 by adding thereto the following proviso:
Section 75. Retirement benefits. x x x: Provided, finally, That retirement pay of the officers/nonofficers of the PNP shall be subject to adjustments based on the prevailing scale of base pay of
police personnel in the active service.
Then, too, is the all familiar rule that:
Retirement laws should be liberally construed in favor of the retiree because their intention is to
provide for his sustenance and hopefully, even comfort, when he no longer has the stamina to
continue earning his livelihood. The liberal approach aims to achieve the humanitarian purposes of
the law in order that efficiency, security and well-being of government employees may be
enhanced.26

The petitioners parlay the notion of prospective application of statutes, noting in this regard that R.A.
No. 6975, as amended, cannot be applied retroactively, there being no provision to that effect.
We are not persuaded.
As correctly found by the appellate court, R.A. No. 6975 itself contextually provides for its retroactive
application to cover those who had retired prior to its effectivity. In this regard, we invite attention to
the three (3) phases of implementation under Section 85 for the absorption and continuation in the
service of, among others, the INP members under the newly-established PNP.
In a further bid to scuttle respondents entitlement to the desired retirement benefits, the petitioners
fault the trial court for ordering the immediate adjustments of the respondents retirement benefits
when the basic petition filed before it was one for declaratory relief. To the petitioners, such petition
does not essentially entail an executory process, the only relief proper under that setting being a
declaration of the parties rights and duties.
Petitioners above posture is valid to a point. However, the execution of judgments in a petition for
declaratory relief is not necessarily indefensible. In Philippine Deposit Insurance Corporation[PDIC]
v. Court of Appeals,27wherein the Court affirmed the order for the petitioners therein to pay the
balance of the deposit insurance to the therein respondents, we categorically ruled:
Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the
filing of a counterclaim based on the same transaction, deed or contract subject of the complaint. A
special civil action is after all not essentially different from an ordinary civil action, which is generally
governed by Rules 1 to 56 of the Rules of Court, except that the former deals with a special subject
matter which makes necessary some special regulation. But the identity between their fundamental
nature is such that the same rules governing ordinary civil suits may and do apply to special civil
actions if not inconsistent with or if they may serve to supplement the provisions of the peculiar rules
governing special civil actions.28
Similarly, in Matalin Coconut Co., Inc. v. Municipal Council of Malabang, Lanao del Sur: 29 the Court
upheld the lower courts order for a party to refund the amounts paid by the adverse party under the
municipal ordinance therein questioned, stating:
x x x Under Sec. 6 of Rule 64, the action for declaratory relief may be converted into an ordinary
action and the parties allowed to file such pleadings as may be necessary or proper, if before the
final termination of the case "a breach or violation of an ordinance, should take place." In the
present case, no breach or violation of the ordinance occurred. The petitioner decided to pay "under
protest" the fees imposed by the ordinance. Such payment did not affect the case; the declaratory
relief action was still proper because the applicability of the ordinance to future transactions still
remained to be resolved, although the matter could also be threshed out in an ordinary suit for the
recovery of taxes paid . In its petition for declaratory relief, petitioner-appellee alleged that by
reason of the enforcement of the municipal ordinance by respondents it was forced to pay under
protest the fees imposed pursuant to the said ordinance, and accordingly, one of the reliefs prayed
for by the petitioner was that the respondents be ordered to refund all the amounts it paid to
respondent Municipal Treasurer during the pendency of the case. The inclusion of said allegation
and prayer in the petition was not objected to by the respondents in their answer. During the trial,
evidence of the
payments made by the petitioner was introduced. Respondents were thus fully aware of the
petitioner's claim for refund and of what would happen if the ordinance were to be declared invalid by
the court.

The Court sees no reason for treating this case differently from PDIC and Matalin. This disposition
becomes all the more appropriate considering that the respondents, as petitioners in the RTC,
pleaded for the immediate adjustment of their retirement benefits which, significantly, the herein
petitioners, as respondents in the same court, did not object to. Being aware of said prayer, the
petitioners then already knew the logical consequence if, as it turned out, a declaratory judgment is
rendered in the respondents favor.
1awphi1.nt

At bottom then, the trial courts judgment forestalled multiplicity of suits which, needless to stress,
would only entail a long and arduous process. Considering their obvious advanced years, the
respondents can hardly afford another protracted proceedings. It is thus for this Court to already
write finis to this case.
WHEREFORE, the instant petition is DENIED and the assailed decision and resolution of the CA,
respectively dated July 7, 2005 and August 24, 2005, are AFFIRMED.
No costs.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

EN BANC
G.R. No. 141386

November 29, 2001

THE COMMISSION ON AUDIT OF THE PROVINCE OF CEBU, Represented by Provincial


Auditor
ROY
L.
URSAL, petitioner,
vs.
PROVINCE OF CEBU, Represented by Governor PABLO P. GARCIA, respondent.
YNARES-SANTIAGO, J.:
May the salaries and personnel-related benefits of public school teachers appointed by local chief
executives in Connection with the establishment and maintenance of extension classes; as well as
the expenses for college scholarship grants, be charged to the Special Education Fund (SEF) of the
local government unit concerned?
The instant petition for review, which raises a pure question of law, seeks to annul and set aside the
decision1 of the Regional Trial Court of Cebu, Branch 20, in a petition for declaratory relief, docketed
as Civil Case No. CEB-24422.
The provincial governor of the province of Cebu, as chairman of the local school board, under
Section 98 of the Local Government Code, appointed classroom teachers who have no items in the
DECS plantilla to handle extension classes that would accommodate students in the public schools.
In the audit of accounts conducted by the Commission on Audit (COA) of the Province of Cebu, for
the period January to June 1998, it appeared that the salaries and personnel-related benefits of the
teachers appointed by the province for the extension classes were charged against the provincial
SEF. Likewise charged to the SEF were the college scholarship grants of the province.
Consequently, the COA issued Notices of Suspension to the province of Cebu, 2 saying that
disbursements for the salaries of teachers and scholarship grants are not chargeable to the
provincial SEF.
Faced with the Notices of Suspension issued by the COA, the province of Cebu, represented by its
governor, filed a petition for declaratory relief with the trial court.
On December 13, 1999, the court a quo rendered a decision declaring the questioned expenses as
authorized expenditures of the SEF. The dispositive portion thereof reads:
WHEREFORE, in view of all the foregoing premises considered, judgment is hereby
rendered giving due course to this instant petition for declaratory relief declaring and
confirming that petitioner is vested with the authority to disburse the proceeds from the
Special Educational Fund [SEF] for the payment of salaries, allowances or honoraria for
teachers and non-teaching personnel in the public schools in the Province of Cebu and its
component cities, and, municipalities, as well as the expenses for scholarship grants of
petitioners specially to poor but deserving students therein.

Declaring, further, respondents audit findings on pages 36 and 37 in the Annual Audit Report
on the Province of Cebu: for the year ending December 31, 1999 as null and void. 3
Hence, the instant petition by the Commission on Audit.
The Special Education Fund was created by virtue of R.A. No. 5447, which is An act creating a
special education fund to be constituted from the proceeds of an additional real property tax and a
certain portion of the taxes on Virginia-type cigarettes and duties on imported leaf tobacco, defining
the activities to be financed, creating school boards for the purpose, and appropriating funds
therefrom, which took effect on January 1, 1969. Pursuant thereto, P.D. No. 464, also known as the
Real Property Tax Code of the Philippines, imposed an annual tax of 1% on real property which shall
accrue to the SEF.4
Under R.A. No. 5447, the SEF may be expended exclusively for the following activities of the DECS

(a) the organization and operation of such number of extension classes as may be needed
to accommodate all children of school age desiring to enter Grade I, including the creation of
positions of classroom teachers, head teachers and principals for such extension classes x x
x;
(b) the programming of the construction and repair of elementary school buildings,
acquisition of sites, and the construction and repair of workshops and similar buildings and
accessories thereof to house laboratory, technical and similar equipment and apparatus
needed by public schools offering practical arts, home economics and vocational courses,
giving priority to elementary schools on the basis of the actual needs and total requirements
of the country x x x;
(c) the payment and adjustment of salaries of public school teachers under and by virtue of
Republic Act Numbered Five Thousand One Hundred Sixty-Eight and all the benefits in favor
of public school teachers provided under Republic Act Numbered Four Thousand Six
Hundred Seventy;
(d) preparation, printing and/or purchase of textbooks, teacher's guides. forms and
pamphlets x x x;
(e) the purchase and/or improvement, repair and refurbishing of machinery, laboratory,
technical and similar equipment and apparatus, including spare parts needed by the Bureau
of Vocational Education and secondary schools offering courses;
(f) the establishment of printing plant to be used exclusively for the printing needs of the
Department of Education and the improvement of regional printing plants in the vocational
schools;
(g) the purchase of teaching materials such as work books, atlases, flip charts, science and
mathematics teaching aids, and simple laboratory devices for elementary and secondary
classes;
(h) the implementation of the existing program for citizenship development in barrio high
schools, folk schools and adult education classes;

(i) the undertaking of education research, including that of the Board of National Education;
(j) the granting of government scholarships to poor but deserving students under Republic
Act Numbered Four Thousand Ninety; and
(k) the promotion of physical education, such as athletic meets. (Emphasis supplied)
With the effectivity of the Local Government Code of 1991, petitioner contends that R.A. No. 5447
was repealed, leaving Sections 235, 272 and 100 (c) of the Code to govern the disposition of the
SEF, to wit:
SEC. 235. Additional Levy on Real Property for the Special Education Fund (SEF). A
province or city or a municipality within the Metropolitan Manila Area, may levy and collect an
annual tax of one percent (1%) on the assessed value of real property which shall be in
addition to the basic real property tax. The proceeds thereof shall exclusively accrue to the
Special Education Fund (SEF).
SEC. 272. Application of Proceeds of the Additional One Percent SEF Tax. The proceeds
from the additional one percent (1%) tax on real properly accruing to the SEF shall be
automatically released to the local school boards: Provided, That, in case of provinces, the
proceeds shall be divided equally between the provincial and municipal school
boards: Provided, however, That the proceeds shall be allocated for the operation and
maintenance of public schools, construction and repair of school buildings, facilities and
equipment, educational research, purchase of books and periodicals, and sports
development as determined and approved by the local school board. (Emphasis supplied)
SEC. 100. Meeting and Quorum; Budget
xxx

xxx

xxx

(c) The annual school board budget shall give priority to the following:
(1) Construction, repair, and maintenance of school buildings and other facilities of public
elementary and secondary schools;
(2) Establishment and maintenance of extension classes where necessary; and
(3) Sports activities at the division, district, municipal, and barangay levels. (Emphasis
supplied)
Invoking the legal maxim "expressio unius est exclusio alterius," petitioner alleges that since
salaries, personnel-related benefits and scholarship grants are not among those authorized as lawful
expenditures of the SEF under the Local Government Code, they should be deemed excluded
therefrom.
Moreover, petitioner claims that since what is allowed for local school boards to determine under
Section 995 of the Local Government Code is only the "annual supplementary budgetary needs; for
the operation and maintenance of public schools," as well as the "supplementary local cost to meet
such needs," the budget of the local school boards for the establishment and maintenance of
extension classes should be construed to refer only to the upkeep and maintenance of public school

building, facilities and similar expenses other than personnel-related benefits. This is because,
petitioner argued, the maintenance and operation of public schools pertain principally to the DECS.
The contentions are without merit. It is a basic precept in statutory construction that the intent of the
legislature is the controlling factor in the interpretation of a statute. 6 In this connection, the following
portions of the deliberations of the Senate on the second reading of the Local Government Code on
July 30, 1990 are significant:
Senator Guingona. Mr. President.
The President. Senator Guingona is recognized.
Senator Guingona. Just for clarification, Mr. President. In this transfer, will it include
everything eventually lock, stock and barrel, including curriculum?
Senator Pimentel. Mr. President, our stand in the Committee is to respect the decision of the
National Government in terms of curriculum.
Senator Guingona. But, supposing the Local Education Board wishes to adopt a certain
curriculum for that particular region?
Senator Pimentel. Mr. President, pursuant to the wording of the proposed transfer of this
elementary school system to local government units, what are specifically covered here are
merely the construction, repair, and maintenance of elementary school buildings and other
structures connected with public elementary school education, payment of salaries,
emoluments, allowances et cetera, procurement of books, other teaching materials and
equipment needed for the proper implementation of the program. There is nothing here that
will indicate that the local government will have any right to- alter the curriculum. (Emphasis
supplied)
Senator Guingona. Thank you, Mr. President.
Similarly instructive are the foregoing deliberations in the House of Representatives on August 16,
1990:
INTERPELLATION OF MS. RAYMUNDO
(Continuation)
Continuing her interpellation, Ms. Raymundo then adverted to subsection 4 of Section 101
[now Section 100, paragraph (c)] and asked if the budget is limited only to the three priority
areas mentioned. She also asked what is meant by the phrase "maintenance of extension
classes."
In response, Mr. De Pedro clarified that the provision is not limited to the three activities, to
which may be added other sets of priorities at the proper time. As to extension classes, he
pointed out that the school boards may provide out of its own funds, for additional teachers
or other requirements if the national government cannot provide funding therefor. Upon Ms.
Raymundo's query, Mr. de Pedro further explained that support for teacher tools could fall
under the priorities cited and is covered by certain circulars.

Undoubtedly, the aforecited exchange of views clearly demonstrates that the legislature intended the
SEF to answer for the compensation of teachers handling extension classes.
Furthermore, the pertinent portion of the repealing clause of the Local Government Code, provides:
SEC. 534. Repealing Clause. x x x
(c) The provisions of . . . Sections 3, a (3) and b (2) of Republic Act No. 5447, regarding the
Special Education Fund . . . are hereby repealed and rendered of no force and effect.
Evidently, what was expressly repealed by the Local Government Code was only Section 3, of R.A.
No. 5447, which deals with the "Allocation of taxes on Virginia type cigarettes and duties on imported
leaf tobacco." The legislature is presumed to know the existing laws, such that whenever it intends to
repeal a particular or specific provision of law, it does so expressly. The failure to add a specific
repealing clause particularly mentioning the statute to be repealed indicates that the intent was not
to repeal any existing law on the matter, unless an irreconcilable inconsistency and repugnancy
exists in the terms of the new and the old laws. 7 Hence, the provisions allocating funds for the
salaries of teachers under Section 1, of R.A. No. 5447, which are not inconsistent with Sections 272
and 100 (c) of the Local Government Code, remain in force and effect.
Even under the doctrine of necessary implication, the allocation of the SEF for the establishment and
maintenance of extension classes logically implies the hiring of teachers who should, as a matter of
course be compensated for their services. Every statute is understood, by implication, to contain all
such provisions as may be necessary to effectuate its object and purpose, or to make effective
rights, powers, privileges or jurisdiction which it grants, including all such collateral and subsidiary
consequences as may be fairly and logically inferred from its terms. Ex necessitate legis.8 Verily, the
services and the corresponding compensation of these teachers are necessary and indispensable to
the establishment and maintenance of extension classes.
Indeed, the operation and maintenance of public schools is lodged principally with the DECS. This is
the reason why only salaries of public school teachers appointed in connection with the
establishment and maintenance of extension classes, inter alia, pertain to the supplementary budget
of the local school boards. Thus, it should be made clear that not every kind of personnel-related
benefits of public school teachers may be charged to the SEF. The SEF may be expended only for
the salaries and personnel-related benefits of teachers appointed by the local school boards in
connection with the establishment and maintenance of extension classes. Extension classes as
referred to mean additional classes needed to accommodate all children of school age desiring to
enter in public schools to acquire basic education. 9
With respect, however, to college scholarship grants, a reading of the pertinent laws of the Local
Government Code reveals that said grants are not among the projects for which the proceeds of the
SEF may be appropriated. It should be noted that Sections 100 (c) and 272 of the Local Government
Code substantially reproduced Section 1, of R.A. No. 5447. But, unlike payment of salaries of
teachers which falls within the ambit of "establishment and maintenance of extension classes" and
"operation and maintenance of public schools," the "granting of government scholarship to poor but
deserving students" was omitted in Sections 100 (c) and 272 of the Local Government Code. Casus
omissus pro omisso habendus est. A person, object, or thing omitted from an enumeration in a
statute must be held to have been omitted intentionally. It is not for this Court to supply such grant of
scholarship where the legislature has omitted it.10
In the same vein, however noble the intention of the province in extending said scholarship to
deserving students, we cannot apply the doctrine of necessary implication inasmuch as the grant of

scholarship is neither necessary nor indispensable to the operation and maintenance of public
schools. Instead, such scholarship grants may be charged to the General Funds of the province.
Pursuant to Section 1, Rule 6311 of the 1997 Rules of Civil Procedure, a petition for declaratory relief
may be filed before there is a breach or violation. The Solicitor General claims that the Notices of
Suspension issued by the COA to the respondent province amounted to a breach or violation, and
therefore, the petition for declaratory relief should have been denied by the trial court.
We are not convinced. As held in Shell Company of the Philippines, Ltd. v. Municipality of
Sipocot,12 my breach of the statute subject of the controversy will not affect the case; the action for
declaratory relief will prosper because the applicability of the statute in question to future
transactions still remains to be resolved. Absent a definite ruling in the instant case for declaratory
relief, doubts as to the disposition of the SEF will persist. Hence, the trial court did not err in giving
due course to the petition for declaratory relief filed by the province of Cebu.
WHEREFORE, in view of all the foregoing, the Decision of the Regional Trial Court of Cebu City,
Branch 20, in Civil Case No. CEB-24422, is AFFIRMED with MODIFICATION. The salaries and
personnel-related benefits of the teachers appointed by the provincial school board of Cebu in
connection with the establishment and maintenance of extension classes, are declared chargeable
against the Special Education Fund of the province. However, the expenses incurred by the
provincial government for the college scholarship grants should not be charged against the Special
Education Fund, but against the General Funds of the province of Cebu.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

EN BANC
G.R. No. 160031

December 18, 2008

SOCIAL
JUSTICE
SOCIETY
(SJS), petitioner,
vs.
HON. JOSE D. LINA, in his capacity as Secretary of the Department of Interior and Local
Government (DILG), Lipa City Mayor HON. VILMA SANTOS-RECTO, Pampanga Provincial
Governor HON. LITO LAPID, and Paraaque City Mayor HON. JOEY MARQUEZ, respondents.
DECISION
NACHURA, J.:
Assailed in this Rule 45 petition are the June 30, 2003 1 and the September 12, 2003 2 Orders of the
Regional Trial Court (RTC) of Manila, Branch 14 in Civil Case No. 02-104585.
Filed with the trial court on September 12, 2002, by petitioner Social Justice Society, a registered
political party, with the trial court was a petition for declaratory relief against the then Secretary of the
Department of Interior and Local Government (DILG), respondent Jose D. Lina,. 3 praying for
Presented for resolution in its petition is the proper construction of Section 90 of Republic Act (R.A.)
No. 7160, which provides that:
SEC. 90. Practice of Profession.
(a) All governors, city and municipal mayors are prohibited from practicing their profession or
engaging in any occupation other than the exercise of their functions as local chief
executives.
(b) Sanggunian members may practice their professions, engage in any occupation, or teach
in schools except during session hours: Provided, That sanggunian members who are
members of the Bar shall not:
(1) Appear as counsel before any court in any civil case wherein a local government
unit or any office, agency, or instrumentality of the government is the adverse party;
(2) Appear as counsel in any criminal case wherein an officer or employee of the
national or local government is accused of an offense committed in relation to his
office;
(3) Collect any fee for their appearance in administrative proceedings involving the
local government unit of which he is an official; and
(4) Use property and personnel of the Government except when
the sanggunian member concerned is defending the interest of the Government.

(c) Doctors of medicine may practice their profession even during official hours of work only
on occasions of emergency: Provided, That the officials concerned do not derive monetary
compensation therefrom. [Underscoring supplied.]
Based on the said provision, specifically paragraph (a) thereof, petitioner posited that actors who
were elected as governors, city and municipal mayors were disallowed by law to appear in movies
and television programs as one of the characters therein, for this would give them undue advantage
over their political opponents, and would considerably reduce the time that they must devote to their
constituents.4
To strengthen its point, petitioner later amended its petition to implead as additional respondents
then Lipa City Mayor Vilma Santos, then Pampanga Provincial Governor Lito Lapid, and then
Paraaque City Mayor Joey Marquez.5
Summing up the arguments of the other respondents in their respective pleadings, the DILG,
through the Office of the Solicitor General (OSG), moved for the dismissal of the petition on the
grounds that: (1) petitioner has no legal standing to file the petition, because it is not a "person
whose rights are affected" by the statute; (2) it is not the real party-in-interest; (3) there is no judicial
controversy; (4) there is no need for construction of the subject provision; (5) there is already a
breach of the statute as alleged in the petition itself; and (6) declaratory relief is not the proper
remedy.6
In the assailed June 30, 2003 Order,7 the trial court, sustaining the arguments of the DILG,
dismissed the petition for declaratory relief. It further denied, in the September 12, 2003
Order,8 petitioners motion for reconsideration.
Dissatisfied, petitioner filed the instant petition for review on certiorari before this Court on the
following grounds:
I.
THE REGIONAL TRIAL COURT SERIOUSLY ERRED IN DISMISSING PETITIONERS
PETITION FOR DECLARATORY RELIEF ON PURELY TECHNICAL GROUNDS.
II.
THE REGIONAL TRIAL COURT SERIOUSLY ERRED IN NOT RESOLVING THE ISSUE
RAISED IN THE PETITION FOR DECLARATORY RELIEF.9
Petitioner contends that it, a registered political party composed of citizens, established to
relentlessly pursue social justice in the Philippines, and allowed to field candidates in the elections,
has the legal interest and the right to be informed and enlightened, on whether or not their public
officials, who are paid out of public funds, can, during their tenure, lawfully appear as heroes or
villains in movies, or comedians in television shows, and flaunt their disdain for legal and ethical
standards. The determination further of a partys legal standing in actions for declaratory relief
involving laws should not be as rigid as when such action involves a deed, will or contract. 10
It also argues that a partys legal standing is a procedural technicality which may be set aside where
the issues raised are of paramount public interest. In the instant case, the importance of the issue
can never be minimized or discounted. The appearance of incumbent city or municipal mayors and
provincial governors, who are actors, in movies and television programs enhances their income but

reduces considerably the time that they should devote to their constituents. This is in violation of
Section 90 of R.A. No. 7160 and Section 7 of R.A. No. 6713 or the Code of Conduct and Ethical
Standards for Public Officials and Employees. Their appearance further gives them undue
advantage in future elections over their opponents who are not actors. 11
Petitioner likewise contends that the petition for declaratory relief should have been converted by the
trial court into an action for prohibition, considering that, in their pleadings, Governor Lapid and
Mayor Marquez offered justifications for their actionsfinancial constraints and freedom of
expression.12 Petitioner therefore prays that should the Court declares the respondents local chief
executives as unable to lawfully engage in their professions as actors, it must also prohibit them
from pursuing the same during their incumbency.13
The Court agrees with petitioners contentions on locus standi considering the liberal attitude it has
taken in recent decisions.
However, following rules of procedure, we find as proper the trial courts dismissal of the petition for
declaratory relief in Civil Case No. 02-104585., the petition for declaratory relief. Readily discernable
is that the same is an inappropriate remedy to enforce compliance with Section 90 of R.A. 7160, and
to prevent local chief executives Santos-Recto, Lapid and Marquez from taking roles in movies and
television shows. The Court, thus, finds grants as apt the OSGs move to dismiss the case.
Indeed, an action for declaratory relief should be filed by a person interested under a deed, a will, a
contract or other written instrument, and whose rights are affected by a statute, an executive order, a
regulation or an ordinance. The purpose of the remedy is to interpret or to determine the validity of
the written instrument and to seek a judicial declaration of the parties rights or duties
thereunder.14 For the action to prosper, it must be shown that (1) there is a justiciable controversy; (2)
the controversy is between persons whose interests are adverse; (3) the party seeking the relief has
a legal interest in the controversy; and (4) the issue is ripe for judicial determination. 15 Suffice it to
state that, in the petition filed with the trial court, petitioner failed to allege the ultimate facts which
satisfy these requisites. Not only that, as admitted by the petitioner, the provision the interpretation of
which is being sought has already been breached by the respondents. Declaratory relief cannot thus
be availed of.16
WHEREFORE, premises considered, the petition is DENIED. No pronouncement as to costs.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

THIRD DIVISION
G.R. No. 150806

January 28, 2008

EUFEMIA
ALMEDA
and
ROMEL
vs.
BATHALA MARKETING INDUSTRIES, INC., respondent.

ALMEDA, petitioners,

DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, of the Decision 1 of the
Court of Appeals (CA), dated September 3, 2001, in CA-G.R. CV No. 67784, and its
Resolution2 dated November 19, 2001. The assailed Decision affirmed with modification the
Decision3 of the Regional Trial Court (RTC), Makati City, Branch 136, dated May 9, 2000 in Civil
Case No. 98-411.
Sometime in May 1997, respondent Bathala Marketing Industries, Inc., as lessee, represented by its
president Ramon H. Garcia, renewed its Contract of Lease 4 with Ponciano L. Almeda (Ponciano), as
lessor, husband of petitioner Eufemia and father of petitioner Romel Almeda. Under the said
contract, Ponciano agreed to lease a portion of the Almeda Compound, located at 2208 Pasong
Tamo Street, Makati City, consisting of 7,348.25 square meters, for a monthly rental
of P1,107,348.69, for a term of four (4) years from May 1, 1997 unless sooner terminated as
provided in the contract. 5 The contract of lease contained the following pertinent provisions which
gave rise to the instant case:
SIXTH - It is expressly understood by the parties hereto that the rental rate stipulated is
based on the present rate of assessment on the property, and that in case the assessment
should hereafter be increased or any new tax, charge or burden be imposed by authorities
on the lot and building where the leased premises are located, LESSEE shall pay, when the
rental herein provided becomes due, the additional rental or charge corresponding to the
portion hereby leased; provided, however, that in the event that the present assessment or
tax on said property should be reduced, LESSEE shall be entitled to reduction in the
stipulated rental, likewise in proportion to the portion leased by him;
SEVENTH - In case an extraordinary inflation or devaluation of Philippine Currency should
supervene, the value of Philippine peso at the time of the establishment of the obligation
shall be the basis of payment; 6
During the effectivity of the contract, Ponciano died. Thereafter, respondent dealt with petitioners. In
a letter7dated December 29, 1997, petitioners advised respondent that the former shall assess and
collect Value Added Tax (VAT) on its monthly rentals. In response, respondent contended that VAT
may not be imposed as the rentals fixed in the contract of lease were supposed to include the VAT
therein, considering that their contract was executed on May 1, 1997 when the VAT law had long
been in effect.8

On January 26, 1998, respondent received another letter from petitioners informing the former that
its monthly rental should be increased by 73% pursuant to condition No. 7 of the contract and Article
1250 of the Civil Code. Respondent opposed petitioners' demand and insisted that there was no
extraordinary inflation to warrant the application of Article 1250 in light of the pronouncement of this
Court in various cases.9
Respondent refused to pay the VAT and adjusted rentals as demanded by petitioners but continued
to pay the stipulated amount set forth in their contract.
On February 18, 1998, respondent instituted an action for declaratory relief for purposes of
determining the correct interpretation of condition Nos. 6 and 7 of the lease contract to prevent
damage and prejudice.10 The case was docketed as Civil Case No. 98-411 before the RTC of Makati.
On March 10, 1998, petitioners in turn filed an action for ejectment, rescission and damages against
respondent for failure of the latter to vacate the premises after the demand made by the
former.11 Before respondent could file an answer, petitioners filed a Notice of Dismissal. 12 They
subsequently refiled the complaint before the Metropolitan Trial Court of Makati; the case was raffled
to Branch 139 and was docketed as Civil Case No. 53596.
Petitioners later moved for the dismissal of the declaratory relief case for being an improper remedy
considering that respondent was already in breach of the obligation and that the case would not end
the litigation and settle the rights of the parties. The trial court, however, was not persuaded, and
consequently, denied the motion.
After trial on the merits, on May 9, 2000, the RTC ruled in favor of respondent and against
petitioners. The pertinent portion of the decision reads:
WHEREFORE, premises considered, this Court renders judgment on the case as follows:
1) declaring that plaintiff is not liable for the payment of Value-Added Tax (VAT) of 10% of the
rent for [the] use of the leased premises;
2) declaring that plaintiff is not liable for the payment of any rental adjustment, there being no
[extraordinary] inflation or devaluation, as provided in the Seventh Condition of the lease
contract, to justify the same;
3) holding defendants liable to plaintiff for the total amount of P1,119,102.19, said amount
representing payments erroneously made by plaintiff as VAT charges and rental adjustment
for the months of January, February and March, 1999; and
4) holding defendants liable to plaintiff for the amount of P1,107,348.69, said amount
representing the balance of plaintiff's rental deposit still with defendants.
SO ORDERED.13
The trial court denied petitioners their right to pass on to respondent the burden of paying the VAT
since it was not a new tax that would call for the application of the sixth clause of the contract. The
court, likewise, denied their right to collect the demanded increase in rental, there being no
extraordinary inflation or devaluation as provided for in the seventh clause of the contract. Because
of the payment made by respondent of the rental adjustment demanded by petitioners, the court
ordered the restitution by the latter to the former of the amounts paid, notwithstanding the well-

established rule that in an action for declaratory relief, other than a declaration of rights and
obligations, affirmative reliefs are not sought by or awarded to the parties.
Petitioners elevated the aforesaid case to the Court of Appeals which affirmed with modification the
RTC decision. The fallo reads:
WHEREFORE, premises considered, the present appeal is DISMISSED and the appealed
decision in Civil Case No. 98-411 is hereby AFFIRMED with MODIFICATION in that the
order for the return of the balance of the rental deposits and of the amounts representing the
10% VAT and rental adjustment, is hereby DELETED.
No pronouncement as to costs.
SO ORDERED.14
The appellate court agreed with the conclusions of law and the application of the decisional rules on
the matter made by the RTC. However, it found that the trial court exceeded its jurisdiction in
granting affirmative relief to the respondent, particularly the restitution of its excess payment.
Petitioners now come before this Court raising the following issues:
I.
WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE IS APPLICABLE TO THE
CASE AT BAR.
II.
WHETHER OR NOT THE DOCTRINE ENUNCIATED IN FILIPINO PIPE AND FOUNDRY
CORP. VS. NAWASA CASE, 161 SCRA 32 AND COMPANION CASES ARE (sic)
APPLICABLE IN THE CASE AT BAR.
III.
WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN THE CASE OF DEL ROSARIO
VS. THE SHELL COMPANY OF THE PHILIPPINES, 164 SCRA 562, THE HONORABLE
COURT OF APPEALS SERIOUSLY ERRED ON A QUESTION OF LAW.
IV.
WHETHER OR NOT THE FINDING OF THE HONORABLE COURT OF APPEALS THAT
RESPONDENT IS NOT LIABLE TO PAY THE 10% VALUE ADDED TAX IS IN
ACCORDANCE WITH THE MANDATE OF RA 7716.
V.
WHETHER OR NOT DECLARATORY RELIEF IS PROPER SINCE PLAINTIFF-APPELLEE
WAS IN BREACH WHEN THE PETITION FOR DECLARATORY RELIEF WAS FILED
BEFORE THE TRIAL COURT.

In fine, the issues for our resolution are as follows: 1) whether the action for declaratory relief is
proper; 2) whether respondent is liable to pay 10% VAT pursuant to Republic Act (RA) 7716; and 3)
whether the amount of rentals due the petitioners should be adjusted by reason of extraordinary
inflation or devaluation.
Declaratory relief is defined as an action by any person interested in a deed, will, contract or other
written instrument, executive order or resolution, to determine any question of construction or validity
arising from the instrument, executive order or regulation, or statute, and for a declaration of his
rights and duties thereunder. The only issue that may be raised in such a petition is the question of
construction or validity of provisions in an instrument or statute. Corollary is the general rule that
such an action must be justified, as no other adequate relief or remedy is available under the
circumstances. 15
Decisional law enumerates the requisites of an action for declaratory relief, as follows: 1) the subject
matter of the controversy must be a deed, will, contract or other written instrument, statute, executive
order or regulation, or ordinance; 2) the terms of said documents and the validity thereof are doubtful
and require judicial construction; 3) there must have been no breach of the documents in question;
4) there must be an actual justiciable controversy or the "ripening seeds" of one between persons
whose interests are adverse; 5) the issue must be ripe for judicial determination; and 6) adequate
relief is not available through other means or other forms of action or proceeding. 16
It is beyond cavil that the foregoing requisites are present in the instant case, except that petitioners
insist that respondent was already in breach of the contract when the petition was filed.
We do not agree.
After petitioners demanded payment of adjusted rentals and in the months that followed, respondent
complied with the terms and conditions set forth in their contract of lease by paying the rentals
stipulated therein. Respondent religiously fulfilled its obligations to petitioners even during the
pendency of the present suit. There is no showing that respondent committed an act constituting a
breach of the subject contract of lease. Thus, respondent is not barred from instituting before the trial
court the petition for declaratory relief.
Petitioners claim that the instant petition is not proper because a separate action for rescission,
ejectment and damages had been commenced before another court; thus, the construction of the
subject contractual provisions should be ventilated in the same forum.
We are not convinced.
It is true that in Panganiban v. Pilipinas Shell Petroleum Corporation 17 we held that the petition for
declaratory relief should be dismissed in view of the pendency of a separate action for unlawful
detainer. However, we cannot apply the same ruling to the instant case. In Panganiban, the unlawful
detainer case had already been resolved by the trial court before the dismissal of the declaratory
relief case; and it was petitioner in that case who insisted that the action for declaratory relief be
preferred over the action for unlawful detainer. Conversely, in the case at bench, the trial court had
not yet resolved the rescission/ejectment case during the pendency of the declaratory relief petition.
In fact, the trial court, where the rescission case was on appeal, itself initiated the suspension of the
proceedings pending the resolution of the action for declaratory relief.
We are not unmindful of the doctrine enunciated in Teodoro, Jr. v. Mirasol18 where the declaratory
relief action was dismissed because the issue therein could be threshed out in the unlawful detainer
suit. Yet, again, in that case, there was already a breach of contract at the time of the filing of the

declaratory relief petition. This dissimilar factual milieu proscribes the Court from applying Teodoro to
the instant case.
Given all these attendant circumstances, the Court is disposed to entertain the instant declaratory
relief action instead of dismissing it, notwithstanding the pendency of the ejectment/rescission case
before the trial court. The resolution of the present petition would write finis to the parties' dispute, as
it would settle once and for all the question of the proper interpretation of the two contractual
stipulations subject of this controversy.
Now, on the substantive law issues.
Petitioners repeatedly made a demand on respondent for the payment of VAT and for rental
adjustment allegedly brought about by extraordinary inflation or devaluation. Both the trial court and
the appellate court found no merit in petitioners' claim. We see no reason to depart from such
findings.
As to the liability of respondent for the payment of VAT, we cite with approval the ratiocination of the
appellate court, viz.:
Clearly, the person primarily liable for the payment of VAT is the lessor who may choose to
pass it on to the lessee or absorb the same. Beginning January 1, 1996, the lease of real
property in the ordinary course of business, whether for commercial or residential use, when
the gross annual receipts exceed P500,000.00, is subject to 10% VAT. Notwithstanding the
mandatory payment of the 10% VAT by the lessor, the actual shifting of the said tax burden
upon the lessee is clearly optional on the part of the lessor, under the terms of the statute.
The word "may" in the statute, generally speaking, denotes that it is directory in nature. It is
generally permissive only and operates to confer discretion. In this case, despite the
applicability of the rule under Sec. 99 of the NIRC, as amended by R.A. 7716, granting the
lessor the option to pass on to the lessee the 10% VAT, to existing contracts of lease as of
January 1, 1996, the original lessor, Ponciano L. Almeda did not charge the lessee-appellee
the 10% VAT nor provided for its additional imposition when they renewed the contract of
lease in May 1997. More significantly, said lessor did not actually collect a 10% VAT on the
monthly rental due from the lessee-appellee after the execution of the May 1997 contract of
lease. The inevitable implication is that the lessor intended not to avail of the option granted
him by law to shift the 10% VAT upon the lessee-appellee. x x x. 19
In short, petitioners are estopped from shifting to respondent the burden of paying the VAT.
Petitioners' reliance on the sixth condition of the contract is, likewise, unavailing. This provision
clearly states that respondent can only be held liable for new taxes imposed after the effectivity of
the contract of lease, that is, after May 1997, and only if they pertain to the lot and the building where
the leased premises are located. Considering that RA 7716 took effect in 1994, the VAT cannot be
considered as a "new tax" in May 1997, as to fall within the coverage of the sixth stipulation.
Neither can petitioners legitimately demand rental adjustment because of extraordinary inflation or
devaluation.
Petitioners contend that Article 1250 of the Civil Code does not apply to this case because the
contract stipulation speaks of extraordinary inflation or devaluation while the Code speaks of
extraordinary inflation or deflation. They insist that the doctrine pronounced in Del Rosario v. The
Shell Company, Phils. Limited20 should apply.

Essential to contract construction is the ascertainment of the intention of the contracting parties, and
such determination must take into account the contemporaneous and subsequent acts of the parties.
This intention, once ascertained, is deemed an integral part of the contract. 21
While, indeed, condition No. 7 of the contract speaks of "extraordinary inflation or devaluation" as
compared to Article 1250's "extraordinary inflation or deflation," we find that when the parties used
the term "devaluation," they really did not intend to depart from Article 1250 of the Civil Code.
Condition No. 7 of the contract should, thus, be read in harmony with the Civil Code provision.
That this is the intention of the parties is evident from petitioners' letter 22 dated January 26, 1998,
where, in demanding rental adjustment ostensibly based on condition No. 7, petitioners made
explicit reference to Article 1250 of the Civil Code, even quoting the law verbatim. Thus, the
application of Del Rosario is not warranted. Rather, jurisprudential rules on the application of Article
1250 should be considered.
Article 1250 of the Civil Code states:
In case an extraordinary inflation or deflation of the currency stipulated should supervene,
the value of the currency at the time of the establishment of the obligation shall be the basis
of payment, unless there is an agreement to the contrary.
Inflation has been defined as the sharp increase of money or credit, or both, without a corresponding
increase in business transaction. There is inflation when there is an increase in the volume of money
and credit relative to available goods, resulting in a substantial and continuing rise in the general
price level.23 In a number of cases, this Court had provided a discourse on what constitutes
extraordinary inflation, thus:
[E]xtraordinary inflation exists when there is a decrease or increase in the purchasing power
of the Philippine currency which is unusual or beyond the common fluctuation in the value of
said currency, and such increase or decrease could not have been reasonably foreseen or
was manifestly beyond the contemplation of the parties at the time of the establishment of
the obligation.24
The factual circumstances obtaining in the present case do not make out a case of extraordinary
inflation or devaluation as would justify the application of Article 1250 of the Civil Code. We would
like to stress that the erosion of the value of the Philippine peso in the past three or four decades,
starting in the mid-sixties, is characteristic of most currencies. And while the Court may take judicial
notice of the decline in the purchasing power of the Philippine currency in that span of time, such
downward trend of the peso cannot be considered as the extraordinary phenomenon contemplated
by Article 1250 of the Civil Code. Furthermore, absent an official pronouncement or declaration by
competent authorities of the existence of extraordinary inflation during a given period, the effects of
extraordinary inflation are not to be applied. 25
WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals
in CA-G.R. CV No. 67784, dated September 3, 2001, and its Resolution dated November 19, 2001,
are AFFIRMED.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

EN BANC
G.R. No. 184915

June 30, 2009

NILO
T.
vs.
COMMISSION ON ELECTIONS and EMELITA B. ALMIRANTE, Respondents.

PATES, Petitioner,

RESOLUTION
BRION, J.:
Our Resolution of November 11, 2008 dismissed the petition in caption pursuant to Section 3, Rule
64 of the Rules of Court which provides:
SEC. 3. Time to file petition.The petition shall be filed within thirty (30) days from notice of the
judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or
reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of
the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the
aggrieved party may file the petition within the remaining period, but which shall not be less than five
(5) days in any event, reckoned from notice of denial.
taking into account the following material antecedents:
a. February 1, 2008 The COMELEC First Division issued its Resolution (assailed in the
petition);
b. February 4, 2008 The counsel for petitioner Nilo T. Pates (petitioner) received a copy of
the February 1, 2008 Resolution;
c. February 8, 2008 The petitioner filed his motion for reconsideration (MR) of the February
1, 2008 Resolution (4 days from receipt of the February 1, 2008 Resolution)
d. September 18, 2008 The COMELEC en banc issued a Resolution denying the
petitioners MR (also assailed in the petition).
e. September 22, 2008 The petitioner received the COMELEC en banc Resolution of
September 18, 2008
Under this chronology, the last day for the filing of a petition for certiorari, i.e., 30 days from notice of
the final COMELEC Resolution, fell on a Saturday (October 18, 2008), as the petitioner only had the
remaining period of 26 days to file his petition, after using up 4 days in preparing and filing his
Motion for Reconsideration. Effectively, the last day for filing was October 20, 2008 the following
Monday or the first working day after October 18, 2008. The petitioner filed his petition with us on
October 22, 2008 or two days late; hence, our Resolution of dismissal of November 11, 2008.
The Motion for Reconsideration

The petitioner asks us in his "Urgent Motion for Reconsideration with Reiteration for the Issuance of
a Temporary Restraining Order" to reverse the dismissal of his petition, arguing that the petition was
seasonably filed under the fresh period rule enunciated by the Supreme Court in a number of cases
decided beginning the year 2005. The "fresh period" refers to the original period provided under the
Rules of Court counted from notice of the ruling on the motion for reconsideration by the tribunal
below, without deducting the period for the preparation and filing of the motion for reconsideration.
He claims that, historically, the fresh period rule was the prevailing rule in filing petitions for certiorari.
This Court, he continues, changed this rule when it promulgated the 1997 Rules of Civil Procedure
and Circular No. 39-98, which both provided for the filing of petitions within the remainder of the
original period, the "remainder" being the original period less the days used up in preparing and filing
a motion for reconsideration. He then points out that on September 1, 2000 or only three years after,
this Court promulgated A.M. No. 00-02-03-SC bringing back the fresh period rule. According to the
petitioner, the reason for the change, which we supposedly articulated in Narzoles v. National Labor
Relations Commission,1 was the tremendous confusion generated by Circular No. 39-98.
The fresh period rule, the petitioner further asserts, was subsequently applied by this Court in the
following cases:
(1) Neypes v. Court of Appeals2 which thenceforth applied the fresh
eriod rule to ordinary appeals of decisions of the Regional Trial Court to the Court of
Appeals;
(2) Spouses de los Santos v. Vda. de Mangubat 3 reiterating Neypes;
(3) Active Realty and Development Corporation v. Fernandez 4 which, following Neypes,
applied the fresh period rule to ordinary appeals from the decisions of the Municipal Trial
Court to the Regional Trial Court; and
(4) Romero v. Court of Appeals 5 which emphasized that A.M. No. 00-02-03-SC is a curative
statute that may be applied retroactively.
A reading of the ruling in these cases, the petitioner argues, shows that this Court has consistently
held that the order or resolution denying the motion for reconsideration or new trial is considered as
the final order finally disposing of the case, and the date of its receipt by a party is the correct
reckoning point for counting the period for appellate review.
The Respondents Comment
We asked the respondents to comment on the petitioners motion for reconsideration. The Office of
the Solicitor General (OSG), citing Section 5, Rule 65 of the Rules of Court and its related cases,
asked via a "Manifestation and Motion" that it be excused from filing a separate comment. We
granted the OSGs manifestation and motion.
For her part, respondent Emelita B. Almirante (respondent Almirante) filed a comment stating that:
(1) we are absolutely correct in concluding that the petition was filed out of time; and (2) the
petitioners reliance on Section 4, Rule 65 of the Rules of Court (as amended by A.M. No. 00-02-03SC) is totally misplaced, as Rule 64, not Rule 65, is the vehicle for review of judgments and final
orders or resolutions of the COMELEC. Respondent Almirante points out that Rule 64 and Rule 65

are different; Rule 65 provides for a 60-day period for filing petitions forcertiorari, while Rule 64
provides for 30 days.
OUR RULING
We do not find the motion for reconsideration meritorious.
A. As a Matter of Law
Section 7, Article IX-A of the Constitution provides that unless otherwise provided by the Constitution
or by law, any decision, order, or ruling of each Commission may be brought to the Court
on certiorari by the aggrieved party within 30 days from receipt of a copy thereof. For this reason, the
Rules of Court provide for a separate rule (Rule 64) specifically applicable only to decisions of the
COMELEC and the Commission on Audit. This Rule expressly refers to the application of Rule 65 in
the filing of a petition for certiorari, subject to the exception clause "except as hereinafter
provided."6
Even a superficial reading of the motion for reconsideration shows that the petitioner has not
challenged our conclusion that his petition was filed outside the period required by Section 3, Rule
64; he merely insists that the fresh period rule applicable to a petition for certiorari under Rule 65
should likewise apply to petitions for certiorariof COMELEC rulings filed under Rule 64.
Rule 64, however, cannot simply be equated to Rule 65 even if it expressly refers to the latter rule.
They exist as separate rules for substantive reasons as discussed below. Procedurally, the most
patent difference between the two i.e., the exception that Section 2, Rule 64 refers to is Section 3
which provides for a special period for the filing of petitions for certiorari from decisions or rulings of
the COMELEC en banc. The period is 30 days from notice of the decision or ruling (instead of the 60
days that Rule 65 provides), with the intervening period used for the filing of any motion for
reconsideration deductible from the originally-granted 30 days (instead of the fresh period of 60 days
that Rule 65 provides).
Thus, as a matter of law, our ruling of November 11, 2008 to dismiss the petition for late filing cannot
but be correct. This ruling is not without its precedent; we have previously ordered a similar dismissal
in the earlier case of Domingo v. Commission on Elections. 7 The Court, too, has countless times in
the past stressed that the Rules of Court must be followed. Thus, we had this to say in Fortich v.
Corona:8
Procedural rules, we must stress, should be treated with utmost respect and due regard since they
are designed to facilitate the adjudication of cases to remedy the worsening problem of delay in the
resolution of rival claims and in the administration of justice. The requirement is in pursuance to the
bill of rights inscribed in the Constitution which guarantees that "all persons shall have a right to the
speedy disposition of their before all judicial, quasi-judicial and administrative bodies," the
adjudicatory bodies and the parties to a case are thus enjoined to abide strictly by the rules. While it
is true that a litigation is not a game of technicalities, it is equally true that every case must be
prosecuted in accordance with the prescribed procedure to ensure an orderly and speedy
administration of justice. There have been some instances wherein this Court allowed a relaxation in
the application of the rules, but this flexibility was "never intended to forge a bastion for erring
litigants to violate the rules with impunity." A liberal interpretation and application of the rules of
procedure can be resorted to only in proper cases and under justifiable causes and circumstances.
(Emphasis supplied)

As emphasized above, exceptional circumstances or compelling reasons may have existed in the
past when we either suspended the operation of the Rules or exempted a particular case from their
application.9 But, these instances were the exceptions rather than the rule, and we invariably took
this course of action only upon a meritorious plea for the liberal construction of the Rules of Court
based on attendant exceptional circumstances. These uncommon exceptions allowed us to maintain
the stability of our rulings, while allowing for the unusual cases when the dictates of justice demand
a correspondingly different treatment.
Under this unique nature of the exceptions, a party asking for the suspension of the Rules of Court
comes to us with the heavy burden of proving that he deserves to be accorded exceptional
treatment. Every plea for a liberal construction of the Rules must at least be accompanied by an
explanation of why the party-litigant failed to comply with the rules and by a justification for the
requested liberal construction.10
Significantly, the petitioner presented no exceptional circumstance or any compelling reason to
warrant the non-application of Section 3, Rule 64 to his petition. He failed to explain why his filing
was late. Other than his appeal to history, uniformity, and convenience, he did not explain why we
should adopt and apply the fresh period rule to an election case.
To us, the petitioners omissions are fatal, as his motion does not provide us any reason specific to
his case why we should act as he advocates.
B. As a Matter of Policy
In harking back to the history of the fresh period rule, what the petitioner apparently wants for
reasons of uniformity and convenience is the simultaneous amendment of Section 3, Rule 64 and
the application of his proposed new rule to his case. To state the obvious, any amendment of this
provision is an exercise in the power of this Court to promulgate rules on practice and procedure as
provided by Section 5(5), Article VIII of the Constitution. Our rulemaking, as every lawyer should
know, is different from our adjudicatory function. Rulemaking is an act of legislation, directly assigned
to us by the Constitution, that requires the formulation of policies rather than the determination of the
legal rights and obligations of litigants before us. As a rule, rulemaking requires that we consult with
our own constituencies, not necessarily with the parties directly affected in their individual cases, in
order to ensure that the rule and the policy that it enunciates are the most reasonable that we can
promulgate under the circumstances, taking into account the interests of everyone not the least of
which are the constitutional parameters and guidelines for our actions. We point these out as our
adjudicatory powers should not be confused with our rulemaking prerogative.
lavvphil

We acknowledge that the avoidance of confusion through the use of uniform standards is not without
its merits. We are not unmindful, too, that no less than the Constitution requires that "motions for
reconsideration of [division] decisions shall be decided by the Commission en banc."11 Thus, the
ruling of the Commission en bancon reconsideration is effectively a new ruling rendered separately
and independently from that made by a division.
Counterbalanced against these reasons, however, are other considerations no less weighty, the
most significant of which is the importance the Constitution and this Court, in obedience to the
Constitution, accord to elections and the prompt determination of their results. Section 3, Article IXC of the Constitution expressly requires that the COMELECs rules of procedure should expedite the
disposition of election cases. This Court labors under the same command, as our proceedings are in
fact the constitutional extension of cases that start with the COMELEC.
lawphil

Based on these considerations, we do not find convenience and uniformity to be reasons sufficiently
compelling to modify the required period for the filing of petitions for certiorari under Rule 64. While
the petitioner is correct in his historical data about the Courts treatment of the periods for the filing of
the different modes of review, he misses out on the reason why the period under Section 3, Rule 64
has been retained. The reason, as made clear above, is constitutionally-based and is no less than
the importance our Constitution accords to the prompt determination of election results. This reason
far outweighs convenience and uniformity. We significantly note that the present petition itself,
through its plea for the grant of a restraining order, recognizes the need for haste in deciding election
cases.
C. Our Liberal Approach
Largely for the same reason and as discussed below, we are not inclined to suspend the rules to
come to the rescue of a litigant whose counsel has blundered by reading the wrong applicable
provision. The Rules of Court are with us for the prompt and orderly administration of justice; litigants
cannot, after resorting to a wrong remedy, simply cry for the liberal construction of these rules. 12 Our
ruling in Lapid v. Laurea13 succinctly emphasized this point when we said:
Members of the bar are reminded that their first duty is to comply with the rules of procedure, rather
than seek exceptions as loopholes. Technical rules of procedure are not designed to frustrate the
ends of justice. These are provided to effect the prompt, proper and orderly disposition of cases and,
thus, effectively prevent the clogging of court dockets. Utter disregard of these rules cannot justly be
rationalized by harking on the policy of liberal construction. [Emphasis supplied.]
We add that even for this Court, liberality does not signify an unbridled exercise of discretion. It has
its limits; to serve its purpose and to preserve its true worth, it must be exercised only in the most
appropriate cases.14
WHEREFORE, premises considered, we DENY the motion for reconsideration for lack of merit. Our
Resolution of November 11, 2008 is hereby declared FINAL. Let entry of judgment be made in due
course.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

EN BANC
G.R. No. 193808

June 26, 2012

LUISK.
LOKIN,
JR.
and
TERESITA
F.
PLANAS, Petitioners,
vs.
COMMISSION ON ELECTIONS (COMELEC), CITIZENS BATTLE AGAINST CORRUPTION
PARTY LIST represented by VIRGINIA S. JOSE SHERWIN N. TUGNA, and CINCHONA CRUZGONZALES, Respondents,
DECISION
SERENO, J.:
The present petition having been flied beyond the reglementary period, Rule 64 of the Rules of Court
compels a dismissal on this basis alone. Despite petitioner's inexplicable disregard of basic
concepts, this Court deems it appropriate to reiterate the specific procedure for the review of
judgments made by the Commission on Elections (COMELEC) as laid down in Rule 64, and how it is
differentiated from the more general remedy afforded by Rule 65.
On 5 July 2010, the COMELEC First Division issued a Resolution 1 expunging the Certificate of
Nomination which included herein petitioners as representatives of the party-list group known as
Citizens Battle Against Corruption (CIBAC). The COMELEC en banc affirmed the said Resolution,
prompting Luis Lokin, Jr. and Teresita F. Planas to file the present Petition for Certiorari. Petitioners
allege grave abuse of discretion on the part of the COMELEC in issuing both Resolutions, praying
that they be recognized as the legitimate nominees of CIBAC party-list, and that petitioner Lokin, Jr.
be proclaimed as the CIBAC party-list representative to the House of Representatives.
Respondent CIBAC party-list is a multi-sectoral party registered 2 under Republic Act No. (R.A.) 7941,
otherwise known as the Party- List System Act. As stated in its constitution and bylaws, the platform
of CIBAC is to fight graft and corruption and to promote ethical conduct in the countrys public
service.3 Under the leadership of the National Council, its highest policymaking and governing body,
the party participated in the 2001, 2004, and 2007 elections. 4 On 20 November 2009, two different
entities, both purporting to represent CIBAC, submitted to the COMELEC a "Manifestation of Intent
to Participate in the Party-List System of Representation in the May 10, 2010 Elections." The first
Manifestation5 was signed by a certain Pia B. Derla, who claimed to be the partys acting secretarygeneral. At 1:30 p.m. of the same day, another Manifestation 6 was submitted by herein respondents
Cinchona Cruz-Gonzales and Virginia Jose as the partys vice-president and secretary-general,
respectively.
On 15 January 2010, the COMELEC issued Resolution No. 8744 7giving due course to CIBACs
Manifestation, "WITHOUT PREJUDICE TO the determination which of the two factions of the
registered party-list/coalitions/sectoral organizations which filed two (2) manifestations of intent to
participate is the official representative of said party-list/coalitions/sectoral organizations xxx." 8
On 19 January 2010, respondents, led by President and Chairperson Emmanuel Joel J. Villanueva,
submitted the Certificate of Nomination 9 of CIBAC to the COMELEC Law Department. The

nomination was certified by Villanueva and Virginia S. Jose. On 26 March 2010, Pia Derla submitted
a second Certificate of Nomination, 10which included petitioners Luis Lokin, Jr. and Teresita Planas as
party-list nominees. Derla affixed to the certification her signature as "acting secretary-general" of
CIBAC.
Claiming that the nomination of petitioners Lokin, Jr. and Planas was unauthorized, respondents filed
with the COMELEC a "Petition to Expunge From The Records And/Or For Disqualification," seeking
to nullify the Certificate filed by Derla. Respondents contended that Derla had misrepresented
herself as "acting secretary-general," when she was not even a member of CIBAC; that the
Certificate of Nomination and other documents she submitted were unauthorized by the party and
therefore invalid; and that it was Villanueva who was duly authorized to file the Certificate of
Nomination on its behalf.11
In the Resolution dated 5 July 2010, the COMELEC First Division granted the Petition, ordered the
Certificate filed by Derla to be expunged from the records, and declared respondents faction as the
true nominees of CIBAC.12Upon Motion for Reconsideration separately filed by the adverse parties,
the COMELEC en banc affirmed the Divisions findings. In a per curiam Resolution dated 31 August
2010,13 the Commission reiterated that Pia Derla was unable to prove her authority to file the said
Certificate, whereas respondents presented overwhelming evidence that Villanueva deputized
CIBAC Secretary General Virginia Jose to submit the Certificate of Nomination pursuant to CIBACs
Constitution and bylaws.
Petitioners now seek recourse with this Court in accordance with Rules 64 and 65 of the Rules of
Court, raising these issues: I) Whether the authority of Secretary General Virginia Jose to file the
partys Certificate of Nomination is an intra-corporate matter, exclusively cognizable by special
commercial courts, and over which the COMELEC has no jurisdiction; and II) Whether the
COMELEC erred in granting the Petition for Disqualification and recognizing respondents as the
properly authorized nominees of CIBAC party-list.
As earlier stated, this Court denies the petition for being filed outside the requisite period. The review
by this Court of judgments and final orders of the COMELEC is governed specifically by Rule 64 of
the Rules of Court, which states:
Sec. 1. Scope. This rule shall govern the review of judgments and final orders or resolutions of the
Commission on Elections and the Commission on Audit.
Sec. 2. Mode of review. A judgment or final order or resolution of the Commission on Elections and
the Commission on Audit may be brought by the aggrieved party to the Supreme Court on certiorari
under Rule 65, except as hereinafter provided.
The exception referred to in Section 2 of this Rule refers precisely to the immediately succeeding
provision, Section 3 thereof, 14 which provides for the allowable period within which to file petitions for
certiorari from judgments of both the COMELEC and the Commission on Audit. Thus, while Rule 64
refers to the same remedy of certiorari as the general rule in Rule 65, they cannot be equated, as
they provide for different reglementary periods. 15 Rule 65 provides for a period of 60 days from notice
of judgment sought to be assailed in the Supreme Court, while Section 3 expressly provides for only
30 days, viz:
SEC. 3. Time to file petition.The petition shall be filed within thirty (30) days from notice of the
judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or
reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of
the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the

aggrieved party may file the petition within the remaining period, but which shall not be less than five
(5) days in any event, reckoned from notice of denial.
Petitioner received a copy of the first assailed Resolution on 12 July 2010. Upon the Motion for
Reconsideration filed by petitioners on 15 July 2010, the COMELEC en banc issued the second
assailed Resolution on 31 August 2010. This per curiam Resolution was received by petitioners on 1
September 2010.16 Thus, pursuant to Section 3 above, deducting the three days it took petitioners to
file the Motion for Reconsideration, they had a remaining period of 27 days or until 28 September
2010 within which to file the Petition for Certiorari with this Court.
However, petitioners filed the present Petition only on 1 October 2010, clearly outside the required
period. In Pates v. Commission on Elections and Domingo v. Commission on Elections, 17 we have
established that the fresh-period rule used in Rule 65 does not similarly apply to the timeliness of
petitions under Rule 64. In Pates, this Court dismissed the
Petition for Certiorari on the sole ground that it was belatedly filed, reasoning thus:
x x x. While it is true that a litigation is not a game of technicalities, it is equally true that every case
must be prosecuted in accordance with the prescribed procedure to ensure an orderly and speedy
administration of justice. There have been some instances wherein this Court allowed a relaxation in
the application of the rules, but this flexibility was "never intended to forge a bastion for erring
litigants to violate the rules with impunity."
xxx

xxx

xxx

Under this unique nature of the exceptions, a party asking for the suspension of the Rules of Court
comes to us with the heavy burden of proving that he deserves to be accorded exceptional
treatment. Every plea for a liberal construction of the Rules must at least be accompanied by an
explanation of why the party-litigant failed to comply with the rules and by a justification for the
requested liberal construction.
xxx

xxx

xxx

x x x. Section 3, Article IX-C of the Constitution expressly requires that the COMELECs rules of
procedure should expedite the disposition of election cases. This Court labors under the same
command, as our proceedings are in fact the constitutional extension of cases that start with the
COMELEC.
Based on these considerations, we do not find convenience and uniformity to be reasons sufficiently
compelling to modify the required period for the filing of petitions for certiorari under Rule 64. While
the petitioner is correct in his historical data about the Courts treatment of the periods for the filing of
the different modes of review, he misses out on the reason why the period under Section 3, Rule 64
has been retained. The reason, as made clear above, is constitutionally-based and is no less than
the importance our Constitution accords to the prompt determination of election results. 18 x x x.
(Emphasis supplied, footnotes omitted.)
In this case, petitioners do not even attempt to explain why the Petition was filed out of time. Clearly,
they are aware of the applicable period for filing, as they themselves invoke the remedy under Rule
64 in conjunction with Rule 65. Hence, there is no acceptable reason for their failure to comply with
the proper procedure. But even if this Court were to apply liberality and take cognizance of the late

Petition, the arguments therein are flawed. The COMELEC has jurisdiction over cases pertaining
to party leadership and the nomination of party-list representatives.
Petitioners contend that the COMELEC never should have taken cognizance of respondents
Petition to Expunge and/or for Disqualification. They have reached this conclusion by characterizing
the present matter as an intra-corporate dispute and, thus, cognizable only by special commercial
courts, particularly the designated commercial court in this case, the Regional Trial Court in Pasig
City.19 Pia Derla purportedly filed the Certificate of Nomination pursuant to the authority granted by
the Board of Trustees of the "CIBAC Foundation, Inc.," the non-stock entity that is registered with the
Securities and Exchange Commission (SEC).20
Thus, petitioners insist that the group that participated in the party-list system in the 2004 and 2007
elections was the SEC-registered entity, and not the National Council, which had allegedly become
defunct since 2003. That was the year when CIBAC Foundation, Inc. was established and registered
with the SEC.21 On the other hand, respondents counter that the foundation was established solely
for the purpose of acting as CIBACs legal and financial arm, as provided by the partys Constitution
and bylaws. It was never intended to substitute for, or oust CIBAC, the party-list itself. 22
Even as petitioners insisted on the purely intra-corporate nature of the conflict between "CIBAC
Foundation" and the CIBAC Sectoral Party, they submitted their Certificate of Nomination and
Manifestation of Intent to participate in the party-list elections. Precisely, petitioners were seeking the
COMELECs approval of their eligibility to participate in the upcoming party-list elections. In effect,
they invoke its authority under the Party-List System Act. 23 Contrary to their stance that the present
dispute stemmed from an intra-corporate matter, their submissions even recognize the COMELECs
constitutional power to enforce and administer all laws relative to the conduct of an election,
plebiscite, initiative, referendum, and recall. 24 More specifically, as one of its constitutional functions,
the COMELEC is also tasked to "register, after sufficient publication, political parties, organizations,
or coalitions which, in addition to other requirements, must present their platform or program of
government."25
In any case, the COMELECs jurisdiction to settle the struggle for leadership within the party is well
established. This singular power to rule upon questions of party identity and leadership is exercised
by the COMELEC as an incident to its enforcement powers. In Laban ng Demokratikong Pilipino v.
Commission on Elections,26 the Court held:
x x x. Corollary to the right of a political party "to identify the people who constitute the association
and to select a standard bearer who best represents the partys ideologies and preference" is the
right to exclude persons in its association and to not lend its name and prestige to those which it
deems undeserving to represent its ideals. A certificate of candidacy makes known to the COMELEC
that the person therein mentioned has been nominated by a duly authorized political group
empowered to act and that it reflects accurately the sentiment of the nominating body. A candidates
political party affiliation is also printed followed by his or her name in the certified list of candidates. A
candidate misrepresenting himself or herself to be a partys candidate, therefore, not only
misappropriates the partys name and prestige but foists a deception upon the electorate, who may
unwittingly cast its ballot for him or her on the mistaken belief that he or she stands for the partys
principles. To prevent this occurrence, the COMELEC has the power and the duty to step in and
enforce the law not only to protect the party but, more importantly, the electorate, in line with the
Commissions broad constitutional mandate to ensure orderly elections. 27 (Emphasis supplied.)
Similar to the present case, Laban delved into the issue of leadership for the purpose of determining
which officer or member was the duly authorized representative tasked with filing the Certificate of
Nomination, pursuant to its Constitution and bylaws, to wit:

The only issue in this case, as defined by the COMELEC itself, is who as between the Party
Chairman and the Secretary General has the authority to sign certificates of candidacy of the official
candidates of the party. Indeed, the petitioners Manifestation and Petition before the
COMELEC merely asked the Commission to recognize only those certificates of candidacy signed
by petitioner Sen. Angara or his authorized representative, and no other.28
In the 2010 case Atienza v. Commission on Elections, 29 it was expressly settled that the COMELEC
possessed the authority to resolve intra-party disputes as a necessary tributary of its constitutionally
mandated power to enforce election laws and register political parties. The Court therein cited Kalaw
v. Commission on Elections and Palmares v. Commission on Elections, which uniformly upheld the
COMELECs jurisdiction over intra-party disputes:
The COMELECs jurisdiction over intra-party leadership disputes has already been settled by the
Court. The Court ruled in Kalaw v. Commission on Elections that the COMELECs powers and
functions under Section 2, Article IX-C of the Constitution, "include the ascertainment of the identity
of the political party and its legitimate officers responsible for its acts." The Court also declared in
another case that the COMELECs power to register political parties necessarily involved the
determination of the persons who must act on its behalf. Thus, the COMELEC may resolve an intraparty leadership dispute, in a proper case brought before it, as an incident of its power to register
political parties.30
Furthermore, matters regarding the nomination of party-list representatives, as well as their
individual qualifications, are outlined in the Party-List System Law. Sections 8 and 9 thereof state:
Sec. 8. Nomination of Party-List Representatives. Each registered party, organization or coalition
shall submit to the COMELEC not later than forty-five (45) days before the election a list of names,
not less than five (5), from which party-list representatives shall be chosen in case it obtains the
required number of votes.
A person may be nominated in one (1) list only. Only persons who have given their consent in writing
may be named in the list. The list shall not include any candidate for any elective office or a person
who has lost his bid for an elective office in the immediately preceding election. No change of names
or alteration of the order of nominees shall be allowed after the same shall have been submitted to
the COMELEC except in cases where the nominee dies, or withdraws in writing his nomination,
becomes incapacitated in which case the name of the substitute nominee shall be placed last in the
list. Incumbent sectoral representatives in the House of Representatives who are nominated in the
party-list system shall not be considered resigned.
Sec. 9. Qualifications of Party-List Nominees. No person shall be nominated as party-list
representative unless he is a natural-born citizen of the Philippines, a registered voter, a resident of
the Philippines for a period of not less than one (1)year immediately preceding the day of the
election, able to read and write, a bona fide member of the party or organization which he seeks to
represent for at least ninety (90) days preceding the day of the election, and is at least twenty-five
(25) years of age on the day of the election.
By virtue of the aforesaid mandate of the Party-List Law vesting the COMELEC with jurisdiction over
the nomination of party-list representatives and prescribing the qualifications of each nominee, the
COMELEC promulgated its "Rules on Disqualification Cases Against Nominees of Party-List Groups/
Organizations Participating in the 10 May 2010 Automated National and Local Elections." 31 Adopting
the same qualifications of party-list nominees listed above, Section 6 of these Rules also required
that:

The party-list group and the nominees must submit documentary evidence in consonance with the
Constitution, R.A. 7941 and other laws to duly prove that the nominees truly belong to the
marginalized and underrepresented sector/s, the sectoral party, organization, political party or
coalition they seek to represent, which may include but not limited to the following:
a. Track record of the party-list group/organization showing active participation of the
nominee/s in the undertakings of the party-list group/organization for the advancement of the
marginalized and underrepresented sector/s, the sectoral party, organization, political party
or coalition they seek to represent;
b. Proofs that the nominee/s truly adheres to the advocacies of the party-list
group/organizations (prior declarations, speeches, written articles, and such other positive
actions on the part of the nominee/s showing his/her adherence to the advocacies of the
party-list group/organizations);
c. Certification that the nominee/s is/are a bona fide member of the party-list group/
organization for at least ninety (90) days prior to the election; and
d. In case of a party-list group/organization seeking representation of the marginalized and
underrepresented sector/s, proof that the nominee/s is not only an advocate of the partylist/organization but is/are also a bona fide member/s of said marginalized and
underrepresented sector.
The Law Department shall require party-list group and nominees to submit the foregoing
documentary evidence if not complied with prior to the effectivity of this resolution not later than
three (3) days from the last day of filing of the list of nominees.
Contrary to petitioners stance, no grave abuse of discretion is attributable to the COMELEC First
Division and the COMELEC en banc. The tribunal correctly found that Pia Derlas alleged authority
as "acting secretary-general" was an unsubstantiated allegation devoid of any supporting evidence.
Petitioners did not submit any documentary evidence that Derla was a member of CIBAC, let alone
the representative authorized by the party to submit its Certificate of Nomination. 32 The COMELEC
ruled:
1wphi1

A careful perusal of the records readily shows that Pia B. Derla, who has signed and submitted, as
the purported Acting Secretary General of CIBAC, the Certificates of Nomination of Respondents,
has no authority to do so. Despite Respondents repeated claim that Ms. Derla is a member and
officer of CIBAC, they have not presented any proof in support of the same. We are at a loss as to
the manner by which Ms. Derla has assumed the post, and We see nothing but Respondents claims
and writings/certifications by Ms. Derla herself that point to that alleged fact. Surely, We cannot rely
on these submissions, as they are the very definition of self-serving declarations.
On the other handWe cannot help but be convinced that it was Emmanuel Joel J. Villanueva, as
the Party President and Chairman, who had been given the sole authority, at least for the 10 May
2010 Elections, to submit the list of nominees for the Party. The records would show that, in
accordance with the Partys Constitution and by-laws, its National Council, the highest policymaking
and governing body of the Party, met on 12 November 2009 and there being a quorum, then
proceeded to elect its new set of officers, which included Mr. Villanueva as both Party President and
Party Chairman, and Virginia S. Jose as Party Secretary General. During the same meeting, the
Partys New Electoral Congress, which as per the CIBACs Constitution and By-Laws, was also
composed of the National Council Members and had the task of choosing the nominees for the Party
in the Party-List Elections, unanimously ruled to delegate to the Party President such latter function.

This set of facts, which had not been belied by concrete contrary evidence, weighed heavily against
Respondents and favorably for Petitioner.33
Pia Derla, who is not even a member of CIBAC, is thus a virtual stranger to the party-list, and clearly
not qualified to attest to petitioners as CIBAC nominees, or certify their nomination to the
COMELEC. Petitioners cannot use their registration with the SEC as a substitute for the evidentiary
requirement to show that the nominees, including Derla, are bona fide members of the party.
Petitioners Planas and Lokin, Jr. have not even presented evidence proving the affiliation of the socalled Board of Trustees to the CIBAC Sectoral Party that is registered with COMELEC.
Petitioners cannot draw authority from the Board of Trustees of the SEC-registered entity, because
the Constitution of CIBAC expressly mandates that it is the National Council, as the governing body
of CIBAC, that has the power to formulate the policies, plans, and programs of the Party, and to
issue decisions and resolutions binding on party members and officers. 34 Contrary to petitioners
allegations, the National Council of CIBAC has not become defunct, and has certainly not been
replaced by the Board of Trustees of the SEC-registered entity. The COMELEC carefully perused the
documents of the organization and outlined the process followed by the National Council before it
complied with its task of choosing the partys nominees.This was based on the "Minutes of Meeting
of CIBAC Party-List National Council" held on 12 November 2009, which respondents attached to
their Memorandum.35
For its part, the COMELEC en banc also enumerated the documentary evidence that further
bolstered respondents claim that it is Chairman Villanueva and Secretary General Virginia Jose who
were duly authorized to submit the Certificate of Nomination to the COMELEC. 36 These include:
a. The Joint Affidavit of Resolutions of the CIBAC National Council and the National Electoral
Congress of CIBAC dated 12 November 2009;
b. Certificate of Deputization and Delegation of Authority issued to CIBAC Secretary-General
Virginia S. Jose by the CIBAC President;
c. Constitution and By-Laws of CIBAC as annexed to its Petition for Registration as Sectoral
Organization Under the Party-List System filed by CIBAC on 13 November 2000; and
d. Manifestation dated 8 January 2010 by CIBACs Secretary General Virginia S. Jose
providing the official list of officers of CIBAC.37
WHEREFORE , finding no grave abuse of discretion on the part of the COMELEC in issuing the
assailed Resolutions, the instant Petition is DISMISSED. This Court AFFIRMS the judgment of the
COMELEC expunging from its records the Certificate of Nomination filed on 26 March 2010 by Pia
B. Derla. The nominees, as listed in the Certificate of Nomination filed on 19 January 2010 by
Emmanuel Joel J. Villanueva, President and Chairman of Citizens Battle Against Corruption
(CIBAC) Party List, are recognized as the legitimate nominees of the said party.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

EN BANC
G.R. No. 188818

May 31, 2011

TOMAS R. OSMEA, in his personal capacity and in his capacity as City Mayor of Cebu
City, Petitioner,
vs.
THE COMMISSION ON AUDIT, Respondent.
DECISION
BRION, J.:
Before the Court is the Petition for Certiorari 1 filed by Tomas R. Osmea, former mayor of the City of
Cebu, under Rule 64 of the Rules of Court. The petition seeks the reversal of the May 6, 2008
Decision2 and the June 8, 2009 Resolution3 of the respondent Commission on Audit (COA), which
disallowed the damages, attorneys fees and litigation expenses awarded in favor of two construction
companies in the collection cases filed against the City of Cebu, and made these charges the
personal liability of Osmea for his failure to comply with the legal requirements for the disbursement
of public funds.
BACKGROUND FACTS
The City of Cebu was to play host to the 1994 Palarong Pambansa (Palaro). In preparation for the
games, the City engaged the services of WT Construction, Inc. (WTCI) and Dakay Construction and
Development Company (DCDC) to construct and renovate the Cebu City Sports Complex. Osmea,
then city mayor, was authorized by the Sangguniang Panlungsod (Sanggunian) of Cebu to represent
the City and to execute the construction contracts.
While the construction was being undertaken, Osmea issued a total of 20 Change/Extra Work
Orders to WTCI, amounting to P35,418,142.42 (about 83% of the original contract price), and to
DCDC, amounting toP15,744,525.24 (about 31% of the original contract price). These Change/Extra
Work Orders were not covered by any Supplemental Agreement, nor was there a prior authorization
from the Sanggunian. Nevertheless, the work proceeded on account of the "extreme urgency and
need to have a suitable venue for the Palaro." 4 The Palaro was successfully held at the Cebu City
Sports Complex during the first six months of 1994.
Thereafter, WTCI and DCDC demanded payment for the extra work they performed in the
construction and renovation of the sports complex. A Sanggunian member, Councilor Augustus
Young, sponsored a resolution authorizing Osmea to execute the supplemental agreements with
WTCI and DCDC to cover the extra work performed, but the other Sanggunian members refused to
pass the resolution. Thus, the extra work completed by WTCI and DCDC was not covered by the
necessary appropriation to effect payment, prompting them to file two separate collection cases
before the Regional Trial Court (RTC) of Cebu City (Civil Case Nos. CEB-17004 5 and CEB-171556 ).
The RTC found the claims meritorious, and ordered the City to pay for the extra work performed.The
RTC likewise awarded damages, litigation expenses and attorneys fees in the amount
ofP2,514,255.40 to WTCI7 and P102,015.00 to DCDC.8 The decisions in favor of WTCI and DCDC

were affirmed on appeal, subject to certain modifications as to the amounts due, and have become
final. To satisfy the judgment debts, the Sanggunian finally passed the required appropriation
ordinances.
During post-audit, the City Auditor issued two notices disallowing the payment of litigation expenses,
damages, and attorneys fees to WTCI and DCDC.9 The City Auditor held Osmea, the members of
the Sanggunian, and the City Administrator liable for the P2,514,255.40 and P102,015.00 awarded
to WTCI and DCDC, respectively, as damages, attorneys fees, and interest charges. These
amounts, the City Auditor concluded, wereunnecessary expenses for which the public officers
should be held liable in their personal capacities pursuant to the law.
Osmea and the members of the Sanggunian sought reconsideration of the disallowance with the
COA Regional Office, which, through a 2nd Indorsement dated April 30, 2003, 10 modified the City
Auditors Decision by absolving the members of the sanggunian from any liability. It declared that the
payment of the amounts awarded as damages and attorneys fees should solely be Osmeas
liability, as it was him who ordered the change or extra work orders without the supplemental
agreement required by law, or the prior authorization from the Sanggunian. The Sanggunian
members cannot be held liable for refusing to enact the necessary ordinance appropriating funds for
the judgment award because they are supposed to exercise their own judgment and discretion in the
performance of their functions; they cannot be mere "rubber stamps" of the city mayor.
The COA Regional Offices Decision was sustained by the COAs National Director for Legal and
Adjudication (Local Sector) in a Decision dated January 16, 2004. 11 Osmea filed an appeal against
this Decision.
On May 6, 2008, the COA issued the assailed Decision which affirmed the notices of
disallowance.12 Osmea received a copy of the Decision on May 23, 2008. Eighteen days after or on
June 10, 2008, Osmea filed a motion for reconsideration of the May 6, 2008 COA Decision.
The COA denied Osmeas motion via a Resolution dated June 8, 2009. 13 The Office of the Mayor of
Cebu City received the June 8, 2009 Resolution of the COA on June 29, 2009. A day before,
however, Osmea left for the United States of America for his check-up after his cancer surgery in
April 2009 and returned to his office only on July 15, 2009. Thus, it was only on July 27, 2009 that
Osmea filed the present petition for certiorari under Rule 64 to assail the COAs Decision of May 6,
2008 and Resolution of June 8, 2009.
THE PETITION
Rule 64 of the Rules of Court governs the procedure for the review of judgments and final orders or
resolutions of the Commission on Elections and the COA. Section 3 of the same Rule provides for a
30-day period, counted from the notice of the judgment or final order or resolution sought to be
reviewed, to file the petition for certiorari. The Rule further states that the filing of a motion for
reconsideration of the said judgment or final order or resolution interrupts the 30-day period.
Osmea filed his motion for reconsideration, of the COAs May 6, 2008 Decision, 18 days from his
receipt thereof, leaving him with 12 days to file a Rule 64 petition against the COA ruling. He argues
that the remaining period should be counted not from the receipt of the COAs June 8, 2009
Resolution by the Office of the Mayor of Cebu City on June 29, 2009, but from the time he officially
reported back to his office on July 15, 2009, after his trip abroad. Since he is being made liable in his
personal capacity, he reasons that the remaining period should be counted from his actual
knowledge of the denial of his motion for reconsideration. Corollary, he needed time to hire a private
counsel who would review his case and prepare the petition.

Osmea pleads that his petition be given due course for the resolution of the important issues he
raised. The damages and interest charges were awarded on account of the delay in the payment of
the extra work done by WTCI and DCDC, which delay Osmea attributes to the refusal of the
Sanggunian to appropriate the necessary amounts. Although Osmea acknowledges the legal
necessity for a supplemental agreement for any extra work exceeding 25% of the original contract
price, he justifies the immediate execution of the extra work he ordered (notwithstanding the lack of
the supplemental agreement) on the basis of the extreme urgency to have the construction and
repairs on the sports complex completed in time for the holding of the Palaro. He claims that the
contractors themselves did not want to embarrass the City and, thus, proceeded to perform the extra
work even without the supplemental agreement.
Osmea also points out that the City was already adjudged liable for the principal sum due for the
extra work orders and had already benefitted from the extra work orders by accepting and using the
sports complex for the Palaro. For these reasons, he claims that all consequences of the liability
imposed, including the payment of damages and interest charges, should also be shouldered by the
City and not by him.
THE COURTS RULING
Relaxation of procedural rules to give effect to a partys right to appeal
Section 3, Rule 64 of the Rules of Court states:
SEC. 3. Time to file petition.The petition shall be filed within thirty (30) days from notice of the
judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or
reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of
the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the
aggrieved party may file the petition within the remaining period, but which shall not be less than five
(5) days in any event, reckoned from notice of denial. [Emphasis ours.]
Several times in the past, we emphasized that procedural rules should be treated with utmost
respect and due regard, since they are designed to facilitate the adjudication of cases to remedy the
worsening problem of delay in the resolution of rival claims and in the administration of justice. From
time to time, however, we have recognized exceptions to the Rules but only for the most compelling
reasons where stubborn obedience to the Rules would defeat rather than serve the ends of justice.
Every plea for a liberal construction of the Rules must at least be accompanied by an explanation of
why the party-litigant failed to comply with the Rules and by a justification for the requested liberal
construction.14 Where strong considerations of substantive justice are manifest in the petition, this
Court may relax the strict application of the rules of procedure in the exercise of its legal
jurisdiction.15
Osmea cites the mandatory medical check-ups he had to undergo in Houston, Texas after his
cancer surgery in April 2009 as reason for the delay in filing his petition for certiorari. Due to his
weakened state of health, he claims that he could not very well be expected to be bothered by the
affairs of his office and had to focus only on his medical treatment. He could not require his office to
attend to the case as he was being charged in his personal capacity.
We find Osmeas reasons sufficient to justify a relaxation of the Rules. Although the service of the
June 8, 2009 Resolution of the COA was validly made on June 29, 2009 through the notice sent to
the Office of the Mayor of Cebu City,16 we consider July 15, 2009 the date he reported back to
office as the effective date when he was actually notified of the resolution, and the reckoning date

of the period to appeal. If we were to rule otherwise, we would be denying Osmea of his right to
appeal the Decision of the COA, despite the merits of his case.
Moreover, a certiorari petition filed under Rule 64 of the Rules of Court must be verified, and a
verification requires the petitioner to state under oath before an authorized officer that he has read
the petition and that the allegations therein are true and correct of his personal knowledge. Given
that Osmea was out of the country to attend to his medical needs, he could not comply with the
requirements to perfect his appeal of the Decision of the COA.
While the Court has accepted verifications executed by a petitioners counsel who personally knows
the truth of the facts alleged in the pleading, this was an alternative not available to Osmea, as he
had yet to secure his own counsel. Osmea could not avail of the services of the City Attorney, as
the latter is authorized to represent city officials only in their official capacity. 17 The COA pins liability
for the amount of damages paid to WTCI and DCDC on Osmea in his personal capacity, pursuant
to Section 103 of Presidential Decree No. 1445 (PD 1445). 18
Thus, the reckoning date to count the remaining 12 days to file his Rule 64 petition should be
counted from July 15, 2009, the date Osmea had actual knowledge of the denial of his motion for
reconsideration of the Decision of the COA and given the opportunity to competently file an appeal
thereto before the Court. The present petition, filed on July 27, 2009, was filed within the
reglementary period.
Personal liability for expenditures of government fund when made in violation of law
The Courts decision to adopt a liberal application of the rules stems not only from humanitarian
considerations discussed earlier, but also on our finding of merit in the petition.
Section 103 of PD 1445 declares that "[e]xpenditures of government funds or uses of government
property in violation of law or regulations shall be a personal liability of the official or employee found
to be directly responsible therefor." Notably, the public officials personal liability arises only if the
expenditure of government funds was made in violation of law. In this case, the damages were paid
to WTCI and DCDC pursuant to final judgments rendered against the City for its unreasonable delay
in paying its obligations. The COA, however, declared that the judgments, in the first place, would
not be rendered against the City had it not been for the change and extra work orders that Osmea
made which (a) it considered as unnecessary, (b) were without the Sanggunians approval, and (c)
were not covered by a supplemental agreement.
The term "unnecessary," when used in reference to expenditure of funds or uses of property, is
relative. In Dr. Teresita L. Salva, etc. v. Guillermo N. Carague, etc., et al., 19 we ruled that
"[c]ircumstances of time and place, behavioural and ecological factors, as well as political, social and
economic conditions, would influence any such determination. x x x [T]ransactions under audit are to
be judged on the basis of not only the standards of legality but also those of regularity, necessity,
reasonableness and moderation." The 10-page letter of City Administrator Juan Saul F. Montecillo to
the Sanggunian explained in detail the reasons for each change and extra work order; most of which
were made to address security and safety concerns that may arise not only during the holding of the
Palaro, but also in other events and activities that may later be held in the sports complex.
Comparing this with the COAs general and unsubstantiated declarations that the expenses were
"not essential"20 and not "dictated by the demands of good government," 21 we find that the expenses
incurred for change and extra work orders were necessary and justified.

The COA considers the change and extra work orders illegal, as these failed to comply with Section
III, C1 of the Implementing Rules and Regulations of Presidential Decree No. 1594, 22 which states
that:
5. Change Orders or Extra Work Orders may be issued on a contract upon the approval of
competent authorities provided that the cumulative amount of such Change Orders or Extra Work
Orders does not exceed the limits of the former's authority to approve original contracts.
6. A separate Supplemental Agreement may be entered into for all Change Orders and Extra
Work Orders if the aggregate amount exceeds 25% of the escalated original contract price. All
change orders/extra work orders beyond 100% of the escalated original contract cost shall be
subject to public bidding except where the works involved are inseparable from the original scope of
the project in which case negotiation with the incumbent contractor may be allowed, subject to
approval by the appropriate authorities. [Emphases ours.]
Reviewing the facts of the case, we find that the prevailing circumstances at the time the change and
extra work orders were executed and completed indicate that the City of Cebu tacitly approved these
orders, rendering a supplemental agreement or authorization from the Sanggunian unnecessary.
1wphi1

The Pre-Qualification, Bids and Awards Committee (PBAC), upon the recommendation of the
Technical Committee and after a careful deliberation, approved the change and extra work orders. It
bears pointing out that two members of the PBAC were members of the Sanggunian as well
Rodolfo Cabrera (Chairman, Committee on Finance) and Ronald Cuenco (Minority Floor Leader). A
COA representative was also present during the deliberations of the PBAC. None of these officials
voiced any objection to the lack of a prior authorization from the Sanggunian or a supplemental
agreement. The RTC Decision in fact mentioned that the Project Post Completion Report and
Acceptance was approved by an authorized representative of the City of Cebu on September 21,
1994.23 "[a]s the projects had been completed, accepted and used by the [City of Cebu]," the RTC
ruled that there is "no necessity of [executing] a supplemental agreement." 24 Indeed, as we declared
in Mario R. Melchor v. COA, 25 a supplemental agreement to cover change or extra work orders is not
always mandatory, since the law adopts the permissive word "may." Despite its initial refusal, the
Sanggunian was eventually compelled to enact the appropriation ordinance in order to satisfy the
RTC judgments. Belated as it may be, the enactment of the appropriation ordinance, nonetheless,
constitutes as sufficient compliance with the requirements of the law. It serves as a confirmatory act
signifying the Sanggunians ratification of all the change and extra work orders issued by Osmea. In
National Power Corporation (NPC) v. Hon. Rose Marie Alonzo-Legasto, etc., et al., 26 the Court
considered the compromise agreement between the NPC and the construction company as a
ratification of the extra work performed, without prior approval from the NPCs Board of Directors.
As in Melchor,27 we find it "unjust to order the petitioner to shoulder the expenditure when the
government had already received and accepted benefits from the utilization of the [sports complex],"
especially considering that the City incurred no substantial loss in paying for the additional work and
the damages awarded. Apparently, the City placed in a time deposit the entire funds allotted for the
construction and renovation of the sports complex. The interest that the deposits earned amounted
to P12,835,683.15, more than enough to cover the damages awarded to WTCI (P2,514,255.40) and
the DCDC (P102,015.00). There was "no showing that [the] petitioner was ill-motivated, or that [the
petitioner] had personally profited or sought to profit from the transactions, or that the disbursements
have been made for personal or selfish ends." 28 All in all, the circumstances showed that Osmea
issued the change and extra work orders for the Citys successful hosting of the Palaro, and not for
any other "nefarious endeavour."29

WHEREFORE, in light of the foregoing, we hereby GRANT the petitioners Petition for Certiorari filed
under Rule 64 of the Rules of Court. The respondents Decision of May 6, 2008 and Resolution of
June 8, 2009 are SET ASIDE.
SO ORDERED.
ARTURO
Associate Justice
WE CONCUR:

D.

BRION

Republic
SUPREME
Manila

of

the

Philippines
COURT

EN BANC
G.R. No. 168296

January 31, 2007

FELOMINO
V.
VILLAGRACIA, Petitioner,
vs.
COMMISSION ON ELECTIONS and RENATO V. DE LA PUNTA, Respondents.
DECISION
PUNO, CJ:
At bar is a Petition for Certiorari under Rule 64 of the Rules of Court with Urgent Prayer for Issuance
of Temporary Restraining Order. Petitioner was proclaimed as winning candidate for the position of
Punong Barangay in Barangay Caawigan, Talisay, Camarines Norte, in the July 15, 2002 barangay
elections by a margin of six (6) votes.
Private respondent filed an election protest with the Municipal Trial Court of Talisay, Camarines
Norte, under Election Case No. 001-2002. After the revision of ballots, the trial court invalidated
thirty-four (34) of the ballots for being marked. All 34 marked ballots were deducted from the votes of
petitioner.
On December 3, 2003, the trial court adjudged private respondent as the true winner and nullified
the proclamation of petitioner, viz.:
WHEREFORE, the Court finds the Protestant Renato dela Punta as the duly elected Punong
Barangay of Caawigan, Talisay, Camarines Norte with the total valid vote[s] of 187 or a winning
margin of 26 votes.
The earlier proclamation made by the Barangay Board of Canvassers of Precinct No. 15-A and 15A-2 and 15-A-1 of Barangay Caawigan, Talisay, Camarines Norte is declared null and void. 1
Petitioner appealed the decision with the First Division of the Commission on Elections (COMELEC)
raising for the first time on appeal the issue that the trial court lacked jurisdiction over the election
protest for failure of private respondent to pay the correct filing fees.
The First Division, through its Resolution 2 dated September 9, 2004, set aside the decision of the
trial court and dismissed the election protest of private respondent for lack of jurisdiction, viz.:
The payment credited to the general fund which could be considered as filing fee is incomplete
considering that Section 6 of Rule 37 of the [COMELEC] Rules on Procedure requires that it should
be One Hundred (P100.00) Pesos. Hence, the trial court could not have acquired jurisdiction over
the [private respondents] case.3
Private respondent moved for reconsideration. In an Order 4 dated October 7, 2004, the First Division
elevated the motion for reconsideration to the COMELEC En Banc.

On June 1, 2005, the COMELEC En Banc promulgated its questioned Resolution granting the
motion for reconsideration and reinstating the decision of the trial court. It issued a writ of
execution5 on July 22, 2005 ordering petitioner to vacate his post as Punong Barangay of Barangay
Caawigan, Talisay, Camarines Norte, in favor of private respondent.
Hence, this petition raising the following issues:
I
WHETHER THE COMMISSION ON ELECTIONS (COMELEC, FOR SHORT) GRAVELY
ABUSED ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION IN NOT APPLYING
THE SOLLER DOCTRINE IN THE INSTANT CASE[.]
II
WHETHER THE COMELEC ERRED IN CONCLUDING THAT THE USE OF THE WORDS
"JOKER", "QUEEN", "ALAS", AND "KAMATIS", IN MORE THAN ONE BALLOT WOULD
CONSTITUTE MARKED BALLOTS.6
Petitioner contends that had public respondent followed the doctrine in Soller v. COMELEC,7 it
would have sustained the ruling of the First Division that the trial court lacked jurisdiction to hear the
election protest due to private respondents failure to pay the correct filing fees.
We disagree. The Soller case is not on all fours with the case at bar. In Soller, petitioner therein filed
with the trial court a motion to dismiss private respondents protest on the ground of, among others,
lack of jurisdiction. In the case at bar, petitioner actively participated in the proceedings and
voluntarily submitted to the jurisdiction of the trial court. It was only after the trial court issued its
decision adverse to petitioner that he raised the issue of jurisdiction for the first time on appeal with
the COMELECs First Division.8
While it is true that a court acquires jurisdiction over a case upon complete payment of the
prescribed filing fee, the rule admits of exceptions, as when a party never raised the issue of
jurisdiction in the trial court. As we stated in Tijam v. Sibonghanoy, et al., viz.:9
xxx [I]t is too late for the loser to question the jurisdiction or power of the court. xxx [I]t is not right for
a party who has affirmed and invoked the jurisdiction of a court in a particular matter to secure an
affirmative relief, to afterwards deny that same jurisdiction to escape a penalty.
It was therefore error on the part of the COMELECs First Division to indiscriminately apply Soller to
the case at bar. As correctly pointed out by public respondent in its questioned Resolution, viz.:
1avvphi1.net

xxx. Villagracia never assailed the proceedings of the trial court for lack of jurisdiction during the
proceedings therein. Instead, he filed an Answer to the Protest on 2 August 2002 and then actively
participated during the hearings and revision of ballots and subsequently filed his Formal Offer of
Exhibits. The issue on the filing fees was never raised until the Decision adverse to his interest was
promulgated by the trial court and only on [a]ppeal to the COMELEC. Necessarily, we apply the case
of Alday vs. FGU Insurance Corporation where the Supreme Court instructed that "although the lack
of jurisdiction of a court may be raised at any stage of the action, a party may be estopped from
raising such questions if he has actively taken part in the very proceedings which he questions,
belatedly objecting to the courts jurisdiction in the event that the judgment or order subsequently

rendered is adverse to him." Villagracia is therefore estopped from questioning the jurisdiction of the
trial court only on [a]ppeal.10
As to the second issue, petitioner contends that in order to invalidate a ballot for being marked, it
must appear that the voter has placed the mark to identify the ballot. 11 Petitioner argues that the
appearance of the words "Joker," "Alas," "Queen" and "Kamatis" in more than one ballot cannot
identify the ballot of a voter so as to violate the secrecy of votes. Thus, the votes should be counted
in his favor.12
There are 34 marked ballots in the case at bar. Fourteen (14) ballots are marked with the word
"Joker"; six (6) ballots with the word "Alas"; seven (7) ballots with the word "Queen"; and, seven (7)
ballots with the word "Kamatis." These ballots were all deducted by the trial court from the votes of
petitioner. While each of these words appears in more than one ballot and may not identify a
particular voter, it is not necessary that the marks in a ballot should be able to specifically identify a
particular voter.13 We have ruled that the distinction should always be between marks that were
apparently carelessly or innocently made, which do not invalidate the ballot, and marks purposely
placed thereon by the voter with a view to possible future identification, which invalidates it. The
marks which shall be considered sufficient to invalidate the ballot are those which the voter himself
deliberately placed on his ballot for the purpose of identifying it thereafter.14
In the case at bar, the marks indicate no other intention than to identify the ballots. The observation
of public respondent on the appearance of the marks on the questioned ballots is apropos, viz.:
xxx. We take notice of the fact that these marks were all written in the number 7 slot of the list of
Kagawad for Sangguniang Barangay. We further take notice that all these marks appear only in
ballots wherein the Punong Barangay voted thereon is Jun Villagracia, the proclaimed winning
candidate and herein [petitioner]. It is therefore indubitable that these ballots are indeed marked
ballots.15
Finally, the present action is one of certiorari under Rule 64 of the Rules of Court where questions of
fact cannot be raised. The familiar rule is that findings of fact of the [COMELEC] supported by
substantial evidence shall be final and non-reviewable. 16 There is no reason to depart from this rule.
IN VIEW WHEREOF, the petition is DISMISSED. The prayer for a Temporary Restraining Order
is DENIED for being moot. The questioned Resolution of the COMELEC En Banc dated June 1,
2005 in EAC No. 1-2004 isAFFIRMED.
Costs against petitioner.
SO ORDERED.