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J .R. No. 156304


October 23,
2006
ANACLETO R. MENESES, FRANCISCO
C. MENESES, CECILIA C. MEMESES,
RAMON M. VASCO, CARMENCITA M.
VASCO-ALIVIA, VICTOR A. MENESES,
MA. ROSARIO MENESES-CARREON,
GAVINO A. MENESES, ARTEMIO A.
MENESES, JR., MA. CARMEN R.
BONGGA, MA. THERESA M. RODRIGO,
JACINTO M. RODRIGO, MA. ELIZABETH
M. RODRIGO, MARTIN M. RODRIGO,
JOSE
ANTONIO
M.
RODRIGO,
DOMINGO M. SALONGA, CAROLINA M.
SALONGA, CORAZON M. SALONGA,
CRISTINA M. SALONGA, CARMELITA M.
SALONGA, CYNTHIA M. SALONGA and
MARILYN F. SALONGA, petitioners,
vs.
SECRETARY OF AGRARIAN REFORM,
LAND BANK OF THE PHILIPPINES,
RODRIGO VELAYO, ANGEL SOLIMAN,
RICARDO MASASU, REGINA STA. ANA,
JUANITO CASTRO, SEVERINO LIGON,
MARCELINO
CUEVAS,
MANOLO
GARCIA, RODRIGO URBANO, FELIX
BINUYA, GORGONIO CATU, ERLINDA
ABLAZA,
IGMEDIO
SANTOS,
FLORENTINA SUSPAN, PEDRO SUPAN,
GABRIEL
PONCE,
FELIPE
PONCE,
MAGNO PONCE, RELELCIO PONCE,
IRENEO RAMOS, ORLANDO TAYAO,
EULALIO
TRINIDAD,
MOISES
MORALES,
LAZARO
MATIAS,
FORTUNATA
MANUGON,
ROMEO
MANUZON, and DAMASO DURIA,
respondents.
DECISION

AUSTRIA-MARTINEZ, J.:
Petitioners were co-owners pro-indiviso of
an irrigated rice land in Barangay Batasan,
San Miguel, Bulacan, measuring 60.8544
hectares and registered in the name of
their grandparents, the spouses Ramon
Meneses and Carmen Rodriguez-Meneses.
On October 21, 1972, the property was
distributed to farmer-beneficiaries by
virtue of Presidential Decree No. 27 (P.D.
No. 27).
On July 16, 1993, petitioners filed with the
Regional Trial Court (RTC) of Bulacan,
Branch 13, a complaint for determination
and payment of just compensation.
Petitioners alleged that from the time the
land
was
distributed
to
farmerbeneficiaries in 1972 up to the time of the
filing of the complaint, no payment or
rentals has been made, and titles have
already been issued to the farmerbeneficiaries. Petitioners also alleged that
the fair market value of the property is
P6,000,000.00.1
The farmer-beneficiaries, the Land Bank of
the
Philippines-Land
Valuation
and
Landowners' Compensation III (LBP-LVLCO
III), the Department of Agrarian Reform
(DAR) Secretary, and the DAR all filed their
respective Answers. For their part, the
farmer-beneficiaries alleged that the land
valuation establishing the average gross
production per hectare by the Barangay
Committee on Land Production (BCLP)
based on three normal crop years before
P.D. No. 27 is in accordance with the
existing guidelines and procedure on
Operation Land Transfer; they have no
unpaid rentals; and jurisdiction over the
case lies with the Department of Agrarian
Reform Adjudication Board (DARAB).2
Meanwhile, the LBP-LVLCO III averred that

it has been acting in good faith in


discharging its obligations, and that the
computation was obtained through the
valuation processes of the DAR on lands
covered by P.D. No. 27 and Executive
Order No. 228 (E.O. No. 228). The LBPLVLCO III likewise alleged that jurisdiction
over the case lies with the DARAB. 3
The DAR Secretary, on the other hand,
alleged that the valuation of the property
was pursuant to the Operation Land
Transfer under P.D. No. 27 and the
reckoning date should be at the time of
the taking of the property, i.e., October
21, 1972.4
Lastly, the DAR claimed that the filing of
the case is premature since there is no
valuation yet made by the DAR based on
E.O. No. 228, and petitioners must
cooperate with the DAR by submitting all
the necessary papers for proper valuation
and expeditious payment of the land. The
DAR also claimed that it must first
determine the valuation before resort to
the court can be made.5
Thereafter, in an Order dated June 22,
1994, the RTC dismissed the complaint for
lack of cause of action. According to the
RTC,
the
determination
of
just
compensation must first be filed with the
DAR and not the Special Agrarian Court.6
Petitioners
filed
a
motion
for
reconsideration,
which
was
partially
granted by the RTC in its Order dated
September 7, 1994, setting aside its order
of dismissal, ordering the suspension of
the proceedings and archiving the case
until primary determination has been
made on the issue of just compensation.7
On October 5, 1994, petitioners filed a
complaint for determination and payment
of just compensation with the DARAB. The

DARAB, however, dismissed the complaint


on the ground that it has no jurisdiction to
hear and decide valuation cases covered
by P.D. No. 27, as the same is within the
exclusive administrative powers of the
Office of the Secretary. 8 Because of the
foregoing dismissal, petitioners filed with
the RTC a motion to re-open and calendar
case for hearing,9 which was granted by
the RTC.
In an Order dated May 9, 1996, the RTC,
with the agreement of the parties,
constituted Commissioners to determine
just compensation,10 but the same was
dissolved
per
its
Report
and
Recommendation dated October 9, 1996,
11
as granted by the RTC in its Order dated
October 11, 1996.12
Pre-trial was terminated on July 10, 1997,
and petitioners were scheduled to present
their evidence.13 During the hearing held
on August 14, 1997, the parties agreed as
to the issue to be resolved "whether or
not the plaintiffs [petitioners] are entitled
to just compensation as provided for in
Republic Act No. 6657 (R.A. No. 6657) and
the Constitution of 1987 and not P.D. No.
27 which was the basis of valuation made
by defendants Secretary of Agrarian
Reform and the Land Bank of the
Philippines of the subject parcel of land
which was acquired in October 21,
1972."14 The parties were then given a
period within which to fie their respective
motions for judgment on the pleadings
and comment/opposition thereto, after
which the case shall be deemed submitted
for resolution.15
On February 7, 1998, the RTC rendered its
Decision dismissing the complaint. It was
the RTC's ruling that since the subject
property was taken from petitioners on

October 21, 1972 under the DAR's


Operation Land Transfer pursuant to P.D.
No. 27, then just compensation must be
based on the value of the property at the
time of taking.
Thus, petitioners filed an appeal with the
Court of Appeals (CA), docketed as CAG.R. CV No. 60355, where petitioners
prayed for a remand of the case to the
RTC for further proceedings and/or
reception of evidence on the just and fair
market value of the property.
On May 30, 2002, the CA16 rendered its
Decision
dismissing
the
appeal.17
Petitioners
filed
a
motion
for
reconsideration, but the same was denied
on the grounds that it was filed 44 days
late and the CA found no
cogent reason to reverse or modify its
Decision.18
Hence, this petition for review on
certiorari based on the following reasons:
I - THAT THE APPEALED DECLISION (sic) IS
RENDERED BY THE COURT OF APPEALS
NOT IN ACCORDANCE WITH LAW OR WITH
APPLICABLE DECISIONS OF THE SUPREME
COURT.19
II - THAT THE COURT OF APPEALS HAS
DEPARTED FROM THE ACCEPTED AND
USUAL
COURSE
OF
JUDICIAL
PROCEEDINGS OR HAS SANCTIONED SUCH
DEPARTURE BY THE LOWER COURT. 20
Petitioners argue that the CA erred in
sustaining the propriety of the motion for
judgment on the pleadings filed by
respondents with the RTC. It was the CA's
ruling that the motion for judgment on the
pleadings was proper since respondents
can be considered as plaintiffs in a
counter-claim. Petitioners also impute
error in the CA's ruling that the RTC
properly dismissed the case since it

appears that there was no initial valuation


yet made by the DARAB.
Respondents, however, argue that the CA
Decision dated May 30, 2002 is already
final and executory due to petitioners'
failure to seasonably file a motion for
reconsideration. Respondents also argue,
among others, that the applicable law in
this case is P.D. No. 27 and E.O. No. 228,
which provides for the formula for the
determination of just compensation, as
recognized in the cases of Land Bank of
the Philippines v. Court of Appeals, 378
Phil. 1248 (1999), and Gabatin v. Land
Bank of the Philippines, G.R. No. 148223,
November 25, 2004, 444 SCRA 176.
The Courts finds merit in the petition.
It is true that petitioners' failure to file
their motion for reconsideration within the
reglementary period rendered the CA
Decision dated May 30, 2002 final and
executory. For all intents and purposes,
said Decision should now be immutable
and unalterable; however, the Court
relaxes this rule in order to serve
substantial justice considering (a) matters
of life, liberty, honor or property, (b) the
existence of special or compelling
circumstances, (c) the merits of the case,
(d) a cause not entirely attributable to the
fault or negligence of the party favored by
the suspension of the rules, (e) a lack of
any showing that the review sought is
merely frivolous and dilatory, and (f) the
other party will not be unjustly prejudiced
thereby.21
The explanation of petitioners' counsel for
the delayed filing of the motion for
reconsideration was that their law firm
secretary failed to inform the court of their
change of address. 22 This, of course, is not
a valid excuse. As a general rule, a client

is bound by the acts of his counsel,


including even the latter's mistakes and
negligence. But where such mistake or
neglect would result in serious injustice to
the client, a departure from this rule is
warranted. To cling to the general rule is
to condone rather than rectify a serious
injustice to petitioners whose only fault
was to repose his faith and entrust his
innocence to his lawyer.23
In Ginete v. Court of Appeals,24 the Court
disregarded the failure of the petitioners
to file a motion for reconsideration of the
CA's dismissal, and instead, ruled that
their counsel's negligence should not
prejudice the merits of their case, as they
were bound to lose their alleged rightful
share in their inheritance to a 59-hectare
property.
In Philippine Ports Authortity v. Sargasso
Construction & Development Corp.,25 the
Court
excused
the
Office
of
the
Government Corporate Counsel's belated
filing of the notice of appeal because
sustaining the finality of the CA's dismissal
of the appeal would leave the petitioner
no other remedy to assail the decision of
the trial court, and it would then have to
implement the award of the reclamation
project to the respondents for the
enhancement of the San Fernando, La
Union port for the price of P30,794,230.89
without the benefit of a public bidding,
and sans the approval of its Board of
Directors.
After reviewing the records of this case,
the Court resolves to give due course to
the case in order to put to rest the issues
herein presented, specially in light of the
Court's ruling in Solmayor v. Arroyo,26 to
wit:
Furthermore, we must bear in mind that

procedural rules are intended to ensure


the proper administration of law and
justice. The rules of procedure ought not
to be applied in a very rigid, technical
sense, for they are adopted to help
secure, not override, substantial justice. A
deviation from its rigid enforcement may
thus be allowed to attain its prime
objective, for after all, the dispensation of
justice is the core reason for the existence
of courts. Moreover, we cannot shy
away
from
our
constitutionally
mandated duty to questions of law
set forth in this petition which hinges
on the determination of the rights of
herein litigants in the light of a very
important piece of social legislation,
Presidential Decree No. 27, which
aims for the equitable distribution
and ownership of land, without
disregarding the property rights of
landowners. Thus, for pragmatic reasons
and consideration of justice and equity,
the Court must put to rest the issues
presented before us. (Emphasis supplied)
If the Court sustains the CA Decision,
which
affirmed
the
RTC
Decision,
petitioners will be left holding an empty
bag, so to speak. It should be noted that
the property subject of this case has
already been distributed to the farmerbeneficiaries way back in 1972, and up to
now, 34 years later, petitioners have yet
to enjoy the fruits of its value. Moreover,
petitioners will be left without any
recourse as regards the resolution of the
issue of just compensation since both the
RTC and the DARAB already dismissed the
separate complaints for just compensation
filed before them. Indeed, the "Court has
the power to except a particular case from
the operation of the rule whenever the

purposes of justice requires it because


what should guide judicial action is that a
party is given the fullest opportunity to
establish the merits of his action or
defense rather than for him to lose life,
honor,
or
property
on
mere
technicalities."27
On the propriety of the filing of a motion
for judgment on the pleadings by the LBP
and adopted by the DAR Secretary the
Court finds that the CA erred in sustaining
its propriety.
Rule 34, Section 1 of the Rules of Court, 28
provides that a judgment on the pleadings
is proper when an answer fails to render
an issue or otherwise admits the material
allegations
of
the
adverse
party's
pleading. The essential question is
whether there are issues generated by the
pleadings. A judgment on the pleadings
may be sought only by a claimant, who is
the party seeking to recover upon a claim,
counterclaim or cross-claim; or to obtain a
declaratory relief.29
In this case, the separate Answers filed by
the
respondents
definitely
tendered
issues, as it made specific denials of the
material allegations in the complaint and
asserted affirmative defenses, which
would bar recovery by petitioners.
Moreover, it was erroneous for the RTC to
require the filing of a motion for judgment
on the pleadings and for the LBP and the
DAR Secretary to file the same since in the
first place, the latter are neither plaintiffs
in the case nor counter-claimants or crossclaimants.
What the RTC obviously meant to be filed
was a motion for summary judgment, a
procedural device designed for the prompt
disposition of actions, which may be
rendered if the pleadings, supporting

affidavits, depositions and admissions on


file show that, after a summary hearing,
there is no genuine issue regarding any
material fact, except as to the amount of
damages, and the moving party is entitled
to a judgment as a matter of law, and
which may be applied for by either a
claimant or a defending party. 30 This is
obvious from the fact that although the
Answers raised issues, these were not
factual ones requiring trial, nor were they
genuine issues,31 as the parties were able
to agree to limit the same to whether
petitioners
are
entitled
to
just
compensation under R.A. No. 6657 and not
P.D. No. 27.32
The Court also finds that the CA erred in
sustaining the RTC ruling that just
compensation in this case should be
based on the value of the property at the
time of taking, October 21, 1972, which is
the effectivity date of P.D. No. 27.
Respondent correctly cited the case of
Gabatin v. Land Bank of the Philippines,33
where the Court ruled that "in computing
the just compensation for expropriation
proceedings, it is the value of the land at
the time of the taking [or October 21,
1972, the effectivity date of P.D. No. 27],
not at the time of the rendition of
judgment, which should be taken into
consideration." Under P.D. No. 27 and E.O.
No. 228, the following formula is used to
compute the land value for palay:
LV (land value) = 2.5 x AGP x GSP x
(1.06)n
It should also be pointed out, however,
that in the more recent case of Land Bank
of the Philippines vs. Natividad,34 the Court
categorically ruled: "the seizure of the
landholding did not take place on the date
of effectivity of P.D. No. 27 but would take

effect
on
the
payment
of
just
compensation." Under Section 17 of R.A.
No. 6657, the following factors are
considered
in
determining
just
compensation, to wit:
Sec.
17.
Determination
of
Just
Compensation. - In determining just
compensation, the cost of acquisition
of the land, the current value of like
properties, its nature, actual use and
income, the sworn valuation by the
owner, the tax declarations, and the
assessment made by government
assessors shall be considered. The social
and economic benefits contributed by
the farmers and the farm-workers
and by the Government to the
property as well as the non-payment
of taxes or loans secured from any
government financing institution on
the said land shall be considered as
additional factors to determine its
valuation. (Emphasis supplied)
Consequently, the question that arises is
which of these two rulings should be
applied?
Under the circumstances of this case, the
Court deems it more equitable to apply
the ruling in the Natividad case. In said
case, the Court applied the provisions of
R.A. No. 6657 in computing just
compensation for property expropriated
under P.D. No. 27, stating, viz.:
Land Bank's contention that the property
was acquired for purposes of agrarian
reform on October 21, 1972, the time of
the effectivity of PD 27, ergo just
compensation should be based on the
value of the property as of that time and
not at the time of possession in 1993, is
likewise erroneous. In Office of the
President, Malacaang, Manila v. Court of

Appeals, we ruled that the seizure of the


landholding did not take place on the date
of effectivity of PD 27 but would take
effect
on
the
payment
of
just
compensation.
Under the factual circumstances of
this
case,
the
agrarian
reform
process is still incomplete as the just
compensation to be paid private
respondents has yet to be settled.
Considering the passage of Republic
Act No. 6657 (RA 6657) before the
completion of this process, the just
compensation should be determined
and the process concluded under the
said law. Indeed, RA 6657 is the
applicable law, with PD 27 and EO
228 having only suppletory effect,
conformably with our ruling in Paris
v. Alfeche.
xxxx
It would certainly be inequitable to
determine just compensation based on the
guideline provided by PD 27 and EO 228
considering the DAR's failure to determine
the just compensation for a considerable
length of time. That just compensation
should be determined in accordance with
RA 6657, and not PD 27 or EO 228, is
especially imperative considering that just
compensation should be the full and fair
equivalent of the property taken from its
owner by the expropriator, the equivalent
being real, substantial, full and ample.
In this case, the trial court arrived at the
just
compensation
due
private
respondents for their property, taking into
account its nature as irrigated land,
location along the highway, market value,
assessor's value and the volume and
value of its produce. This Court is
convinced that the trial court correctly

determined
the
amount
of
just
compensation due private respondents in
accordance with, and guided by, RA 6657
and existing jurisprudence.35 (Emphasis
supplied)
As previously noted, the property was
expropriated under the Operation Land
Transfer scheme of P.D. No. 27 way back in
1972. More than 30 years have passed
and petitioners are yet to benefit from it,
while
the
farmer-beneficiaries
have
already been harvesting its produce for
the longest time. Events have rendered
the applicability of P.D. No. 27 inequitable.
Thus, the provisions of R.A. No. 6657
should apply in this case.
Finally, the Court sustains petitioners'
contention that the CA erred in ruling that
the
RTC
correctly
dismissed
their
complaint. Even assuming that the RTC
was correct in holding that P.D. No. 27
applies, still it should not have simply
dismissed the complaint after resolving
the issue of which law should apply.
Instead, it should have proceeded to
determine the just compensation due to
petitioners.
Records show that the complaint for just
compensation was first filed in the RTC,
but this was dismissed in the Order dated
June 22, 1994, for the reason that the
determination of just compensation must
first be filed with the DAR.36 Conformably
with said ruling, petitioners filed the
complaint with the DAR, which dismissed
the same on the ground that it has no
jurisdiction to hear and decide valuation
cases covered by P.D. No. 27. 37 Because of
said dismissal, petitioners went back to
the RTC for the re-opening of the case.
Petitioners' case was obviously thrown
back and forth between the two venues,

and with the RTC's second dismissal, they


were left hanging and without any
recourse, which, of course, is iniquitous
considering that their property has already
long
been
expropriated
by
the
government and its fruits enjoyed by the
farmer-beneficiaries.
Given the foregoing conclusion, this case
should then be remanded to the Regional
Trial Court (RTC) of Bulacan, Branch 13, for
the
final
determination
of
just
compensation.
WHEREFORE, the petition is GRANTED.
The Decision dated May 30, 2002 and
Resolution dated December 9, 2002
rendered by the Court of Appeals in CAG.R. CV No. 60355 is REVERSED and SET
ASIDE. The records of this case is ordered
REMANDED to Regional Trial Court (RTC)
of Bulacan, Branch 13, for further
proceedings with deliberate dispatch and
in accordance with the Court's discussion
in this Decision.
No costs.
SO ORDERED.
OSE D. ONTIMARE, JR., and RENE D.
ONTIMARE, as sons/heirs, substituted
for their deceased father and the
original party JOSE M. ONTIMARE, SR.
- versus SPS. RENATO and ROSARIO ELEP,
Respondents.

Promulgated:
January 20, 2006

DECISION
For review on certiorari is the Decision,[1] dated July 18, 2003, of the Court of Appeals in CA-G.R. CV No. 69138, affirming with modifications the
Summary Judgment[2] dated July 11, 2000 of the Regional Trial Court of Quezon City, Branch 77, in Civil Case No. Q-96-28991. The RTC ordered Jose M.
Ontimare, Sr. to pay respondents actual and compensatory damages in the amount of P75,000 per month from July 1996 to September 1998, exemplary
damages amounting to P50,000, attorneys fees in the amount of P30,000, and the sum of P150,000 as reimbursement for the damage on respondents
wood parquet floors, wall paintings and ceiling.

The facts, as borne by the records, are as follows:


Ontimare Sr. and respondents are neighbors in Hyacinth Street, Roxas District, Quezon City. Respondents wanted to build a four-door, two-storey apartment
on their lot at No. 74 Hyacinth Street and applied for a building permit with the Building Official of Quezon City sometime in December 1995.
Ontimare Sr. owned the adjoining house and adjacent lot on No. 72 Hyacinth Street. His terrace extends to the boundary between his property and
respondents. On December 3, 1995, respondents wrote Ontimare Sr. a letter seeking his written consent to the construction of a firewall adjacent to his
existing firewall.
Instead of consenting, on December 20, 1995, Ontimare Sr. filed a Complaint with the Building Official asking that the request for a building permit be
withheld since a firewall would adversely affect the ventilation and market value of his property.
Despite a building permit issued to respondents on January 8, 1996,[3] a Cease and Desist Order[4] to stop the construction of the four-door apartment
was issued on January 12, 1996, as a result of the Complaint of Ontimare Sr.
However, when respondents wrote the City Engineer and explained they were constructing a one-sided firewall within their property, the Cease and Desist
Order was forthwith lifted on January 16, 1996.
On January 26, 1996, the complaint of Ontimare Sr. was dismissed. He appealed to the City Mayor, who ordered an investigation on the matter.
On February 2, 1996, Ontimare Sr. filed a Notarial Prohibition.
After hearings conducted on June 18 and 25, 1996, the Building Official dismissed the complaint on July 11, 1996 and ordered Ontimare Sr. to make the
adjustments in the construction of his house.[5] Respondents were issued a new building permit on July 16, 1996.[6]
Meanwhile, the day before, on July 15, 1996, while respondents workers were plastering and water-proofing the firewall, Ontimare Sr. fired his shotgun,
threatening to kill anyone who would enter his property and work on respondents construction. [7] As a result, a portion of the firewall remained unfinished.
According to respondents, water seeped in the building and damaged the sanding, the wood parquet floors and the ceiling. Respondents filed an action for
damages with application for preliminary injunction and restraining order against Ontimare Sr. before the Regional Trial Court of Quezon City, Branch 77.
After trial, Ontimare Sr. moved for a summary judgment while the respondents moved for the resolution of the case on the merits. The RTC issued the
summary judgment, the dispositive portion of which reads,
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs, and the defendant is hereby ordered to pay the plaintiffs:
1.
Actual and compensatory damages in the form of unrealized income and bank amortization interest in the amount of P75,000.00 per month
from July, 1996 to September, 1998;
2.
The amount of P150,000.00 as reimbursement for the damage on the wood parquet floors, wall paintings and ceiling;
3.
P50,000.00 as and by way of exemplary damages; and
4.
P30,000.00 as and by way of attorneys fees.
SO ORDERED.[8]
On appeal, the Court of Appeals affirmed the assailed summary judgment with modification,
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs, and the defendant is hereby ordered to pay the plaintiffs:
1.
Compensatory damages in the form of unrealized income in the total amount of Two Hundred Eighty-eight Thousand Pesos (P288,000.00) for
Apartments A, B and C, and bank amortization interest from July 1996 to July 1997 in the total amount of Three Hundred Forty-four Thousand Eight Hundred
Seventy-five Pesos and 74/100 centavos (P344,875.74);
2.
The amount of P150,000.00 as reimbursement for the damage on the wood parquet floors, wall paintings and ceiling;
3.
P50,000.00 as and by way of exemplary damages; and
4.
P30,000 as and by way of attorneys fees.
SO ORDERED.[9]
Meanwhile, while the case was on appeal, Ontimare Sr. died. He was survived by his two sons, petitioners herein, who now come to us on a petition for
review on certiorari on the ground that:
1. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN MAINTAINING THE TRIAL COURTS SUMMARY JUDGMENT AGAINST MOVANT DEFENDANT

2. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN OVERLOOKING MATERIAL FACTS TO FIND DEFENDANT SOLELY LIABLE FOR THE DELAY IN THE
PLASTERING OF THE FIREWALL
3. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT HOLDING THAT THE LOWER COURT ERRED IN CONSIDERING DEFENDANTS MOTION FOR
RECONSIDERATION AS A MERE SCRAP OF PAPER WHICH COULD NOT BE ACTED UPON BY THE COURT
4. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN AWARDING UNEARNED RENT AND REIMBURSEMENT OF BANK INTEREST AMORTIZATION FOR
ANY PERIOD AFTER THE REWORK ON THE FIREWALL HAD BEEN COMPLETED IN SEPTEMBER 1996
5. THE COURT OF APPEALS COMMITTED A PATENT ERROR IN GRANTING DAMAGES EQUIVALENT TO ELEVEN MONTHS WHEN THE LIABILITY PERIOD IT
COMPUTED ONLY ADDED UP TO TEN MONTHS
6. THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN AWARDING EXEMPLARY DAMAGES WITHOUT ANY BAD FAITH ON THE PART OF
DEFENDANT[10]
Simply put, there are two issues for resolution, namely (1) Is the summary judgment rendered by the trial court proper? (2) Are petitioners liable for the
damages awarded?
Anent the first issue, petitioners argue that summary judgment may issue only in favor of a moving party and only when there is no genuine issue on any
material fact, except for the amount of damages. Petitioners insist that the summary judgment in this case was rendered against the movant and despite the
existence of disputed facts.
On the other hand, respondents counter that Ontimare Sr., in moving for summary judgment indicated that he did not want a de riguer trial. Further,
respondents argue that he waived his right to question the said summary judgment when he did not object to respondents motion that the case be
resolved on its merits.
On this issue, Rule 34, Section 3 of the Rules of Court is pertinent. It provides:
SEC. 3. Motion and proceedings thereon. - After the hearing, the judgment sought shall be rendered forthwith if the pleading, depositions, and admissions
on file together with the affidavits, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.
Hence, for summary judgment to be proper, two (2) requisites must concur, to wit: (1) there must be no genuine issue on any material fact, except for the
amount of damages; and (2) the moving party must be entitled to a judgment as a matter of law.
When, on their face, the pleadings tender a genuine issue, summary judgment is not proper. An issue is genuine if it requires the presentation of evidence
as distinguished from a sham, fictitious, contrived or false claim.[11]
In the instant case, the summary judgment was rendered after the presentation of evidence by both parties in a full blown trial. Records show that during
the two-year trial of the case, Ontimare Sr. had presented his own witnesses, all four of them, and had cross-examined the witnesses of the opposing party.
The trial courts decision was merely denominated as summary judgment. But in essence, it is actually equivalent to a judgment on the merits, making the
rule on summary judgment inapplicable in this case.
Anent the second issue, petitioners contend that respondents were issued locational clearance only on July 16, 1996 and hence, the start of the
construction work should be reckoned not earlier than the said date. When the shotgun incident happened on July 15, 1996, respondents had no locational
clearance.
Petitioners also argue that the unearned rent and reimbursement of bank interest amortization should be counted up to and not from the completion of the
rework because the apartments could have been rented out and could have started to earn once the rework was completed. Petitioners insist the period for
the computation of unrealized income should have been ten months.
Lastly, petitioners maintain that Ontimare Sr. did not act in bad faith nor abusively in the protection of his rights, thus no exemplary damages should be
granted.
For their part, respondents counter that petitioners raise pure questions of fact already ruled upon by the Court of Appeals, hence, the instant petition
should be denied outright. Granting arguendo that the petition should be given due course, respondents aver that Ontimare Sr., despite knowledge that
respondents had already acquired a building permit, nevertheless, threatened bodily harm on workers of respondents to prevent the construction. He
should thus be held liable for damages for abuse of his rights to the prejudice of respondents.

Respondents alleged that rework on the firewall started from September 1996, as evidenced by the receipts issued by the contractor. The compensatory
damages in the form of unearned rent started to accrue on October 1, 1996 until the completion of the rework on August 1, 1997 for Apartment A (a total
of eleven months) and until July 15, 1997 for Apartments B and C (a total of ten months and fifteen days).
Lastly, respondents posit that Ontimare Sr.s threats with use of a firearm constitute bad faith.
At the outset, it bears stressing that, except for the issue on exemplary damages, petitioners raise pure questions of fact, which may not be the subject of a
petition for review on certiorari.[12] Well-settled is the rule that the Supreme Court is not a trier of facts. When supported by substantial evidence, the
findings of fact of the Court of Appeals are conclusive and binding on the parties and are not reviewable by this Court, unless the case falls under any of the
following recognized exceptions:
(1) When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;
(2) When the inference made is manifestly mistaken, absurd or impossible;
(3) Where there is a grave abuse of discretion;
(4) When the judgment is based on a misapprehension of facts;
(5) When the findings of fact are conflicting;
(6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and
appellee;
(7) When the findings are contrary to those of the trial court;
(8) When the findings of fact are conclusions without citation of specific evidence on which they are based;
(9) When the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondents; and
(10) When the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record. [13]
Petitioners failed to show that their case falls under any of the above-quoted exceptions. Hence, we see no reason to disturb the findings of the Court of
Appeals, which we find supported by evidence on record.
We are likewise constrained from reversing the award of exemplary damages. Exemplary damages are imposed by way of example or correction for the
public good.[14] Ontimare Sr.s firing his shotgun at respondents workers cannot be countenanced by this Court. Exemplary damages in the amount of
P50,000 is proper.
WHEREFORE, the petition is DENIED. The assailed Decision, of the Court of Appeals dated July 18, 2003, in CA-G.R. CV No. 69138 is AFFIRMED. Costs
against petitioners.
SO ORDERED.

ASIAN
CONSTRUCTION
AND G.R. No. 153827
DEVELOPMENT CORPORATION,
Petitioner, v
PHILIPPINE
COMMERCIAL
INTERNATIONAL BANK,
Respondent.
April 25, 2006

In this petition for review under Rule 45 of the Rules of Court, petitioner Asian Construction and Development Corporation or ASIAKONSTRUKT, seeks the
reversal and setting aside of the decision 1[1]dated March 15, 2002 and the Resolution 2[2] dated June 3, 2002 of the Court of Appeals (CA) in CA-G.R. CV No.
68189. The assailed decision affirm with modification the Summary Judgment rendered by the Regional Trial Court (RTC) of Makati City in an action for a
sum of money thereat commenced by the herein respondent, Philippine Commercial International Bank (PCIBANK) against the petitioner, while the
challenged resolution denied petitioners motion for reconsideration.
The facts
On February 24, 1999, in the RTC of Makati City, respondent PCIBANK filed a complaint 3[3] for a sum of money with prayer for a writ of preliminary
attachment against petitioner ASIAKONSTRUKT. Docketed as Civil Case No. 99-432, the complaint alleged, inter alia, as follows:
FIRST CAUSE OF ACTION
2.01
On various occasions, ASIAKONSTRUKT obtained U.S. dollar denominated credit accommodations from PCIBANK in the amount of Four Million
Four Hundred Eighty Seven Thousand U.S. dollars (US$4,487,000.00), exclusive of interests, charges and fees thereon and the cost of collecting the same.
These credit accommodations are covered by the following promissory notes:

[1]

Penned by then Associate Justice Romeo J. Callejo, Sr. (now a member of this Court), with Associate Justices Remedios J. Salazar-Fernando and Perlita Tirona,
(ret.), concurring; Rollo, pp. 34-58.

2[2]

Id. at 59.

3[3]

Id. at 61-69.

xxx

xxx

xxx

2.02
Prompt and faithful payment of all the foregoing promissory notes was secured by the following deeds of assignment executed by
ASIAKONSTRUKT in favor of PCIBANK:
(a) Deed of Assignment of Receivables/Contract Proceeds dated 20 July 1994 where ASIAKONSTRUKT assigned its receivables from its Contract with the
National Power Corporation (NPC) in the amount of .P54,500,000;
(b) Deed of Assignment of Receivables dated 28 June 1995 where ASIAKONSTRUKT assigned its receivables from its Contract with the NPC in the amount
of P26,281,000.00;
(c) Deed of Assignment of Receivables dated 28 August 1995 where ASIAKONSTRUKT assigned its receivables from its Sub-Contract with ABB Power, Inc.,
in the amount of P43,000,000.00;
(d) Deed of Assignment of Contract Proceeds dated 27 March 1996 where ASIAKONSTRUKT assigned its receivables from its contracts with PNOC in the
aggregate amount of P46,000,000.00; and
(e) Deed of Assignment of Contract Proceeds dated 20 February 1997 where ASIAKONSTRUKT assigned its receivables from the Ormat Philippines, Inc., in
the aggregate amount of US$3,350,000.00;
2.03

All the foregoing deeds of assignments stipulate, among others, the following terms and conditions:

a)
The assignment is for the purpose of securing payment of the principal amount and the interests and bank charges accruing thereon, the costs
of collecting the same and all other expenses which PCIBANK may be put in connection with or as an incident of the assignment;
b)
That the assignment secures also any extension or renewal of the credit which is the subject thereof as any and all other obligations of
ASIAKONSTRUKT of whatever kind and nature as appear in the records of PCIBANK, which ASIAKONSTRUKT accepts as the final and conclusive evidence of
such obligations to PCIBANK, whether contracted before, during or after the constitution of [the assignment agreement];
c)
That PCIBANK authorizes ASIAKONSTRUKT, at the latters expense, to collect and receive for [PCIBANK] all the Receivables; and
d)
That ASIAKONSTRUKT shall have no right, and agrees not to use any of the proceeds of any collections, it being agreed by the parties
that [ASIAKONSTRUKT] divests itself of all the rights, title and interest in said Receivables and the proceeds of the collection received thereon.
2.04
The promissory notes have remained not fully paid despite their having become due and demandable. Repeated verbal and written demands
were made upon ASIAKONSTRUKT, but to no avail. It has failed and refused, and continues to fail and refuse, to pay its outstanding obligations to PCIBANK;
2.05
As a result of ASIAKONSTRUKTs refusal to pay its outstanding obligations, PCIBANK was constrained to refer the matter to counsel and thus incur
attorneys fees and legal costs.
2.06
The aggregate unpaid obligation of ASIAKONSTRUKT to PCIBANK, as of 31 December 1998, amounts to US$4,553,446.06, broken down as
follows:
Principal
US$ 4,067,867.23
Interest
US$ 291,263.27
Penalties
US$ 194,315.56
TOTAL US$ 4,553,446.06

For its second cause of action, PCIBANK alleged in the same complaint as follows:
SECOND CAUSE OF ACTION
4.02
as a result of the fraudulent acts of ASIAKONSTRUKT, PCIBANK suffered the following damages, all of which ASIAKONSTRUKT must be held to pay
PCIBANK:
4.02.1 Exemplary damages, in the interest of public good and purposes of correction, in the amount of not less than .P50,000.00;
4.02.2 Attorneys fees in the amount of not less than . P1,800,000.00; and
4.02.3 Costs of suit.
In support of its prayer for a writ of preliminary attachment embodied in the complaint, plaintiff PCIBANK alleges the following:
3.02

ASIAKONSTRUKT is guilty of fraud in contracting the debt, in the performance thereof, or both, xxx;

303. PCIBANK agreed to enter into the above-mentioned credit accommodations primarily because of the existence of the deeds of assignment listed
above. However, from telephone inquiries made with responsible officers of the National Power Corporation, ABB Power, Inc., PNOC and Ormat Philippines,
Inc., PCIBANK was surprised to learn that ASIAKONSTRUKT had long ago collected the contract proceeds, or portions thereof, which were previously
assigned to PCIBANK. However, to date, it has yet to turn over these proceeds to PCIBANK. Worse, PCIBANK learned that the contract proceeds were used
by ASIAKONSTRUKT for its own purposes clear evidence of fraud, which has deprived PCIBANK of its security. ASIAKONSTRUKTs unauthorized use of the
contract proceeds for its own purposes was subsequently confirmed by Mr. Napoleon Garcia, Vice President for Finance of ASIAKONSTRUKT, in a telephone
discussion on 12 January 1999 with Ms. Maricel E. Salaveria of PCIBANK. xxx Needless to say, ASIAKONSTRUKT has fraudulently collected such receivables
to the prejudice of PCIBANK.
3.04 it is evident that ASIAKONSTRUKT never had any intention of complying with the deeds of assignment. ASIAKONSTRUKT only misled PCIBANK into
believing that it had sufficient security to ensure payment of its loan obligations.
3.05 Alternatively, granting, in argumenti gratia, that ASIAKONSTRUKT, at the time it executed the foregoing deeds of assignment, really intended to
abide by their terms and conditions, it nevertheless committed manifest fraud when it collected the contract proceeds, and instead of remitting them to
PCIBANK, used them for its own purposes.
In an order4[4] dated April 13, 1999, the trial court, after receiving ex parte PCIBANKs evidence in support of its prayer for preliminary attachment, directed
the issuance of the desired writ, thus
WHEREFORE, let a writ of preliminary attachment issue against all the property of defendant not exempt from execution or so much thereof as may be
sufficient to satisfy plaintiffs principal claim of US$4,553,446.06, representing the alleged unpaid obligation of defendant, inclusive of interest and penalty
charges, as of December 31, 1998, which is equivalent to P174,260,380.72, upon plaintiffs filing of a bond in an equal amount to answer for all it may
sustain by reason of the attachment if the Court shall finally adjudge that plaintiff was not entitled thereto.

4[4]

Original Records, p. 320.

SO ORDERED.
With plaintiff PCIBANK having posted the requisite bond, a writ of preliminary attachment was thereafter issued by the trial court. Per records, defendant
ASIAKONSTRUKT did not file any motion for the quashal or dissolution of the writ
Meanwhile, on August 27, 1999, defendant ASIAKONSTRUKT filed its Answer, 5[5] thereunder making admissions and denials. Defendant admits, subject to
its defenses, the material allegations of the Complaint as regards its indebtedness to plaintiff PCIBANK and its execution of the various deeds of assignment
enumerated therein. It, however, denies, for lack of knowledge sufficient to form a belief as to the truth thereof, the averments in the Complaint that it has
not paid, despite demands, its due and demandable obligations, as well as the amounts due the plaintiff as itemized in paragraph 2.06, supra, of the
Complaint. It likewise denies PCIBANKs allegations in the same Complaint in support of its prayer for a writ of preliminary attachment, particularly its
having fraudulently misappropriated for its own use the contract proceeds/receivables under the contracts mentioned in the several deeds of assignments,
claiming in this respect that it has still remaining receivables from those contracts.
By way of defenses, defendant pleads in its Answer the alleged severe financial and currency crisis which hit the Philippines in July 1997, which adversely
affected and ultimately put it out of business. Defendant adds that the deeds of assignments it executed in favor of PCIBANK were standard forms proposed
by the bank as pre-condition for the release of the loans and therefore partake of the nature of contracts of adhesion, leaving the defendant to the
alternative of taking it or leaving it. By way of counterclaim, defendant prayed for an award of P1,000,000.00 as and for attorneys fees and P200,000.00 as
litigation expenses.
On January 24, 2000, plaintiff PCIBANK filed a verified Motion for Summary Judgment,6[6] therein contending that the defenses interposed by the defendant
are sham and contrived, that the alleged financial crisis pleaded in the Answer is not a fortuitous event that would excuse debtors from their loan
obligations, nor is it an exempting circumstance under Article 1262 of the New Civil Code where, as here, the same is attended by bad faith. In the same
motion, PCIBANK also asserts that the deeds of assignments executed in its favor are not contracts of adhesion, and even if they were, the same are valid.
To the Motion for Summary Judgment, defendant interposed an Opposition7[7] insisting that its Answer tendered or raised genuine and substantial issues of
material facts which require full-blown trial, namely
1.
Whether or not defendant received all or part of the proceeds/receivables due from the contracts mentioned in the deeds of assignment at the time
the complaint was filed;
2.

Granting that defendant received those proceeds/receivables, whether or not defendant fraudulently misappropriated the same;

3.
Whether or not defendant is virtually insolvent as a result of the regionwide economic crisis that hit Asia, causing the Philippine peso to depreciate
drastically; and
4.
Whether the parties dealt with each other on equal footing with respect to the execution of the deeds of assignment as to give the defendant an
honest opportunity to reject the onerous terms imposed therein.

5[5]

Rollo, pp. 70-75.

6[6]

Rollo, pp. 78-85.

7[7]

Id. at pp. 88-94.

Significantly, defendant did not append to its aforementioned Opposition any affidavit in support of the alleged genuine issues of material facts mentioned
therein.
Before the pending incident (motion for summary judgment) could be resolved by the trial court, plaintiff PCIBANK waived its claim for exemplary damages
and agreed to reduce its claim for attorneys fees from P1,800,000.00 to P1,260,000.00, but made it clear that its waiver of exemplary damages and
reduction of attorneys fees are subject to the condition that a full and final disposition of the case is obtained via summary judgment.
On May 16, 2000, the trial court, acting favorably on PCIBANKs motion for summary judgment, came out with its Summary Judgment,8[8] the decretal
portion of which reads:
WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff:
1.
the sum of US$4,553,446.06, or its equivalent in Philippine currency at the time of payment, with interest thereon at the rate of 8.27% per
annum from February 24, 1999 until fully paid;
2.
P1,260,000.00 as and for attorneys fees; and
3.
the costs of suit.
SO ORDERED.
Explains the trial court in rendering its Summary Judgment:
A thorough examination of the parties pleadings and their respective stand in the foregoing motion, the court finds that indeed with defendants admission
of the first cause of action there remains no question of facts in issue. Further, the proffered defenses are worthless, unsubstantial, sham and contrived.
Considering that there is no more issue to be resolved, the court hereby grants plaintiffs Motion and renders Judgment in favor of the plaintiff against the
defendant based on their respective pleadings in accordance with Section 4, Rule 35 of the Rules of Court.
In time, petitioner went to the CA whereat its appellate recourse was docketed as CA-G.R. CV No. 68189. As stated at the threshold hereof, the CA, in its
decision9[9] of May 15, 2002, affirmed with modification the Summary Judgment rendered by the trial court, the modification being as regards the award for
attorneys fees which the CA reduced to P1,000,000.00, to wit:
IN THE LIGHT OF ALL THE FOREGOING, the appeal is PARTIALLY GRANTED. The Decision appealed from is AFFIRMED with the MODIFICATION THAT THE
AWARD FOR ATTORNEYS FEES is reduced to P1,000,000.00.
SO ORDERED.
With its motion for reconsideration having been denied by the CA in its Resolution 10[10] of June 3, 2002, petitioner is now with us via the present recourse,
raising the following issues:
I
WHETHER OR NOT THERE IS A GENUINE ISSUE AS TO A MATERIAL FACT WHICH RULES OUT THE PROPRIETY OF A SUMMARY JUDGMENT.
II
WHETHER OR NOT THE AWARD OF ATTORNEYS FEES IS EXORBITANT OR UNCONSCIONABLE.
We DENY.
As in the two courts below, it is petitioners posture that summary judgment is improper in this case because there are genuine issues of fact which have to
be threshed out during trial, to wit: (a) whether or not petitioner was able to collect only a portion of the contract proceeds/receivables it was bound to
deliver, remit and tender to respondent under the several deeds of assignment it executed in favor of the latter; and (b) whether or not petitioner

8[8]

Id. at 102-107.

9[9]

Rollo, pp. 34-58.

10[10] Rollo, p. 59.

fraudulently misappropriated and used for its benefit the said proceeds/receivables. Ergo, so petitioner maintains, genuine triable issues of fact are present
in this case, which thereby precludes rendition of summary judgment.
We are not persuaded.
Under Rule 35 of the 1997 Rules of Procedure, as amended, except as to the amount of damages, when there is no genuine issue as to any material fact
and the moving party is entitled to a judgment as a matter of law, summary judgment may be allowed. 11[11] Summary or accelerated judgment is a
procedural technique aimed at weeding out sham claims or defenses at an early stage of litigation thereby avoiding the expense and loss of time involved
in a trial.12[12]
Under the Rules, summary judgment is appropriate when there are no genuine issues of fact which call for the presentation of evidence in a full-blown trial.
Even if on their face the pleadings appear to raise issues, when the affidavits, depositions and admissions show that such issues are not genuine, then
summary judgment as prescribed by the Rules must ensue as a matter of law. The determinative factor, therefore, in a motion for summary judgment, is
the presence or absence of a genuine issue as to any material fact.
A genuine issue is an issue of fact which requires the presentation of evidence as distinguished from a sham, fictitious, contrived or false claim. When the
facts as pleaded appear uncontested or undisputed, then there is no real or genuine issue or question as to the facts, and summary judgment is called for.
The party who moves for summary judgment has the burden of demonstrating clearly the absence of any genuine issue of fact, or that the issue posed in
the complaint is patently unsubstantial so as not to constitute a genuine issue for trial. Trial courts have limited authority to render summary judgments
and may do so only when there is clearly no genuine issue as to any material fact. When the facts as pleaded by the parties are disputed or contested,
proceedings for summary judgment cannot take the place of trial. 13[13]
The CA, in its challenged decision, stated and we are in full accord with it:
In the present recourse, the [petitioner] relied not only on the judicial admissions in its pleadings, more specifically its Answer to the complaint, the
testimony of Maricel Salaveria as well as Exhibits A to T-3, adduced in evidence by the [respondent], during the hearing on its plea for the issuance, by
the Court a quo, of a writ of preliminary attachment. Significantly, the [petitioner] did not bother filing a motion for the quashal of the Writ issued by the
Court a quo.
It must be borne in mind, too, that the [petitioner] admitted, in its Answer the due execution and authenticity of the documents appended to the complaint
. The [petitioner] did not deny its liability for the principal amount claimed by the [respondent] in its complaint. The [petitioner] merely alleged, by way of
defenses, that it failed to pay its account because of the region-wide economic crisis that engulfed Asia, in July, 1997, and the Deeds of Assignment
executed by it in favor of the [respondent] were contracts of adhesion:
xxx

xxx

xxx

The [petitioner] elaborated on and catalogued its defenses in its Appellants Brief what it believed, as genuine issues.

11[11] Northwest Airlines vs. CA, G.R. No. 120337, January 20, 1998, 284 SCRA 408.
12[12] Excelsa Industries, Inc, vs. CA,G.R. No. 105455, August 23, 1995, 247 SCRA 560.

13

[13]

Evadel Realty and Development Corporation vs. Soriano, G.R. No. 144291, April 20, 2001, 357 SCRA 395, 401.

(i)

Whether or not [petitioner] received all or part of the proceeds/receivables due from the construction contracts at the time the civil action was filed;

(ii)
Granting that [petitioner] received the proceeds/receivables from the construction contracts, whether or not [petitioner] fraudulently
misappropriated the same;
(iii)
Whether or not [petitioner] had become virtually insolvent as a result of the region-wide economic crisis that hit Asia, causing the Philippine
peso to depreciate dramatically; and
(iv)
Whether or not [respondent] and [petitioner] dealt with each other on equal footing with respect to the execution of the deeds of assignment of
receivables as to give [petitioner] an honest opportunity to reject the onerous terms imposed on it.
However, the [petitioner] failed to append, to its Opposition to the Motion for Summary Judgment, Affidavits showing the factual basis for its
defenses of extraordinary deflation, including facts, figures and data showing its financial condition before and after the economic crisis and that the
crisis was the proximate cause of its financial distress. It bears stressing that the [petitioner] was burdened to demonstrate, by its Affidavits and
documentary evidence, that, indeed, the Philippines was engulfed in an extraordinary deflation of the Philippine Peso and that the same was the proximate
cause of the financial distress, it claimed, it suffered.
Where, on the basis of the records, inclusive of the pleadings of the parties, and the testimonial and documentary evidence adduced by the [respondent],
supportive of its plea for a writ of preliminary attachment, the [respondent] had causes of action against the [petitioner], it behooved the [petitioner] to
controvert the same with affidavits/documentary evidence showing a prima facie genuine defense. As the Appellate Court of Illinois so aptly declared:
The defendant must show that he has a bona fide defense to the action, one which he may be able to establish. It must be a plausible ground of defense,
something fairly arguable and of a substantial character. This he must show by affidavits or other proof.
The trial court, of course, must determine from the affidavits filed whether the defendant has interposed a sufficiently good defense to entitle it to defend,
but where defendants affidavits present no substantial triable issues of fact, the court will grant the motion for summary judgment.
xxx

xxx

xxx

The failure of the [petitioner] to append to its Opposition any Affidavits showing that its defenses were not contrived or cosmetic to delay judgment
created a presumption that the defenses of the [petitioner] were not offered in good faith and that the same could not be sustained ( Unites States
versus Fiedler, et al., Federal Reported, 2nd, 578).
If, indeed, the [petitioner] believed it that was prevented from complying with its obligations to the [respondent], under its contracts, it should have
interposed a counterclaims for rescission of contracts, conformably with the pronouncement of our Supreme Court, thus:
The [petitioner] did not. This only exposed the barrenness of the pose of the [petitioner].

The [petitioner] may have experienced financial difficulties because of the 1997 economic crisis that ensued in Asia. However, the same does not
constitute a valid justification for the [petitioner] to renege on its obligations to the [respondent]. The [petitioner] cannot even find solace in Articles 1266
and 1267 of the New Civil Code for, as declared by our Supreme Court:
It is a fundamental rule that contracts, once perfected, bind both contracting parties, and obligations arising therefrom have the force of law between the
parties and should be complied with in good faith. But the law recognizes exceptions to the principle of the obligatory force of contracts. One exception is
laid down in Article 1266 of the Civil Code, which reads: The debtor in obligations to do shall also be released when the prestation becomes legally or
physically impossible without the fault of the obligor.
Petitioner cannot, however, successfully take refuge in the said article, since it is applicable only to obligations to do, and not obligations to give. An
obligation to do includes all kinds of work or service; while an obligation to give is a prestation which consists in the delivery of a movable or an immovable
thing in order to create a real right, or for the use of the recipient, or for its simple possession, or in order to return it to its owner.
xxx

xxx

xxx

In this case, petitioner wants this Court to believe that the abrupt change in the political climate of the country after the EDSA Revolution and its poor
financial condition rendered the performance of the lease contract impractical and inimical to the corporate survival of the petitioner. (Philippine
National Construction Corporation versus Court of Appeals, et al., 272 SCRA 183, at pages 191-192, supra)
The [petitioner] even failed to append any Affidavit to its Opposition showing how much it had received from its construction contracts and how and to
whom the said collections had been appended. The [petitioner] had personal and sole knowledge of the aforesaid particulars while the [respondent] did
not.
In fine, we rule and so hold that the CA did not commit any reversible error in affirming the summary judgment rendered by the trial court as, at bottom,
there existed no genuine issue as to any material fact. We also sustain the CAs reduction in the award of attorneys fees to only P1,000,000.00, given the
fact that there was no full-blown trial.
WHEREFORE, the assailed CA decision is AFFIRMED in toto and this petition is DENIED for lack of merit.
Costs against petitioner. SO ORDERED
G.R. No. 143188
February 14, 2007
FLORENTINO
PINEDA,
Petitioner,
vs.
HEIRS OF ELISEO GUEVARA, represented by ERNESTO E. GUEVARA and ISAGANI S. GUEVARA, namely: ELISEO GUEVARA, JR., ZENAIDA G.
SAPALICIO, DANTE G. GUEVARA, DANILO C. GUEVARA, and ISAGANI S. GUEVARA, Respondents.
DECISION
TINGA, J.:
On appeal by way of certiorari under Rule 45 of the 1997 Rules of Civil Procedure are the Decision 1 and Resolution of the Court of Appeals in CA-G.R. CV No.
54074. The Decision reversed the order of dismissal of the Regional Trial Court (RTC), Branch 273, Marikina, and directed the court a quo to conduct trial on
the merits, while the Resolution denied petitioner Pinedas motion for reconsideration.
As borne out by the records, the following are the factual antecedents.

On 7 September 1995, respondents Eliseo Guevara, Jr., Zenaida G. Sapalicio, Dante G. Guevara and Isagani S. Guevara, collectively referred hereinafter as
the Guevara heirs, filed an action for the nullification of the certificates of title of a parcel of land measuring approximately 2,304 hectares situated in
Marikina.
Named defendants were the estate of the late Pedro Gonzales, Virginia Perez, Crisanta Perez, Jose Perez, Roy Guadalupe, Lino Bucad and Florentino Pineda.
The complaint, docketed as Civil Case No. 95-171-MK, was raffled to Branch 273 of the RTC of Marikina.
The Guevara heirs alleged in the complaint that they were the co-owners of a property originally covered by Original Certificate of Title (OCT) No. 386
issued on 7 December 1910 in favor of the spouses Emiliano Guevara and Matilde Crimen. The couples son, and the Guevara heirs predecessor-in-interest,
Eliseo Guevara, allegedly purchased the property on 1 January 1932 and had exercised ownership over the property since then by selling and donating
portions thereof to third persons. The Guevara heirs averred that the sale of the property to Eliseo Guevara was annotated at the back of OCT No. 386.
According to the Guevara heirs, the defendants illegally claimed ownership and possession over a certain portion of the property, particularly that area
covered by Transfer Certificate of Title (TCT) No. 223361 issued to the estate of Pedro C. Gonzales. TCT No. 223361 was derived from OCT No. 629, which
the Guevara heirs described as fake, having been issued only on 26 January 1912 or subsequent to the issuance of OCT No. 386. Hence, the Guevara heirs
prayed that OCT No. 629 and its derivative titles, to wit, TCT Nos. 223361, 244447, 244448, 244449 be cancelled, that the Guevara heirs be declared
owners of the property and that a new certificate of title be issued in their names.
Defendant Pineda filed an answer with counterclaim, raising the defenses of lack of cause of action, prescription, laches and estoppel. He averred that he
was a buyer in good faith and had been in actual possession of the land since 1970 initially as a lessor and subsequently as an owner. He registered the
property in his name and was issued TCT No. 257272.
Defendants Virginia, Crisanta, and Jose, all surnamed Perez, filed an answer with compulsory counterclaim and averred that their father, Marcos Perez,
purchased the property from the late Pedro Gonzales and had it declared in Perezs name for taxation purposes. According to them, they had been in actual
possession of a lot measuring 375 square meters before 1958 and had been regularly paying the property taxes thereon.
The rest of the defendants, including the estate of Pedro Gonzales, also filed an answer with counterclaim, raising the same defenses of laches and
prescription and res judicata. They claimed that OCT No. 629 was issued to the Municipality of Marikina in 1912 and that the late Pedro Gonzales and his
family started occupying the property as early as 1950 as lessees thereon. The late Pedro Gonzales allegedly bought the property from the Municipality of
Marikina in a public bidding on 25 April 1966 and had allowed defendants to occupy the property. They asserted that the Guevara heirs never actually
occupied the property.
On 4 December 1995, the RTC set the case for hearing as if a motion to dismiss had been filed. During the hearing, the parties presented oral arguments
and were directed to file their memoranda.
After submission of memoranda, the RTC issued an Order dated 7 May 1996, dismissing the action on the ground of laches. The Guevara heirs appealed the
order of dismissal, claiming the denial of their right to due process.
On 23 August 1999, the Court of Appeals promulgated the assailed Decision, which set aside the RTCs order of dismissal and directed the reinstatement of
Civil Case No. 95-171-MK. The appellate court ruled that a complaint cannot be dismissed under Rule
16, Section 12 of the Rules of Court based on laches since laches is not one of the grounds enumerated under said provision. Although the RTC order of
dismissal did not rule on the other affirmative defenses raised by petitioners in the answer, such as lack of cause of action, prescription and res judicata,
the Court of Appeals discussed them and ruled that none of these affirmative defenses raised were present to warrant the dismissal of the action.
Only Pineda sought reconsideration. In its 3 May 2000 Resolution, the Court of Appeals denied Pinedas motion. Hence, the instant petition, attributing the
following errors to the Court of Appeals:
THE COURT OF APPEALS ERRED IN TAKING COGNIZANCE OF THE APPEAL OF RESPONDENTS WHICH RAISED ONLY PURELY QUESTIONS OF LAW; AND,
THEREFORE, IT ACTED WITHOUT JURISDICTION IN HEARING AND DECIDING THE SAID APPEALED CASE.
THE COURT OF APPEALS ERRED IN NOT CONSIDERING THE AFFIRMATIVE DEFENSE OF LACHES AS ANALOGOUS TO PRESCRIPTION.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE TRIAL COURTS DISMISSAL OF THE RESPONDENTS COMPLAINT IS ERRONEOUS FOR THE REASON
THAT THE AFFIRMATIVE DEFENSE OF LACHES IS NOT AMONG THE GROUNDS FOR A MOTION TO DISMISS UNDER THE RULES, WHICH MAY BE ALLEGED AS
AFFIRMATIVE DEFENSE TO BE PROVED DURING THE TRIAL.

AS A COROLLARY TO THE THIRD ASSIGNED ERROR ABOVE, THE COURT OF APPEALS ERRED IN NOT TREATING THE ASSAILED ORDER OF DISMISSAL OF
RESPONDENTS COMPLAINT BY THE TRIAL COURT AS A SUMMARY JUDGMENT, TO AVOID PROTRACTED LITIGATION.
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT WHILE PRESCRIPTION IN DEROGATION OF THE TITLE TO REGISTERED OWNERS WILL NOT LIE,
LACHES WILL.3
Counsel for the estate of Pedro Gonzales filed a Comment/Manifestation, 4 stating that her clients have adopted and joined Pinedas petition praying for the
reinstatement of the trial courts order of dismissal.
At bottom, the petition raises two main issues, to wit: (1) whether or not the appeal of the heirs of Guevara was improperly elevated to the Court of Appeals
since, according to them, it raised a pure question of law; and (2) whether or not the trial court correctly dismissed the action on the ground of laches
without conducting trial on the merits.
Petitioner Pineda had ample opportunity to raise before the Court of Appeals the objection on the improper mode of appeal taken by the heirs of Guevara.
This, he failed to do. The issue of improper appeal was raised only in Pinedas motion for reconsideration of the Court of Appeals Decision. Hence, this
Court cannot now, for the first time on appeal, pass upon this issue. For an issue cannot be raised for the first time on appeal. 5 In any case, the appeal by
the heirs of Guevara also raised the issue regarding the existence of laches on the part of petitioners as defendants, which is factual in nature as discussed
below.
Now, did the trial court correctly order the dismissal of the complaint based on laches without conducting trial on the merits? The Court of Appeals
disagreed, holding that under Rule 16, Section 1 6 of the Rules of Court, laches is not enumerated under said provision, hence, it must be proved during trial.
On the other hand, petitioner Pineda asserts that laches is analogous to prescription and, therefore, can be a ground of dismissing a complaint as though a
motion to dismiss is filed.
Well-settled is the rule that the elements of laches must be proved positively. Laches is evidentiary in nature which could not be established by mere
allegations in the pleadings and can not be resolved in a motion to dismiss. At this stage therefore, the dismissal of the complaint on the ground of laches is
premature.7 Those issues must be resolved at the trial of the case on the merits wherein both parties will be given ample opportunity to prove their
respective claims and defenses.8
The elements of laches are: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which the complaint
seeks a remedy; (2) delay in asserting the complainants rights, the complainant having had knowledge or notice of the defendants conduct as having
been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right in
which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred. 9
Whether or not the elements of laches are present is a question involving a factual determination by the trial court. There is no absolute rule as to what
constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances. 10 Laches is not concerned with the mere
lapse of time, rather, the party must have been afforded an opportunity to pursue his claim in order that the delay may sufficiently constitute laches. 11
Without prejudging the instant case, an apparent delay in the enforcement of ones claim does not automatically constitute laches. The party charged with
negligence or omission in invoking his right must be afforded the opportunity to raise his defenses, which can be accommodated only in a contentious
proceeding.
In reversing the RTCs order of dismissal, the Court of Appeals held that "laches could not be a ground to dismiss the complaint as it is not enumerated
under Rule 16, Section 1." 12 This is not entirely correct. Under paragraph (h) thereof, where a claim or demand set forth in the plaintiffs pleading has been
paid, waived, abandoned, or otherwise extinguished, the same may be raised in a motion to dismiss. The language of the rule, particularly on the relation
of the words "abandoned" and "otherwise extinguished" to the phrase "claim or demand deemed set forth in the plaintiffs pleading" is broad enough to
include within its ambit the defense of bar by laches. However, when a party moves for the dismissal of the complaint based on laches, the trial court must
set a hearing on the motion where the parties shall submit not only their arguments on the questions of law but also their evidence on the questions of fact
involved.13 Thus, being factual in nature, the elements of laches must be proved or disproved through the presentation of evidence by the parties. As
discussed above, an apparent delay in the filing of a complaint as shown in a pleading does not automatically warrant the dismissal of the complaint on the
ground of laches.

In the case at bar, while the trial court correctly set the case for hearing as though a motion to dismiss had been filed, the records do not reveal that it
extended to the parties the opportunity to present evidence. For instance, counsel for the heirs of Guevara filed and served written interrogatories 14 on one
of the defendants but the trial court held in abeyance the resolution of the motion to order the defendant to submit answers to the written interrogatories. 15
The trial court likewise denied the Ex Parte Motion To Set Trial filed by the heirs of Guevara. 16 These were the instances which would have enabled the trial
court to receive evidence on which to anchor its factual findings. Although the trial court heard oral arguments and required the parties to submit their
respective memoranda, the presentation of evidence on the defenses which are grounds for a motion to dismiss was not held at all. Otherwise, the oral
arguments and memoranda submitted by the parties would have enabled this Court to review the trial courts factual finding of laches instead of
remanding the case for trial on the merits. A perusal of the records precludes this Court from making a categorical declaration on whether the heirs of
Guevara were guilty of laches.
Neither does the affirmative defense of prescription alleged in an answer automatically warrant the dismissal of the complaint under Rule 16. An allegation
of prescription can effectively be used in a motion to dismiss only when the complaint on its face shows that indeed the action has already prescribed. 17
Otherwise, the issue of prescription is one involving evidentiary matters requiring a full-blown trial on the merits and cannot be determined in a mere
motion to dismiss.18 Pinedas theory that the defense of laches should be treated as an affirmative defense of prescription warranting the dismissal of the
complaint is erroneous.1awphi1.net
There is also no basis in procedural law to treat the RTCs order of dismissal as a summary judgment. The trial court cannot motu proprio decide that
summary judgment on an action is in order. Under the applicable provisions of Rule 35, the defending party or the claimant, as the case may be, must
invoke the rule on summary judgment by filing a motion. 19 The adverse party must be notified of the motion for summary judgment 20 and furnished with
supporting affidavits, depositions or admissions before hearing is conducted. 21 More importantly, a summary judgment is permitted only if there is no
genuine issue as to any material fact and a moving party is entitled to a judgment as a matter of law. 22
Based on the parties allegations in the complaint and answer, the issues in the case at bar are far from settled. For instance, both petitioner and
respondents claim their ownership rights over the same property based on two different original certificates of title. Respondents charge petitioner of illegal
occupation while the latter invokes good faith in the acquisition of the property. Clearly, these are factual matters which can be best ventilated in a fullblown proceeding before the trial court, especially when what are involved appear to be sizeable parcels of land covered by two certificates of title.
Except for Pineda, the other defendants did not elevate the Court of Appeals Decision to this Court. With respect to them, the appellate courts Decision
has already become final and conclusive, notwithstanding their adoption 23 of Pinedas petition.
WHEREFORE, the instant petition for review on certiorari is DENIED and the Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 54074 are
AFFIRMED. Let the records of the case be remanded for further proceedings to the Regional Trial Court of Marikina City, which is hereby ORDERED to try and
decide the case with deliberate speed.
SO ORDERED.
[G.R. No. 161135. April 8, 2005]
SWAGMAN HOTELS AND TRAVEL, INC., petitioner, vs. HON. COURT OF APPEALS, and NEAL B. CHRISTIAN, respondents.
May a complaint that lacks a cause of action at the time it was filed be cured by the accrual of a cause of action during the pendency of the case? This is
the basic issue raised in this petition for the Courts consideration.
Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc., through Atty. Leonor L. Infante and Rodney David Hegerty, its president and vicepresident, respectively, obtained from private respondent Neal B. Christian loans evidenced by three promissory notes dated 7 August 1996, 14 March
1997, and 14 July 1997. Each of the promissory notes is in the amount of US$50,000 payable after three years from its date with an interest of 15% per
annum payable every three months.[1] In a letter dated 16 December 1998, Christian informed the petitioner corporation that he was terminating the loans
and demanded from the latter payment in the total amount of US$150,000 plus unpaid interests in the total amount of US$13,500.[2]
On 2 February 1999, private respondent Christian filed with the Regional Trial Court of Baguio City, Branch 59, a complaint for a sum of money and
damages against the petitioner corporation, Hegerty, and Atty. Infante. The complaint alleged as follows: On 7 August 1996, 14 March 1997, and 14 July
1997, the petitioner, as well as its president and vice-president obtained loans from him in the total amount of US$150,000 payable after three years, with
an interest of 15% per annum payable quarterly or every three months. For a while, they paid an interest of 15% per annum every three months in

accordance with the three promissory notes. However, starting January 1998 until December 1998, they paid him only an interest of 6% per annum, instead
of 15% per annum, in violation of the terms of the three promissory notes. Thus, Christian prayed that the trial court order them to pay him jointly and
solidarily the amount of US$150,000 representing the total amount of the loans; US$13,500 representing unpaid interests from January 1998 until
December 1998; P100,000 for moral damages; P50,000 for attorneys fees; and the cost of the suit.[3]
The petitioner corporation, together with its president and vice-president, filed an Answer raising as defenses lack of cause of action and novation of the
principal obligations. According to them, Christian had no cause of action because the three promissory notes were not yet due and demandable. In
December 1997, since the petitioner corporation was experiencing huge losses due to the Asian financial crisis, Christian agreed (a) to waive the interest of
15% per annum, and (b) accept payments of the principal loans in installment basis, the amount and period of which would depend on the state of business
of the petitioner corporation. Thus, the petitioner paid Christian capital repayment in the amount of US$750 per month from January 1998 until the time the
complaint was filed in February 1999. The petitioner and its co-defendants then prayed that the complaint be dismissed and that Christian be ordered to
pay P1 million as moral damages; P500,000 as exemplary damages; and P100,000 as attorneys fees.[4]
In due course and after hearing, the trial court rendered a decision[5] on 5 May 2000 declaring the first two promissory notes dated 7 August 1996 and 14
March 1997 as already due and demandable and that the interest on the loans had been reduced by the parties from 15% to 6% per annum. It then
ordered the petitioner corporation to pay Christian the amount of $100,000 representing the principal obligation covered by the promissory notes dated 7
August 1996 and 14 March 1997, plus interest of 6% per month thereon until fully paid, with all interest payments already paid by the defendant to the
plaintiff to be deducted therefrom.
The trial court ratiocinated in this wise:
(1) There was no novation of defendants obligation to the plaintiff. Under Article 1292 of the Civil Code, there is an implied novation only if the old and the
new obligation be on every point incompatible with one another.
The test of incompatibility between the two obligations or contracts, according to an imminent author, is whether they can stand together, each one having
an independent existence. If they cannot, they are incompatible, and the subsequent obligation novates the first (Tolentino, Civil Code of the Philippines,
Vol. IV, 1991 ed., p. 384). Otherwise, the old obligation will continue to subsist subject to the modifications agreed upon by the parties. Thus, it has been
written that accidental modifications in an existing obligation do not extinguish it by novation. Mere modifications of the debt agreed upon between the
parties do not constitute novation. When the changes refer to secondary agreement and not to the object or principal conditions of the contract, there is no
novation; such changes will produce modifications of incidental facts, but will not extinguish the original obligation. Thus, the acceptance of partial
payments or a partial remission does not involve novation (id., p. 387). Neither does the reduction of the amount of an obligation amount to a novation
because it only means a partial remission or condonation of the same debt.
In the instant case, the Court is of the view that the parties merely intended to change the rate of interest from 15% per annum to 6% per annum when the
defendant started paying $750 per month which payments were all accepted by the plaintiff from January 1998 onward. The payment of the principal
obligation, however, remains unaffected which means that the defendant should still pay the plaintiff $50,000 on August 9, 1999, March 14, 2000 and July
14, 2000.
(2) When the instant case was filed on February 2, 1999, none of the promissory notes was due and demandable. As of this date however, the first and the
second promissory notes have already matured. Hence, payment is already due.
Under Section 5 of Rule 10 of the 1997 Rules of Civil Procedure, a complaint which states no cause of action may be cured by evidence presented without
objection. Thus, even if the plaintiff had no cause of action at the time he filed the instant complaint, as defendants obligation are not yet due and
demandable then, he may nevertheless recover on the first two promissory notes in view of the introduction of evidence showing that the obligations
covered by the two promissory notes are now due and demandable.
(3) Individual defendants Rodney Hegerty and Atty. Leonor L. Infante can not be held personally liable for the obligations contracted by the defendant
corporation it being clear that they merely acted in representation of the defendant corporation in their capacity as General Manager and President,
respectively, when they signed the promissory notes as evidenced by Board Resolution No. 1(94) passed by the Board of Directors of the defendant
corporation (Exhibit 4).[6]
In its decision[7] of 5 September 2003, the Court of Appeals denied petitioners appeal and affirmed in toto the decision of the trial court, holding as follows:

In the case at bench, there is no incompatibility because the changes referred to by appellant Swagman consist only in the manner of payment. . . .
Appellant Swagmans interpretation that the three (3) promissory notes have been novated by reason of appellee Christians acceptance of the monthly
payments of US$750.00 as capital repayments continuously even after the filing of the instant case is a little bit strained considering the stiff requirements
of the law on novation that the intention to novate must appear by express agreement of the parties, or by their acts that are too clear and unequivocal to
be mistaken. Under the circumstances, the more reasonable interpretation of the act of the appellee Christian in receiving the monthly payments of
US$750.00 is that appellee Christian merely allowed appellant Swagman to pay whatever amount the latter is capable of. This interpretation is supported
by the letter of demand dated December 16, 1998 wherein appellee Christian demanded from appellant Swagman to return the principal loan in the
amount of US$150,000 plus unpaid interest in the amount of US$13,500.00
...
Appellant Swagman, likewise, contends that, at the time of the filing of the complaint, appellee Christian ha[d] no cause of action because none of the
promissory notes was due and demandable.
Again, We are not persuaded.
...
In the case at bench, while it is true that appellant Swagman raised in its Answer the issue of prematurity in the filing of the complaint, appellant Swagman
nonetheless failed to object to appellee Christians presentation of evidence to the effect that the promissory notes have become due and demandable.
The afore-quoted rule allows a complaint which states no cause of action to be cured either by evidence presented without objection or, in the event of an
objection sustained by the court, by an amendment of the complaint with leave of court (Herrera, Remedial Law, Vol. VII, 1997 ed., p. 108).[8]
Its motion for reconsideration having been denied by the Court of Appeals in its Resolution of 4 December 2003, [9] the petitioner came to this Court raising
the following issues:
I. WHERE THE DECISION OF THE TRIAL COURT DROPPING TWO DEFENDANTS HAS BECOME FINAL AND EXECUTORY, MAY THE RESPONDENT COURT OF
APPEALS STILL STUBBORNLY CONSIDER THEM AS APPELLANTS WHEN THEY DID NOT APPEAL?
II. WHERE THERE IS NO CAUSE OF ACTION, IS THE DECISION OF THE LOWER COURT VALID?
III. MAY THE RESPONDENT COURT OF APPEALS VALIDLY AFFIRM A DECISION OF THE LOWER COURT WHICH IS INVALID DUE TO LACK OF CAUSE OF ACTION?
IV. WHERE THERE IS A VALID NOVATION, MAY THE ORIGINAL TERMS OF CONTRACT WHICH HAS BEEN NOVATED STILL PREVAIL?[10]
The petitioner harps on the absence of a cause of action at the time the private respondents complaint was filed with the trial court. In connection with this,
the petitioner raises the issue of novation by arguing that its obligations under the three promissory notes were novated by the renegotiation that
happened in December 1997 wherein the private respondent agreed to waive the interest in each of the three promissory notes and to accept US$750 per
month as installment payment for the principal loans in the total amount of US$150,000. Lastly, the petitioner questions the act of the Court of Appeals in
considering Hegerty and Infante as appellants when they no longer appealed because the trial court had already absolved them of the liability of the
petitioner corporation.
On the other hand, the private respondent asserts that this petition is a mere ploy to continue delaying the payment of a just obligation. Anent the fact that
Hegerty and Atty. Infante were considered by the Court of Appeals as appellants, the private respondent finds it immaterial because they are not affected
by the assailed decision anyway.
Cause of action, as defined in Section 2, Rule 2 of the 1997 Rules of Civil Procedure, is the act or omission by which a party violates the right of another. Its
essential elements are as follows:
1. A right in favor of the plaintiff by whatever means and under whatever law it arises or is created;
2. An obligation on the part of the named defendant to respect or not to violate such right; and
3. Act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery of damages or other appropriate relief.[11]
It is, thus, only upon the occurrence of the last element that a cause of action arises, giving the plaintiff the right to maintain an action in court for recovery
of damages or other appropriate relief.

It is undisputed that the three promissory notes were for the amount of P50,000 each and uniformly provided for (1) a term of three years; (2) an interest of
15 % per annum, payable quarterly; and (3) the repayment of the principal loans after three years from their respective dates. However, both the Court of
Appeals and the trial court found that a renegotiation of the three promissory notes indeed happened in December 1997 between the private respondent
and the petitioner resulting in the reduction not waiver of the interest from 15% to 6% per annum, which from then on was payable monthly, instead of
quarterly. The term of the principal loans remained unchanged in that they were still due three years from the respective dates of the promissory notes.
Thus, at the time the complaint was filed with the trial court on 2 February 1999, none of the three promissory notes was due yet; although, two of the
promissory notes with the due dates of 7 August 1999 and 14 March 2000 matured during the pendency of the case with the trial court. Both courts also
found that the petitioner had been religiously paying the private respondent US$750 per month from January 1998 and even during the pendency of the
case before the trial court and that the private respondent had accepted all these monthly payments.
With these findings of facts, it has become glaringly obvious that when the complaint for a sum of money and damages was filed with the trial court on 2
February 1999, no cause of action has as yet existed because the petitioner had not committed any act in violation of the terms of the three promissory
notes as modified by the renegotiation in December 1997. Without a cause of action, the private respondent had no right to maintain an action in court,
and the trial court should have therefore dismissed his complaint.
Despite its finding that the petitioner corporation did not violate the modified terms of the three promissory notes and that the payment of the principal
loans were not yet due when the complaint was filed, the trial court did not dismiss the complaint, citing Section 5, Rule 10 of the 1997 Rules of Civil
Procedure, which reads:
Section 5. Amendment to conform to or authorize presentation of evidence. When issues not raised by the pleadings are tried with the express or implied
consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment;
but failure to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues
made by the pleadings, the court may allow the pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and
the ends of substantial justice will be subserved thereby. The court may grant a continuance to enable the amendment to be made.
According to the trial court, and sustained by the Court of Appeals, this Section allows a complaint that does not state a cause of action to be cured by
evidence presented without objection during the trial. Thus, it ruled that even if the private respondent had no cause of action when he filed the complaint
for a sum of money and damages because none of the three promissory notes was due yet, he could nevertheless recover on the first two promissory notes
dated 7 August 1996 and 14 March 1997, which became due during the pendency of the case in view of the introduction of evidence of their maturity
during the trial.
Such interpretation of Section 5, Rule 10 of the 1997 Rules of Civil Procedure is erroneous.
Amendments of pleadings are allowed under Rule 10 of the 1997 Rules of Civil Procedure in order that the actual merits of a case may be determined in the
most expeditious and inexpensive manner without regard to technicalities, and that all other matters included in the case may be determined in a single
proceeding, thereby avoiding multiplicity of suits.[12] Section 5 thereof applies to situations wherein evidence not within the issues raised in the pleadings is
presented by the parties during the trial, and to conform to such evidence the pleadings are subsequently amended on motion of a party. Thus, a complaint
which fails to state a cause of action may be cured by evidence presented during the trial.
However, the curing effect under Section 5 is applicable only if a cause of action in fact exists at the time the complaint is filed, but the complaint is
defective for failure to allege the essential facts. For example, if a complaint failed to allege the fulfillment of a condition precedent upon which the cause of
action depends, evidence showing that such condition had already been fulfilled when the complaint was filed may be presented during the trial, and the
complaint may accordingly be amended thereafter.[13] Thus, in Roces v. Jalandoni,[14] this Court upheld the trial court in taking cognizance of an otherwise
defective complaint which was later cured by the testimony of the plaintiff during the trial. In that case, there was in fact a cause of action and the only
problem was the insufficiency of the allegations in the complaint. This ruling was reiterated in Pascua v. Court of Appeals.[15]
It thus follows that a complaint whose cause of action has not yet accrued cannot be cured or remedied by an amended or supplemental pleading alleging
the existence or accrual of a cause of action while the case is pending.[16] Such an action is prematurely brought and is, therefore, a groundless suit, which
should be dismissed by the court upon proper motion seasonably filed by the defendant. The underlying reason for this rule is that a person should not be

summoned before the public tribunals to answer for complaints which are immature. As this Court eloquently said in Surigao Mine Exploration Co., Inc. v.
Harris:[17]
It is a rule of law to which there is, perhaps, no exception, either at law or in equity, that to recover at all there must be some cause of action at the
commencement of the suit. As observed by counsel for appellees, there are reasons of public policy why there should be no needless haste in bringing
up litigation, and why people who are in no default and against whom there is yet no cause of action should not be summoned before the public tribunals to
answer complaints which are groundless. We say groundless because if the action is immature, it should not be entertained, and an action prematurely
brought is a groundless suit.
It is true that an amended complaint and the answer thereto take the place of the originals which are thereby regarded as abandoned (Reynes vs. Compaa
General de Tabacos [1912], 21 Phil. 416; Ruyman and Farris vs. Director of Lands [1916], 34 Phil., 428) and that the complaint and answer having been
superseded by the amended complaint and answer thereto, and the answer to the original complaint not having been presented in evidence as an exhibit,
the trial court was not authorized to take it into account. (Bastida vs. Menzi & Co. [1933], 58 Phil., 188.) But in none of these cases or in any other case
have we held that if a right of action did not exist when the original complaint was filed, one could be created by filing an amended complaint. In some
jurisdictions in the United States what was termed an imperfect cause of action could be perfected by suitable amendment (Brown vs. Galena Mining &
Smelting Co., 32 Kan., 528; Hooper vs. City of Atlanta, 26 Ga. App., 221) and this is virtually permitted in Banzon and Rosauro vs. Sellner ([1933], 58 Phil.,
453); Asiatic Potroleum [sic] Co. vs. Veloso ([1935], 62 Phil., 683); and recently in Ramos vs. Gibbon (38 Off. Gaz., 241). That, however, which is no
cause of action whatsoever cannot by amendment or supplemental pleading be converted into a cause of action: Nihil de re accrescit ei qui nihil
in re quando jus accresceret habet.
We are therefore of the opinion, and so hold, that unless the plaintiff has a valid and subsisting cause of action at the time his action is
commenced, the defect cannot be cured or remedied by the acquisition or accrual of one while the action is pending, and a supplemental
complaint or an amendment setting up such after-accrued cause of action is not permissible. (Emphasis ours).
Hence, contrary to the holding of the trial court and the Court of Appeals, the defect of lack of cause of action at the commencement of this suit cannot be
cured by the accrual of a cause of action during the pendency of this case arising from the alleged maturity of two of the promissory notes on 7 August
1999 and 14 March 2000.
Anent the issue of novation, this Court observes that the petitioner corporation argues the existence of novation based on its own version of what
transpired during the renegotiation of the three promissory notes in December 1997. By using its own version of facts, the petitioner is, in a way,
questioning the findings of facts of the trial court and the Court of Appeals.
As a rule, the findings of fact of the trial court and the Court of Appeals are final and conclusive and cannot be reviewed on appeal to the Supreme Court [18]
as long as they are borne out by the record or are based on substantial evidence.[19] The Supreme Court is not a trier of facts, its jurisdiction being limited
to reviewing only errors of law that may have been committed by the lower courts. Among the exceptions is when the finding of fact of the trial court or the
Court of Appeals is not supported by the evidence on record or is based on a misapprehension of facts. Such exception obtains in the present case. [20]
This Court finds to be contrary to the evidence on record the finding of both the trial court and the Court of Appeals that the renegotiation in December
1997 resulted in the reduction of the interest from 15% to 6% per annum and that the monthly payments of US$750 made by the petitioner were for the
reduced interests.
It is worthy to note that the cash voucher dated January 1998[21] states that the payment of US$750 represents INVESTMENT PAYMENT. All the succeeding
cash vouchers describe the payments from February 1998 to September 1999 as CAPITAL REPAYMENT.[22] All these cash vouchers served as receipts
evidencing private respondents acknowledgment of the payments made by the petitioner: two of which were signed by the private respondent himself and
all the others were signed by his representatives. The private respondent even identified and confirmed the existence of these receipts during the hearing.
[23] Significantly, cognizant of these receipts, the private respondent applied these payments to the three consolidated principal loans in the summary of
payments he submitted to the court.[24]
Under Article 1253 of the Civil Code, if the debt produces interest, payment of the principal shall not be deemed to have been made until the interest has
been covered. In this case, the private respondent would not have signed the receipts describing the payments made by the petitioner as capital
repayment if the obligation to pay the interest was still subsisting. The receipts, as well as private respondents summary of payments, lend credence to

petitioners claim that the payments were for the principal loans and that the interests on the three consolidated loans were waived by the private
respondent during the undisputed renegotiation of the loans on account of the business reverses suffered by the petitioner at the time.
There was therefore a novation of the terms of the three promissory notes in that the interest was waived and the principal was payable in monthly
installments of US$750. Alterations of the terms and conditions of the obligation would generally result only in modificatory novation unless such terms and
conditions are considered to be the essence of the obligation itself.[25] The resulting novation in this case was, therefore, of the modificatory type, not the
extinctive type, since the obligation to pay a sum of money remains in force.
Thus, since the petitioner did not renege on its obligation to pay the monthly installments conformably with their new agreement and even continued
paying during the pendency of the case, the private respondent had no cause of action to file the complaint. It is only upon petitioners default in the
payment of the monthly amortizations that a cause of action would arise and give the private respondent a right to maintain an action against the
petitioner.
Lastly, the petitioner contends that the Court of Appeals obstinately included its President Infante and Vice-President Hegerty as appellants even if they did
not appeal the trial courts decision since they were found to be not personally liable for the obligation of the petitioner. Indeed, the Court of Appeals erred
in referring to them as defendants-appellants; nevertheless, that error is no cause for alarm because its ruling was clear that the petitioner corporation was
the one solely liable for its obligation. In fact, the Court of Appeals affirmed in toto the decision of the trial court, which means that it also upheld the latters
ruling that Hegerty and Infante were not personally liable for the pecuniary obligations of the petitioner to the private respondent.
In sum, based on our disquisition on the lack of cause of action when the complaint for sum of money and damages was filed by the private respondent,
the petition in the case at bar is impressed with merit.
WHEREFORE, the petition is hereby GRANTED. The Decision of 5 September 2003 of the Court of Appeals in CA-G.R. CV No. 68109, which affirmed the
Decision of 5 May 2000 of the Regional Trial Court of Baguio, Branch 59, granting in part private respondents complaint for sum of money and damages,
and its Resolution of 4 December 2003, which denied petitioners motion for reconsideration are hereby REVERSED and SET ASIDE. The complaint docketed
as Civil Case No. 4282-R is hereby DISMISSED for lack of cause of action.
No costs.
SO ORDERED.
G.R. No. 148246
February 16, 2007
REPUBLIC
OF
THE
PHILIPPINES,
Petitioner,
vs.
JUAN C. TUVERA, VICTOR P. TUVERA and TWIN PEAKS DEVELOPMENT CORPORATION, Respondents.
DECISION
TINGA, J.:
The long-term campaign for the recovery of ill-gotten wealth of former President Ferdinand E. Marcos, his wife Imelda, and their associates, has been met
with many impediments, some of which are featured in this case, that have led to doubts whether there is still promise in that enterprise. Yet even as the
prosecution of those cases have drudged on and on, the era of their final reckoning is just beginning before this Court. The heavy hammer of the law is just
starting to fall.
The instant action originated from a civil complaint for restitution and damages filed by the Republic of the Philippines against Marcos and his longtime aide
Juan Tuvera, as well as Tuvera's son Victor and a corporation the younger Tuvera had controlled. Trial on the case against the Tuveras proceeded separately
before the Sandiganbayan. After the Republic had presented its evidence, the Tuveras successfully moved for the dismissal of the case on demurrer to
evidence. The demurrer was sustained, and it falls upon this Court to ascertain the absence or existence of sufficient proof to support the relief sought by
the
Republic
against
the
Tuveras.
I.
We begin with the facts.

Twin Peaks Development Corporation (Twin Peaks) was organized on 5 March 1984 as a corporation with a principal purpose of engaging in the real estate
business. There were five incorporating stockholders, including respondent Victor Tuvera (Victor) 1 who owned 48% of the shares of the fledgling
corporation. Victor was the son of respondent Juan Tuvera, who was then Presidential Executive Assistant of President Marcos.
Acting on a letter dated 31 May 1984 of Twin Peaks Vice-President and Treasurer Evelyn Fontanilla in behalf of the corporation, President Marcos granted
the award of a Timber License Agreement (TLA), more specifically TLA No. 356, in favor of Twin Peaks to operate on 26,000 hectares of forest land with an
annual allowable cut of 60,000 cubic meters of timber and to export 10,000 cubic meters of mahogany of the narra species. 2 As a result, Twin Peaks was
able to engage in logging operations.
On 25 February 1986, President Marcos was ousted, and Corazon C. Aquino assumed the presidency. Among her first acts as President was to establish the
Philippine Commission on Good Government (PCGG), tasked with tracking down the ill-gotten wealth procured by Marcos, his family, and associates during
his 20-year rule. Among the powers granted to the PCGG was the power to issue writs of sequestration. 3 On 13 June 1988, the PCGG issued a Writ of
Sequestration on all assets, properties, records, documents, and shares of stock of Twin Peaks on the ground that all the assets of the corporation are illgotten wealth for having been acquired directly or indirectly through fraudulent and illegal means. 4 This was followed
two days later by Mission Order No. MER-88 (Mission Order), also issued by the PCGG, implementing the aforementioned Writ of Sequestration. 5
On 9 December 1988, the PCGG, in behalf of the Republic, filed the Complaint now subject of this Petition. 6 Impleaded as defendants in the Complaint7 were
Juan and Victor Tuvera, as well as the then-exiled President Marcos. Through the Complaint, the Republic sought to recover funds allegedly acquired by said
parties in flagrant breach of trust and fiduciary obligations with grave abuse of right and power in violation of the Constitution and the laws of the Republic
of the Philippines.8
In particular, the Complaint alleged that Juan Tuvera, as Presidential Executive Assistant of President Marcos, took advantage of his relationship to influence
upon and connection with the President by engaging in a scheme to unjustly enrich himself at the expense of the Republic and of the Filipino people. This
was allegedly accomplished on his part by securing TLA No. 356 on behalf of Twin Peaks despite existing laws expressly prohibiting the exportation of
mahogany of the narra species 9 and Twin Peaks lack of qualification to be a grantee thereof for lack of sufficient logging equipment to engage in the
logging business.10 The Complaint further alleged that Twin Peaks exploited the countrys natural resources by engaging in large-scale logging and the
export of its produce through its Chinese operators whereby respondents obtained a revenue of approximately P45 million.
The Complaint prayed that (1) TLA No. 356 be reverted to the State or cancelled; (2) respondents be jointly and severally ordered to pay P48 million11 as
actual damages; and (3) respondents pay moral, temperate and exemplary damages, litigation expenses, and treble judicial costs. 12 It cited as grounds for
relief, gross abuse of official position and authority, breach of public trust and fiduciary obligations, brazen abuse of right and power, unjust enrichment,
and violation of the Constitution. 13
In their Answer,14 respondents Victor Tuvera and Twin Peaks claimed that Twin Peaks was awarded TLA No. 356 only after its articles of incorporation had
been amended enabling it to engage in logging operations, 15 that the Republics reference to Chinese operations and revenue of approximately P45 million
were merely
imagined,16 and that the PCGG has no statutory authority to institute the action. 17 By way of counterclaim, respondents asked that the Republic be ordered
to pay Victor Tuvera moral damages and to pay both Victor Tuvera and Twin Peaks exemplary damages, and to reimburse their attorneys fees. 18
Anent the allegation that Twin Peaks sold about P3 million worth of lumber despite the Writ of Sequestration issued by the PCGG, respondents stressed that
the Director of Forest Development acted within the scope of his authority and the courts have no supervising power over the actions of the Director of
Forest Development and the Secretary of the Department of Environment and Natural Resources (DENR) in the performance of their official duties. 19
As an affirmative and special defense, respondents Victor Tuvera and Twin Peaks alleged that after Twin Peaks was granted TLA No. 356 in 24 August 1984,
Felipe Ysmael, Jr. and Co., Inc. had filed a motion for the cancellation of the same with the DENR
Secretary. When respondents submitted their Answer, the denial by the DENR of the Ysmael motion was under review before the Court. 20
Juan Tuvera, who was abroad when the case was filed on 9 December 1988, later submitted his own Answer on 6 December 1989. 21 He also denied the
allegations of the Republic and alleged that as Presidential Executive Assistant of then President Marcos, he acted within the confines of his duties and had
perpetrated no unlawful acts. He merely transmitted communications of approval in the course of his duties and had nothing to do with the decisions of
then President Marcos.22 He denied having anything to do with Twin Peaks.

Juan Tuvera filed a compulsory counterclaim on the ground that the instant action had besmirched his reputation and caused serious anxiety and mental
anguish thus entitling him to moral and exemplary damages and litigation expenses. 23
On 3 May 1989, respondents filed an Omnibus Motion to Nullify Writ of Sequestration and/or the Mission Order. 24 The Sandiganbayan issued a Temporary
Restraining Order against the PCGG requiring it to cease, refrain and desist from further implementing the Writ of Sequestration and the Mission Order. 25
Subsequently, on motion of respondents, the Sandiganbayan granted a Writ of Preliminary Injunction covering the Mission Order. The Sandiganbayan
deferred its resolution on the Motion to Lift the Writ of Sequestration. 26
From 1988 to 1993, the proceedings before the Sandiganbayan were delayed owing to the difficulty of acquiring jurisdiction over the person of President
Marcos, who was by then already in exile. Thus, upon motion by respondents, the Sandiganbayan granted them a separate pre-trial/trial from President
Marcos.27
Respondents submitted their documentary evidence in the Pre-Trial Conference while the Republic reserved to present the same during trial. After the pretrial conference, the Sandiganbayan issued a Pre-Trial Order 28 dated 3 November 1993, which presented the issues for litigation as follows:
Whether or not defendant Juan C. Tuvera who was a Presidential Executive Assistant at the time material to this case, by himself and in concert with his codefendants Ferdinand E. Marcos and Victor Tuvera, took advantage of his relation and connection with the late Marcos, secure (sic) a timber concession for
Twin Peaks Development Corporation and, engage (sic) in a scheme to unjustly enrich himself at the expense of the Republic and the Filipino People. 29
The Pre-Trial Order also indicated that the Republic admitted the exhibits by respondents, subject to the presentation of certified true copies thereof.
Respondents exhibits were as follows:30
Exhibit
Nos.

Description

Amended Articles of Incorporation dated 31 July 1984

TLA No. 356

Order, Minister Ernesto M. Maceda, 22 July 1986

3-A

Order, Minister Ernesto M. Maceda, 10 October 1986

3-B

Order, Minister Ernesto M. Maceda, 26 November 1986, O.P. Case No.


3521

3-C

Resolution, Office of the President, 6 July 1987, O.P. Case No. 3521

3-D

Order, Office of the President, 14 August 1987, I.S. No. 66

3-E

Complaint, PCGG, dated 20 July 1988

3-E-1, 3- I.S. No. 66 Affidavit, PCGG, Almario F. Mendoza, Ltv. Ramon F.


E-2,
Mendoza and Affidavit, Isidro Santiago
3-E-3
3-F

Counter-Affidavit, Juan C. Tuvera, 17 August 1989

3-F-1

PCGG, Motion to Withdraw, Jose Restituto F. Mendoza, 10 May 1989

3-F-2

Decision, Supreme Court, 18 October 1990

3-G

Resolution, Supreme Court, 5 June 1991

Complaint, DENR, Almario F, Mendoza, 9 March 1990

4-A

Answer/Comment, DENR, Almario F. Mendoza, dated 20 April 1990

4-B

Decision, DENR, dated 28 August 1990

Complaint, Ombudsman, etc., Case No. 0-90-0708, 9 March 1990

6, 6-A

Answer/Counter-Affidavit, etc.

6-B
Decision, Ombudsman Case No. 0-90-0708, dated 8 August 1990
The Republic presented three (3) witnesses during the trial. The first witness was Joveniana M. Galicia, Chief of the National Forest Management Division of
the Forest Management Bureau. She identified TLA No. 356 of Twin Peaks dated 20 August 1984 and a Memorandum dated 18 July 1984. She testified that
TLA No. 356 covers 26,000 hectares of forest land located in the Municipality of Isabela, Province of Quirino. 31 The Memorandum dated 18 July 1984
addressed to Director Edmundo Cortez recited then President Marcos grant of the timber concession to Twin Peaks. Identified and marked in the same
memorandum were the name and signature of Juan Tuvera. 32 Upon cross-examination, Galicia stated that she was not yet the chief of the Division when the
documents she identified were submitted to the Bureau. She further stated it was her first time to see the aforementioned documents when she was asked
to bring the same before the trial court. 33
The next witness was Fortunato S. Arcangel, Regional Technical Director III of the DENR. He testified that he is a Technical Director under the Forest
Management Services of the DENR. 34 He identified Forestry Administration Order (FAO) No. 11 dated 1 September 1970. He said he was aware of TLA No.
356 of Twin Peaks35 because at the time it was issued, he was the chief of the Forestry Second Division and his duties included the evaluation and
processing of applications for licenses and permits for the disposition and distribution of timber and other forest products. 36 Consequently,
he was aware of the process by which TLA No. 356 was issued to Twin Peaks. 37 According to him, they processed the application insofar as they evaluated
the location of the area concerned and its present vegetative state, examined the records, and determined the annual allowable land. After the
examination, the license agreement was prepared and submitted for approval. 38 He continued that under FAO No. 11, a public bidding is required before
any license agreement or permit for the utilization of timber within the forestry land is issued 39 but no public bidding was conducted for TLA No. 356. 40 He
explained that no such bidding was conducted because of a Presidential Instruction not to accept any application for timber licensing as a consequence of
which bidding procedures were stopped. 41 Upon cross-examination, Arcangel said that at the time TLA No. 356 was issued, the Revised Forestry Code of the
Philippines42 was already in effect but there were still provisions in FAO No. 11 that remained applicable such as the terms and conditions of granting a
license. He also stated that the issuance of the license to Twin Peaks emanated from the President of the Philippines. 43
The Republics third and last witness was Teresita M. Zuiga, employee of the Bureau of Internal Revenue. She identified the 1986 Income Tax Returns of
Victor P. Tuvera, Evelyn Fontanilla and Feliciano O. Salvana, stockholders of Twin Peaks. 44
On 24 June 1994, the Republic rested its case after its formal offer of evidence, as follows: 45
Exhibi Documents
ts

Purpose

Timber License Agreement


No. 356 of Twin Peaks
Realty Development Corp.
dated 20 August 1984

To prove that the Timber License


Agreement was executed prior to the
amendment of the Articles of Incorporation
of Twin Peaks Realty Development Corp.

Memorandum

dated

18 To prove the participation of Juan C. Tuvera

July 1984 of Juan C. Tuvera, in the grant of the timber concession of


Presidential
Executive Twin Peaks Realty Development Corp.
Secretary
C

Forestry
Administrative To
prove
that
Twin
Peaks
Realty
Order No. 11 (Revised)
Development Corp. was granted a timber
license agreement without following the
procedure outlined in the forestry rules
and regulation and in violation of law.

Income Tax
Victor Tuvera

Return

of To prove that Victor Tuvera was not a


legitimate stockholder of Twin Peaks Realty
Development Corp.

Income Tax Return


Evelyn Fontanilla

of To prove that Evelyn Fontanilla was not a


legitimate stockholder of Twin Peaks Realty
Development Corp.

Income Tax Return


Feliciano Salvana

of To prove that Feliciano Salvana was not a


legitimate stockholder of Twin Peaks Realty
Development Corp.

Articles of Incorporation of
Twin
Peaks
Realty
Development
Corp.
(original)

Timber
Manifestation To
show
that
Twin
Peaks
Realty
Report of [Twin Peaks Development Corp. lacks equipment to
Realty Development Corp.] process logs.
consigned
to
Scala
Sawmill46

To
prove
that
Twin
Peaks
Realty
Development Corp. was organized to
engage in the real estate business and not
in the logging industry.

Timber
Manifestation To
show
that
Twin
Peaks
Realty
Report of Twin Peaks Development Corp. lacks equipment to
consigned to La Pea process logs.
Sawmill47
Respondents subsequently submitted certified true copies of the exhibits they had presented during the pre-trial conference. 48
With leave of court, respondents filed a Demurrer to Evidence. Respondents argued that the Republic failed to present sufficient legal affirmative evidence
to prove its claim. In particular, respondents demurrer contends that the memorandum (Exh. B) and TLA No. 356 are not "legal evidence" because "legal
evidence" is not meant to raise a mere suspicion or doubt. Respondents also claim that income tax returns are not sufficient to show ones holding in a
corporation. Respondents also cited the factual antecedents culminating with the Courts decision in Felipe Ysmael, Jr. & Corp., Inc. v. Sec. of Environment
and Natural Resources. 49

The Republic filed a Manifestation, contending that the demurrer is not based on the insufficiency of its evidence but on the strength of the evidence of
respondents as shown by their own exhibits. The Republic claimed that the Revised Forestry Code of the Philippines does not dispense with the requirement
of public bidding. The Republic added that Sec. 5 of said law clearly provides that all applications for a timber license agreement must be filed before the
Bureau of Forest Development and that respondents still have to prove compliance with the requirements for service contracts. 50
Respondents opposed the Manifestation, maintaining that since the Republic admitted the exhibits of respondents during the pre-trial, it is bound by its own
admission. Further, these same exhibits contain uncontroverted facts and laws that only magnify the conclusion that the Republic has no right to relief. 51
In its Resolution dated 23 May 2001, 52 the Sandiganbayan sustained the demurrer to evidence and referred to the decision of this Court in Ysmael in
holding that res judicata applies. The Anti-Graft Court also did not give credence to the Republics allegations concerning respondents abuse of power
and/or public trust and consequent liability for damages in view of its failure to establish any violation of Arts. 19, 20 and 21 of the Civil Code.
In essence, the Sandiganbayan held that the validity of TLA No. 356 was already fully adjudicated in a Resolution/Order issued by the Office of the President
on 14 August 1987, which had become final and executory with the failure of the aggrieved party to seek a review thereof. The Sandiganbayan continued
that the above pronouncement is supported by this Court in Ysmael. Consequently, the Sandiganbayan concluded, the Republic is barred from questioning
the validity of TLA No. 356 in consonance with the principle of res judicata.
The Republic now questions the correctness of the Sandiganbayans decision to grant the demurrer to evidence because it was not based solely on the
insufficiency of its evidence but also on the evidence of respondent mentioned during the pre-trial conference. The Republic also challenges the
applicability
of
res
judicata.
II.
Preliminarily, we observe that respondents had filed before the Sandiganbayan a pleading captioned Motion to Dismiss or Demurrer to Evidence, thus
evincing that they were seeking the alternative reliefs of either a motion to dismiss or a demurrer to evidence. However, the Sandiganbayan, in resolving
this motion, referred to it as Motion to Dismiss on Demurrer to Evidence, a pleading of markedly different character from a Motion to Dismiss or Demurrer
to Evidence. Still, a close reading of the Sandiganbayan Resolution reveals clearly that the Sandiganbayan was treating the motion as a demurrer, following
Rule 33, Section 1 of the Rules of Court, rather than a motion to dismiss under Rule 16, Section 1.
This notwithstanding, the Sandiganbayan justified the grant of demurrer with res judicata as rationale. Res judicata is an inappropriate ground for
sustaining a demurrer to evidence, even as it stands as a proper ground for a motion to dismiss. A demurrer may be granted if, after the presentation of
plaintiffs evidence, it appears upon the facts and the law that the plaintiff has shown no right to relief. In contrast, the grounds for res judicata present
themselves even before the presentation of evidence, and it should be at that stage that the defense of res judicata should be invoked as a ground for
dismissal. Properly speaking, the movants for demurral who wish to rely on a controlling value of a settled case as a ground for demurrer should invoke the
ground of stare decisis in lieu of res judicata.
In Domondon v. Lopez,53 we distinguished a motion to dismiss for failure of the complainant to state a cause of action from a motion to dismiss based on
lack of cause of action. The first is governed by Rule 16, Section 1(g), 54 while the second by Rule 3355 of the Rules of Court, to wit:
x x x The first [situation where the complaint does not alleged cause of action] is raised in a motion to dismiss under Rule 16 before a responsive pleading
is filed and can be determined only from the allegations in the initiatory pleading and not from evidentiary or other matter aliunde. The second [situation
where the evidence does not sustain the cause of
action alleged] is raised in a demurrer to evidence under Rule 33 after the plaintiff has rested his case and can be resolved only on the basis of the
evidence he has presented in support of his claim. The first does not concern itself with the truth and falsity of the allegations while the second arises
precisely because the judge has determined the truth and falsity of the allegations and has found the evidence wanting.
Hence, a motion to dismiss based on lack of cause of action is filed by the defendant after the plaintiff has presented his evidence on the ground that the
latter has shown no right to the relief sought. While a motion to dismiss under Rule 16 is based on preliminary objections which can be ventilated before
the beginning of the trial, a motion to dismiss under Rule 33 is in the nature of a demurrer to evidence on the ground of insufficiency of evidence and is
presented
only
after
the
plaintiff
has
rested
his
case. 56
[Emphasis
supplied]
III.
We shall first discuss the question of whether or not a demurrer to evidence may be granted based on the evidence presented by the opposing parties.

An examination of the Sandiganbayans Resolution shows that dismissal of the case on demurrer to evidence was principally anchored on the Republics
failure to show its right to relief because of the existence of a prior judgment which consequently barred the relitigation of the same issue. In other words,
the Sandiganbayan did
not dismiss the case on the insufficiency of the Republics evidence nor on the strength of respondents evidence. Rather, it based its dismissal on the
existence of the Ysmael case which, according to it, would render the case barred by res judicata.
Prescinding from this procedural miscue, was the Sandiganbayan correct in applying res judicata to the case at bar? To determine whether or not res
judicata indeed applies in the instant case, a review of Ysmael is proper.
In brief, Felipe Ysmael, Jr. & Co., Inc. was a grantee of a timber license agreement, TLA No. 87. Sometime in August 1983, the Bureau of Forest
Development cancelled TLA No. 87 despite the companys letter for the reconsideration of the revocation. Barely one year thereafter, one-half (or 26,000
hectares) of the area formerly covered by TLA No. 87 was re-awarded to Twin Peaks under TLA No. 356.
In 1986, Felipe Ysmael, Jr. & Co., Inc. sent separate letters to the Office of the President and the Ministry of Natural Resources primarily seeking the
reinstatement of TLA No. 87 and the revocation of TLA No. 356. Both offices denied the relief prayed for. Consequently, Felipe Ysmael, Jr. & Co., Inc. filed a
petition for review before this Court.
The Court, through the late Justice Irene Cortes, held that Ysmaels letters to the Office of the President and to the Ministry of Natural Resources in 1986
sought the reconsideration of a memorandum order by the Bureau of Forest Development canceling their timber license agreement in 1983 and the
revocation of TLA No. 356 subsequently issued by the Bureau in 1984. Ysmael did not attack the administrative actions until after 1986. Since the decision
of the Bureau has become final, it has the force and effect of a final judgment within the purview of the doctrine of res judicata. These decisions and orders,
therefore, are conclusive upon the rights of the affected parties as though the same had been rendered by a court of general jurisdiction. The Court also
denied the petition of Ysmael because it failed to file the special civil action for certiorari under Rule 65 within a reasonable time, as well as in due regard
for public policy considerations and the principle of non-interference by the courts in matters which are addressed to the sound discretion of government
agencies entrusted with the regulation of activities coming under the special technical knowledge and training of such agencies.
In Sarabia and Leido v. Secretary of Agriculture and Natural Resources, et al., 57 the Court discussed the underlying principle for res judicata, to wit:
The fundamental principle upon which the doctrine of res judicata rests is that parties ought not to be permitted to litigate the same issue more than once;
that, when a right or fact has been judicially tried and determined by a court of competent jurisdiction, or an opportunity for such trial has been given, the
judgment of the court, so long as it remains unreversed, should be conclusive upon the parties and those in privity with them in law or estate.
For res judicata to serve as an absolute bar to a subsequent action, the following requisites must concur: (1) the former judgment or order must be final; (2)
the judgment or order must be on the merits; (3) it must have been rendered by a court having jurisdiction over the subject matter and parties; and (4)
there must be between the first and second actions, identity of parties, of subject matter, and of causes of action. 58 When there is only identity of issues
with no identity of causes of action, there exists res judicata in the concept of conclusiveness of judgment. 59
In Ysmael, the case was between Felipe Ysmael Jr. & Co., Inc. and the Deputy Executive Secretary, the Secretary of Environment and Natural Resources, the
Director of the Bureau of Forest Development and Twin Peaks Development and Realty Corporation. The present case, on the other hand, was initiated by
the Republic of
the Philippines represented by the Office of the Solicitor General. No amount of imagination could let us believe that there was an identity of parties
between this case and the one formerly filed by Felipe Ysmael Jr. & Co., Inc.
The Sandiganbayan held that despite the difference of parties, res judicata nevertheless applies on the basis of the supposed sufficiency of the "substantial
identity" between the Republic of the Philippines and Felipe Ysmael, Jr. Co., Inc. We disagree. The Court in a number of cases considered the substantial
identity of parties in the application of res judicata in instances where there is privity between the two parties, as between their successors in interest by
title60 or where an additional party was simply included in the subsequent case 61 or where one of the parties to a previous case was not impleaded in the
succeeding case.62
The Court finds no basis to declare the Republic as having substantial interest as that of Felipe Ysmael, Jr. & Co., Inc. In the first place, the Republics cause
of action lies in the alleged abuse of

power on respondents part in violation of R.A. No. 3019 63 and breach of public trust, which in turn warrants its claim for restitution and damages. Ysmael,
on the other hand, sought the revocation of TLA No. 356 and the reinstatement of its own timber license agreement. Indeed, there is no identity of parties
and
no
identity
of
causes
of
action
between
the
two
cases.
IV.
What now is the course of action to take since we cannot affirm the Sandiganbayans grant of the demurrer to evidence? Rule 33, Sec. 1 reads:
Sec. 1. Effect of judgment on demurrer to evidence. After the plaintiff has completed the presentation of his evidence, the defendant may move for
dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. If his motion is denied, he shall have the right to present
evidence. If the motion is granted but on appeal the order of dismissal is reversed he shall have be deemed to have waived the right to present evidence.
The general rule is that upon the dismissal of the demurrer in the appellate court, the defendant loses the right to present his evidence and the appellate
court shall then proceed to render judgment on the
merits on the basis of plaintiffs evidence. As the Court explained in Generoso Villanueva Transit Co., Inc. v. Javellana: 64
The rationale behind the rule and doctrine is simple and logical. The defendant is permitted, without waiving his right to offer evidence in the event that his
motion is not granted, to move for a dismissal (i.e., demur to the plaintiffs evidence) on the ground that upon the facts as thus established and the
applicable law, the plaintiff has shown no right to relief. If the trial court denies the dismissal motion, i.e., finds that plaintiffs evidence is sufficient for an
award of judgment in the absence of contrary evidence, the case still remains before the trial court which should then proceed to hear and receive the
defendants evidence so that all the facts and evidence of the contending parties may be properly placed before it for adjudication as well as before the
appellate courts, in case of appeal. Nothing is lost. The doctrine is but in line with the established procedural precepts in the conduct of trials that the trial
court liberally receive all proffered evidence at the trial to enable it to render its decision with all possibly relevant proofs in the record, thus assuring that
the appellate courts upon appeal have all the material before them necessary to make a correct judgment, and avoiding the need of remanding the case
for retrial or reception of improperly excluded evidence, with the possibility thereafter of still another appeal, with all the concomitant delays. The rule,
however, imposes the condition by the same token that if his demurrer is granted by the trial court, and the order of dismissal is reversed on appeal, the
movant loses his right to present evidence in his behalf and he shall have been deemed to have elected to stand on the insufficiency of plaintiffs case and
evidence. In such event, the appellate court which reverses the order of dismissal shall proceed to render judgment on the merits on the basis of plaintiffs
evidence.65
It thus becomes the Court's duty to rule on the merits of the complaint, duly taking into account the evidence presented by the Republic, and without need
to consider whatever evidence the Tuveras have, they having waived their right to present evidence in their behalf.
V.
Executive Order No. 14-A66 establishes that the degree of proof required in cases such as this instant case is preponderance of evidence. Section 3 thereof
reads:
SEC. 3. The civil suits to recover unlawfully acquired property under Republic Act No. 1379 or for restitution, reparation of damages, or indemnification for
consequential and other damages or any other civil actions under the Civil Code or other existing laws filed with the Sandiganbayan against Ferdinand E.
Marcos, Imelda R. Marcos, members of their immediate family, close relatives, subordinates, close and/or business associates, dummies, agents and
nominees, may proceed independently of any criminal proceedings and may be proved by a preponderance of evidence. [Emphasis supplied.]
Thus, the Court recently held in Yuchengco v. Sandiganbayan, 67 that in establishing the quantum of evidence required for civil cases involving the Marcos
wealth held by their immediate family, close relatives, subordinates, close and/or business associates, dummies,
agents and nominees filed before the Sandiganbayan, that "the Sandiganbayan, x x x was not to look for proof beyond reasonable doubt, but to determine,
based on the evidence presented, in light of common human experience, which of the theories proffered by the parties is more worthy of credence."
In order that restitution may be proper in this case, it must be first established that the grant of the TLA to Twin Peaks was illegal. With the illegality of the
grant established as fact, finding Victor Tuvera, the major stockholder of Twin Peaks, liable in this case should be the ineluctable course. In order that Juan
Tuvera may be held answerable as well, his own participation in the illegal grant should also be substantiated.
Regarding the first line of inquiry, the Complaint adverted to several provisions of law which ostensibly were violated by the grant of the TLA in favor of
Twin Peaks. These include R.A. No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, and Articles 19, 20 and 21 of the Civil Code.

Still, the most organic laws that determine the validity or invalidity of the TLA are those that governed the issuance of timber license agreements in 1984.
In that regard, the Republic argues that the absence of a bidding process is patent proof of the irregularity of the issuance of the TLA in favor of Twin Peaks.
A timber license agreement authorizes a person to utilize forest resources within any forest land with the right of possession and exclusion of others. 68 The
Forestry Reform Code prohibits any person from utilizing, exploiting, occupying, possessing or conducting any activity within any forest land unless he had
been authorized to do so under a license agreement, lease, license or permit. 69 The Code also mandates that no timber license agreement shall be issued
unless the applicant satisfactorily proves that he has the financial resources and technical capability not only to minimize utilization, but also to practice
forest protection, conservation and development measures to insure the perpetuation of said forest in productive condition. 70 However, the Code is silent as
to the procedure in the acquisition of such timber license agreement. Such procedure is more particularly defined under FAO No. 11, dated 1 September
1970, which provides for the "revised forestry license regulations."
FAO No. 11 establishes that it is the Director of Forestry who has the power "to grant timber licenses and permits." 71 It also provides as a general policy that
timber license agreements shall be
granted through no other mode than public bidding. 72 However, Section 24 of FAO No. 11 does admit that a timber license agreement may be granted
through "negotiation," as well as through "public bidding."
26. When license may be issued.A license under this Regulations may be issued or granted only after an application and an award either through bidding
or by negotiation has been made and the Director of Forestry is satisfied that the issuance of such license shall not be inconsistent with existing laws and
regulations or prejudicial to public interest, and that the necessary license fee, bond deposit and other requirements of the Bureau of Forestry have been
paid and complied with.73 [Emphasis supplied.]
However, even a person who is granted a TLA through "negotiation" is still required to submit the same requirements and supporting papers as required for
public bidding. The pertinent provisions of FAO No. 11 state:
18. Requirements and supporting papers to be submitted.The following requirements with accompanying supporting papers or documents shall be
submitted in addition to the requirements of Section 12:
a. With bid application:
The applicant shall support his bid application with the required application fee duly paid and proofs of the following:
(1) Capitalization.Cash deposits and established credit line by applicant in domestic bank certified to by the bank President or any of its authorized
officials, duly attested by depositor as his own to be used exclusively in logging and wood processing operations if awarded the area. The bank certificate
shall be accompanied by a written consent by the applicant-depositor for the Director of Forestry or his authorized representative to verify such cash
deposit with bank authorities.
Capitalization and financial statements. A minimum capitalization of P20.00 per cubit meter in cash and an established credit line of P150.00 per cubic
meter based on the allowable annual cut are required. Financial statements certified by the independent and reputable certified public accountants must
accompany the application as proof of the necessary capitalization.
Additional capitalization, Real Estate. In the event that the capitalization of the applicant is less than the minimum or less than that set by the Director of
Forestry for the area, the applicant bidder may be asked to submit an affidavit signifying his readiness, should the area be awarded to him, to convert
within a specified time any specified unencumbered and titled real estate into cash for use in operating and developing the area. Presentation of real estate
should show location by municipality and province, hectarage, title number, latest land tax declaration, assessed value of land and improvements (stating
kind of improvements), and encumbrances if any.
(2) Logging machinery and equipment.Evidence of ownership or capacity to acquire the requisite machinery or equipment shall accompany the bid
application. The capacity or ability to acquire machineries and equipments shall be determined by the committee on award. Leased equipment or
machineries may be considered in the determination by the Committee if expressly authorized in writing by the Director of Forestry.
(3) Technical know-how.To assure efficient operation of the area or concession, the applicant shall submit proof of technical competence and know-how
and/or his ability to provide hired services of competent personnel.

(4) Operation or development plan. An appropriate plan of operation and development of the forest area applied for shall be submitted, including phasing
plans and the fund requirements therefor, consistent with selective logging methods and the sustained yield policy of the Bureau of Forestry. This plan must
be in general agreement with the working unit plan for the area as contained in Chapter III, Section 6(a) hereinabove.
(5) Processing plant.The bidder or applicant shall show evidence of ownership of, or negotiation to acquire, a wood processing plant. The kind and type of
plant, such as plywood, veneer, bandmill, etc. shall be specified. The plant should be capable of processing at least 60% of the allowable annual cut.
(6) Forestry Department.The applicant shall submit assurance under oath that he shall put a forestry department composed of trained or experienced
foresters to carry out forest management activities such as selective logging, planting of denuded or logged-over areas within the concessions as specified
by the Director of Forestry and establish a forest nursery for the purpose.
(7) Statement on sustained yield operations, reforestation, and protection under management plans. The bidder or applicant shall submit a sworn
statement of his agreement and willingness to operate the area under sustained yield to reforest cleared areas and protect the concession or licensed area
and under the approved management plan, and to abide with all existing forestry laws, rules and regulations and those that may hereafter be promulgated;
and of his agreement that any violation of these conditions shall be sufficient cause for the cancellation of the licenses.
(8) Organization plan.Other important statement connected with sound management and operation of the area, such as the submission among others, of
the organizational plan and employment of concession guards, shall be submitted. In this connection, the applicant shall submit a sworn statement to the
effect no alien shall be employed without prior approval of proper authorities.
(9) Unauthorized use of heave equipment.The applicant shall give his assurance that he shall not introduce into his area additional heave equipment and
machinery without approval of the Director of Forestry.
(10) Such other inducements or considerations to the award as will serve public interest may also be required from time to time.
xxxx
d) With applications for areas to be negotiated.All the foregoing requirements and supporting papers required for bidding under Section 18(a)
hereinabove and of Section 20(b) hereinbelow shall also apply to all areas that may be granted through negotiation. In no case shall an area exceeding
100,000 hectares be granted thru negotiation. 74
The rationale underlying the very elaborate procedure that entails prior to the grant of a timber license agreement is to avert the haphazard exploitation of
the State's forest resources as it provides that only the most qualified applicants will be allowed to engage in timber activities within the strict limitations of
the grant and that cleared forest areas will have to be renewed through reforestation. Since timber is not a readily renewable natural resource, it is
essential and appropriate that the State serve and act as a jealous and zealous guardian of our forest lands, with the layers of bureaucracy that encumber
the grant of timber license agreements effectively serving as a defensive wall against the thoughtless ravage of our forest resources.
There is no doubt that no public bidding occurred in this case. Certainly, respondents did not raise the defense in their respective answers. The absence of
such bidding was testified on by prosecution witness Arcangel. Yet even if we consider that Twin Peaks could have acquired the TLA through "negotiation,"
the prescribed requirements for "negotiation" under the law were still not complied with.
It is evident that Twin Peaks was of the frame of mind that it could simply walk up to President Marcos and ask for a timber license agreement without
having to comply with the elaborate application procedure under the law. This is indicated by the letter dated 31 May 1984 75 signed by Twin Peaks Vice
President and Treasurer Evelyn Fontanilla, addressed directly to then President Marcos, wherein Twin Peaks expressed that "we would like to request a
permit to export 20,000 cubic meters of logs and to cut and process 10,000 cubic meters of the narra species in the same area." 76 A marginal note therein
signed by Marcos indicates an approval thereof. Neither the Forestry Reform Code nor FAO No. 11 provide for the submission of
an application directly to the Office of the President as a proper mode for the issuance of a TLA. Without discounting the breadth and scope of the
Presidents powers as Chief Executive, the authority of the President with respect to timber licenses is, by the express terms of the Revised Forestry Code,
limited to the amendment, modification, replacement or rescission of any contract, concession, permit, license or any other form of privilege granted by
said Code.77
There are several factors that taint this backdoor application for a timber license agreement by Twin Peaks. The forest area covered by the TLA was already
the subject of a pre-existing TLA in favor of Ysmael. The Articles of Incorporation of Twin Peaks does not even stipulate that logging was either a principal or
secondary purpose of the corporation. Respondents do allege that the Articles was amended prior to the grant in order to accommodate logging as a

corporate purpose, yet since respondents have waived their right to present evidence by reason of their resort to demurrer, we cannot consider such
allegation as proven.
Sec. 18(a)(1) of FAO No. 11 requires that an applicant must have a minimum capitalization of P20.00 per cubic meter in cash and an established credit line
of P150.00 per cubic meter based on the allowable annual cut. TLA No. 356 allowed Twin Peaks to operate on 26,000 hectares of forest land with an annual
allowable cut of 60,000 cubic meters of timber. With such annual allowable cut, Twin
Peaks, therefore, must have at least P1,200,000.00 in cash as its minimum capitalization, following FAO No. 11. An examination of Twin Peaks Articles of
Incorporation shows that its paid-up capital was only P312,500.00.78 Clearly, Twin Peaks paid-up capital is way below the minimum capitalization
requirement.
Moreover, Sec. 18(5) provides that the bidder or applicant shall show evidence of ownership of, or negotiation to acquire, a wood processing plant.
However, although TLA No. 356 was issued to Twin Peaks in 1984, it continued to engage the services of at least two sawmills 79 as late as 1988. Four (4)
years from the issuance of the license, Twin Peaks remained incapable of processing logs.
What could have made Twin Peaks feel emboldened to directly request President Marcos for the grant of Timber License Agreement despite the obvious
problems relating to its capacity to engage in timber activities? The reasonable assumption is that the official and personal proximity of Juan Tuvera to
President Marcos was a key factor, considering that he was the father of Twin Peaks' most substantial stockholder.
The causes of action against respondents allegedly arose from Juan Tuveras abuse of his relationship, influence and connection as Presidential Executive
Assistant of then President Marcos. Through Juan Tuveras position, the Republic claims that Twin Peaks was able to secure a Timber License Agreement
despite its lack of qualification and the absence of a public bidding. On account of the unlawful issuance of a timber license agreement, the natural
resources of the country were unlawfully exploited at the expense of the Filipino people. Victor Tuvera, as son of Juan Tuvera and a major stockholder of
Twin Peaks, was included as respondent for having substantially benefited from this breach of trust. The circumstance of kinship alone may not be enough
to disqualify Victor Tuvera from seeking a timber license agreement. Yet the basic ethical principle of delicadeza should have dissuaded Juan Tuvera from
any official or unofficial participation or intervention in behalf of the "request" of Twin Peaks for a timber license.
Did Juan Tuvera do the honorable thing and keep his distance from Twin Peaks' "request"? Apparently not. Instead, he penned a Memorandum dated 18 July
1984 in his capacity as Presidential Executive Assistant, directed at the Director of Forestry, the official who, under the law, possessed the legal authority to
decide whether to grant the timber license agreements after deliberating on the application and its supporting documents. The Memorandum reads in full:
Office
of
the
President
of
the
Philippines
Malacanang
18 July 1984
74-84
MEMORANDUM to
Director
Edmundo
Cortes
Bureau of Forest Development
I wish to inform you that the President has granted the award to the Twin Peaks Realty Development Corporation, of the concession to manage, operate and
develop in accordance with existing policies and regulations half of the timber area in the Province of Quirino covered by TLA No. 87, formerly belonging to
the Felipe Ysmael, Jr. & Company and comprising 54,920 hectares, and to export half of the requested 20,000 cubic meters of logs to be gathered from the
area.
Herewith is a copy of the letter concering (sic) this matter of Ms. Evelyn F. Fontanilla, Vice-President and Treasurer of the Twin Peaks Realty Development
Corporation, on which the President indicated such approval in his own hand, which I am furnishing you for your information and appropriate action.
(signed)
JUAN
C.
TUVERA
Presidential Executive Assistant80
The Memorandum establishes at the very least that Tuvera knew about the Twin Peaks "request," and of President Marcos's favorable action on such
"request." The Memorandum also indicates that Tuvera was willing to convey those facts to the Director of Forestry, the ostensible authority in deciding

whether the Twin Peaks "request" should have been granted. If Juan Tuvera were truly interested in preventing any misconception that his own position had
nothing to do with the favorable action on the "request" lodged by the company controlled by his son, he would not have prepared or signed the
Memorandum at all. Certainly, there were other officials in Malacaang who could have performed that role had the intent of the Memorandum been merely
to inform the Director of Forestry of such Presidential action.
Delicadeza is not merely a stentorian term evincing a bygone ethic. It is a legal principle as embodied by certain provisions of the Anti-Graft and Corrupt
Practices Act. Section 3 of R.A. No. 3019 states in part:
Sec. 3. Corrupt practices of public officers.In addition to acts or omissions of public officers already penalized by existing law, the following shall
constitute corrupt practices of any public officer and are hereby declared to be unlawful:
(a) Persuading, inducing or influencing another public officer to perform an act constituting a violation of rules and regulations duly promulgated by
competent authority or an offense in connection with the official duties of the latter, or allowing himself to be persuaded, induced or influenced to commit
such violation or offense.
xxxx
(h) Directly or indirectly having financial or pecuniary interest in any business, contract or transaction in connection with which he intervenes or takes part
in his official capacity, or in which he is prohibited by the Constitution or by any law from having any interest.
The Memorandum signed by Juan Tuvera can be taken as proof that he "persuaded, induced or influenced" the Director of Forestry to accommodate a
timber license agreement in favor of Twin Peaks, despite the failure to undergo public bidding, or to comply with the requisites for the grant of such
agreement by negotiation, and in favor of a corporation that did not appear legally capacitated to be granted such agreement. The fact that the principal
stockholder of Twin Peaks was his own son establishes his indirect pecuniary interest in the transaction he appears to have intervened in. It may have been
possible on the part of Juan Tuvera to prove that he did not persuade, induce or influence the Director of Forestry or any other official in behalf of the timber
license agreement of Twin Peaks, but then again, he waived his right to present evidence to acquit himself of such suspicion. Certainly, the circumstances
presented by the evidence of the prosecution are sufficient to shift the burden of evidence to Tuvera in establishing that he did not violate the provisions of
the Anti-Graft and Corrupt Practices Act in relation to the Twin Peaks "request." Unfortunately, having waived his right to present evidence, Juan Tuvera
failed to disprove that he failed to act in consonance with his obligations under the Anti-Graft and Corrupt Practices Act.
In sum, the backdoor recourse for a hugely priced favor from the government by itself, and more in tandem with other brazen relevant damning
circumstances, indicates the impudent abuse of power and the detestable misuse of influence that homologously made the acquisition of ill-gotten wealth a
reality. Upon the facts borne out by the evidence for the Republic and guideposts supplied by the governing laws, the Republic has a clear right to the
reliefs
it
seeks.
VI.
If only the Court's outrage were quantifiable in sums of money, respondents are due for significant pecuniary hurt. Instead, the Court is forced to explain in
the next few paragraphs why respondents could not be forced to recompensate the Filipino people in appropriate financial terms. The fault lies with those
engaged by the government to litigate this case in behalf of the State.
It bears to the most primitive of reasons that an action for recovery of sum of money must prove the amount sought to be recovered. In the case at bar, the
Republic rested its case without presenting any evidence, documentary or testimonial, to establish the amount that should be restituted to the State by
reason of the illegal acts committed by the respondents. There is the bare allegation in the complaint that the State is entitled to P48 million by way of
actual damages, but no single proof presented as to why the State is entitled to such amount.
Actual damages must be proven, not presumed. 81 The Republic failed to prove damages. It is not enough for the Republic to have established, as it did, the
legal travesty that led to the wrongful obtention by Twin Peaks of the TLA. It should have established the degree of injury sustained by the State by reason
of such wrongful act.
We fail to comprehend why the Republic failed to present any proof of actual damages. Was it the inability to obtain the necessary financial documents that
would establish the income earned by Twin Peaks during the period it utilized the TLA, despite the presence of the discovery processes? Was it mere
indolence or sheer incompetence? Whatever the reason, the lapse is inexcusable, and the injury ultimately conduces to the pain of the Filipino people. If

the litigation of this case is indicative of the mindset in the prosecution of ill-gotten wealth cases, it is guaranteed to ensure that those who stole from the
people will be laughing on their way to the bank.
The claim for moral damages deserves short shrift. The claimant in this case is the Republic of the Philippines, a juridical person. We explained in Filipinas
Broadcasting v. Ago Medical & Educational Center-Bicol Christian College of Medicine (AMEC-BCCM):82
A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot experience physical suffering or such sentiments as
wounded feelings, serious anxiety, mental anguish or moral shock. The Court of Appeals cites Mambulao Lumber Co. v. PNB, et al. to justify the award of
moral damages. However, the Court's statement in Mambulao that "a corporation may have a good reputation which, if besmirched, may also be a ground
for the award of moral damages" is an obiter dictum.
Nevertheless, AMEC's claim for moral damages falls under item 7 of Article 2219 of the Civil Code. This provision expressly authorizes the recovery of moral
damages in cases of libel, slander or any other form of defamation. Article 2219(7) does not qualify whether the plaintiff is a natural or juridical person.
Therefore, a juridical person such as a corporation can validly complain for libel or any other form of defamation and claim for moral damages. 83
As explained, a juridical person is not entitled to moral damages under Article 2217 of the Civil Code. It may avail of moral damages under the analogous
cases listed in Article 2219, such as for libel, slander or any other form of defamation. Suffice it to say that the action at bar does not involve any of the
analogous cases under Article 2219, and indeed upon an intelligent reading of Article 2219, it is difficult to see how the Republic could sustain any of the
injuries contemplated therein. Any lawyer for the Republic who poses a claim for moral damages in behalf of the State stands in risk of serious ridicule.
However, there is sufficient basis for an award of temperate damages, also sought by the Republic notwithstanding the fact that a claim for both actual and
temperate damages is internally inconsistent. Temperate or moderate damages avail when "the court finds that some pecuniary loss has been suffered but
its amount can not from the nature of the case, be proved with certainty." 84 The textual language might betray an intent that temperate damages do not
avail when the case, by its nature, is susceptible to proof of pecuniary loss; and certainly the Republic could have proved pecuniary loss herein. 85 Still,
jurisprudence applying Article 2224 is clear that temperate damages may be awarded even in instances where pecuniary loss could theoretically have been
proved with certainty.1awphi1.net
In a host of criminal cases, the Court has awarded temperate damages to the heirs of the victim in cases where the amount of actual damages was not
proven due to the inadequacy of the evidence presented by the prosecution. These cases include People v. Oliano,86 People v. Suplito,87 People v. De la
Tongga,[88] People v. Briones,89 and People v. Plazo.90 In Viron Transportation Co., Inc. v. Delos Santos,91 a civil action for damages involving a vehicular
collision, temperate damages were awarded for the resulting damage sustained by a cargo truck, after the plaintiff had failed to submit competent proof of
actual damages.
We cannot discount the heavy influence of common law, and its reliance on judicial precedents, in our law on tort and damages. Notwithstanding the
language of Article 2224, a line of jurisprudence has emerged authorizing the award of temperate damages even in cases where the amount of pecuniary
loss could have been proven with certainty, if no such adequate proof was presented. The allowance of temperate damages when actual damages were not
adequately proven is ultimately a rule drawn from equity, the principle affording relief to those definitely injured who are unable to prove how definite the
injury. There is no impediment to apply this doctrine to the case at bar, which involves one of the most daunting and noble undertakings of our young
democracythe recovery of ill-gotten wealth salted away during the Marcos years. If the doctrine can be justified to answer for the unlawful damage to a
cargo truck, it is a
compounded wrath if it cannot answer for the unlawful exploitation of our forests, to the injury of the Filipino people. The amount of P1,000,000.00 as
temperate damages is proper.
The allowance of temperate damages also paves the way for the award of exemplary damages. Under Article 2234 of the Civil Code, a showing that the
plaintiff is entitled to temperate damages allows for the award of exemplary damages. Even as exemplary damages cannot be recovered as a matter of
right, the courts are empowered to decide whether or not they should be adjudicated. Ill-gotten wealth cases are hornbook demonstrations where damages
by way of example or correction for the public good should be awarded. Fewer causes of action deserve the stigma left by exemplary damages, which
"serve as a deterrent against or as a negative incentive to curb socially deleterious actions." 92 The obtention of the timber license agreement by Twin Peaks
through fraudulent and illegal means was highlighted by Juan Tuveras abuse of his position as Presidential Executive Assistant. The consequent
exploitation of 26 hectares of forest land benefiting all respondents is a grave case of unjust enrichment at the expense of the Filipino people and of the

environment which should never be countenanced. Considering the expanse of forest land exploited by respondents, the volume of timber that was
necessarily cut by virtue of their abuse and the estimated wealth acquired by respondents through grave abuse of trust and public office, it is only
reasonable that petitioner be granted the amount of P1,000,000.00 as exemplary damages.
The imposition of exemplary damages is a means by which the State, through its judicial arm, can send the clear and unequivocal signal best expressed in
the pithy but immutable phrase, "never again." It is severely unfortunate that the Republic did not exert its best efforts in the full recovery of the actual
damages caused by the illegal grant of the Twin Peaks TLA. To the best of our ability, through the appropriate vehicle of exemplary damages, the Court will
try to fill in that deficiency. For if there is a lesson that should be
learned from the national trauma of the rule of Marcos, it is that kleptocracy cannot pay. As those dark years fade into the backburner of the collective
memory, and a new generation emerges without proximate knowledge of how bad it was then, it is useful that the Court serves a reminder here and now.
WHEREFORE, the petition is GRANTED. The Resolution of the Sandiganbayan dated 23 May 2001 is REVERSED. Respondents Juan C. Tuvera, Victor P. Tuvera
and Twin Peaks Development Corporation are hereby ordered to jointly and severally pay to the Republic of the Philippines One Million ( P1,000,000.00)
Pesos, as and for temperate damages, and One Million (P1,000,000.00) Pesos, as and for exemplary damages, plus costs of suit.
SO ORDERED.
G.R. No. 159189
February 21, 2007
THE
MANILA
BANKING
CORPORATION,
Petitioner,
vs.
UNIVERSITY OF BAGUIO, INC. and GROUP DEVELOPERS, INC., Respondents.
DECISION
QUISUMBING, J.:
On appeal is the Order 1 dated April 11, 2002 of the Regional Trial Court (RTC) of Makati City, Branch 61, in Civil Case No. 90-389, dismissing petitioners
amended complaint for a sum of money with application for preliminary attachment. In the appeal under Section 2, Rule 41, on a pure question of law,
petitioner alleges that the assailed Order of the RTC was manifestly not in accord with law and jurisprudence. Also assailed is the trial courts June 27, 2003
Order2 denying the motion for reconsideration.1awphi1.net
The facts are culled from the records.
On November 26, 1981, petitioner Manila Banking Corporation granted a P14 million credit line3 to respondent University of Baguio, Inc. for the construction
of additional buildings and purchase of new equipment. 4 On behalf of the university, then Vice-Chairman Fernando C. Bautista, Jr. 5 signed Promissory Note
(PN) Nos. 10660, 10672, 10687, and 107086 and executed a continuing suretyship agreement. 7 However, Bautista, Jr. diverted the net proceeds of the loan.
He endorsed and delivered the four checks representing the net proceeds to respondent Group Developers, Inc. (GDI). 8 The loan was not paid.
On February 12, 1990, the bank filed a complaint for a sum of money with application for preliminary attachment 9 against the university, Bautista, Jr. and
his wife Milagros, before the RTC of Makati City. Five years later, on March 31, 1995, the bank amended the complaint and impleaded GDI as additional
defendant.
In the amended complaint,10 the bank alleged that it was unaware and did not approve the diversion of the loan to GDI; that it granted the loan without
collateral upon the universitys undertaking that it would construct new buildings; and that GDI connived with the university and Bautista, Jr. in fraudulently
contracting the debt.
In its Answer, the university claimed that the bank and GDI approved the diversion. Allegedly, Victor G. Puyat, then GDIs President, and Vicente G. Puyat,
then the banks President, decided to use the proceeds of the loan. The university stated that Vicente G. Puyat and Victor G. Puyat even assured the
university, in separate letters11 both dated October 22, 1981, that it would be relieved of any liability from the loan. Consequently, even if the loan was
overdue, the bank did not demand payment until February 8, 1989. By way of cross-claim, the university prayed that GDI be ordered to pay the university
the amount it would have to pay the bank. In addition, the university filed a third-party complaint against Victor G. Puyat and the heirs of Vicente G. Puyat.
On December 14, 1995, the bank and GDI executed a deed of dacion en pago.12 As attorney-in-fact of Batulao Bio-Loop Farms, Inc., GDI ceded and
transferred to the bank a parcel of land consisting of 210,000 square meters located in Nasugbu, Batangas and covered by Transfer Certificate of Title No.

T-70784. The dacion en pago was for a consideration of P78 million and in full settlement of the loan under PN Nos. 10660, 10672, 10687, and 10708,
subject of Civil Case No. 90-389.13
In an Omnibus Order14 dated April 21, 1997, the trial court dismissed the third-party complaint against the heirs of Vicente G. Puyat for being premature
since the banks cause of action was against the university as a "dummy" of GDI. The trial court also dismissed the case as to Fernando Bautista, Jr. and his
wife upon Fernandos death. The trial court further ruled that the universitys motion to implead GDI as third-party defendant, and GDIs motions to dismiss
the amended complaint and cross-claim, had been mooted by the dacion en pago.
On March 19, 1998, the university moved to dismiss the amended complaint on the grounds that: (1) there was "no more cause of action" against it since
the loan had been settled by GDI; and (2) the bank "failed to prosecute the action for an unreasonable length of time." 15 In an Order16 dated August 17,
1999, the trial court denied the motion since the "matters relied upon by the university were evidentiary in nature."
On October 14, 1999, the university moved to set the case for pre-trial on December 2, 1999. 17
On August 3, 2000, the trial court resolved GDIs motion to resolve the motions to dismiss and defer pre-trial; expunged from the record the deed of dacion
en pago; and reinstated GDIs motions to dismiss the amended complaint and cross-claim on the ground that no compromise agreement was submitted for
its approval.18
On August 29, 2001, the university filed a manifestation with motion for reconsideration of the August 17, 1999 Order denying the universitys motion to
dismiss the amended complaint. The university argued that the grounds for its motion to dismiss were not evidentiary as the deed of dacion en pago and
the banks judicial admission thereof were on record.
The bank opposed the motion on the ground that the motion for reconsideration of the August 17, 1999 Order was filed after more than two years. The
bank noted that it was the university which moved to set the case for pre-trial; thus, its claim of not seeking reconsideration of the August 17, 1999 Order
because of the scheduled pre-trial was preposterous. The bank concluded that the motion to dismiss lacked basis since the deed of dacion en pago had
already been expunged.
In the appealed Order of April 11, 2002, the trial court ruled that the bank had no cause of action against the defendants because its claim for a sum of
money had been paid through the dacion en pago. The trial court noted that the bank even admitted the settlement. It disposed of the case as follows:
WHEREFORE, in view of the foregoing, defendant [respondent herein] University of Baguios Motion to Dismiss Amended Complaint is herein GRANTED and
this complaint for collection of sum of money is herein DISMISSED.
Defendant UBI [respondent university] shall file the appropriate Manifestation in Court specifying the dates in June when it will be available to present
evidence on its counterclaim.
SO ORDERED.19
Hence, this appeal where petitioner alleges:
I.
The RTC seriously erred in granting the Motion to Dismiss of respondent UBI on the basis of a document that has already been indisputably stricken off from
(sic) the records of the case.
ii.
The RTC seriously erred in granting ubis Motion to Dismiss when the issues raised therein are evidentiary in nature and did not refer to the allegations in
the complaint.
iii.
The RTC seriously erred in ruling, without trial, that the Deed of Dacion en Pago between petitioner and respondent ubI [Should be gdi] has not been
rescinded.
iv.
The RTC should have denied ubis Manifestation (with Motion for Reconsideration) as the filing of the Motion to Dismiss after respondent ubi filed its Answer
violated the Rules of Court.
V.
The RTC, without justifiable nor legal basis, adopted different policies to parties similarly situated.

vi.
The RTC, without justifiable nor legal basis, resolved for the second time a Motion to Dismiss which it has earlier denied instead of resolving the
Manifestation (with Motion for Reconsideration of said denial) which it was being asked to resolve. 20
In essence, the issue for our resolution is, did the trial court err in dismissing the amended complaint, without trial, upon motion of respondent university?
Petitioner argues that the universitys motion to dismiss on alleged lack of cause of action because of the deed of dacion en pago, an evidence aliunde, was
improper since petitioner has yet to present its evidence. Petitioner also argues that the April 11, 2002 appealed Order was flawed because it was based on
evidence expunged from the record.
Respondent university counters that the amended complaint deserved dismissal because petitioner admitted the dacion en pago and stated its lack of
interest to pursue the case against respondent university. The university contends that petitioners acceptance of the Batangas property, as equivalent of
performance, extinguished the obligation under the four promissory notes. Thus, the university concludes that no more cause of action lies against it.
For its part, respondent GDI maintains that the dacion en pago has no "legal effect" but also avers that the dacion en pago effectively paid the loan
warranting dismissal of the complaint, cross-claim and counterclaim against it.
Prefatorily, we note the trial courts inconsistent rulings in this case. To recall, the Omnibus Order dated April 21, 1997 appeared to have considered the
dacion en pago as full settlement of the case. The trial court thus ruled that the dacion en pago mooted the motion to implead GDI as third-party
defendant, and GDIs motions to dismiss amended complaint and third-party cross-claim. 21 Yet, in the same order, the trial court dismissed the case against
the heirs of Vicente G. Puyat on the ground of prematurity, since petitioners cause of action was against respondent university as "dummy" of GDI,
implying that the case was not yet actually settled. Recall also that the August 17, 1999 Order ruled that the payment of the loan through the dacion en
pago was "evidentiary"22 or had to be proved. The order was silent on whether it reversed the trial courts earlier statement that the dacion en pago settled
the loan and the case.
A year later, on August 3, 2000, the trial court expunged the deed of dacion en pago and reinstated GDIs motions to dismiss the amended complaint and
cross-claim.23 Then, the appealed Order of April 11, 2002 ruled that petitioner had "no cause of action" against the defendants since the loan was settled by
the dacion en pago,24 despite the order which expunged the deed.
In Domondon v. Lopez,25 we distinguished a motion to dismiss for failure of the complaint to state a cause of action from a motion to dismiss based on lack
of cause of action. The first is governed by Section 1 (g), 26 Rule 16, while the second by Rule 33, 27 of the Rules of Court, to wit:
. . . The first [situation where the complaint does not allege a sufficient cause of action] is raised in a motion to dismiss under Rule 16 before a responsive
pleading is filed and can be determined only from the allegations in the initiatory pleading and not from evidentiary or other matters aliunde. The second
[situation where the evidence does not sustain the cause of action alleged] is raised in a demurrer to evidence under Rule 33 after the plaintiff has rested
his case and can be resolved only on the basis of the evidence he has presented in support of his claim. The first does not concern itself with the truth and
falsity of the allegations while the second arises precisely because the judge has determined the truth and falsity of the allegations and has found the
evidence wanting.
Hence, a motion to dismiss based on lack of cause of action is filed by the defendant after the plaintiff has presented his evidence on the ground that the
latter has shown no right to the relief sought. While a motion to dismiss under Rule 16 is based on preliminary objections which can be ventilated before
the beginning of the trial, a motion to dismiss under Rule 33 is in the nature of a demurrer to evidence on the ground of insufficiency of evidence and is
presented only after the plaintiff has rested his case. 28 (Emphasis supplied.)
In this case, the universitys March 19, 1998 motion to dismiss the amended complaint was improper under Rule 16 because it was filed after respondent
university filed its responsive pleading, its Answer. Also, the motions merit could not be determined based solely on the allegations of the initiatory
pleading, the amended complaint, since the motion was based on the deed of dacion en pago, which was not even alleged in the complaint. And since the
deed of dacion en pago had been expunged from the record, the trial court erred in its finding of payment and lack of cause of action based on the deed. In
fact, on January 11, 2002 or just three months before it dismissed the amended complaint, the trial court had even noted petitioner counsels manifestation
regarding the parties initial efforts to enter into a "dacion en pago but not based on the previous offer made but on a new proposal involving new
properties"29 and urged them to pursue further settlement discussions. 30

In addition, the motion alleged that petitioner had "no more cause of action" or lacked a cause of action against the university. Following Domondon, that
motion was a motion to dismiss under Rule 33 in the nature of demurrer to evidence and would be proper only after petitioner had presented its evidence
and rested its case. In the case at bar, there had been no presentation of evidence yet and petitioner had not rested its case. Therefore, the August 17,
1999 Order properly denied the motion to dismiss for being improper under either Rule 16 or 33.
The trial court had also made a premature statement in its Omnibus Order dated April 21, 1997 that the dacion en pago settled the loan and the case, even
as it also stated that respondent university was used as a "dummy" of GDI. If indeed there was fraud, considering the uncollateralized loan, its diversion,
nonpayment, absence of demand although overdue, and the dacion en pago where title of the property accepted as payment cannot be transferred, the
fraud should be uncovered to determine who are liable to pay the loan. We note too that the April 11, 2002 Order was unclear if it ruled again on the
universitys March 19, 1998 motion to dismiss or acted on its August 29, 2001 manifestation with motion for reconsideration of the two-year old August 17,
1999 Order. To reiterate, the August 17, 1999 Order aptly denied the motion. Thus, we reverse the April 11, 2002 and June 27, 2003 assailed Orders.
Lastly, it must be pointed out that while the Court allows a relaxation in the application of procedural rules in some instances, courts and litigants are
enjoined to follow rules strictly because they are designed to facilitate the adjudication of cases. 31 Instead of rules being followed, however, we find their
misapplication in this case resulting to inconsistent rulings, confusion and delay. Had the trial court exercised its inherent power to control its proceedings, 32
it would not have taken this long to reach pre-trial, which had been first set on December 2, 1999 through respondent universitys motion. Significantly,
even the trial court had tentatively set the pre-trial on June 7, 2002 33 but erroneously dismissed the amended complaint on April 11, 2002.
WHEREFORE, we GRANT the petition and SET ASIDE the trial courts April 11, 2002 and June 27, 2003 Orders. The trial court is ORDERED to proceed with
the pre-trial and hear this case with dispatch. No pronouncement as to costs.
SO ORDERED.
G.R. No. 165585
November 20, 2013
GOVERNMENT
SERVICE
INSURANCE
SYSTEM,
Petitioner,
vs.
PRUDENTIAL GUARANTEE AND ASSURANCE, INC., DEVELOPMENT BANK OF THE PHILIPPINES and LAND BANK OF THE PHILIPPINES,
Respondents.
x-----------------------x
G.R. No. 176982
GOVERNMENT
SERVICE
INSURANCE
SYSTEM,
Petitioner,
vs.
PRUDENTIAL GUARANTEE AND ASSURANCE, INC., Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in these consolidated petitions for review on Certiorari1 are separate issuances of the Court of Appeals (CA) in relation to the complaint for sum of
money filed by Prudential Guarantee and Assurance, Inc. (PGAI) against the Government Service Insurance System (GSIS) before the Regional Trial Court of
Makati City, Branch 149 (RTC), docketed as Civil Case No. 01-1634.
In particular, the petition in G.R. No. 165585 assails the Decision2 dated May 26, 2004 and Resolution3 dated October 6, 2004 of the CA in CA-G.R. SP No.
69289 which affirmed the Order4 dated February 14, 2002, as well as the Order,5 Notices of Garnishment,6 and Writ of Execution,7 all dated February 19,
2002, issued by the RTC authorizing execution pending appeal.
On the other hand, the petition in G.R. No. 176982 assails the Decision 8 dated October 30, 2006 and Resolution9 dated March 12, 2007 of the CA in CA-G.R.
CV No. 73965 which dismissed the appeal filed by GSIS, affirming with modification the Order10 dated January 11, 2002 of the RTC rendering judgment on
the pleadings.
The Facts
Sometime in March 1999, the National Electrification Administration (NEA) entered into a Memorandum of Agreement11 (MOA) with GSIS insuring all real
and personal properties mortgaged to it by electrical cooperatives under an Industrial All Risks Policy (IAR policy). 12 The total sum insured under the IAR

policy was P16,731,141,166.80, out of which, 95% or P15,894,584,108.40 was reinsured by GSIS with PGAI for a period of one year or from March 5, 1999
to March 5, 2000.13 As reflected in Reinsurance Request Note No. 99-15014 (reinsurance cover) and the Reinsurance Binder15 dated April 21, 1999
(reinsurance binder), GSIS agreed to pay PGAI reinsurance premiums in the amount of P32,885,894.52 per quarter or a total of P131,543,578.08.16 While
GSIS remitted to PGAI the reinsurance premiums for the first three quarters, it, however, failed to pay the fourth and last reinsurance premium due on
December 5, 1999 despite demands. This prompted PGAI to file, on November 15, 2001, a Complaint 17 for sum of money (complaint) against GSIS before
the RTC, docketed as Civil Case No. 01-1634.
In its complaint, PGAI alleged, among others, that: (a) after it had issued the IAR policy, it further reinsured the risks covered under the said reinsurance
with reputable reinsurers worldwide such as Lloyds of London, Copenhagen Re, Cigna Singapore, CCR, Generali, and Arig;18 (b) the first three reinsurance
premiums were paid to PGAI by GSIS and, in the same vein, NEA paid the first three reinsurance premiums due to GSIS;19 (c) GSIS failed to pay PGAI the
fourth and last reinsurance premium due on December 5, 1999;20 (d) the IAR policy remained in full force and effect for the entire insurable period and, in
fact, the losses/damages on various risks reinsured by PGAI were paid and accordingly settled by it; 21 (e) PGAI is under continuous pressure from its
reinsurers in the international market to settle the matter;22 and (f) GSIS acknowledged its obligation to pay the last reinsurance premium as it, in turn,
demanded from NEA the fourth and last reinsurance premium.23
In its Answer,24 GSIS admitted, among others, that: (a) its request for reinsurance cover was accepted by PGAI in a reinsurance binder; 25 (b) it remitted to
PGAI the first three reinsurance premiums which were paid by NEA;26 and (c) it failed to remit the fourth and last reinsurance premium to PGAI.27 It,
however, denied, inter alia, that: (a) it had acknowledged its obligation to pay the last quarters reinsurance premium to PGAI; 28 and (b) the IAR policy
remained in full force and effect for the entire insurable period of March 5, 1999 to March 5, 2000.29 GSIS also proffered the following affirmative defenses:
(a) the complaint states no cause of action against GSIS because the non-payment of the last reinsurance premium only renders the reinsurance contract
ineffective, and does not give PGAI a right of action to collect;30 (b) pursuant to the regulations issued by the Commission on Audit, GSIS is prohibited from
advancing payments to PGAI occasioned by the failure of the principal insured, NEA, to pay the insurance premium;31 and (c) PGAIs cause of action lies
against NEA since GSIS merely acted as a conduit.32 By way of counterclaim, GSIS prayed that PGAI be ordered to pay exemplary damages, including
litigation expenses, and costs of suit.33
On December 18, 2001, PGAI filed a Motion for Judgment on the Pleadings34 averring that GSIS essentially admitted the material allegations of the
complaint, such as: (a) the existence of the MOA between NEA and GSIS; (b) the existence of the reinsurance binder between GSIS and PGAI; (c) the
remittance by GSIS to PGAI of the first three quarterly reinsurance premiums; and (d) the failure/refusal of GSIS to remit the fourth and last reinsurance
premium.35 Hence, PGAI prayed that the RTC render a judgment on the pleadings pursuant to Section 1, Rule 34 of the Rules of Court (Rules). GSIS
opposed36 the foregoing motion by reiterating the allegations and defenses in its Answer.
On January 11, 2002, the RTC issued an Order37 (January 11, 2002 Order) granting PGAIs Motion for Judgment on the Pleadings. It observed that the
admissions of GSIS that it paid the first three quarterly reinsurance premiums to PGAI affirmed the validity of the contract of reinsurance between them. As
such, GSIS cannot now renege on its obligation to remit the last and remaining quarterly reinsurance premium. 38 It further pointed out that while it is true
that the payment of the premium is a requisite for the validity of an insurance contract as provided under Section 77 of Presidential Decree No. (PD) 612, 39
otherwise known as "The Insurance Code," it was held in Makati Tuscany Condominium Corp. v. CA 40 (Makati Tuscany) that insurance policies are valid even
if the premiums were paid in installments, as in this case.41 Thus, in view of the foregoing, the RTC ordered GSIS to pay PGAI the last quarter reinsurance
premium in the sum of P32,885,894.52, including interests amounting to P6,519,515.91 as of July 31, 2000 until full payment, attorneys fees, and costs of
suit.42 Dissatisfied, GSIS filed a notice of appeal.43
Meanwhile, PGAI filed a Motion for Execution Pending Appeal44 based on the following reasons: (a) GSIS appeal was patently dilatory since it already
acknowledged the validity of PGAIs claim;45 (b) GSIS posted no valid defense as its Answer raised no genuine issues;46 and (c) PGAI would suffer serious
and irreparable injury as it may be blacklisted as a consequence of the non-payment of premiums due.47 PGAI also manifested its willingness to post a
sufficient surety bond to answer for any resulting damage to GSIS.48 The latter opposed49 the motion asserting that there lies no sufficient ground or
urgency to justify execution pending appeal. It also claimed that all its funds and properties are exempted from execution citing Section 39 of Republic Act
No. (RA) 8291,50 otherwise known as "The Government Service Insurance System Act of 1997."51

On February 14, 2002, the RTC issued an Order52 (February 14, 2002 Order) granting PGAIs Motion for Execution Pending Appeal, conditioned on the
posting of a bond. It further held that only the GSIS Social Insurance Fund is exempt from execution. Accordingly, PGAI duly posted a surety bond which the
RTC approved through an Order53 dated February 19, 2002, resulting to the issuance of a writ of execution54 and notices of garnishment55 (February 19,
2002 issuances), all of even date, against GSIS.
The CA Proceedings Antecedent to G.R. No. 165585
Aggrieved by the RTCs February 14, 2002 Order, as well as the February 19, 2002 issuances, GSIS without first filing a motion for reconsideration (from
the said order of execution) or a sufficient supersedeas bond56 filed on February 26, 2002 a petition for certiorari57 before the CA, docketed as CA-G.R. SP
No. 69289, against the RTC and PGAI. It also impleaded in the said petition the Land Bank of the Philippines (LBP) and the Development Bank of the
Philippines (DBP) as nominal parties so as to render them subject to the writs and processes of the CA.58
In its petition, GSIS argued that: (a) none of the grounds proffered by PGAI justifies the issuance of a writ of execution pending appeal; 59 and (b) all funds
and assets of GSIS are exempt from execution and levy in accordance with RA 8291.60
On April 4, 2002, the CA issued a temporary restraining order (TRO)61 enjoining the garnishment of GSIS funds with LBP and DBP. Nevertheless, since the
TROs effectivity lapsed, GSIS funds with the LBP were eventually garnished.62
On May 26, 2004, the CA rendered a Decision63 dismissing GSIS petition, upholding, among others, the validity of the execution pending appeal pursuant
to the RTCs February 14, 2002 Order as well as the February 19, 2002 issuances. It found that the impending blacklisting of PGAI constitutes a good reason
for allowing the execution pending appeal (also known as "discretionary execution") considering that the imposition of international sanctions on any single
local insurance company puts in grave and immediate jeopardy not only the viability of that company but also the integrity of the entire local insurance
system including that of the state insurance agency. It pointed out that the insurance business thrives on credibility which is maintained by honoring
financial commitments.
On the claimed exemption of GSIS funds from execution, the CA held that such exemption only covers funds under the Social Insurance Fund which remains
liable for the payment of benefits like retirement, disability and death compensation and not those covered under the General Insurance Fund, as in this
case, which are meant for investment in the business of insurance and reinsurance.64
GSIS motion for reconsideration65 was denied by the CA in a Resolution66 dated October 6, 2004. Hence, the petition for review on certiorari in G.R. No.
165585.67
The CA Proceedings Antecedent to G.R. No. 176982
Separately, GSIS also assailed the RTCs January 11, 2002 Order which granted PGAIs Motion for Judgment on the Pleadings through an appeal 68 filed on
October 7, 2002, docketed as CA G.R. CV No. 73965.
GSIS averred that the RTC gravely erred in: (a) rendering judgment on the pleadings since it specifically denied the material allegations in PGAIs complaint;
(b) ordering execution pending appeal since there are no justifiable reasons for the same; and (c) effecting execution against funds and assets of GSIS
given that RA 8291 exempts the same from levy, execution and garnishment.69
For its part, PGAI maintained that: (a) the judgment on the pleadings was in order given that GSIS never disputed the facts as alleged in its complaint; (b)
the discretionary execution was proper in view of the dilatory methods employed by GSIS in order to evade the payment of a valid obligation; and (c) the
general insurance fund of GSIS, which was attached and garnished by the RTC, is not exempt from execution.70
In a Decision71 dated October 30, 2006, the CA sustained the RTCs January 11, 2002 Order but deleted the awards of interest and attorneys fees for lack
of factual and legal basis.72
The CA ruled that judgment on the pleadings was proper since GSIS did not specifically deny the genuineness, due execution, and perfection of its
reinsurance contract with PGAI.73 In fact, PGAI even settled reinsurance claims during the covering period rendering the reinsurance contract not only
perfected but partially executed as well.74
Passing on the issue of the exemption from execution of GSIS funds, the CA, citing Rubia v. GSIS 75 (Rubia), held that the exemption provided for by RA 8291
is not absolute since it only pertains to the social security benefits of its members; thus, funds used by the GSIS for business investments and commercial
ventures, as in this case, may be attached and garnished.76

GSIS motion for reconsideration77 was denied by the CA in a Resolution78 dated March 12, 2007. Hence, the present petition for review on certiorari in G.R.
No. 176982.79
The Issues Before the Court
In these consolidated petitions, the essential issues are the following: (a) in G.R. No. 165585, whether the CA erred in (1) upholding the RTCs February 14,
2002 Order authorizing execution pending appeal, and (2) ruling that only the Social Insurance Fund and not the General Fund of the GSIS is exempt from
garnishment; and (b) in G.R. No. 176982, whether the CA erred in sustaining the RTCs January 11, 2002 Order rendering judgment on the pleadings.
The Courts Ruling
The petitions are partly meritorious.
A. Good reasons to allow execution pending appeal and the nature of the exemption under Section 39 of RA 8291.
The execution of a judgment pending appeal is an exception to the general rule that only a final judgment may be executed. 80 In order to grant the same
pursuant to Section 2,81 Rule 39 of the Rules, the following requisites must concur: (a) there must be a motion by the prevailing party with notice to the
adverse party; (b) there must be a good reason for execution pending appeal; and (c) the good reason must be stated in a special order. 82
Good reasons call for the attendance of compelling circumstances warranting immediate execution for fear that favorable judgment may yield to an empty
victory. In this regard, the Rules do not categorically and strictly define what constitutes "good reason," and hence, its presence or absence must be
determined in view of the peculiar circumstances of each case. As a guide, jurisprudence dictates that the "good reason" yardstick imports a superior
circumstance that will outweigh injury or damage to the adverse party.83 Corollarily, the requirement of "good reason" does not necessarily entail
unassailable and flawless basis but at the very least, an invocation thereof must be premised on solid footing.84
In the case at bar, the RTC, as affirmed by the CA, granted PGAIs motion for execution pending appeal on the ground that the impending sanctions against
it by foreign underwriters/reinsurers constitute good reasons therefor. It must, however, be observed that PGAI has not proffered any evidence to
substantiate its claim, as it merely presented bare allegations thereon. It is hornbook doctrine that mere allegations do not constitute proof. As held in Real
v. Belo,85 "it is basic in the rule of evidence that bare allegations, unsubstantiated by evidence, are not equivalent to proof. In short, mere allegations are
not evidence."86 Hence, without any sufficient basis to support the existence of its alleged "good reasons," it cannot be said that the second requisite to
allow an execution pending appeal exists. To reiterate, the requirement of "good reasons" must be premised on solid footing so as to ensure that the
"superior circumstance" which would impel immediate execution is not merely contrived or based on speculation. This, however, PGAI failed to demonstrate
in the present case. In fine, the Court therefore holds that the CAs affirmance of the RTCs February 14, 2002 Order authorizing execution pending appeal,
as well as the February 19, 2002 issuances related thereto, was improper.
Nevertheless, while an execution pending appeal should not lie in view of the above-discussed reasons, it must be noted that the funds and assets of GSIS
may after the resolution of the appeal and barring any provisional injunction thereto be subject to execution, attachment, garnishment or levy since the
exemption under Section 39 of RA 829187 does not operate to deny private entities from properly enforcing their contractual claims against GSIS.88 This has
been established in the case of Rubia wherein the Court held as follows:
The declared policy of the State in Section 39 of the GSIS Charter granting GSIS an exemption from tax, lien, attachment, levy, execution, and other legal
processes should be read together with the grant of power to the GSIS to invest its "excess funds" under Section 36 of the same Act. Under Section 36, the
GSIS is granted the ancillary power to invest in business and other ventures for the benefit of the employees, by using its excess funds for investment
purposes. In the exercise of such function and power, the GSIS is allowed to assume a character similar to a private corporation. Thus, it may sue and be
sued, as also explicitly granted by its charter.
Needless to say, where proper, under Section 36, the GSIS may be held liable for the contracts it has entered into in the course of its business investments.
For GSIS cannot claim a special immunity from liability in regard to its business ventures under said Section.
Nor can it deny contracting parties, in our view, the right of redress and the enforcement of a claim, particularly as it arises from a purely contractual
relationship of a private character between an individual and the GSIS.89 (Emphases supplied and citations omitted)
Thus, the petition in G.R. No. 165585 is partly granted.
B. Propriety of judgment on the pleadings.

Judgment on the pleadings is appropriate when an answer fails to tender an issue, or otherwise admits the material allegations of the adverse partys
pleading. The rule is stated in Section 1, Rule 34 of the Rules which reads as follows:
Sec. 1. Judgment on the pleadings. Where an answer fails to tender an issue, or otherwise admits the material allegations of the adverse partys pleading,
the court may, on motion of that party, direct judgment on such pleading. x x x.
In this relation, jurisprudence dictates that an answer fails to tender an issue if it does not comply with the requirements of a specific denial as set out in
Sections 890 and 10,91 Rule 8 of the Rules, resulting in the admission of the material allegations of the adverse partys pleadings.92
As such, it is a form of judgment that is exclusively based on the submitted pleadings without the introduction of evidence as the factual issues remain
uncontroverted.93
In this case, records disclose that in its Answer, GSIS admitted the material allegations of PGAIs complaint warranting the grant of the relief prayed for. In
particular, GSIS admitted that: (a) it made a request for reinsurance cover which PGAI accepted in a reinsurance binder effective for one year; 94 (b) it
remitted only the first three reinsurance premium payments to PGAI;95 (c) it failed to pay PGAI the fourth and final reinsurance premium installment;96 and
(d) it received demand letters from PGAI.97 It also did not refute the allegation of PGAI that it settled reinsurance claims during the reinsured period. On the
basis of these admissions, the Court finds that the CA did not err in affirming the propriety of a judgment on the pleadings.
GSIS affirmative defense that the non-payment of the last reinsurance premium merely rendered the contract ineffective pursuant to Section 77 98 of PD
612 no longer involves any factual issue, but stands solely as a mere question of law in the light of the foregoing admissions hence allowing for a judgment
on the pleadings. Besides, in the case of Makati Tuscany, the Court already ruled that the non-payment of subsequent installment premiums would not
prevent the insurance contract from taking effect; that the parties intended to make the insurance contract valid and binding is evinced from the fact that
the insured paid and the insurer received several reinsurance premiums due thereon, although the former refused to pay the remaining balance, viz:
We hold that the subject policies are valid even if the premiums were paid on installments. The records clearly show that petitioner and private respondent
intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. The initial insurance contract
entered into in 1982 was renewed in 1983, then in 1984. In those three (3) years, the insurer accepted all the installment payments. Such acceptance of
payments speaks loudly of the insurers intention to honor the policies it issued to petitioner. Certainly, basic principles of equity and fairness would not
allow the insurer to continue collecting and accepting the premiums, although paid on installments, and later deny liability on the lame excuse that the
premiums were not prepaid in full.
We therefore sustain the Court of Appeals. We quote with approval the well-reasoned findings and conclusion of the appellate court contained in its
Resolution denying the motion to reconsider its Decision
While the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the contract, We are not prepared to rule
that the request to make installment payments duly approved by the insurer, would prevent the entire contract of insurance from going into effect despite
payment and acceptance of the initial premium or first installment . Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition
of prepayment by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy
binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums
are not paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to morals, good customs,
public order or public policy (De Leon, the Insurance Code, at p. 175). So is an understanding to allow insured to pay premiums in installments not so
proscribed. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted.
[I]n the case before Us, petitioner paid the initial installment and thereafter made staggered payments resulting in full payment of the 1982 and 1983
insurance policies.1wphi1 For the 1984 policy, petitioner paid two (2) installments although it refused to pay the balance.
It appearing from the peculiar circumstances that the parties actually intended to make three (3) insurance contracts valid, effective and binding, petitioner
may not be allowed to renege on its obligation to pay the balance of the premium after the expiration of the whole term of the third policy (No. AH-CPP9210651) in March 1985. Moreover, as correctly observed by the appellate court, where the risk is entire and the contract is indivisible, the insured is not
entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary. 99 (Emphases supplied
and citation omitted)

Thus, owing to the identical complexion of Makati Tuscany with the present case, the Court upholds PGAIs right to be paid by GSIS the amount of the fourth
and last reinsurance premium pursuant to the reinsurance contract between them. All told, the petition in G.R. No. 176982 is denied.
WHEREFORE, the petition in G.R. No. 165585 is PARTLY GRANTED. The Decision dated May 26, 2004 and Resolution dated October 6, 2004 of the Court of
Appeals in CA-G.R. SP No. 69289 are MODIFIED only insofar as it upheld the validity of Prudential Guarantee and Assurance, Inc.s execution pending
appeal. In this respect, the Order dated February 14, 2002 of the Regional Trial Court of Makati, Branch 149 as well as all other issuances related thereto
are set aside.
On the other hand, the petition in G.R. No. 176982 is DENIED. The Decision dated October 30, 2006 and Resolution dated March 12, 2007 in CA-G.R. CV No.
73965 are hereby AFFIRMED.
SO ORDERED.
G.R. Nos. 167274-75
July 21, 2008
COMMISSIONER
OF
INTERNAL
REVENUE,
Petitioner,
vs.
FORTUNE TOBACCO CORPORATION, Respondent.
DECISION
TINGA, J.:
Simple and uncomplicated is the central issue involved, yet whopping is the amount at stake in this case.
After much wrangling in the Court of Tax Appeals (CTA) and the Court of Appeals, Fortune Tobacco Corporation (Fortune Tobacco) was granted a tax refund
or tax credit representing specific taxes erroneously collected from its tobacco products. The tax refund is being re-claimed by the Commissioner of Internal
Revenue (Commissioner) in this petition.
The following undisputed facts, summarized by the Court of Appeals, are quoted in the assailed Decision 1 dated 28 September 2004:
CAG.R. SP No. 80675
xxxx
Petitioner2 is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal address at
Fortune Avenue, Parang, Marikina City.
Petitioner is the manufacturer/producer of, among others, the following cigarette brands, with tax rate classification based on net retail price prescribed by
Annex "D" to R.A. No. 4280, to wit:
Brand

Tax
Rate

Champion M 100

P1.00

Salem M 100

P1.00

Salem M King

P1.00

Camel F King

P1.00

Camel Lights Box


P1.00
20s
Camel Filters Box
P1.00
20s
Winston F Kings

P5.00

Winston Lights
P5.00
Immediately prior to January 1, 1997, the above-mentioned cigarette brands were subject to ad valorem tax pursuant to then Section 142 of the Tax Code
of 1977, as amended. However, on January 1, 1997, R.A. No. 8240 took effect whereby a shift from the ad valorem tax (AVT) system to the specific tax
system was made and subjecting the aforesaid cigarette brands to specific tax under [S]ection 142 thereof, now renumbered as Sec. 145 of the Tax Code of
1997, pertinent provisions of which are quoted thus:
Section 145. Cigars and Cigarettes(A) Cigars. There shall be levied, assessed and collected on cigars a tax of One peso (P1.00) per cigar.
"(B) Cigarettes packed by hand. There shall be levied, assessesed and collected on cigarettes packed by hand a tax of Forty centavos (P0.40) per pack.
(C) Cigarettes packed by machine. There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates prescribed below:
(1) If the net retail price (excluding the excise tax and the value-added tax) is above Ten pesos (P10.00) per pack, the tax shall be Twelve (P12.00) per pack;
(2) If the net retail price (excluding the excise tax and the value added tax) exceeds Six pesos and Fifty centavos (P6.50) but does not exceed Ten pesos
(P10.00) per pack, the tax shall be Eight Pesos (P8.00) per pack.
(3) If the net retail price (excluding the excise tax and the value-added tax) is Five pesos (P5.00) but does not exceed Six Pesos and fifty centavos ( P6.50)
per pack, the tax shall be Five pesos (P5.00) per pack;
(4) If the net retail price (excluding the excise tax and the value-added tax) is below Five pesos (P5.00) per pack, the tax shall be One peso (P1.00) per
pack;
"Variants of existing brands of cigarettes which are introduced in the domestic market after the effectivity of R.A. No. 8240 shall be taxed under the highest
classification of any variant of that brand.
The excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not be lower than the tax, which is due
from each brand on October 1, 1996. Provided, however, that in cases were (sic) the excise tax rate imposed in paragraphs (1), (2), (3) and (4) hereinabove
will result in an increase in excise tax of more than seventy percent (70%), for a brand of cigarette, the increase shall take effect in two tranches: fifty
percent (50%) of the increase shall be effective in 1997 and one hundred percent (100%) of the increase shall be effective in 1998.
Duly registered or existing brands of cigarettes or new brands thereof packed by machine shall only be packed in twenties.
The rates of excise tax on cigars and cigarettes under paragraphs (1), (2) (3) and (4) hereof, shall be increased by twelve percent (12%)
on January 1, 2000. (Emphasis supplied)
New brands shall be classified according to their current net retail price.
For the above purpose, net retail price shall mean the price at which the cigarette is sold on retail in twenty (20) major supermarkets in Metro Manila
(for brands of cigarettes marketed nationally), excluding the amount intended to cover the applicable excise tax and value-added tax. For brands which are
marketed only outside Metro [M]anila, the net retail price shall mean the price at which the cigarette is sold in five (5) major supermarkets in the region
excluding the amount intended to cover the applicable excise tax and the value-added tax.
The classification of each brand of cigarettes based on its average retail price as of October 1, 1996, as set forth in Annex "D," shall remain in force until
revised by Congress.
Variant of a brand shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the brand and/or a different brand which
carries the same logo or design of the existing brand.
To implement the provisions for a twelve percent (12%) increase of excise tax on, among others, cigars and cigarettes packed by machines by January 1,
2000, the Secretary of Finance, upon recommendation of the respondent Commissioner of Internal Revenue, issued Revenue Regulations No. 17-99, dated
December 16, 1999, which provides the increase on the applicable tax rates on cigar and cigarettes as follows:
SECTI
ON

ARTICLES

PRESENT SPECIFIC TAX RATE PRIOR TO NEW SPECIFIC TAX RATE EFFECTIVE
JAN. 1, 2000
JAN. 1, 2000

145

(A)

P1.00/cigar

P1.12/cigar

(B)Cigarettes packed by machine


(1) Net retail price (excluding VAT and excise) exceeds P12.00/pack
P10.00 per pack

P13.44/ pack

(2) Exceeds P10.00 per pack

P8.00/pack

P8.96/pack

(3) Net retail price (excluding VAT and excise) is P5.00 to P5.00/pack
P6.50 per pack

P5.60/pack

(4) Net Retail Price (excluding VAT and excise) is below P1.00/pack
P1.12/pack
P5.00 per pack
Revenue Regulations No. 17-99 likewise provides in the last paragraph of Section 1 thereof, "(t)hat the new specific tax rate for any existing brand
of cigars, cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not be lower than the excise tax that is actually
being paid prior to January 1, 2000."
For the period covering January 1-31, 2000, petitioner allegedly paid specific taxes on all brands manufactured and removed in the total amounts of
P585,705,250.00.
On February 7, 2000, petitioner filed with respondents Appellate Division a claim for refund or tax credit of its purportedly overpaid excise tax for the
month of January 2000 in the amount of P35,651,410.00
On June 21, 2001, petitioner filed with respondents Legal Service a letter dated June 20, 2001 reiterating all the claims for refund/tax credit of its overpaid
excise taxes filed on various dates, including the present claim for the month of January 2000 in the amount of P35,651,410.00.
As there was no action on the part of the respondent, petitioner filed the instant petition for review with this Court on December 11, 2001, in order to
comply with the two-year period for filing a claim for refund.
In his answer filed on January 16, 2002, respondent raised the following Special and Affirmative Defenses;
4. Petitioners alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau;
5. The amount of P35,651,410 being claimed by petitioner as alleged overpaid excise tax for the month of January 2000 was not properly documented.
6. In an action for tax refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to its claim for
refund/credit.
7. Petitioner must show that it has complied with the provisions of Section 204(C) in relation [to] Section 229 of the Tax Code on the prescriptive period for
claiming tax refund/credit;
8. Claims for refund are construed strictly against the claimant for the same partake of tax exemption from taxation; and
9. The last paragraph of Section 1 of Revenue Regulation[s] [No.]17-99 is a valid implementing regulation which has the force and effect of law."
CA G.R. SP No. 83165
The petition contains essentially similar facts, except that the said case questions the CTAs December 4, 2003 decision in CTA Case No. 6612 granting
respondents3 claim for refund of the amount of P355,385,920.00 representing erroneously or illegally collected specific taxes covering the period January
1, 2002 to December 31, 2002, as well as its March 17, 2004 Resolution denying a reconsideration thereof.
xxxx
In both CTA Case Nos. 6365 & 6383 and CTA No. 6612, the Court of Tax Appeals reduced the issues to be resolved into two as stipulated by the parties, to
wit: (1) Whether or not the last paragraph of Section 1 of Revenue Regulation[s] [No.] 17-99 is in accordance with the pertinent provisions of Republic Act
[No.] 8240, now incorporated in Section 145 of the Tax Code of 1997; and (2) Whether or not petitioner is entitled to a refund of P35,651,410.00 as alleged
overpaid excise tax for the month of January 2000.
xxxx
Hence, the respondent CTA in its assailed October 21, 2002 [twin] Decisions[s] disposed in CTA Case Nos. 6365 & 6383:

WHEREFORE, in view of the foregoing, the court finds the instant petition meritorious and in accordance with law. Accordingly, respondent is hereby
ORDERED to REFUND to petitioner the amount of P35,651.410.00 representing erroneously paid excise taxes for the period January 1 to January 31, 2000.
SO ORDERED.
Herein petitioner sought reconsideration of the above-quoted decision. In [twin] resolution[s] [both] dated July 15, 2003, the Tax Court, in an apparent
change of heart, granted the petitioners consolidated motions for reconsideration, thereby denying the respondents claim for refund.
However, on consolidated motions for reconsideration filed by the respondent in CTA Case Nos. 6363 and 6383, the July 15, 2002 resolution was set aside,
and the Tax Court ruled, this time with a semblance of finality, that the respondent is entitled to the refund claimed. Hence, in a resolution dated November
4, 2003, the tax court reinstated its December 21, 2002 Decision and disposed as follows:
WHEREFORE, our Decisions in CTA Case Nos. 6365 and 6383 are hereby REINSTATED. Accordingly, respondent is hereby ORDERED to REFUND petitioner
the total amount of P680,387,025.00 representing erroneously paid excise taxes for the period January 1, 2000 to January 31, 2000 and February 1, 2000 to
December 31, 2001.
SO ORDERED.
Meanwhile, on December 4, 2003, the Court of Tax Appeals rendered decision in CTA Case No. 6612 granting the prayer for the refund of the amount of
P355,385,920.00 representing overpaid excise tax for the period covering January 1, 2002 to December 31, 2002. The tax court disposed of the case as
follows:
IN VIEW OF THE FOREGOING, the Petition for Review is GRANTED. Accordingly, respondent is hereby ORDERED to REFUND to petitioner the amount of
P355,385,920.00 representing overpaid excise tax for the period covering January 1, 2002 to December 31, 2002.
SO ORDERED.
Petitioner sought reconsideration of the decision, but the same was denied in a Resolution dated March 17, 2004. 4 (Emphasis supplied) (Citations omitted)
The Commissioner appealed the aforesaid decisions of the CTA. The petition questioning the grant of refund in the amount of P680,387,025.00 was
docketed as CA-G.R. SP No. 80675, whereas that assailing the grant of refund in the amount of P355,385,920.00 was docketed as CA-G.R. SP No. 83165.
The petitions were consolidated and eventually denied by the Court of Appeals. The appellate court also denied reconsideration in its Resolution 5 dated 1
March 2005.
In its Memorandum6 22 dated November 2006, filed on behalf of the Commissioner, the Office of the Solicitor General (OSG) seeks to convince the Court
that the literal interpretation given by the CTA and the Court of Appeals of Section 145 of the Tax Code of 1997 (Tax Code) would lead to a lower tax
imposable on 1 January 2000 than that imposable during the transition period. Instead of an increase of 12% in the tax rate effective on 1 January 2000 as
allegedly mandated by the Tax Code, the appellate courts ruling would result in a significant decrease in the tax rate by as much as 66%.
The OSG argues that Section 145 of the Tax Code admits of several interpretations, such as:
1. That by January 1, 2000, the excise tax on cigarettes should be the higher tax imposed under the specific tax system and the tax imposed under the ad
valorem tax system plus the 12% increase imposed by par. 5, Sec. 145 of the Tax Code;
2. The increase of 12% starting on January 1, 2000 does not apply to the brands of cigarettes listed under Annex "D" referred to in par. 8, Sec. 145 of the
Tax Code;
3. The 12% increment shall be computed based on the net retail price as indicated in par. C, sub-par. (1)-(4), Sec. 145 of the Tax Code even if the resulting
figure will be lower than the amount already being paid at the end of the transition period. This is the interpretation followed by both the CTA and the Court
of Appeals.7
This being so, the interpretation which will give life to the legislative intent to raise revenue should govern, the OSG stresses.
Finally, the OSG asserts that a tax refund is in the nature of a tax exemption and must, therefore, be construed strictly against the taxpayer, such as
Fortune Tobacco.
In its Memorandum8 dated 10 November 2006, Fortune Tobacco argues that the CTA and the Court of Appeals merely followed the letter of the law when
they ruled that the basis for the 12% increase in the tax rate should be the net retail price of the cigarettes in the market as outlined in paragraph C, sub
paragraphs (1)-(4), Section 145 of the Tax Code. The Commissioner allegedly has gone beyond his delegated rule-making power when he promulgated,

enforced and implemented Revenue Regulation No. 17-99, which effectively created a separate classification for cigarettes based on the excise tax
"actually being paid prior to January 1, 2000." 9
It should be mentioned at the outset that there is no dispute between the fact of payment of the taxes sought to be refunded and the receipt thereof by the
Bureau of Internal Revenue (BIR). There is also no question about the mathematical accuracy of Fortune Tobaccos claim since the documentary evidence in
support of the refund has not been controverted by the revenue agency. Likewise, the claims have been made and the actions have been filed within the
two (2)-year prescriptive period provided under Section 229 of the Tax Code.
The power to tax is inherent in the State, such power being inherently legislative, based on the principle that taxes are a grant of the people who are taxed,
and the grant must be made by the immediate representatives of the people; and where the people have laid the power, there it must remain and be
exercised.10
This entire controversy revolves around the interplay between Section 145 of the Tax Code and Revenue Regulation 17-99. The main issue is an inquiry into
whether the revenue regulation has exceeded the allowable limits of legislative delegation.
For ease of reference, Section 145 of the Tax Code is again reproduced in full as follows:
Section 145. Cigars and Cigarettes(A) Cigars.There shall be levied, assessed and collected on cigars a tax of One peso (P1.00) per cigar.
(B). Cigarettes packed by hand.There shall be levied, assessed and collected on cigarettes packed by hand a tax of Forty centavos (P0.40) per pack.
(C) Cigarettes packed by machine.There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates prescribed below:
(1) If the net retail price (excluding the excise tax and the value-added tax) is above Ten pesos (P10.00) per pack, the tax shall be Twelve pesos (P12.00)
per pack;
(2) If the net retail price (excluding the excise tax and the value added tax) exceeds Six pesos and Fifty centavos (P6.50) but does not exceed Ten pesos
(P10.00) per pack, the tax shall be Eight Pesos (P8.00) per pack.
(3) If the net retail price (excluding the excise tax and the value-added tax) is Five pesos (P5.00) but does not exceed Six Pesos and fifty centavos (P6.50)
per pack, the tax shall be Five pesos (P5.00) per pack;
(4) If the net retail price (excluding the excise tax and the value-added tax) is below Five pesos (P5.00) per pack, the tax shall be One peso (P1.00) per
pack;
Variants of existing brands of cigarettes which are introduced in the domestic market after the effectivity of R.A. No. 8240 shall be taxed under the highest
classification of any variant of that brand.
The excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not be lower than the tax, which is due
from each brand on October 1, 1996. Provided, however, That in cases where the excise tax rates imposed in paragraphs (1), (2), (3) and (4) hereinabove
will result in an increase in excise tax of more than seventy percent (70%), for a brand of cigarette, the increase shall take effect in two tranches: fifty
percent (50%) of the increase shall be effective in 1997 and one hundred percent (100%) of the increase shall be effective in 1998.
Duly registered or existing brands of cigarettes or new brands thereof packed by machine shall only be packed in twenties.
The rates of excise tax on cigars and cigarettes under paragraphs (1), (2) (3) and (4) hereof, shall be increased by twelve percent (12%)
on January 1, 2000.
New brands shall be classified according to their current net retail price.
For the above purpose, net retail price shall mean the price at which the cigarette is sold on retail in twenty (20) major supermarkets in Metro Manila
(for brands of cigarettes marketed nationally), excluding the amount intended to cover the applicable excise tax and value-added tax. For brands which are
marketed only outside Metro Manila, the net retail price shall mean the price at which the cigarette is sold in five (5) major intended to cover the
applicable excise tax and the value-added tax.
The classification of each brand of cigarettes based on its average retail price as of October 1, 1996, as set forth in Annex "D," shall remain in force until
revised by Congress.
Variant of a brand shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the brand and/or a different brand which
carries the same logo or design of the existing brand. 11 (Emphasis supplied)

Revenue Regulation 17-99, which was issued pursuant to the unquestioned authority of the Secretary of Finance to promulgate rules and regulations for the
effective implementation of the Tax Code,12 interprets the above-quoted provision and reflects the 12% increase in excise taxes in the following manner:
SECTI
ON

DESCRIPTION OF ARTICLES

PRESENT SPECIFIC TAX RATES PRIOR TO NEW SPECIFIC TAX RATE Effective
JAN. 1, 2000
Jan.. 1, 2000

145

(A)

P1.00/cigar

P1.12/cigar

(B)Cigarettes packed by Machine


(1) Net Retail Price (excluding VAT and Excise) exceeds P12.00/pack
P10.00 per pack

P13.44/pack

(2) Net Retail Price (excluding VAT and Excise) is P6.51 up P8.00/pack
to P10.00 per pack

P8.96/pack

(3) Net Retail Price (excluding VAT and excise) is P5.00 to P5.00/pack
P6.50 per pack

P5.60/pack

(4) Net Retail Price (excluding VAT and excise) is below P1.00/pack
P1.12/pack
P5.00 per pack)
This table reflects Section 145 of the Tax Code insofar as it mandates a 12% increase effective on 1 January 2000 based on the taxes indicated under
paragraph C, sub-paragraph (1)-(4). However, Revenue Regulation No. 17-99 went further and added that "[T]he new specific tax rate for any existing
brand of cigars, cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not be lower than the excise tax that is actually being paid
prior to January 1, 2000."13
Parenthetically, Section 145 states that during the transition period, i.e., within the next three (3) years from the effectivity of the Tax Code, the excise tax
from any brand of cigarettes shall not be lower than the tax due from each brand on 1 October 1996. This qualification, however, is conspicuously absent
as regards the 12% increase which is to be applied on cigars and cigarettes packed by machine, among others, effective on 1 January 2000. Clearly and
unmistakably, Section 145 mandates a new rate of excise tax for cigarettes packed by machine due to the 12% increase effective on 1 January 2000
without regard to whether the revenue collection starting from this period may turn out to be lower than that collected prior to this date.
By adding the qualification that the tax due after the 12% increase becomes effective shall not be lower than the tax actually paid prior to 1 January 2000,
Revenue Regulation No. 17-99 effectively imposes a tax which is the higher amount between the ad valorem tax being paid at the end of the three (3)-year
transition period and the specific tax under paragraph C, sub-paragraph (1)-(4), as increased by 12%a situation not supported by the plain wording of
Section 145 of the Tax Code.
This is not the first time that national revenue officials had ventured in the area of unauthorized administrative legislation.
In Commissioner of Internal Revenue v. Reyes,14 respondent was not informed in writing of the law and the facts on which the assessment of estate taxes
was made pursuant to Section 228 of the 1997 Tax Code, as amended by Republic Act (R.A.) No. 8424. She was merely notified of the findings by the
Commissioner, who had simply relied upon the old provisions of the law and Revenue Regulation No. 12-85 which was based on the old provision of the law.
The Court held that in case of discrepancy between the law as amended and the implementing regulation based on the old law, the former necessarily
prevails. The law must still be followed, even though the existing tax regulation at that time provided for a different procedure. 15
In Commissioner of Internal Revenue v. Central Luzon Drug Corporation,16 the tax authorities gave the term "tax credit" in Sections 2(i) and 4 of Revenue
Regulation 2-94 a meaning utterly disparate from what R.A. No. 7432 provides. Their interpretation muddled up the intent of Congress to grant a mere
discount privilege and not a sales discount. The Court, striking down the revenue regulation, held that an administrative agency issuing regulations may
not enlarge, alter or restrict the provisions of the law it administers, and it cannot engraft additional requirements not contemplated by the legislature. The
Court emphasized that tax administrators are not allowed to expand or contract the legislative mandate and that the "plain meaning rule" or verba legis in

statutory construction should be applied such that where the words of a statute are clear, plain and free from ambiguity, it must be given its literal meaning
and applied without attempted interpretation.
As we have previously declared, rule-making power must be confined to details for regulating the mode or proceedings in order to carry into effect the law
as it has been enacted, and it cannot be extended to amend or expand the statutory requirements or to embrace matters not covered by the statute.
Administrative regulations must always be in harmony with the provisions of the law because any resulting discrepancy between the two will always be
resolved in favor of the basic law. 17
In Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop, Inc.,18 Commissioner Jose Ong issued Revenue Memorandum Order (RMO) No. 15-91,
as well as the clarificatory Revenue Memorandum Circular (RMC) 43-91, imposing a 5% lending investors tax under the 1977 Tax Code, as amended by
Executive Order (E.O.) No. 273, on pawnshops. The Commissioner anchored the imposition on the definition of lending investors provided in the 1977 Tax
Code which, according to him, was broad enough to include pawnshop operators. However, the Court noted that pawnshops and lending investors were
subjected to different tax treatments under the Tax Code prior to its amendment by the executive order; that Congress never intended to treat pawnshops
in the same way as lending investors; and that the particularly involved section of the Tax Code explicitly subjected lending investors and dealers in
securities only to percentage tax. And so the Court affirmed the invalidity of the challenged circulars, stressing that "administrative issuances must not
override, supplant or modify the law, but must remain consistent with the law they intend to carry out." 19
In Philippine Bank of Communications v. Commissioner of Internal Revenue, 20 the then acting Commissioner issued RMC 7-85, changing the prescriptive
period of two years to ten years for claims of excess quarterly income tax payments, thereby creating a clear inconsistency with the provision of Section
230 of the 1977 Tax Code. The Court nullified the circular, ruling that the BIR did not simply interpret the law; rather it legislated guidelines contrary to the
statute passed by Congress. The Court held:
It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general interpretations
of tax laws) which are issued from time to time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed upon a statute
by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and will
be ignored if judicially found to be erroneous. Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and
in harmony with, the law they seek to apply and implement. 21
In Commissioner of Internal Revenue v. CA, et al.,22 the central issue was the validity of RMO 4-87 which had construed the amnesty coverage under E.O.
No. 41 (1986) to include only assessments issued by the BIR after the promulgation of the executive order on 22 August 1986 and not assessments made
to that date. Resolving the issue in the negative, the Court held:
x x x all such issuances must not override, but must remain consistent and in harmony with, the law they seek to apply and implement. Administrative
rules and regulations are intended to carry out, neither to supplant nor to modify, the law. 23
xxx
If, as the Commissioner argues, Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities already assessed (administratively) prior
to 22 August 1986, the law could have simply so provided in its exclusionary clauses. It did not. The conclusion is unavoidable, and it is that the executive
order has been designed to be in the nature of a general grant of tax amnesty subject only to the cases specifically excepted by it. 24
In the case at bar, the OSGs argument that by 1 January 2000, the excise tax on cigarettes should be the higher tax imposed under the specific tax system
and the tax imposed under the ad valorem tax system plus the 12% increase imposed by paragraph 5, Section 145 of the Tax Code, is an unsuccessful
attempt to justify what is clearly an impermissible incursion into the limits of administrative legislation. Such an interpretation is not supported by the clear
language of the law and is obviously only meant to validate the OSGs thesis that Section 145 of the Tax Code is ambiguous and admits of several
interpretations.
The contention that the increase of 12% starting on 1 January 2000 does not apply to the brands of cigarettes listed under Annex "D" is likewise
unmeritorious, absurd even. Paragraph 8, Section 145 of the Tax Code simply states that, "[T]he classification of each brand of cigarettes based on its
average net retail price as of October 1, 1996, as set forth in Annex D, shall remain in force until revised by Congress." This declaration certainly does not
lend itself to the interpretation given to it by the OSG. As plainly worded, the average net retail prices of the listed brands under Annex "D," which classify

cigarettes according to their net retail price into low, medium or high, obviously remain the bases for the application of the increase in excise tax rates
effective on 1 January 2000.
The foregoing leads us to conclude that Revenue Regulation No. 17-99 is indeed indefensibly flawed. The Commissioner cannot seek refuge in his claim that
the purpose behind the passage of the Tax Code is to generate additional revenues for the government. Revenue generation has undoubtedly been a major
consideration in the passage of the Tax Code. However, as borne by the legislative record, 25 the shift from the ad valorem system to the specific tax system
is likewise meant to promote fair competition among the players in the industries concerned, to ensure an equitable distribution of the tax burden and to
simplify tax administration by classifying cigarettes, among others, into high, medium and low-priced based on their net retail price and accordingly
graduating tax rates.
At any rate, this advertence to the legislative record is merely gratuitous because, as we have held, the meaning of the law is clear on its face and free
from the ambiguities that the Commissioner imputes. We simply cannot disregard the letter of the law on the pretext of pursuing its spirit. 26
Finally, the Commissioners contention that a tax refund partakes the nature of a tax exemption does not apply to the tax refund to which Fortune Tobacco
is entitled. There is parity between tax refund and tax exemption only when the former is based either on a tax exemption statute or a tax refund statute.
Obviously, that is not the situation here. Quite the contrary, Fortune Tobaccos claim for refund is premised on its erroneous payment of the tax, or better
still the governments exaction in the absence of a law.
Tax exemption is a result of legislative grace. And he who claims an exemption from the burden of taxation must justify his claim by showing that the
legislature intended to exempt him by words too plain to be mistaken. 27 The rule is that tax exemptions must be strictly construed such that the exemption
will not be held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention. 28
A claim for tax refund may be based on statutes granting tax exemption or tax refund. In such case, the rule of strict interpretation against the taxpayer is
applicable as the claim for refund partakes of the nature of an exemption, a legislative grace, which cannot be allowed unless granted in the most explicit
and categorical language. The taxpayer must show that the legislature intended to exempt him from the tax by words too plain to be mistaken. 29
Tax refunds (or tax credits), on the other hand, are not founded principally on legislative grace but on the legal principle which underlies all quasi-contracts
abhorring a persons unjust enrichment at the expense of another. 30 The dynamic of erroneous payment of tax fits to a tee the prototypic quasi-contract,
solutio indebiti, which covers not only mistake in fact but also mistake in law. 31
The Government is not exempt from the application of solutio indebiti. 32 Indeed, the taxpayer expects fair dealing from the Government, and the latter has
the duty to refund without any unreasonable delay what it has erroneously collected. 33 If the State expects its taxpayers to observe fairness and honesty in
paying their taxes, it must hold itself against the same standard in refunding excess (or erroneous) payments of such taxes. It should not unjustly enrich
itself at the expense of taxpayers. 34 And so, given its essence, a claim for tax refund necessitates only preponderance of evidence for its approbation like in
any other ordinary civil case.
Under the Tax Code itself, apparently in recognition of the pervasive quasi-contract principle, a claim for tax refund may be based on the following: (a)
erroneously or illegally assessed or collected internal revenue taxes; (b) penalties imposed without authority; and (c) any sum alleged to have been
excessive or in any manner wrongfully collected. 35
What is controlling in this case is the well-settled doctrine of strict interpretation in the imposition of taxes, not the similar doctrine as applied to tax
exemptions. The rule in the interpretation of tax laws is that a statute will not be construed as imposing a tax unless it does so clearly, expressly, and
unambiguously. A tax cannot be imposed without clear and express words for that purpose. Accordingly, the general rule of requiring adherence to the
letter in construing statutes applies with peculiar strictness to tax laws and the provisions of a taxing act are not to be extended by implication. In
answering the question of who is subject to tax statutes, it is basic that in case of doubt, such statutes are to be construed most strongly against the
government and in favor of the subjects or citizens because burdens are not to be imposed nor presumed to be imposed beyond what statutes expressly
and clearly import.36 As burdens, taxes should not be unduly exacted nor assumed beyond the plain meaning of the tax laws. 37
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA G.R. SP No. 80675, dated 28 September 2004, and its Resolution, dated 1
March 2005, are AFFIRMED. No pronouncement as to costs.
SO ORDERED.

LAND BANK OF THE PHILIPPINES,


Petitioner,

G.R. No. 157206


Present:

- versus -

SPOUSES PLACIDO ORILLA and CLARA DY


ORILLA,
Respondents.

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:
June 27, 2008

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

Without doubt, justice is the supreme need of man. Man can endure without food for days, but if he is deprived even with the least injustice, he can
be that violent to give up his life for it. History will tell us that many great nations had emerged in the past, yet they succumbed to downfall when their
leaders had gone so immorally low that they could not anymore render justice to their people. In our times, we are witnesses to radical changes in our
society rooted on alleged injustice. The only hope is in the courts as the last bulwark of democracy being the administrator of justice and the legitimate
recourse of their grievances.14[1]
The Facts
This is an appeal via a petition 15[2] for review on certiorari under Rule 45 of the Rules of Court of the Decision 16[3] of the Court of Appeals dated July
29, 2002 in CA-G.R. SP No. 63691 entitled Land Bank of the Philippines v. Hon. Venancio J. Amila, in his capacity as Presiding Judge, Regional Trial Court,
14
15
16

Branch 3, Tagbilaran City, Spouses Placido Orilla and Clara Dy Orilla. Said Decision affirmed the Order17[4] dated December 21, 2000 of the Regional Trial
Court (RTC), Branch 3, Tagbilaran City, sitting as a Special Agrarian Court (SAC) in Civil Case No. 6085.
Spouses Placido and Clara Orilla (respondents) were the owners of Lot No. 1, 11-12706, situated in Bohol, containing an area of 23.3416 hectares
and covered by Transfer Certificate of Title No. 18401. In the latter part of November 1996, the Department of Agrarian Reform Provincial Agrarian Reform
Office (DAR-PARO) of Bohol sent respondents a Notice of Land Valuation and Acquisition dated November 15, 1996 informing them of the compulsory
acquisition of 21.1289 hectares of their landholdings pursuant to the Comprehensive Agrarian Reform Law (Republic Act [RA] 6657) for P371,154.99 as
compensation based on the valuation made by the Land Bank of the Philippines (petitioner).
Respondents rejected the said valuation. Consequently, the Provincial Department of Agrarian Reform Adjudication Board (Provincial DARAB)
conducted a summary hearing on the amount of just compensation. Thereafter, the Provincial DARAB affirmed the valuation made by the petitioner.
Unsatisfied, respondents filed an action for the determination of just compensation before the Regional Trial Court (as a Special Agrarian Court [SAC])
of Tagbilaran City. The case was docketed as Civil Case No. 6085 and was raffled to Branch 3.
After trial on the merits, the SAC rendered a Decision 18[5] dated November 20, 2000, the dispositive portion of which reads
WHEREFORE, judgment is hereby rendered fixing the just compensation of the land of petitioner subject matter of the instant action at P7.00 per
square meter, as only prayed for, which shall earn legal interest from the filing of the complaint until the same shall have been fully paid. Furthermore,
respondents are hereby ordered to jointly and solidarily indemnify the petitioners their expenses for attorneys fee and contract fee in the conduct of the
appraisal of the land by a duly licensed real estate appraiser Angelo G. Fajardo of which petitioner shall submit a bill of costs therefor for the approval of the
Court.
SO ORDERED.19[6]
On December 11, 2000, petitioner filed a Notice of Appeal. 20[7] Subsequently, on December 15, 2000, respondents filed a Motion for Execution
Pending Appeal21[8] pursuant to Section 2, Rule 39 of the 1997 Rules of Civil Procedure and the consolidated cases of Landbank of the Philippines v. Court
of Appeals, et al.22[9] and Department of Agrarian Reform v. Court of Appeals, et al. 23[10] Respondents claimed that the total amount of P1,479,023.00
17
18
19
20
21
22
23

(equivalent to P7.00 per square meter for 21.1289 hectares), adjudged by the SAC as just compensation, could then be withdrawn under the authority of
the aforementioned case.
Meanwhile, on December 18, 2000, the DAR filed its own Notice of Appeal 24[11] from the SAC Decision dated November 20, 2000. The DAR alleged in
its Notice that it received a copy of the SAC Decision only on December 6, 2000.
On December 21, 2000, the SAC issued an Order 25[12] granting the Motion for Execution Pending Appeal, the decretal portion of which reads
WHEREFORE, the herein motion is granted and the petitioners are hereby ordered to post bond equivalent to one-half of the amount due them by
virtue of the decision in this case. The respondent Land Bank of the Philippines, is therefore, ordered to immediately deposit with any accessible bank, as
may be designated by respondent DAR, in cash or in any governmental financial instrument the total amount due the petitioner-spouses as may be
computed within the parameters of Sec. 18(1) of RA 6657. Furthermore, pursuant to the Supreme Court decisions in Landbank of the Philippines vs. Court
of Appeals, et al. G.R. No. 118712, promulgated on October 6, 1995 and Department of Agrarian Reform vs. Court of Appeals, et al., G.R. No. 118745,
promulgated on October 6, 1995, the petitioners may withdraw the same for their use and benefit consequent to their right of ownership thereof. 26[13]
On December 25, 2000, respondents filed a Motion for Partial Reconsideration 27[14] of the amount of the bond to be posted, which was later denied
in an Order28[15] dated January 11, 2001.
Petitioner filed a Motion for Reconsideration 29[16] on December 27, 2000, which was likewise denied in an Order 30[17] dated December 29, 2000.
On March 13, 2001, petitioner filed with the Court of Appeals a special civil action 31[18] for certiorari and prohibition under Rule 65 of the Rules of
Court with prayer for issuance of a temporary restraining order and/or preliminary injunction. It questioned the propriety of the SAC Order granting the
execution pending appeal. Respondents and the presiding judge of the SAC, as nominal party, filed their respective comments 32[19] on the petition.
24
25
26
27
28
29
30
31
32

In its Decision dated July 29, 2002, the Court of Appeals dismissed the petition on the ground that the assailed SAC Order dated December 21, 2000
granting execution pending appeal was consistent with justice, fairness, and equity, as respondents had been deprived of the use and possession of their
property pursuant to RA 6657 and are entitled to be immediately compensated with the amount as determined by the SAC under the principle of prompt
payment of just compensation.
Petitioner filed a Motion for Reconsideration of the Court of Appeals Decision, but the same was denied in a Resolution dated February 5, 2003.
Hence, this appeal.
Petitioner anchors its petition on the following grounds:
I.
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE RESPONDENTS WERE ENTITLED TO EXECUTION PENDING APPEAL OF THE
COMPENSATION FIXED BY THE SAC BASED ON THE PRINCIPLE OF PROMPT PAYMENT OF JUST COMPENSATION, EVEN THOUGH THE PRINCIPLE OF PROMPT
PAYMENT IS SATISFIED BY THE PAYMENT AND IMMEDIATE RELEASE OF THE PROVISIONAL COMPENSATION UNDER SECTION 16(E) OF RA 6657, UPON
SUBMISSION OF THE LEGAL REQUIREMENTS, IN ACCORDANCE WITH THE RULING OF THIS HONORABLE COURT IN THE CASE OF LAND BANK OF THE
PHILIPPINES V. COURT OF APPEALS, PEDRO L. YAP, ET AL., G.R. NO. 118712, OCTOBER 6, 1995 AND JULY 5, 1996 , AND NOT BY EXECUTION PENDING APPEAL
OF THE COMPENSATION FIXED BY THE SAC.
II.
THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN UPHOLDING THE SAC ORDER FOR EXECUTION PENDING APPEAL WHICH WAS
ISSUED WITHOUT ANY GOOD REASON RECOGNIZED UNDER EXISTING JURISPRUDENCE AND PROPER HEARING AND RECEPTION OF EVIDENCE IN VIOLATION
OF SECTION 2(A), RULE 39 OF THE RULES OF COURT.
For its first ground, petitioner asserts that, according to our ruling in Land Bank of the Philippines v. Court of Appeals,33[20] the principle of prompt
payment of just compensation is already satisfied by the concurrence of two (2) conditions: (a) the deposits made by petitioner in any accessible bank,
equivalent to the DAR/LBP valuation of the expropriated property as provisional compensation, must be in cash and bonds as expressly provided for by
Section 16(e) of RA 6657, not merely earmarked or reserved in trust; and (b) the deposits must be immediately released to the landowner upon compliance
with the legal requirements under Section 16 34[21] of RA 6657, even pending the final judicial determination of just compensation.
Anent the second ground, petitioner argues that the good reasons cited by the SAC, as affirmed by the Court of Appeals, namely: (1) that execution
pending appeal would be in consonance with justice, fairness, and equity considering that the land had long been taken by the DAR; (2) that suspending
the payment of compensation will prolong the agony that respondents have been suffering by reason of the deprivation of their property; and (3) that it
would be good and helpful to the economy are not valid reasons to justify the execution pending appeal, especially because the execution was granted
without a hearing.
This appeal should be denied.
As the issues raised are interrelated, they shall be discussed jointly.
Execution of a judgment pending appeal is governed by Section 2(a) of Rule 39 of the Rules of Court, to wit:
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34

SEC. 2. Discretionary execution.


(a) Execution of a judgment or a final order pending appeal. -- On motion of the prevailing party with notice to the adverse party filed in the trial
court while it has jurisdiction over the case and is in possession of either the original record or the record on appeal, as the case may be, at the time of the
filing of such motion, said court may, in its discretion, order execution of a judgment or final order even before the expiration of the period to appeal.
xxxx
Discretionary execution may only issue upon good reasons to be stated in a special order after due hearing.
As provided above, execution of the judgment or final order pending appeal is discretionary. As an exception to the rule that only a final judgment
may be executed, it must be strictly construed. Thus, execution pending appeal should not be granted routinely but only in extraordinary circumstances.
The Rules of Court does not enumerate the circumstances which would justify the execution of the judgment or decision pending appeal. However,
we have held that good reasons consist of compelling or superior circumstances demanding urgency which will outweigh the injury or damages suffered
should the losing party secure a reversal of the judgment or final order. The existence of good reasons is what confers discretionary power on a court to
issue a writ of execution pending appeal. These reasons must be stated in the order granting the same. Unless they are divulged, it would be difficult to
determine whether judicial discretion has been properly exercised. 35[22]
In this case, do good reasons exist to justify the grant by the SAC of the motion for execution pending appeal? The answer is a resounding YES.
The expropriation of private property under RA 6657 is a revolutionary kind of expropriation, 36[23] being a means to obtain social justice by
distributing land to the farmers, envisioning freedom from the bondage to the land they actually till. As an exercise of police power, it puts the landowner,
not the government, in a situation where the odds are practically against him. He cannot resist it. His only consolation is that he can negotiate for the
amount of compensation to be paid for the property taken by the government. As expected, the landowner will exercise this right to the hilt, subject to the
limitation that he can only be entitled to just compensation. Clearly therefore, by rejecting and disputing the valuation of the DAR, the landowner is merely
exercising his right to seek just compensation. 37[24]
In this case, petitioner valued the property of respondents at P371,154.99 for the compulsory acquisition of 21.1289 hectares of their landholdings.
This amount respondents rejected. However, the same amount was affirmed by the DAR after the conduct of summary proceedings. Consequently,
respondents brought the matter to the SAC for the determination of just compensation. After presentation of evidence from both parties, the SAC found the
valuation of the LBP and the DAR too low and pegged the just compensation due the respondents at P7.00 per square meter, or a total of P1,479,023.00 for
the 21.1289 hectares. In determining such value, the SAC noted the following circumstances:
1.
35
36
37

the nearest point of the land is about 1.5 kilometers from Poblacion Ubay;

2.
the total area of the land based on the sketch-map presented by the MARO is 23.3416 hectares.
3.
the land is generally plain, sandy loam, without stones, rocks or [pebbles];
4.
the land is adjoining the National Highway of Ubay-Trinidad, Bohol;
5.
11.4928 hectares of the land is devoted to planting rice, which portion is rain-fed and produces 60-80 cavans of rice per hectare with two (2) harvest
seasons a year;
6.
four (4) hectares is planted with 210 fruit-bearing coconut trees, which private respondents used to receive a share of P1,500.00 per harvest four (4)
times a year;
7.
five (5) hectares is cogonal but now most area is planted with cassava;
8.
the area is traversed with electricity providing electric power to some occupants;
9.
across the National Highway, about 200 meters away from the landholding, is an irrigation canal of the National Irrigation Administration (NIA);
10. the Ubay Airport is about two (2) kilometers from the landholding;
11. fruit trees like mangoes and jackfruits were also planted on the property;
12. north of the landholding, about a kilometer away, is the seashore;
13. the market value of the land per Tax Declaration No. 45-002-00084 is P621,310.00 for the entire 23.2416 hectares but representing only 48% of the
actual value of the property;
14. that the real estate appraiser Angelo Z. Fajardo appraised the land at P80,000.00 per hectare for the Riceland and P30,000.00 for all other portions
thereof;
15. testimony of the representative from petitioner that the factors considered in the appraisal of land are the cost of acquisition of the land, the current
value, its nature, its actual use and income, the sworn valuation of the owner, and the assessment by the government functionary concerned;
16. petitioners contention that the main basis for the valuation it made was the very low price that the petitioners had paid for the land when they
acquired it along with other parcels from the Development Bank of the Philippines in a foreclosure sale;
17. the testimony of the Municipal Agrarian Reform Officer for DAR that it was contemplated that the property be disposed to farmer-beneficiaries at a
relatively higher price; and
18. the fact that Ubay town is a fast-growing municipality being a consistent recipient of government projects and facilities in view of its natural resources
and favorable geographical locationBohol Circumferential Road Improvement Project Phase I, the Leyte-Bohol Interconnection Project Phase I, the Ilaya
Reservior Irrigation Project, the Metro San Pascual Rural and Waterworks System, the 250-hectare Central Visayas Coconut Seeds Production Center, the
Philippine Carabao Center at the Ubay Stock Farm, and several other public and private business facilities. 38[25]
In light of these circumstances, the SAC found that the valuation made by petitioner, and affirmed by the DAR, was unjustly way below the fair valuation of
the landholding at the time of its taking by the DAR. The SAC, mindful also of the advanced age of respondents at the time of the presentation of evidence
for the determination of just compensation, deemed it proper to grant their motion for execution pending appeal with the objective of ensuring prompt
payment of just compensation.
Contrary to the view of petitioner, prompt payment of just compensation is not satisfied by the mere deposit with any accessible bank of the provisional
compensation determined by it or by the DAR, and its subsequent release to the landowner after compliance with the legal requirements set by RA 6657.
Constitutionally, just compensation is the sum equivalent to the market value of the property, broadly described as the price fixed by the seller in open
market in the usual and ordinary course of legal action and competition, or the fair value of the property as between the one who receives and the one who

38

desires to sell, it being fixed at the time of the actual taking by the government. 39[26] Just compensation is defined as the full and fair equivalent of the
property taken from its owner by the expropriator. It has been repeatedly stressed by this Court that the true measure is not the takers gain but the owners
loss. The word just is used to modify the meaning of the word compensation to convey the idea that the equivalent to be given for the property to be taken
shall be real, substantial, full, and ample. 40[27]
The concept of just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also payment within
a reasonable time from its taking. Without prompt payment, compensation cannot be considered just inasmuch as the property owner is made to suffer the
consequences of being immediately deprived of his land while being made to wait for a decade or more before actually receiving the amount necessary to
cope with his loss.41[28]
Put differently, while prompt payment of just compensation requires the immediate deposit and release to the landowner of the provisional compensation
as determined by the DAR, it does not end there. Verily, it also encompasses the payment in full of the just compensation to the landholders as finally
determined by the courts. Thus, it cannot be said that there is already prompt payment of just compensation when there is only a partial payment thereof,
as in this case.
While this decision does not finally resolve the propriety of the determination of just compensation by the SAC in view of the separate appeal on the matter,
we find no grave abuse of discretion on the part of the SAC judge in allowing execution pending appeal. The good reasons cited by the SACthat it would be
in consonance with justice, fairness, and equity, and that suspending payment will prolong the agony of respondents suffered due to the deprivation of
their landare eloquently elucidated in the Comment filed by SAC Judge Venancio J. Amila, as nominal party, on the petition for certiorari and prohibition of
petitioner before the Court of Appeals, viz.:
In addition to the Comment of private respondents, through counsel Hilario C. Baril, which the undersigned has just received a copy today, it is well
to state here that respondent Placido Orilla is already an old man just as his wife. The appealed Decision will show that Orilla was already 71 years old at
the time he testified in this case and the transcripts would further show that the money that he used in buying the DBP foreclosed property herein subject
of compulsory acquisition by the DAR came from his retirement benefits evidently thinking that his investment would afford him security and contentment
in his old age. But, luckily or unluckily, the land was taken from him by the DAR at a price so low that he could not swallow, thus, he brought the issue to
court. Yet, all along, the land has been under the enjoyment of farmer-beneficiaries without him yet being paid therefor. In the mind of the Court, if
payment for the land would be delayed further, it would not be long that death would overtake him. What a misfortune to his long years of service to
acquire that hard-earned savings only to be deprived therefrom at the time when he needed it most. 42[29]
The SAC, aware of the protracted proceedings of the appeal of its November 20, 2000 Decision, but without imputing any dilatory tactics on the part of
petitioner, thus deemed it proper, in its sound discretion, to grant the execution pending appeal. Moreover, the execution of the judgment of the SAC was

39
40
41
42

conditioned on the posting of a bond by the respondents, despite pleas to reduce the same, in the amount of one-half of the just compensation determined
by the said court or P739,511.50.
To reiterate, good reasons for execution pending appeal consist of compelling or superior circumstances demanding urgency which will outweigh the injury
or damages suffered should the losing party secure a reversal of the judgment or final order. In the case at bar, even with the procedural flaw in the SACs
grant of execution without a hearing, the injury that may be suffered by respondents if execution pending appeal is denied indeed outweighs the damage
that may be suffered by petitioner in the grant thereof. As correctly pointed out by respondents, the reversal of the November 20, 2000 SAC Decision, in
the sense that petitioner will pay nothing at all to respondents, is an impossibility, considering the constitutional mandate that just compensation be paid
for expropriated property. The posting of the required bond, to our mind, adequately insulates the petitioner against any injury it may suffer if the SAC
determination of just compensation is reduced.
Suffice it to say that, given the particular circumstances of this case, along with the considerable bond posted by respondents, the assailed SAC Order of
December 21, 2000 and the Decision of the Court of Appeals dated July 29, 2002 are justified.
WHEREFORE, the Decision of the Court of Appeals dated July 29, 2002 is AFFIRMED
SO ORDERED.
LEAZAR P. QUINTO and
GERINO A. TOLENTINO, JR.,
COMMISSION ON
ELECTIONS,
Respondent.

G.R. No. 189698


versus Present
Promulgated:
February 22, 2010

RESOLUTION
Upon a careful review of the case at bar, this Court resolves to grant the respondent Commission on Elections (COMELEC) motion for reconsideration,
and the movants-intervenors motions for reconsideration-in-intervention, of this Courts December 1, 2009 Decision (Decision). 43[1]
The assailed Decision granted the Petition for Certiorari and Prohibition filed by Eleazar P. Quinto and Gerino A. Tolentino, Jr. and declared as
unconstitutional the second proviso in the third paragraph of Section 13 of Republic Act No. 9369, 44[2] Section 66 of the Omnibus Election Code 45[3] and
Section 4(a) of COMELEC Resolution No. 8678, 46[4] mainly on the ground that they violate the equal protection clause of the Constitution and suffer from
overbreadth. The assailed Decision thus paved the way for public appointive officials to continue discharging the powers, prerogatives and functions of
their office notwithstanding their entry into the political arena.
In support of their respective motions for reconsideration, respondent COMELEC and movants-intervenors submit the following arguments:

43
44
45
46

(1) The assailed Decision is contrary to, and/or violative of, the constitutional proscription against the participation of public appointive officials and
members of the military in partisan political activity;
(2) The assailed provisions do not violate the equal protection clause when they accord differential treatment to elective and appointive officials, because
such differential treatment rests on material and substantial distinctions and is germane to the purposes of the law;
(3) The assailed provisions do not suffer from the infirmity of overbreadth; and
(4) There is a compelling need to reverse the assailed Decision, as public safety and interest demand such reversal.
We find the foregoing arguments meritorious.
I.
Procedural Issues
First, we shall resolve the procedural issues on the timeliness of the COMELECs motion for reconsideration which was filed on December 15, 2009, as well
as the propriety of the motions for reconsideration-in-intervention which were filed after the Court had rendered its December 1, 2009 Decision.
i.
Timeliness of COMELECs Motion for Reconsideration
Pursuant to Section 2, Rule 56-A of the 1997 Rules of Court, 47[5] in relation to Section 1, Rule 52 of the same rules, 48[6] COMELEC had a period of
fifteen days from receipt of notice of the assailed Decision within which to move for its reconsideration. COMELEC received notice of the assailed Decision
on December 2, 2009, hence, had until December 17, 2009 to file a Motion for Reconsideration.
The Motion for Reconsideration of COMELEC was timely filed. It was filed on December 14, 2009. The corresponding Affidavit of Service (in substitution of
the one originally submitted on December 14, 2009) was subsequently filed on December 17, 2009 still within the reglementary period.
ii.
Propriety of the Motions for Reconsideration-in-Intervention
Section 1, Rule 19 of the Rules of Court provides:
A person who has legal interest in the matter in litigation or in the success of either of the parties, or an interest against both, or is so situated as to be
adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed
to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the
original parties, and whether or not the intervenors rights may be fully protected in a separate proceeding.
Pursuant to the foregoing rule, this Court has held that a motion for intervention shall be entertained when the following requisites are satisfied: (1) the
would-be intervenor shows that he has a substantial right or interest in the case; and (2) such right or interest cannot be adequately pursued and protected
in another proceeding.49[7]
Upon the other hand, Section 2, Rule 19 of the Rules of Court provides the time within which a motion for intervention may be filed, viz.:
SECTION 2. Time to intervene. The motion for intervention may be filed at any time before rendition of judgment by the trial court. A copy of the pleadingin-intervention shall be attached to the motion and served on the original parties. (italics supplied)
This rule, however, is not inflexible. Interventions have been allowed even beyond the period prescribed in the Rule, when demanded by the higher interest
of justice. Interventions have also been granted to afford indispensable parties, who have not been impleaded, the right to be heard even after a decision
has been rendered by the trial court, 50[8] when the petition for review of the judgment has already been submitted for decision before the Supreme Court, 51

47
48
49

[9] and even where the assailed order has already become final and executory. 52[10] In Lim v. Pacquing,53[11] the motion for intervention filed by the
Republic of the Philippines was allowed by this Court to avoid grave injustice and injury and to settle once and for all the substantive issues raised by the
parties.
In fine, the allowance or disallowance of a motion for intervention rests on the sound discretion of the court 54[12] after consideration of the appropriate
circumstances.55[13] We stress again that Rule 19 of the Rules of Court is a rule of procedure whose object is to make the powers of the court fully and
completely available for justice.56[14] Its purpose is not to hinder or delay, but to facilitate and promote the administration of justice. 57[15]
We rule that, with the exception of the IBP Cebu City Chapter, all the movants-intervenors may properly intervene in the case at bar.
First, the movants-intervenors have each sufficiently established a substantial right or interest in the case.
As a Senator of the Republic, Senator Manuel A. Roxas has a right to challenge the December 1, 2009 Decision, which nullifies a long established law; as a
voter, he has a right to intervene in a matter that involves the electoral process; and as a public officer, he has a personal interest in maintaining the trust
and confidence of the public in its system of government.
On the other hand, former Senator Franklin M. Drilon and Tom V. Apacible are candidates in the May 2010 elections running against appointive officials who,
in view of the December 1, 2009 Decision, have not yet resigned from their posts and are not likely to resign from their posts. They stand to be directly
injured by the assailed Decision, unless it is reversed.
Moreover, the rights or interests of said movants-intervenors cannot be adequately pursued and protected in another proceeding. Clearly, their rights will
be foreclosed if this Courts Decision attains finality and forms part of the laws of the land.
With regard to the IBP Cebu City Chapter, it anchors its standing on the assertion that this case involves the constitutionality of elections laws for this
coming 2010 National Elections, and that there is a need for it to be allowed to intervene xxx so that the voice of its members in the legal profession would
also be heard before this Highest Tribunal as it resolves issues of transcendental importance. 58[16]

50
51
52
53
54
55
56
57
58

Prescinding from our rule and ruling case law, we find that the IBP-Cebu City Chapter has failed to present a specific and substantial interest sufficient to
clothe it with standing to intervene in the case at bar. Its invoked interest is, in character, too indistinguishable to justify its intervention.
We now turn to the substantive issues.
II.
Substantive Issues
The assailed Decision struck down Section 4(a) of Resolution 8678, the second proviso in the third paragraph of Section 13 of Republic Act (RA) 9369, and
Section 66 of the Omnibus Election Code, on the following grounds:
(1) They violate the equal protection clause of the Constitution because of the differential treatment of persons holding appointive offices and those holding
elective positions;
(2) They are overbroad insofar as they prohibit the candidacy of all civil servants holding appointive posts: (a) without distinction as to whether or not they
occupy high/influential positions in the government, and (b) they limit these civil servants activity regardless of whether they be partisan or nonpartisan in
character, or whether they be in the national, municipal or barangay level; and
(3) Congress has not shown a compelling state interest to restrict the fundamental right of these public appointive officials.
We grant the motions for reconsideration. We now rule that Section 4(a) of Resolution 8678, Section 66 of the Omnibus Election Code, and the second
proviso in the third paragraph of Section 13 of RA 9369 are not unconstitutional, and accordingly reverse our December 1, 2009 Decision.
III.
Section 4(a) of COMELEC Resolution 8678 Compliant with Law
Section 4(a) of COMELEC Resolution 8678 is a faithful reflection of the present state of the law and jurisprudence on the matter, viz.:
Incumbent Appointive Official. - Under Section 13 of RA 9369, which reiterates Section 66 of the Omnibus Election Code, any person holding a public
appointive office or position, including active members of the Armed Forces of the Philippines, and officers and employees in government-owned or
-controlled corporations, shall be considered ipso facto resigned from his office upon the filing of his certificate of candidacy.
Incumbent Elected Official. Upon the other hand, pursuant to Section 14 of RA 9006 or the Fair Election Act, 59[17] which repealed Section 67 of the
Omnibus Election Code60[18] and rendered ineffective Section 11 of R.A. 8436 insofar as it considered an elected official as resigned only upon the start of
the campaign period corresponding to the positions for which they are running, 61[19] an elected official is not deemed to have resigned from his office upon
the filing of his certificate of candidacy for the same or any other elected office or position. In fine, an elected official may run for another position without
forfeiting his seat.

59
60
61

These laws and regulations implement Section 2(4), Article IX-B of the 1987 Constitution, which prohibits civil service officers and employees from engaging
in any electioneering or partisan political campaign.
The intention to impose a strict limitation on the participation of civil service officers and employees in partisan political campaigns is unmistakable.
The exchange between Commissioner Quesada and Commissioner Foz during the deliberations of the Constitutional Commission is instructive:
MS. QUESADA.
xxxx
Secondly, I would like to address the issue here as provided in Section 1 (4), line 12, and I quote: "No officer or employee in the civil service shall engage,
directly or indirectly, in any partisan political activity." This is almost the same provision as in the 1973 Constitution. However, we in the government
service have actually experienced how this provision has been violated by the direct or indirect partisan political activities of many government officials.
So, is the Committee willing to include certain clauses that would make this provision more strict, and which would deter its violation?
MR. FOZ. Madam President, the existing Civil Service Law and the implementing rules on the matter are more than exhaustive enough to really prevent
officers and employees in the public service from engaging in any form of partisan political activity. But the problem really lies in implementation because,
if the head of a ministry, and even the superior officers of offices and agencies of government will themselves violate the constitutional injunction against
partisan political activity, then no string of words that we may add to what is now here in this draft will really implement the constitutional intent against
partisan political activity. x x x62[20] (italics supplied)
To emphasize its importance, this constitutional ban on civil service officers and employees is presently reflected and implemented by a number of
statutes. Section 46(b)(26), Chapter 7 and Section 55, Chapter 8 both of Subtitle A, Title I, Book V of the Administrative Code of 1987 respectively provide
in relevant part:
Section 44. Discipline: General Provisions:
xxxx
(b)

The following shall be grounds for disciplinary action:

xxxx
(26)

Engaging directly or indirectly in partisan political activities by one holding a non-political office.

xxxx
Section 55. Political Activity. No officer or employee in the Civil Service including members of the Armed Forces, shall engage directly or indirectly in any
partisan political activity or take part in any election except to vote nor shall he use his official authority or influence to coerce the political activity of any
62

other person or body. Nothing herein provided shall be understood to prevent any officer or employee from expressing his views on current political
problems or issues, or from mentioning the names of his candidates for public office whom he supports: Provided, That public officers and employees
holding political offices may take part in political and electoral activities but it shall be unlawful for them to solicit contributions from their subordinates or
subject them to any of the acts involving subordinates prohibited in the Election Code.
Section 261(i) of Batas Pambansa Blg. 881 (the Omnibus Election Code) further makes intervention by civil service officers and employees in partisan
political activities an election offense, viz.:
SECTION 261. Prohibited Acts. The following shall be guilty of an election offense:
xxxx
(i) Intervention of public officers and employees. Any officer or employee in the civil service, except those holding political offices; any officer, employee, or
member of the Armed Forces of the Philippines, or any police force, special forces, home defense forces, barangay self-defense units and all other paramilitary units that now exist or which may hereafter be organized who, directly or indirectly, intervenes in any election campaign or engages in any partisan
political activity, except to vote or to preserve public order, if he is a peace officer.
The intent of both Congress and the framers of our Constitution to limit the participation of civil service officers and employees in partisan political
activities is too plain to be mistaken.
But Section 2(4), Article IX-B of the 1987 Constitution and the implementing statutes apply only to civil servants holding apolitical offices. Stated
differently, the constitutional ban does not cover elected officials, notwithstanding the fact that [t]he civil service embraces all branches,
subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters. 63[21] This is
because elected public officials, by the very nature of their office, engage in partisan political activities almost all year round, even outside of the campaign
period.64[22] Political partisanship is the inevitable essence of a political office, elective positions included. 65[23]
The prohibition notwithstanding, civil service officers and employees are allowed to vote, as well as express their views on political issues, or mention the
names of certain candidates for public office whom they support. This is crystal clear from the deliberations of the Constitutional Commission, viz.:
MS. AQUINO: Mr. Presiding Officer, my proposed amendment is on page 2, Section 1, subparagraph 4, lines 13 and 14. On line 13, between the words "any"
and "partisan," add the phrase ELECTIONEERING AND OTHER; and on line 14, delete the word "activity" and in lieu thereof substitute the word CAMPAIGN.
May I be allowed to explain my proposed amendment?
THE PRESIDING OFFICER (Mr. Treas):

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64
65

Commissioner Aquino may proceed.

MS. AQUINO: The draft as presented by the Committee deleted the phrase "except to vote" which was adopted in both the 1935 and 1973 Constitutions.
The phrase "except to vote" was not intended as a guarantee to the right to vote but as a qualification of the general prohibition against taking part in
elections.
Voting is a partisan political activity. Unless it is explicitly provided for as an exception to this prohibition, it will amount to disenfranchisement. We know
that suffrage, although plenary, is not an unconditional right. In other words, the Legislature can always pass a statute which can withhold from any class
the right to vote in an election, if public interest so required. I would only like to reinstate the qualification by specifying the prohibited acts so that those
who may want to vote but who are likewise prohibited from participating in partisan political campaigns or electioneering may vote.
MR. FOZ:
There is really no quarrel over this point, but please understand that there was no intention on the part of the Committee to disenfranchise
any government official or employee. The elimination of the last clause of this provision was precisely intended to protect the members of the civil service
in the sense that they are not being deprived of the freedom of expression in a political contest. The last phrase or clause might have given the impression
that a government employee or worker has no right whatsoever in an election campaign except to vote, which is not the case. They are still free to express
their views although the intention is not really to allow them to take part actively in a political campaign. 66[24]
IV.
Section 4(a) of Resolution 8678, Section 13 of RA 9369, and
Section 66 of the Omnibus Election Code Do Not Violate the
Equal Protection Clause
We now hold that Section 4(a) of Resolution 8678, Section 66 of the Omnibus Election Code, and the second proviso in the third paragraph of Section 13 of
RA 9369 are not violative of the equal protection clause of the Constitution.
i.

Farias, et al. v. Executive Secretary, et al. is Controlling

In truth, this Court has already ruled squarely on whether these deemed-resigned provisions challenged in the case at bar violate the equal protection
clause of the Constitution in Farias, et al. v. Executive Secretary, et al.67[25]
In Farias, the constitutionality of Section 14 of the Fair Election Act, in relation to Sections 66 and 67 of the Omnibus Election Code, was assailed on the
ground, among others, that it unduly discriminates against appointive officials. As Section 14 repealed Section 67 (i.e., the deemed-resigned provision in
respect of elected officials) of the Omnibus Election Code, elected officials are no longer considered ipso facto resigned from their respective offices upon
their filing of certificates of candidacy. In contrast, since Section 66 was not repealed, the limitation on appointive officials continues to be operative they
are deemed resigned when they file their certificates of candidacy.
The petitioners in Farias thus brought an equal protection challenge against Section 14, with the end in view of having the deemed-resigned provisions
apply equally to both elected and appointive officials. We held, however, that the legal dichotomy created by the Legislature is a reasonable classification,
as there are material and significant distinctions between the two classes of officials. Consequently, the contention that Section 14 of the Fair Election Act,
in relation to Sections 66 and 67 of the Omnibus Election Code, infringed on the equal protection clause of the Constitution, failed muster. We ruled:
66
67

The petitioners' contention, that the repeal of Section 67 of the Omnibus Election Code pertaining to elective officials gives undue benefit to such officials
as against the appointive ones and violates the equal protection clause of the constitution, is tenuous.
The equal protection of the law clause in the Constitution is not absolute, but is subject to reasonable classification. If the groupings are characterized by
substantial distinctions that make real differences, one class may be treated and regulated differently from the other. The Court has explained the nature of
the equal protection guarantee in this manner:
The equal protection of the law clause is against undue favor and individual or class privilege, as well as hostile discrimination or the oppression of
inequality. It is not intended to prohibit legislation which is limited either in the object to which it is directed or by territory within which it is to operate. It
does not demand absolute equality among residents; it merely requires that all persons shall be treated alike, under like circumstances and conditions both
as to privileges conferred and liabilities enforced. The equal protection clause is not infringed by legislation which applies only to those persons falling
within a specified class, if it applies alike to all persons within such class, and reasonable grounds exist for making a distinction between those who fall
within such class and those who do not.
Substantial distinctions clearly exist between elective officials and appointive officials. The former occupy their office by virtue of the mandate of the
electorate. They are elected to an office for a definite term and may be removed therefrom only upon stringent conditions. On the other hand, appointive
officials hold their office by virtue of their designation thereto by an appointing authority. Some appointive officials hold their office in a permanent capacity
and are entitled to security of tenure while others serve at the pleasure of the appointing authority.
Another substantial distinction between the two sets of officials is that under Section 55, Chapter 8, Title I, Subsection A. Civil Service Commission, Book V
of the Administrative Code of 1987 (Executive Order No. 292), appointive officials, as officers and employees in the civil service, are strictly prohibited from
engaging in any partisan political activity or take (sic) part in any election except to vote. Under the same provision, elective officials, or officers or
employees holding political offices, are obviously expressly allowed to take part in political and electoral activities.
By repealing Section 67 but retaining Section 66 of the Omnibus Election Code, the legislators deemed it proper to treat these two classes of officials
differently with respect to the effect on their tenure in the office of the filing of the certificates of candidacy for any position other than those occupied by
them. Again, it is not within the power of the Court to pass upon or look into the wisdom of this classification.
Since the classification justifying Section 14 of Rep. Act No. 9006, i.e., elected officials vis--vis appointive officials, is anchored upon material and significant
distinctions and all the persons belonging under the same classification are similarly treated, the equal protection clause of the Constitution is, thus, not
infringed.68[26]
The case at bar is a crass attempt to resurrect a dead issue. The miracle is that our assailed Decision gave it new life. We ought to be guided by the
doctrine of stare decisis et non quieta movere. This doctrine, which is really adherence to precedents, mandates that once a case has been decided one
way, then another case involving exactly the same point at issue should be decided in the same manner. 69[27] This doctrine is one of policy grounded on
the necessity for securing certainty and stability of judicial decisions. As the renowned jurist Benjamin Cardozo stated in his treatise The Nature of the
Judicial Process:
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69

It will not do to decide the same question one way between one set of litigants and the opposite way between another. If a group of cases involves the
same point, the parties expect the same decision. It would be a gross injustice to decide alternate cases on opposite principles. If a case was decided
against me yesterday when I was a defendant, I shall look for the same judgment today if I am plaintiff. To decide differently would raise a feeling of
resentment and wrong in my breast; it would be an infringement, material and moral, of my rights." Adherence to precedent must then be the rule rather
than the exception if litigants are to have faith in the even-handed administration of justice in the courts.70[28]
Our Farias ruling on the equal protection implications of the deemed-resigned provisions cannot be minimalized as mere obiter dictum. It is trite to state
that an adjudication on any point within the issues presented by the case cannot be considered as obiter dictum.71[29] This rule applies to all pertinent
questions that are presented and resolved in the regular course of the consideration of the case and lead up to the final conclusion, and to any statement
as to the matter on which the decision is predicated. 72[30] For that reason, a point expressly decided does not lose its value as a precedent because the
disposition of the case is, or might have been, made on some other ground; or even though, by reason of other points in the case, the result reached might
have been the same if the court had held, on the particular point, otherwise than it did. 73[31] As we held in Villanueva, Jr. v. Court of Appeals, et al.:74
[32]
A decision which the case could have turned on is not regarded as obiter dictum merely because, owing to the disposal of the contention, it was necessary
to consider another question, nor can an additional reason in a decision, brought forward after the case has been disposed of on one ground, be regarded
as dicta. So, also, where a case presents two (2) or more points, any one of which is sufficient to determine the ultimate issue, but the court actually
decides all such points, the case as an authoritative precedent as to every point decided, and none of such points can be regarded as having the status of
a dictum, and one point should not be denied authority merely because another point was more dwelt on and more fully argued and considered , nor does a
decision on one proposition make statements of the court regarding other propositions dicta. 75[33] (italics supplied)
ii.

Classification Germane to the Purposes of the Law

The Farias ruling on the equal protection challenge stands on solid ground even if reexamined.

70
71
72
73
74
75

To start with, the equal protection clause does not require the universal application of the laws to all persons or things without distinction. 76[34] What it
simply requires is equality among equals as determined according to a valid classification. 77[35] The test developed by jurisprudence here and yonder is
that of reasonableness,78[36] which has four requisites:
(1) The classification rests on substantial distinctions;
(2) It is germane to the purposes of the law;
(3) It is not limited to existing conditions only; and
(4) It applies equally to all members of the same class. 79[37]
Our assailed Decision readily acknowledged that these deemed-resigned provisions satisfy the first, third and fourth requisites of reasonableness. It,
however, proffers the dubious conclusion that the differential treatment of appointive officials vis--vis elected officials is not germane to the purpose of the
law, because whether one holds an appointive office or an elective one, the evils sought to be prevented by the measure remain, viz.:
For example, the Executive Secretary, or any Member of the Cabinet for that matter, could wield the same influence as the Vice-President who at the same
time is appointed to a Cabinet post (in the recent past, elected Vice-Presidents were appointed to take charge of national housing, social welfare
development, interior and local government, and foreign affairs). With the fact that they both head executive offices, there is no valid justification to treat
them differently when both file their [Certificates of Candidacy] for the elections. Under the present state of our law, the Vice-President, in the example,
running this time, let us say, for President, retains his position during the entire election period and can still use the resources of his office to support his
campaign.80[38]
Sad to state, this conclusion conveniently ignores the long-standing rule that to remedy an injustice, the Legislature need not address every manifestation
of the evil at once; it may proceed one step at a time. 81[39] In addressing a societal concern, it must invariably draw lines and make choices, thereby
creating some inequity as to those included or excluded. 82[40] Nevertheless, as long as the bounds of reasonable choice are not exceeded, the courts must
defer to the legislative judgment.83[41] We may not strike down a law merely because the legislative aim would have been more fully achieved by
expanding the class.84[42] Stated differently, the fact that a legislative classification, by itself, is underinclusive will not render it unconstitutionally arbitrary
76
77
78
79
80
81
82
83
84

or invidious.85[43] There is no constitutional requirement that regulation must reach each and every class to which it might be applied; 86[44] that the
Legislature must be held rigidly to the choice of regulating all or none.
Thus, any person who poses an equal protection challenge must convincingly show that the law creates a classification that is palpably arbitrary or
capricious.87[45] He must refute all possible rational bases for the differing treatment, whether or not the Legislature cited those bases as reasons for the
enactment,88[46] such that the constitutionality of the law must be sustained even if the reasonableness of the classification is fairly debatable. 89[47] In the
case at bar, the petitioners failed and in fact did not even attempt to discharge this heavy burden. Our assailed Decision was likewise silent as a sphinx on
this point even while we submitted the following thesis:
... [I]t is not sufficient grounds for invalidation that we may find that the statutes distinction is unfair, underinclusive, unwise, or not the best solution from a
public-policy standpoint; rather, we must find that there is no reasonably rational reason for the differing treatment. 90[48]
In the instant case, is there a rational justification for excluding elected officials from the operation of the deemed resigned provisions? I submit that there
is.
An election is the embodiment of the popular will, perhaps the purest expression of the sovereign power of the people. 91[49] It involves the choice or
selection of candidates to public office by popular vote. 92[50] Considering that elected officials are put in office by their constituents for a definite term, it
may justifiably be said that they were excluded from the ambit of the deemed resigned provisions in utmost respect for the mandate of the sovereign will.
In other words, complete deference is accorded to the will of the electorate that they be served by such officials until the end of the term for which they
were elected. In contrast, there is no such expectation insofar as appointed officials are concerned.
The dichotomized treatment of appointive and elective officials is therefore germane to the purposes of the law. For the law was made
not merely to preserve the integrity, efficiency, and discipline of the public service; the Legislature, whose wisdom is outside the rubric of
judicial scrutiny, also thought it wise to balance this with the competing, yet equally compelling, interest of deferring to the sovereign
will.93[51] (emphasis in the original)
85
86
87
88
89
90
91
92
93

In fine, the assailed Decision would have us equalize the playing field by invalidating provisions of law that seek to restrain the evils from running riot.
Under the pretext of equal protection, it would favor a situation in which the evils are unconfined and vagrant, existing at the behest of both appointive and
elected officials, over another in which a significant portion thereof is contained. The absurdity of that position is self-evident, to say the least.
The concern, voiced by our esteemed colleague, Mr. Justice Nachura, in his dissent, that elected officials (vis--vis appointive officials) have greater political
clout over the electorate, is indeed a matter worth exploring but not by this Court. Suffice it to say that the remedy lies with the Legislature. It is the
Legislature that is given the authority, under our constitutional system, to balance competing interests and thereafter make policy choices responsive to
the exigencies of the times. It is certainly within the Legislatures power to make the deemed-resigned provisions applicable to elected officials, should it
later decide that the evils sought to be prevented are of such frequency and magnitude as to tilt the balance in favor of expanding the class. This Court
cannot and should not arrogate unto itself the power to ascertain and impose on the people the best state of affairs from a public policy standpoint.
iii.

Mancuso v. Taft Has Been Overruled

Finding no Philippine jurisprudence to prop up its equal protection ruling, our assailed Decision adverted to, and extensively cited, Mancuso v. Taft.94[52]
This was a decision of the First Circuit of the United States Court of Appeals promulgated in March 1973, which struck down as unconstitutional a similar
statutory provision. Pathetically, our assailed Decision, relying on Mancuso, claimed:
(1) The right to run for public office is inextricably linked with two fundamental freedoms freedom of expression and association;
(2) Any legislative classification that significantly burdens this fundamental right must be subjected to strict equal protection review; and
(3) While the state has a compelling interest in maintaining the honesty and impartiality of its public work force, the deemed-resigned provisions pursue
their objective in a far too heavy-handed manner as to render them unconstitutional.
It then concluded with the exhortation that since the Americans, from whom we copied the provision in question, had already stricken down a similar
measure for being unconstitutional[,] it is high-time that we, too, should follow suit.
Our assailed Decisions reliance on Mancuso is completely misplaced. We cannot blink away the fact that the United States Supreme Court
effectively overruled Mancuso three months after its promulgation by the United States Court of Appeals. In United States Civil Service
Commission, et al. v. National Association of Letter Carriers AFL-CIO, et al.95[53] and Broadrick, et al. v. State of Oklahoma, et al.,96[54] the
United States Supreme Court was faced with the issue of whether statutory provisions prohibiting federal 97[55] and state98[56] employees from taking an
active part in political management or in political campaigns were unconstitutional as to warrant facial invalidation. Violation of these provisions results in
dismissal from employment and possible criminal sanctions.
94
95
96
97
98

The Court declared these provisions compliant with the equal protection clause. It held that (i) in regulating the speech of its employees, the state as
employer has interests that differ significantly from those it possesses in regulating the speech of the citizenry in general; (ii) the courts must therefore
balance the legitimate interest of employee free expression against the interests of the employer in promoting efficiency of public services; (iii) if the
employees expression interferes with the maintenance of efficient and regularly functioning services, the limitation on speech is not unconstitutional; and
(iv) the Legislature is to be given some flexibility or latitude in ascertaining which positions are to be covered by any statutory restrictions. 99[57] Therefore,
insofar as government employees are concerned, the correct standard of review is an interest-balancing approach, a means-end scrutiny that examines the
closeness of fit between the governmental interests and the prohibitions in question. 100[58]
Letter Carriers elucidated on these principles, as follows:
Until now, the judgment of Congress, the Executive, and the country appears to have been that partisan political activities by federal employees must be
limited if the Government is to operate effectively and fairly, elections are to play their proper part in representative government, and employees
themselves are to be sufficiently free from improper influences. The restrictions so far imposed on federal employees are not aimed at particular parties,
groups, or points of view, but apply equally to all partisan activities of the type described. They discriminate against no racial, ethnic, or religious
minorities. Nor do they seek to control political opinions or beliefs, or to interfere with or influence anyone's vote at the polls.
But, as the Court held in Pickering v. Board of Education, 101[59] the government has an interest in regulating the conduct and the speech of its employees
that differ(s) significantly from those it possesses in connection with regulation of the speech of the citizenry in general. The problem in any case is to
arrive at a balance between the interests of the (employee), as a citizen, in commenting upon matters of public concern and the interest of the
(government), as an employer, in promoting the efficiency of the public services it performs through its employees. Although Congress is free to strike a
different balance than it has, if it so chooses, we think the balance it has so far struck is sustainable by the obviously important interests sought to be
served by the limitations on partisan political activities now contained in the Hatch Act.
It seems fundamental in the first place that employees in the Executive Branch of the Government, or those working for any of its agencies, should
administer the law in accordance with the will of Congress, rather than in accordance with their own or the will of a political party. They are expected to
enforce the law and execute the programs of the Government without bias or favoritism for or against any political party or group or the members thereof .
A major thesis of the Hatch Act is that to serve this great end of Government-the impartial execution of the laws-it is essential that federal employees, for
example, not take formal positions in political parties, not undertake to play substantial roles in partisan political campaigns, and not run for office on
partisan political tickets. Forbidding activities like these will reduce the hazards to fair and effective government.
There is another consideration in this judgment: it is not only important that the Government and its employees in fact avoid practicing political justice, but
it is also critical that they appear to the public to be avoiding it, if confidence in the system of representative Government is not to be eroded to a
disastrous extent.

99
100
101

Another major concern of the restriction against partisan activities by federal employees was perhaps the immediate occasion for enactment of the Hatch
Act in 1939. That was the conviction that the rapidly expanding Government work force should not be employed to build a powerful, invincible, and
perhaps corrupt political machine. The experience of the 1936 and 1938 campaigns convinced Congress that these dangers were sufficiently real that
substantial barriers should be raised against the party in power-or the party out of power, for that matter-using the thousands or hundreds of thousands of
federal employees, paid for at public expense, to man its political structure and political campaigns.
A related concern, and this remains as important as any other, was to further serve the goal that employment and advancement in the Government service
not depend on political performance, and at the same time to make sure that Government employees would be free from pressure and from express or
tacit invitation to vote in a certain way or perform political chores in order to curry favor with their superiors rather than to act out their own beliefs . It may
be urged that prohibitions against coercion are sufficient protection; but for many years the joint judgment of the Executive and Congress has been that to
protect the rights of federal employees with respect to their jobs and their political acts and beliefs it is not enough merely to forbid one employee to
attempt to influence or coerce another. For example, at the hearings in 1972 on proposed legislation for liberalizing the prohibition against political activity,
the Chairman of the Civil Service Commission stated that the prohibitions against active participation in partisan political management and partisan
political campaigns constitute the most significant safeguards against coercion . . .. Perhaps Congress at some time will come to a different view of the
realities of political life and Government service; but that is its current view of the matter, and we are not now in any position to dispute it. Nor, in our view,
does the Constitution forbid it.
Neither the right to associate nor the right to participate in political activities is absolute in any event. 102[60] x x x
xxxx
As we see it, our task is not to destroy the Act if we can, but to construe it, if consistent with the will of Congress, so as to comport with constitutional
limitations. (italics supplied)
Broadrick likewise definitively stated that the assailed statutory provision is constitutionally permissible, viz.:
Appellants do not question Oklahoma's right to place even-handed restrictions on the partisan political conduct of state employees. Appellants freely
concede that such restrictions serve valid and important state interests, particularly with respect to attracting greater numbers of qualified people by
insuring their job security, free from the vicissitudes of the elective process, and by protecting them from political extortion. Rather, appellants maintain
that however permissible, even commendable, the goals of s 818 may be, its language is unconstitutionally vague and its prohibitions too broad in their
sweep, failing to distinguish between conduct that may be proscribed and conduct that must be permitted. For these and other reasons, appellants assert
that the sixth and seventh paragraphs of s 818 are void in toto and cannot be enforced against them or anyone else.
We have held today that the Hatch Act is not impermissibly vague. 103[61] We have little doubt that s 818 is similarly not so vague that men of
common intelligence must necessarily guess at its meaning. 104[62] Whatever other problems there are with s 818, it is all but frivolous to suggest that the
section fails to give adequate warning of what activities it proscribes or fails to set out explicit standards' for those who must apply it. In the plainest
102
103
104

language, it prohibits any state classified employee from being an officer or member of a partisan political club or a candidate for any paid public office. It
forbids solicitation of contributions for any political organization, candidacy or other political purpose and taking part in the management or affairs of any
political party or in any political campaign. Words inevitably contain germs of uncertainty and, as with the Hatch Act, there may be disputes over the
meaning of such terms in s 818 as partisan, or take part in, or affairs of political parties. But what was said in Letter Carriers, is applicable here: there are
limitations in the English language with respect to being both specific and manageably brief, and it seems to us that although the prohibitions may not
satisfy those intent on finding fault at any cost, they are set out in terms that the ordinary person exercising ordinary common sense can sufficiently
understand and comply with, without sacrifice to the public interest.' x x x
xxxx
[Appellants] nevertheless maintain that the statute is overbroad and purports to reach protected, as well as unprotected conduct, and must therefore
be struck down on its face and held to be incapable of any constitutional application. We do not believe that the overbreadth doctrine may appropriately be
invoked in this manner here.
xxxx
The consequence of our departure from traditional rules of standing in the First Amendment area is that any enforcement of a statute thus placed at issue
is totally forbidden until and unless a limiting construction or partial invalidation so narrows it as to remove the seeming threat or deterrence to
constitutionally protected expression. Application of the overbreadth doctrine in this manner is, manifestly, strong medicine. It has been employed by the
Court sparingly and only as a last resort. x x x
x x x But the plain import of our cases is, at the very least, that facial over-breadth adjudication is an exception to our traditional rules of practice
and that its function, a limited one at the outset, attenuates as the otherwise unprotected behavior that it forbids the State to sanction moves from pure
speech toward conduct and that conduct-even if expressive-falls within the scope of otherwise valid criminal laws that reflect legitimate state interests in
maintaining comprehensive controls over harmful, constitutionally unprotected conduct. Although such laws, if too broadly worded, may deter protected
speech to some unknown extent, there comes a point where that effect-at best a prediction-cannot, with confidence, justify invalidating a statute on its
face and so prohibiting a State from enforcing the statute against conduct that is admittedly within its power to proscribe . To put the matter another way,
particularly where conduct and not merely speech is involved, we believe that the overbreadth of a statute must not only be real, but substantial as well,
judged in relation to the statute's plainly legitimate sweep. It is our view that s 818 is not substantially overbroad and that whatever overbreadth may exist
should be cured through case-by-case analysis of the fact situations to which its sanctions, assertedly, may not be applied.
Unlike ordinary breach-of-the peace statutes or other broad regulatory acts, s 818 is directed, by its terms, at political expression which if engaged in by
private persons would plainly be protected by the First and Fourteenth Amendments. But at the same time, s 818 is not a censorial statute, directed at
particular groups or viewpoints. The statute, rather, seeks to regulate political activity in an even-handed and neutral manner. As indicted, such statutes
have in the past been subject to a less exacting overbreadth scrutiny. Moreover, the fact remains that s 818 regulates a substantial spectrum of conduct
that is as manifestly subject to state regulation as the public peace or criminal trespass. This much was established in United Public Workers v. Mitchell,
and has been unhesitatingly reaffirmed today in Letter Carriers. Under the decision in Letter Carriers, there is no question that s 818 is valid at least insofar
as it forbids classified employees from: soliciting contributions for partisan candidates, political parties, or other partisan political purposes; becoming
members of national, state, or local committees of political parties, or officers or committee members in partisan political clubs, or candidates for any paid
public office; taking part in the management or affairs of any political party's partisan political campaign; serving as delegates or alternates to caucuses or
conventions of political parties; addressing or taking an active part in partisan political rallies or meetings; soliciting votes or assisting voters at the polls or

helping in a partisan effort to get voters to the polls; participating in the distribution of partisan campaign literature; initiating or circulating partisan
nominating petitions; or riding in caravans for any political party or partisan political candidate.
x x x It may be that such restrictions are impermissible and that s 818 may be susceptible of some other improper applications. But, as presently
construed, we do not believe that s 818 must be discarded in toto because some persons arguably protected conduct may or may not be caught or chilled
by the statute. Section 818 is not substantially overbroad and it not, therefore, unconstitutional on its face. (italics supplied)
It bears stressing that, in his Dissenting Opinion, Mr. Justice Nachura does not deny the principles enunciated in Letter Carriers and Broadrick.
He would hold, nonetheless, that these cases cannot be interpreted to mean a reversal of Mancuso, since they pertain to different types of laws and were
decided based on a different set of facts, viz.:
In Letter Carriers, the plaintiffs alleged that the Civil Service Commission was enforcing, or threatening to enforce, the Hatch Acts prohibition against active
participation in political management or political campaigns. The plaintiffs desired to campaign for candidates for public office, to encourage and get
federal employees to run for state and local offices, to participate as delegates in party conventions, and to hold office in a political club.
In Broadrick, the appellants sought the invalidation for being vague and overbroad a provision in the (sic) Oklahomas Merit System of Personnel
Administration Act restricting the political activities of the States classified civil servants, in much the same manner as the Hatch Act proscribed partisan
political activities of federal employees. Prior to the commencement of the action, the appellants actively participated in the 1970 reelection campaign of
their superior, and were administratively charged for asking other Corporation Commission employees to do campaign work or to give referrals to persons
who might help in the campaign, for soliciting money for the campaign, and for receiving and distributing campaign posters in bulk.
Mancuso, on the other hand, involves, as aforesaid, an automatic resignation provision. Kenneth Mancuso, a full time police officer and classified civil
service employee of the City of Cranston, filed as a candidate for nomination as representative to the Rhode Island General Assembly. The Mayor of
Cranston then began the process of enforcing the resign-to-run provision of the City Home Rule Charter.
Clearly, as the above-cited US cases pertain to different types of laws and were decided based on a different set of facts, Letter Carriers and Broadrick
cannot be interpreted to mean a reversal of Mancuso. x x x (italics in the original)
We hold, however, that his position is belied by a plain reading of these cases. Contrary to his claim, Letter Carriers, Broadrick and Mancuso all
concerned the constitutionality of resign-to-run laws, viz.:
(1) Mancuso involved a civil service employee who filed as a candidate for nomination as representative to the Rhode Island General Assembly. He
assailed the constitutionality of 14.09(c) of the City Home Rule Charter, which prohibits continuing in the classified service of the city after becoming a
candidate for nomination or election to any public office.
(2) Letter Carriers involved plaintiffs who alleged that the Civil Service Commission was enforcing, or threatening to enforce, the Hatch Acts prohibition
against active participation in political management or political campaigns 105[63] with respect to certain defined activities in which they desired to engage.
The plaintiffs relevant to this discussion are:

105

(a) The National Association of Letter Carriers, which alleged that its members were desirous of, among others, running in local elections for offices such as
school board member, city council member or mayor;
(b) Plaintiff Gee, who alleged that he desired to, but did not, file as a candidate for the office of Borough Councilman in his local community for fear that his
participation in a partisan election would endanger his job; and
(c) Plaintiff Myers, who alleged that he desired to run as a Republican candidate in the 1971 partisan election for the mayor of West Lafayette, Indiana, and
that he would do so except for fear of losing his job by reason of violation of the Hatch Act.
The Hatch Act defines active participation in political management or political campaigns by cross-referring to the rules made by the Civil Service
Commission. The rule pertinent to our inquiry states:
30. Candidacy for local office: Candidacy for a nomination or for election to any National, State, county, or municipal office is not permissible . The
prohibition against political activity extends not merely to formal announcement of candidacy but also to the preliminaries leading to such announcement
and to canvassing or soliciting support or doing or permitting to be done any act in furtherance of candidacy. The fact that candidacy, is merely passive is
immaterial; if an employee acquiesces in the efforts of friends in furtherance of such candidacy such acquiescence constitutes an infraction of the
prohibitions against political activity. (italics supplied)
Section 9(b) requires the immediate removal of violators and forbids the use of appropriated funds thereafter to pay compensation to these persons. 106[64]
(3) Broadrick was a class action brought by certain Oklahoma state employees seeking a declaration of unconstitutionality of two sub-paragraphs of
Section 818 of Oklahomas Merit System of Personnel Administration Act. Section 818 (7), the paragraph relevant to this discussion, states that [n]o
employee in the classified service shall be a candidate for nomination or election to any paid public office Violation of Section 818 results in dismissal from
employment, possible criminal sanctions and limited state employment ineligibility.
Consequently, it cannot be denied that Letter Carriers and Broadrick effectively overruled Mancuso. By no stretch of the imagination could Mancuso
still be held operative, as Letter Carriers and Broadrick (i) concerned virtually identical resign-to-run laws, and (ii) were decided by a superior court, the
United States Supreme Court. It was thus not surprising for the First Circuit Court of Appeals the same court that decided Mancuso to hold categorically
and emphatically in Magill v. Lynch107[65] that Mancuso is no longer good law. As we priorly explained:
Magill involved Pawtucket, Rhode Island firemen who ran for city office in 1975. Pawtuckets Little Hatch Act prohibits city employees from engaging in a
broad range of political activities. Becoming a candidate for any city office is specifically proscribed, 108[66] the violation being punished by removal from
office or immediate dismissal. The firemen brought an action against the city officials on the ground that that the provision of the city charter was
unconstitutional. However, the court, fully cognizant of Letter Carriers and Broadrick, took the position that Mancuso had since lost
considerable vitality. It observed that the view that political candidacy was a fundamental interest which could be infringed upon only if
less restrictive alternatives were not available, was a position which was no longer viable, since the Supreme Court (finding that the
governments interest in regulating both the conduct and speech of its employees differed significantly from its interest in regulating
those of the citizenry in general) had given little weight to the argument that prohibitions against the coercion of government employees
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were a less drastic means to the same end, deferring to the judgment of Congress, and applying a balancing test to determine whether
limits on political activity by public employees substantially served government interests which were important enough to outweigh the
employees First Amendment rights.109[67]
It must be noted that the Court of Appeals ruled in this manner even though the election in Magill was characterized as nonpartisan, as it was reasonable
for the city to fear, under the circumstances of that case, that politically active bureaucrats might use their official power to help political friends and hurt
political foes. Ruled the court:
The question before us is whether Pawtucket's charter provision, which bars a city employee's candidacy in even a nonpartisan city election, is
constitutional. The issue compels us to extrapolate two recent Supreme Court decisions, Civil Service Comm'n v. Nat'l Ass'n of Letter Carriers and Broadrick
v. Oklahoma. Both dealt with laws barring civil servants from partisan political activity. Letter Carriers reaffirmed United Public Workers v. Mitchell,
upholding the constitutionality of the Hatch Act as to federal employees. Broadrick sustained Oklahoma's Little Hatch Act against constitutional attack,
limiting its holding to Oklahoma's construction that the Act barred only activity in partisan politics. In Mancuso v. Taft, we assumed that proscriptions of
candidacy in nonpartisan elections would not be constitutional. Letter Carriers and Broadrick compel new analysis.
xxxx
What we are obligated to do in this case, as the district court recognized, is to apply the Courts interest balancing approach to the kind of nonpartisan
election revealed in this record. We believe that the district court found more residual vigor in our opinion in Mancuso v. Taft than remains after Letter
Carriers. We have particular reference to our view that political candidacy was a fundamental interest which could be trenched upon only if less restrictive
alternatives were not available. While this approach may still be viable for citizens who are not government employees, the Court in Letter Carriers
recognized that the government's interest in regulating both the conduct and speech of its employees differs significantly from its interest in regulating
those of the citizenry in general. Not only was United Public Workers v. Mitchell "unhesitatingly" reaffirmed, but the Court gave little weight to the argument
that prohibitions against the coercion of government employees were a less drastic means to the same end, deferring to the judgment of the Congress. We
cannot be more precise than the Third Circuit in characterizing the Court's approach as "some sort of 'balancing' process". 110[68] It appears that the
government may place limits on campaigning by public employees if the limits substantially serve government interests that are "important" enough to
outweigh the employees' First Amendment rights. x x x (italics supplied)
Upholding thus the constitutionality of the law in question, the Magill court detailed the major governmental interests discussed in Letter Carriers and
applied them to the Pawtucket provision as follows:
In Letter Carriers[,] the first interest identified by the Court was that of an efficient government, faithful to the Congress rather than to party. The district
court discounted this interest, reasoning that candidates in a local election would not likely be committed to a state or national platform. This observation
undoubtedly has substance insofar as allegiance to broad policy positions is concerned. But a different kind of possible political intrusion into efficient
administration could be thought to threaten municipal government: not into broad policy decisions, but into the particulars of administration favoritism in
minute decisions affecting welfare, tax assessments, municipal contracts and purchasing, hiring, zoning, licensing, and inspections. Just as the Court in
Letter Carriers identified a second governmental interest in the avoidance of the appearance of "political justice" as to policy, so there is an equivalent
interest in avoiding the appearance of political preferment in privileges, concessions, and benefits. The appearance (or reality) of favoritism that the
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charter's authors evidently feared is not exorcised by the nonpartisan character of the formal election process. Where, as here, party support is a key to
successful campaigning, and party rivalry is the norm, the city might reasonably fear that politically active bureaucrats would use their official power to
help political friends and hurt political foes. This is not to say that the city's interest in visibly fair and effective administration necessarily justifies a blanket
prohibition of all employee campaigning; if parties are not heavily involved in a campaign, the danger of favoritism is less, for neither friend nor foe is as
easily identified.
A second major governmental interest identified in Letter Carriers was avoiding the danger of a powerful political machine. The Court had in mind the large
and growing federal bureaucracy and its partisan potential. The district court felt this was only a minor threat since parties had no control over
nominations. But in fact candidates sought party endorsements, and party endorsements proved to be highly effective both in determining who would
emerge from the primary election and who would be elected in the final election. Under the prevailing customs, known party affiliation and support were
highly significant factors in Pawtucket elections. The charter's authors might reasonably have feared that a politically active public work force would give
the incumbent party, and the incumbent workers, an unbreakable grasp on the reins of power. In municipal elections especially, the small size of the
electorate and the limited powers of local government may inhibit the growth of interest groups powerful enough to outbalance the weight of a partisan
work force. Even when nonpartisan issues and candidacies are at stake, isolated government employees may seek to influence voters or their co-workers
improperly; but a more real danger is that a central party structure will mass the scattered powers of government workers behind a single party platform or
slate. Occasional misuse of the public trust to pursue private political ends is tolerable, especially because the political views of individual employees may
balance each other out. But party discipline eliminates this diversity and tends to make abuse systematic. Instead of a handful of employees pressured into
advancing their immediate superior's political ambitions, the entire government work force may be expected to turn out for many candidates in every
election. In Pawtucket, where parties are a continuing presence in political campaigns, a carefully orchestrated use of city employees in support of the
incumbent party's candidates is possible. The danger is scarcely lessened by the openness of Pawtucket's nominating procedure or the lack of party labels
on its ballots.
The third area of proper governmental interest in Letter Carriers was ensuring that employees achieve advancement on their merits and that they be free
from both coercion and the prospect of favor from political activity. The district court did not address this factor, but looked only to the possibility of a civil
servant using his position to influence voters, and held this to be no more of a threat than in the most nonpartisan of elections. But we think that the
possibility of coercion of employees by superiors remains as strong a factor in municipal elections as it was in Letter Carriers. Once again, it is the
systematic and coordinated exploitation of public servants for political ends that a legislature is most likely to see as the primary threat of employees'
rights. Political oppression of public employees will be rare in an entirely nonpartisan system. Some superiors may be inclined to ride herd on the politics of
their employees even in a nonpartisan context, but without party officials looking over their shoulders most supervisors will prefer to let employees go their
own ways.
In short, the government may constitutionally restrict its employees' participation in nominally nonpartisan elections if political parties play a large role in
the campaigns. In the absence of substantial party involvement, on the other hand, the interests identified by the Letter Carriers Court lose much of their
force. While the employees' First Amendment rights would normally outbalance these diminished interests, we do not suggest that they would always do
so. Even when parties are absent, many employee campaigns might be thought to endanger at least one strong public interest, an interest that looms
larger in the context of municipal elections than it does in the national elections considered in Letter Carriers. The city could reasonably fear the prospect of
a subordinate running directly against his superior or running for a position that confers great power over his superior. An employee of a federal agency
who seeks a Congressional seat poses less of a direct challenge to the command and discipline of his agency than a fireman or policeman who runs for
mayor or city council. The possibilities of internal discussion, cliques, and political bargaining, should an employee gather substantial political support, are
considerable. (citations omitted)

The court, however, remanded the case to the district court for further proceedings in respect of the petitioners overbreadth charge. Noting that
invalidating a statute for being overbroad is not to be taken lightly, much less to be taken in the dark, the court held:
The governing case is Broadrick, which introduced the doctrine of "substantial" overbreadth in a closely analogous case. Under Broadrick, when one who
challenges a law has engaged in constitutionally unprotected conduct (rather than unprotected speech) and when the challenged law is aimed at
unprotected conduct, "the overbreadth of a statute must not only be real, but substantial as well, judged in relation to the statute's plainly legitimate
sweep." Two major uncertainties attend the doctrine: how to distinguish speech from conduct, and how to define "substantial" overbreadth. We are spared
the first inquiry by Broadrick itself. The plaintiffs in that case had solicited support for a candidate, and they were subject to discipline under a law
proscribing a wide range of activities, including soliciting contributions for political candidates and becoming a candidate. The Court found that this
combination required a substantial overbreadth approach. The facts of this case are so similar that we may reach the same result without worrying unduly
about the sometimes opaque distinction between speech and conduct.
The second difficulty is not so easily disposed of. Broadrick found no substantial overbreadth in a statute restricting partisan campaigning. Pawtucket has
gone further, banning participation in nonpartisan campaigns as well. Measuring the substantiality of a statute's overbreadth apparently requires, inter
alia, a rough balancing of the number of valid applications compared to the number of potentially invalid applications. Some sensitivity to reality is needed;
an invalid application that is far-fetched does not deserve as much weight as one that is probable. The question is a matter of degree; it will never be
possible to say that a ratio of one invalid to nine valid applications makes a law substantially overbroad. Still, an overbreadth challenger has a duty to
provide the court with some idea of the number of potentially invalid applications the statute permits. Often, simply reading the statute in the light of
common experience or litigated cases will suggest a number of probable invalid applications. But this case is different. Whether the statute is overbroad
depends in large part on the number of elections that are insulated from party rivalry yet closed to Pawtucket employees. For all the record shows, every
one of the city, state, or federal elections in Pawtucket is actively contested by political parties. Certainly the record suggests that parties play a major role
even in campaigns that often are entirely nonpartisan in other cities. School committee candidates, for example, are endorsed by the local Democratic
committee.
The state of the record does not permit us to find overbreadth; indeed such a step is not to be taken lightly, much less to be taken in the dark . On the other
hand, the entire focus below, in the short period before the election was held, was on the constitutionality of the statute as applied. Plaintiffs may very well
feel that further efforts are not justified, but they should be afforded the opportunity to demonstrate that the charter forecloses access to a significant
number of offices, the candidacy for which by municipal employees would not pose the possible threats to government efficiency and integrity which Letter
Carriers, as we have interpreted it, deems significant. Accordingly, we remand for consideration of plaintiffs' overbreadth claim. (italics supplied, citations
omitted)
Clearly, Letter Carriers, Broadrick, and Magill demonstrate beyond doubt that Mancuso v. Taft, heavily relied upon by the ponencia, has
effectively been overruled.111[69] As it is no longer good law, the ponencias exhortation that [since] the Americans, from whom we copied the provision
in question, had already stricken down a similar measure for being unconstitutional[,] it is high-time that we, too, should follow suit is misplaced and
unwarranted.112[70]
Accordingly, our assailed Decisions submission that the right to run for public office is inextricably linked with two fundamental freedoms those of
expression and association lies on barren ground. American case law has in fact never recognized a fundamental right to express ones political
111
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views through candidacy,113[71] as to invoke a rigorous standard of review. 114[72] Bart v. Telford115[73] pointedly stated that [t]he First
Amendment does not in terms confer a right to run for public office, and this court has held that it does not do so by implication either. Thus, ones interest
in seeking office, by itself, is not entitled to constitutional protection. 116[74] Moreover, one cannot bring ones action under the rubric of freedom of
association, absent any allegation that, by running for an elective position, one is advancing the political ideas of a particular set of voters. 117[75]
Prescinding from these premises, it is crystal clear that the provisions challenged in the case at bar, are not violative of the equal protection clause.
The deemed-resigned provisions substantially serve governmental interests (i.e., (i) efficient civil service faithful to the government and the people rather
than to party; (ii) avoidance of the appearance of political justice as to policy; (iii) avoidance of the danger of a powerful political machine; and (iv) ensuring
that employees achieve advancement on their merits and that they be free from both coercion and the prospect of favor from political activity) . These are
interests that are important enough to outweigh the non-fundamental right of appointive officials and employees to seek elective office.
En passant, we find it quite ironic that Mr. Justice Nachura cites Clements v. Fashing118[76] and Morial, et al. v. Judiciary Commission of the
State of Louisiana, et al.119[77] to buttress his dissent. Maintaining that resign-to-run provisions are valid only when made applicable to specified
officials, he explains:
U.S. courts, in subsequent cases, sustained the constitutionality of resign-to-run provisions when applied to specified or particular officials, as
distinguished from all others,120[78] under a classification that is germane to the purposes of the law. These resign-to-run legislations were not
expressed in a general and sweeping provision, and thus did not violate the test of being germane to the purpose of the law, the second
requisite for a valid classification. Directed, as they were, to particular officials, they were not overly encompassing as to be overbroad. (emphasis in the
original)
This reading is a regrettable misrepresentation of Clements and Morial. The resign-to-run provisions in these cases were upheld not because they referred
to specified or particular officials (vis--vis a general class); the questioned provisions were found valid precisely because the Court deferred to
legislative judgment and found that a regulation is not devoid of a rational predicate simply because it happens to be incomplete . In fact,
the equal protection challenge in Clements revolved around the claim that the State of Texas failed to explain why some public officials are subject to the
resign-to-run provisions, while others are not. Ruled the United States Supreme Court:

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114
115
116
117
118
119
120

Article XVI, 65, of the Texas Constitution provides that the holders of certain offices automatically resign their positions if they become candidates for any
other elected office, unless the unexpired portion of the current term is one year or less. The burdens that 65 imposes on candidacy are even less
substantial than those imposed by 19. The two provisions, of course, serve essentially the same state interests. The District Court found 65 deficient,
however, not because of the nature or extent of the provision's restriction on candidacy, but because of the manner in which the offices are classified.
According to the District Court, the classification system cannot survive equal protection scrutiny, because Texas has failed to explain sufficiently why some
elected public officials are subject to 65 and why others are not. As with the case of 19, we conclude that 65 survives a challenge under the Equal
Protection Clause unless appellees can show that there is no rational predicate to the classification scheme.
The history behind 65 shows that it may be upheld consistent with the "one step at a time" approach that this Court has undertaken with regard to state
regulation not subject to more vigorous scrutiny than that sanctioned by the traditional principles. Section 65 was enacted in 1954 as a transitional
provision applying only to the 1954 election. Section 65 extended the terms of those offices enumerated in the provision from two to four years. The
provision also staggered the terms of other offices so that at least some county and local offices would be contested at each election. The automatic
resignation proviso to 65 was not added until 1958. In that year, a similar automatic resignation provision was added in Art. XI, 11, which applies to
officeholders in home rule cities who serve terms longer than two years. Section 11 allows home rule cities the option of extending the terms of municipal
offices from two to up to four years.
Thus, the automatic resignation provision in Texas is a creature of the State's electoral reforms of 1958. That the State did not go further in applying the
automatic resignation provision to those officeholders whose terms were not extended by 11 or 65, absent an invidious purpose, is not the sort of
malfunctioning of the State's lawmaking process forbidden by the Equal Protection Clause. A regulation is not devoid of a rational predicate simply because
it happens to be incomplete. The Equal Protection Clause does not forbid Texas to restrict one elected officeholder's candidacy for another elected office
unless and until it places similar restrictions on other officeholders. The provision's language and its history belie any notion that 65 serves the invidious
purpose of denying access to the political process to identifiable classes of potential candidates. (citations omitted and italics supplied)
Furthermore, it is unfortunate that the dissenters took the Morial line that there is no blanket approval of restrictions on the right of public employees to
become candidates for public office out of context. A correct reading of that line readily shows that the Court only meant to confine its ruling to the facts of
that case, as each equal protection challenge would necessarily have to involve weighing governmental interests vis--vis the specific prohibition assailed.
The Court held:
The interests of public employees in free expression and political association are unquestionably entitled to the protection of the first and fourteenth
amendments. Nothing in today's decision should be taken to imply that public employees may be prohibited from expressing their private views on
controversial topics in a manner that does not interfere with the proper performance of their public duties. In today's decision, there is no blanket approval
of restrictions on the right of public employees to become candidates for public office. Nor do we approve any general restrictions on the political and civil
rights of judges in particular. Our holding is necessarily narrowed by the methodology employed to reach it. A requirement that a state judge resign his
office prior to becoming a candidate for non-judicial office bears a reasonably necessary relation to the achievement of the state's interest in preventing the
actuality or appearance of judicial impropriety. Such a requirement offends neither the first amendment's guarantees of free expression and association nor
the fourteenth amendment's guarantee of equal protection of the laws. (italics supplied)
Indeed, the Morial court even quoted Broadrick and stated that:
In any event, the legislature must have some leeway in determining which of its employment positions require restrictions on partisan political activities
and which may be left unregulated. And a State can hardly be faulted for attempting to limit the positions upon which such restrictions are placed.
(citations omitted)

V.
Section 4(a) of Resolution 8678, Section 13 of RA 9369,
and Section 66 of the Omnibus Election Code
Do Not Suffer from Overbreadth
Apart from nullifying Section 4(a) of Resolution 8678, Section 13 of RA 9369, and Section 66 of the Omnibus Election Code on equal protection ground, our
assailed Decision struck them down for being overbroad in two respects, viz.:
(1) The assailed provisions limit the candidacy of all civil servants holding appointive posts without due regard for the type of position being held by the
employee seeking an elective post and the degree of influence that may be attendant thereto; 121[79] and
(2) The assailed provisions limit the candidacy of any and all civil servants holding appointive positions without due regard for the type of office being
sought, whether it be partisan or nonpartisan in character, or in the national, municipal or barangay level.
Again, on second look, we have to revise our assailed Decision.
i.
Limitation on Candidacy Regardless of
Incumbent Appointive Officials Position, Valid
According to the assailed Decision, the challenged provisions of law are overly broad because they apply indiscriminately to all civil servants holding
appointive posts, without due regard for the type of position being held by the employee running for elective office and the degree of influence that may be
attendant thereto.
Its underlying assumption appears to be that the evils sought to be prevented are extant only when the incumbent appointive official running for elective
office holds an influential post.
Such a myopic view obviously fails to consider a different, yet equally plausible, threat to the government posed by the partisan potential of a large and
growing bureaucracy: the danger of systematic abuse perpetuated by a powerful political machine that has amassed the scattered powers of government
workers so as to give itself and its incumbent workers an unbreakable grasp on the reins of power. 122[80] As elucidated in our prior exposition: 123[81]
Attempts by government employees to wield influence over others or to make use of their respective positions (apparently) to promote their own candidacy
may seem tolerable even innocuous particularly when viewed in isolation from other similar attempts by other government employees. Yet it would be
decidedly foolhardy to discount the equally (if not more) realistic and dangerous possibility that such seemingly disjointed attempts, when taken together,
constitute a veiled effort on the part of an emerging central party structure to advance its own agenda through a carefully orchestrated use of [appointive
and/or elective] officials coming from various levels of the bureaucracy.
121
122
123

[T]he avoidance of such a politically active public work force which could give an emerging political machine an unbreakable grasp on the reins of power is
reason enough to impose a restriction on the candidacies of all appointive public officials without further distinction as to the type of positions being held
by such employees or the degree of influence that may be attendant thereto. (citations omitted)
ii.
Limitation on Candidacy
Regardless of Type of Office Sought, Valid
The assailed Decision also held that the challenged provisions of law are overly broad because they are made to apply indiscriminately to all civil servants
holding appointive offices, without due regard for the type of elective office being sought, whether it be partisan or nonpartisan in character, or in the
national, municipal or barangay level.
This erroneous ruling is premised on the assumption that the concerns of a truly partisan office and the temptations it fosters are sufficiently different from
those involved in an office removed from regular party politics [so as] to warrant distinctive treatment, 124[82] so that restrictions on candidacy akin to those
imposed by the challenged provisions can validly apply only to situations in which the elective office sought is partisan in character. To the extent,
therefore, that such restrictions are said to preclude even candidacies for nonpartisan elective offices, the challenged restrictions are to be considered as
overbroad.
Again, a careful study of the challenged provisions and related laws on the matter will show that the alleged overbreadth is more apparent than real. Our
exposition on this issue has not been repudiated, viz.:
A perusal of Resolution 8678 will immediately disclose that the rules and guidelines set forth therein refer to the filing of certificates of candidacy and
nomination of official candidates of registered political parties, in connection with the May 10, 2010 National and Local Elections.125[83]
Obviously, these rules and guidelines, including the restriction in Section 4(a) of Resolution 8678, were issued specifically for purposes of the May 10, 2010
National and Local Elections, which, it must be noted, are decidedly partisan in character. Thus, it is clear that the restriction in Section 4(a) of RA 8678
applies only to the candidacies of appointive officials vying for partisan elective posts in the May 10, 2010 National and Local Elections. On this score, the
overbreadth challenge leveled against Section 4(a) is clearly unsustainable.
Similarly, a considered review of Section 13 of RA 9369 and Section 66 of the Omnibus Election Code, in conjunction with other related laws on the matter,
will confirm that these provisions are likewise not intended to apply to elections for nonpartisan public offices.
The only elections which are relevant to the present inquiry are the elections for barangay offices, since these are the only elections in this country
which involve nonpartisan public offices.126[84]

124
125
126

In this regard, it is well to note that from as far back as the enactment of the Omnibus Election Code in 1985, Congress has intended that these nonpartisan
barangay elections be governed by special rules, including a separate rule on deemed resignations which is found in Section 39 of the Omnibus Election
Code. Said provision states:
Section 39. Certificate of Candidacy. No person shall be elected punong barangay or kagawad ng sangguniang barangay unless he files a sworn certificate
of candidacy in triplicate on any day from the commencement of the election period but not later than the day before the beginning of the campaign period
in a form to be prescribed by the Commission. The candidate shall state the barangay office for which he is a candidate.
xxxx
Any elective or appointive municipal, city, provincial or national official or employee, or those in the civil or military service, including those in governmentowned or-controlled corporations, shall be considered automatically resigned upon the filing of certificate of candidacy for a barangay office .
Since barangay elections are governed by a separate deemed resignation rule, under the present state of law, there would be no occasion to apply the
restriction on candidacy found in Section 66 of the Omnibus Election Code, and later reiterated in the proviso of Section 13 of RA 9369, to any election
other than a partisan one. For this reason, the overbreadth challenge raised against Section 66 of the Omnibus Election Code and the pertinent proviso in
Section 13 of RA 9369 must also fail. 127[85]
In any event, even if we were to assume, for the sake of argument, that Section 66 of the Omnibus Election Code and the corresponding provision in
Section 13 of RA 9369 are general rules that apply also to elections for nonpartisan public offices, the overbreadth challenge would still be futile. Again, we
explained:
In the first place, the view that Congress is limited to controlling only partisan behavior has not received judicial imprimatur, because the general
proposition of the relevant US cases on the matter is simply that the government has an interest in regulating the conduct and speech of its employees that
differs significantly from those it possesses in connection with regulation of the speech of the citizenry in general. 128[86]
Moreover, in order to have a statute declared as unconstitutional or void on its face for being overly broad, particularly where, as in this case, conduct and
not pure speech is involved, the overbreadth must not only be real, but substantial as well, judged in relation to the statutes plainly legitimate sweep. 129
[87]
In operational terms, measuring the substantiality of a statutes overbreadth would entail, among other things, a rough balancing of the number of valid
applications compared to the number of potentially invalid applications. 130[88] In this regard, some sensitivity to reality is needed; an invalid application

127
128
129
130

that is far-fetched does not deserve as much weight as one that is probable. 131[89] The question is a matter of degree. 132[90] Thus, assuming for the sake of
argument that the partisan-nonpartisan distinction is valid and necessary such that a statute which fails to make this distinction is susceptible to an
overbreadth attack, the overbreadth challenge presently mounted must demonstrate or provide this Court with some idea of the number of potentially
invalid elections (i.e. the number of elections that were insulated from party rivalry but were nevertheless closed to appointive employees) that may in all
probability result from the enforcement of the statute. 133[91]
The state of the record, however, does not permit us to find overbreadth. Borrowing from the words of Magill v. Lynch, indeed, such a step is not to be taken
lightly, much less to be taken in the dark, 134[92] especially since an overbreadth finding in this case would effectively prohibit the State from enforcing an
otherwise valid measure against conduct that is admittedly within its power to proscribe. 135[93]
This Court would do well to proceed with tiptoe caution, particularly when it comes to the application of the overbreadth doctrine in the analysis of statutes
that purportedly attempt to restrict or burden the exercise of the right to freedom of speech, for such approach is manifestly strong medicine that must be
used sparingly, and only as a last resort. 136[94]
In the United States, claims of facial overbreadth have been entertained only where, in the judgment of the court, the possibility that protected speech of
others may be muted and perceived grievances left to fester (due to the possible inhibitory effects of overly broad statutes) outweighs the possible harm to
society in allowing some unprotected speech or conduct to go unpunished. 137[95] Facial overbreadth has likewise not been invoked where a limiting
construction could be placed on the challenged statute, and where there are readily apparent constructions that would cure, or at least substantially
reduce, the alleged overbreadth of the statute. 138[96]
In the case at bar, the probable harm to society in permitting incumbent appointive officials to remain in office, even as they actively pursue elective posts,
far outweighs the less likely evil of having arguably protected candidacies blocked by the possible inhibitory effect of a potentially overly broad statute.
In this light, the conceivably impermissible applications of the challenged statutes which are, at best, bold predictions cannot justify invalidating these
statutes in toto and prohibiting the State from enforcing them against conduct that is, and has for more than 100 years been, unquestionably within its
131
132
133
134
135
136
137
138

power and interest to proscribe. 139[97] Instead, the more prudent approach would be to deal with these conceivably impermissible applications through
case-by-case adjudication rather than through a total invalidation of the statute itself. 140[98]
Indeed, the anomalies spawned by our assailed Decision have taken place. In his Motion for Reconsideration, intervenor Drilon stated that a number of
high-ranking Cabinet members had already filed their Certificates of Candidacy without relinquishing their posts. 141[99] Several COMELEC election officers
had likewise filed their Certificates of Candidacy in their respective provinces. 142[100] Even the Secretary of Justice had filed her certificate of substitution
for representative of the first district of Quezon province last December 14, 2009 143[101] even as her position as Justice Secretary includes supervision over
the City and Provincial Prosecutors,144[102] who, in turn, act as Vice-Chairmen of the respective Boards of Canvassers. 145[103] The Judiciary has not been
spared, for a Regional Trial Court Judge in the South has thrown his hat into the political arena. We cannot allow the tilting of our electoral playing field in
their favor.
For the foregoing reasons, we now rule that Section 4(a) of Resolution 8678 and Section 13 of RA 9369, which merely reiterate Section 66 of the Omnibus
Election Code, are not unconstitutionally overbroad.
IN VIEW WHEREOF, the Court RESOLVES to GRANT the respondents and the intervenors Motions for Reconsideration; REVERSE and SET ASIDE this Courts
December 1, 2009 Decision; DISMISS the Petition; and ISSUE this Resolution declaring as not UNCONSTITUTIONAL (1) Section 4(a) of COMELEC Resolution
No. 8678, (2) the second proviso in the third paragraph of Section 13 of Republic Act No. 9369, and (3) Section 66 of the Omnibus Election Code.
SO ORDERED.

139
140
141
142
143
144
145

REPUBLIC OF THE PHILIPPINES,


Petitioner,

G.R. No. 170375

- versus HON.
MAMINDIARA
P.
MANGOTARA, in his capacity as
Presiding Judge of the Regional
Trial Court, Branch 1, Iligan City,
Lanao del Norte, and MARIA
CRISTINA
FERTILIZER
CORPORATION, and the PHILIPPINE
NATIONAL BANK,
Respondents,
- versus G.R. No. 170505
HON. COURT OF APPEALS (Special
Twenty-Third Division, Cagayan de
Oro City), and LAND TRADE REALTY
CORPORATION as represented by
Atty. Max C. Tabimina,
Respondents,

Promulgated:
July 7, 2010

Before the Court are seven consolidated Petitions for Review on Certiorari and a Petition
for Certiorari under Rules 45 and 65 of the Rules of Court, respectively, arising from actions for
quieting of title, expropriation, ejectment, and reversion, which all involve the same parcels of
land.
In G.R. No. 170375, the Republic of the Philippines (Republic), by way of consolidated Petitions
for Review on Certiorari and for Certiorari under Rules 45 and 65 of the Rules of Court,
respectively, seeks to set aside the issuances of Judge Mamindiara P. Mangotara (Judge
Mangotara) of the Regional Trial Court, Branch 1 (RTC-Branch 1) of Iligan City, Lanao del Norte, in
Civil Case No. 106, particularly, the: (1) Resolution 146[1] dated July 12, 2005 which, in part,
dismissed the Complaint for Expropriation of the Republic for the latters failure to implead
indispensable parties and forum shopping; and (2) Resolution 147[2] dated October 24, 2005, which
denied the Partial Motion for Reconsideration of the Republic.
G.R. Nos. 178779 and 178894 are two Petitions for Review on Certiorari under Rule 45 of the
Rules of Court, where Landtrade Realty Corporation (LANDTRADE), Teofilo Cacho, and/or Atty.
Godofredo Cabildo assail the Decision148[3] dated January 19, 2007 and Resolution 149[4] dated July 4,
2007 of the Court of Appeals in CA-G.R. CV No. 00456. The Court of Appeals affirmed the
Decision150[5] dated July 17, 2004 of the Regional Trial Court, Branch 3 (RTC-Branch 3) of Iligan
City, Lanao del Norte, in Civil Case No. 4452, granting the Petition for Quieting of Title, Injunction
and Damages filed by Demetria Vidal and Azimuth International Development Corporation
(AZIMUTH) against Teofilo Cacho and Atty. Godofredo Cabildo.

146
147
148
149
150

G.R. No. 170505 is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
in which LANDTRADE urges the Court to reverse and set aside the Decision151[6] dated November
23, 2005 of the Court of Appeals in CASP Nos. 85714 and 85841. The appellate court annulled
several issuances of the Regional Trial Court, Branch 5 (RTC-Branch 5) of Iligan City, Lanao del
Norte, and its sheriff, in Civil Case No. 6613, specifically, the: (1) Order 152[7] dated August 9, 2004
granting the Motion for Execution Pending Appeal of LANDTRADE; (2) Writ of Execution 153[8] dated
August 10, 2004; (3) two Notices of Garnishment 154[9] both dated August 11, 2004, and (4)
Notification155[10] dated August 11, 2004. These issuances of the RTC-Branch 5 allowed and/or
enabled execution pending appeal of the Decision 156[11] dated February 17, 2004 of the Municipal
Trial Court in Cities (MTCC), Branch 2 of Iligan City, Lanao del Norte, favoring LANDTRADE in Civil
Case No. 11475-AF, the ejectment case said corporation instituted against the National Power
Corporation (NAPOCOR) and the National Transmission Corporation (TRANSCO).
G.R. Nos. 173355-56 and 173563-64 are two Petitions for Certiorari and Prohibition
under Rule 65 of the Rules of Court with prayer for the immediate issuance of a Temporary
Restraining Order (TRO) and/or Writ of Preliminary Injunction filed separately by NAPOCOR and
TRANSCO. Both Petitions seek to annul the Resolution157[12] dated June 30, 2006 of the Court of
Appeals in the consolidated cases of CA-G.R. SP Nos. 00854 and 00889, which (1) granted the
Omnibus Motion of LANDTRADE for the issuance of a writ of execution and the designation of a
special sheriff for the enforcement of the Decision 158[13] dated December 12, 2005 of the RTCBranch 1 in Civil Case No. 6613, and (2) denied the applications of NAPOCOR and TRANSCO for a
writ of preliminary injunction to enjoin the execution of the same RTC Decision. The Decision
dated December 12, 2005 of RTC-Branch 1 in Civil Case No. 6613 affirmed the Decision dated
February 17, 2004 of the MTCC in Civil Case No. 11475-AF, favoring LANDTRADE.
G.R. No. 173401 involves a Petition for Review on Certiorari under Rule 45 of the Rules of Court
filed by the Republic, which raises pure questions of law and seeks the reversal of the following
issuances of the Regional Trial Court, Branch 4 (RTC-Branch 4) of Iligan City, Lanao del Norte, in
Civil Case No. 6686, an action for cancellation of titles and reversion: (1) Order 159[14] dated
December 13, 2005 dismissing the Complaint in Civil Case No. 6686; and (2) Order 160[15] dated
May 16, 2006, denying the Motion for Reconsideration of the Republic.
I
THE PRECEDING CASES
The consolidated seven cases have for their common genesis the 1914 case of Cacho v.
Government of the United States161[16] (1914 Cacho case).
The 1914 Cacho Case
Sometime in the early 1900s, the late Doa Demetria Cacho (Doa Demetria) applied for the
registration of two parcels of land: (1) Lot 1 of Plan II-3732, the smaller parcel with an area of
3,635 square meters or 0.36 hectares (Lot 1); and (2) Lot 2 of Plan II-3732, the larger parcel
with an area of 378,707 square meters or 37.87 hectares (Lot 2). Both parcels are situated
in what was then the Municipality of Iligan, Moro Province, which later became Sitio Nunucan,
151
152
153
154
155
156
157
158
159
160
161

then Brgy. Suarez, in Iligan City, Lanao del Norte. Doa Demetrias applications for registration
were docketed as GLRO Record Nos. 6908 and 6909.
The application in GLRO Record No. 6908 covered Lot 1, the smaller parcel of land. Doa
Demetria allegedly acquired Lot 1 by purchase from Gabriel Salzos (Salzos). Salzos, in turn,
bought Lot 1 from Datto Darondon and his wife Alanga, evidenced by a deed of sale in favor of
Salzos signed solely by Alanga, on behalf of Datto Darondon.
The application in GLRO Record No. 6909 involved Lot 2, the bigger parcel of land. Doa
Demetria purportedly purchased Lot 2 from Datto Bunglay. Datto Bunglay claimed to have
inherited Lot 2 from his uncle, Datto Anandog, who died without issue.
Only the Government opposed Doa Demetrias applications for registration on the ground that the
two parcels of land were the property of the United States and formed part of a military
reservation, generally known as Camp Overton.
On December 10, 1912, the land registration court (LRC) rendered its Decision in GLRO Record
Nos. 6908 and 6909.
Based on the evidence, the LRC made the following findings in GLRO Record No. 6908:
6th. The court is convinced from the proofs that the small parcel of land sold by the Moro
woman Alanga was the home of herself and her husband, Darondon, and was their conjugal
property; and the court so finds.
xxxx
As we have seen, the deed on which applicants title to the small parcel rests, is executed only by
the Moro woman Alanga, wife of Datto Darondon, which is not permitted either by the Moro laws
or the Civil Code of the Philippine Islands. It appears that the husband of Alanga, Datto
Darondon, is alive yet, and before admitting this parcel to registration it is ordered that
a deed from Datto Darondon, husband of Alanga, be presented, renouncing all his
rights in the small parcel of land object of Case No. 6908, in favor of the applicant.162[17]
(Emphases supplied.)
In GLRO Record No. 6909, the LRC observed and concluded that:
A tract of land 37 hectares in area, which is the extent of the land under discussion, is larger than
is cultivated ordinarily by the Christian Filipinos. In the Zamboanga cadastral case of thousands
of parcels now on trial before this court, the average size of the parcels is not above 3 or 4
hectares, and the court doubts very much if a Moro with all his family could cultivate as
extensive a parcel of land as the one in question. x x x
xxxx
The court is also convinced from the proofs that the small portion in the southern part of
the larger parcel, where, according to the proofs, Datto Anandog had his house and where
there still exist some cocos and fruit trees, was the home of the said Moro Datto Anandog;
and the court so finds. As to the rest of the large parcel the court does not find the title
of Datto Bunglay established. According to his own declaration his residence on this land
commenced only a few days before the sale. He admitted that the coco trees he is supposed to
have planted had not yet begun to bear fruit at the time of the sale, and were very small. Datto
Duroc positively denies that Bunglay lived on the land, and it clearly appears that he was not on
the land when it was first occupied by the military. Nor does Datto Bunglay claim to have planted
the three mango trees by the roadside near point 25 of the plan. The court believes that all the
rest of this parcel, not occupied nor cultivated by Datto Anandog, was land claimed by Datto
Duroc and also by Datto Anandog and possibly by other dattos as a part of their general
jurisdiction, and that it is the class of land that Act No. 718 prohibits the sale of, by the dattos,
without the express approval of the Government.
It is also found that Datto Bunglay is the nephew of Dato Anandog, and that the Moro woman
Alanga, grantor of the small parcel, is the sister of Datto Anandog, and that he died without
issue.
xxxx
162

It appears also that according to the provisions of the Civil Code as also the provisions of the
Luwaran Code of the Moros, the Moro woman Alanga has an interest in the portion of land left by
her deceased brother, Datto Anandog. By article LXXXV, section 3, of the Luwaran Code, it will be
seen that the brothers and sisters of a deceased Moro inherit his property to the exclusion of the
more distant relatives. Therefore Datto Bunglay had no legal interest whatever in the land to sell
to the applicant, Doa Demetria Cacho. But the Moro woman, Alanga, having appeared as a
witness for the applicant without having made any claim to the land, the court finds from this
fact that she has ratified the sale made by her nephew.
The court therefore finds that the applicant Doa Demetria Cacho is owner of the
portion of land occupied and planted by the deceased Datto Anandog in the southern
part of the large parcel object of expediente No. 6909 only; and her application as to
all the rest of the land solicited in said case is denied. And it is ordered that a new
survey of the land be made and a corrected plan be presented, excluding all the land
not occupied and cultivated by Datto Anandog; that said survey be made and the
corrected plan presented on or before the 30 th day of March, 1913, with previous
notice to the commanding general of the Division of the Philippines.
On the 8th day of December, the court was at Camp Overton and had another ocular inspection of
the land for the purpose of fixing the limits of the part cultivated by Datto Anandog, so often
mentioned herein, with previous notice to the applicant and her husband and representative,
Seor Dionisio Vidal. Having arrived late, Seor Vidal did not assist in the ocular inspection, which
was fixed for 3 oclock, p.m. of the day mentioned. But the court, nevertheless, set stakes
marking the N.E., S.E., and S.W. corners of the land found to have been cultivated by the
deceased Anandog. The N.E. limit of said land is a brook, and the N.W. corner is the point where
the brook intersects the shore line of the sea, the other corners mentioned being marked with
pine stakes. And it is ordered that the new survey be made in accordance with the
points mentioned, by tracing four straight lines connecting these four points. Between
the portion cultivated by Datto Anandog and the mouth of the River Agus there is a high steep
hill and the court does not believe it possible to cultivate said hill, it being covered with rocks and
forest.163[18] (Emphases supplied.)
The LRC additionally decreed at the end of its December 10, 1912 Decision:
It is further ordered that one-half of the costs of the new survey be paid by the applicant and the
other half by the Government of the United States, and that the applicant present the
corresponding deed from Datto Darondon on or before the above-mentioned 30 th day of March,
1913. Final decision in these cases is reserved until the presentation of the said deed and the
new plan.164[19]
Apparently dissatisfied with the foregoing LRC judgment, Doa Demetria appealed to this Court. In
its Decision dated December 10, 1914, the Court affirmed in toto the LRC Decision of December
10, 1912, well satisfied that the findings of fact of the court below were fully sustained by the
evidence adduced during trial.
Eighty-three years later, in 1997, the Court was again called upon to settle a matter
concerning the registration of Lots 1 and 2 in the case of Cacho v. Court of Appeals165[20] (1997
Cacho case).
The 1997 Cacho Case
On June 29, 1978, Teofilo Cacho (Teofilo), claiming to be the late Doa Demetrias son and sole
heir, filed before the RTC a petition for reconstitution of two original certificates of title (OCTs),
docketed under the original GLRO Record Nos. 6908 and 6909.
Teofilos petition was opposed by the Republic, National Steel Corporation (NSC), and the City of
Iligan.
Acting on the motion for judgment on demurrer to evidence filed by the Republic and NSC, the
RTC initially dismissed Teofilos petition for reconstitution of titles because there was inadequate
163
164
165

evidence to show the prior existence of the titles sought to be restored. According to the RTC, the
proper remedy was a petition for the reconstitution of decrees since it is undisputed that in Cases
No. 6908 and 6909, Decrees No. 10364 and 18969, respectively, were issued. Teofilo sought
leave of court for the filing and admission of his amended petition, but the RTC refused. When
elevated to this Court in Cacho v. Mangotara, docketed as G.R. No. 85495, the Court resolved to
remand the case to the RTC, with an order to the said trial court to accept Teofilos amended
petition and to hear it as one for re-issuance of decrees.
In opposing Teofilos petition, the Republic and NSC argued that the same suffered from
jurisdictional infirmities; that Teofilo was not the real party-in-interest; that Teofilo was guilty of
laches; that Doa Demetria was not the registered owner of the subject parcels of land; that no
decrees were ever issued in Doa Demetrias name; and that the issuance of the decrees was
dubious and irregular.
After trial, on June 9, 1993, the RTC rendered its Decision granting Teofilos petition and ordering
the reconstitution and re-issuance of Decree Nos. 10364 and 18969. The RTC held that the
issuance of Decree No. 10364 in GLRO No. 6908 on May 9, 1913 and Decree No. 18969 in GLRO
Record No. 6909 on July 8, 1915 was sufficiently established by the certifications and testimonies
of concerned officials. The original issuance of these decrees presupposed a prior judgment that
had become final.
On appeal, the Court of Appeals reversed the RTC Decision dated June 9, 1993 and dismissed the
petition for re-issuance of Decree Nos. 10364 and 18969 because: (1) re-issuance of Decree No.
18969 in GLRO Record No. 6909 could not be made in the absence of the new survey ordered by
this Court in the 1914 Cacho case; (2) the heir of a registered owner may lose his right to recover
possession of the property and title thereto by laches; and (3) Teofilo failed to establish his
identity and existence and that he was a real party-in-interest.
Teofilo then sought recourse from this Court in the 1997 Cacho case. The Court reversed the
judgment of the Court of Appeals and reinstated the decision of the RTC approving the reissuance of Decree Nos. 10364 and 18969. The Court found that such decrees had in fact been
issued and had attained finality, as certified by the Acting Commissioner, Deputy Clerk of Court
III, Geodetic Engineer, and Chief of Registration of the then Land Registration Commission, now
National Land Titles and Deeds Registration Administration (NALTDRA). The Court further
reasoned that:
[T]o sustain the Court of Appeals ruling as regards requiring petitioners to fulfill the conditions
set forth in Cacho vs. U.S. would constitute a derogation of the doctrine of res judicata.
Significantly, the issuance of the subject decrees presupposes a prior final judgment because the
issuance of such decrees is a mere ministerial act on part of the Land Registration Commission
(now the NALTDRA), upon presentation of a final judgment. It is also worth noting that the
judgment in Cacho vs. U.S. could not have acquired finality without the prior fulfillment of the
conditions in GLRO Record No. 6908, the presentation of the corresponding deed of sale from
Datto Dorondon on or before March 30, 1913 (upon which Decree No. 10364 was issued on May
9, 1913); and in GLRO Record No. 6909, the presentation of a new survey per decision of Judge
Jorge on December 10, 1912 and affirmed by this Court on December 10, 1914 (upon which
Decree No. 18969 was issued on July 8, 1915).
Requiring the submission of a new plan as a condition for the re-issuance of the decree
would render the finality attained by the Cacho vs. U.S. case nugatory, thus, violating the
fundamental rule regarding res judicata. It must be stressed that the judgment and the resulting
decree are res judicata, and these are binding upon the whole world, the proceedings being in
the nature of proceedings in rem. Besides, such a requirement is an impermissible assault upon
the integrity and stability of the Torrens System of registration because it also effectively renders
the decree inconclusive.166[21]
As to the issue of laches, the Court referred to the settled doctrine that laches cannot bar the
issuance of a decree. A final decision in land registration cases can neither be rendered
inefficacious by the statute of limitations nor by laches.
Anent the issue of the identity and existence of Teofilo and he being a real party-in-interest, the
Court found that these were sufficiently established by the records. The Court relied on Teofilos
Affidavit of Adjudication as Doa Demetrias sole heir, which he executed before the Philippine
Consulate General in Chicago, United States of America (U.S.A.); as well as the publication in the
Times Journal of the fact of adjudication of Doa Demetrias estate. Teofilo also appeared
166

personally before the Vice Consul of the Philippine Consulate General in Chicago to execute a
Special Power of Attorney in favor of Atty. Godofredo Cabildo (Atty. Cabildo) who represented him
in this case. The Court stressed that the execution of public documents is entitled to the
presumption of regularity and proof is required to assail and controvert the same.
In the Resolution dated July 28, 1997,167[22] the Court denied the Motions for Reconsideration of
the Republic and NSC.
As a result of the 1997 Cacho case, the decrees of registration were re-issued bearing new
numbers and OCTs were issued for the two parcels of land in Doa Demetrias name. OCT No. 01200 (a.f.) was based on re-issued Decree No. N-219464 in GLRO Record No. 6908, while OCT No.
0-1201 (a.f.) was based on re-issued Decree No. N-219465 in GLRO Record No. 6909.
II
THE ANTECENT FACTS
OF THE PETITIONS AT BAR
The dispute over Lots 1 and 2 did not end with the termination of the 1997 Cacho case. Another
four cases involving the same parcels of land were instituted before the trial courts during and
after the pendency of the 1997 Cacho case. These cases are: (1) the Expropriation Case, G.R. No.
170375; (2) the Quieting of Title Case, G.R. Nos. 178779 and 178894; (3) the Ejectment or
Unlawful Detainer Case, G.R. No. 170505 (execution pending appeal before the RTC) and G.R.
Nos. 173355-56 and 173563-64 (execution pending appeal before the Court of Appeals); and (4)
the Cancellation of Titles and Reversion Case, G.R. No. 173401. These cases proceeded
independently of each other in the courts a quo until they reached this Court via the present
Petitions. In the Resolution168[23] dated October 3, 2007, the Court consolidated the seven Petitions
considering that they either originated from the same case or involved similar issues.
Expropriation Case
(G.R. No. 170375)
The Complaint for Expropriation was originally filed on August 15, 1983 by the Iron and
Steel Authority (ISA), now the NSC, against Maria Cristina Fertilizer Corporation (MCFC), and the
latters mortgagee, the Philippine National Bank (PNB). The Complaint was docketed as Civil Case
No. 106 and raffled to RTC-Branch 1, presided over by Judge Mangotara.
ISA was created pursuant to Presidential Decree No. 2729 169[24] dated August 9, 1973, to
strengthen, develop, and promote the iron and steel industry in the Philippines. Its existence was
extended until October 10, 1988.
On November 16, 1982, during the existence of ISA, then President Ferdinand E. Marcos issued
Presidential Proclamation No. 2239,170[25] reserving in favor of ISA a parcel of land in Iligan City,
measuring 302,532 square meters or 30.25 hectares, to be devoted to the integrated steel
program of the Government. MCFC occupied certain portions of this parcel of land. When
negotiations with MCFC failed, ISA was compelled to file a Complaint for Expropriation.
When the statutory existence of ISA expired during the pendency of Civil Case No. 106, MCFC
filed a Motion to Dismiss the case alleging the lack of capacity to sue of ISA. The RTC-Branch 1
granted the Motion to Dismiss in an Order dated November 9, 1988. ISA moved for
reconsideration or, in the alternative, for the substitution of the Republic as plaintiff in Civil Case
No. 106, but the motion was denied by RTC-Branch 1. The dismissal of Civil Case No. 106 was
affirmed by the Court of Appeals, thus, ISA appealed to this Court. In Iron and Steel Authority v.
Court of Appeals171[26] (ISA case), the Court remanded the case to RTC-Branch 1, which was
ordered to allow the substitution of the Republic for ISA as plaintiff. Entry of Judgment was made
in the ISA case on August 31, 1998. In an Order 172[27] dated November 16, 2001, the RTC-Branch 1
allowed the substitution of the Republic for ISA as plaintiff in Civil Case No. 106.
167
168
169
170
171
172

Alleging that Lots 1 and 2 involved in the 1997 Cacho case encroached and overlapped the
parcel of land subject of Civil Case No. 106, the Republic filed with the RTC-Branch 1 a Motion for
Leave to File Supplemental Complaint dated October 7, 2004 and to Admit the Attached
Supplemental Complaint dated September 28, 2004 173[28] seeking to implead in Civil Case No. 106
Teofilo Cacho and Demetria Vidal and their respective successors-in-interest, LANDTRADE and
AZIMUTH.
MCFC opposed the Motion for leave to file and to admit the Supplemental Complaint on
the ground that the Republic was without legal personality to file the same because ISA was the
plaintiff in Civil Case No. 106. MCFC argued that the Republic failed to move for the execution of
the decision in the ISA case within the prescriptive period of five years, hence, the only remedy
left was for the Republic to file an independent action to revive the judgment. MCFC further
pointed out that the unreasonable delay of more than six years of the Republic in seeking the
substitution and continuation of the action for expropriation effectively barred any further
proceedings therein on the ground of estoppel by laches.
In its Reply, the Republic referred to the Order dated November 16, 2001 of the RTC-Branch 1
allowing the substitution of the Republic for ISA.
In an Order dated April 4, 2005, the RTC-Branch 1 denied the Motion of the Republic for
leave to file and to admit its Supplemental Complaint. The RTC-Branch 1 agreed with MCFC that
the Republic did not file any motion for execution of the judgment of this Court in the ISA case.
Since no such motion for execution had been filed, the RTC-Branch 1 ruled that its Order dated
November 16, 2001, which effected the substitution of the Republic for ISA as plaintiff in Civil
Case No. 106, was an honest mistake. The Republic filed a Motion for Reconsideration of the April
4, 2005 Order of the RTC-Branch 1.
MCFC then filed a Motion to Dismiss Civil Case No. 106 for: (1) failure of the Republic to
implead indispensable parties because MCFC insisted it was not the owner of the parcels of land
sought to be expropriated; and (2) forum shopping considering the institution by the Republic on
October 13, 2004 of an action for the reversion of the same parcels subject of the instant case
for expropriation.
Judge Mangotara of RTC-Branch 1 issued a Resolution 174[29] on July 12, 2005, denying for
lack of merit the Motion for Reconsideration of the Order dated April 4, 2005 filed by the
Republic, and granting the Motion to Dismiss Civil Case No. 106 filed by MCFC. Judge Mangotara
justified the dismissal of the Expropriation Case thus:
What the Republic seeks [herein] is the expropriation of the subject parcels of land. Since the
exercise of the power of eminent domain involves the taking of private lands intended for public
use upon payment of just compensation to the owner x x x, then a complaint for expropriation
must, of necessity, be directed against the owner of the land subject thereof. In the case at bar,
the decision of the Supreme Court in Cacho v. Government of the United States x x x, decreeing
the registration of the subject parcels of land in the name of the late Doa Demetria Cacho has
long attained finality and is conclusive as to the question of ownership thereof. Since MCFC, the
only defendant left in this case, is not a proper party defendant in this complaint for
expropriation, the present case should be dismissed.
This Court notes that the Republic [has filed reversion proceedings] dated September 27, 2004,
involving the same parcels of land, docketed as Case No. 6686 pending before the Regional Trial
Court of Lanao del Norte, Iligan City Branch 4. [The Republic], however, did not state such fact in
its Verification and Certification of Non-Forum Shopping attached to its Supplemental Complaint
dated September 28, 2004. [It is therefore] guilty of forum shopping. Moreover, considering that
in the Reversion case, [the Republic] asserts ownership over the subject parcels of land, it cannot
be allowed to take an inconsistent position in this expropriation case without making a mockery
of justice.175[30]

173
174
175

The Republic filed a Motion for Reconsideration of the Resolution dated July 12, 2005,
insofar as it dismissed Civil Case No. 106, but said Motion was denied by Judge Mangatora in a
Resolution176[31] dated October 24, 2005.
On January 16, 2006, the Republic filed with this Court the consolidated Petition for Review
on Certiorari and Petition for Certiorari under Rules 45 and 65 of the Rules of Court, respectively,
docketed as G.R. No. 170375.
The Quieting of Title Case
(G.R.
Nos.

178779

and

178894)

Demetria Vidal (Vidal) and AZIMUTH filed on November 18, 1998, a Petition 177[32] for Quieting of
Title against Teofilo, Atty. Cabildo, and the Register of Deeds of Iligan City, which was docketed as
Civil Case No. 4452 and raffled to RTC-Branch 3.
In the Petition, Vidal claimed that she, and not Teofilo, was the late Doa Demetrias sole surviving
heir, entitled to the parcels of land covered by OCT Nos. 0-1200 (a.f.) and 0-1201 (a.f.). She
averred that she is the daughter of Francisco Cacho Vidal (Francisco) and Fidela Arellano
Confesor. Francisco was the only child of Don Dionisio Vidal and Doa Demetria.
AZIMUTH, for its part, filed the Petition as Vidals successor-in-interest with respect to a 23hectare portion of the subject parcels of land pursuant to the Memorandum of Agreement dated
April 2, 1998 and Deed of Conditional Conveyance dated August 13, 2004, which Vidal executed
in favor of AZIMUTH.
Teofilo opposed the Petition contending that it stated no cause of action because there was no
title being disturbed or in danger of being lost due to the claim of a third party, and Vidal had
neither legal nor beneficial ownership of the parcels of land in question; that the matter and
issues raised in the Petition had already been tried, heard, and decided by the RTC of Iligan City
and affirmed with finality by this Court in the 1997 Cacho case; and that the Petition was barred
by the Statute of Limitations and laches.
LANDTRADE, among other parties, was allowed by the RTC-Branch 3 to intervene in Civil Case
No. 4452. LANDTRADE alleged that it is the owner of a portion of the subject parcels of land,
measuring 270,255 square meters or about 27.03 hectares, which it purportedly acquired
through a Deed of Absolute Sale dated October 1, 1996 from Teofilo, represented by Atty.
Cabildo. LANDTRADE essentially argued that Vidal's right as heir should be adjudicated upon in a
separate and independent proceeding and not in the instant Quieting of Title Case.
During the pre-trial conference, the parties manifested that there was no possibility of any
amicable settlement among them.
Vidal and AZIMUTH submitted testimonial and documentary evidence during the trial before the
RTC-Branch 3. Teofilo and Atty. Cabildo failed to present any evidence as they did not appear at
all during the trial, while LANDTRADE was declared by the RTC-Branch 3 to have waived its right
to present evidence on its defense and counterclaim.
On July 17, 2004, the RTC-Branch 3 rendered its Decision 178[33] in Civil Case No. 4452 in favor of
Vidal and AZIMUTH, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the petitioners and against the
respondents and intervenors:
1) DECLARING:
a.) Petitioner Demetria C. Vidal the sole surviving heir of the late Doa Demetria Cacho;
b.) Petitioner Demetria C. Vidal alone has the hereditary right to and interest in the Subject
Property;

176
177
178

c.) Petitioner Azimuth International Development Corporation is the successor-in-interest of


petitioner Demetria C. Vidal to a portion of the Subject Property to the extent provided in their 2
April 1998 Memorandum of Agreement and 13 August 1998 Deed of Conditional Conveyance;
d.) Respondent Teofilo Cacho is not a son or heir of the late Dona Demetria Cacho; and
e.) Respondent Teofilo Cacho, Godofredo Cabildo and any of their transferees/assignees have no
valid right to or interest in the Subject Property.
2) ORDERING:
a.) Respondent Register of Deeds of Iligan City, and any other person acting in his behalf, stop,
cease and desist:
i) From accepting or registering any affidavit of self- adjudication or any other document
executed by respondents Teofilo Cacho, Godofredo Cabildo and/or any other person which in any
way transfers the title to the Subject Property from Dona Demetria Cacho to respondent Teofilo
Cacho, Godofredo Cabildo and/or any of their transferees/assignees, including the intervenors.
ii) From cancelling the OCTs or any certificate of title over the Subject Property in the name of
Demetria Cacho or any successor certificate of title, and from issuing new certificates of title in
the name of respondents Teofilo Cacho, Godofredo Cabildo their transferees/assignees, including
the intervenors.
b) Respondents Teofilo Cacho, Godofredo Cabildo, their transferees/assignees, and any other
person acting in their behalf, to stop, cease and desist:
i) From executing, submitting to any Register of Deeds, or registering or causing to be registered
therein, any affidavit of self-adjudication or any other document which in any way transfers title
to the Subject Property from Demetria Cacho to respondents Teofilo Cacho, Godofredo Cabildo
and/or any of their transferees/assignees, including the intervenors.
ii) From canceling or causing the cancellation of OCTs or any certificate of title over the Subject
Property in the name of Demetria Cacho or any successor certificate of title, and from issuing
new certificates of title in the name of respondent Teofilo Cacho, Godofredo Cabildo and/or any of
their transferees/assignees, including the intervenors.
iii) From claiming or representing in any manner that respondent Teofilo Cacho is the son or heir
of Demetria Cacho or has rights to or interest in the Subject Property.
3) ORDERING respondents Teofilo Cacho and Atty. Godofredo Cabildo to pay petitioners, jointly
and severally, the following:
a) For temperate damages
P 80,000.00
b) For nominal damages P 60,000.00
c) For moral damages
P500,000.00
d) For exemplary damages
P 500,000.00
e) For attorney's fees (ACCRA Law)-P1,000,000.00
f) For Attorney's fees
P500,000.00
(Atty. Voltaire Rovira)
g) For litigation expenses P300,000.00
For lack of factual and legal basis, the counterclaim of Teofilo Cacho and Atty. Godofredo Cabildo
is hereby dismissed.
Likewise, the counterclaim of intervenor IDD/Investa is dismissed for lack of basis as the
petitioners succeeded in proving their cause of action.
On the cross-claim of intervenor IDD/Investa, respondents Teofilo Cacho and Atty. Godofredo
Cabildo are ORDERED to pay IDD/Investa, jointly and severally, the principal sum of P5,433,036
with 15% interest per annum.
For lack of legal basis, the counterclaim of Intervenor Landtrade Realty Development Corporation
is dismissed.
Likewise, Intervenor Manguera's counterclaim is dismissed for lack of legal basis. 179[34]
The joint appeal filed by LANDTRADE, Teofilo, and Atty. Cabildo with the Court of Appeals was
docketed as CA-G.R. CV No. 00456. The Court of Appeals, in its Decision 180[35] of January 19, 2007,
affirmed in toto the Decision dated July 17, 2004 of the RTC-Branch 3.
179

According to the Court of Appeals, the RTC-Branch 3 did not err in resolving the issue on Vidals
status, filiation, and hereditary rights as it is determinative of the issue on ownership of the
subject properties. It was indubitable that the RTC-Branch 3 had jurisdiction over the person of
Teofilo and juridical personality of LANDTRADE as they both filed their Answers to the Petition for
Quieting of Title thereby voluntarily submitting themselves to the jurisdiction of said trial court.
Likewise, the Petition for Quieting of Title is in itself within the jurisdiction of the RTC-Branch 3.
Hence, where there is jurisdiction over the person and subject matter, the resolution of all other
questions arising in the case is but an exercise by the court of its jurisdiction. Moreover, Teofilo
and LANDTRADE were guilty of estoppel by laches for failing to assail the jurisdiction of the RTCBranch 3 at the first opportunity and even actively participating in the trial of the case and
seeking affirmative reliefs.
In addition, the Court of Appeals held that the 1997 Cacho case only determined the validity and
efficacy of the Affidavit of Adjudication that Teofilo executed before the Philippine Consulate
General in the U.S.A. The decision of this Court in the 1997 Cacho case, which had become final
and executory, did not vest upon Teofilo ownership of the parcels of land as it merely ordered the
re-issuance of a lost duplicate certificate of title in its original form and condition.
The Court of Appeals agreed in the finding of the RTC-Branch 3 that the evidence on record
preponderantly supports Vidals claim of being the granddaughter and sole heiress of the late Doa
Demetria. The appellate court further adjudged that Vidal did not delay in asserting her rights
over the subject parcels of land. The prescriptive period for real actions over immovables is 30
years. Vidals rights as Doa Demetrias successor-in-interest accrued upon the latters death in
1974, and only 24 years thereafter, in 1998, Vidal already filed the present Petition for Quieting
of Title. Thus, Vidals cause of action had not yet prescribed. And, where the action was filed
within the prescriptive period provided by law, the doctrine of laches was also inapplicable.
LANDTRADE, Teofilo, and Atty. Cabildo filed separate Motions for Reconsideration of the
January 19, 2007 Decision of the Court of Appeals, which were denied in the July 4, 2007
Resolution181[36] of the same court.
On August 24, 2007, LANDTRADE filed with this Court a Petition for Review on Certiorari
under Rule 45 of the Rules of Court, which was docketed as G.R. No. 178779. On September 6,
2007, Teofilo and Atty. Cabildo filed their own Petition for Review on Certiorari under Rule 45 of
the Rules of Court, which was docketed as G.R. No. 178894.
The Ejectment or Unlawful Detainer Case
(G.R. Nos. 170505, 173355-56, and 173563-64)
Three Petitions before this Court are rooted in the Unlawful Detainer Case instituted by
LANDTRADE against NAPOCOR and TRANSCO.
On August 9, 1952, NAPOCOR took possession of two parcels of land in Sitio Nunucan, Overton,
Fuentes, Iligan City, denominated as Lots 2029 and 2043, consisting of 3,588 square meters (or
0.36 hectares) and 3,177 square meters (or 0.32 hectares), respectively. On Lot 2029, NAPOCOR
constructed its power sub-station, known as the Overton Sub-station, while on Lot 2043, it built a
warehouse, known as the Agus 7 Warehouse, both for the use of its Agus 7 Hydro-Electric Power
Plant. For more than 30 years, NAPOCOR occupied and possessed said parcels of land pursuant
to its charter, Republic Act No. 6395. 182[37] With the enactment in 2001 of Republic Act No. 9136,
otherwise known as the Electric Power Industry Reform Act (EPIRA), TRANSCO assumed the
functions of NAPOCOR with regard to electrical transmissions and took over possession of the
Overton Sub-station.
Claiming ownership of the parcels of land where the Overton Sub-station and Agus 7 Warehouse
are located, LANDTRADE filed with the MTCC on April 9, 2003 a Complaint for Unlawful Detainer
against NAPOCOR and TRANSCO, which was docketed as Civil Case No. 11475-AF.
In its Complaint, LANDTRADE alleged that it acquired from Teofilo, through Atty. Cabildo, two
parcels of land at Sitio Nunucan, Overton, Fuentes, Brgy. Maria Cristina, Iligan City, with a
combined area of 270,255 square meters or around 27.03 hectares, as evidenced by a Deed of
Absolute Sale183[38] dated October 1, 1996. Certain portions of said parcels of land were being
occupied by the Overton Sub-station and Agus 7 Warehouse of NAPOCOR and TRANSCO, through
180
181
182

the tolerance of LANDTRADE. Upon failure of NAPOCOR and TRANSCO to pay rentals or to vacate
the subject properties after demands to do so, LANDTRADE filed the present Complaint for
Unlawful Detainer, plus damages in the amount of P450,000.00 as yearly rental from date of the
first extra-judicial demand until NAPOCOR and TRANSCO vacate the subject properties.
In their separate Answers, NAPOCOR and TRANSCO denied the material allegations in the
Complaint and countered, by way of special and affirmative defenses, that the Complaint was
barred by res judicata; that the MTCC has no jurisdiction over the subject matter of the action;
and that LANDTRADE lacked the legal capacity to sue.
On February 17, 2004, the MTCC rendered its Decision 184[39] in favor of LANDTRADE. The MTCC
disposed:
WHEREFORE, premises considered, judgment is hereby rendered in favor of Plaintiff Land
Trade Realty Corporation represented by Atty. Max C. Tabimina and against defendant National
Power Corporation represented by its President, Mr. Rogelio M. Murga and co-defendant TRANSCO
represented by its President Dr. Allan T. Ortiz and Engr. Lorrymir A. Adaza, Manager, NAPOCORMindanao, Regional Center, Ma. Cristina, Iligan City, ordering:
1. Defendants National Power Corporation and TRANSCO, their agents or representatives or any
person/s acting on its behalf or under its authority to vacate the premises;
2. Defendants NAPOCOR and TRANSCO to pay Plaintiff jointly and solidarily:
a. Php500,000.00 a month representing fair rental value or compensation since June 29, 1978
until defendant shall have vacated the premises;
b. Php20,000.00 for and as attorneys fees and
c. Cost of suit.
Execution shall issue immediately upon motion, unless an appeal has been perfected and the
defendant to stay execution files a sufficient supersedeas bond, approved by this Court and
executed in favor of the plaintiff, to pay the rents, damages, and costs accruing down to the time
of judgment appealed from, and unless, during the pendency of the appeal, defendants deposit
with the appellate court the amount of P500,000.00 per month, as reasonable value of the use
and occupancy of the premises for the preceding month or period on or before the tenth day of
each succeeding month or period.185[40]
NAPOCOR and TRANSCO seasonably filed a Joint Notice of Appeal. Their appeal, docketed as Civil
Case No. 6613, was initially assigned to the RTC-Branch 5, presided over by Judge Maximino
Magno Libre (Judge Libre).
LANDTRADE filed on June 24, 2004 a Motion for Execution, asserting that NAPOCOR and
TRANSCO had neither filed a supersedeas bond with the MTCC nor periodically deposited with the
RTC the monthly rental for the properties in question, so as to stay the immediate execution
pending appeal of the MTCC judgment. However, the said Motion failed to comply with the
required notice of hearing under Rule 15, Section 5 of the Rules of Court. LANDTRADE then filed a
Motion to Withdraw and/or Replace Notice of Hearing.
NAPOCOR and TRANSCO filed on July 13, 2004 a Joint Motion to Suspend Proceedings citing
Amagan v. Marayag,186[41] in which the Court ruled that if circumstances should require, the
proceedings in an ejectment case may be suspended in whatever stage it may be found. Since
LANDTRADE anchors its right to possession of the subject parcels of land on the Deed of Sale
executed in its favor by Teofilo on October 1, 1996, the ejectment case should be held in
abeyance pending the resolution of other cases in which title over the same properties are in
issue, i.e., (1) Civil Case No. 6600, the action for the annulment of the Deed of Sale dated
October 1, 1996 filed by Teofilo against LANDTRADE pending before the RTC-Branch 4; and (2)
Civil Case No. 4452, the Quieting of Title Case filed by Vidal and AZIMUTH against Teofilo and
Atty. Cabildo pending before the RTC-Branch 3.
183
184
185
186

LANDTRADE filed on July 19, 2004 another Motion for Execution, which was heard together with
the Joint Motion to Suspend Proceedings of NAPOCOR and TRANSCO. After said hearing, the RTCBranch 5 directed the parties to file their memoranda on the two pending Motions.
LANDTRADE, in its Memorandum, maintained that the pendency of Civil Case No. 4452, the
Quieting of Title Case, should not preclude the execution of the MTCC judgment in the Unlawful
Detainer Case because the issue involved in the latter was only the material possession or
possession de facto of the parcels of land in question. LANDTRADE also reported that Civil Case
No. 6600, the action for annulment of the Deed of Sale dated October 1, 1996 instituted by
Teofilo, was already dismissed given that the RTC-Branch 4 had approved the Compromise
Agreement executed between LANDTRADE and Teofilo.
NAPOCOR and TRANSCO likewise filed their respective Memoranda. Subsequently,
NAPOCOR filed a Supplement to its Memorandum to bring to the attention of the RTC-Branch 5
the Decision rendered on July 17, 2004 by the RTC-Branch 3 in Civil Case No. 4452, the Quieting
of Title Case, categorically declaring Teofilo, the predecessor-in-interest of LANDTRADE, as having
no right at all to the subject parcels of land. Resultantly, the right of LANDTRADE to the two
properties, which merely emanated from Teofilo, was effectively declared as non-existent too.
On August 4, 2004, the RTC-Branch 5 issued an Order 187[42] denying the Joint Motion to Suspend
Proceedings of NAPOCOR and TRANSCO. The RTC held that the pendency of other actions
involving the same parcels of land could not stay execution pending appeal of the MTCC
judgment because NAPOCOR and TRANSCO failed to post the required bond and pay the monthly
rentals.
Five days later, on August 9, 2004, the RTC-Branch 5 issued another Order188[43] granting the
Motion of LANDTRADE for execution of the MTCC judgment pending appeal.
The next day, on August 10, 2004, the Acting Clerk of Court, Atty. Joel M. Macaraya, Jr., issued a
Writ of Execution Pending Appeal189[44] which directed Sheriff IV Alberto O. Borres (Sheriff Borres)
to execute the MTCC Decision dated February 17, 2004.
A day later, on August 11, 2004, Sheriff Borres issued two Notices of Garnishment190[45]
addressed to PNB and Land Bank of the Philippines in Iligan City, garnishing all the goods,
effects, stocks, interests in stocks and shares, and any other personal properties belonging to
NAPOCOR and TRANSCO which were being held by and under the possession and control of said
banks. On even date, Sheriff Borres also issued a Notification 191[46] to NAPOCOR and TRANSCO for
them to vacate the subject parcels of land; and to pay LANDTRADE the sums of (a)
P156,000,000.00, representing the total fair rental value for the said properties, computed at
P500,000.00 per month, beginning June 29, 1978 until June 29, 2004, or for a period of 26 years,
and (b) P20,000.00 as attorney's fees.
Thereafter, NAPOCOR and TRANSCO each filed before the Court of Appeals in Cagayan de
Oro City a Petition for Certiorari, under Rule 65 of the Rules of Court, with prayer for the issuance
of a TRO and writ of preliminary injunction. The Petitions, docketed as CA-G.R. SP Nos. 85174 and
85841, were eventually consolidated.
The Court of Appeals issued on August 18, 2004 a TRO 192[47] enjoining the enforcement and
implementation of the Order of Execution and Writ of Execution Pending Appeal of the RTCBranch 5 and Notices of Garnishment and Notification of Sheriff Borres.
The Court of Appeals, in its Decision 193[48] dated November 23, 2005, determined that public
respondents did commit grave abuse of discretion in allowing and/or effecting the execution of
the MTCC judgment pending appeal, since NAPOCOR and TRANSCO were legally excused from
187
188
189
190
191
192
193

complying with the requirements for a stay of execution specified in Rule 70, Section 19 of the
Rules of Court, particularly, the posting of a supersedeas bond and periodic deposits of rental
payments. The decretal portion of said appellate court Decision states:
ACCORDINGLY, the two petitions at bench are GRANTED; the Order dated 9 August 2004, the Writ
of Execution Pending Appeal dated 10 August 2004, the two Notices of Garnishment dated 11
August 2004, and the Notification dated 11 August 2004, are ANNULLED and SET ASIDE. 194[49]
Displeased, LANDTRADE elevated the case to this Court on January 10, 2006 via a Petition for
Review on Certiorari under Rule 45 of the Rules of Court, which was docketed as G.R. No.
170505.
In the meantime, with the retirement of Judge Libre and the inhibition 195[50] of Judge Oscar
Badelles, the new presiding judge of RTC-Branch 5, Civil Case No. 6613 was re-raffled to the RTCBranch 1, presided over by Judge Mangotara. The RTC-Branch 1 promulgated on December 12,
2005 a Decision196[51] in Civil Case No. 6613 which affirmed in toto the February 17, 2004 Decision
of the MTCC in Civil Case No. 11475-AF favoring LANDTRADE.
NAPOCOR and TRANSCO filed with the RTC-Branch 1 twin Motions, namely: (1) Motion for
Reconsideration of the Decision dated December 12, 2005; and (2) Motion for Inhibition of Judge
Mangotara. The RTC-Branch 1 denied both Motions in a Resolution dated January 30, 2006.
NAPOCOR and TRANSCO filed with the Court of Appeals separate Petitions for Review with prayer
for TRO and/or a writ of preliminary injunction, which were docketed as CA-G.R. SP Nos. 00854
and 00889, respectively. In a Resolution dated March 24, 2006, the Court of Appeals granted the
prayer for TRO of NAPOCOR and TRANSCO.
With the impending lapse of the effectivity of the TRO on May 23, 2006, NAPOCOR filed on
May 15, 2006 with the Court of Appeals a Manifestation and Motion praying for the resolution of
its application for preliminary injunction.
On May 23, 2006, the same day the TRO lapsed, the Court of Appeals granted the motions
for extension of time to file a consolidated comment of LANDTRADE. Two days later, LANDTRADE
filed an Omnibus Motion seeking the issuance of (1) a writ of execution pending appeal, and (2)
the designation of a special sheriff in accordance with Rule 70, Section 21 of the Rules of Court.
In a Resolution197[52] dated June 30, 2006, the Court of Appeals granted the Omnibus Motion
of LANDTRADE and denied the applications for the issuance of a writ of preliminary injunction of
NAPOCOR and TRANSCO. In effect, the appellate court authorized the execution pending appeal
of the judgment of the MTCC, affirmed by the RTC-Branch 1, thus:
IN LIGHT OF THE ABOVE DISQUISITIONS, this Court resolves to grant the [LANDRADE]s omnibus
motion for execution pending appeal of the decision rendered in its favor which is being assailed
in these consolidated petitions for review. Accordingly, the [NAPOCOR and TRANSCOs] respective
applications for issuance of writ of preliminary injunction are both denied for lack of factual and
legal bases. The Municipal Trial Court in Cities, Branch 2, Iligan City, which at present has the
custody of the records of the case a quo, is hereby ordered to cause the immediate issuance of a
writ of execution relative to its decision dated 17 February 2004 in Civil Case No. 11475-AF. 198[53]
On July 20, 2006, NAPOCOR filed with this Court a Petition for Certiorari and Prohibition under
Rule 65 of the Rules of Court with an urgent plea for a TRO, docketed as G.R. No. 173355-56. On
August 2, 2006, TRANSCO filed with this Court its own Petition for Certiorari, docketed as G.R. No.
173563-64.

194
195
196
197
198

On July 21, 2006, NAPOCOR filed an Urgent Motion for the Issuance of a TRO in G.R. No. 17335556. In a Resolution199[54] dated July 26, 2006, the Court granted the Motion of NAPOCOR and
issued a TRO,200[55] effective immediately, which enjoined public and private respondents from
implementing the Resolution dated June 30, 2006 of the Court of Appeals in CA-G.R. SP Nos.
00854 and 00889 and the Decision dated February 17, 2004 of the MTCC in Civil Case No. 11475AF.
On July 31, 2006, Vidal and AZIMUTH filed a Motion for Leave to Intervene and to Admit
Attached Comment-in-Intervention, contending therein that Vidal was the lawful owner of the
parcels of land subject of the Unlawful Detainer Case as confirmed in the Decision dated July 17,
2004 of the RTC-Branch 3 in Civil Case No. 4452. In a Resolution dated September 30, 2006, the
Court required the parties to comment on the Motion of Vidal and AZIMUTH, and deferred action
on the said Motion pending the submission of such comments.
The Cancellation of Titles and Reversion Case
(G.R. No. 173401)
On October 13, 2004, the Republic filed a Complaint for the Cancellation of OCT Nos. 0-1200
(a.f.) and 0-1201 (a.f.) and Reversion against the late Doa Demetria, represented by her alleged
heirs, Vidal and/or Teofilo, together with AZIMUTH and LANDTRADE. The Complaint, docketed as
Civil Case No. 6686, was raffled to the RTC-Branch 4.
The Republic sought the cancellation of OCT Nos. 0-1200 (a.f.) and 0-1201 (a.f.) and the reversion
of the parcels of land covered thereby to the Government based on the following allegations in
its Complaint, under the heading Cause of Action:
5.
On October 15, 1998, Original Certificates of Title (OCTs) Nos. 0-1200 (a.f.) and 0-1201
(a.f.) were issued in the name of Demetria Cacho, widow, now deceased consisting of a total area
of Three Hundred Seventy-Eight Thousand Seven Hundred and Seven (378,707) square meters
and Three Thousand Seven Hundred Thirty-Five (3,635) square meters, respectively, situated in
Iligan City, x x x
xxxx
6.
The afore-stated titles were issued in implementation of a decision rendered in LRC (GLRO)
Record Nos. 6908 and 6909 dated December 10, 1912, as affirmed by the Honorable Supreme
Court in Cacho v. Government of the United States, 28 Phil. 616 (December 10, 1914),
7.
The decision in LRC (GLRO) Record Nos. 6908 and 6909, upon which the titles were issued,
did not grant the entire area applied for therein. x x x
xxxx
9.
As events turned out, the titles issued in connection with LRC (GLRO) Record Nos. 6908
and 6909 i.e. OCT Nos. 0-1200 (a.f.) and 0-1201 (a.f.) cover property MUCH LARGER in area than
that granted by the land registration court in its corresponding decision, supra.
10.
While the LRC Decision, as affirmed by the Honorable Supreme Court, granted only the
southern part of the 37.87 hectare land subject of LRC (GLRO) Record Case No. 6909, the
ENTIRE 37.87 hectares is indicated as the property covered by OCT 0-1200 (a.f.). Worse, OCT
No. 0-1200 (a.f.) made reference to Case No. 6908 as basis thereof, yet, the decision in said
case is clear:
(i)
The parcel object of Case No. 6908 is small (Cacho vs. Government of the United
States, 28 Phil. 616, p. 619)
(ii)
The parcel of land claimed by the applicant in Case No. 6909 is the bigger of two
parcels and contains 37.87 hectares
11.
More significantly, the technical description in Original Certificate of Title No. 0-1200 (a.f.)
specifies the date of survey as August 31 to September 1, 1910, which is EARLIER than the date
the Supreme Court, in Cacho supra, resolved LRC (GLRO) Record No. 6909 (involving 37.87
hectares). In resolving the application involving the 37.87 hectares, the Honorable Supreme
199
200

Court declared that only the southern part of the 37.87 hectare property applied for is granted
and that a new survey specifying the southern part thereof should be submitted. Accordingly,
any survey involving the granted southern part should bear a date subsequent to the December
10, 1914 Supreme Court decision. x x x
xxxx
12.
The Honorable Supreme Court further declared that the Decision in LRC (GLRO) Record No.
6909 was reserved:
Final decision in these case is reserved until the presentation of the new plan. (28 Phil. 616, p.
631; Underscoring supplied)
In other words, as of December 10, 1914, when the Honorable Supreme Court rendered its
Decision on appeal in LRC (GLRO) Record No. 6909, final decision of the case was still reserved
until the presentation of a new plan. The metes and bounds of OCT No. 0-1200 (a.f.) could not
have been the technical description of the property granted by the court described as the
southern part of the large parcel object of expediente 6909 only (Cacho vs. Government of
the United States, 28 Phil. 617, 629). As earlier stated, the technical description appearing in
said title was the result of a survey conducted in 1910 or before the Supreme Court decision was
rendered in 1914.
13.
In the same vein, Original Certificate of Title No. 0-1201 (a.f.) specifies LRC (GLRO)
Record No. 6909 as the basis thereof (see front page of OCT No. 0-1201 (a.f.)). Yet, the technical
description makes, as its reference, Lot 1, Plan II-3732, LR Case No. 047, LRC (GLRO) Record
No. 6908 (see page 2 of said title). A title issued pursuant to a decision may only cover the
property subject of the case. A title cannot properly be issued pursuant to a decision in Case
6909, but whose technical description is based on Case 6908.
14.
The decision in LRC (GLRO) Record Nos. 6908 and 6909 has become final and
executory, and it cannot be modified, much less result in an increased area of the property
decreed therein.
xxxx
16.
In sum, Original Certificates of Title Nos. 0-1200 (a.f.) and 0-1201 (a.f.), as issued,
are null and void since the technical descriptions vis--vis the areas of the parcels of land covered
therein went beyond the areas granted by the land registration court in LRC (GLRO) Record Nos.
6908 and 6909.201[56]
Vidal and AZIMUTH filed a Motion to Dismiss dated December 23, 2004 on the grounds that (1)
the Republic has no cause of action; (2) assuming arguendo that the Republic has a cause of
action, its Complaint failed to state a cause of action; (3) assuming arguendo that the Republic
has a cause of action, the same is barred by prior judgment; (4) assuming further that the
Republic has a cause of action, the same was extinguished by prescription; and (4) the Republic
is guilty of forum shopping.
Upon motion of the Republic, the RTC-Branch 4 issued an Order 202[57] dated October 4, 2005,
declaring LANDTRADE and Teofilo, as represented by Atty. Cabildo, in default since they failed to
submit their respective answers to the Complaint despite the proper service of summons upon
them.
LANDTRADE subsequently filed its Answer with Compulsory Counterclaim dated September 28,
2005. It also moved for the setting aside and reconsideration of the Order of Default issued
against it by the RTC-Branch 4 on October 20, 2005.
On December 13, 2005, the RTC-Branch 4 issued an Order 203[58] dismissing the Complaint of the
Republic in Civil Case No. 6686, completely agreeing with Vidal and AZIMUTH.
The RTC-Branch 4 reasoned that the Republic had no cause of action because there was no
showing that the late Doa Demetria committed any wrongful act or omission in violation of any
201
202
203

right of the Republic. Doa Demetria had sufficiently proven her ownership over the parcels of
land as borne in the ruling of the LRC in GLRO Record Nos. 6908 and 6909. On the other hand,
the Republic had no more right to the said parcels of land. The Regalian doctrine does not apply
in this case because the titles were already issued to Doa Demetria and segregated from the
mass of the public domain.
The RTC-Branch 4 likewise held that the Republic failed to state a cause of action in its
Complaint. The arguments of the Republic i.e., the absence of a new survey plan and deed, the
titles covered properties with much larger area than that granted by the LRC had been answered
squarely in the 1997 Cacho case. Also, the Complaint failed to allege that fraud had been
committed in having the titles registered and that the Director of Lands requested the reversion
of the subject parcels of land.
The RTC-Branch 4 was convinced that the Complaint was barred by res judicata because the
1914 Cacho case already decreed the registration of the parcels of land in the late Doa
Demetrias name and the 1997 Cacho case settled that there was no merit in the argument that
the conditions imposed in the first case have not been complied with.
The RTC-Branch 4 was likewise persuaded that the cause of action or remedy of the Republic was
lost or extinguished by prescription pursuant to Article 1106 of the Civil Code and Section 32 of
Presidential Decree No. 1529, otherwise known as the Land Registration Decree, which
prescribes a one-year period within which to file an action for the review of a decree of
registration.
Finally, the RTC-Branch 4 found the Republic guilty of forum shopping because there is between
this case, on one hand, and the 1914 and 1997 Cacho cases, on the other, identity of parties, as
well as rights asserted and reliefs prayed for, as the contending parties are claiming rights of
ownership over the same parcels of land.
The Republic filed a Motion for Reconsideration of the dismissal of its Complaint but the same
was denied by the RTC-Branch 4 in its Order 204[59] dated May 16, 2006.
Assailing the Orders dated December 13, 2005 and May 16, 2006 of the RTC-Branch 4, the
Republic filed on August 11, 2006 a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, which was docketed as G.R. No. 173401.
III
ISSUES AND DISCUSSIONS
Expropriation Case
(G.R. No. 170375)
The Republic, in its consolidated Petitions challenging the Resolutions dated July 12, 2005 and
October 24, 2005 of the RTC-Branch 1 in Civil Case No. 106, made the following assignment of
errors:
RESPONDENT JUDGE GRAVELY ERRED IN ORDERING THE DISMISSAL OF THE EXPROPRIATION
COMPLAINT IN CIVIL CASE NO. 106 CONSIDERING THAT:
(a) THE NON-JOINDER OF PARTIES IS NOT A GROUND FOR THE DISMISSAL OF AN ACTION
PURSUANT TO SECTION 11, RULE 3 OF THE 1997 RULES OF CIVIL PROCEDURE;
(b) AN EXPROPRIATION PROCEEDING IS AN ACTION QUASI IN REM WHEREIN THE FACT THAT THE
OWNER OF THE PROPERTY IS MADE A PARTY TO THE ACTION IS NOT ESSENTIALLY
INDISPENSABLE;
(c) PETITIONER DID NOT COMMIT ANY FORUM SHOPPING WITH THE FILING OF THE REVERSION
COMPLAINT DOCKETED AS CIVIL CASE NO. 6686 WHICH IS PENDING BEFORE BRANCH 4 OF THE
REGIONAL TRIAL COURT OF ILIGAN CITY.205[60]
Filing of consolidated petitions under both Rules 45 and 65

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At the outset, the Court notes that the Republic filed a pleading with the caption
Consolidated Petitions for Review on Certiorari (Under Rule 45) and Certiorari (Under Rule 65) of
the Rules of Court. The Republic explains that it filed the Consolidated Petitions pursuant to
Metropolitan Waterworks and Sewerage System (MWSS) v. Court of Appeals 206[61] (MWSS case).
The reliance of the Republic on the MWSS case to justify its mode of appeal is misplaced,
taking the pronouncements of this Court in said case out of context.
The issue in the MWSS case was whether a possessor in good faith has the right to remove
useful improvements, and not whether consolidated petitions under both Rules 45 and 65 of the
Rules of Court can be filed. Therein petitioner MWSS simply filed an appeal by certiorari under
Rule 45 of the Rules of Court, but named the Court of Appeals as a respondent. The Court
clarified that the only parties in an appeal by certiorari under Rule 45 of the Rules of Court are
the appellant as petitioner and the appellee as respondent. The court which rendered the
judgment appealed from is not a party in said appeal. It is in the special civil action of certiorari
under Rule 65 of the Rules of Court where the court or judge is required to be joined as party
defendant or respondent. The Court, however, also acknowledged that there may be an instance
when in an appeal by certiorari under Rule 45, the petitioner-appellant would also claim that the
court that rendered the appealed judgment acted without or in excess of its jurisdiction or with
grave abuse of discretion, in which case, such court should be joined as a party-defendant or
respondent. While the Court may have stated that in such an instance, the petition for review on
certiorari under Rule 45 of the Rules of Court is at the same time a petition for certiorari under
Rule 65, the Court did not hold that consolidated petitions under both Rules 45 and 65 could or
should be filed.
The Court, in more recent cases, had been stricter and clearer on the distinction between these
two modes of appeal. In Nunez v. GSIS Family Bank,207[62] the Court elucidated:
In Ligon v. Court of Appeals where the therein petitioner described her petition as an appeal
under Rule 45 and at the same time as a special civil action of certiorari under Rule 65 of the
Rules of Court, this Court, in frowning over what it described as a chimera, reiterated that the
remedies of appeal and certiorari are mutually exclusive and not alternative nor successive.
To be sure, the distinctions between Rules 45 and 65 are far and wide. However, the most
apparent is that errors of jurisdiction are best reviewed in a special civil action for certiorari
under Rule 65 while errors of judgment can only be corrected by appeal in a petition for review
under Rule 45.
But in the same case, the Court also held that:
This Court, x x x, in accordance with the liberal spirit which pervades the Rules of Court and in
the interest of justice may treat a petition for certiorari as having been filed under Rule 45, more
so if the same was filed within the reglementary period for filing a petition for review. 208[63]
It is apparent in the case at bar that the Republic availed itself of the wrong mode of appeal by
filing Consolidated Petitions for Review under Rule 45 and for Certiorari under Rule 65, when
these are two separate remedies that are mutually exclusive and neither alternative nor
successive. Nevertheless, the Court shall treat the Consolidated Petitions as a Petition for Review
on Certiorari under Rule 45 and the allegations therein as errors of judgment. As the records
show, the Petition was filed on time under Rules 45. Before the lapse of the 15-day reglementary
period to appeal under Rule 45, the Republic filed with the Court a motion for extension of time
to file its petition. The Court, in a Resolution 209[64] dated January 23, 2006, granted the Republic a
30-day extension, which was to expire on December 29, 2005. The Republic was able to file its
Petition on the last day of the extension period.
Hierarchy of courts

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The direct filing of the instant Petition with this Court did not violate the doctrine of hierarchy of
courts.
According to Rule 41, Section 2(c) 210[65] of the Rules of Court, a decision or order of the RTC
may be appealed to the Supreme Court by petition for review on certiorari under Rule 45,
provided that such petition raises only questions of law. 211[66]
A question of law exists when the doubt or controversy concerns the correct application of law or
jurisprudence to a certain set of facts; or when the issue does not call for an examination of the
probative value of the evidence presented, the truth or falsehood of facts being admitted. 212[67] A
question of fact exists when the doubt or difference arises as to the truth or falsehood of facts or
when the query invites calibration of the whole evidence considering mainly the credibility of the
witnesses, the existence and relevancy of specific surrounding circumstances, as well as their
relation to each other and to the whole, and the probability of the situation. 213[68]
Here, the Petition of the Republic raises pure questions of law, i.e., whether Civil Case No. 106
should have been dismissed for failure to implead indispensable parties and for forum shopping.
Thus, the direct resort by the Republic to this Court is proper.
The Court shall now consider the propriety of the dismissal by the RTC-Branch 1 of the Complaint
for Expropriation of the Republic.

The proper parties in the expropriation proceedings


The right of the Republic to be substituted for ISA as plaintiff in Civil Case No. 106 had long been
affirmed by no less than this Court in the ISA case. The dispositive portion of the ISA case reads:
WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991 to
the extent that it affirmed the trial courts order dismissing the expropriation proceedings, is
hereby REVERSED and SET ASIDE and the case is REMANDED to the court a quo which shall allow
the substitution of the Republic of the Philippines for petitioner Iron Steel Authority for further
proceedings consistent with this Decision. No pronouncement as to costs. 214[69]
The ISA case had already become final and executory, and entry of judgment was made in said
case on August 31, 1998. The RTC-Branch 1, in an Order dated November 16, 2001, effected the
substitution of the Republic for ISA.
The failure of the Republic to actually file a motion for execution does not render the substitution
void. A writ of execution requires the sheriff or other proper officer to whom it is directed to
enforce the terms of the writ. 215[70] The November 16, 2001 Order of the RTC-Branch 1 should be
deemed as voluntary compliance with a final and executory judgment of this Court, already
rendering a motion for and issuance of a writ of execution superfluous.
Besides, no substantive right was violated by the voluntary compliance by the RTC-Branch 1 with
the directive in the ISA case even without a motion for execution having been filed. To the
contrary, the RTC-Branch 1 merely enforced the judicially determined right of the Republic to the
substitution. While it is desirable that the Rules of Court be faithfully and even meticulously
observed, courts should not be so strict about procedural lapses that do not really impair the
administration of justice. If the rules are intended to insure the orderly conduct of litigation it is
because of the higher objective they seek which is the protection of the substantive rights of the
parties.216[71]
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The Court also observes that MCFC did not seek any remedy from the Order dated November 16,
2001 of the RTC-Branch 1. Consequently, the said Order already became final, which even the
RTC-Branch 1 itself cannot reverse and set aside on the ground of honest mistake.
The RTC-Branch 1 dismissed the Complaint in Civil Case No. 106 on another ground: that MCFC is
not a proper party to the expropriation proceedings, not being the owner of the parcels of land
sought to be expropriated. The RTC-Branch 1 ratiocinated that since the exercise of the power of
eminent domain involves the taking of private land intended for public use upon payment of just
compensation to the owner, then a complaint for expropriation must be directed against the
owner of the land sought to be expropriated.
The Republic insists, however, that MCFC is a real party-in-interest, impleaded as a defendant in
the Complaint for Expropriation because of its possessory or occupancy rights over the subject
parcels of land, and not by reason of its ownership of the said properties. In addition, the
Republic maintains that non-joinder of parties is not a ground for the dismissal of an action.
Rule 67, Section 1 of the then Rules of Court 217[72] described how expropriation proceedings
should be instituted:
Section 1. The complaint. The right of eminent domain shall be exercised by the filing of a
complaint which shall state with certainty the right and purpose of condemnation, describe the
real or personal property sought to be condemned, and join as defendants all persons
owning or claiming to own, or occupying, any part thereof or interest therein, showing,
so far as practicable, the interest of each defendant separately. If the title to any property
sought to be condemned appears to be in the Republic of the Philippines, although
occupied by private individuals, or if the title is otherwise obscure or doubtful so that the
plaintiff cannot with accuracy or certainty specify who are the real owners, averment to that
effect may be made in the complaint. 218[73] (Emphases supplied.)
For sure, defendants in an expropriation case are not limited to the owners of the property
to be expropriated, and just compensation is not due to the property owner alone. As this Court
held in De Knecht v. Court of Appeals219[74]:
The defendants in an expropriation case are not limited to the owners of the property
condemned. They include all other persons owning, occupying or claiming to own the
property. When [property] is taken by eminent domain, the owner x x x is not
necessarily the only person who is entitled to compensation. In the American jurisdiction,
the term owner when employed in statutes relating to eminent domain to designate the persons
who are to be made parties to the proceeding, refer, as is the rule in respect of those entitled to
compensation, to all those who have lawful interest in the property to be condemned, including a
mortgagee, a lessee and a vendee in possession under an executory contract. Every person
having an estate or interest at law or in equity in the land taken is entitled to share in the award.
If a person claiming an interest in the land sought to be condemned is not made a party, he is
given the right to intervene and lay claim to the compensation. (Emphasis supplied.)
At the time of the filing of the Complaint for Expropriation in 1983, possessory/occupancy
rights of MCFC over the parcels of land sought to be expropriated were undisputed. In fact, Letter
of Instructions No. 1277220[75] dated November 16, 1982 expressly recognized that portions of the
lands reserved by Presidential Proclamation No. 2239, also dated November 16, 1982, for the use
and immediate occupation by the NSC, were then occupied by an idle fertilizer plant/factory and
related facilities of MCFC. It was ordered in the same Letter of Instruction that:
(1)
NSC shall negotiate with the owners of MCFC, for and on behalf of the Government, for the
compensation of MCFC's present occupancy rights on the subject lands at an amount of Thirty
(P30.00) Pesos per square meter or equivalent to the assessed value thereof (as determined by
the City Assessor of Iligan), whichever is higher. NSC shall give MCFC the option to either remove
its aforesaid plant, structures, equipment, machinery and other facilities from the lands or to sell
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or cede ownership thereof to NSC at a price equivalent to the fair market value thereof as
appraised by the Asian Appraisal Inc. as may be mutually agreed upon by NSC and MCFC.
(2)
In the event that NSC and MCFC fail to agree on the foregoing within sixty (60) days from
the date hereof, the Iron and Steel Authority (ISA) shall exercise its authority under Presidential
Decree (PD) No. 272, as amended, to initiate the expropriation of the aforementioned
occupancy rights of MCFC on the subject lands as well as the plant, structures, equipment,
machinery and related facilities, for and on behalf of NSC, and thereafter cede the same to NSC.
During the pendency of the expropriation proceedings, NSC shall take possession of the
properties, subject to bonding and other requirements of P.D. 1533. (Emphasis supplied.)
Being the occupant of the parcel of land sought to be expropriated, MCFC could very well
be named a defendant in Civil Case No. 106. The RTC-Branch 1 evidently erred in dismissing the
Complaint for Expropriation against MCFC for not being a proper party.
Also erroneous was the dismissal by the RTC-Branch 1 of the original Complaint for
Expropriation for having been filed only against MCFC, the occupant of the subject land, but not
the owner/s of the said property.
Dismissal is not the remedy for misjoinder or non-joinder of parties. According to Rule 3,
Section 11 of the Rules of Court:
SEC. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is
ground for dismissal of an action. Parties may be dropped or added by order of the court
on motion of any party or on its own initiative at any stage of the action and on such terms as
are just. Any claim against a misjoined party may be severed and proceeded with separately.
(Emphasis supplied.)
MCFC contends that the aforequoted rule does not apply in this case where the party not
joined, i.e., the owner of the property to be expropriated, is an indispensable party.
An indispensable party is a party-in-interest without whom no final determination can be
had of an action.221[76]
Now, is the owner of the property an indispensable party in an action for expropriation? Not
necessarily. Going back to Rule 67, Section 1 of the Rules of Court, expropriation proceedings
may be instituted even when title to the property sought to be condemned appears to be in the
Republic of the Philippines, although occupied by private individuals. The same rule provides that
a complaint for expropriation shall name as defendants all persons owning or claiming to own, or
occupying, any part thereof or interest in the property sought to be condemned. Clearly, when
the property already appears to belong to the Republic, there is no sense in the Republic
instituting expropriation proceedings against itself. It can still, however, file a complaint for
expropriation against the private persons occupying the property. In such an expropriation case,
the owner of the property is not an indispensable party.
To recall, Presidential Proclamation No. 2239 explicitly states that the parcels of land reserved to
NSC are part of the public domain, hence, owned by the Republic. Letter of Instructions No. 1277
recognized only the occupancy rights of MCFC and directed NSC to institute expropriation
proceedings to determine the just compensation for said occupancy rights. Therefore, the owner
of the property is not an indispensable party in the original Complaint for Expropriation in Civil
Case No. 106.
Assuming for the sake of argument that the owner of the property is an indispensable
party in the expropriation proceedings, the non-joinder of said party would still not warrant
immediate dismissal of the complaint for expropriation. In Vda. De Manguerra v. Risos,222[77] the
Court applied Rule 3, Section 11 of the Rules of Court even in case of non-joinder of an
indispensable party, viz:
[F]ailure to implead an indispensable party is not a ground for the dismissal of an action. In such
a case, the remedy is to implead the non-party claimed to be indispensable. Parties may be
added by order of the court, on motion of the party or on its own initiative at any stage of the
action and/or such times as are just. If the petitioner/plaintiff refuses to implead an
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indispensable party despite the order of the court, the latter may dismiss the
complaint/petition for the petitioner's/plaintiff's failure to comply. (Emphasis supplied.)
In this case, the RTC-Branch 1 did not first require the Republic to implead the alleged owner/s of
the parcel of land sought to be expropriated. Despite the absence of any order from the Court,
the Republic upon becoming aware that the parcels of land involved in the 1914 Cacho case and
1997 Cacho case, claimed by Teofilo and LANDTRADE, and Vidal and AZIMUTH, encroached into
and overlapped with the parcel of land subject of Civil Case No. 106 sought leave of court to file
a Supplemental Complaint to implead these four parties. The RTC-Branch 1 did not take the
Supplemental Complaint of the Republic into consideration. Instead, it dismissed outright the
original Complaint for Expropriation against MCFC.
Forum shopping
The RTC-Branch 1 further erred in finding that the Republic committed forum shopping by
(1) simultaneously instituting the actions for expropriation (Civil Case No. 106) and reversion
(Civil Case No. 6686) for the same parcels of land; and (2) taking inconsistent positions when it
conceded lack of ownership over the parcels of land in the expropriation case but asserted
ownership of the same properties in the reversion case.
There is no dispute that the Republic instituted reversion proceedings (Civil Case No. 6686) for
the same parcels of land subject of the instant Expropriation Case (Civil Case No. 106). The
Complaint for Cancellation of Titles and Reversion 223[78] dated September 27, 2004 was filed by
the Republic with the RTC on October 13, 2004. The records, however, do not show when the
Supplemental Complaint for Expropriation 224[79] dated September 28, 2004 was filed with the RTC.
Apparently, the Supplemental Complaint for Expropriation was filed after the Complaint for
Cancellation of Titles and Reversion since the Republic mentioned in the former the fact of filing
of the latter.225[80] Even then, the Verification and Certification of Non-Forum Shopping 226[81]
attached to the Supplemental Complaint for Expropriation did not disclose the filing of the
Complaint for Cancellation of Titles and Reversion. Notwithstanding such non-disclosure, the
Court finds that the Republic did not commit forum shopping for filing both Complaints.
In NBI-Microsoft Corporation v Hwang,227[82] the Court laid down the circumstances when forum
shopping exists:
Forum-shopping takes place when a litigant files multiple suits involving the same parties, either
simultaneously or successively, to secure a favorable judgment. Thus, it exists where the
elements of litis pendentia are present, namely: (a) identity of parties, or at least such parties
who represent the same interests in both actions; (b) identity of rights asserted and relief prayed
for, the relief being founded on the same facts; and (c) the identity with respect to the two
preceding particulars in the two cases is such that any judgment that may be rendered in the
pending case, regardless of which party is successful, would amount to res judicata in the other
case. Forum-shopping is an act of malpractice because it abuses court processes. x x x.
Here, the elements of litis pendencia are wanting. There is no identity of rights asserted and
reliefs prayed for in Civil Case No. 106 and Civil Case No. 6686.
Civil Case No. 106 was instituted against MCFC to acquire, for a public purpose, its
possessory/occupancy rights over 322,532 square meters or 32.25 hectares of land which, at the
time of the filing of the original Complaint in 1983, was not yet covered by any certificate of title.
On the other hand, Civil Case No. 6686 sought the cancellation of OCT Nos. 0-1200 (a.f.) and 01201 (a.f.), which was entered into registration on December 4, 1998 in Doa Demetrias name, on
the argument that the parcels of land covered by said certificates exceeded the areas granted by
the LRC to Doa Demetria in GLRO Record Nos. 6908 and 6909, as affirmed by this Court in the
1914 Cacho case.
Expropriation vis--vis reversion
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The Republic is not engaging in contradictions when it instituted both expropriation and
reversion proceedings for the same parcels of land. The expropriation and reversion proceedings
are distinct remedies that are not necessarily exclusionary of each other.
The filing of a complaint for reversion does not preclude the institution of an action for
expropriation. Even if the land is reverted back to the State, the same may still be subject to
expropriation as against the occupants thereof.
Also, Rule 67, Section 1 of the Rules of Court allows the filing of a complaint for expropriation
even when the title to any property sought to be condemned appears to be in the Republic of the
Philippines, although occupied by private individuals, or if the title is otherwise obscure or
doubtful so that the plaintiff cannot with accuracy or certainty specify who are the real owners.
Rule 67, Section 9 of the Rules of Court further provides:
SEC. 9. Uncertain ownership; conflicting claims. If the ownership of the property
taken is uncertain, or there are conflicting claims to any part thereof, the court may
order any sum or sums awarded as compensation for the property to be paid to the court for the
benefit of the person adjudged in the same proceeding to be entitled thereto. But the judgment
shall require the payment of the sum or sums awarded to either the defendant or the court
before the plaintiff can enter upon the property, or retain it for the public use or purpose if entry
has already been made. (Emphasis supplied.)
Hence, the filing by the Republic of the Supplemental Complaint for Expropriation impleading
Teofilo, Vidal, LANDTRADE, and AZIMUTH, is not necessarily an admission that the parcels of land
sought to be expropriated are privately owned. At most, the Republic merely acknowledged in its
Supplemental Complaint that there are private persons also claiming ownership of the parcels of
land. The Republic can still consistently assert, in both actions for expropriation and reversion,
that the subject parcels of land are part of the public domain.
In sum, the RTC-Branch 1 erred in dismissing the original Complaint and disallowing the
Supplemental Complaint in Civil Case No. 106. The Court reverses and sets aside the Resolutions
dated July 12, 2005 and October 24, 2005 of the RTC-Branch 1 in Civil Case 106, and reinstates
the Complaint for Reversion of the Republic.
The Quieting of Title Case
(G.R. Nos. 178779 and 178894)
Essentially, in their Petitions for Review on Certiorari under Rule 45 of the Rules of Court,
LANDTRADE and Teofilo, and/or Atty. Cabildo are calling upon this Court to determine whether the
Court of Appeals, in its Decision dated January 19, 2007 in CA-G.R. CV No. 00456, erred in (1)
upholding the jurisdiction of the RTC-Branch 3 to resolve the issues on Vidal's status, filiation, and
heirship in Civil Case No. 4452, the action for quieting of title; (2) not holding that Vidal and
AZIMUTH have neither cause of action nor legal or equitable title or interest in the parcels of land
covered by OCT Nos. 0-1200 (a.f.) and 0-1201 (a.f.); (3) finding the evidence sufficient to
establish Vidals status as Doa Demetrias granddaughter and sole surviving heir; and (4) not
holding that Civil Case No. 4452 was already barred by prescription.
In their Comment, Vidal and AZIMUTH insisted on the correctness of the Court of Appeals
Decision dated January 19, 2007, and questioned the propriety of the Petition for Review filed by
LANDTRADE as it supposedly raised only factual issues.
The Court rules in favor of Vidal and AZIMUTH.
Petitions for review under Rule 45
A scrutiny of the issues raised, not just in the Petition for Review of LANDTRADE, but also
those in the Petition for Review of Teofilo and/or Atty. Cabildo, reveals that they are both factual
and legal.
The Court has held in a long line of cases that in a petition for review on certiorari under
Rule 45 of the Rules of Court, only questions of law may be raised as the Supreme Court is not a
trier of facts. It is settled that as a rule, the findings of fact of the Court of Appeals especially
those affirming the trial court are final and conclusive and cannot be reviewed on appeal to the
Supreme Court. The exceptions to this rule are: (a) when the conclusion is a finding grounded
entirely on speculations, surmises or conjectures; (b) when the inference made is manifestly

mistaken, absurd or impossible; (c) when there is grave abuse of discretion; (d) when the
judgment is based on a misapprehension of facts; (e) when the findings of fact are conflicting; (f)
when the Court of Appeals, in making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and appellee; (g) where the Court of
Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if
properly considered, would justify a different conclusion; and (h) where the findings of fact of the
Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation
of specific evidence, or where the facts set forth by the petitioner are not disputed by the
respondent, or where the findings of fact of the Court of Appeals are premised on absence of
evidence but are contradicted by the evidence on record. 228[83] None of these exceptions exists in
the Petitions at bar.
Be that as it may, the Court shall address in full-length all the issues tendered in the
instant Petitions for Review, even when factual, if only to bolster the conclusions reached by the
RTC-Branch 3 and the Court of Appeals, with which the Court fully concurs.
Jurisdiction vis--vis exercise of jurisdiction
LANDTRADE, Teofilo, and/or Atty. Cabildo argue that the RTC-Branch 3 had no jurisidiction
to resolve the issues of status, filiation, and heirship in an action for quieting of title as said
issues should be ventilated and adjudicated only in special proceedings under Rule 90, Section 1
of the Rules of Court, pursuant to the ruling of this Court in Agapay v. Palang229[84] (Agapay case)
and Heirs of Guido Yaptinchay and Isabel Yaptinchay v. Del Rosario 230[85] (Yaptinchay case). Even
on the assumption that the RTC-Branch 3 acquired jurisdiction over their persons, LANDTRADE,
Teofilo, and/or Atty. Cabildo maintain that the RTC-Branch 3 erred in the exercise of its jurisdiction
by adjudicating and passing upon the issues on Vidals status, filiation, and heirship in the
Quieting of Title Case. Moreover, LANDTRADE, Teofilo, and/or Atty. Cabildo aver that the
resolution of issues regarding status, filiation, and heirship is not merely a matter of procedure,
but of jurisdiction which cannot be waived by the parties or by the court.
The aforementioned arguments fail to persuade.
In the first place, jurisdiction is not the same as the exercise of jurisdiction. The Court
distinguished between the two, thus:
Jurisdiction is not the same as the exercise of jurisdiction. As distinguished from the exercise of
jurisdiction, jurisdiction is the authority to decide a cause, and not the decision rendered therein.
Where there is jurisdiction over the person and the subject matter, the decision on all
other questions arising in the case is but an exercise of the jurisdiction. And the errors
which the court may commit in the exercise of jurisdiction are merely errors of judgment which
are the proper subject of an appeal.231[86] (Emphasis supplied.)
Here, the RTC-Branch 3 unmistakably had jurisdiction over the subject matter and the parties in
Civil Case No. 4452.
Jurisdiction over the subject matter or nature of the action is conferred only by the Constitution
or by law. Once vested by law on a particular court or body, the jurisdiction over the subject
matter or nature of the action cannot be dislodged by anybody other than by the legislature
through the enactment of a law. The power to change the jurisdiction of the courts is a matter of
legislative enactment, which none but the legislature may do. Congress has the sole power to
define, prescribe and apportion the jurisdiction of the courts. 232[87]
The RTC has jurisdiction over an action for quieting of title under the circumstances described in
Section 19(2) of Batas Pambansa Blg. 129, as amended:
SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original
jurisdiction:
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(2) In all civil actions which involve the title to, or possession of, real property, or any
interest therein, where the assessed value of the property involved exceeds Twenty
thousand pesos (P20,000.00) or, for civil actions in Metro Manila, where such value exceeds
Fifty thousand pesos (P50,000.00) except actions for forcible entry into and unlawful detainer of
lands or buildings, original jurisdiction over which is conferred upon the Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts.
Records show that the parcels of land subject of Civil Case No. 4452 have a combined assessed
value of P35,398,920.00,233[88] undisputedly falling within the jurisdiction of the RTC-Branch 3.
The RTC-Branch 3 also acquired jurisdiction over the person of Teofilo when he filed his Answer to
the Complaint of Vidal and AZIMUTH; and over the juridical personality of LANDTRADE when the
said corporation was allowed to intervene in Civil Case No. 4452.
Considering that the RTC-Branch 3 had jurisdiction over the subject matter and parties in
Civil Case No. 4452, then it can rule on all issues in the case, including those on Vidals status,
filiation, and heirship, in exercise of its jurisdiction. Any alleged erroneous finding by the RTCBranch 3 concerning Vidals status, filiation, and heirship in Civil Case No. 4452, is merely an error
of judgment subject to the affirmation, modification, or reversal by the appellate court when
appealed.
The Agapay and Yaptinchay cases
LANDTRADE, Teofilo, and/or Atty. Cabildo cannot rely on the cases of Agapay and Yaptinchay to
support their position that declarations on Vidals status, filiation, and heirsip, should be made in
special proceedings and not in Civil Case No. 4452.
In the Agapay case, the deceased Miguel Agapay (Miguel) contracted two marriages. Miguel
married Carlina (sometimes referred to as Cornelia) in 1949, and they had a daughter named
Herminia, who was born in 1950. Miguel left for Hawaii a few months after his wedding to Carlina.
When Miguel returned to the Philippines in 1972, he did not live with Carlina and Herminia. He
married Erlinda in 1973, with whom he had a son named Kristopher, who was born in 1977.
Miguel died in 1981. A few months after Miguels death, Carlina and Herminia filed a complaint for
recovery of ownership and possession with damages against Erlinda over a riceland and house
and lot in Pangasinan, which were allegedly purchased by Miguel during his cohabitation with
Erlinda. The RTC dismissed the complaint, finding little evidence that the properties pertained to
the conjugal property of Miguel and Carlina. The RTC went on to provide for the intestate shares
of the parties, particularly of Kristopher, Miguels illegitimate son. On appeal, the Court of
Appeals: (1) reversed the RTC judgment; (2) ordered Erlinda to vacate and deliver the properties
to Carlina and Herminia; and (3) ordered the Register of Deeds to cancel the Transfer Certificates
of Title (TCTs) over the subject property in the name of Erlinda and to issue new ones in the
names of Carlina and Herminia. Erlinda filed a Petition for Review with this Court.
In resolving Erlindas Petition, the Court held in the Agapay case that Article 148 of the Family
Code applied to Miguel and Erlinda. Article 148 specifically governs the property relations of a
man and a woman who are not capacitated to marry each other and live exclusively with each
other as husband and wife without the benefit of marriage or under a void marriage. Under said
provision, only the properties acquired by both parties through their actual joint contribution of
money, property, or industry shall be owned by them in common in proportion to their respective
contributions. In this case, the Court found that the money used to buy the subject properties all
came from Miguel.
The Court then proceeded to address another issue in the Agapay case, more relevant to the one
at bar:
The second issue concerning Kristopher Palangs status and claim as an illegitimate son and heir
to Miguels estate is here resolved in favor of respondent courts correct assessment that the trial
court erred in making pronouncements regarding Kristophers heirship and filiation inasmuch as
questions as to who are the heirs of the decedent, proof of filiation of illegitimate children and
the determination of the estate of the latter and claims thereto should be ventilated in the proper

233

probate court or in a special proceeding instituted for the purpose and cannot be adjudicated in
the instant ordinary civil action which is for recovery of ownership and possession. 234[89]
The Yaptinchay case involved two parcels of land in Cavite which were supposedly owned by
Guido and Isabel Yaptinchay (spouses Yaptinchay). Upon the death of the spouses Yaptinchay,
their heirs (Yaptinchay heirs) executed an Extra-Judicial Settlement of the deceased spouses
estate. However, the Yaptinchay heirs discovered that the properties were already covered by
TCTs in the name of Golden Bay Realty Corporation (Golden Bay), prompting the Yaptinchay heirs
to file with the RTC a complaint against Golden Bay for the annulment and/or declaration of
nullity of TCT Nos. 493363 to 493367 and all their derivatives, or in the alternative, the
reconveyance of realty with a prayer for a writ of preliminary injunction and/or restraining order
with damages. The Yaptinchay heirs later filed an amended complaint to include additional
defendants to whom Golden Bay sold portions of the subject properties. The RTC initially
dismissed the amended complaint, but acting on the motion for reconsideration of the
Yaptinchay heirs, eventually allowed the same. Golden Bay and its other co-defendants
presented a motion to dismiss the amended complaint, which was granted by the RTC. The
Yaptinchay heirs came before this Court via a Petition for Certiorari.
The Court first observed in the Yaptinchay case that the Yaptinchay heirs availed themselves of
the wrong remedy. An order of dismissal is the proper subject of an appeal, not a petition for
certiorari. Next, the Court affirmed the dismissal of the amended complaint, thus:
Neither did the respondent court commit grave abuse of discretion in issuing the questioned
Order dismissing the Second Amended Complaint of petitioners, x x x.
xxxx
In Litam, etc., et al. v. Rivera, this court opined that the declaration of heirship must be made in
an administration proceeding, and not in an independent civil action. This doctrine was reiterated
in Solivio v. Court of Appeals where the court held:
In Litam, et al. v. Rivera, 100 Phil. 364, where despite the pendency of the special proceedings
for the settlement of the intestate estate of the deceased Rafael Litam, the plaintiffs-appellants
filed a civil action in which they claimed that they were the children by a previous marriage of
the deceased to a Chinese woman, hence, entitled to inherit his one-half share of the conjugal
properties acquired during his marriage to Marcosa Rivera, the trial court in the civil case
declared that the plaintiffs-appellants were not children of the deceased, that the properties in
question were paraphernal properties of his wife, Marcosa Rivera, and that the latter was his only
heir. On appeal to this Court, we ruled that such declarations (that Marcosa Rivera was the only
heir of the decedent) is improper, in Civil Case No. 2071, it being within the exclusive
competence of the court in Special Proceedings No. 1537, in which it is not as yet, in issue, and,
will not be, ordinarily, in issue until the presentation of the project of partition. (p. 378).
The trial court cannot make a declaration of heirship in the civil action for the reason that such a
declaration can only be made in a special proceeding. Under Section 3, Rule 1 of the 1997
Revised Rules of Court, a civil action is defined as one by which a party sues another for the
enforcement or protection of a right, or the prevention or redress of a wrong while a special
proceeding is a remedy by which a party seeks to establish a status, a right, or a particular fact.
It is then decisively clear that the declaration of heirship can be made only in a special
proceeding inasmuch as the petitioners here are seeking the establishment of a status or right. 235
[90]
LANDTRADE, Teofilo, and/or Atty. Cabildo missed one vital factual distinction between the
Agapay and Yaptinchay cases, on one hand, and the present Petitions, on the other, by reason of
which, the Court shall not apply the prior two to the last.
The Agapay and Yaptinchay cases, as well as the cases of Litam v. Rivera236[91] and Solivio v. Court
of Appeals,237[92] cited in the Yaptinchay case, all arose from actions for reconveyance; while
234
235
236
237

the instant Petitions stemmed from an action for quieting of title. The Court may have
declared in previous cases that an action for reconveyance is in the nature of an action for
quieting of title,238[93] but the two are distinct remedies.
Ordinary civil action for reconveyance vis-a-vis special proceeding for quieting of title
The action for reconveyance is based on Section 55 of Act No. 496, otherwise known as the Land
Registration Act, as amended, which states [t]hat in all cases of registration procured by fraud
the owner may pursue all his legal and equitable remedies against the parties to such fraud,
without prejudice, however, to the rights of any innocent holder for value of a certificate of title.
The Court, in Heirs of Eugenio Lopez, Sr. v. Enriquez,239[94] described an action for reconveyance
as follows:
An action for reconveyance is an action in personam available to a person whose property
has been wrongfully registered under the Torrens system in anothers name. Although the
decree is recognized as incontrovertible and no longer open to review, the registered owner is
not necessarily held free from liens. As a remedy, an action for reconveyance is filed as an
ordinary action in the ordinary courts of justice and not with the land registration court.
Reconveyance is always available as long as the property has not passed to an innocent third
person for value. x x x (Emphases supplied.)
On the other hand, Article 476 of the Civil Code lays down the circumstances when a person may
institute an action for quieting of title:
ART. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of
any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective
but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial
to said title, an action may be brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast upon title to real property or
any interest therein.
In Calacala v. Republic,240[95] the Court elucidated on the nature of an action to quiet title:
Regarding the nature of the action filed before the trial court, quieting of title is a
common law remedy for the removal of any cloud upon or doubt or uncertainty with respect to
title to real property. Originating in equity jurisprudence, its purpose is to secure x x x an
adjudication that a claim of title to or an interest in property, adverse to that of the complainant,
is invalid, so that the complainant and those claiming under him may be forever afterward free
from any danger of hostile claim. In an action for quieting of title, the competent court is tasked
to determine the respective rights of the complainant and other claimants, x x x not
only to place things in their proper place, to make the one who has no rights to said immovable
respect and not disturb the other, but also for the benefit of both, so that he who has the right
would see every cloud of doubt over the property dissipated, and he could afterwards without
fear introduce the improvements he may desire, to use, and even to abuse the property as he
deems best x x x . (Emphases supplied.)
The Court expounded further in Spouses Portic v. Cristobal241[96] that:
Suits to quiet title are characterized as proceedings quasi in rem. Technically, they are
neither in rem nor in personam. In an action quasi in rem, an individual is named as defendant.
However, unlike suits in rem, a quasi in rem judgment is conclusive only between the parties.
Generally, the registered owner of a property is the proper party to bring an action to quiet
title. However, it has been held that this remedy may also be availed of by a person other
238
239
240
241

than the registered owner because, in the Article reproduced above, title does not necessarily
refer to the original or transfer certificate of title. Thus, lack of an actual certificate of title to a
property does not necessarily bar an action to quiet title. x x x (Emphases supplied.)
The Court pronounced in the Agapay and Yaptinchay cases that a declaration of heirship cannot
be made in an ordinary civil action such as an action for reconveyance, but must only be
made in a special proceeding, for it involves the establishment of a status or right.
The appropriate special proceeding would have been the settlement of the estate of the
decedent. Nonetheless, an action for quieting of title is also a special proceeding, specifically
governed by Rule 63 of the Rules of Court on declaratory relief and similar remedies. 242[97] Actions
for declaratory relief and other similar remedies are distinguished from ordinary civil actions
because:
2.
In declaratory relief, the subject-matter is a deed, will, contract or other written
instrument, statute, executive order or regulation, or ordinance. The issue is the validity or
construction of these documents. The relief sought is the declaration of the petitioners
rights and duties thereunder.
The concept of a cause of action in ordinary civil actions does not apply to declaratory relief as
this special civil action presupposes that there has been no breach or violation of the instruments
involved. Consequently, unlike other judgments, the judgment in an action for declaratory relief
does not essentially entail any executional process as the only relief to be properly granted
therein is a declaration of the rights and duties of the parties under the instrument,
although some exceptions have been recognized under certain situations. 243[98]
Civil Case No. 4452 could not be considered an action for reconveyance as it is not based on the
allegation that the two parcels of land, Lots 1 and 2, have been wrongfully registered in another
persons name. OCT Nos. 0-1200 (a.f.) and 0-1201 (a.f.), covering the subject properties, are still
in Doa Demetrias name. Vidal and Teofilo each claims to have inherited the two parcels of land
from the late Doa Demetria as said decedents sole heir, but neither Vidal nor Teofilo has been
able to transfer registration of the said properties to her/his name as of yet.
Instead, Civil Case No. 4452 is indisputably an action for quieting of title, a special proceeding
wherein the court is precisely tasked to determine the rights of the parties as to a particular
parcel of land, so that the complainant and those claiming under him/her may be forever free
from any danger of hostile claim. Vidal asserted title to the two parcels of land as Doa Demetrias
sole heir. The cloud on Vidals title, which she sought to have removed, was Teofilos adverse claim
of title to the same properties, also as Doa Demetrias only heir. For it to determine the rights of
the parties in Civil Case No. 4452, it was therefore crucial for the RTC-Branch 3 to squarely make
a finding as to the status, filiation, and heirship of Vidal in relation to those of Teofilo. A finding
that one is Doa Demetrias sole and rightful heir would consequently exclude and extinguish the
claim of the other.
Even assuming arguendo that the proscription in the Agapay and Yaptinchay cases against
making declarations of heirship in ordinary civil actions also extends to actions for quieting of
title, the same is not absolute.
In Portugal v. Portugal-Beltran244[99] (Portugal case), the Court recognized that there are
instances when a declaration of heirship need not be made in a separate special proceeding:
The common doctrine in Litam, Solivio and Guilas in which the adverse parties are putative heirs
to the estate of a decedent or parties to the special proceedings for its settlement is that if the
special proceedings are pending, or if there are no special proceedings filed but there is, under
the circumstances of the case, a need to file one, then the determination of, among other issues,
heirship should be raised and settled in said special proceedings. Where special proceedings had
been instituted but had been finally closed and terminated, however, or if a putative heir has lost
the right to have himself declared in the special proceedings as co-heir and he can no longer ask
for its re-opening, then an ordinary civil action can be filed for his declaration as heir in order to

242
243
244

bring about the annulment of the partition or distribution or adjudication of a property or


properties belonging to the estate of the deceased. 245[100]
In the Portugal case itself, the Court directed the trial court to already determine petitioners
status as heirs of the decedent even in an ordinary civil action, i.e., action for annulment of title,
because:
It appearing x x x that in the present case the only property of the intestate estate of
Portugal is the Caloocan parcel of land, to still subject it, under the circumstances of the case, to
a special proceeding which could be long, hence, not expeditious, just to establish the status of
petitioners as heirs is not only impractical; it is burdensome to the estate with the costs and
expenses of an administration proceeding. And it is superfluous in light of the fact that the
parties to the civil casesubject of the present case, could and had already in fact presented
evidence before the trial court which assumed jurisdiction over the case upon the issues it
defined during pre-trial.
In fine, under the circumstances of the present case, there being no compelling reason to
still subject Portugals estate to administration proceedings since a determination of petitioners
status as heirs could be achieved in the civil case filed by petitioners, the trial court should
proceed to evaluate the evidence presented by the parties during the trial and render a decision
thereon upon the issues it defined during pre-trial, x x x. 246[101]
Another case, Heirs of Teofilo Gabatan v. Court of Appeals 247[102] (Gabatan case), involved an
action for recovery of ownership and possession of property with the opposing parties insisting
that they are the legal heirs of the deceased. Recalling the Portugal case, the Court ruled:
Similarly, in the present case, there appears to be only one parcel of land being claimed by the
contending parties as their inheritance from Juan Gabatan. It would be more practical to dispense
with a separate special proceeding for the determination of the status of respondent as the sole
heir of Juan Gabatan, specially in light of the fact that the parties to Civil Case No. 89-092, had
voluntarily submitted the issue to the RTC and already presented their evidence regarding the
issue of heirship in these proceeding. Also the RTC assumed jurisdiction over the same and
consequently rendered judgment thereon.
In Fidel v. Court of Appeals 248[103] (Fidel case), therein respondents, the heirs of the late
Vicente Espineli (Vicente) from his first marriage, instituted an action to annul the sale of
Vicentes property to therein petitioners, the spouses Fidel. The subject property was sold to
petitioners by Vicentes heirs from his second marriage. Even though ones legitimacy can only be
questioned in a direct action seasonably filed by the proper party, the Court held that it was
necessary to pass upon respondents relationship to Vicente in the action for annulment of sale so
as to determine respondents legal rights to the subject property. In fact, the issue of whether
respondents are Vicentes heirs was squarely raised by petitioners in their Pre-Trial Brief. Hence,
petitioners were estopped from assailing the ruling of the trial court on respondents status.
In Civil Case No. 4452, Teofilo and/or Atty. Cabildo themselves asked the RTC-Branch 3 to resolve
the issue of Vidal's legal or beneficial ownership of the two parcels of land. 249[104] During trial,
Vidal already presented before the RTC-Branch 3 evidence to establish her status, filiation, and
heirship. There is no showing that Doa Demetria left any other property that would have required
special administration proceedings. In the spirit of the Portugal, Gabatan, and Fidel cases, the
Court deems it more practical and expeditious to settle the issue on Vidals status, filiation, and
heirship in Civil Case No. 4452.
Title in quieting of title

245
246
247
248
249

LANDTRADE, Teofilo, and/or Atty. Cabildo further contend that Vidal and AZIMUTH have no cause
of action for quieting of title since Vidal has no title to the two parcels of land. In comparison,
Teofilos title to the same properties, as Doa Demetrias only heir, was already established and
recognized by this Court in the 1997 Cacho case.
Again, the Court cannot sustain the foregoing contention of LANDTRADE, Teofilo, and/or Atty.
Cabildo.
It must be borne in mind that the concept of a cause of action in ordinary civil actions does not
apply to quieting of title. In declaratory relief, the subject-matter is a deed, will, contract or other
written instrument, statute, executive order or regulation, or ordinance. The issue is the validity
or construction of these documents. The relief sought is the declaration of the petitioners rights
and duties thereunder. Being in the nature of declaratory relief, this special civil action
presupposes that there has yet been no breach or violation of the instruments involved. 250[105]
In an action for quieting of title, the subject matter is the title sought to have quieted. Title is not
limited to the certificate of registration under the Torrens System (i.e., OCT or TCT). Pursuant to
Article 477 of the Civil Code, the plaintiff must have legal or equitable title to, or interest in,
the real property subject of the action for quieting of title. The plaintiff need not even be in
possession of the property. If she is indeed Doa Demetrias sole heir, Vidal already has equitable
title to or interest in the two parcels of land by right of succession, even though she has not yet
secured certificates of title to the said properties in her name.
LANDTRADE, Teofilo, and/or Atty. Cabildo mistakenly believe that the 1997 Cacho case had
conclusively settled Teofilo's identity and existence as Doa Demetrias sole heir. They failed to
appreciate that the 1997 Cacho case involved Teofilos petition for reconstitution of title, treated
as a petition for the re-issuance of Decree Nos. 10364 and 18969. The grant by the RTC of
Teofilos petition, affirmed by this Court, only conclusively established the prior issuance and
existence and the subsequent loss of the two decrees, thus, entitling Teofilo to the reissuance of the said decrees in their original form and condition.
As the Court of Appeals pointed out in its assailed Decision dated January 19, 2007, the issue of
Teofilos heirship was not the lis mota of the 1997 Cacho case. It was addressed by the Court in
the 1997 Cacho case for the simple purpose of determining Teofilos legal interest in filing a
petition for the re-issuance of the lost decrees. The Court merely found therein that Teofilos
Affidavit of Adjudication, executed in the U.S.A. before the Philippine Consulate General, enjoyed
the presumption of regularity and, thus, sufficiently established Teofilos legal interest. The 1997
Cacho case, however, did not conclusively settle that Teofilo is indeed Doa Demetrias only heir
and the present owner, by right of succession, of the subject properties.

Factual findings of the RTC-Branch 3 and the Court of Appeals


LANDTRADE, Teofilo, and/or Atty. Cabildo additionally posit that the evidence presented by
Vidal and AZIMUTH were insufficient to prove the fact of Vidal's filiation and heirship to Doa
Demetria. LANDTRADE, Teofilo, and/or Atty. Cabildo particularly challenged the reliance of the
RTC-Branch 3 on Vidals baptismal certificate, arguing that it has no probative value and is not
conclusive proof of filiation.
Alternative means of proving an individuals filiation have been recognized by this
Court in Heirs of Ignacio Conti v. Court of Appeals. 251[106] The property in litigation in said case was
co-owned by Lourdes Sampayo (Sampayo) and Ignacio Conti, married to Rosario Cuario
(collectively referred to as the spouses Conti). Sampayo died without issue. Therein respondents,
claiming to be Sampayos collateral relatives, filed a petition for partition of the subject property,
plus damages. To prove that they were collaterally related to Sampayo through the latters
brothers and sisters, respondents submitted photocopies of the birth certificates, certifications
on the non-availability of records of births, and certified true copies of the baptismal certificates
of Sampayos siblings. The spouses Conti questioned the documentary evidence of respondents
filiation on the ground that these were incompetent and inadmissible, but the Court held that:
250
251

Under Art. 172 of the Family Code, the filiation of legitimate children shall be proved by
any other means allowed by the Rules of Court and special laws, in the absence of a record of
birth or a parents admission of such legitimate filiation in a public or private document duly
signed by the parent. Such other proof of ones filiation may be a baptismal certificate, a judicial
admission, a family Bible in which his name has been entered, common reputation respecting his
pedigree, admission by silence, the testimonies of witnesses and other kinds of proof admissible
under Rule 130 of the Rules of Court. By analogy, this method of proving filiation may also be
utilized in the instant case.
xxxx
The admissibility of baptismal certificates offered by Lydia S. Reyes, absent the testimony of the
officiating priest or the official recorder, was settled in People v. Ritter, citing U.S. v. de Vera (28
Phil. 105 [1914]), thus x x x the entries made in the Registry Book may be considered as entries made in the course of
the business under Section 43 of Rule 130, which is an exception to the hearsay rule. The
baptisms administered by the church are one of its transactions in the exercise of ecclesiastical
duties and recorded in the book of the church during the course of its business.
It may be argued that baptismal certificates are evidence only of the administration of the
sacrament, but in this case, there were four (4) baptismal certificates which, when taken
together, uniformly show that Lourdes, Josefina, Remedios and Luis had the same set of parents,
as indicated therein. Corroborated by the undisputed testimony of Adelaida Sampayo that with
the demise of Lourdes and her brothers Manuel, Luis and sister Remedios, the only sibling left
was Josefina Sampayo Reyes, such baptismal certificates have acquired evidentiary weight to
prove filiation.252[107]
Thus, Vidals baptismal certificate is not totally bereft of any probative value. It may be
appreciated, together with all the other documentary and testimonial evidence submitted on
Vidals filiation, to wit:
The first issue proposed by petitioners for resolution is whether or not petitioner Demetria C.
Vidal is the sole surviving heir of the late Doa Demetria Cacho. To prove that, indeed, she is the
sole surviving heir of the late Doa Demetria Cacho, she testified in open court and identified the
following documentary evidence, to wit:
Exhibit A Birth Certificate of Demetria C. Vidal
Exhibit B Partida de Bautismo of Demetria C. Vidal
Exhibit C Certificate of Baptism Demetria C. Vidal
Exhibit D Cacho Family Tree
Exhibit D-1 Branch of Demetria Cacho
Exhibit F Death Certificate of Demetria Cacho.
Exhibit P Drivers license of Demetria C. Vidal.
Exhibit Q to Q5 The book entitled CACHO, the introductory page on March 1988 when the data
were compiled, page 58 on the Vidal branch of the Cacho family, page 62 on Demetria Cacho
and her descendants, page 69 on the family member with the then latest birth day 26 March
1988, and page 77 with the picture of Demetria Cacho Vidal, Dionisio Vidal and Francisco Vidal. 253
[108]
In contrast, LANDTRADE, Teofilo, and/or Atty. Cabildo failed to present any evidence at all in
support of their claims. According to the RTC-Branch 3:
Landtrade was also declared to have waived its right to present evidence on its defense and
counterclaim in the above-entitled case in view of its failure to present evidence on their
scheduled trial date.
xxxx

252
253

Since respondents Teofilo Cacho and Atty. Godofredo Cabildo opted not to adduce evidence in
this case as they failed to appear during the scheduled trial dates, the court shall decide on the
basis of the evidence for the respondents-intervenor and petitioners. 254[109]
Based on the evidence presented before it, the RTC-Branch 3 made the following factual findings:
From the evidence adduced, both testimonial and documentary, the court is convinced that
petitioner Vidal is the granddaughter of Demetria Cacho Vidal, the registered owner of the
subject property covered by decree Nos. 10364 & 18969, reissued as Decrees No. 19364 and No.
16869. Such being the case, she is an heir of Demetria Cacho Vidal.
Petitioner Vidals Certificate of Birth (Exh. A) shows that she was born on June 3, 1941, with the
name Demetria Vidal. [Her] father was Francisco Vidal and her mother was Fidela Confesor,
Francisco Vidal is the son of Dionisio Vidal and Demetria Cacho as shown by [his] Partida de
Bautismo (Baptismal Certificate). Moreover, it was shown in the same document that her
godmother was Demetria Cacho. By inference, this Demetria Cacho is actually Demetria Cacho
Vidal because she was married to Dionisio Vidal, the father of Francisco Vidal.
Now then, is Demetria Cacho Vidal the same person referred to in Cacho v. Government of the
United States (28 Phil. 616 [1914])? Page 618, Vol. 28 of the Philippine Reports would indicate
that the applicant for registration was Doa Demetria Cacho y Soriano (Exh. R-1). The Death
Certificate of Demetria Cacho Vidal shows that her mother was Candelaria Soriano (Exh. F).
Necessarily, they are one and the same person. This is further confirmed by the fact that the
husband of Demetria Cacho Vidal, Seor Dionisio Vidal, was quoted in pp. 629-630 of the
aforecited decision as the husband of Demetria Cacho (Exh. R-3).
The book CACHO (Exhs. Q to Q-5) and the Cacho Family Tree (Exhs. D to D-1) further strengthen
the aforecited findings of this Court.
It was established by petitioner Vidals own testimony that at the time of Doa Demetria Cacho's
death, she left no heir other than petitioner Vidal. Her husband, Don Dionisio, died even before
the war, while her only child, Francisco Cacho Vidal xxx Vidals father died during the war.
Petitioners only sibling Francisco Dionisio died at childbirth.
xxxx
The next factual issue proposed by petitioners is whether or not respondent Teofilo Cacho is the
son or heir of the late Doa Demetria Cacho. The following facts and circumstances negate the
impression that he is the son, as he claims to be, of Doa Demetria Cacho. Thus:
a)
Doa Demetria Cacho was married to Don Dionisio Vidal, and thus her full name was Doa
Demetria Cacho Vidal. Her only child, expectedly, carried the surname Vidal (Francisco Cacho
Vidal). Had Teofilo Cacho actually been a son of Demetria Cacho, he would and should have
carried the name Teofilo Cacho Vidal, but he did not.
b)
Teofilo Cacho admits to being married to one Elisa Valderrama in the Special Power of
Attorney he issued to Atty. Godofredo [Cabildo] (Exh. O). Teofilo Cacho married Elisa Valderrama
on 27 May 1953, in the Parish of the Immaculate Conception, Bani, Pangasinan. The Certificate of
Marriage shows that Teofilo Cacho is the son of Agustin Cacho and Estefania Cordial, not
Demetria Cacho. In his Certificate of Baptism (Exh. G), he was born to Agustin Cacho and
Estefania Cordial on May 1930 (when Doa Demetria Cacho was already 50 years old).
c)
The Cacho Family Tree (Exh. D) (that is, the Cacho Family to which Doa Demetria Cacho
belonged) as well as the book on the Cacho Family (Exh. Q) are bereft of any mention of Teofilo
Cacho or his wife Elisa Valderrama, or even his real father Agustin Cacho, or mother Estefania
Cordial. They are not known to be related to the Cacho family of Doa Demetria Cacho.
d)
Paragraph 1.11 of the Petition charges respondent Teofilo Cacho of having falsely and
fraudulently claiming to be the son and sole heir of the late Doa Demetria Cacho. In his answer
to this particular paragraph, he denied the same for lack of knowledge or information to form a
belief. He should know whether this allegation is true or not because it concerns him. If true, he
should admit and if false, he opted to deny the charges for lack of knowledge or information to
form a belief. The Court considers his denial as an admission of the allegation that he is falsely
and fraudulently claiming to be the son and sole heir of the late Doa Demetria Cacho. 255[110]
254

Considering the aforequoted factual findings, the RTC-Branch 3 arrived at the following legal
conclusions, quieting the titles of Vidal and AZIMUTH, viz:
The first proposed legal issue to be resolved had been amply discussed under the first factual
issue. Certainly, petitioner Vidal has hereditary rights, interest, or title not only to a portion of the
Subject Property but to the entire property left by the late Doa Demetria Cacho Vidal, subject,
however, to the Deed of Conditional Conveyance executed by petitioner Vidal of a portion of the
Subject Property in favor of petitioner Azimuth International Development Corporation (Exh. J)
executed pursuant to their Memorandum of Agreement (Exh. I). Consequently, it goes without
saying that petitioner Azimuth International Development Corporation has a right, interest in, or
title to a portion of the subject property.
As discussed earlier in this decision, Teofilo Cacho, not being the son, as he claims to be, of the
late Doa Demetria Cacho Vidal, has no hereditary rights to the Subject Property left by Doa
Demetria Cacho Vidal. He failed to show any evidence that he is the son of the late Doa Demetria
Cacho Vidal as he and his co respondent, Atty. Godofredo Cabildo, even failed to appear on the
scheduled trial date.
It is, therefore, safe to conclude that respondents Teofilo Cacho and/or Atty. Godofredo Cabildo
and their transferees/assignees have no right, interest in, or title to the subject property.
Prescinding from the finding of this Court that respondent Teofilo Cacho is not the son of the
registered owner of the Subject Property, the late Doa Demetria Cacho Vidal, respondent Cacho
committed false pretenses and fraudulent acts in representing himself as son and sole heir of
Doa Demetria Cacho (Vidal) in his petition in court, which eventually led to the reconstitution of
the titles of Doa Demetria Cacho (Vidal). Certainly, his misrepresentation in the reconstitution
case, which apparently is the basis of his claim to the subject property, casts clouds on
[respondents'] title to the subject property.
It is only right that petitioner Vidal should seek protection of her ownership from acts tending to
cast doubt on her title. Among the legal remedies she could pursue, is this petition for Quieting
of Title under Chapter 3, Title I, Book II of the Civil Code, Articles 476 to 481 inclusive. x x x. 256[111]
The Court of Appeals affirmed in toto the judgment of the RTC-Branch 3. The appellate court even
soundly trounced Teofilos attack on the factual findings of the trial court:
[T]he material facts sought to be established by the afore-mentioned documentary evidence
corroborated by the testimony of VIDAL, whose testimony or credibility neither TEOFILO and
LANDTRADE even attempted to impeach, only proves one thing, that she is the granddaughter of
DOA DEMETRIA and the sole heiress thereof.
xxxx
Hence, it is now too late for appellant TEOFILO to assail before Us the facts proven during the
trial, which he failed to refute in open court. Verily, TEOFILOs lackadaisical attitude in the conduct
of his defense only shows that he has no proof to offer in refutation of the evidence advanced by
appellee VIDAL.
Otherwise stated, appellant TEOFILO is an impostor, a pretender and bogus heir of DOA
DEMETRIA.
xxxx
Besides, it is quite unnatural and against human nature for a rightful heir, if TEOFILO is really
one, to merely stand still with folded arms, while the accusing finger of VIDAL is right on his very
nose. In all likelihood, and with all his might and resources, a rightful heir may even be expected
to cross continents and reach distant shores to protect his interest over the subject properties,
which in this case is arguably worth more than a Kings ransom.
It stands on record that TEOFILO CACHO has all along even prior to executing his Affidavit of
Adjudication in 1985 in Chicago, United States of America, and in simultaneously executing a
Special Power of Attorney in favor of ATTY. CABILDO, had remained in the United States, and not
255
256

for a single moment appeared in court except through his agents or representatives. To Our
mind, this fact alone adversely affects his pretension in claiming to be an heir of DOA
DEMETRIA.257[112]
As a rule, the findings of fact of the trial court when affirmed by the Court of Appeals are final
and conclusive, and cannot be reviewed on appeal by this Court as long as they are borne out by
the record or are based on substantial evidence. It is not the function of the Court to analyze or
weigh all over again the evidence or premises supportive of such factual determination. The
Court has consistently held that the findings of the Court of Appeals and other lower courts are,
as a rule, accorded great weight, if not binding upon it, save for the most compelling and cogent
reasons.258[113] There is no justification for the Court to deviate from the factual findings of the
RTC-Branch 3 and the Court of Appeals which are clearly supported by the evidence on record.
Prescription
LANDTRADE finally asserts that the action for quieting of title of Vidal and AZIMUTH
already prescribed since LANDTRADE has been in possession of the two parcels of land in
question. The prescriptive period for filing said action lapsed in 1995, ten years from the time
Teofilo executed his Affidavit of Adjudication in 1985. Yet, Vidal and AZIMUTH instituted Civil Case
No. 4452 only in 1998.
It is too late in the day for LANDTRADE to raise the issue of prescription of Civil Case No. 4452 for
the first time before this Court. In this jurisdiction, the defense of prescription cannot be raised
for the first time on appeal. Such defense may be waived, and if it was not raised as a defense
in the trial court, it cannot be considered on appeal, the general rule being that the Appellate
Court is not authorized to consider and resolve any question not properly raised in the lower
court.259[114]
But even if the Court takes cognizance of the issue of prescription, it will rule against
LANDTRADE.
A real action is one where the plaintiff seeks the recovery of real property or, as indicated in what
is now Rule 4, Section 1 of the Rules of Court, a real action is an action affecting title to or
recovery of possession of real property.260[115] An action for quieting of title to real property,
such as Civil Case No. 4452, is indubitably a real action.
Article 1141 of the Civil Code plainly provides that real actions over immovables prescribe after
thirty years. Doa Demetria died in 1974, transferring by succession, her title to the two parcels
of land to her only heir, Vidal. Teofilo, through Atty. Cabildo, filed a petition for reconstitution of
the certificates of title covering said properties in 1978. This is the first palpable display of
Teofilos adverse claim to the same properties, supposedly, also as Doa Demetrias only heir.
When Vidal and AZIMUTH instituted Civil Case No. 4452 in 1998, only 20 years had passed, and
the prescriptive period for filing an action for quieting of title had not yet prescribed.
Nevertheless, the Court notes that Article 1411 of the Civil Code also clearly states that the 30year prescriptive period for real actions over immovables is without prejudice to what is
established for the acquisition of ownership and other real rights by prescription. Thus, the Court
must also look into the acquisitive prescription periods of ownership and other real rights.
Acquisitive prescription of dominion and real rights may be ordinary or extraordinary. 261[116]
Ordinary acquisitive prescription requires possession of things in good faith and with just
title for the time fixed by law. 262[117] In the case of ownership and other real rights over immovable
property, they are acquired by ordinary prescription through possession of 10 years.263[118]
257
258
259
260
261
262
263

LANDTRADE cannot insist on the application of the 10-year ordinary acquisitive prescription
period since it cannot be considered a possessor in good faith. The good faith of the possessor
consists in the reasonable belief that the person from whom he received the thing was the owner
thereof, and could transmit his ownership. 264[119]
LANDTRADE came to possession of the two parcels of land after purchasing the same from
Teofilo. The Court stresses, however, that Teofilo is not the registered owner of the subject
properties. The said properties are still registered in Doa Demetrias name under OCT Nos. 0-1200
(a.f.) and 0-1201 (a.f.). The Affidavit of Adjudication, by which Teofilo declared himself to be the
sole heir of Doa Demetrias estate, is not even annotated on the OCTs. Worse, LANDTRADE is not
dealing directly with Teofilo, but only with the latters attorney-in-fact, Atty. Cabildo. It is axiomatic
that one who buys from a person who is not a registered owner is not a purchaser in good faith. 265
[120]
Furthermore, in its Complaint for Unlawful Detainer against NAPOCOR and TRANSCO, which was
docketed as Civil Case No. 11475-AF before the MTCC, LANDTRADE itself alleged that when it
bought the two parcels of land from Teofilo, portions thereof were already occupied by the
Overton Sub-station and Agus 7 Warehouse of NAPOCOR and TRANSCO. This is another
circumstance which should have prompted LANDTRADE to investigate or inspect the property
being sold to it. It is, of course, expected from the purchaser of a valued piece of land to inquire
first into the status or nature of possession of the occupants, i.e., whether or not the occupants
possess the land en concepto de dueo, in concept of owner. As is the common practice in the real
estate industry, an ocular inspection of the premises involved is a safeguard a cautious and
prudent purchaser usually takes. Should he find out that the land he intends to buy is occupied
by anybody else other than the seller who, as in this case, is not in actual possession, it would
then be incumbent upon the purchaser to verify the extent of the occupants possessory rights.
The failure of a prospective buyer to take such precautionary steps would mean negligence on
his part and would thereby preclude him from claiming or invoking the rights of a purchaser in
good faith.266[121]
Since the ordinary acquisitive prescription period of 10 years does not apply to
LANDTRADE, then the Court turns its attention to the extraordinary acquisitive prescription
period of 30 years set by Article 1137 of the Civil Code, which reads:
ART. 1137. Ownership and other real rights over immovables also prescribe through
uninterrupted adverse possession thereof for thirty years, without need of title or of good faith.
LANDTRADE adversely possessed the subject properties no earlier than 1996, when it
bought the same from Teofilo, and Civil Case No. 4452 was already instituted two years later in
1998. LANDTRADE cannot tack its adverse possession of the two parcels of land to that of Teofilo
considering that there is no proof that the latter, who is already residing in the U.S.A., adversely
possessed the properties at all.
Thus, the Court of Appeals did not err when it affirmed in toto the judgment of the RTC-Branch 3
which declared, among other things, that (a) Vidal is the sole surviving heir of Doa Demetria, who
alone has rights to and interest in the subject parcels of land; (b) AZIMUTH is Vidals successor-ininterest to portions of the said properties in accordance with the 1998 Memorandum of
Agreement and 2004 Deed of Conditional Conveyance; (c) Teofilo is not the son or heir of Doa
Demetria; and (d) Teofilo, Atty. Cabildo, and their transferees/assignees, including LANDTRADE,
have no valid right to or interest in the same properties.
The Ejectment or Unlawful Detainer Case
(G.R. Nos. 170505, 173355-56, and 173563-64)
The Petitions in G.R. Nos. 170505, 173355-56, and 173563-64 all concern the execution
pending appeal of the Decision dated February 17, 2004 of the MTCC in Civil Case No. 11475-AF,
which ordered NAPOCOR and TRANSCO to vacate the two parcels of land in question, as well as
to pay rent for the time they occupied said properties.
264
265
266

LANDTRADE filed its Petition for Review in G.R. No. 170505 when it failed to have the MTCC
Decision dated February 17, 2004 executed while Civil Case No. 6613, the appeal of the same
judgment by NAPOCOR and TRANSCO, was still pending before the RTC-Branch 5.
NAPOCOR and TRANSCO sought recourse from this Court through their Petitions for Certiorari and
Prohibition in G.R. Nos. 173355-56 and 173563-64 after the RTC-Branch 1 (to which Civil Case
No. 6613 was re-raffled) already rendered a Decision dated December 12, 2005 in Civil Case No.
6613, affirming the MTCC Decision dated February 17, 2004. Expectedly, NAPOCOR and
TRANSCO appealed the judgment of the RTC-Branch 1 to the Court of Appeals. The Court of
Appeals granted the motion for execution pending appeal of LANDTRADE, and denied the
application for preliminary injunction of NAPOCOR and TRANSCO.
The requirements of posting a supersedeas bond and depositing rent to stay
execution
The pivotal issue in G.R. No. 170505 is whether LANDTRADE is entitled to the execution of the
MTCC Decision dated February 17, 2004 even while said judgment was then pending appeal
before the RTC-Branch 5. The RTC-Branch 5 granted the motion for immediate execution pending
appeal of LANDTRADE because of the failure of NAPOCOR and TRANSCO to comply with the
requirements for staying the execution of the MTCC judgment, as provided in Rule 70, Section 19
of the Rules of Court. The Court of Appeals subsequently found grave abuse of discretion on the
part of RTC-Branch 5 in issuing the Order dated August 9, 2004 which granted execution pending
appeal and the Writ of Execution Pending Appeal dated August 10, 2004; and on the part of
Sheriff Borres, in issuing the Notices of Garnishment and Notification to vacate, all dated August
11, 2004. According to the appellate court, NAPOCOR and TRANSCO are exempt from the
requirements of filing a supersedeas bond and depositing rent in order to stay the execution of
the MTCC judgment.
Rule 70, Section 19 of the Rules of Court lays down the requirements for staying the immediate
execution of the MTCC judgment against the defendant in an ejectment suit:
SEC. 19. Immediate execution of judgment; how to stay same. If judgment is rendered against
the defendant, execution shall issue immediately upon motion, unless an appeal has been
perfected and the defendant to stay execution files a sufficient supersedeas bond,
approved by the Municipal Trial Court and executed in favor of the plaintiff to pay the rents,
damages, and costs accruing down to the time of the judgment appealed from, and unless,
during the pendency of the appeal, he deposits with the appellate court the amount of
rent due from time to time under the contract, if any, as determined by the judgment of the
Municipal Trial Court. In the absence of a contract, he shall deposit with the Regional Trial Court
the reasonable value of the use and occupation of the premises for the preceding month or
period at the rate determined by the judgment of the lower court on or before the tenth day of
each succeeding month or period. The supersedeas bond shall be transmitted by the Municipal
Trial Court, with the other papers, to the clerk of the Regional Trial Court to which the action is
appealed.
All amounts so paid to the appellate court shall be deposited with said court or authorized
government depositary bank, and shall be held there until the final disposition of the appeal,
unless the court, by agreement of the interested parties, or in the absence of reasonable grounds
of opposition to a motion to withdraw, or for justifiable reasons, shall decree otherwise. Should
the defendant fail to make the payments above prescribed from time to time during the
pendency of the appeal, the appellate court, upon motion of the plaintiff, and upon proof of such
failure, shall order the execution of the judgment appealed from with respect to the restoration of
possession, but such execution shall not be a bar to the appeal taking its course until the final
disposition thereof on the merits.
After the case is decided by the Regional Trial Court, any money paid to the court by the
defendant for purposes of the stay of execution shall be disposed of in accordance with the
provisions of the judgment of the Regional Trial Court. In any case wherein it appears that the
defendant has been deprived of the lawful possession of land or building pending the appeal by
virtue of the execution of the judgment of the Municipal Trial Court, damages for such deprivation
of possession and restoration of possession may be allowed the defendant in the judgment of the
Regional Trial Court disposing of the appeal. (Emphases supplied.)

The Court had previously recognized the exemption of NAPOCOR from filing a supersedeas bond.
The Court stated in Philippine Geothermal, Inc. v. Commissioner of Internal Revenue 267[122] that a
chronological review of the NAPOCOR Charter will show that it has been the lawmakers intention
that said corporation be completely exempt not only from all forms of taxes, but also from filing
fees, appeal bonds, and supersedeas bonds in any court or administrative proceedings. The
Court traced the history of the NAPOCOR Charter, thus:
Republic Act No. 6395 (10 September 1971) enumerated the details covered by the
exemptions by stating under Sec. 13 that The Corporation shall be non-profit and shall devote all
its returns from its capital investment, as well as excess revenues from its operation, for
expansionthe Corporation is hereby declared exempt from the payment of all taxes, duties, fees,
imposts, charges, costs and service fees in any court or administrative proceedings in which it
may be a party, restrictions and duties to the Republic of the Philippines, its provinces, cities,
municipalities and other government agencies and instrumentalities . . . Subsequently,
Presidential Decree No. 380 (22 January 1974), Sec. 10 made even more specific the details
of the exemption of NPC to cover, among others, both direct and indirect taxes on all petroleum
products used in its operation. Presidential Decree No. 938 (27 May 1976), Sec. 13 amended
the tax exemption by simplifying the same law in general terms. It succinctly exempts service
fees, including filing fees, appeal bonds, supersedeas bonds, in any court or administrative
proceedings. The use of the phrase all forms of taxes demonstrate the intention of the law to
give NPC all the exemption it has been enjoying before. The rationale for this exemption is that
being non-profit, the NPC shall devote all its return from its capital investment as well as excess
revenues from its operation, for expansion. 268[123] (Emphases supplied.)
As presently worded, Section 13 of Republic Act No. 6395, the NAPOCOR Charter, as amended,
reads:
SEC. 13. Non-profit Character of the Corporation; Exemption from All Taxes, Duties, Fees,
Imposts and Other Charges by the Government and Government Instrumentalities. The
Corporation shall be non-profit and shall devote all its returns from its capital investment as well
as excess revenues from its operation, for expansion. To enable the Corporation to pay its
indebtedness and obligations and in furtherance and effective implementation of the policy
enunciated in Section One of this Act, the Corporation, including its subsidiaries, is hereby
declared exempt from the payment of all forms of taxes, duties, fees, imposts as well as costs
and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or
administrative proceedings. (Emphasis supplied.)
In A.M. No. 05-10-20-SC, captioned In Re: Exemption of the National Power Corporation from
Payment of Filing/Docket Fees, the Court addressed the query of a Clerk of Court from the RTC of
Urdaneta, Pangasinan on whether NAPOCOR is exempt from the payment of filing fees and
Sheriffs Trust Fund. In its Resolution dated December 6, 2005, the Court, upon the
recommendation of the Court Administrator, declared that NAPOCOR is still exempt from the
payment of filing fees, appeal bonds, and supersedeas bonds.
Consistent with the foregoing, the Court of Appeals rendered its Decision dated November 23,
2005 in CA-G.R. SP Nos. 85714 and 85841 declaring that NAPOCOR was exempt from filing a
supersedeas bond to stay the execution of the MTCC judgment while the same was pending
appeal before the RTC-Branch 5. The appellate court also held that the exemption of NAPOCOR
extended even to the requirement for periodical deposit of rent, ratiocinating that:
On the whole, the posting of supersedeas bond and the making of the periodical deposit are
designed primarily to insure that the plaintiff would be paid the back rentals and the
compensation for the use and occupation of the premises should the municipal trial courts
decision be eventually affirmed on appeal. Elsewise stated, both the posting of the supersedeas
bond and the payment of monthly deposit are required to accomplish one and the same purpose,
namely, to secure the performance of, or to satisfy the judgment appealed from in case it is
affirmed on appeal by the appellate court.
xxxx
Thus viewed, the inescapable conclusion is, and so We hold, that although the term making of
monthly deposit in ejectment cases is not expressly or specifically mentioned in Section 13 of
267
268

R.A. 6395, however, inasmuch as it has the same or similar function, purpose, and essence as a
supersedeas bond, it should be deemed included in the enumeration laid down under the said
provision. This accords well with the principle of ejusdem generis which says that where a statute
uses a general word followed by an enumeration of specific words embraced within the general
word merely as examples, the enumeration does not restrict the meaning of the general word
which should be construed to include others of the same class although not enumerated therein;
or where a general word or phrase follows an enumeration of particular and specific words of the
same class or where the latter follow the former, the general word or phrase is to be construed to
include persons, things or cases akin to, resembling, or of the same kind or class as those
specifically mentioned.
In a nutshell, We hold that petitioner NAPOCOR enjoys exemption not only from posting
supersedeas bond in courts in appealed ejectment cases, but also from periodically depositing
the amount of the monthly rental or the reasonable compensation of the use and occupancy of
the property, as determined in the municipal trial courts decision. 269[124]
The Court of Appeals further adjudged that the exemptions of NAPOCOR similarly applied to
TRANSCO since [i]t is all too obvious that the interests of NAPOCOR and TRANSCO over the
premises in litigation are so interwoven and dependent upon each other, such that whatever is
adjudged in regard to the former, whether favorable or adverse, would ineluctably and similarly
affect the latter[;] and [c]onsequently, x x x the stay of the execution of the appealed decision
insofar as NAPOCOR is concerned necessarily extends and inures to its co-defendant TRANSCO,
not by virtue of the formers statutory exemption privilege from filing supersedeas bond and
making periodic deposits, but by the indisputably operative fact that the rights and liabilities in
litis of BOTH defendants are so intimately interwoven, interdependent, and indivisible. 270[125]
Only recently, however, the Court reversed its stance on the exemption of NAPOCOR from filing
fees, appeal bonds, and supersedeas bonds. Revisiting A.M. No. 05-10-20-SC, the Court issued
Resolutions dated October 27, 2009 and March 10, 2010, wherein it denied the request of
NAPOCOR for exemption from payment of filing fees and court fees for such request appears to
run counter to Article VIII, Section 5(5) 271[126] of the Constitution, on the rule-making power of the
Supreme Court over the rules on pleading, practice and procedure in all courts, which includes
the sole power to fix the filing fees of cases in courts. The Court categorically pronounced that
NAPOCOR can no longer invoke its amended Charter as basis for exemption from the payment of
legal fees.
Nevertheless, in this case, the RTC-Branch 1 already promulgated its Decision in Civil Case
No. 6613 on December 12, 2005, denying the appeal of NAPOCOR and TRANSCO and affirming
the MTCC judgment against said corporations. NAPOCOR and TRANSCO presently have pending
appeals of the RTC-Branch 1 judgment before the Court of Appeals.
Rule 70, Section 19 of the Rules of Court applies only when the judgment of a Municipal Trial
Court (and any same level court such as the MTCC) in an ejectment case is pending appeal
before the RTC. When the RTC had already resolved the appeal and its judgment, in turn, is
pending appeal before the Court of Appeals, then Rule 70, Section 21 of the Rules of Court
governs.
The Court already pointed out in Northcastle Properties and Estate Corporation v. Paas 272[127] that
Section 19 applies only to ejectment cases pending appeal with the RTC, and Section 21 to those
already decided by the RTC. The Court again held in Uy v. Santiago273[128] that:
[I]t is only execution of the Metropolitan or Municipal Trial Courts judgment pending appeal with
the Regional Trial Court which may be stayed by a compliance with the requisites provided in
Rule 70, Section 19 of the 1997 Rules on Civil Procedure. On the other hand, once the
Regional Trial Court has rendered a decision in its appellate jurisdiction, such decision shall,
under Rule 70, Section 21 of the 1997 Rules on Civil Procedure, be immediately executory,
269
270
271
272
273

without prejudice to an appeal, via a Petition for Review, before the Court of Appeals and/or
Supreme Court. (Emphases supplied.)
According to Rule 70, Section 21 of the Rules of Court, [t]he judgment of the Regional Trial Court
against the defendant shall be immediately executory, without prejudice to a further appeal that
may be taken therefrom. It no longer provides for the stay of execution at such stage.
Thus, subsequent events have rendered the Petition of LANDTRADE in G.R. No. 170505 moot and
academic. It will serve no more purpose for the Court to require NAPOCOR and TRANSCO to still
comply with the requirements of filing a supersedeas bond and depositing rent to stay execution
pending appeal of the MTCC judgment, as required by Rule 70, Section 19 of the Rules of Court,
when the appeal had since been resolved by the RTC.
Preliminary injunction to stay execution of RTC judgment against defendant in an
ejectment case
The issues raised by NAPOCOR and TRANSCO in their Petitions in G.R. Nos. 173355-56 and
173563-64 boil down to the sole issue of whether the Court of Appeals committed grave abuse of
discretion amounting to lack or excess of jurisdiction in refusing to enjoin the execution of the
Decision dated December 12, 2005 of the RTC-Branch 1 in Civil Case No. 6613 while the same is
pending appeal before the appellate court.
The Court of Appeals granted the issuance of a writ of execution in favor of LANDTRADE and
denied the application for writ of preliminary injunction of NAPOCOR and TRANSCO because Rule
70, Section 21 of the Rules of Court explicitly provides that the RTC judgment in an ejectment
case, which is adverse to the defendant and pending appeal before the Court of Appeals, shall be
immediately executory and can be enforced despite further appeal. Therefore, the execution of
the RTC judgment pending appeal is the ministerial duty of the Court of Appeals, specifically
enjoined by law to be done.
NAPOCOR and TRANSCO argue that neither the rules nor jurisprudence explicitly declare that
Rule 70, Section 21 of the Rules of Court bars the application of Rule 58 on preliminary
injunction. Regardless of the immediately executory character of the RTC judgment in an
ejectment case, the Court of Appeals, before which said judgment is appealed, is not deprived of
power and jurisdiction to issue a writ of preliminary injunction when circumstances so warrant.
There is merit in the present Petitions of NAPOCOR and TRANSCO.
The Court expounded on the nature of a writ of preliminary injunction in Levi Strauss & Co. v.
Clinton Apparelle, Inc. 274[129]:
Section 1, Rule 58 of the Rules of Court defines a preliminary injunction as an order granted at
any stage of an action prior to the judgment or final order requiring a party or a court, agency or
a person to refrain from a particular act or acts. Injunction is accepted as the strong arm of
equity or a transcendent remedy to be used cautiously as it affects the respective rights of the
parties, and only upon full conviction on the part of the court of its extreme necessity. An
extraordinary remedy, injunction is designed to preserve or maintain the status quo of things and
is generally availed of to prevent actual or threatened acts until the merits of the case can be
heard. It may be resorted to only by a litigant for the preservation or protection of his rights or
interests and for no other purpose during the pendency of the principal action. It is resorted to
only when there is a pressing necessity to avoid injurious consequences, which cannot be
remedied under any standard compensation. The resolution of an application for a writ of
preliminary injunction rests upon the existence of an emergency or of a special recourse before
the main case can be heard in due course of proceedings.
Section 3, Rule 58, of the Rules of Court enumerates the grounds for the issuance of a
preliminary injunction:
SEC. 3. Grounds for issuance of preliminary injunction. A preliminary injunction may be granted
when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief
consists in restraining the commission or continuance of the act or acts complained of, or in
requiring the performance of an act or acts, either for a limited period or perpetually;
274

(b) That the commission, continuance, or non-performance of the act or acts complained of
during the litigation would probably work injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is
procuring or suffering to be done, some act or acts probably in violation of the rights of the
applicant respecting the subject of the action or proceeding, and tending to render the judgment
ineffectual.
Under the cited provision, a clear and positive right especially calling for judicial protection must
be shown. Injunction is not a remedy to protect or enforce contingent, abstract, or future rights;
it will not issue to protect a right not in esse and which may never arise, or to restrain an act
which does not give rise to a cause of action. There must exist an actual right. There must be a
patent showing by the complaint that there exists a right to be protected and that the acts
against which the writ is to be directed are violative of said right.
Benedicto v. Court of Appeals 275[130] sets forth the following elucidation on the applicability of Rule
58 vis--vis Rule 70, Section 21 of the Rules of Court:
This section [Rule 70, Section 21] presupposes that the defendant in a forcible entry or unlawful
detainer case is unsatisfied with the judgment of the Regional Trial Court and decides to appeal
to a superior court. It authorizes the RTC to immediately issue a writ of execution without
prejudice to the appeal taking its due course. It is our opinion that on appeal the appellate court
may stay the said writ should circumstances so require.
In the case of Amagan v. Marayag, we reiterated our pronouncement in Vda. de Legaspi v.
Avendao that the proceedings in an ejectment case may be suspended in whatever stage it may
be found. We further drew a fine line between forcible entry and unlawful detainer, thus:
Where the action, therefore, is one of illegal detainer, as distinguished from one of forcible entry,
and the right of the plaintiff to recover the premises is seriously placed in issue in a proper
judicial proceeding, it is more equitable and just and less productive of confusion and
disturbance of physical possession, with all its concomitant inconvenience and expenses. For the
Court in which the issue of legal possession, whether involving ownership or not, is brought to
restrain, should a petition for preliminary injunction be filed with it, the effects of any order or
decision in the unlawful detainer case in order to await the final judgment in the more
substantive case involving legal possession or ownership. It is only where there has been
forcible entry that as a matter of public policy the right to physical possession should be
immediately set at rest in favor of the prior possession regardless of the fact that the other party
might ultimately be found to have superior claim to the premises involved thereby to discourage
any attempt to recover possession thru force, strategy or stealth and without resorting to the
courts.
Patently, even if RTC judgments in unlawful detainer cases are immediately executory,
preliminary injunction may still be granted. There need only be clear showing that
there exists a right to be protected and that the acts against which the writ is to be
directed violate said right. (Emphasis supplied.)
As in Benedicto, substantial considerations exist herein that compels the Court to issue a
writ of preliminary injunction enjoining the execution of the February 17, 2004 Decision of the
MTCC, as affirmed by the December 12, 2005 Decision of the RTC-Branch 1, until the appeal of
latter judgment, sought by NAPOCOR and TRANSCO, is finally resolved by the Court of Appeals.
First, the two parcels of land claimed by LANDTRADE are the subject of several other
cases. In fact, Vidal and AZIMUTH, who instituted the Quieting of Title Case against Teofilo and
LANDTRADE (also presently before the Court in G.R. Nos. 178779 and 178894) have filed a
Motion For Leave to Intervene in the instant case, thus, showing that there are other parties who,
while strangers to the ejectment case, might be greatly affected by its result and who want to
protect their interest in the subject properties. And although cases involving title to real property,
i.e., quieting of title, accion publiciana, etc., are not prejudicial to and do not suspend an
ejectment case,276[131] the existence of such cases should have already put the Court of Appeals
on guard that the title of LANDTRADE to the subject properties on which it fundamentally based
its claim of possessory right is being fiercely contested.

275
276

Second, it is undisputed that TRANSCO and its predecessor, NAPOCOR, have been in possession
of the disputed parcels of land for more than 40 years. Upon said properties stand the TRANSCO
Overton Sub-station and Agus 7 Warehouse. The Overton Sub-station, in particular, is a crucial
facility responsible for providing the power requirements of a large portion of Iligan City, the two
Lanao Provinces, and other nearby provinces. Without doubt, having TRANSCO vacate its Overton
Sub-station, by prematurely executing the MTCC judgment of February 17, 2004, carries serious
and irreversible implications, primordial of which is the widespread disruption of the electrical
power supply in the aforementioned areas, contributing further to the electric power crisis
already plaguing much of Mindanao.
Lastly, allowing execution pending appeal would result in the payment of an astronomical
amount in rentals which, per Sheriff Borress computation, already amounted to P156,000,000.00
by August 11, 2004, when he issued the Notices of Garnishment and Notification against
NAPOCOR and TRANSCO; plus, P500,000.0 each month thereafter. Payment of such an amount
may seriously put the operation of a public utility in peril, to the detriment of its consumers.
These circumstances altogether present a pressing necessity to avoid injurious consequences,
not just to NAPOCOR and TRANSCO, but to a substantial fraction of the consuming public as well,
which cannot be remedied under any standard compensation. The issuance by the Court of
Appeals of a writ of preliminary injunction is justified by the circumstances.
The Court must emphasize though that in so far as the Ejectment Case is concerned, it has only
settled herein issues on the propriety of enjoining the execution of the MTCC Decision dated
February 17, 2004 while it was on appeal before the RTC, and subsequently, before the Court of
Appeals. The Court of Appeals has yet to render a judgment on the appeal itself. But it may not
be amiss for the Court to also point out that in G.R. Nos. 178779 and 178894 (Quieting of Title
Case), it has already found that Vidal, not Teofilo, is the late Doa Demetrias sole heir, who alone
inherits Doa Demetrias rights to and interests in the disputed parcels of land. This conclusion of
the Court in the Quieting of Title Case will inevitably affect the Ejectment Case still pending
appeal before the Court of Appeals since LANDTRADE is basing its right to possession in the
Ejectment Case on its supposed title to the subject properties, which it derived from Teofilo.
The Cancellation of Titles and Reversion Case
(G.R. No. 173401)
The Republic is assailing in its Petition in G.R. No. 173401 the (1) Order dated December
13, 2005 of the RTC-Branch 4 dismissing Civil Case No. 6686, the Complaint for Cancellation of
Titles and Reversion filed by the Republic against the deceased Doa Demetria, Vidal and/or
Teofilo, and AZIMUTH and/or LANDTRADE; and (2) Order dated May 16, 2006 of the same trial
court denying the Motion for Reconsideration of the Republic, averring that:
With due respect, the trial court decided a question of substance contrary to law and
jurisprudence in ruling:
(i)
THAT PETITIONER HAD NO CAUSE OF ACTION IN INSTITUTING THE SUBJECT COMPLAINT
FOR CANCELLATION OF OCT NOS. 0-1200 (A.F.) AND 0-1201 (A.F.), INCLUDING ALL DERIVATIVE
TITLES, AND REVERSION.
(ii)
THAT PETITIONERS COMPLAINT FOR CANCELLATION OF OCT NOS. 0-1200 (A.F.) AND 01201 (A.F.) INCLUDING ALL DERIVATIVE TITLES, AND REVERSION IS BARRED BY THE DECISIONS IN
CACHO VS GOVERNMENT OF THE UNITED STATES (28 PHIL. 616 [1914] AND CACHO VS COURT OF
APPEALS (269 SCRA 159 [1997].
(iii)

THAT PETITIONERS CAUSE OF ACTION HAS PRESCRIBED; AND

(iv)

THAT PETITIONER IS GUILTY OF FORUM SHOPPING. 277[132]


The Court finds merit in the present Petition.

Cause of action for reversion


The Complaint in Civil Case No. 6686 seeks the cancellation of OCT Nos. 0-1200 (a.f.) and 0-1201 (a.f.), with all their
derivative titles, and reversion. The Complaint was dismissed by the RTC-Branch 4 in its Order dated December 13,
2005, upon Motion of Vidal and AZIMUTH, on the ground that the State does not have a cause of
action for reversion. According to the RTC-Branch 4, there was no showing that the late Doa
277

Demetria committed any wrongful act or omission in violation of any right of the Republic.
Additionally, the Regalian doctrine does not apply to Civil Case No. 6686 because said doctrine
does not extend to lands beyond the public domain. By the own judicial admission of the
Republic, the two parcels of land in question are privately owned, even before the same were
registered in Doa Demetrias name.
The Court disagrees.
Rule 2, Section 2 of the Rules of Court defines a cause of action as the act or omission by
which a party violates a right of another. Its essential elements are the following: (1) a right in favor of the plaintiff; (2)
an obligation on the part of the named defendant to respect or not to violate such right; and (3) such defendants act or omission that is
violative of the right of the plaintiff or constituting a breach of the obligation of the former to the latter.278[133]
Reversion is an action where the ultimate relief sought is to revert the land back to the
government under the Regalian doctrine. Considering that the land subject of the action
originated from a grant by the government, its cancellation is a matter between the grantor and
the grantee.279[134] In Estate of the Late Jesus S. Yujuico v. Republic 280[135] (Yujuico case), reversion
was defined as an action which seeks to restore public land fraudulently awarded and disposed
of to private individuals or corporations to the mass of public domain. It bears to point out,
though, that the Court also allowed the resort by the Government to actions for reversion to
cancel titles that were void for reasons other than fraud, i.e., violation by the grantee of a patent
of the conditions imposed by law; 281[136] and lack of jurisdiction of the Director of Lands to grant a
patent covering inalienable forest land 282[137] or portion of a river, even when such grant was
made through mere oversight.283[138] In Republic v. Guerrero,284[139] the Court gave a more general
statement that the remedy of reversion can be availed of only in cases of fraudulent or
unlawful inclusion of the land in patents or certificates of title.
The right of the Republic to institute an action for reversion is rooted in the Regalian doctrine.
Under the Regalian doctrine, all lands of the public domain belong to the State, and that the
State is the source of any asserted right to ownership in land and charged with the conservation
of such patrimony. This same doctrine also states that all lands not otherwise appearing to be
clearly within private ownership are presumed to belong to the State.285[140] It is incorporated
in the 1987 Philippine Constitution under Article XII, Section 2 which declares [a]ll lands of the
public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are
owned by the State. x x x No public land can be acquired by private persons without any grant,
express or implied, from the government; it is indispensable that there be a showing of the title
from the State.286[141]
The reversion case of the Republic in Civil Case No. 6686 rests on the main argument that OCT
Nos. 0-1200 (a.f.) and 0-1201 (a.f.), issued in Doa Demetrias name, included parcels of lands which were
not adjudicated to her by the Court in the 1914 Cacho case. Contrary to the statement made by
the RTC-Branch 4 in its December 13, 2005 Order, the Republic does not make any admission in
its Complaint that the two parcels of land registered in Doa Demetrias name were privately
owned even prior to their registration. While the Republic does not dispute that that two parcels
of land were awarded to Doa Demetria in the 1914 Cacho case, it alleges that these were not the
same as those covered by OCT Nos. 0-1200 (a.f.) and 0-1201 (a.f.) issued in Doa Demetrias name
84 years later. If, indeed, the parcels of land covered by said OCTs were not those granted to Doa
Demetria in the 1914 Cacho case, then it can be presumed, under the Regalian doctrine, that
said properties still form part of the public domain belonging to the State.
278
279
280
281
282
283
284
285
286

Just because OCTs were already issued in Doa Demetrias name does not bar the Republic from instituting an action for reversion.
Indeed, the Court made it clear in Francisco v. Rodriguez287[142] that Section 101 of the Public Land Act may be invoked only
when title has already vested in the individual, e.g., when a patent or a certificate of title has
already been issued[,] for the basic premise in an action for reversion is that the certificate of
title fraudulently or unlawfully included land of the public domain, hence, calling for the
cancellation of said certificate. It is actually the issuance of such a certificate of title which
constitutes the third element of a cause of action for reversion.
The Court further finds that the Complaint of the Republic in Civil Case No. 6686 sufficiently
states a cause of action for reversion, even though it does not allege that fraud was committed
in the registration or that the Director of Lands requested the reversion.
It is a well-settled rule that the existence of a cause of action is determined by the allegations in
the complaint. In the resolution of a motion to dismiss based on failure to state a cause of action,
only the facts alleged in the complaint must be considered. The test in cases like these is
whether a court can render a valid judgment on the complaint based upon the facts alleged and
pursuant to the prayer therein. Hence, it has been held that a motion to dismiss generally
partakes of the nature of a demurrer which hypothetically admits the truth of the factual
allegations made in a complaint.288[143] The hypothetical admission extends to the relevant and
material facts well pleaded in the complaint and inferences fairly deducible therefrom. Hence, if
the allegations in the complaint furnish sufficient basis by which the complaint can be
maintained, the same should not be dismissed regardless of the defense that may be assessed
by the defendants.289[144]
In Vergara v. Court of Appeals,290[145] the Court additionally explained that:
In determining whether allegations of a complaint are sufficient to support a cause of action, it
must be borne in mind that the complaint does not have to establish or allege facts proving the
existence of a cause of action at the outset; this will have to be done at the trial on the merits of
the case. To sustain a motion to dismiss for lack of cause of action, the complaint must show that
the claim for relief does not exist, rather than that a claim has been defectively stated, or is
ambiguous, indefinite or uncertain.
The Republic meticulously presented in its Complaint the discrepancies between the 1914 Cacho
case, on one hand, which granted Doa Demetria title to two parcels of land; and OCT Nos. 0-1200
(a.f.) and 0-1201 (a.f.), on the other, which were supposedly issued pursuant to the said case. In
paragraphs 9 and 16 of its Complaint, the Republic clearly alleged that OCT Nos. 0-1200 (a.f.)
and 0-1201 (a.f.) cover properties much larger than or areas beyond those granted by the land
registration court in GLRO Record Nos. 6908 and 6909. Thus, the Republic was able to
satisfactorily allege the unlawful inclusion, for lack of an explicit grant from the Government, of
parcels of public land into Doa Demetrias OCTs, which, if true, will justify the cancellation of said
certificates and the return of the properties to the Republic.
That the Complaint in Civil Case No. 6686 does not allege that it had been filed by the Office of
the Solicitor General (OSG), at the behest of the Director of Lands, does not call for its dismissal
on the ground of failure to state a cause of action. Section 101 of Commonwealth Act No. 141,
otherwise known as the Public Land Act, as amended, simply requires that:
SEC. 101. All actions for the reversion to the Government of lands of the public domain or
improvements thereon shall be instituted by the Solicitor General or the officer acting in his
stead, in the proper courts, in the name of the Republic of the Philippines. (Emphasis
supplied.)
Clear from the aforequoted provision that the authority to institute an action for reversion, on
behalf of the Republic, is primarily conferred upon the OSG. While the OSG, for most of the time,
will file an action for reversion upon the request or recommendation of the Director of Lands,
there is no basis for saying that the former is absolutely bound or dependent on the latter.
287
288
289
290

RTC-Branch 4 cited Sherwill Development Corporation v. Sitio Nio Residents Association, Inc.
291
[146] (Sherwill case), to support its ruling that it is absolutely necessary that an investigation and
a determination of fraud should have been made by the Director of Lands prior to the filing of a
case for reversion. The Sherwill case is not in point and does not constitute a precedent for the
case at bar. It does not even involve a reversion case. The main issue therein was whether the
trial court properly dismissed the complaint of Sherwill Development Corporation for quieting of
title to two parcels of land, considering that a case for the declaration of nullity of its TCTs,
instituted by the Sto. Nio Residents Association, Inc., was already pending before the Land
Management Bureau (LMB). The Court recognized therein the primary jurisdiction of the LMB
over the dispute, and affirmed the dismissal of the quieting of title case on the grounds of litis
pendentia and forum shopping.
Res judicata
Public policy and sound practice enshrine the fundamental principle upon which the doctrine of
res judicata rests that parties ought not to be permitted to litigate the same issues more than
once. It is a general rule common to all civilized system of jurisprudence, that the solemn and
deliberate sentence of the law, pronounced by its appointed organs, upon a disputed fact or a
state of facts, should be regarded as a final and conclusive determination of the question
litigated, and should forever set the controversy at rest. Indeed, it has been well said that this
maxim is more than a mere rule of law; more even than an important principle of public policy;
and that it is not too much to say that it is a fundamental concept in the organization of every
jural system. Public policy and sound practice demand that, at the risk of occasional errors,
judgments of courts should become final at some definite date fixed by law. The very object for
which courts were constituted was to put an end to controversies. 292[147]
The doctrine of res judicata comprehends two distinct concepts - (1) bar by former judgment,
and (2) conclusiveness of judgment. For res judicata to serve as an absolute bar to a subsequent
action, the following requisites must concur: (1) the former judgment or order must be final; (2)
the judgment or order must be on the merits; (3) it must have been rendered by a court having
jurisdiction over the subject matter and parties; and (4) there must be between the first and
second actions, identity of parties, of subject matter, and of causes of action. When there is no
identity of causes of action, but only an identity of issues, there exists res judicata in the concept
of conclusiveness of judgment. Although it does not have the same effect as res judicata in the
form of bar by former judgment which prohibits the prosecution of a second action upon the
same claim, demand, or cause of action, the rule on conclusiveness of judgment bars the
relitigation of particular facts or issues in another litigation between the same parties on a
different claim or cause of action. 293[148]
The 1914 Cacho case does not bar the Complaint for reversion in Civil Case No. 6686 by res
judicata in either of its two concepts.
There is no bar by prior judgment because the 1914 Cacho case and Civil Case No. 6686 do not
have the same causes of action and, even possibly, they do not involve identical subject matters.
Land registration cases, such as GLRO Record Nos. 6908 and 6909, from which the 1914 Cacho
case arose, are special proceedings where the concept of a cause of action in ordinary civil
actions does not apply. In special proceedings, the purpose is to establish a status, condition or
fact; in land registration proceedings, the ownership by a person of a parcel of land is sought to
be established.294[149] Civil Case No. 6686 is an action for reversion where the cause of action is
the alleged unlawful inclusion in OCT Nos. 0-1200 (a.f.) and 0-1201 (a.f.) of parcels of public land
that were not among those granted to Doa Demetria in the 1914 Cacho case. Thus, Civil Case
No. 6686 even rests on supposition that the parcels of land covered by the certificates of title in
Doa Demetrias name, which the Republic is seeking to have cancelled, are different from the
parcels of land that were the subject matter of the 1914 Cacho case and adjudged to Doa
Demetria.
Res judicata in the concept of conclusiveness of judgment, likewise, does not apply as between
the 1914 Cacho case and Civil Case No. 6686. A careful study of the Complaint in Civil Case No.
291
292
293
294

6686 reveals that the Republic does not seek to re-litigate any of the issues resolved in the 1914
Cacho case. The Republic no longer questions in Civil Case No. 6686 that Doa Demetria was
adjudged the owner of two parcels of land in the 1914 Cacho case. The Republic is only insisting
on the strict adherence to the judgment of the Court in the 1914 Cacho case, particularly: (1) the
adjudication of a smaller parcel of land, consisting only of the southern portion of the 37.87hectare Lot 2 subject of Doa Demetrias application in GLRO Record No. 6909; and (2) the
submission of a new technical plan for the adjudicated southern portion of Lot 2 in GLRO Record
No. 6909, and the deed executed by Datto Darondon, husband of Alanga, renouncing all his
rights to Lot 1, in GLRO Record No. 6908, in Doa Demetrias favor. 295[150]
Similarly, the 1997 Cacho case is not an obstacle to the institution by the Republic of Civil Case
No. 6686 on the ground of res judicata.
Bar by prior judgment does not apply for lack of identity of causes of action between the
1997 Cacho case and Civil Case No. 6686. The 1997 Cacho case involves a petition for reissuance of decrees of registration. In the absence of principles and rules specific for such a
petition, the Court refers to those on reconstitution of certificates of title, being almost of the
same nature and granting closely similar reliefs.
Reconstitution denotes a restoration of the instrument which is supposed to have been lost or
destroyed in its original form or condition. The purpose of the reconstitution of title or any
document is to have the same reproduced, after observing the procedure prescribed by law, in
the same form they were when the loss or destruction occurred. 296[151] Reconstitution is another
special proceeding where the concept of cause of action in an ordinary civil action finds no
application.
The Court, in the 1997 Cacho case, granted the reconstitution and re-issuance of the decrees of
registration considering that the NALTDRA, through then Acting Commissioner Santiago M.
Kapunan,297[152] its Deputy Clerk of Court III, the Head Geodetic Engineer, and the Chief of
Registration, certified that according to the Record Book of Decrees for Ordinary Land
Registration Case, Decree No. 18969 was issued in GLRO Record No. 6909 and Decree No. 10364
was issued in GLRO Record No. 6908[;] 298[153] thus, leaving no doubt that said decrees had in fact
been issued.
The 1997 Cacho case only settled the issuance, existence, and subsequent loss of Decree
Nos. 10364 and 18969. Consequently, said decrees could be re-issued in their original form or
condition. The Court, however, could not have passed upon in the 1997 Cacho case the issues on
whether Doa Demetria truly owned the parcels of land covered by the decrees and whether the
decrees and the OCTs subsequently issued pursuant thereto are void for unlawfully including land
of the public domain which were not awarded to Doa Demetria.
The following pronouncement of the Court in Heirs of Susana de Guzman Tuazon v. Court
of Appeals299[154] is instructive:
Precisely, in both species of reconstitution under Section 109 of P.D. No. 1529 and R.A. No. 26,
the nature of the action denotes a restoration of the instrument which is supposed to have been
lost or destroyed in its original form and condition. The purpose of the action is merely to
have the same reproduced, after proper proceedings, in the same form they were
when the loss or destruction occurred, and does not pass upon the ownership of the
land covered by the lost or destroyed title. It bears stressing at this point that ownership
should not be confused with a certificate of title. Registering land under the Torrens System does
not create or vest title because registration is not a mode of acquiring ownership. A certificate of
title is merely an evidence of ownership or title over the particular property described therein.
Corollarily, any question involving the issue of ownership must be threshed out in a
separate suit, which is exactly what the private respondents did when they filed Civil Case No.
95-3577 before Branch 74. The trial court will then conduct a full-blown trial wherein the parties
will present their respective evidence on the issue of ownership of the subject properties to
enable the court to resolve the said issue. x x x. (Emphases supplied.)
295
296
297
298
299

Whatever findings the Court made on the issue of ownership in the 1997 Cacho case are
mere obiter dictum. As the Court held in Amoroso v. Alegre, Jr.300[155]:
Petitioner claims in his petition that the 3 October 1957 Decision resolved the issue of ownership
of the lots and declared in the body of the decision that he had sufficiently proven
uncontroverted facts that he had been in possession of the land in question since 1946 x x x
[and] has been in possession of the property with sufficient title. However, such findings made
by the CFI in the said decision are mere obiter, since the ownership of the properties,
titles to which were sought to be reconstituted, was never the issue in the
reconstitution case. Ownership is not the issue in a petition for reconstitution of title.
A reconstitution of title does not pass upon the ownership of the land covered by the
lost or destroyed title.
It may perhaps be argued that ownership of the properties was put in issue when petitioner
opposed the petition for reconstitution by claiming to be the owner of the properties. However,
any ruling that the trial court may make on the matter is irrelevant considering the
courts limited authority in petitions for reconstitution. In a petition for reconstitution of
title, the only relief sought is the issuance of a reconstituted title because the reconstituting
officers power is limited to granting or denying a reconstituted title. As stated earlier, the
reconstitution of title does not pass upon the ownership of the land covered by the lost or
destroyed title, and any change in the ownership of the property must be the subject of a
separate suit. (Emphases supplied.)
The Court concedes that the 1997 Cacho case, by reason of conclusiveness of judgment,
prevents the Republic from again raising as issues in Civil Case No. 6686 the issuance and
existence of Decree Nos. 10364 and 18969, but not the validity of said decrees, as well as the
certificates of title issued pursuant thereto.
Forum shopping
Forum shopping is the filing of multiple suits involving the same parties for the same cause of
action, either simultaneously or successively, for the purpose of obtaining a favorable judgment.
A party violates the rule against forum shopping if the elements of litis pendentia are present; or
if a final judgment in one case would amount to res judicata in the other.301[156]
There is forum shopping when the following elements are present: (a) identity of parties, or at
least such parties as represent the same interests in both actions; (b) identity of rights asserted
and relief prayed for, the relief being founded on the same facts; and (c) the identity of the two
preceding particulars, is such that any judgment rendered in the other action will, regardless of
which party is successful, amount to res judicata in the action under consideration; said
requisites are also constitutive of the requisites for auter action pendant or lis pendens.302[157]
Given the preceding disquisition of the Court that the 1914 and 1997 Cacho cases do not
constitute res judicata in Civil Case No. 6686, then the Court also cannot sustain the dismissal by
the RTC-Branch 4 of the Complaint of the Republic in Civil Case No. 6686 for forum shopping.
Prescription
According to the RTC-Branch 4, the cause of action for reversion of the Republic was
already lost or extinguished by prescription, citing Section 32 of the Property Registration
Decree, which provides:
SEC. 32. Review of decree of registration; Innocent purchaser for value. The decree of
registration shall not be reopened or revised by reason of absence, minority, or other disability of
any person adversely affected thereby, nor by any proceeding in any court for reversing
judgment, subject, however, to the right of any person, including the government and the
branches thereof, deprived of land or of any estate or interest therein by such adjudication or
confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a
petition for reopening and review of the decree of registration not later than one year from and
300
301
302

after the date of the entry of such decree of registration, but in no case shall such petition be
entertained by the court where an innocent purchaser for value has acquired the land or an
interest therein, whose rights may be prejudiced. Whenever the phrase innocent purchaser of
value or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent
lessee, mortgagee, or other encumbrancer for value.
Upon the expiration of said period of one year, the decree of registration and the certificate of
title issued shall become incontrovertible. Any person aggrieved by such decree of registration in
any case may pursue his remedy by action for damages against the applicant or any other
persons responsible for the fraud.
Decree No. 10364 in GLRO Record No. 6908 was issued on May 9, 1913, while Decree No.
18969 in GLRO Record No. 6909 was issued on July 8, 1915. In the course of eight decades, the
decrees were lost and subsequently reconstituted per order of this Court in the 1997 Cacho case.
The reconstituted decrees were issued on October 15, 1998 and transcribed on OCT Nos. 0-1200
(a.f.) and 0-1201 (a.f.). The reconstituted decrees were finally entered into the Registration Book
for Iligan City on December 4, 1998 at 10:00 a.m. Almost six years had elapsed from entry of the
decrees by the time the Republic filed its Complaint in Civil Case No. 6686 on October 13, 2004.
Nonetheless, elementary is the rule that prescription does not run against the State and its
subdivisions. When the government is the real party in interest, and it is proceeding mainly to
assert its own right to recover its own property, there can as a rule be no defense grounded on
laches or prescription. Public land fraudulently included in patents or certificates of title may be
recovered or reverted to the State in accordance with Section 101 of the Public Land Act. The
right of reversion or reconveyance to the State is not barred by prescription. 303[158]
The Court discussed lengthily in Republic v. Court of Appeals304[159] the indefeasibility of a
decree of registration/certificate of title vis--vis the remedy of reversion available to the State:
The petitioner invokes Republic v. Animas, where this Court declared that a title founded on fraud
may be cancelled notwithstanding the lapse of one year from the issuance thereof. Thus:
x x x The misrepresentations of the applicant that he had been occupying and cultivating the land
and residing thereon are sufficient grounds to nullify the grant of the patent and title under
Section 91 of the Public Land Law which provides as follows:
"The statements made in the application shall be considered as essential conditions or parts of
any concession, title or permit issued on the basis of such application, and any false statement
thereon or omission of facts, changing, or modifying the consideration of the facts set forth in
such statement, and any subsequent modification, alteration, or change of the material facts set
forth in the application shall ipso facto produce the cancellation of the concession, title or permit
granted. x x x"
A certificate of title that is void may be ordered cancelled. A title will be considered void if it is
procured through fraud, as when a person applies for registration of the land under his name
although the property belongs to another. In the case of disposable public lands, failure on the
part of the grantee to comply with the conditions imposed by law is a ground for holding such
title void. The lapse of the one year period within which a decree of title may be reopened for
fraud would not prevent the cancellation thereof, for to hold that a title may become indefeasible
by registration, even if such title had been secured through fraud or in violation of the law, would
be the height of absurdity. Registration should not be a shield of fraud in securing title.
This doctrine was reiterated in Republic v. Mina, where Justice Relova declared for the Court:
A certificate of title that is void may be ordered cancelled. And, a title will be considered void if it
is procured through fraud, as when a person applies for registration of the land on the claim that
he has been occupying and cultivating it. In the case of disposable public lands, failure on the
part of the grantee to comply with the conditions imposed by law is a ground for holding such
title void. x x x The lapse of one (1) year period within which a decree of title may be reopened
for fraud would not prevent the cancellation thereof for to hold that a title may become
indefeasible by registration, even if such title had been secured through fraud or in violation of
the law would be the height of absurdity. Registration should not be a shield of fraud in securing
title.
303
304

Justifying the above-quoted provision, the Court declared in Piero, Jr. v. Director of Lands:
It is true that under Section 122 of the Land Registration Act, a Torrens title issued on the basis of
a free patent or a homestead patent is as indefeasible as one judicially secured. And in repeated
previous decisions of this Court that indefeasibility has been emphasized by Our holding that not
even the Government can file an action for annulment, but at the same time, it has been made
clear that an action for reversion may be instituted by the Solicitor General, in the name of the
Republic of the Philippines. It is to the public interest that one who succeeds in fraudulently
acquiring title to a public land should not be allowed to benefit therefrom, and the State should,
therefore, have an even existing authority, thru its duly authorized officers, to inquire into the
circumstances surrounding the issuance of any such title, to the end that the Republic, thru the
Solicitor General or any other officer who may be authorized by law, may file the corresponding
action for the reversion of the land involved to the public domain, subject thereafter to disposal
to other qualified persons in accordance with law. In other words, the indefeasibility of a title
over land previously public is not a bar to an investigation by the Director of Lands as to how
such title has been acquired, if the purpose of such investigation is to determine whether or not
fraud had been committed in securing such title in order that the appropriate action for reversion
may be filed by the Government.
Private respondent PNB points out that Animas involved timberland, which is not alienable or
disposable public land, and that in Piero the issue raised was whether the Director of Lands
would be enjoined by a writ of prohibition from investigating allegations of fraud that led to the
issuance of certain free patents. Nevertheless, we find that the doctrine above quoted is no less
controlling even if there be some factual disparities (which are not material here), especially as it
has been buttressed by subsequent jurisprudence.
In Director of Lands v. Jugado, upon which the appellate court based its ruling, the Court declared
meaningfully that:
There is, however, a section in the Public Land Law (Sec. 101 of Commonwealth Act 141), which
affords a remedy whereby lands of the public domain fraudulently awarded may be recovered or
reverted back to its original owner, the Government. But the provision requires that all such
actions for reversion shall be instituted by the Solicitor General or the officer acting in his stead,
in the proper courts, in the name of the Republic of the Philippines (See Director of Lands v. De
Luna, supra). As the party in interest in this case is the Director of Lands and not the Republic of
the Philippines, the action cannot prosper in favor of the appellant.
The reference was to the Public Land Law which authorizes the reversion suit under its Sec. 101,
thus:
Sec. 101. All actions for the reversion to the Government of lands of the public domain or
improvements thereon shall be instituted by the Solicitor General or the officer acting in his
stead, in the proper courts, in the name of the Republic of the Philippines.
This remedy was recently affirmed by the Court in Heirs of Gregorio Tengco v. Heirs of Jose and
Victoria Aliwalas, thus:
x x x Title to the property having become incontrovertible, such may no longer be collaterally
attacked. If indeed there had been any fraud or misrepresentation in obtaining the title, an action
for reversion instituted by the Solicitor General would be the proper remedy.
It is evident from the foregoing jurisprudence that despite the lapse of one year from the entry of
a decree of registration/certificate of title, the State, through the Solicitor General, may still
institute an action for reversion when said decree/certificate was acquired by fraud or
misrepresentation. Indefeasibility of a title does not attach to titles secured by fraud and
misrepresentation. Well-settled is the doctrine that the registration of a patent under the Torrens
system does not by itself vest title; it merely confirms the registrants already existing one.
Verily, registration under the Torrens system is not a mode of acquiring ownership. 305[160]
But then again, the Court had several times in the past recognized the right of the State to
avail itself of the remedy of reversion in other instances when the title to the land is void for
reasons other than having been secured by fraud or misrepresentation. One such case is

305

Spouses Morandarte v. Court of Appeals,306[161] where the Bureau of Lands (BOL), by mistake and
oversight, granted a patent to the spouses Morandarte which included a portion of the Miputak
River. The Republic instituted an action for reversion 10 years after the issuance of an OCT in the
name of the spouses Morandarte. The Court ruled:
Be that as it may, the mistake or error of the officials or agents of the BOL in this regard cannot
be invoked against the government with regard to property of the public domain. It has been
said that the State cannot be estopped by the omission, mistake or error of its officials or agents.
It is well-recognized that if a person obtains a title under the Public Land Act which includes, by
oversight, lands which cannot be registered under the Torrens system, or when the Director of
Lands did not have jurisdiction over the same because it is a public domain, the grantee does
not, by virtue of the said certificate of title alone, become the owner of the land or property
illegally included. Otherwise stated, property of the public domain is incapable of registration and
its inclusion in a title nullifies that title.
Another example is the case of Republic of the Phils. v. CFI of Lanao del Norte, Br. IV,307[162]
in which the homestead patent issued by the State became null and void because of the
grantees violation of the conditions for the grant. The Court ordered the reversion even though
the land subject of the patent was already covered by an OCT and the Republic availed itself of
the said remedy more than 11 years after the cause of action accrued, because:
There is merit in this appeal considering that the statute of limitation does not lie against the
State. Civil Case No. 1382 of the lower court for reversion is a suit brought by the petitioner
Republic of the Philippines as a sovereign state and, by the express provision of Section 118 of
Commonwealth Act No. 141, any transfer or alienation of a homestead grant within five (5) years
from the issuance of the patent is null and void and constitute a cause for reversion of the
homestead to the State. In Republic vs. Ruiz, 23 SCRA 348, We held that "the Court below
committed no error in ordering the reversion to plaintiff of the land grant involved herein,
notwithstanding the fact that the original certificate of title based on the patent had been
cancelled and another certificate issued in the names of the grantee heirs. Thus, where a
grantee is found not entitled to hold and possess in fee simple the land, by reason of his having
violated Section 118 of the Public Land Law, the Court may properly order its reconveyance to
the grantor, although the property has already been brought under the operation of the Torrens
System. And, this right of the government to bring an appropriate action for reconveyance is not
barred by the lapse of time: the Statute of Limitations does not run against the State." (Italics
supplied). The above ruling was reiterated in Republic vs. Mina, 114 SCRA 945.
If the Republic is able to establish after trial and hearing of Civil Case No. 6686 that the decrees
and OCTs in Doa Demetrias name are void for some reason, then the trial court can still order the
reversion of the parcels of land covered by the same because indefeasibility cannot attach to a
void decree or certificate of title. The RTC-Branch 4 jumped the gun when it declared that the
cause of action of the Republic for reversion in Civil Case No. 6686 was already lost or
extinguished by prescription based on the Complaint alone.
All told, the Court finds that the RTC-Branch 4 committed reversible error in dismissing the
Complaint for Cancellation of Titles and Reversion of the Republic in Civil Case No. 6686.
Resultantly, the Court orders the reinstatement of said Complaint. Yet, the Court also deems it
opportune to recall the following statements in Saad-Agro Industries, Inc. v. Republic 308[163]:
It has been held that a complaint for reversion involves a serious controversy, involving a
question of fraud and misrepresentation committed against the government and it is aimed at
the return of the disputed portion of the public domain. It seeks to cancel the original certificate
of registration, and nullify the original certificate of title, including the transfer certificate of title
of the successors-in-interest because the same were all procured through fraud and
misrepresentation. Thus, the State, as the party alleging the fraud and misrepresentation that
attended the application of the free patent, bears that burden of proof. Fraud and
misrepresentation, as grounds for cancellation of patent and annulment of title, should never be
presumed but must be proved by clear and convincing evidence, mere preponderance of
evidence not even being adequate. It is but judicious to require the Government, in an
action for reversion, to show the details attending the issuance of title over the
306
307
308

alleged inalienable land and explain why such issuance has deprived the State of the
claimed property. (Emphasis supplied.)
It may do well for the Republic to remember that there is a prima facie presumption of regularity
in the issuance of Decree Nos. 10364 and 18969, as well as OCT Nos. 0-1200 (a.f.) and 0-1201
(a.f.), in Doa Demetrias name, and the burden of proof falls upon the Republic to establish by
clear and convincing evidence that said decrees and certificates of title are null and void.
IV
DISPOSITIVE PART
WHEREFORE, premises considered, the Court renders the following judgment in the
Petitions at bar:
1)
In G.R. No. 170375 (Expropriation Case), the Court GRANTS the Petition for
Review of the Republic of the Philippines. It REVERSES and SETS ASIDE the Resolutions dated
July 12, 2005 and October 24, 2005 of the Regional Trial Court, Branch 1 of Iligan City, Lanao del
Norte. It further ORDERS the reinstatement of the Complaint in Civil Case No. 106, the
admission of the Supplemental Complaint of the Republic, and the return of the original record of
the case to the court of origin for further proceedings. No costs.
2)
In G.R. Nos. 178779 and 178894 (Quieting of Title Case), the Court DENIES the
consolidated Petitions for Review of Landtrade Realty Corporation, Teofilo Cacho, and/or Atty.
Godofredo Cabildo for lack of merit. It AFFIRMS the Decision dated January 19, 2007 and
Resolution dated July 4, 2007 of the Court of Appeals in CA-G.R. CV. No. 00456, affirming in toto
the Decision dated July 17, 2004 of the Regional Trial Court, Branch 3 of Iligan City, Lanao del
Norte, in Civil Case No. 4452. Costs against Landtrade Realty Corporation, Teofilo Cacho, and
Atty. Godofredo Cabildo.
3)
In G.R. No. 170505 (The Ejectment or Unlawful Detainer Case execution pending appeal
before the Regional Trial Court), the Court DENIES the Petition for Review of Landtrade Realty
Corporation for being moot and academic given that the Regional Trial Court, Branch 1 of Iligan
City, Lanao del Norte had already rendered a Decision dated December 12, 2005 in Civil Case No.
6613. No costs.
4)
In G.R. Nos. 173355-56 and 173563-64 (The Ejectment or Unlawful Detainer
Case execution pending appeal before the Court of Appeals), the Court GRANTS the
consolidated Petitions for Certiorari and Prohibition of the National Power Corporation and
National Transmission Corporation. It SETS ASIDE the Resolution dated June 30, 2006 of the
Court of Appeals in CA-G.R. SP Nos. 00854 and 00889 for having been rendered with grave abuse
of discretion amounting to lack or excess of jurisdiction. It further ORDERS the Court of Appeals
to issue a writ of preliminary injunction enjoining the execution of the Decision dated December
12, 2005 of the Regional Trial Court, Branch 1 of Iligan City, Lanao del Norte, in Civil Case No.
6613, while the same is pending appeal before the Court of Appeals in CA-G.R. SP Nos. 00854
and 00889. It finally DIRECTS the Court of Appeals to resolve without further delay the pending
appeals before it, in CA-G.R. SP Nos. 00854 and 00889, in a manner not inconsistent with this
Decision. No costs.
5)
In G.R. No. 173401 (Cancellation of Titles and Reversion Case), the Court GRANTS
the Petition for Review of the Republic of the Philippines. It REVERSES and SETS ASIDE the
Orders dated December 13, 2005 and May 16, 2006 of the Regional Trial Court, Branch 4 of Iligan
City in Civil Case No. 6686. It further ORDERS the reinstatement of the Complaint in Civil Case
No. 6686 and the return of the original record of the case to the court of origin for further
proceedings. No costs.
SO ORDERED.
ASSOCIATED
ANGLO-AMERICAN
TOBACCO
CORPORATION
and
FLORANTE DY,
Petitioners,

G.R. No. 167237

Present:
- versus HON. COURT OF APPEALS,
HON. CRISPIN C. LARON,

in

his

CARPIO, J., Chairperson,


BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.

capacity
as
PRESIDING
JUDGE,
REGIONAL TRIAL COURT, REGION 1,
BRANCH 44, DAGUPAN CITY, SHERIFF
VIRGILIO F. VILLAR, OFFICE OF THE
EX-OFFICIO SHERIFF OF PASAY CITY,
REGISTER OF DEEDS OF LINGAYEN,
PANGASINAN and SPOUSES PAUL
PELAEZ, JR. and ROCELI MAMISAY
PELAEZ,

Promulgated:

Respondents.
April 23, 2010
x-------------------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
The appeal of a final order substantially amending only some matters in a previously rendered Decision
is also an appeal of the other intimately interwoven matters passed upon in the original decision.
In the present Petition for Certiorari and Prohibition, petitioners assail the May 31, 2004 Decision 309[1]
and the January 17, 2005310[2] Resolution of the Court of Appeals (CA) in CA-G.R. SP. No. 75347. The CA
dismissed the Petition for Certiorari filed before it assailing the Decision and several Orders of the
Regional Trial Court (RTC) of Dagupan City, Branch 44 in Civil Case No. D-8732.
Factual Antecedents
Spouses Paul Pelaez, Jr. (Paul) and Roceli Mamisay Pelaez (Roceli) were employees of petitioner
Associated Anglo-American Tobacco Corporation (the Corporation). Paul worked as Sales Supervisor and
later as Senior Salesman while Roceli worked as secretary.
As salesman, Paul was required, on April 17, 1986, by the Corporation to post a bond to answer
for any amount which he might fail to turnover to the Corporation. He complied by executing a
mortgage bond over his family's house and lot in favor of the Corporation. The mortgaged real estate
was covered by Transfer Certificate of Title (TCT) No. 155994 of the Registry of Deeds of Pangasinan.
Upon its determination that Paul had defaulted in remitting the sales proceeds, the Corporation
initiated the extrajudicial foreclosure of the mortgage bond.
To stop the extrajudicial sale, Paul and Roceli filed on August 21, 1987, a Complaint against the
Corporation, Dy and the Sheriff Virgilio S. Villar (Sheriff) before the RTC.
Ruling of the Regional Trial Court
The RTC issued a restraining order and, subsequently, a writ of preliminary injunction to stop the
extrajudicial sale. Then, on September 14, 2000, after due hearing, Judge Crispin C. Laron, issued a
Decision in favor of the spouses Pelaez, the fallo of which reads:
WHEREFORE, judgment is rendered in favor of the plaintiffs and against the defendants, as
follows:
1.
The defendants Associated Anglo-American Tobacco Corporation and Florante C. Dy are
ordered to jointly and severally pay plaintiffs the amount of P23,820.16 representing the overage and
the account of Plaintiff Paul Pelaez, Jr. and to release the mortgage on the parcel of land covered by, and
release to plaintiffs, Transfer Certificate of Title No. 155994;
2.
The defendants Associated Anglo-American Tobacco Corporation and Florante C. Dy are
ordered to pay the plaintiffs moral, exemplary damages, attorney's fees and litigation expenses in the
amount of P50,000.00;
3.
309
310

The injunction is made permanent.

With costs against defendants.


SO ORDERED.311[3]
Upon motion of the spouses Pelaez, the RTC amended its Decision in its February 7, 2001 Order,
to wit:
WHEREFORE, the Motion for Partial Reconsideration is granted and the dispositive portion of the Decision
dated September 14, 2000 is hereby modified as follows:
The defendants Associated Anglo-American Tobacco Corp. and Florante C. Dy are ordered to
jointly and severally pay plaintiffs the amount of P843,383.11 representing the overage and the amount
of award of moral and exemplary damages and attorney's fees is increased from P50,000.00 to
P2,000,000.00.
Furnish copies of this Order to Atty. Efren Moncupa and Atty. Da Vinci Crisostomo.
SO ORDERED.312[4]
On February 20, 2001, petitioners received their copy of the February 7, 2001 Order and on
March 6, 2001, they filed a Notice of Appeal of the September 14, 2000 Decision and the February 7,
2001 Order of the RTC. The spouses Pelaez, on the other hand, filed a Motion to Dismiss the Appeal and
Motion for Partial Execution dated August 22, 2001.
Ruling on the motion, the RTC in its May 9, 2002 Order, found that the petitioners Notice of
Appeal was filed timely "only insofar as the Order of the Court dated February 7, 2001 is concerned."
Hence, it disposed as follows:
WHEREFORE, the appeal insofar as to all matters not raised in the plaintiffs' Motion for Partial
Reconsideration is DISMISSED.
Let a writ of execution issue for the release of the mortgage on the parcel of land covered by, and
release to plaintiffs Transfer Certificate of Title No. 155994 and that the injunction is made permanent.
Furnish copies of this Order to Atty. Rafael Declaro, Jr., Atty. Da Vinci Crisostomo and Mr. Sancho
Esquillo.
SO ORDERED.313[5]
On June 7, 2002, a Writ of Execution in favor of the spouses Pelaez was issued and on December
12, 2002, the RTC issued two Orders, one denying petitioners motion for reconsideration of the May 9,
2002 Order; and the other mandating the release of the mortgage under TCT No. 155994 and causing
the issuance of a new title in the name of spouses Pelaez free from any liens or encumbrances.
Ruling of the Court of Appeals
Petitioners then filed a Petition for Certiorari with the CA. The CA found that the September 14,
2000 Decision of the RTC had become final and executory. It found no cogent reason to disturb the RTC's
Decision and its subsequent amendment as embodied in the February 7, 2001 Order. The dispositive
portion of the CA Decision states:
WHEREFORE, premises considered, the petition is DISMISSED for lack of merit.
SO ORDERED.314[6]

311
312
313
314

After the denial by the CA of their motion for reconsideration, petitioners filed the present Petition
for Certiorari and Prohibition.
Issues
Petitioners raise the following issues:
Whether or not the Court of Appeals committed grave abuse of discretion tantamount to lack of
jurisdiction in holding the trial court's decision to be final and executory notwithstanding that said
decision had been modified, superseded and substituted by a subsequent order upon which petitioner
had duly perfected an appeal?
Whether or not the Court of Appeals gravely abused its discretion in holding that the petition for
certiorari is not the right judicial remedy but ordinary appeal notwithstanding the latter course of action
had already been availed of to no avail?
Whether or not the Court of Appeals committed grave abuse of discretion when in dismissing the
petition for certiorari it validated in effect the trial court's order to release the mortgage and declaring
the injunction permanent notwithstanding the loss of jurisdiction due to the perfection of an appeal? 315
[7]
Petitioners' Arguments
Petitioners contend that their petition for certiorari is the proper remedy and that it was filed on
time within 60 days from their receipt of the CA's assailed Resolution.
They contend that the CA gravely abused its discretion when it regarded the September 14, 2000
Decision of the trial court as final and executory even if said Decision was already modified, superseded,
vacated and substituted by the subsequent February 7, 2001 Order.
They also contend that it is grossly erroneous for the CA to conclude that the Petition for
Certiorari and Prohibition is not the right judicial remedy but ordinary appeal, when the latter action had
already been taken and perfected by petitioners but the trial court simply refused to elevate the records
to the CA.
Respondents' Arguments
Respondents on the other hand contend that petitioners failed to demonstrate patent and gross
abuse of discretion on the part of the CA and since all they say is that the CA erred in dismissing their
petition, the CA Resolution can only be assailed by means of a petition for review, not an original petition
for certiorari. They also contend that the availability of the remedy of filing a petition for review
foreclosed the filing of this original petition for certiorari and justifies its dismissal.
Respondents also submit that the February 7, 2001 RTC Order granting the spouses Pelaez' Partial
Motion for Reconsideration by increasing the monetary awards only, did not amend the RTC Decision but
merely supplemented it. Thus, they contend that the finality of the Decision was therefore not affected.
Our Ruling
The petition has merit.
Mode of Appeal
Petitioners are questioning a final decision of the CA by resorting to Rule 65, when their remedy
should be based on Rule 45. This case would normally have been dismissed outright for failure of the
petitioners to adopt the proper remedy. While ordinarily, certiorari is unavailing where the appeal period
has lapsed, there are exceptions. Among them are (a) when public welfare and the advancement of
public policy dictates; (b) when the broader interest of justice so requires; (c) when the writs issued are
null and void; or (d) when the questioned order amounts to an oppressive exercise of judicial authority.316
[8] In the present case, the CA's act of dismissing petitioners' petition for certiorari and in finding the
RTC's Decision already final and executory in its entirety, despite the filing by the petitioners of a Notice
of Appeal within 15 days from their receipt of the February 7, 2001 RTC Order amending the said RTC
315
316

Decision is an oppressive exercise of judicial authority. Hence, in the interest of substantial justice, we
deem it wise to overlook the procedural technicalities.
Trial Court's Decision and Its Modification
Both parties agree that the February 7, 2001 Order increased the monetary awards in the
Decision, specifically, the amount of overage from P23,820.16 to P843,383.11 and the award of moral
and exemplary damages and attorney's fees from P50,000.00 to P2,000,000.00. They however, differ on
whether these changes constituted an amendment of the Decision or merely provided a supplement to
the Decision. Petitioners argue that the change constituted a substantial amendment, which therefore
makes the entire case reviewable on appeal, while respondents argue that the Order merely
supplements the Decision which therefore makes only the changes reviewable on appeal. They both cite
Esquivel v. Alegre317[9] which states:
There is a difference between an amended judgment and a supplemental judgment. In an
amended and clarified judgment, the lower court makes a thorough study of the original judgment and
renders the amended and clarified judgment only after considering all the factual and legal issues. The
amended and clarified decision is an entirely new decision which supersedes the original decision.
Following the court's differentiation of a supplemental pleading from an amending pleading, it can be
said that a supplemental decision does not take the place or extinguish the existence of the original. As
its very name denotes, it only serves to bolster or adds something to the primary decision. A
supplement exists side by side with the original. It does not replace that which it supplements.
In the present case, the dispositive portion of the February 7, 2001 Order was crafted in such a
way that it initially evades a categorical classification into either of the situations as described in the
above-cited case.
Hence, we further take into consideration that what plaintiffs filed was merely a Partial Motion for
Reconsideration. It is clear they were seeking a partial change in the original Decision. It follows that
there were some parts of the Decision that they sought to remain unchanged. The RTC, thus made a
study of only a portion of its original Decision and then amended the pertinent portion. The RTC Decision
was indeed, only partially amended. The February 7, 2001 Order cannot be considered as a
supplemental Decision because it cannot exist side by side with the original pertinent portion on
overage, damages and attorney's fees. The former replaced and superceded the latter.
Now what is the effect of this partial amendment? Is the subject RTC Decision divisible, such that
a portion may be considered already final and unappealable while another portion may be considered as
not yet final and unappealable? To answer this question we draw some light from some provisions of the
Rules of Court that permit divisions, to wit:
Rule 37, Sec. 7. Partial new trial or reconsideration.- If the grounds for a motion under this Rule appear to
the court to affect the issues as to only a part, or less than all of the matter in controversy, or only one,
or less than all, of the parties to it, the court may order a new trial or grant reconsideration as to such
issues if severable without interfering with the judgment or final order upon the rest. (Italics and
emphasis supplied)
Rule 36, Sec. 5. Separate judgments.-When more than one claim for relief is presented in an action, the
court, at any stage, upon a determination of the issues material to a particular claim and all
counterclaims arising out of the transaction or occurrence which is the subject matter of
the claim, may render a separate judgment disposing of such claim. The judgment shall terminate the
action with respect to the claim so disposed of and the action shall proceed as to the remaining claims.
It can be seen that when matters, issues or claims can properly and conveniently be separately
resolved, then division is permitted, otherwise it is not. We see no hindrance in applying this thesis to the
current situation.
In the present case, the matter of the release of the mortgaged property is material and intertwined with
the issue of the amount of overage as well as the issue on the amount of damages. 318[10] It is difficult to
separate these matters because a determination of the correct amount of overage would require the
examination and computation of the entire account of deliveries and payments. Necessarily, upon reexamination of the subject account during an appeal, the possibility of finding a shortage instead of an
overage is present. And dependent on the result of the re-examination of the entire account is the
317
318

determination of the correctness of either the foreclosure or release of the mortgaged property. It follows
that the ruling on the amount of damages and attorney's fees, if any, may also be affected by a reexamination of the entire account.
As the disposition of some inter-related issues in the original RTC Decision were materially
amended by the February 7, 2001 RTC Order, these two issuances must be taken in conjunction with
each other. Together, these two issuances form one integrated amended decision.319[11] Hence, an
appeal from the February 7, 2001 RTC Order must be deemed to be an appeal from the whole integrated
amended Decision.
Appeal and Partial Execution
Petitioners received their copy of the February 7, 2001 Order on February 20, 2001. They timely
filed a notice of appeal on March 6, 2001, or after 14 days. The appeal was duly perfected.
When an appeal had been duly perfected, execution of the judgment, whether wholly or
partially,320[12] was not a matter of right, but of discretion provided good reasons therefor existed. The
compelling grounds for the issuance of the writ must be stated in a special order after due hearing.
Aside from the existence of good reasons, the rules also require that the motion for partial execution
should have been filed while the trial court still had jurisdiction over the case.321[13]
In the present case, the RTC's May 9, 2002 Order granting the issuance of the writ of execution failed to
state good reasons for the issuance of the writ. The RTC mistakenly deemed that the execution should
issue as a matter of right because it had held that part of its September 14, 2001 Decision had become
final and executory. As previously discussed, the said proposition is erroneous because the Decision in
the present case is not properly severable.
Furthermore, the motion for partial execution was filed only on August 22, 2001, more than four months
after the appeal was perfected. In appeals by notice of appeal, the court loses jurisdiction over the case
upon the perfection of the appeals filed in due time and the expiration of the time to appeal of the other
parties."322[14] Each party only has at most 15 days from their receipt of the final order to appeal it.
Thus, when respondents filed their motion for partial execution the RTC no longer had jurisdiction over
the case and it no longer had jurisdiction to act on the said motion for partial execution.
Aside from the fact that the appeal was filed on time and should thus not have been dismissed in
the assailed May 9, 2002 Order, the said Order, which also resolved the motion for partial execution, fell
short of the requirements of Section 2, Rule 39, as previously discussed. Where the order of execution is
not in conformity with the rules, the same is null and void.323[15] Therefore, the CA erred in not nullifying
the May 9, 2002 Order.
Finally, we address the December 12, 2002 RTC Orders. These Orders proceeded from, and
implemented, the May 9, 2002 Order that was null and void. These Orders were also issued more than a
year after the RTC had already lost jurisdiction over the case. Clearly, like the May 9, 2002 Order, the
December 12, 2002 Orders were also null and void. Thus the CA should have also nullified these Orders
instead of dismissing the petition for certiorari questioning these Orders before it.
WHEREFORE, the petition is GRANTED. The assailed May 31, 2004 Decision and January 17, 2005
Resolution of the Court of Appeals in CA-G.R. SP. No. 75347 are REVERSED and SET ASIDE. The May 9,
2002 and both December 12, 2002 Orders of the Regional Trial Court in Civil Case No. D-8732 are
DECLARED NULL and VOID. The Regional Trial Court of Dagupan City, Branch 44 is ORDERED to
TRANSMIT forthwith the records of Civil Case No. D-8732 to the Court of Appeals for the appeal.
SO ORDERED.
PEOPLE OF THE PHILIPPINES,
Plaintiff,

G.R. Nos. 153952-71


Present:
CORONA, C.J.,

319
320
321
322
323

Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.

- versus -

THE HON. SANDIGANBAYAN (4TH


Promulgated:
Div.) and HENRY BARRERA,
Respondents.
August 23, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
LEONARDO-DE CASTRO, J.:
This Petition for Certiorari under Rule 65 of the Rules of Court assails the Decision 324[1] dated May
6, 2002 of the Sandiganbayan granting the Demurrer to Evidence of Mayor Henry E. Barrera
(Mayor Barrera) and dismissing Criminal Case Nos. 25035-25037, 25039-25041, 25043, 2504525047, 25049-25050, and 25053-25054, on the ground that the elements of the offense under
Section 3(e) of Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices
Act, as amended, were not established beyond reasonable doubt.
Mayor Barrera, together with Rufina Escala (Escala) and Santos Edquiban (Edquiban), were
charged with 14 counts of violation of Sections 3(e) and 9 of Republic Act No. 3019 in separate
Informations, which alleged essentially similar set of facts, save for the names of the
complainants, to wit:
That on or about 30 June 1998, or sometime prior or subsequent thereto, in Candelaria, province
of Zambales, Philippines, and within the jurisdiction of this Honorable Court, accused Henry E.
Barrera, Santos Edquiban and Rufina E. Escala, all public officers, then being the Municipal
Mayor, Market Collector, and District Supervisor, respectively, all of Candelaria, Province of
Zambales, committing the penal offense herein charged against them while in the performance
of, in relation to, and taking advantage of their official functions and duties as such, thru
manifest partiality and/or evident bad faith, did then and there, willfully, unlawfully, and
criminally, in conspiracy with one another, prevent [Ermelinda Abella (Criminal Case No. 25035),
Lourdes Jaquias (C.C. No. 25036), John Espinosa (C.C. No. 25037), Jean Basa (C.C. No. 25038),
Lerma Espinosa (C.C. No. 25039), Eduardo Sison (C.C No. 25040), Lina Hebron (C. C. No. 25041),
Nora Elamparo (C.C. No. 25042), Luz Aspiras (C.C . No. 25043), Oscar Lopez (C.C. No. 25044),
Corazon Cansas (C.C. No. 25045), Michelle Palma (C.C. No. 25046), Mila Saberon (C.C. No.25047),
Merlina Miraflor (C.C. No. 25048), Edna Bagasina (C.C. No. 25049), Jocelyn Educalane (C.C. No.
25050), Alvin Gatdula (C.C. No. 25051), Helen Egenias (C.C. No. 25052), Luz Eclarino (C.C. No.
25053) and Josephine Elamparo (C.C. No. 25054)], a legitimate lessee-stallholder from exercising
his/her contractual and/or proprietary rights to transfer to, occupy and/or operate his/her
assigned stall at the public market of Candelaria, Province of Zambales, under the subsisting
lease contract dated 25 June 1998, without any valid or justifiable reason whatsoever, by means
of the issuance and implementation of the patently unlawful Memorandum No. 1 dated 30 June
1998, thereby causing undue injury to (private complainants). 325[2]

During the Pre-Trial Conference on February 22, 2000, the People and Mayor Barrera marked their
respective documentary exhibits and entered into the following stipulation of facts:
1.
That at the time material to this case as alleged in all of the Informations, accused Henry
E. Barrera was a public officer being then the municipal mayor of Candelaria, Zambales;
2.
That private complainants were awarded individual contract of lease for a market
stall in the new Candelaria Public Market by the former Mayor Fidel Elamparo before the oath
taking of the accused on June 30, 1998;
3.
324
325

That the awardees are the following:

2.

1.
Ermelina Abella
11.
Corazon Cansas
Lourdes Jaquias
12.
Michelle Palma
3.
John Espinosa
13.
Mila Saberon
4.
Jean Basa
14. Merlinda Miraflor
5.
Lerma Espinosa
15. Edna Bagasina
6.
Eduardo Sison
16. Jocelyn Educalane
7.
Lina Hebron 17. Alvin Gatdula
8.
Nora Elamparo
18. Helen Egenias
9.
Luz Aspiras 19. Luz Eclarino
10.
Oscar Lopez 20. Josephine Elamparo

4.
That on June 30, 1998 accused Henry E. Barrera after taking his oath as the new Mayor of Candelaria, Zambales went to the public market and
pleaded with the complainants herein not to occupy the new market stalls;
5.
That there was a public hearing conducted on the issue of the public market on July 8, 1998 by the Sangguniang Bayan with the new elected mayor
as presiding officer;
6.

That accused Henry E. Barrera was the Vice-Mayor of Candelaria, Zambales from 1986 to 1992;

7.

That the accused was a stall holder or lessee of one of the stalls at the Candelaria Public Market;

8.

That on March 11, 1995 during the time of Mayor Fidel Elamparo, the public market of Candelaria, Zambales was razed to the ground;

9.

That the incident displaced about 60 market vendors;

10.
That Ex-Mayor Elamparo assured the market vendors who were displaced together with Congressman Antonio Diaz that they will enjoy
priority/preference over the new stalls once the public market is re-built; and
11.

That the displaced market vendors were temporarily sheltered along Perla St. and Ruby St., adjacent to the burned public market.

The parties agreed, that the only issue to be resolved is: whether or not accused Henry E. Barrera is liable for violation of Section 3(e) and 9 of
Republic Act No. 3019.326[3]
While the Pre-Trial Order, reflecting the foregoing stipulation of facts, was not signed by the members of the Fourth Division of the Sandiganbayan, the
issuance, authenticity, and contents thereof were never disputed nor put in issue by any of the parties.
When arraigned, accused Mayor Barrera, Escala, and Edquiban separately pleaded not guilty.

326

On August 2, 2000, Escala and Edquiban filed an Omnibus Motion: 1) For the Issuance of an Order Dropping Dr. Rufina Escala and Mr. Santos Edquiban from
the Information; 2) To Withdraw Bond; and 3) To Lift Hold Departure Orders on the ground that the Ombudsman approved the recommendation of the
Special Prosecutor to drop said two accused from the Informations.
In an Order dated August 8, 2000, the Sandiganbayan granted the Omnibus Motion and accordingly ordered Escala and Edquiban dropped from the
Informations.
Complainants Abella, Jaquias, John Espinosa, Lerma Espinosa, Sison, Hebron, Cansas, Palma, Saberon, Bagasina, Educalane, Eclarino, and Josephine
Elamparo testified for the People. Upon motion of the People, the Sandiganbayan issued an Order dated August 14, 2001, dismissing the complaints of
Basa, Norma Elamparo, Lopez, Miraflor, Gatdula, and Egenias, on the ground that said charges cannot be prosecuted successfully without the testimony of
these six complainants. The People, however, proceeded with the prosecution of the complaints of Abella and the 13 other complainants (Abella, et al.).
Subsequently, the People formally offered its documentary exhibits, which were admitted in evidence.
Mayor Barrera filed a Motion for Leave to File Demurrer to Evidence on October 23, 2001, which the Sandiganbayan granted in an Order dated October 29,
2001.
Mayor Barrera filed his Demurrer to Evidence on November 8, 2001, avowing that there was no bad faith in his issuance of Memorandum No. 1, which
prevented Abella, et al., from occupying the new stalls at the Candelaria Public Market. He explained that he needed to issue Memorandum No. 1 since the
previous Municipal Mayor, Fidel Elamparo, awarded the Lease Contracts over the new public market stalls less than a week before the end of the latters
term and without regard to the requirement of pertinent laws. Mayor Barrera also claimed that he did not act with manifest partiality in issuing
Memorandum No. 1 considering that said issuance applies not only to Abella, et al., but also to all awardees of the questionable Lease Contracts. Mayor
Barrera further pointed out that Abella, et al., did not suffer any undue injury even when they were unable to occupy the new public market stalls as they
were able to continue working and earning as market vendors at the temporary public market site. Hence, Mayor Barrera argued that any purported
damage sustained by Abella, et al., by reason of the issuance and implementation of Memorandum No. 1 should be solely borne by them, being damnum
absque injuria.
In its Comment/Opposition to Mayor Barreras Demurrer to Evidence, the People asserted that the pieces of evidence it adduced and presented were more
than sufficient to sustain the accused Mayors conviction. The People maintained that it would be in Mayor Barreras best interest to explain during trial why
on June 30, 1998, said Mayor, assisted by the police, forcibly evicted Abella, et al., from the new public market and padlocked the market stalls without the
benefit of any court order. According to the People, Mayor Barreras actuations displayed a wanton disregard of the constitutional rights to life and property,
as well as to due process of law, which resulted to business losses on the part of Abella, et al., from the time their market stalls were closed.
On May 6, 2002, the Sandiganbayan rendered its Decision granting Mayor Barreras Demurrer to Evidence and dismissing the criminal cases against said
Mayor. The dispositive portion of the Decision reads:
WHEREFORE, the Demurrer to Evidence filed by accused HENRY E. BARRERA, through counsel, is hereby GRANTED and Criminal Cases Nos. 25035-37;
25039-41; 25043; 25045-47; 25049-50 and 25053-54 are hereby DISMISSED on the ground that the elements of the offense under Sec. 3(e) of R.A. No.
3019, as amended, were not established beyond reasonable doubt. 327[4]

327

Without filing a Motion for Reconsideration of the Sandiganbayan judgment, the People filed the present Petition, faulting the graft court for the following:
I
THE RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION IN PROMULGATING THE ASSAILED DECISION AS IT NEVER EXPRESSED CLEARLY AND
DISTINCTLY THE FACTS AND THE EVIDENCE ON WHICH IT IS BASED, IN VIOLATION OF THE PROVISIONS OF SEC. 14, ARTICLE VIII OF THE CONSTITUTION.
II
THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION IN RULING THAT THE PROSECUTION FAILED TO PROVE AND QUANTIFY ACTUAL INJURY
AND DAMAGE SUFFERED BY THE PRIVATE COMPLAINANTS.
III
THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION IN RULING THAT THE PROSECUTION FAILED TO PROVE EVIDENT BAD FAITH ON THE
PART OF THE PRIVATE RESPONDENT.
The Petition has no merit.
At the outset, we note that this Petition for Certiorari under Rule 65 of the Rules of Court was filed without a Motion for Reconsideration of the Decision
dated May 6, 2002 having been filed before the Sandiganbayan. This fact alone would have warranted the dismissal of the instant Petition given the
general rule that a motion for reconsideration is a condition sine qua non before the filing of a petition for certiorari. In Republic v. Sandiganbayan,328[5] we
held:
As a rule, the special civil action of certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, lies only when the lower court has been given
the opportunity to correct the error imputed to it through a motion for reconsideration of the assailed order or resolution. The rationale of the rule rests
upon the presumption that the court or administrative body which issued the assailed order or resolution may amend the same, if given the chance to
correct its mistake or error. The motion for reconsideration, therefore, is a condition sine qua non before filing a petition for certiorari.
Here, petitioners filed the instant petitions for certiorari without interposing a motion for reconsideration of the assailed Resolution of the Sandiganbayan.
Section 1 of the same Rule 65 requires that petitioners must not only show that the trial court, in issuing the questioned Resolution, acted without or in
excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, but that there is no appeal, nor any plain, speedy,
and adequate remedy in the ordinary course of law. We have held that the plain, speedy, and adequate remedy referred to in Section 1 of
Rule 65 is a motion for reconsideration of the questioned Order or Resolution. It bears stressing that the strict application of this rule will also prevent
unnecessary and premature resort to appellate proceedings. We thus cannot countenance petitioners disregard of this procedural norm and frustrate its
purpose of attaining speedy, inexpensive, and orderly judicial proceedings.
In justifying their failure to file the required motion for reconsideration, petitioners vehemently assert that they were deprived of due process and there is
extreme urgency for relief, and that under the circumstances, a motion for reconsideration would be useless.

328

We are not persuaded.


Petitioners may not arrogate to themselves the determination of whether a motion for reconsideration is necessary or not. To dispense with the
requirement of filing a motion for reconsideration, petitioners must show concrete, compelling, and valid reason for doing so. They must demonstrate that
the Sandiganbayan, in issuing the assailed Resolution, acted capriciously, whimsically and arbitrarily by reason of passion and personal hostility. Such
capricious, whimsical and arbitrary acts must be apparent on the face of the assailed Resolution. These, they failed to do.
The People in the instant case absolutely failed to provide any explanation as to why it did not first move for reconsideration of the challenged
Sandiganbayan judgment before seeking a writ of certiorari from this Court. We therefore cannot find any concrete, compelling, and valid reason to except
the People from the aforementioned general rule of procedure.
The Petition at bar must also be dismissed on substantive grounds.
Article VIII, Section 14 of the 1987 Constitution mandates that [n]o decision shall be rendered by any court without expressing therein clearly and distinctly
the facts and the law on which it is based. The purpose of Article VIII, Section 14 of the Constitution is to inform the person reading the decision, and
especially the parties, of how it was reached by the court after consideration of the pertinent facts and examination of the applicable laws. The losing party
is entitled to know why he lost, so he may appeal to a higher court, if permitted, should he believe that the decision should be reversed. A decision that
does not clearly and distinctly state the facts and the law on which it is based leaves the parties in the dark as to how it was reached and is especially
prejudicial to the losing party, who is unable to pinpoint the possible errors of the court for review by a higher tribunal. Thus, a decision is adequate if a
party desiring to appeal therefrom can assign errors against it. 329[6]
Our review of the Sandiganbayan Decision dated May 6, 2006 reveals that said judgment actually contained a summary of the antecedent facts and
proceedings; as well as a discussion on the relevant statutory provisions, the elements of the offense charged, and the testimonial and documentary
evidence presented by the People. The factual and legal bases of the assailed Sandiganbayan Decision, granting Mayor Barreras Demurrer to Evidence, are
readily evident in the following excerpts therefrom:
The instant Demurrer to Evidence is impressed with merit.
Section 3, paragraph (e) of R.A. 3019, provides that:
Section 3. Corrupt Practices of Public Officers. In addition to acts or omissions of public officers already penalized by existing law, the following
shall constitute corrupt practices of any public officer and are hereby declared to be unlawful;
xxxx
e) Causing any undue injury to any party, including the Government, or giving any private party any unwarranted benefit, advantage or
preference in the discharge of his official administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence.
xxx

329

To be liable for violation of Section 3(e) of Republic Act No. 3019, four essential elements (as stated in the Information filed in the present cases) must be
present:
1)

That the accused is a public officer or a private person charged in conspiracy with the public officers;

2)

That said public officer commits the prohibited acts during the performance of his official duties or in relation to his public position;

3)

That he causes undue injury to any party, whether government or private individuals; and

4)

That the public officer has acted with manifest partiality, evident bad faith or gross inexcusable negligence.

The first two above-stated elements are clearly present in the instance cases. However, the third and fourth elements appear to be absent, or at best
remain doubtful.
The undue injury mentioned as the third essential element in the commission of the crime requires proof of actual injury and damage. Clarifying, the
Supreme Court, in Llorente v. Sandiganbayan, stated:
x x x Unlike in actions for torts, undue injury in Sec. 3(e) cannot be presumed even after a wrong or a violation of a right has been established. Its existence
must be proven as one of the elements of a crime. In fact, the causing of undue injury or the giving of any unwarranted advantage or preference through
manifest partiality, evident bad faith or gross inexcusable negligence constitutes the very act punished under this section. Thus, it is required that the
undue injury be specified, quantified and proven to the point of moral certainty.
In the instant cases, the evidence presented by the prosecution failed to prove actual injury and damage suffered by the private complainants, as one of
the elements of the crime herein charged, in that it failed to specify, quantify and prove to the point of moral certainty the purported undue injury. The
complainants in their testimonies, admitted that they have been working and earning, either as market vendors or in pursuit of their profession from the
time of the closure of their respective market stalls up to now. Also, their claims of business losses, at the time material to the cases at bar, leave much to
be desired vis--vis the moral certitude exacted by law to prove the alleged undue injury. Pathetically, said evidence, are either contradictory or incredible.
Likewise, the prosecutions evidence failed to prove manifest partiality and/or evident bad faith on the part of the accused, as the fourth of the above-stated
requisites for the commission of the crime herein charged.
For an act to be considered as exhibiting manifest partiality, there must be a showing of a clear, notorious or plain inclination or predilection to favor one
side rather than the other. Partiality is synonymous with bias which excites a disposition to see and report matters as they are wished for rather than as
they are. Evident bad faith, on the other hand, is something which does not simply connote bad judgment or negligence; it imputes a dishonest purpose or
some moral obliquity and conscious doing of a wrong; a breach of sworn duty through some motive or intent or ill will; It partakes of the nature of fraud. It
contemplates a state of mind affirmatively operating with furtive design, or some motive of self-interest or ill will for ulterior purpose. Evident bad faith
connotes a manifest and deliberate intent on the part of the accused to do wrong or cause damage.
The evidence presented by the prosecution falls short of that quantum of proof necessary to establish the fact that the accused acted with manifest
partiality or with evident bad faith. On the contrary, what is clear from the evidence adduced, was that herein accused simply exercised his legitimate
powers under the Local Government Code of 1991 (LGC) which provides that a municipal mayor has the power to enforce all laws and ordinances relative
to the governance of the municipality and the exercise of its corporate powers and, for this purpose, he shall have the power to issue such executive order

as are necessary for the proper enforcement and execution of the laws and ordinances . Ex-Mayor Elamparos acts of entering into lease contracts, when his
term was about to expire and herein accused-movants term was about to commence, being the mayor-elect, was not only in violation of the Local
Government Code provision that no contract may be entered into by the local chief executive in behalf of the local government unit without prior
authorization by the sangguniang concerned, but also of the other requirements of law such as, a verified application from the complainants, payment of
application fees, drawing of lots and the opening of bids, since not all the displaced vendors can be accommodated in the thirty-two stalls in the new public
market. The intent of such a maneuvering was obviously to tie the hands of the incoming administration.
The undue haste of awarding stalls in the new public market by Ex-Mayor Elamparo was flagrant, because from 26 June to 30 June, 1998, former stall
holders of the old market that burned down, held a rally to denounce the allegedly unfair awarding of contracts of lease over the new stalls, complaints
ranging from awards to new comers, to instances of two stalls, being awarded to one lessee.
It was precisely in this state of affair that prompted herein accused-movant Barrera to cause the issuance of Memorandum No. 1, Series of 1998, after he
had taken his oath as mayor of Candelaria, Zambales, to wit:
You are hereby advised that effective 1:00 PM, June 30, 1998, the transferring to and occupancy of stalls inside the Public Market shall be temporarily
suspended.
For your strict implementation and compliance.
Lastly, of significance is the fact that Memorandum No. 1 applied to all stallholders at the new public market, be they supporters or not of Mayor Barrera
during the 1998 mayoralty elections just past. These admissions of the complaining witnesses in open court, thus, refute their allegations in their affidavits
that the purpose of the memorandum was to award the new stalls to Mayor Barreras supporters.
In the light of all the foregoing, We find that herein accused-movant Henry E. Barrera cannot in fairness be held liable under the indictment. In this
connection, it has been held that the prosecution must rely on the strength of its own evidence and not on the weakness of the defense; the burden of
proof is never on the accused to disprove the facts necessary to establish the crime charged. It is safely entrenched in our jurisprudence says the Supreme
Court, that unless the prosecution discharges its burden to prove the guilt of an accused beyond reasonable doubt, the latter need not even offer evidence
in his behalf.330[7]
In fact, based on the foregoing, the People was able to identify and discuss with particularity in its present Petition the grave abuse of discretion allegedly
committed by the graft court in granting Mayor Barreras Demurrer to Evidence. Thus, contrary to the Peoples contention, the aforequoted Sandiganbayan
judgment did not violate the mandate of Article VIII, Section 14 of the 1987 Constitution.
We further disagree with the Peoples assertion of grave abuse of discretion on the part of Sandiganbayan in ruling that several elements for the violation of
Section 3(e) of Republic Act No. 3019331[8] are lacking, or at best, doubtful, in this case.

330
331

In order to be held guilty of violating Section 3(e) of Republic Act No. 3019, the provision itself explicitly requires that the accused caused undue injury for
having acted with manifest partiality, evident bad faith, or with gross inexcusable negligence, in the discharge of his official administrative or
judicial function. The Peoples evidence failed to support the existence of these two elements.
The issuance by Mayor Barrera of Memorandum No. 1 is rooted in Section 444, in relation to Section 22, of Republic Act No. 7160, otherwise known
as the Local Government Code of 1991, which provide:
Section 444. The Chief Executive: Powers, Duties, Functions and Compensation. (a) The municipal mayor, as the chief executive of the municipal
government, shall exercise such powers and perform such duties and functions as provided by this Code and other laws.
(b)
For efficient, effective and economical governance the purpose of which is the general welfare of the municipality and its inhabitants pursuant
to Section 16 of this Code, the municipal mayor shall:
xxxx
(2)
Enforce all laws and ordinances relative to the governance of the municipality and the exercise of its corporate powers provided for under
Section 22 of this Code, implement all approved policies, programs, projects, services and activities of the municipality and, in addition to the foregoing,
shall:
xxxx
(iii)

Issue such executive orders as are necessary for the proper enforcement and execution of laws and ordinances.
Section 22. Corporate Powers. x x x
xxxx

(c) Unless otherwise provided in this Code, no contract may be entered into by the local chief executive in behalf of the local government unit
without prior authorization by the sanggunian concerned. A legible copy of such contract shall be posted at a conspicuous place in the provincial capitol or
the city, municipality or barangay hall.
The award of Lease Contracts over the new public market stalls were marred by several irregularities, among which, was it being made by the former Mayor
with only one week before the expiration of his term and the lack of prior authorization by the sanggunian as required by Section 22(c) of Republic Act No.
7160. Also, there were 60 market vendors displaced by the fire at the old public market, but only 32 stalls were available for occupancy at the new public
market. A rally was held by the stall holders displaced by the fire from the old public market to denounce the allegedly unfair awarding of the Lease
Contracts over the new public market stalls to new comers, and even in some instances, the awarding of two stalls to only one lessee. These circumstances
prompted Mayor Barrera, the newly elected Municipal Mayor, to issue Memorandum No. 1 pursuant to his duty of enforcing and implementing laws and
ordinances for the general welfare of the municipality and its inhabitants. It bears to stress that Memorandum No. 1 applies equitably to all awardees of the
Lease Contracts over the new public market stalls, not just Abella, et al., and did not give any unwarranted benefit, advantage, or preference to any

particular private party. Consequently, we find that the Sandiganbayan did not commit grave abuse of discretion when it declared that Mayor Barrera did
not issue Memorandum No. 1 with manifest partiality, evident bad faith, or with gross inexcusable negligence.
Moreover, in Pecho v. Sandiganbayan,332[9] we explained that the undue injury caused to any party, including the government, under Section 3(e) of
Republic Act No. 3019, could only mean actual injury or damage which must be established by evidence. Abella, et al., alleged undue damage/injury by
reason of Memorandum No. 1 because they had been unable to occupy the new public market stalls and were thus deprived of their daily income of varying
amounts. However, Abella, et al., in their own testimonies,333[10] admitted that that they have continued working and earning either as market vendors at the
temporary public market site, or in pursuit of their profession from the time their market stalls were closed until present time. Hence, there was no
sufficient evidence to establish actual injury or damage suffered by Abella, et al., by reason of Memorandum No. 1.
In People v. Sandiganbayan,334[11] we defined grave abuse of discretion as follows:
Grave abuse of discretion is the capricious and whimsical exercise of judgment as equivalent to lack of jurisdiction or where the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or a
virtual refusal to perform the duty enjoined or to act in contemplation of law. x x x.
xxxx
The demurrer to evidence in criminal cases, such as the one at bar, is filed after the prosecution had rested its case, and when the same is granted, it calls
for an appreciation of the evidence adduced by the prosecution and its sufficiency to warrant conviction beyond reasonable doubt, resulting in a dismissal
of the case on the merits, tantamount to an acquittal of the accused. Such dismissal of a criminal case by the grant of demurrer to evidence may not be
appealed, for to do so would be to place the accused in double jeopardy. The verdict being one of acquittal, the case ends there.
The sole office of an extraordinary writ of certiorari is the correction of errors of jurisdiction including the commission of grave abuse of discretion
amounting to lack or excess of jurisdiction. For as long as the court acted within its jurisdiction, an error of judgment that it may commit in the exercise
thereof is not correctible through the special civil action of certiorari. To reiterate, the Sandiganbayan, in rendering the challenged Decision, acted with
jurisdiction and did not gravely abuse its discretion.
There being no grave abuse of discretion on the part of the Sandiganbayan in granting Mayor Barreras Demurrer to Evidence as to deprive the graft court
of jurisdiction, the issuance of a writ of certiorari is not warranted in the present case.
WHEREFORE, the Petition is hereby DISMISSED.
SO ORDERED.

332
333
334

LEAGUE OF CITIES OF THE G.R. No. 176951


PHILIPPINES (LCP) represented
by LCP National President
JERRY P. TREAS, CITY OF
ILOILO represented by
MAYOR JERRY P. TREAS,
CITY OF CALBAYOG
represented by MAYOR
MEL SENEN S. SARMIENTO,
and JERRY P. TREAS in his
personal capacity as taxpayer,
Petitioners,
- versus COMMISSION ON ELECTIONS;
MUNICIPALITY OF BAYBAY,
PROVINCE OF LEYTE;
MUNICIPALITY OF BOGO,
PROVINCE OF CEBU;
MUNICIPALITY OF CATBALOGAN,
PROVINCE OF WESTERN SAMAR;
MUNICIPALITY OF TANDAG,
PROVINCE OF SURIGAO DEL SUR;
MUNICIPALITY OF BORONGAN,
PROVINCE OF EASTERN SAMAR;
and MUNICIPALITY OF TAYABAS,
PROVINCE OF QUEZON,
Respondents.
CITY OF TARLAC, CITY OF SANTIAGO,
CITY OF IRIGA, CITY OF LIGAO,
CITY OF LEGAZPI, CITY OF
TAGAYTAY, CITY OF SURIGAO,
CITY OF BAYAWAN, CITY OF
SILAY, CITY OF GENERAL SANTOS,
CITY OF ZAMBOANGA, CITY OF
GINGOOG, CITY OF CAUAYAN,
CITY OF PAGADIAN, CITY OF
SAN CARLOS, CITY OF
SAN FERNANDO, CITY OF
TACURONG, CITY OF TANGUB,
CITY OF OROQUIETA, CITY OF

URDANETA, CITY OF VICTORIAS,


CITY OF CALAPAN, CITY OF
HIMAMAYLAN, CITY OF
BATANGAS, CITY OF BAIS,
CITY OF CADIZ, and
CITY OF TAGUM,
Petitioners-In-Intervention.
x-----------------------------x
LEAGUE OF CITIES OF THE G.R. No. 177499
PHILIPPINES (LCP) represented
by LCP National President
JERRY P. TREAS, CITY OF
ILOILO represented by
MAYOR JERRY P. TREAS,
CITY OF CALBAYOG
represented by MAYOR
MEL SENEN S. SARMIENTO,
and JERRY P. TREAS in his
personal capacity as taxpayer,
Petitioners,
- versus COMMISSION ON ELECTIONS;
MUNICIPALITY OF LAMITAN,
PROVINCE OF BASILAN;
MUNICIPALITY OF TABUK,
PROVINCE OF KALINGA;
MUNICIPALITY OF BAYUGAN,
PROVINCE OF AGUSAN DEL SUR;
MUNICIPALITY OF BATAC,
PROVINCE OF ILOCOS NORTE;
MUNICIPALITY OF MATI,
PROVINCE OF DAVAO ORIENTAL;
and MUNICIPALITY OF GUIHULNGAN,
PROVINCE OF NEGROS ORIENTAL,
Respondents.

CITY OF TARLAC, CITY OF


SANTIAGO, CITY OF IRIGA,
CITY OF LIGAO, CITY OF LEGAZPI,
CITY OF TAGAYTAY, CITY OF SURIGAO,
CITY OF BAYAWAN, CITY OF
SILAY, CITY OF GENERAL SANTOS,
CITY OF ZAMBOANGA, CITY OF
GINGOOG, CITY OF CAUAYAN,
CITY OF PAGADIAN, CITY OF
SAN CARLOS, CITY OF
SAN FERNANDO, CITY OF
TACURONG, CITY OF TANGUB,
CITY OF OROQUIETA, CITY OF
URDANETA, CITY OF VICTORIAS,
CITY OF CALAPAN, CITY OF
HIMAMAYLAN, CITY OF
BATANGAS, CITY OF BAIS,
CITY OF CADIZ, and
CITY OF TAGUM,
Petitioners-In-Intervention.
x - - - - - - - - - - - - - - - - - - - - - - - - - - --x
LEAGUE OF CITIES OF THE G.R. No. 178056
PHILIPPINES (LCP) represented
by LCP National President Present:
JERRY P. TREAS, CITY OF
ILOILO represented by CORONA, C.J.,
MAYOR JERRY P. TREAS, CARPIO,
CITY OF CALBAYOG CARPIO MORALES,
represented by MAYOR VELASCO, JR.,
MEL SENEN S. SARMIENTO, NACHURA,
and JERRY P. TREAS in his LEONARDO-DE CASTRO,
personal capacity as taxpayer, BRION,
Petitioners, PERALTA,
BERSAMIN,
DEL CASTILLO,
- versus ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
COMMISSION ON ELECTIONS; SERENO, JJ.
MUNICIPALITY OF CABADBARAN,

PROVINCE OF AGUSAN
DEL NORTE; MUNICIPALITY
OF CARCAR, PROVINCE OF
CEBU; and MUNICIPALITY OF
EL SALVADOR, MISAMIS
ORIENTAL,
Respondents.
CITY OF TARLAC, CITY OF
SANTIAGO, CITY OF IRIGA,
CITY OF LIGAO, CITY OF LEGAZPI,
CITY OF TAGAYTAY, CITY OF SURIGAO,
CITY OF BAYAWAN, CITY OF SILAY,
CITY OF GENERAL SANTOS,
CITY OF ZAMBOANGA, CITY OF
GINGOOG, CITY OF CAUAYAN,
CITY OF PAGADIAN, CITY OF
SAN CARLOS, CITY OF
SAN FERNANDO, CITY OF
TACURONG, CITY OF TANGUB,
CITY OF OROQUIETA, CITY OF
URDANETA, CITY OF VICTORIAS,
CITY OF CALAPAN, CITY OF
HIMAMAYLAN, CITY OF
BATANGAS, CITY OF BAIS,
CITY OF CADIZ, and
Promulgated:
CITY OF TAGUM,
Petitioners-In-Intervention.
August 24, 2010
x--------------------------------------------------x
RESOLUTION
CARPIO, J.:
For resolution are (1) the ad cautelam motion for reconsideration and (2) motion to annul the Decision of 21 December 2009 filed by petitioners
League of Cities of the Philippines, et al. and (3) the ad cautelam motion for reconsideration filed by petitioners-in-intervention Batangas City, Santiago
City, Legazpi City, Iriga City, Cadiz City, and Oroquieta City.
On 18 November 2008, the Supreme Court En Banc, by a majority vote, struck down the subject 16 Cityhood Laws for violating Section 10, Article X
of the 1987 Constitution and the equal protection clause. On 31 March 2009, the Supreme Court En Banc, again by a majority vote, denied the respondents
first motion for reconsideration. On 28 April 2009, the Supreme Court En Banc, by a split vote, denied the respondents second motion for reconsideration.

Accordingly, the 18 November 2008 Decision became final and executory and was recorded, in due course, in the Book of Entries of Judgments on 21 May
2009.
However, after the finality of the 18 November 2008 Decision and without any exceptional and compelling reason, the Court En Banc
unprecedentedly reversed the 18 November 2008 Decision by upholding the constitutionality of the Cityhood Laws in the Decision of 21 December 2009.
Upon reexamination, the Court finds the motions for reconsideration meritorious and accordingly reinstates the 18 November 2008 Decision
declaring the 16 Cityhood Laws unconstitutional.
A. Violation of Section 10, Article X of the Constitution
Section 10, Article X of the 1987 Constitution provides:
No province, city, municipality, or barangay shall be created, divided, merged, abolished or its boundary substantially altered, except in
accordance with the criteria established in the local government code and subject to approval by a majority of the votes cast in a plebiscite in the
political units directly affected. (Emphasis supplied)
The Constitution is clear. The creation of local government units must follow the criteria established in the Local Government Code and not in
any other law. There is only one Local Government Code. 335[1] The Constitution requires Congress to stipulate in the Local Government Code all the criteria
necessary for the creation of a city, including the conversion of a municipality into a city. Congress cannot write such criteria in any other law, like the
Cityhood Laws.
The clear intent of the Constitution is to insure that the creation of cities and other political units must follow the same uniform, nondiscriminatory criteria found solely in the Local Government Code. Any derogation or deviation from the criteria prescribed in the Local
Government Code violates Section 10, Article X of the Constitution.
RA 9009 amended Section 450 of the Local Government Code to increase the income requirement from P20 million to P100 million for the creation of
a city. This took effect on 30 June 2001. Hence, from that moment the Local Government Code required that any municipality desiring to
become a city must satisfy the P100 million income requirement. Section 450 of the Local Government Code, as amended by RA 9009, does not
contain any exemption from this income requirement.
In enacting RA 9009, Congress did not grant any exemption to respondent municipalities, even though their cityhood bills were pending in Congress
when Congress passed RA 9009. The Cityhood Laws, all enacted after the effectivity of RA 9009, explicitly exempt respondent municipalities from the
increased income requirement in Section 450 of the Local Government Code, as amended by RA 9009. Such exemption clearly violates Section 10,
Article X of the Constitution and is thus patently unconstitutional. To be valid, such exemption must be written in the Local Government
Code and not in any other law, including the Cityhood Laws.
RA 9009 is not a law different from the Local Government Code. Section 1 of RA 9009 pertinently provides: Section 450 of Republic Act No. 7160,
otherwise known as the Local Government Code of 1991, is hereby amended to read as follows: x x x. RA 9009 amended Section 450 of the Local
Government Code. RA 9009, by amending Section 450 of the Local Government Code, embodies the new and prevailing Section 450 of the
Local Government Code. Considering the Legislatures primary intent to curtail the mad rush of municipalities wanting to be converted into cities, RA
335

9009 increased the income requirement for the creation of cities. To repeat, RA 9009 is not a law different from the Local Government Code, as it expressly
amended Section 450 of the Local Government Code.
The language of RA 9009 is plain, simple, and clear. Nothing is unintelligible or ambiguous; not a single word or phrase admits of two or more
meanings. RA 9009 amended Section 450 of the Local Government Code of 1991 by increasing the income requirement for the creation of cities. There are
no exemptions from this income requirement. Since the law is clear, plain and unambiguous that any municipality desiring to convert into a city must meet
the increased income requirement, there is no reason to go beyond the letter of the law. Moreover, where the law does not make an exemption, the Court
should not create one.336[2]
B. Operative Fact Doctrine
Under the operative fact doctrine, the law is recognized as unconstitutional but the effects of the unconstitutional law, prior to its declaration of
nullity, may be left undisturbed as a matter of equity and fair play. In fact, the invocation of the operative fact doctrine is an admission that the law is
unconstitutional.
However, the minoritys novel theory, invoking the operative fact doctrine, is that the enactment of the Cityhood Laws and the functioning of the 16
municipalities as new cities with new sets of officials and employees operate to contitutionalize the unconstitutional Cityhood Laws. This novel
theory misapplies the operative fact doctrine and sets a gravely dangerous precedent.
Under the minoritys novel theory, an unconstitutional law, if already implemented prior to its declaration of unconstitutionality by the Court, can no
longer be revoked and its implementation must be continued despite being unconstitutional. This view will open the floodgates to the wanton enactment of
unconstitutional laws and a mad rush for their immediate implementation before the Court can declare them unconstitutional. This view is an open
invitation to serially violate the Constitution, and be quick about it, lest the violation be stopped by the Court.
The operative fact doctrine is a rule of equity. As such, it must be applied as an exception to the general rule that an unconstitutional law
produces no effects. It can never be invoked to validate as constitutional an unconstitutional act. In Planters Products, Inc. v. Fertiphil Corporation,337[3]
the Court stated:
The general rule is that an unconstitutional law is void. It produces no rights, imposes no duties and affords no protection. It has no legal
effect. It is, in legal contemplation, inoperative as if it has not been passed. Being void, Fertiphil is not required to pay the levy. All levies paid should be
refunded in accordance with the general civil code principle against unjust enrichment. The general rule is supported by Article 7 of the Civil Code, which
provides:
ART. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse or custom or practice to the
contrary.
When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern.
The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair play. It nullifies the
effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an

336
337

operative fact and may have consequences which cannot always be ignored. The past cannot always be erased by a new judicial
declaration.
The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. Thus, it
was applied to a criminal case when a declaration of unconstitutionality would put the accused in double jeopardy or would put in limbo the acts done by a
municipality in reliance upon a law creating it. (Emphasis supplied)
The operative fact doctrine never validates or constitutionalizes an unconstitutional law. Under the operative fact doctrine, the
unconstitutional law remains unconstitutional, but the effects of the unconstitutional law, prior to its judicial declaration of nullity, may be left undisturbed
as a matter of equity and fair play. In short, the operative fact doctrine affects or modifies only the effects of the unconstitutional law, not the
unconstitutional law itself.
Thus, applying the operative fact doctrine to the present case, the Cityhood Laws remain unconstitutional because they violate Section 10, Article X
of the Constitution. However, the effects of the implementation of the Cityhood Laws prior to the declaration of their nullity, such as the payment of
salaries and supplies by the new cities or their issuance of licenses or execution of contracts, may be recognized as valid and effective. This does not mean
that the Cityhood Laws are valid for they remain void. Only the effects of the implementation of these unconstitutional laws are left undisturbed as a matter
of equity and fair play to innocent people who may have relied on the presumed validity of the Cityhood Laws prior to the Courts declaration of their
unconstitutionality.
C. Equal Protection Clause
As the Court held in the 18 November 2008 Decision, there is no substantial distinction between municipalities with pending cityhood bills in the 11 th
Congress and municipalities that did not have pending bills. The mere pendency of a cityhood bill in the 11 th Congress is not a material difference to
distinguish one municipality from another for the purpose of the income requirement. The pendency of a cityhood bill in the 11 th Congress does not
affect or determine the level of income of a municipality. Municipalities with pending cityhood bills in the 11 th Congress might even have lower
annual income than municipalities that did not have pending cityhood bills. In short, the classification criterion mere pendency of a cityhood bill
in the 11th Congress is not rationally related to the purpose of the law which is to prevent fiscally non-viable municipalities from
converting into cities.
Moreover, the fact of pendency of a cityhood bill in the 11 th Congress limits the exemption to a specific condition existing at the time of passage of
RA 9009. That specific condition will never happen again. This violates the requirement that a valid classification must not be limited to
existing conditions only. In fact, the minority concedes that the conditions (pendency of the cityhood bills) adverted to can no longer be repeated.
Further, the exemption provision in the Cityhood Laws gives the 16 municipalities a unique advantage based on an arbitrary date the filing of their
cityhood bills before the end of the 11th Congress as against all other municipalities that want to convert into cities after the effectivity of RA 9009.
In addition, limiting the exemption only to the 16 municipalities violates the requirement that the classification must apply to all similarly situated.
Municipalities with the same income as the 16 respondent municipalities cannot convert into cities, while the 16 respondent municipalities can. Clearly, as
worded, the exemption provision found in the Cityhood Laws, even if it were written in Section 450 of the Local Government Code, would still be
unconstitutional for violation of the equal protection clause.
D. Tie-Vote on a Motion for Reconsideration

Section 7, Rule 56 of the Rules of Court provides:


SEC. 7. Procedure if opinion is equally divided. Where the court en banc is equally divided in opinion, or the necessary majority cannot be had, the
case shall again be deliberated on, and if after such deliberation no decision is reached, the original action commenced in the court shall be dismissed; in
appealed cases, the judgment or order appealed from shall stand affirmed; and on all incidental matters, the petition or motion shall be denied.
(Emphasis supplied)
The En Banc Resolution of 26 January 1999 in A.M. No. 99-1-09-SC, reads:
A MOTION FOR THE CONSIDERATION OF A DECISION OR RESOLUTION OF THE COURT EN BANC OR OF A DIVISION MAY BE GRANTED UPON A VOTE OF
A MAJORITY OF THE MEMBERS OF THE EN BANC OR OF A DIVISION, AS THE CASE MAY BE, WHO ACTUALLY TOOK PART IN THE DELIBERATION OF THE
MOTION.
IF THE VOTING RESULTS IN A TIE, THE MOTION FOR RECONSIDERATION IS DEEMED DENIED. (Emphasis supplied)
The clear and simple language of the clarificatory en banc Resolution requires no further explanation. If the voting of the Court en banc results in a
tie, the motion for reconsideration is deemed denied. The Courts prior majority action on the main decision stands affirmed. 338[4] This clarificatory
Resolution applies to all cases heard by the Court en banc, which includes not only cases involving the constitutionality of a law, but also, as expressly
stated in Section 4(2), Article VIII of the Constitution, all other cases which under the Rules of Court are required to be heard en banc.
The 6-6 tie-vote by the Court en banc on the second motion for reconsideration necessarily resulted in the denial of the second motion for
reconsideration. Since the Court was evenly divided, there could be no reversal of the 18 November 2008 Decision, for a tie-vote cannot result in any court
order or directive.339[5] The judgment stands in full force. 340[6] Undeniably, the 6-6 tie-vote did not overrule the prior majority en banc Decision of
18 November 2008, as well as the prior majority en banc Resolution of 31 March 2009 denying reconsideration. The tie-vote on the second
motion for reconsideration is not the same as a tie-vote on the main decision where there is no prior decision. Here, the tie-vote plainly signifies that there
is no majority to overturn the prior 18 November 2008 Decision and 31 March 2009 Resolution, and thus the second motion for reconsideration must be
denied.
Further, the tie-vote on the second motion for reconsideration did not mean that the present cases were left undecided because there remain the
Decision of 18 November 2008 and the Resolution of 31 March 2009 where a majority of the Court en banc concurred in declaring the unconstitutionality of
the sixteen Cityhood Laws. In short, the 18 November 2008 Decision and the 31 March 2009 Resolution, which were both reached with the
concurrence of a majority of the Court en banc, are not reconsidered but stand affirmed. 341[7] These prior majority actions of the Court en
banc can only be overruled by a new majority vote, not a tie-vote because a tie-vote cannot overrule a prior affirmative action.
338
339
340
341

The denial, by a split vote, of the second motion for reconsideration inevitably rendered the 18 November 2008 Decision final. In fact, in its
Resolution of 28 April 2009, denying the second motion for reconsideration, the Court en banc reiterated that no further pleadings shall be entertained and
stated that entry of judgment be made in due course.
The dissenting opinion stated that a deadlocked vote of six is not a majority and a non-majority does not constitute a rule with precedential value. 342
[8]
Indeed, a tie-vote is a non-majority a non-majority which cannot overrule a prior affirmative action, that is the 18 November 2008 Decision striking
down the Cityhood Laws. In short, the 18 November 2008 Decision stands affirmed. And assuming a non-majority lacks any precedential value, the 18
November 2008 Decision, which was unreversed as a result of the tie-vote on the respondents second motion for reconsideration, nevertheless remains
binding on the parties.343[9]
Conclusion
Section 10, Article X of the Constitution expressly provides that no x x x city shall be created x x x except in accordance with the criteria
established in the local government code. This provision can only be interpreted in one way, that is, all the criteria for the creation of cities must be
embodied exclusively in the Local Government Code. In this case, the Cityhood Laws, which are unmistakably laws other than the Local Government Code,
provided an exemption from the increased income requirement for the creation of cities under Section 450 of the Local Government Code, as amended by
RA 9009. Clearly, the Cityhood Laws contravene the letter and intent of Section 10, Article X of the Constitution.
Adhering to the explicit prohibition in Section 10, Article X of the Constitution does not cripple Congress power to make laws. In fact, Congress is not
prohibited from amending the Local Government Code itself, as what Congress did by enacting RA 9009. Indisputably, the act of amending laws comprises
an integral part of the Legislatures law-making power. The unconstitutionality of the Cityhood Laws lies in the fact that Congress provided an exemption
contrary to the express language of the Constitution that [n]o x x x city x x x shall be created except in accordance with the criteria established in the local
government code. In other words, Congress exceeded and abused its law-making power, rendering the challenged Cityhood Laws void for being violative of
the Constitution.
WHEREFORE, we GRANT the motions for reconsideration of the 21 December 2009 Decision and REINSTATE the 18 November 2008 Decision
declaring UNCONSTITUTIONAL the Cityhood Laws, namely: Republic Act Nos. 9389, 9390, 9391, 9392, 9393, 9394, 9398, 9404, 9405, 9407, 9408, 9409,
9434, 9435, 9436, and 9491.
We NOTE petitioners motion to annul the Decision of 21 December 2009.
SO ORDERED.
DEE PING WEE, ARACELI WEE and
MARINA U. TAN,
Petitioners,
342
343

G.R. No. 169345


Present:

- versus -

CORONA, C.J.,
Chairperson,
VELASCO, JR.,
NACHURA,*
LEONARDO-DE CASTRO, and
PEREZ, JJ.

Promulgated:
LEE HIONG WEE and ROSALIND
WEE,
Respondents.
August 25, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
LEONARDO DE CASTRO, J.:
The case before this Court is a Petition for Review on Certiorari344[1] under Rule 45 of the Rules of Court, which seeks to reverse the Resolutions dated June
29, 2005345[2] and August 18, 2005346[3] of the Court of Appeals (First Division) in CA-G.R. SP No. 90024. In the Resolution dated June 29, 2005, the appellate
court denied due course to the Petition for Certiorari and Prohibition with prayer for issuance of a Writ of Preliminary Injunction and/or a Temporary
Restraining Order (TRO)347[4] filed by herein petitioners, which assailed the Order 348[5] dated April 21, 2005 of the Regional Trial Court (RTC) of Quezon City,
Branch 93, in Civil Case No. Q-04-091, denying petitioners Omnibus Motion (to Quash Writ of Execution and/or Suspend Execution). 349[6] The petitioners
Motion for Reconsideration350[7] of the Resolution dated June 29, 2005 was denied by the Court of Appeals in the Resolution dated August 18, 2005.
*
344
345
346
347
348
349
350

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


Petitioners Dee Ping Wee and Marina U. Tan are the brother and sister of respondent Lee Hiong Wee. Petitioner Araceli Wee is the spouse of Dee Ping Wee,
while respondent Rosalind Wee is the spouse of Lee Hiong Wee.
At the commencement of the controversy, petitioners Dee Ping Wee, Araceli Wee and Marina U. Tan were the majority stockholders of: (1) Marcel Trading
Corporation, a domestic corporation that is primarily engaged in the business of cultivating, buying, selling at wholesale, exporting and manufacturing of
seaweeds;351[8] (2) Marine Resources Development Corporation, a domestic corporation that is primarily engaged in the business of cultivating, buying,
selling and exporting on a wholesale basis seaweeds, seashells and other marine products; 352[9] and (3) First Marcel Properties, Inc., a domestic corporation
that is primarily engaged in the business of acquisition, development and disposition of real estate and other kinds of structures. 353[10] On the other hand,
respondents Lee Hiong Wee and Rosalind Wee were minority stockholders in the said corporations.
On April 16, 2004, respondents, through their counsel, sent a letter to petitioner Dee Ping Wee, demanding the inspection of the corporate records of the
above corporations. The letter stated thus:
April 16, 2004
Mr. Dee Ping Wee
Marcel Tower
Araneta Avenue, Quezon City
Metro Manila
Re: Demand for Inspection and Reproduction of Corporate records and to be Furnished Financial Statements of [Marine Resources Development
Corporation, First Marcel Properties, Inc. and Marcel Trading Corporation]
Dear Mr. Wee:
We write in behalf of our clients, Lee Hiong Wee and Rosalind L. Wee who as per records on file with the Securities and Exchange Commission are
stockholders of Marine Resources and Development Corporation, First Marcel Properties Inc. and Marcel Trading Corporation.
Since all of these records are in the same premises which are located in Marcel Tower, our clients request that the same be made available for their (or their
representatives) inspection and reproduction at the fifth floor of the said building on April 26, 2004 at 10:00 am.
Likewise, we request you to furnish our clients with financial statements of said companies for the years ending 2002 and 2003.

351
352
353

We shall appreciate receiving a reply from you on this matter before the said date. Otherwise, we shall take the same to mean as your refusal to comply
with this request. In which case, we shall be constrained to file the necessary legal suits to enforce the rights of our clients.
Thank you,
Very truly yours,
For the Firm
(Signed)
PONCEVIC M. CEBALLOS354[11]
On April 22, 2004, petitioner Dee Ping Wee replied to the above letter in the following manner, viz:
April 22, 2004
Atty. Poncevic Ceballos
Unit 3-E AGCOR Bldg., 335 Katipunan Ave.
Loyola Heights, Quezon City
Atty. Ceballos,
In connection with you[r] letter dated April 16, 2004, I wish to inform you that the Board of Directors of Marcel Trading Corporation and Marine Resources
Development Corporation will only accede to the demand of your clients if the following conditions are fully satisfied:
1.

Wee Lee Hiong and Rosalind Wee will furnish complete and true financial reports of Rico Philippines Industrial Corporation to include:

1.1

Balance Sheet, Income Statement and Cash Flow Statements for the year 2003;

1.2

Detailed Statement on how he disbursed the deposits he withdrew from the PBCOM, METROBANK and other depositary banks;

2.
Pay back to Marcel Trading Corporation, the cash advances he obtained in 2003. Documents reveal that Marcel Trading Corporation availed of bank
loan the proceeds of which was obtained by Wee Lee Hiong for the operation of Rico Philippines Industrial Corporation, aside from the own funds of Marcel
Trading Corporation that was likewise loaned to RPIC. Marcel Trading Corporation had paid substantial sum of interest for the Loan and greatly affected the
operations of Marcel Trading Corporation.
3.
Account for the export sales made by Wee Lee Hiong of all RPICs finished products but foreign customers were instructed/directed to make
payments/remittances to his companys bank account/deposit in Hongkong.

354

The directors of [Marcel Trading Corporation and Marine Resources Development Corporation] have equal or even better rights to make such demands from
your clients.
Once your client is ready to fulfill the foregoing conditions, please inform us.
Very truly,
(Signed)
DEE PING WEE355[12]
As their demand letter met an unfavorable reply, respondents filed before the RTC of Quezon City, on May 12, 2004, three separate Complaints against
petitioners for the inspection of the corporate books of the above-mentioned corporations. The complaint involving Marcel Trading Corporation was
docketed as Civil Case No. Q-04-091, 356[13] while those pertaining to Marine Resources Development Corporation and First Marcel Properties, Inc. were
docketed, respectively, as Civil Case No. Q-04-092 357[14] and Civil Case No. Q-04-093.358[15]
Invoking similar causes of action in each of the complaints, respondents claimed that petitioners violated their rights to gain access to and inspect the
corporate books, records and financial statements of the above corporations, which rights are guaranteed by Sections 74 and 75 of the Corporation Code. 359
[16] In view of the allegedly illegal and baseless acts of the petitioners, respondents sought payment for moral and exemplary damages, as well as attorneys
fees and costs of suit.
On May 31, 2004, petitioners filed separate Answers,360[17] praying for the dismissal of the complaints for lack of merit. Petitioners asserted, among others,
that the letter dated April 16, 2004 of respondents counsel failed to specify the particular records or documents they wished to inspect and the purpose for
such inspection. Petitioners countered that respondents complaints for inspection of corporate records were ill-motivated, merely contrived to harass
petitioners and the controlling stockholders, sought for vexatious purposes and, therefore, not germane to respondents rights as stockholders. The obvious
purpose of respondents in demanding inspection of the corporate records was, allegedly, to fish for evidence that they could use against petitioners to
regain management control of the aforementioned corporations or to find technical defects in the corporate transactions so that they can file harassment
suits against petitioners.361[18]
355
356
357
358
359
360
361

On June 23, 2004, the RTC of Quezon City, Branch 93, sitting as a special commercial court, rendered three separate, but similarly worded, Decisions in Civil
Case Nos. Q-04-091,362[19] Q-04-092363[20] and Q-04-093.364[21] Except for the names of the corporations involved, the decisions of the trial court uniformly read:
Based on the pleadings submitted and the pieces of documentary evidence attached thereto, the court is satisfied that the [respondents] Lee Hiong
Wee and Rosalind L. Wee are stockholders of the corporation [Marcel Trading Corporation/Marine Resources Development Corporation/First Marcel
Properties, Inc.]. Upon the other hand, the [petitioners] have not advanced any valid ground to warrant a denial of the stockholders right to
inspect corporate books and records as well as to copies of financial statements of the corporation.
The rights of inspection and to copies of financial statements under Sections 74 and 75 are inherent in the ownership of shares of a corporation.
These rights enable stockholders to know how the corporation is being managed.
The stockholders right of inspection of the corporations books and records is based upon their ownership of the assets and property of the
corporation. It is therefore, an incident of ownership of the corporate property whether this ownership or interest be termed an equitable ownership, a
beneficial ownership or a quasi-ownership. This right is predicated upon the necessity of self-protection.
The exercise of these rights may be denied, however, if it is shown that the stockholders have improperly used any information
secured through a previous examination or that the demand is purely speculative or merely to satisfy curiosity. These grounds have not
been shown to be present in this case.
WHEREFORE, the foregoing premises considered, the court rules in favor of the [respondents]. The [petitioners] are accordingly directed to allow
the [respondents] to exercise their right to inspect corporate books and records during business hours of any working day subject to the following
conditions:
1.
Written notice of when the right is to be exercised be given the [petitioners]/other appropriate officers of the corporation to allow for facility; the
deployment of necessary manpower and ready availability of records to be inspected/copied and, insofar as the instant action is concerned, the following
corporate records/documents spanning the period from January 2003 up to the present are to be made available:
a.
Check vouchers and checks;
b.
Debit and credit memoranda;
c.
Monthly bank statements from Metrobank, BPI, Banco de Oro, China Bank, Philippine Bank of Communications and other banks where the corporation
currently maintains accounts;
d.
Records of accounts receivables and payables;
e.
Monthly inventory list;
f.
Purchase and sales books;
g.
Sales invoices;
h.
General ledgers;
362
363
364

i.
j.
k.

Worksheet;
Monthly cash flow statements;
Financial statements both internal and external

2.
Payment of the reasonable costs of inspection and photocopying be deposited with the treasurer of the corporation which is fixed, for the purpose of
the inspection herein allowed, at P10,000.00 initially, subject to liquidation;
3.
If there be other books and records to be inspected, a schedule of these items, the desired date of inspection which must be during business hours of
any working day, and the purpose thereof, be communicated seasonably to the [petitioners]/appropriate officers of the corporation together with the
payment of reasonable cost of inspection/photocopying;
4.
All inspection and photocopying activities shall be carried out at the principal office and/or premises of the corporation where the corporate books,
records and documents are kept.
The court fails to find any sufficient basis to award damages to the [respondents].
Costs against [petitioners]. (Citations omitted, emphasis ours.)
The records of the cases reveal that petitioners received copies of the RTC Decisions on July 7, 2004, while respondents received the same on July 8,
2004.365[22]
On August 23, 2004, petitioners filed before the Court of Appeals three separate Petitions for Certiorari under Rule 65 of the Rules of Court, which contained
the same arguments in impugning the judgments of the RTC. The petition challenging the decision in Civil Case No. Q-04-091 was docketed as CA-G.R. SP
No. 85878,366[23] while the petitions contesting the judgments in Civil Case Nos. Q-04-092 and Q-04-093 were docketed as CA-G.R. SP Nos. 85880 367[24] and
85879,368[25] respectively.
Petitioners argued that they resorted to the extraordinary remedy of certiorari given that there was no plain, speedy and adequate remedy in the ordinary
course of law and that a decision rendered in an intra-corporate controversy was immediately executory. Petitioners likewise claimed that the RTC erred
when it adjudged that the exercise of [a stockholders right to inspect and to receive copies of financial statements] may be denied x x x if it is shown that
the stockholders have improperly used any information secured through a previous examination or that the demand is purely speculative or merely to
satisfy curiosity and that said grounds have not been shown to be present in this case. Petitioners submitted that, other than the aforementioned grounds,
a stockholders right to inspect corporate records may also be denied (1) if the stockholder is not acting in good faith and (2) the inspection is not for a
legitimate purpose. Said grounds were allegedly the very defenses relied upon by petitioners in their Answers, but the trial court ignored the same. In so
365
366
367
368

doing, petitioners concluded that the RTC acted capriciously, whimsically, arbitrarily and in a despotic manner, thus committing grave abuse of discretion
amounting to lack of jurisdiction. Petitioners prayed that a preliminary injunction and/or a TRO be issued, enjoining the enforcement or implementation of
the Decisions of the RTC dated June 23, 2004, to prevent grave and irreparable damage to petitioners.
On August 31, 2004, petitioners filed a Motion for Consolidation 369[26] of the three petitions with CA-G.R. SP No. 85878, in the interest of judicial economy and
coherence and the fact that the three (3) cases involve the same parties and affecting closely related subject matters and thus involving common
questions of law or facts.
CA-G.R. SP No. 85878
In a Resolution370[27] dated September 2, 2004, the Court of Appeals (12 th Division) dismissed the petition in CA-G.R. SP No. 85878, ratiocinating in this
wise:
While petitioners admit that appeal was an available remedy, they claim that it is not adequate, speedy and sufficient. However, other than said bare
allegation, petitioners have not explained why appeal is not an adequate remedy.
Admittedly, petitioners received a copy of the assailed Decision on July 7, 2004, hence, they had fifteen (15) days therefrom, or until
July 22, 2004, within which to appeal the same. However, it was only on August 23, 2004 that petitioners filed the instant petition for
certiorari with this Court. The fact that the assailed Decision is immediately executory, pursuant to Section 4 of the Interim Rules of Procedure
Governing Intra-Corporate Controversies under Republic Act No. 8799, does not necessarily mean that appeal is not an adequate remedy. Under Section 10,
Rule 41 of the 1997 Rules of Civil Procedure, the clerk of court of the Regional Trial Court is required to transmit to this Court the records of the appealed
case within thirty (30) days after the perfection of the appeal. Likewise, Section 3, Rule 44 of the same Rules provides that if the original record is not
transmitted to this Court within thirty (30) days after the perfection of the appeal, either party may file a motion with the trial court, with notice to the
other, for the transmittal of such record or record on appeal. Thus, had petitioners immediately filed a notice of appeal with respondent court,
the records of Civil Case No. Q-04-091 could have been transmitted to this Court within thirty (30) days from said filing, i.e., even before
the instant petition was filed on August 23, 2004, and petitioners could have sought a temporary restraining order in the appealed case
to stay the enforcement of the assailed Decision.
As pointed out in Manila Electric Company vs. Court of Appeals, 187 SCRA 200, 205:
While the special civil action of certiorari may be availed of in the alternative situation where an appeal would not constitute a plain, speedy and adequate
remedy, this is on the theoretical assumption that the right to appeal is still available in the case. If, however, the remedy by appeal had already been lost
and the loss was occasioned by petitioners own neglect or error in the choice of remedies, certiorari cannot lie as a substitute or a tool to shield the
petitioner from the adverse consequences of such neglect or error. The two remedies are mutually exclusive and not alternative or successive.
WHEREFORE, the instant petition is DISMISSED. (Emphases ours.)

369
370

Subsequently, on September 22, 2004, the Court of Appeals (12 th Division) issued a Resolution,371[28] which merely noted the petitioners Motion for
Consolidation, inasmuch as the petition in CA-G.R. SP No. 85878 was already dismissed.
Petitioners filed a Motion for Reconsideration 372[29] of the Resolution dated September 2, 2004, but the same was denied in a Resolution 373[30] dated
November 17, 2004.
Afterward, petitioners no longer challenged before this Court the Resolutions of the Court of Appeals (12 th Division) in CA-G.R. SP No. 85878.
CA-G.R. SP No. 85880
On March 11, 2005, the Court of Appeals (Fourth Division) promulgated its Decision 374[31] in CA-G.R. SP No. 85880, annulling the RTC Decision dated
June 23, 2004 in Civil Case No. Q-04-092. The appellate court explained thus:
As [respondents] failed to allege their motive, purpose or reason for the inspection, the trial court, in its assailed decision, did not make any finding
that the inspection sought was for a legitimate purpose. Neither can we discern, on the basis of the records of this case, that indeed the [respondents] were
properly motivated in seeking an inspection of the records and books of Marine Resources Development Corporation.
Consequently, in the absence of any showing of proper motive on the part of the [respondents] in seeking an inspection of the books and records of
Marine Resources Development Corporation, in line with the ruling of the Supreme Court in the aforecited case of Gonzales vs. Philippine National Bank, we
hold that the trial court patently erred and as a result thereof, gravely abused its discretion when, in its assailed decision, it ruled in favor of the
[respondents], allowing them to inspect the records and books of Marine Resources Development Corporation.
WHEREFORE, the instant petition for certiorari is hereby GRANTED. The assailed decision of the Regional Trial Court, National Capital Judicial Region,
Branch 93, Quezon City, in Civil Case No. Q-04-092 is ANNULLED and SET ASIDE. Judgment is hereby rendered dismissing [respondents] complaint for
lack of merit.375[32]

371
372
373
374
375

Respondents sought the reconsideration 376[33] of the above decision, but the Court of Appeals (Fourth Division) denied the same in a Resolution 377[34]
dated February 7, 2006. Thereafter, the Decision dated March 11, 2005 in CA-G.R. SP No. 85880 became final and executory on March 2, 2006. 378[35]
CA-G.R. SP No. 85879
On April 28, 2005, the Court of Appeals (Eighth Division) rendered a Decision 379[36] in CA-G.R. SP No. 85879, adopting the Decision dated March 11,
2005 in CA-G.R. SP No. 85880. After quoting the relevant portions of the latter decision, the Court of Appeals (Eighth Division) adjudged that:
This Division agrees with the x x x findings of the Fourth Division, the same having been reached after a thorough discussion of the merits of the case. The
only difference between CA-G.R. SP No. 85880 and the present case is that the said case involves Marine Resources Development Corporation while this
case concerns First Marcel Properties, Inc.
WHEREFORE, the Decision dated March 11, 2005 rendered in CA-G.R. SP No. 85880 is hereby adopted by this Division. 380[37]
Respondents filed a Motion for Reconsideration 381[38] of the above Decision, but the same was denied in a Resolution 382[39] dated May 19, 2006.
Subsequently, the Decision dated April 28, 2005 in CA-G.R. SP No. 85879 became final and executory on June 27, 2006. 383[40]
Motion for Execution
In the interregnum, after the RTC of Quezon City promulgated the Decisions dated June 23, 2004 in Civil Case Nos. Q-04-091, Q-04-092 and Q-04093, respondents filed a Motion for Execution384[41] of the said decisions on September 15, 2004. Respondents averred that said motion was consistent
with Rule 1, Section 4 of the Interim Rules of Procedure Governing Intra-Corporate Controversies:

376
377
378
379
380
381
382
383
384

SEC. 4. Executory nature of decisions and orders. All decisions and orders issued under these Rules shall immediately be executory. No appeal or petition
taken therefrom shall stay the enforcement or implementation of the decision or order, unless restrained by an appellate court. Interlocutory orders shall
not be subject to appeal.
As there was no restraining order issued by an appellate court, enjoining the execution of the RTC decisions, respondents argued that the said
execution should proceed as a matter of course.
In an Order385[42] dated February 21, 2005, the RTC denied the Motion for Execution of the decisions in Civil Case Nos. Q-04-092 and Q-04-093,
stating that the Motion for Writ of Execution cannot be granted at this time in view of the pendency of incidents with the appellate court [CA-G.R. SP No.
85879 and CA-G.R. SP No. 85880], which incidents stand to be affected by a precipitate execution of the judgments in these cases. To rule otherwise may
render moot the proceedings that are pending with the higher court.
On the other hand, the RTC granted the Motion for Execution of the decision in Civil Case No. Q-04-091 in an Order 386[43] likewise dated February 21,
2005. The trial court based its ruling on the fact that the petition in CA-G.R. SP No. 85878, which assailed the decision in Civil Case No. Q-04-091, had
already been dismissed and the Motion for Reconsideration thereof was also denied.
On March 9, 2005, the Branch Clerk of Court of the RTC of Quezon City issued the Writ of Execution 387[44] in Civil Case No. Q-04-091.
On March 22, 2005, petitioners filed an Omnibus Motion (To Quash Writ of Execution and/or Suspend Execution) 388[45] in Civil Case No. Q-04091. Petitioners observed that the Motion for Execution was based on the Court of Appeals (12 th Division) Resolution dated September 2, 2004 in CA-G.R. SP
No. 85878, which dismissed the petition assailing the RTC Decision dated June 23, 2004 in Civil Case No. Q-04-091. Petitioners pointed out that they
subsequently received a copy of the Decision dated March 11, 2005 in CA-G.R. SP No. 85880, wherein the Court of Appeals (Fourth Division) set aside the
ruling of the RTC in Civil Case No. Q-04-092 and thereby disallowed the respondents from inspecting the corporate records of Marine Resources
Development Corporation. Petitioners also noted that the dismissal of the petition for certiorari in CA-G.R. SP No. 85878 was merely based on a technicality,
i.e., that petitioners should have instead filed an appeal, and that the Resolution of the Court of Appeals (12 th Division) did not delve on the merits of the
case. Except for the identity of the corporations concerned, petitioners posited that the Decision dated March 11, 2005 in CA-G.R. SP No. 85880
supplemented what was lacking in the Resolution dated September 2, 2004 in CA-G.R. SP No. 85878 by resolving the issue of the propriety of the intended
inspection of corporate records. Thus, petitioners asserted that the Decision dated March 11, 2005 in CA-G.R. SP No. 85880 was a supervening event, which
warranted the suspension of the execution of the RTC Decision dated June 23, 2004 in Civil Case No. Q-04-091.
In an Order389[46] dated April 21, 2005, the RTC denied the petitioners Omnibus Motion (To Quash Writ of Execution and/or Suspend Execution),
elucidating thus:
385
386
387
388
389

On [petitioners] Omnibus Motion (to Quash Writ of Execution and/or Suspend Execution) and subsequent related pleadings, the court resolves to deny the
motion as the arguments raised therein do not sufficiently persuade the court that legal basis exists to justify the quashal of the Writ of Execution and/or
suspension of its execution.
It bears to note that the Resolution of the Court of Appeals [in CA-G.R. SP No. 85880], granting [petitioners] Petition for [Certiorari] with the Court of
Appeals in a similar case (Q-04-092) and the setting aside of the order of inspection which was ordered by this court, has no relevance to this case. Worthy
of emphasis is that the corporation involved herein is Marcel Trading Corporation which is separate from Marine Resources Development Corporation, the
corporation involved in Q-04-092.
The Omnibus Motion is accordingly denied.
CA-G.R. SP No. 90024
Discontented with the above order, petitioners filed with the Court of Appeals a Petition for Certiorari and Prohibition with prayer for issuance of a
Writ of Preliminary Injunction and/or a Temporary Restraining Order, 390[47] which petition was docketed as CA-G.R. SP No. 90024 and raffled to the First
Division. Petitioners imputed grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the RTC when the latter denied the
petitioners Omnibus Motion (To Quash Writ of Execution and/or Suspend Execution) and failed to consider as a supervening event the Court of Appeals
(Fourth Division) Decision dated March 11, 2005 in CA-G.R. SP No. 85880, which should have warranted the suspension of the execution of the RTC Decision
dated June 23, 2004 in Civil Case No. Q-04-091.
In the assailed Resolution391[48] dated June 29, 2005, the Court of Appeals (First Division) denied due course to the petition, thus:
After a study of the petitions and its annexes, the Court perceived no grave abuse of discretion committed by the [RTC]. The decision was rendered
on the basis of the existing law and prevailing jurisprudence. As to its execution, there is no subsequent event justifying a quashal of the writ of execution
or suspension of its implementation. The [RTC] was correct when [it] stated that the corporation involved, Marcel Trading Corporation, is different, or
separate from, Marine Resources Development Corporation, the corporation involved in Q-04-092.
xxxx
The burden of proof in this regard lies with the corporation who refuses a stockholder from exercising his right. It is not the other way around. A
stockholder need not prove that he is in good faith and his request or demand is for a legitimate purpose. The right is there. The burden is on the
corporation to show that he really has other motives not legitimate.
This issue is not novel. In the case of Republic (PCGG) v. Sandiganbayan and Cojuangco, G.R. No. 88809, July 10, 1991, it was ruled that the
corporation has the burden to show that private respondents action in seeking examination of the corporate records was moved by unlawful
or ill-motivated designs which could appropriately call for a judicial protection against the exercise of such right. x x x
390
391

xxxx
WHEREFORE, there being no prima facie showing of a grave abuse of discretion, the petition is DENIED due course.
Petitioners filed a Motion for Reconsideration 392[49] of the above Resolution, but the Court of Appeals (First Division) likewise denied the same in the
Resolution393[50] dated August 18, 2005.
Thus, petitioners came to this Court via the instant petition, praying for the issuance of a writ of preliminary injunction and/or a TRO to enjoin the
enforcement of the Writ of Execution dated March 9, 2005, pending the consideration of the petition and, ultimately, the permanent suspension of the
implementation of the said Writ of Execution in view of the finality of the Court of Appeals (Fourth Division) Decision dated March 11, 2005 in CA-G.R. SP No.
85880.
On October 17, 2005, the Court issued a TRO, 394[51] which enjoined the RTC from enforcing or implementing the Writ of Execution dated March 9, 2005
in Civil Case No. Q-04-091.
The sole issue put forward for our consideration is:
WHETHER OR NOT THE DECISIONS IN SP NO. 85880 AND 85879 RENDERED BY SEPARATE DIVISIONS OF THE COURT OF APPEALS[,] DECLARING AS
IMPROPER THE INTENDED INSPECTION OF CORPORATE RECORDS OF MARINE RESOURCE DEVELOPMENT CORPORATION AND FIRST MARCEL PROPERTIES
CORPORATION, CONSTITUTE A SUPERVENING EVENT WHICH WOULD WARRANT THE SUSPENSION OF EXECUTION OF THE DECISION OF THE REGIONAL TRIAL
COURT GRANTING INSPECTION OF CORPORATE RECORDS OF MARCEL TRADING CORPORATION?
Petitioners reiterate their position that the Decision dated March 11, 2005 of the Court of Appeals (Fourth Division) in CA-G.R. SP No. 85880, which
set aside the ruling of the RTC in Civil Case No. Q-04-092 should have been considered as a supervening event that justified the suspension of the
execution of the RTC Decision dated June 23, 2004 in Civil Case No. Q-04-091. Notwithstanding the lack of identity of the corporations involved, petitioners
aver that Civil Case No. Q-04-091 was factually similar to Civil Case No. Q-04-092. Thus, they claim that the RTC should have taken judicial notice of the
Decision dated March 11, 2005 of the Court of Appeals (Fourth Division) in CA-G.R. SP No. 85880. Once more, petitioners highlight the fact that the
dismissal of the petition in CA-G.R. SP No. 85878 was allegedly based on a mere technicality sans a discussion on the merits of the case. As such, the
Decision in CA-G.R. SP No. 85880 only supplemented what was lacking in the Decision in CA-G.R. SP No. 85878. To the mind of petitioners, the RTC should
have at least awaited the finality of the judgments in CA-G.R. SP Nos. 85880 and 85879 before it ordered the execution of the Decision dated June 23, 2004
in Civil Case No. Q-04-091.
The instant petition is devoid of merit.
392
393
394

After a careful review of the facts and arguments in this case, the Court finds that petitioners have already lost their right to question the RTC
Decision dated June 23, 2004 in Civil Case No. Q-04-091, much less to seek the suspension of the execution thereof.
In Natalia Realty, Inc. v. Court of Appeals,395[52] the Court had the occasion to discuss the nature of supervening events, thus:
One of the exceptions to the principle of immutability of final judgments is the existence of supervening events. Supervening events refer to facts which
transpire after judgment has become final and executory or to new circumstances which developed after the judgment has acquired finality, including
matters which the parties were not aware of prior to or during the trial as they were not yet in existence at that time.
A supervening event affects or changes the substance of the judgment and renders the execution thereof inequitable. 396[53] Should such an event
occur after a judgment becomes final and executory, which event may render the execution of the judgment impossible or unjust, Ramirez v. Court of
Appeals397[54] dictates that a stay or preclusion of execution may properly be sought.
Doubtless, the RTC Decisions dated June 23, 2004 in Civil Case Nos. Q-04-091, Q-04-092 and Q-04-093 have since become final and executory.
Civil cases involving the inspection of corporate books are governed by the rules of procedure set forth in A.M. No. 01-2-04-SC ,398[55] otherwise known as the
Interim Rules of Procedure for Intra-Corporate Controversies under Republic Act No. 8799 399[56] (Interim Rules). Section 4, Rule 1400[57] of the Interim Rules
defines the nature of the judgments rendered thereunder as follows:
SEC. 4. Executory nature of decisions and orders. - All decisions and orders issued under these Rules shall immediately be executory, except the
awards for moral damages, exemplary damages and attorneys fees, if any. No appeal or petition taken therefrom shall stay the enforcement or
implementation of the decision or order, unless restrained by an appellate court. Interlocutory orders shall not be subject to appeal. (Emphases
ours.)
Verily, the first part of Section 4, Rule 1 of the Interim Rules is categorical. Save for the exceptions clearly stated therein, the provision enunciates
that a decision and order issued under the Interim Rules shall be enforceable immediately after the rendition thereof. In order to assail the decision or
order, however, the second part of the provision speaks of an appeal or petition that needs to be filed by the party concerned. In this appeal or petition, a
395
396
397
398
399
400

restraining order must be sought from the appellate court to enjoin the enforcement or implementation of the decision or order. Unless a restraining order
is so issued, the decision or order rendered under the Interim Rules shall remain to be immediately executory.
On September 14, 2004, the Court issued a Resolution in A.M. No. 04-9-07-SC 401[58] to rectify the situation wherein lawyers and litigants are in a
quandary on how to prevent under appropriate circumstances the execution of decisions and orders in cases involving corporate rehabilitation and intracorporate controversies.402[59] To address the need to clarify the proper mode of appeal in [cases involving corporate rehabilitation and intra-corporate
controversies] in order to prevent cluttering the dockets of the courts with appeals and/or petitions for certiorari,403[60] the Court thereby resolved that:
1.
All decisions and final orders in cases falling under the Interim Rules of Corporate Rehabilitation and the Interim Rules of Procedure Governing
Intra-Corporate Controversies under Republic Act No. 8799 shall be appealable to the Court of Appeals through a petition for review under Rule 43
of the Rules of Court.
2.
The petition for review shall be taken within fifteen (15) days from notice of the decision or final order of the Regional Trial Court .
Upon proper motion and the payment of the full amount of the legal fee prescribed in Rule 141 as amended before the expiration of the reglementary
period, the Court of Appeals may grant an additional period of fifteen (15) days within which to file the petition for review. No further extension shall be
granted except for the most compelling reasons and in no case to exceed fifteen (15) days. (Emphases ours.)
In the instant case, petitioners received the RTC Decisions dated June 23, 2004 in Civil Case Nos. Q-04-091, Q-04-092 and Q-04-093 on July 7, 2004.
Thereafter, petitioners filed with the Court of Appeals three separate petitions for certiorari on August 23, 2004. On September 2, 2004, the Court of
Appeals (12th Division) resolved to dismiss the petition for certiorari in CA-G.R. SP No. 85878, holding that the same was a mere substitute for the lost
remedy of appeal. Petitioners then filed a Motion for Reconsideration on the said resolution. Thereafter, during the pendency of the Motion for
Reconsideration in CA-G.R. SP No. 85878, as well as the petitions for certiorari in CA-G.R. SP Nos. 85880 and 85879, the Resolution in A.M. No. 04-9-07-SC
took effect on October 15, 2004.
As regards the applicability of the Resolution to pending appeals or petitions, the same pertinently provided that:
3.
This Resolution shall apply to all pending appeals filed within the reglementary period from decisions and final orders in cases falling
under the Interim Rules of Corporate Rehabilitation and the Interim Rules of Procedure Governing Intra-Corporate Controversies under Republic Act No.
8799, regardless of the mode of appeal or petition resorted to by the appellant or petitioner.
4.
These pending appeals or petitions shall be treated in the following manner:
xxxx
c. In case a petition appealing or assailing the decision and/or final order is filed directly with the Court of Appeals within the reglementary
period, such petition shall be considered a petition for review under Rule 43.

401
402
403

The issue that needs to be resolved at this point is whether or not petitioners pursued the correct remedy in questioning the RTC Decisions in Civil Case
Nos. Q-04-091, Q-04-092 and Q-04-093. Corollary to this is whether or not the petitions for certiorari filed by petitioners could have been treated as
petitions for review under Rule 43 of the Rules of Court, in accordance with the provisions of the Resolution in A.M. No. 04-9-07-SC, such that petitioners
can be considered to have availed themselves of the proper remedy in assailing the rulings of the RTC.
We answer in the negative.
The term petition in the third and fourth paragraphs of A.M. No. 04-9-07-SC, cannot be construed as to include a petition for certiorari under Rule 65 of the
Rules of Court. The rationale for this lies in the essential difference between a petition for review under Rule 43 and a petition for certiorari under Rule 65 of
the Rules of Court. In Sebastian v. Morales,404[61] the Court underscored, thus:
That a petition for certiorari under Rule 65 should pro forma satisfy the requirements for the contents of a petition for review under Rule 43 does not
necessarily mean that one is the same as the other. Or that one may be treated as the other, for that matter. A petition for review is a mode of appeal,
while a special civil action for certiorari is an extraordinary process for the correction of errors of jurisdiction. It is basic remedial law that the two remedies
are distinct, mutually exclusive, and antithetical. The extraordinary remedy of certiorari is proper if the tribunal, board, or officer exercising judicial or quasijudicial functions acted without or in grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal or any plain, speedy, and
adequate remedy in law. A petition for review, on the other hand, seeks to correct errors of judgment committed by the court, tribunal, or officer. x x x
When a court, tribunal, or officer has jurisdiction over the person and the subject matter of the dispute, the decision on all other questions arising in the
case is an exercise of that jurisdiction. Consequently, all errors committed in the exercise of said jurisdiction are merely errors of judgment. Under
prevailing procedural rules and jurisprudence, errors of judgment are not proper subjects of a special civil action for certiorari. For if every error committed
by the trial court or quasi-judicial agency were to be the proper subject of review by certiorari, then trial would never end and the dockets of appellate
courts would be clogged beyond measure. x x x.
The RTC Decisions in Civil Case Nos. Q-04-091, Q-04-092 and Q-04-093 are final orders that disposed of the whole subject matter or terminated the
particular proceedings or action, leaving nothing to be done but to enforce by execution what has been determined. 405[62] As the RTC was unquestionably
acting within its jurisdiction, all errors that it might have committed in the exercise of such jurisdiction are errors of judgment, which are reviewable by a
timely appeal.
The petitioners erroneous choice of remedy was further aggravated by the fact that the same was apparently resorted to after they lost the remedy of
appeal. In their petitions for certiorari before the Court of Appeals, petitioners pointedly stated that while it may be true that appeal was an available
remedy, the same is not adequate or equally beneficial, speedy and sufficient. 406[63] This is plainly inaccurate. As previously discussed, petitioners received
the RTC Decisions in Civil Case Nos. Q-04-091, Q-04-092 and Q-04-093 on July 7, 2004. From then on, petitioners filed the three separate petitions for

404
405
406

certiorari with the Court of Appeals on August 23, 2004, or forty-seven (47) days after receipt of the RTC Decisions. In Federation of Free Workers v.
Inciong,407[64] we reiterated the basic remedial law principle that:
While the special civil action of certiorari may be availed of in the alternative situation where an appeal would not constitute a plain, speedy, and adequate
remedy, this is on the theoretical assumption that the right to appeal is still available in the case. If, however, the remedy by appeal had already been lost
and the loss was occasioned by petitioners own neglect or error in the choice of remedies, certiorari cannot lie as a substitute or a tool to shield the
petitioner from the adverse consequences of such neglect or error. The two remedies are mutually exclusive and not alternative or successive.
Although the above doctrine admits of certain exceptions, 408[65] none of them was sufficiently proven to apply in the instant case.
The Court of Appeals (12 th Division) was, therefore, correct in dismissing the petition for certiorari in CA-G.R. SP No. 85878, which assailed the RTC Decision
in Civil Case No. Q-04-091. Contrariwise, the Fourth and Eighth Divisions of the Court of Appeals should not have assumed jurisdiction over the petitions for
certiorari in CA-G.R. SP Nos. 85880 and 85879, respectively. The Court likewise notes that after taking cognizance of the petitions filed before them on
August 23, 2004, the latter two divisions of the Court of Appeals even failed to issue a preliminary injunction and/or a TRO, enjoining the enforcement or
implementation of the RTC Decisions in Civil Case Nos. Q-04-092 and Q-04-093. Thus, in view of the foregoing, the RTC Decisions dated June 23, 2004 in
Civil Case Nos. Q-04-091, Q-04-092 and Q-04-093 remained to be immediately executory.
Nevertheless, it did not escape our attention that the RTC granted only the respondents motion for execution in Civil Case No. Q-04-091 and denied the
similar motions in Civil Case Nos. Q-04-092 and Q-04-093. Significantly, respondents no longer questioned the RTC Order denying the motions for execution
in the latter two cases. The ultimate issue that petitioners elevated to this Court pertained to the propriety of the issuance of the writ of execution of the
RTC Decision in Civil Case No. Q-04-091. Thus, we accordingly limit our discussion thereto.
Petitioners contend that the supervening event which developed after the finality of the judgment in Civil Case No. Q-04-091 is the Decision dated March
11, 2005 of the Court of Appeals (Fourth Division) in CA-G.R. SP No. 85880.
We disagree.
There is nothing in the Decision in CA-G.R. SP No. 85880 that affects or changes the substance of the judgment in Civil Case No. Q-04-091 and renders the
execution of the same inequitable.
The petition for certiorari in CA-G.R. SP No. 85880 was filed in order to dispute the judgment in the RTC Decision in Civil Case No. Q-04-092. In the said
case, respondents sought to gain access to and inspect the corporate books and records of Marine Resources Development Corporation. On the other
hand, in Civil Case No. Q-04-091, respondents entreated that they be allowed to inspect the corporate books and records of Marcel Trading Corporation.
Despite the fact that the parties to this case are all stockholders in the said corporations and the respondents invoked the same provisions of law, the cases
filed before the RTC were entirely distinct from and independent of each other. The two corporations involved are primarily engaged in different businesses
and do not share exactly the same set of stockholders. The records of the case are also silent with respect to the consolidation of the cases before the trial

407
408

court. Thus, any ruling on Civil Case No. Q-04-092 would not materially alter the substance of the judgment in Civil Case No. Q-04-091, which would render
the execution of the latter case inequitable.
Additionally, the Court of Appeals (Fourth Division) in CA-G.R. SP No. 85880 adjudged that the RTC patently erred in deciding in favor of respondents since
the latter failed to show that they were impelled by proper motives in seeking to inspect the corporate records of Marine Resources Development
Corporation.
However, as correctly held by the Court of Appeals (First Division) in the assailed Resolution dated June 29, 2005 in CA-G.R. SP No. 90024, Republic v.
Sandiganbayan409[66] has already settled that the burden of proof lies with the corporation who refuses to grant to the stockholder the right to inspect
corporate records. In said case, Eduardo Cojuangco, Jr. sought the inspection and examination of the corporate records of San Miguel Corporation (SMC)
and United Coconut Planters Bank (UCPB). As the shares of Cojuangco in the aforementioned corporations had previously been sequestered by the
Presidential Commission on Good Government (PCGG), the requests for inspection were coursed through the said government agency. The PCGG,
thereafter, denied Cojuangcos requests, arguing that the purpose of the latter was merely to satisfy his curiosity regarding the performance of SMC and
UCPB. In rejecting PCGGs line of reasoning, the Court ruled that:
[T]he argument is devoid of merit. Records indicate that [Cojuangco] is the ostensible owner of a substantial number of shares and is a stockholder of
record in SMC and UCPB. Being a stockholder beyond doubt, there is therefore no reason why [Cojuangco] may not exercise his statutory right of inspection
in accordance with Sec. 74 of the Corporation Code, the only express limitation being that the right of inspection should be exercised at reasonable hours
on business days; 2) the person demanding to examine and copy excerpts from the corporation's records and minutes has not improperly used any
information secured through any previous examination of the records of such corporation; and 3) the demand is made in good faith or for a legitimate
purpose. The latter two limitations, however, must be set up as a defense by the corporation if it is to merit judicial cognizance. As such, and in the
absence of evidence, the PCGG cannot unilaterally deny a stockholder from exercising his statutory right of inspection based on an unsupported and naked
assertion that private respondent's motive is improper or merely for curiosity or on the ground that the stockholder is not in friendly terms with the
corporation's officers.
xxxx
In the case at bar, [PCGG] failed to discharge the burden of proof to show that [Cojuangcos] action in seeking examination of the
corporate records was moved by unlawful or ill-motivated designs which could appropriately call for a judicial protection against the
exercise of such right. Save for its unsubstantiated allegations, [PCGG] could offer no proof, nay, not even a scintilla of evidence that
respondent Cojuangco, Jr., was motivated by bad faith; that the demand was for an illegitimate purpose or that the demand was impelled
by speculation or idle curiosity. Surely, [Cojuangcos] substantial shareholdings in the SMC and UCPB cannot be an object of mere curiosity. (Emphasis
ours.)
The Court is fully aware that the Decision dated March 11, 2005 of the Court of Appeals (Fourth Division) in CA-G.R. SP No. 85880 and the Decision dated
April 28, 2005 of the Court of Appeals (Eighth Division) in CA-G.R. SP No. 85879, which adopted the ruling of the Fourth Division, had already become final
and executory for failure of respondents to appeal therefrom. The Court may no longer disturb the same in these proceedings. In any event, the
applicability of the said decisions of the Court of Appeals (Fourth and Eighth Divisions) is limited to the letter-demand for the inspection of corporate
records of Marine Resources Development Corporation (Civil Case No. Q-04-092) and First Marine Properties, Inc. (Civil Case No. Q-04-093) made by
respondents on April 16, 2004.
409

In light of the foregoing, the Court declares that petitioners cannot rely on the Decision dated March 11, 2005 in CA-G.R. SP No. 85880 nor the Decision
dated April 28, 2005 in CA-G.R. SP No. 85879 in order to pray for the permanent suspension of the writ of execution in Civil Case No. Q-04-091. The
execution of the Decision dated June 23, 2004 in Civil Case No. Q-04-091 should now proceed as a matter of course.
WHEREFORE, the Court hereby:
(1)
(2)

DENIES the instant Petition for Review on Certiorari under Rule 45 of the Rules of Court;
AFFIRMS the Resolutions dated June 29, 2005 and August 18, 2005 of the Court of Appeals in CA-G.R. SP No. 90024;

(3)
REMANDS the records of this case to the Regional Trial Court of Quezon City, Branch 93, for the immediate execution of the Decision dated June
23, 2004 in Civil Case No. Q-04-091; and
(4)

LIFTS the Temporary Restraining Order issued on October 17, 2005.

Costs against petitioners.


SO ORDERED.
LIGAYA V. SANTOS,
A.M. No. RTJ-05-1946
EDNA CORTEZ,
[Formerly OCA IPI No. 05-2181-RTJ] GIRLIE CASTILLO and
CHRISTOPHER CASTILLO,
Present:
Complainants,
YNARES-SANTIAGO, Chairperson,
- versus AUSTRIA-MARTINEZ,
CALLEJO, SR., and
JUDGE ROLANDO G. HOW,
CHICO-NAZARIO, JJ.
Regional Trial Court, Branch
257, Paraaque City,
Promulgated:
Respondent.
January 26, 2007
x--------------------------------------------------x

RESOLUTION

AUSTRIA-MARTINEZ, J.

Before us is an administrative complaint 410[1] dated January 31, 2005 filed by Ligaya V. Santos, Edna Cortez, Girlie Castillo and Christopher Castillo
(complainants) against Judge Rolando G. How (respondent), Regional Trial Court, Branch 257, Paraaque City, for Gross Ignorance of the Law, Manifest
Partiality and Serious Misconduct, relative to Criminal Case Nos. 01-0921, entitled People of the Philippines v. Ligaya V. Santos, and 01-0425, entitled People
of the Philippines v. Rolly Tonion, Jhunrey Soriano, Christopher Castillo, Girlie Castillo, Robert Bunda and Pedro Jimenez.
The facts of the case as found by the Office of the Court Administrator (OCA) are as follows:
Complainant Ligaya V. Santos is the Chairwoman of Barangay 659-A, Arroceros, Manila, while the other complainants are Barangay Councilors and Barangay
Policemen, respectively. They are presently detained without bail in Paraaque City Jail as accused in the aforementioned criminal cases involving the
successive 'ambush' incidents during the second quarter of 2001 against two sons of Manila Assistant City Prosecutor Domingo I. Orda, Jr. On the second
'ambush' incident, the Paraaque City Prosecutor's Office found probable cause against the accused (complainants herein) but the Department of Justice (DOJ),
upon review, recommended the dismissal of the complaints in a Joint Resolution dated 13 June 2002.
On 21 June 2002, the City Prosecutor of Paraaque City, acting on the DOJ Joint Resolution, moved for the withdrawal of the Information against
complainants. It was granted by the trial court in an Order dated 5 July 2001. The Court of Appeals, acting on the Petition filed by Prosecutor Orda in CA GR
SP 72962, nullified the order of withdrawal. As a consequence, the accused were arrested on the basis of the previous warrants of arrest issued by the trial
court. This Honorable Court, on review, in GR No. 158236, sustained the ruling of the Court of Appeals.
Upon receipt of the Supreme Court Resolution, the trial court directed the resumption of the proceedings on the subject criminal cases. However,
Prosecutor Orda filed a motion to inhibit Presiding Judge Raul E. de Leon for partiality in the issuance of the previous order granting the withdrawal of the
Information. Judge de Leon inhibited himself, and the cases were re-raffled and eventually assigned to respondent judge before whose court complainants
filed their petition for bail.
On 14 December 2004, the prosecution presented as its first witness, SABINO FRIAS, the same star witness who previously surfaced with an
affidavit after erstwhile 'star witness' GINA AZARCON repudiated her prior declarations. Frias re-affirmed his affidavit and positively identified all the alleged
malefactors, including herein complainants.
On 16 December 2004, the prosecution presented its second witness, JONAS AGNOTE, a Lawton jeepney dispatcher and alleged co-conspirator, who
volunteered to testify only the day before. Agnote directly implicated Ligaya Santos as the mastermind who instructed him to look for gun-for-hire, which he
provided in the person of 'Dagul' who was eventually hired for a price of P100,000.00 to kill Prosecutor Orda.
Respondent Judge held that he would resolve the petition for bail on the basis of the evidence presented by the prosecution. When
complainants manifested that they would present one witness to identify the documents on record, respondent branded the request as 'misplaced.' He
even rejected outright the request of the defense counsel to make a tender of proof and instead declared the petition deemed submitted for resolution,
subject to the filing of memorandum by the parties within five (5) days.
On 29 December 2004, respondent issued an Order denying bail to the accused. Complainants assail the order for being based on a one-sentence
conclusion that the evidence of guilt is strong, without any supporting evaluation or consideration of the issues raised. 411[2]
410
411

In his Comment,412[3] respondent professes impartiality in handling the subject criminal cases. He asserts that he had explained to the parties that, for
purposes of bail hearing, only the prosecution is required to present evidence since it is not yet a trial of the main case and the court is only preliminarily
tasked to determine if the evidence of guilt is strong.
Respondent argues that, even granting the accused may be allowed to present their evidence but the Judge did not allow it, the disallowance cannot
be considered partiality or misconduct. He claims that he believed in good faith that he would fairly and correctly resolve the petition for bail by evaluating
it based solely on the evidence of the prosecution; and that allowing both parties to present their evidence would mean resolving the merits of the case
itself. He contends that if ever he committed any error, it was an error of judgment committed in good faith for which complainants have remedies under
the Rules.
Respondent further contends that it is inaccurate and unfair to claim that his Order denying bail was without supporting evaluation of the evidence
and only made a one-sentence conclusion that the evidence of guilt is strong. He stresses that the questioned Order contains a summary of the testimonies
of the witnesses of the prosecution and it is only after the summary that he made a conclusion that the evidence of guilt of the accused is strong. He
explains that he did not elaborate each and every point in support of the conclusion since they are already contained in the summary. He avers that he
intentionally made the conclusion terse because an outright conclusion of everything might be considered a prejudgment of the case.
In the Agenda Report dated July 13, 2005, 413[4] the OCA made the following evaluation and recommendation, to wit:
EVALUATION:
xxxx
Respondent Judge insists that, for purposes of bail hearing, only the prosecution is required to present evidence since it is not yet a trial of the main
case and the court is only preliminarily tasked to determine if the evidence of guilt is strong. He claims that in decreeing such position he merely exercised
his discretion, bail being discretionary in the subject cases, and that if ever he erred in his ruling it is merely an error of judgment.
The Constitution guarantees to every person under legal custody the right to bail, except those charged with offenses punishable by reclusion perpetua
when evidence of guilt is strong. The rules likewise mandate that before ruling on an application for bail, a hearing should first be conducted to determine
the existence of a strong evidence against the accused.
A hearing for bail is summary in nature or otherwise in the discretion of the court. Summary hearing means such brief and speedy method of
receiving and considering the evidence of guilt as is practicable and consistent with the purpose of the hearing which is merely to determine the weight of
the evidence for purposes of bail. The course of the inquiry may be left to the discretion of the court which may confine itself to receiving such evidence as
has reference to substantial matters avoiding unnecessary thoroughness in the examination and cross-examination of witnesses and reducing to a
reasonable minimum the amount of corroboration particularly on details that are not essential to the purpose of the hearing.

412
413

It is true that the weight of the evidence adduced is addressed to the sound discretion of the court. However, such discretion may be exercised
only after the hearing called to ascertain the degree of guilt of the accused for the purpose of determining whether or not he should be granted provisional
liberty. At the hearing, the court should assure that the prosecution is afforded the opportunity to adduce evidence relevant to the factual issue, with the
applicant having the right of cross-examination and to introduce his own evidence in rebuttal. Both the prosecution and the defense must be given
reasonable opportunity to prove, in the case of the prosecution, that evidence of guilt of the applicant is strong; and, in the case of the defense, that such
evidence of guilt is not strong. The accused has the right to cross-examine the witnesses presented by the prosecution and to introduce his evidence in
rebuttal to establish his right to bail.
In fine, the hearing is for the purpose of enabling the court to exercise sound discretion as to whether or not under the Constitution and laws in force
the accused is entitled to provisional release on bail. At the hearing, the petitioner can rightfully cross examine the witnesses presented by the prosecution
and introduce his own evidence in rebuttal.
In the instant case, respondent cut short the hearing after the prosecution presented its evidence and dispensed altogether with the defense's turn
to adduce evidence in rebuttal. Said denial of the request to present evidence shows deficiency in prudence, discretion and judgment on the part of respondent Judge. The deficiency is
magnified by respondent's outright denial of complainants' request to make a tender of proof, which is allowed under the Rules. It is not accurate to
contend that hearing the prosecution overcome its burden of proof would suffice. Dictates of fair play should have at least reminded respondent to inquire
first the nature of the evidence proposed to be presented, determine whether or not they will be essential for the purpose of ascertaining entitlement to
bail, before discarding any evidence outright. This is in keeping with procedural due process, given established rules and jurisprudence on bail.
It is a pressing responsibility of judges to endeavor at all times to avoid such actions as would impress upon litigants the disregard of due process.
On this, respondent had been remiss.
True, as a matter of public policy, a judge may not be disciplined for error of judgment absent proof that such error was made with a conscious and
deliberate intent to cause injustice. This does not mean, however, that a judge need not observe propriety, discreetness and due care in the performance
of his official functions. In every case, a judge shall endeavor diligently to ascertain the facts and the applicable law unswayed by partisan interests, public
opinion or fear of criticism.
The records, however, fail to establish bad faith, corruption, dishonesty or fraud on the part of respondent, thereby meriting for him a tempered
penalty. In fact, a finding of good faith is consistent with the fact that respondent still granted both parties opportunity to submit their respective
memorandum after he disallowed the defense to present evidence.
Finally, the rest of the charges against respondent lack merit. Specifically, the charge of bias and partiality was not substantiated. Moreover, that the decision
was based on a one-sentence conclusion that the evidence of guilt is strong is inaccurate. The conclusion to that effect was actually preceded by a
thorough summary of the evidence. The fact that there was no categorical discussion on how the conclusion was reached does not make it less a
reasonable conclusion. Obviously, respondent accorded the evidence probative weight, which he deemed to be adequate for his inference. At any rate, the
inadequacy of expression of the questioned Order is outweighed by its substantial compliance with the requirements for an Order granting or denying bail.
RECOMMENDATION:
1.

Respectfully submitted for consideration of the Honorable Court are our recommendations that:

The instant complaint be RE-DOCKETED as a regular administrative case;

1.
For deficiency in prudence, which borders on disregard of due process, respondent be REPRIMANDED with Stern Warning that subsequent infractions
shall be dealt with more severely;
The rest of the charges against respondent be DISMISSED for lack of merit.
We adopt the findings of facts and recommendation of the OCA.
On September 12, 2005, respondent manifested that there is a related case Administrative Case No. 6701 entitled Judge Rolando G. How v. Atty. Roan I.
Libarios. He avers that since the present case and the latter case arose from the same incident, the two cases should be consolidated. 414[5] In its Resolution of
August 23, 2006, the Court denied consolidation and considered the matter submitted for resolution based on the pleadings filed.
On September 23, 2005, complainants manifested their willingness to submit the case for resolution based on the pleadings filed. 415[6]
At issue is whether or not the acts committed by respondent judge constitute gross ignorance of the law, manifest partiality and serious misconduct.
On gross ignorance of the law.
No person charged with a capital offense, or an offense punishable by reclusion perpetua or life imprisonment, shall be admitted to bail when evidence
of guilt is strong, regardless of the stage of the criminal prosecution. 416[7]
Stressing our ruling in Basco v. Rapatalo,417[8] we held that when the grant of bail is discretionary, the prosecution has the burden of showing that the evidence
of guilt against the accused is strong. However, the determination of whether or not the evidence of guilt is strong, being a matter of judicial discretion,
remains with the judge. This discretion, by the very nature of things, may rightly be exercised only after the evidence is submitted to the court at the
hearing. Since the discretion is directed to the weight of the evidence and since evidence cannot properly be weighed if not duly exhibited or produced
before the court, it is obvious that a proper exercise of judicial discretion requires that the evidence of guilt be submitted to the court, the petitioner
having the right of cross examination and to introduce his own evidence in rebuttal. 418[9]
The discretion of the trial court is not absolute nor beyond control. It must be sound, and exercised within reasonable bounds. 419[10] Judicial discretion,
by its very nature, involves the exercise of the judge's individual opinion and the law has wisely provided that its exercise be guided by well-known rules
which, while allowing the judge rational latitude for the operation of his own individual views, prevent them from getting out of control. 420[11] An uncontrolled
414
415
416
417
418
419
420

or uncontrollable discretion on the part of a judge is a misnomer. It is a fallacy. Lord Mansfield, speaking of the discretion to be exercised in granting or
denying bail, said: but discretion when applied to a court of justice, means sound discretion guided by law. It must not be arbitrary, vague and fanciful; but
legal and regular. 421[12]
Jurisprudence is replete with decisions on the right of petitioner in bail proceedings to introduce his own evidence in rebuttal. 422[13] Respondent failed
to observe and consider for his proper determination and evaluation the weight of evidence presented by the prosecution. This, to our mind, is a clear
denial of complainants right to due process and equal protection of the law as embodied in our Constitution. 423[14]
Records show that during the hearing of the application for bail, complainants' counsel insisted on presenting their evidence to disprove the
allegations of the prosecution. However, respondent argued that the prosecution has to establish evidence against the accused because if he will go to the
defense evidence, there will be no way of stopping it, it will go through and through, as if, he is already hearing the main case. 424[15] This line of argument by
respondent is misplaced considering that what the complainants were asking is for their evidence, which is already a part of the record, to be presented
and admitted as tender of proof.
The reasons given by respondent that for purposes of bail hearing, only the prosecution is required to present evidence since it is not yet a trial of
the main case; that the court is only preliminarily tasked to determine if the evidence of guilt is strong; and that to allow complainants to present their
evidence would mean resolving the merits of the case itself, are not plausible.
Respondent, in effect, deprived the accused with their right to present rebuttal evidence which to our mind is a clear violation of their right to due process
and equal protection of the law. As aptly observed by the OCA, dictates of fair play should have at least reminded respondent to inquire first of the nature
of the evidence proposed to be presented, determine whether or not it will be essential for the purpose of ascertaining entitlement to bail, before
discarding any evidence outright. This is in keeping with procedural due process, given established rules and jurisprudence on bail. 425[16]
It is clear from the foregoing that respondent is remiss in his responsibility to endeavor at all times to avoid such actions as would impress upon
litigants the disregard of due process.
It is settled that as a matter of policy, the acts of a judge in his judicial capacity are not subject to disciplinary action. He cannot be subjected to
liability civil, criminal or administrative for any of his official acts, no matter how erroneous, as along as he acts in good faith. 426[17] To hold otherwise would
be to render judicial office untenable, for no one called upon to try the facts or interpret the law in the process of administering justice can be infallible in
his judgment.427[18]
421
422
423
424
425
426

However, although a judge may not always be subjected to disciplinary action for every erroneous order or decision he renders, relative immunity is
not a license to be negligent, abusive or arbitrary in the performance of his adjudicatory prerogatives. 428[19]
To constitute gross ignorance of the law, it is not enough that the subject decision, order or actuation of the judge in the performance of his official duties is
contrary to existing law and jurisprudence but, most importantly, he must be moved by bad faith, fraud, dishonesty, or corruption. 429[20] Good faith and
absence of malice, corrupt motives or improper considerations, are sufficient defenses in which a judge charged with ignorance of the law can find refuge. 430
[21]
However, good faith in situations of fallible discretion inhered only within the parameters of tolerable judgment and does not apply where the issues
are so simple and the applicable legal principles evident and basic as to be beyond possible margins of error.431[22]
In this case, respondent's act of cutting short the hearing after the prosecution presented its evidence, without affording the defense to adduce evidence in
rebuttal together with his outright denial of complainants request to offer proof, is a clear disregard of the right of the accused to disprove that the
evidence of guilt is strong. It is of no moment that respondent required complainants to submit their memorandum. What is significant is that complainants
were deprived of their constitutional right to present evidence during the hearing which the respondent may intelligently appreciate and evaluate in the
light of the circumstances then obtaining.
It must be stressed that occupying the exalted position of a judge entails a lot of responsibilities, foremost of which is proficiency in the law. Canon 3,
Rule 3.01 of the Code of Judicial Conduct mandates that a judge shall be faithful to the laws and maintain professional competence. He is mandated to be
conversant with the law and to have more than a cursory acquaintance with the rules and authoritative doctrines. When the law is elementary, not to be
aware of it constitutes gross ignorance thereof. Judges are expected to have more than just a modicum of acquaintance with the statutes and procedural
rules.
On manifest partiality and serious misconduct.
Nothing in the records suggests that respondent was motivated by malice or corrupt motives to deny the application for bail. Complainants failed to
substantiate their other allegations with competent proof besides their own bare allegations. Respondent did what he thought was right under the law and
established principles. Hence, respondent could not be held liable for manifest partiality and serious misconduct. The Court cannot presume partiality
based on the circumstances alleged in the complaint.

427
428
429
430
431

Moreover, for serious misconduct to exist, the judicial act complained of should be corrupt or inspired by an intention to violate the law or a
persistent disregard of well-known legal rules. 432[23] The records are bereft of any evidence to this effect to warrant disciplinary action against respondent.
On denying bail based on a one-sentence conclusion that the evidence of guilt is strong.
We agree with the OCA that although there was no categorical discussion on how the conclusion, that the evidence of guilt is strong, was reached,
the same does not make it less a reasonable conclusion. The inadequacy of expression of the questioned Order is outweighed by its substantial compliance
with the requirements for an Order granting or denying bail.
In sum, the act of respondent in denying the complainants the right to present evidence constitutes simple ignorance of the law; but in the absence of
malice, corrupt motives or improper considerations on the part of the respondent, the penalty of reprimand recommended by the OCA is just and
reasonable.
ACCORDINGLY, the Court finds Judge Rolando G. How guilty of simple ignorance of the law and REPRIMANDS him with a STERN WARNING that a
repetition of the same or similar acts will be dealt with more severely.
SO ORDERED.
FRANCISCO A. LABAO,
Petitioner,

G.R. No. 187984


Present:

versus -

LOLITO N. FLORES, AMADO A.


DAGUISONAN, PEPE M. CANTAR,
JULIO G. PAGENTE, JESUS E.
ARENA, CRISPIN A. NAVALES,
OSCAR M. VENTE, ARTEMIO B.
ARAGON, ARNOLD M. CANTAR,
ALBERTO T. CUADERO, RASMI E.
RONQUILLO, PEDRO R. GABUTAN,
ELPEDIO
E.
MENTANG,

WILFREDO R. MIOSA, * RODERICK


P.
NAMBATAC,
MARCIAL
D.
RIVERA, SANDE E. CASTIL,**
432
*
*

CARPIO MORALES, J., Chairperson,


BRION,
BERSAMIN,
VILLARAMA, JR., and
SERENO, JJ.

CRISOSTOMO
B.
ESIC,
and Promulgated:
November 15, 2010
AMBROSIO M. CANTAR,***
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION
BRION, J.:
We resolve the petition for review on certiorari433[1] filed by petitioner Francisco A. Labao (petitioner) to challenge the decision 434[2] and resolution435[3]
of the Court of Appeals (CA) in CA-G.R. SP No. 01472-MIN.436[4]
The Factual Antecedents
The facts of the case, gathered from the records, are briefly summarized below.
The petitioner is the proprietor and general manager of the San Miguel Protective Security Agency ( SMPSA), a licensed security-service contractor.
Respondents Lolito N. Flores, Amado A. Daguisonan, Pepe M. Cantar, Julio G. Pagente, Jesus E. Arena, Crispin A. Navales, Oscar M. Vente, Artemio B. Aragon,
Arnold M. Cantar, Alberto T. Cuadero, Rasmi E. Ronquillo, Pedro R. Gabutan, Elpedio E. Mentang, Wilfredo R. Miosa, Roderick P. Nambatac, Marcial D. Rivera,
Sande E. Castil, Crisostomo B. Esic, Ambrosio M. Cantar (respondents) and Jimmy O. Bicoy, were SMPSA security guards assigned to the National Power
Corporation, Mindanao Regional Center (NPC-MRC), Ditucalan, Iligan City. Each of the respondents had a monthly salary of P7,020.00.
On July 27, 2004, the petitioner issued a memorandum requiring all security guards to submit their updated personal data files, security guard professional
license, and other pertinent documents by July 30, 2004 for reevaluation in connection with the SMPSAs new service contract with the NPC-MRC. 437[5]
When respondents failed to comply with the petitioners directive, despite several notices to do so, the petitioner relieved them from NPC-MRC duty starting
September and October 2004, and ordered them to report to the Senior Operations Officer, Nemesio Sombilon, for new assignments.
Sometime in March and April 2005, the respondents filed individual complaints with the Iligan City Sub-Regional Arbitration Branch of the National Labor
Relations Commission (NLRC) for illegal dismissal and money claims, claiming they were constructively dismissed when they were not given new
*
*
433
434
435
436
437

assignments for a period of over 6 months, despite repeated requests for NPC-MRC redeployment and for new assignments. The complaints were
consolidated.
The petitioner and SMPSA denied the charge of constructive dismissal. They countered that the respondents relief from NPC-MRC duty was a valid exercise
of its management prerogative. Furthermore, they issued a notice (dated January 17, 2005) 438[6] directing the respondents to report to SMPSAs main office
for new assignments, but the latter failed or refused to comply without any valid reasons.
The Labor Arbiter Ruling
In a December 27, 2005 decision, Labor Arbiter (LA) Noel Augusto S. Magbanua dismissed the consolidated complaints for lack of merit. He held that
the respondents relief from NPC-MRC duty was due to their failure to comply with SMSPAs requirement for its employees to submit updated documents to
meet NPC-MRC contract renewal requirements. According to the LA, this was a legitimate exercise of NPC-MRCs management prerogative, in light of the
information it received that some security guards carried falsified documents. 439[7]
The respondents appealed the dismissal of their complaints to the NLRC.

The NLRC Ruling


In a July 31, 2006 resolution, the NLRC affirmed the LA decision. It noted that the respondents relief was in good faith, without grave abuse of discretion,
and in the best interest of the business enterprise since SMPSA merely exercised its management prerogative and discretion to protect its business
interest.440[8]
It also noted that the respondents temporary off-detail did not exceed the 6-month period permitted by law, since the respondents were directed, through
the January 17, 2005 notice, to report for a new assignment on January 25, 2005, but they failed or refused to do so.
In a September 29, 2006 resolution, the NLRC denied the respondents subsequent motion for reconsideration. 441[9] The respondents counsel, Atty.
Demosthenes R. Plando, received the September 29, 2006 resolution on October 13, 2006.
Eighty-eight (88) days later, or on January 9, 2007, the respondents, through their new counsel, filed with the CA a petition for certiorari under Rule 65 of
the Rules of Court, alleging that they were informed of the September 29, 2006 resolution on December 6, 2006, while Bicoy received a copy of the
resolution on November 6, 2006.

438
439
440
441

The CA Ruling
In its September 5, 2008 decision, the CA set aside the NLRC resolution, finding that the respondents were constructively dismissed when they were not
given new assignments for more than 6 months, from September and October 2004, when the respondents were off-detailed, until March and April 2005,
when they filed their individual complaints for illegal dismissal. The appellate court noted that the January 17, 2005 notice to report for new assignments
did not toll the 6-month floating status period since the respondents failed to receive the notice before the appointed date, as SMPSA sent the notice by
registered mail, which normally takes at least 5 working days to reach the intended recipients. 442[10]
Finding that reinstatement was no longer viable under the circumstances, the CA awarded the respondents separation pay at one (1) months salary for
every year of service, plus full backwages, allowances and other statutory benefits under the law.
The petitioner and SMPSA moved for reconsideration, arguing that the CA should have dismissed the petition outright for late filing, and that there was no
compelling reason for the reversal of the LA and the NLRCs factual findings. 443[11]
In its April 22, 2009 resolution, the CA modified its September 5, 2008 decision by dismissing Bicoys petition for having been filed out of time. However, it
considered the respondents petition as timely filed. It also opined that disregarding any procedural lapses best served substantial justice. 444[12]
The petitioner then filed the present petition. Bicoy, with respondents Castil, Esic, and Ambrocio M. Cantar filed a separate appeal, docketed as G.R. No.
190848. The Court denied this appeal in its April 5, 2010 resolution for late filing and for non-compliance with Rules 45 and 46 of the Rules of Court.
The Petition
The petitioner argues that: (a) the respondents CA petition for certiorari was filed 28 days late; (b) the respondents new counsel concealed Atty. Plandos
October 13, 2006 receipt of the September 26, 2006 resolution and relied on the respondents December 6, 2006 notice of the resolution; and (c) the
evidence on record supports the LA and NLRC decisions.
The Case for the Respondents
In contrast, the respondents submit that: (a) December 6, 2006 is the reckoning date of the 60-day period; (b) Atty. Plandos October 13, 2006 receipt did
not bind them because his secretary, Sonia M. Barnachea, misplaced the September 29, 2006 resolution and they should not suffer for her negligence; and
(c) the evidence on record does not support the LA and NLRC rulings.
Issue
The core issues boil down to whether the CA erred in acting on the respondents petition despite its late filing, and in reversing the LA and NLRC decisions.
442
443
444

The Courts Ruling


We find the petition meritorious.

Timeliness of the CA petition for certiorari


Under Section 4 of Rule 65 of the 1997 Rules of Civil Procedure, 445[13] certiorari should be instituted within a period of 60 days from notice of the judgment,
order, or resolution sought to be assailed.446[14] The 60-day period is inextendible to avoid any unreasonable delay that would violate the constitutional
rights of parties to a speedy disposition of their case. 447[15]
Time and again, we have stressed that procedural rules do not exist for the convenience of the litigants; the rules were established primarily to provide
order to, and enhance the efficiency of, our judicial system. 448[16] While procedural rules are liberally construed, the provisions on reglementary periods are
strictly applied, indispensable as they are to the prevention of needless delays, and are necessary to the orderly and speedy discharge of judicial
business.449[17] The timeliness of filing a pleading is a jurisdictional caveat that even this Court cannot trifle with. 450[18]
Viewed in this light, procedural rules are not to be belittled or dismissed simply because their non-observance may have prejudiced a party's substantive
rights; like all rules, they are required to be followed.
However, there are recognized exceptions to their strict observance, such as: (1) most persuasive and weighty reasons; (2) to relieve a litigant from an
injustice not commensurate with his failure to comply with the prescribed procedure; (3) good faith of the defaulting party by immediately paying within a
reasonable time from the time of the default; (4) the existence of special or compelling circumstances; (5) the merits of the case; (6) a cause not entirely
attributable to the fault or negligence of the party favored by the suspension of the rules; (7) a lack of any showing that the review sought is merely
frivolous and dilatory; (8) the other party will not be unjustly prejudiced thereby; (9) fraud, accident, mistake or excusable negligence without appellant's
fault; (10) peculiar legal and equitable circumstances attendant to each case; (11) in the name of substantial justice and fair play; (12) importance of the

445
446
447
448
449
450

issues involved; and (13) exercise of sound discretion by the judge guided by all the attendant circumstances. 451[19] Thus, there should be an effort on the
part of the party invoking liberality to advance a reasonable or meritorious explanation for his/her failure to comply with the rules.
Negligence of former counsel binds the respondents
In the present case, the respondents petition for certiorari was filed twenty-eight (28) days late from Atty. Plandos October 13, 2006 receipt of the
September 29, 2006 resolution. The respondents insist that they should not suffer for Atty. Plandos negligence in failing to inform them of the September
29, 2006 resolution, and the reckoning date for the 60-day period should be their December 6, 2006 notice.
The general rule is that a client is bound by the acts, even mistakes, of his counsel in the realm of procedural technique. 452[20] The exception to this
rule is when the negligence of counsel is so gross, reckless and inexcusable that the client is deprived of his day in court. 453[21] The failure of a partys
counsel to notify him on time of the adverse judgment, to enable him to appeal therefrom, is negligence that is not excusable. We have repeatedly held
that notice sent to counsel of record is binding upon the client, and the neglect or failure of counsel to inform him of an adverse judgment
resulting in the loss of his right to appeal is not a ground for setting aside a judgment valid and regular on its face.454[22]
We cannot sustain the respondents argument that they cannot be bound by Atty. Plandos negligence since this would set a dangerous precedent. It
would enable every party-litigant to render inoperative any adverse order or decision of the courts or tribunals, through the simple expedient of alleging
his/her counsels gross negligence.
We thus find that the CA erred in acting on the respondents petition for certiorari despite its late filing. The NLRC resolution was already final and executory,
and the CA had no jurisdiction to entertain the petition, except to order its dismissal.
Immutability of NLRC resolution
The NLRCs resolution became final ten (10) days after counsels receipt, and the respondents failure to file the petition within the required (60)-day period
rendered it impervious to any attack through a Rule 65 petition for certiorari. Thus, no court can exercise jurisdiction to review the resolution. 455[23]
Needless to stress, a decision that has acquired finality becomes immutable and unalterable and may no longer be modified in any respect, even if the
modification is meant to correct erroneous conclusions of fact or law and whether it will be made by the court that rendered it or by the highest court of the
land.456[24] All the issues between the parties are deemed resolved and laid to rest once a judgment becomes final and executory; execution of the decision
451
452
453
454
455
456

proceeds as a matter of right as vested rights are acquired by the winning party. 457[25] Just as a losing party has the right to appeal within the prescribed
period, the winning party has the correlative right to enjoy the finality of the decision on the case. 458[26] After all, a denial of a petition for being time-barred
is tantamount to a decision on the merits. 459[27] Otherwise, there will be no end to litigation, and this will set to naught the main role of courts of justice to
assist in the enforcement of the rule of law and the maintenance of peace and order by settling justiciable controversies with finality. 460[28]
WHEREFORE, the present petition is GRANTED. The assailed decision and resolution of the Court of Appeals in CA-G.R. SP No. 01472-MIN are REVERSED
and SET ASIDE. The decision of the Labor Arbiter is REINSTATED. No pronouncement as to costs.
SO ORDERED.

457
458
459
460