PROVINCE OF CAMARINES SUR,

represented by Governor Luis Raymund F.

Villafuerte, Jr.,
Petitioner,

On 13 January 1997, the City of Naga filed a

Complaint for Declaratory Relief and/or
Quieting of Title against Camarines Sur
before the Regional Trial Court (RTC) of the
City of Naga, Branch 61, which was docketed
as Civil Case No. 97-3691.
[9]

- versus -

The City of Naga alleged that, for a

considerable length of time, Camarines Sur
possessed and claimed ownership of Plaza
Rizal because of a tax declaration over the
said property in the name of the province. As
a result, Camarines Sur had long exercised
administrative control and management of
Plaza Rizal, to the exclusion of the City
of Naga.The City of Naga could not introduce
improvements on Plaza Rizal, and its
constituents could not use the property
without securing a permit from the proper
officials of Camarines Sur. The situation had
created a conflict of interest between the
parties herein and had generated animosities
among their respective officials.

HONORABLE COURT OF APPEALS;

and CITY OF NAGA, represented by
Mayor Jesse M. Robredo,
Respondents.
D E C I S I O N

CHICO-NAZARIO, J.:
This Petition for Certiorari under Rule 65 of
the Rules of Court seeks to annul and set
aside the Decision dated 28 June 2004 and
the Resolution dated 11 August 2006 of the
Court of Appeals in CA-G.R. SP No.
56243. The assailed Decision of the appellate
court denied due course the Petition for
Review on Certiorari filed by petitioner
Province of Camarines Sur (Camarines Sur),
while the assailed Resolution denied the
Motion for Reconsideration of the earlier
Decision.
[1]

[2]

[3]

The City of Naga stressed that it did

not intend to acquire ownership of Plaza
Rizal. Being a property of the public domain,
Plaza Rizal could not be claimed by any
subdivision of the state, as it belonged to the
public in general. Instead, the City
of Naga sought a declaration that the
administrative control and management of
Plaza Rizal should be vested in it, given that
the said property is situated within its
territorial
jurisdiction. The
City
of Naga invoked Section 2, Article I of
Republic Act No. 305, the Charter of the City
of Naga, which states:

[4]

The property subject of the instant case is a

parcel of land, known as Plaza Rizal, situated
within the territory of herein respondent City
of Naga and with an aggregate area of 4,244
square meters, more or less. Plaza Rizal is
located in front of the old provincial capitol
building, where the Provincial Government of
Camarines Sur used to have its seat, at the
time when the then Municipality of Naga was
still the provincial capital.

SEC. 2. Territory of the City

of Naga.
The
city
of Naga which
is
hereby
created, shall comprise the
present territorial jurisdiction
of the municipality of Naga, in
the Province of Camarines Sur.

On 18 June 1948, Republic Act No.

305 took effect and, by virtue thereof,
the Municipality of Naga was converted into
the City of Naga. Subsequently, on 16 June
1955, Republic Act No. 1336 was approved,
transferring the site of the provincial capitol
of Camarines Sur from the City of Naga to the
barrio of Palestina, Municipality of Pili. The
Municipality of Pili was also named as the
new provincial capital.
[5]

[6]

On 21 February 1997, Camarines Sur filed an

Answer with Motion to Dismiss. It argued
that it was the legal and absolute owner of
Plaza Rizal and, therefore, had the sole right
to maintain, manage, control, and supervise

[7]

[10]

[8]

domain. The
domain of a
State includes
normally only
the expanse of
its territory over
which
it
exercises
the
full rights of
sovereignty. x x
x

the said property. Camarines Sur asserted that

the City of Naga was without any cause of
action because the Complaint lacked any legal
or factual basis. Allegedly, Section 2 of
Republic Act No. 305 merely defined the
territorial jurisdiction of the City of Naga and
did not vest any color of right to the latter to
manage and control any property owned by
Camarines Sur. Furthermore, the remedy of
Declaratory Relief was inappropriate because
there was no justiciable controversy, given
that the City of Naga did not intend to acquire
ownership of Plaza Rizal; and Camarines Sur,
being the owner of Plaza Rizal, had the right
to the management, maintenance, control, and
supervision thereof. There was likewise no
actual or impending controversy, since Plaza
Rizal had been under the control and
supervision of Camarines Sur since time
immemorial. The remedy of Quieting of Title
was inappropriate, as the City of Naga had no
legal or equitable title to or interest in Plaza
Rizal
that
needed
protection. Lastly,
Camarines Sur stated that Plaza Rizal was not
a property of public domain, but a property
owned by Camarines Sur which was devoted
to public use.

Sovereignty, in
turn, refers to
the
supreme
power of a State
to
command
and
enforce
obedience; it is
the power, to
which, legally
speaking
all
interest[s] are
practically
subject and all
wills
subordinate. x x
x Indeed, from
the point of
view of national
law, it is in a
sense absolute
control over a
definite
territory. x x x.

In an Order[11] dated 28 May 1997, the RTC

denied the Motion to Dismiss of Camarines
Sur, since the grounds cited therein were legal
issues that were evidentiary in nature and
could only be threshed out in a full-blown
trial.
On 10 March 1999, the RTC rendered a
Decision in favor of the City of Naga, the
pertinent portions of which provide:
As understood in the Law of
Nations,
the
right
of
jurisdiction
accorded
a
sovereign state consists of first,
its personal jurisdiction, which
in a sense is its authority over
its nationals who are in a
foreign country and second,
territorial jurisdiction, which is
its authority over persons and
properties within the territorial
boundaries x x x.

In summation therefore from

the above-quoted citations,
when territorial jurisdiction is
being referred to, it means the
entire territory over which a
State (or any local government
unit) can exercise absolute
control.

[12]

In the instant case, [Camarines

Sur] thru (sic) counsel
admitted during the pre-trial
conference that indeed, the
property in question, which is
Plaza Rizal, is within the
territorial jurisdiction of the
[City of Naga]. Thus, applying
the above-quoted principles
concerning
territorial
jurisdiction, [Camarines Sur] is
barred by its express admission

The territorial
jurisdiction of a
state is based on
the right of
2

from claiming that it is

the Province ofCamarines
Sur who has the right to
administratively
control,
manage and supervise said
Plaza Rizal.

property and rights of the city.

x x x Since [Section 2, Article
I] of [Republic Act No.] 305
defines the territory of [the
City of] Naga and Plaza Rizal
is
within
its
territorial
jurisdiction, ergo, it is the City
[of Naga] who has the right of
administrative control and
management of Plaza Rizal.

[The contention of Camarines

Sur] that [Section 2, Article
I] of [Republic Act No.] 305
merely defines [the] territory
of the City of Naga has no
strong leg to stand on.

The RTC thus decreed:

The unequivocal and specific

import of said provision
provides the extent into which
the City of Naga can exercise
its powers and functions over
all its constituents and
properties found within its
territory. Further, Art. II, Sec.
9, par. b of [Republic Act No.]
305 provides one of the
general powers and duties of
the City Mayor, to wit:

WHEREFORE,
premises
considered, [Section 2, Article
I] of [Republic Act No.] 305 is
hereby
interpreted
and
declared in this Court to mean
that the administrative control
and management of Plaza
Rizal is within the City of
Naga and not with the
Province of Camarines Sur.
[13]

Camarines Sur received a copy of the

foregoing Decision on 16 March 1999, and
filed a Motion for Reconsideration of the
same on 30 March 1999. The RTC denied the
Motion for Reconsideration of Camarines Sur
in an Order dated 1 September 1999. The
RTC reiterated that the enactment of Republic
Act
No.
305,
which
converted
theMunicipality of Naga into an independent
city, had ipso facto ceased the power of
administrative control and supervision
exercised by Camarines Sur over the property
within the territorial jurisdiction of
the Municipality of Naga and vested into the
City of Naga. The administrative control and
supervision exercised by Camarines Sur over
Plaza Rizal, since the time of the creation of
the City of Naga and up to the time of the
filing of the instant case, was by mere
tolerance on the part of the said
city. Furthermore, the claim of ownership of
Plaza Rizal by Camarines Sur was wanting,
given that there was no express legislative
action therefor. Public streets, squares, plazas
and the like, are not the private property of
either the City of Naga or Camarines Sur.

To safeguard all
the
lands,
buildings,
records,
moneys, credits
and
other
property
and
rights of the
city, and subject
to
the
[provisions] of
this
Charter,
have control of
all its property.

[14]

[15]

Considering that the Province

[of Camarines Sur] expressly
acknowledged that [Section 2,
Article I] of [Republic Act
No.] 305 merely defines the
territory of [the City of Naga],
then it is safe to assume that it
also accept that the City of
Naga as represented by the
City Mayor exercises control
of all the properties of the City,
for properties as used in the
above-quoted provision refers
to lands, buildings, records,
moneys[,] credits and other

Camarines Sur received a copy of the RTC

Order dated 1 September 1999, denying its
Motion for Reconsideration, on 3 September
1999. On 8 September 1999, Camarines Sur
filed with the RTC a Notice of Appeal. In an
Order dated 13 September 1999, the RTC
disapproved the Notice of Appeal for noncompliance with the material data rule, which
requires the statement of such data as will
show that the appeal was perfected on time.

Petition for Review of Camarines Sur was

docketed as CA-G.R. SP No. 56243.
On 28 June 2004, the Court of Appeals
promulgated the assailed Decision denying
the Petition in CA-G.R. SP No. 56243. It
pronounced:
We deny the petition.
Where an appeal would have
been an adequate remedy but it
was lost through petitioners
inexcusable
negligence,
certiorari is not in order. x x
x Certiorari cannot be resorted
to as a substitute for the lost
remedy of appeal x x x. It is
notable that Camarines Sur
took this recourse of petition
for certiorari only after it
twice attempted to avail of
appeal, but both of which were
DISAPPROVED. Because it
made these attempts to appeal,
it goes without saying that
Camarines Sur believed that
the errors it claimed were
committed by the court a
quo were correctible only by
appeal
and
not
by
certiorari. Thus,
when
it
subsequently filed the instant
petition, it was availing of it as
a disallowed substitute remedy
for a lost appeal. Time and
again it has been ruled that
[the] remedies of appeal and
certiorari
are
mutually
exclusive and not alternative or
successive x x x.

[16]

[17]

On 13 September 1999, Camarines Sur filed a

second Notice of Appeal, which was again
disapproved
by
the
RTC
in
an
Order dated 14 September 1999 for having
been filed outside of the reglementary
period. The RTC noted that Camarines Sur
received a copy of the RTC Decision dated 10
March 1999 on 16 March 1999. It thus had a
period of 15 days therefrom to file a motion
for reconsideration or appeal. Camarines Sur
filed its Motion for Reconsideration on 30
March 1999 or on the fourteenth day of the
reglementary period. Said Motion for
Reconsideration was denied by the RTC in an
Order dated 1 September 1999, which was
received by Camarines Sur on 3 September
1999.Thereafter, Camarines Sur only had two
days left to file its Notice of Appeal, but the
province filed said Notice on 8 September
1999, or five days after receipt of the Order
denying its Motion for Reconsideration.[20]
[18]

[19]

On 18 October 1999, Camarines Sur filed

before the Court a Petition for Review
on Certiorari, which was docketed as G.R.
No. 139838. Camarines Sur questioned in its
Petition the act of the RTC of giving due
course to the Complaint for Declaratory
Relief and/or Quieting of Title and the
interpretation of said trial court of Section 2,
Article 1 of Republic Act No. 305.
[21]

But disregarding for the nonce

the lost appeal and its
disallowed substitution by
certiorari, still the petition
would fail because of the
absence of grave abuse of
discretion. The court a quo had
declared that:

In a Resolution[22] dated 17 November 1999,

the Court referred the Petition for Review
filed by Camarines Sur to the Court of
Appeals for appropriate action, holding that
the latter had jurisdiction concurrent with that
of the former over the case, and no special
and important reason was cited for the Court
to take cognizance of the case in the first
instance. Before the appellate court, the

The existence
of
the Municipalit
y of Naga was
governed by the
provisions
of
Chapter 57 of

the Old Revised

Administrative
Code, otherwise
known as the
Regular
Municipal
Law. A
law
under which the
municipalities
in
regularly
organized
provinces like
the province of
Camarines
Sur may
be
organized. As a
consequence of
its creation, the
Municipality of
Naga acquired
title to all the
property,
powers, rights
and obligations
falling within its
territorial limits
(62
C.J.S.
193). Being a
political
subdivision
created within
an
organized
province,
the
administration
of the higher
political
subdivision,
the province of
Camarines
Sur x x x has
stood as trustee
of
all
the
properties
belonging to the
State within its
territorial
limits. This is
the legal and
logical reason
why[,] before
the conversion
of
the municipality
of Naga to
a
City[,]
[Camarines Sur]
was exercising

control
and
supervision
over
Plaza
Rizal. x x x
This finds support in one of the
provisions
of
the
old
Administrative Code of the
Philippine Islands where it was
provided that:
SEC.
2168. Beginnin
g
of
the
corporate
existence
of
new
municipality. x
x x.
When
a
township
or
other
local
territorial
division
is
converted
or
fused into a
municipality all
property rights
vested in the
original
territorial
organization
shall
become
vested in the
government of
the
municipality. x
x x.
When Naga was converted
from a municipality into a city,
all properties under its
territorial
jurisdiction
including Plaza Rizal was
vested upon it. (Emphasis
ours.)
[23]

The fallo of the Court

Appeals decision reads:

of

WHEREFORE, the petition

is DENIED
DUE
COURSE and DISMISSED.
[24]

Court to decide on the questions of law raised

in the dismissed Petition.

Camarines Sur sought a reconsideration of

the aforequoted Decision, but the Court of
Appeals denied the same in the assailed
Resolution dated 11 August 2006.
[25]

First, Camarines Sur avers that the filing of

the Complaint for Declaratory Relief and/or
Quieting of Title was improper as it was
hinged
on
a
pretended
controversy. Essentially, the complaint of the
City of Naga did not show an active
antagonistic assertion of a legal right, on one
side, and a denial thereof, on the other. Such
action sought merely to create an unwarranted
inference not of a clear right, but of a
theoretical implication that a property, even if
not legally owned or possessed by a city,
could be administratively controlled and
managed by it on the sheer expediency of
being
located
within
its
territorial
jurisdiction. Thus, there was no actual
controversy between Camarines Sur and the
City of Naga, considering that Camarines Sur
had always managed and administratively
controlled the same, the projects installed
thereon and the programs and activities held
therein, without any question from the
previous Mayors of the City of Naga or from
any national official, department, bureau or
agency.

Camarines Sur, thus, filed the instant

Petition, raising the sole issue of:
WHETHER OR NOT THE
HONORABLE COURT OF
APPEALS ACTED WITH
GRAVE
ABUSE
OF
DISCRETION AMOUNTING
TO LACK OR EXCESS OF
JURISDICTION WHEN IT
TREATED THE [PETITION
FOR REVIEW UNDER RULE
45 FILED BY CAMARINES
SUR]
AS
ONE
FOR
CERTIORARI UNDER RULE
65 THEREBY DENYING
DUE
COURSE
AND
DISMISSING
THE
PETITION AND EVEN THE
MOTION
FOR
RECONSIDERATION
ON
THE GROUND THAT THE
PETITION WAS AVAILED
OF AS A SUBSTITUTE FOR
THE LOST APPEAL AND
FOR ABSENCE OF GRAVE
ABUSE OF DISCRETION.

Second, Camarines Sur contends that since

Plaza Rizal is admittedly located within the
territorial jurisdiction of the City of Naga, the
question of law is whether the management
and administrative control of said land should
be vested in the City of Naga, simply because
of Article 1, Section 2 of the Charter of the
City
of Naga. Naga
never
possessed
administrative control and management of
Plaza Rizal when it was still a municipality,
and it cannot be deemed to have been vested
with the same, just because it was converted
into the City of Naga especially when the City
admits it does not intend to acquire ownership
of Plaza Rizal.

Camarines Sur argues that the Court of

Appeals went beyond its authority and
gravely abused its discretion when it treated
and resolved the Petition for Review
on Certiorariunder Rule 45 of the Rules of
Court as a Petition for Certiorari under Rule
65, which must allege grave abuse of
discretion on the part of the RTC, and which
cannot be made a substitute for a lost
appeal. Camarines Sur insists that what it filed
was a Petition under Rule 45, which raised all
reversible errors committed by the RTC and
presented all questions of laws.
Moreover, as the Court of Appeals upheld the
Decision dated 16 March 1999 of the RTC
based on a wrong premise and application of
legal principles, Camarines Sur pleads for this

Petition for Review v. Petition for Certiorari

At the outset, the Court holds that the Court of

Appeals indeed committed grave abuse of
discretion amounting to lack or excess of
jurisdiction in erroneously and inexplicably
resolving the Petition, which was initially
filed by Camarines Sur before the Court, but
later referred to the appellate court, as if the
same were a Petition for Certiorari under
Rule 65 of the Rules of Court. This mistake is
evident in the preliminary statement of the
case, as found in the first paragraph of the
Decision dated 28 June 2004, where the Court
of Appeals stated that:
The petitioner Province of
Camarines Sur (or Camarines
Sur for brevity), represented by
Gov. Luis Villafuerte, asks
through
this Petition
for Certiorari that
the
Decision of Branch 61 of the
Regional Trial Court stationed
at Naga City x x x be reversed
and set aside x x x.
(Emphasis ours.)

appeal by certiorari from a judgment, final

order or resolution of the x x x the Regional
Trial Court x x x, may file with the Supreme
Court a verified petition for review
on certiorari. The petition may include an
application for a writ of preliminary
injunction or other provisional remedies and
shall raise only questions of law, which must
be distinctly set forth."
[29]

A perusal of the petition referred to the Court

of Appeals lays bare the fact that the same
was undoubtedly a Petition for Review
on Certiorari under Rule 45 of the Rules of
Court. Not only does the title of the Petition
indicate it as such, but a close reading of the
issues and allegations set forth therein also
discloses that it involved pure questions of
law. A question of law arises when there is
doubt as to what the law is on a certain state
of facts. For a question to be one of law, the
same must not involve an examination of the
probative value of the evidence presented by
the litigants or any of them. The resolution of
the issue must rest solely on what the law
provides on the given set of circumstances.
The Court of Appeals, thus, could not fault
Camarines Sur for failing to allege, much less
prove, grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the
RTC when such is not required for a Petition
for Review on Certiorari.

[26]

For a Petition for Certiorari under Rule 65 of

the Rules of Court to prosper, the following
requisites must be present: (1) the writ is
directed against a tribunal, a board or an
officer exercising judicial or quasi-judicial
functions; (2) such tribunal, board or officer
has acted without or in excess of jurisdiction
or with grave abuse of discretion amounting
to lack or excess of jurisdiction; and (3) there
is no appeal or any plain, speedy and adequate
remedy in the ordinary course of law.

[30]

[27]

Likewise,
the
doctrine
that certiorari cannot be resorted to as a
substitute for the lost remedy of appeal
applies only when a party actually files a
Petition for Certiorariunder Rule 65 in lieu of
a Petition for Review under Rule 45, since the
latter remedy was already lost through the
fault of the petitioning party. In the instant
case, Camarines Sur actually filed a Petition
for Review under Rule 45; the Court of
Appeals only mistook the same for a Petition
for Certiorari under Rule 65.

There is grave abuse of discretion "when there

is a capricious and whimsical exercise of
judgment as is equivalent to lack of
jurisdiction, such as 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 so as to amount
to an evasion of positive duty or to a virtual
refusal to perform the duty enjoined or to act
at all in contemplation of law."
[28]

On the other hand, Rule 45 of the Rules of

Court pertains to a Petition for Review
on Certiorari, whereby "a party desiring to

assertion by the City of Naga of a superior

right to the administrative control and
management of Plaza Rizal, because said
property of the public domain is within its
territorial jurisdiction, is clearly antagonistic
to and inconsistent with the insistence of
Camarines Sur. The latter asserted in its
Complaint for Declaratory Relief and/or
Quieting of Title that it should maintain
administrative control and management of
Plaza Rizal having continuously possessed the
same under a claim of ownership, even after
the conversion of the Municipality of Naga
into an independent component city. The City
of Naga further asserted that as a result of the
possession by Camarines Sur, the City of
Naga could not introduce improvements on
Plaza Rizal; its constituents were denied
adequate use of said property, since
Camarines Sur required that the latters
permission must first be sought for the use of
the same; and it was still Camarines Sur that
was able to continuously use Plaza Rizal for
its own programs and projects. The City
of Naga undoubtedly has a legal interest in the
controversy, given that Plaza Rizal is
undisputedly
within
its
territorial
jurisdiction. Lastly, the issue is ripe for
judicial determination in that, in view of the
conflicting interests of the parties to this case,
litigation is inevitable, and there is no
adequate relief available in any other form or
proceeding.

Be that as it may, the Court still finds that the

questions of law invoked by Camarines Sur
must be resolved against it.
Declaratory Relief
Declaratory relief is defined as an
action by any person interested in a deed, will,
contract or other written instrument, executive
order or resolution, to determine any question
of construction or validity arising from the
instrument, executive order or regulation, or
statute; and for a declaration of his rights and
duties thereunder. The only issue that may
be raised in such a petition is the question of
construction or validity of provisions in an
instrument or statute.
[31]

[32]

The requisites of an action for

declaratory relief are: (1) there must be a
justiciable controversy between persons
whose interests are adverse; (2) the party
seeking the relief has a legal interest in the
controversy; and (3) the issue is ripe for
judicial determination.[33]
The Court rules that the City
of Naga properly resorted to the filing of an
action for declaratory relief.
In the instant case, the controversy
concerns the construction of the provisions of
Republic Act No. 305 or the Charter of the
City
of Naga. Specifically,
the
City
of Nagaseeks an interpretation of Section 2,
Article I of its Charter, as well as a declaration
of the rights of the parties to this case
thereunder.

[34]

Administrative control and supervision of

Plaza Rizal
Republic Act No. 305 took effect on 18 June
1948. At that time, the Spanish Civil Code of
1889
was
still
in
effect
in
the Philippines. Properties
of
local
government units under the Spanish Civil
Code were limited to properties of public use
and patrimonial property. Article 344 of the
Spanish Civil Code provides:

To recall, Section 2, Article I of

Republic Act No. 305 defines the territory of
the City of Naga, providing that the City shall
comprise the present territorial jurisdiction of
the Municipality of Naga. By virtue of this
provision, the City of Naga prays that it be
granted the right to administratively control
and supervise Plaza Rizal, which is
undisputedly within the territorial jurisdiction
of the City.

[35]

Art. 344. Property of

public use, in provinces and in
towns,
comprises
the
provincial and town roads, the
squares, streets, fountains, and
public waters, the promenades,
and public works of general

Clearly, the interests of the City of Naga and

Camarines Sur in this case are adverse. The

service paid for by such towns

or provinces.
All
other
property
possessed
by
either
is
patrimonial and shall be
governed by the provisions of
this code, unless otherwise
provided by special laws.

capitol site in Naga. A

monument in honor of our
national hero was built by the
Provincial Government of
Camarines Sur sometime in
1911 on a portion of subject
land. Within the same land, a
structure as a memorial for
Ninoy Aquino was also
constructed by the Provincial
Government of Camarines Sur;
and nearby, a stage in honor of
President Manuel Quezon was
also built. In the post-martial
[law] period there was
inscribed in the wall of the said
garden the following words:
Freedom Park of Camarines
Sur.

Under the 1950 Civil Code, the properties of

local government units are set forth in Article
424 thereof, which reads:
Art. 424. Property for
public use, in the provinces,
cities, and municipalities,
consist of the provincial roads,
city streets, municipal streets,
the squares, fountains, public
waters,
promenades,
and
public works for public service
paid for by said provinces,
cities, or municipalities.

A historical marker was

erected in the said place which
attests to the long standing
ownership, possession and
management
by
the Province of Camarines
Sur of said place.

All
other
property
possessed by any of them is
patrimonial and shall be
governed by this Code, without
prejudice to the provisions of
special laws.

All the improvements in said

place, such as the construction
of monuments and memorial
structures, the concreting of its
flooring and the walkways,
planting
of
trees
and
ornamental
plants,
the
construction of the skating or
skateboard ring, a public TV
facility, an internet caf, a
gazebo where people from all
walks of life discuss religion,
political, social and economic
issues, a portable stage where
cultural shows are held, a giant
chessboard on the tiled ground
with large pieces for playing,
where portable booths are
installed for the trade fairs
during fiesta or Christmas
season, where year-round
lights are wrapped around the
trees, all of which have been
constructed, operated and
maintained by the Province of
Camarines Sur (not by Naga
City) where millions of pesos
had been spent for construction
and millions of pesos are

Manifestly, the definition of what

constitutes the properties for public use and
patrimonial properties of local government
units has practically remained unchanged.
As regards properties for public use,
the principle is the same: property for public
use can be used by everybody, even by
strangers or aliens, in accordance with its
nature; but nobody can exercise over it the
rights of a private owner.
[36]

It is, therefore, vital to the resolution of this

case that the exact nature of Plaza Rizal be
ascertained. In this regard, the description
thereof by Camarines Sur is enlightening, viz:
The land subject of the Action
filed
by
the
City
of Naga against
the Province of Camarines
Sur was a garden that served as
the front lawn of the old

budgeted
annually
for
maintenance,
operating
expenses
and
personnel
services by the Province of
Camarines Sur.

was located in the said municipality, thereby

ceased to be part of the territorial jurisdiction
of Camarines Sur and was, instead transferred
to the territorial jurisdiction of the City
of Naga. Theretofore, the local government
unit that is the proper agent of the Republic of
the Philippines that should administer and
possess Plaza Rizal is the City of Naga.

[37]

Unmistakable from the above description is

that, at present, Plaza Rizal partakes of the
nature of a public park or promenade. As
such, Plaza Rizal is classified as a property
for public use.

Camarines Sur cannot claim that Plaza Rizal

is part of its patrimonial property. The basis
for the claim of ownership of Camarines
Sur, i.e., the tax declaration covering Plaza
Rizal in the name of the province, hardly
convinces this Court. Well-settled is the rule
that a tax declaration is not conclusive
evidence of ownership or of the right to
possess land, when not supported by any
other evidence. The same is merely
an indicia of a claim of ownership.[40] In the
same manner, the Certification[41] dated 14
June 1996 issued by the Department of
Environment
and
Natural
ResourcesCommunity
Environment
and
Natural Resources Office (DENR-CENRO) in
favor of Camarines Sur, merely stating that
the parcel of land described therein,
purportedly Plaza Rizal, was being claimed
solely by Camarines Sur, hardly constitutes
categorical proof of the alleged ownership of
the said property by the province.
[39]

In Municipality of San Carlos, Pangasinan v.

Morfe, the Court recognized that a public
plaza is a public land belonging to, and,
subject to the administration and control of,
the Republic of the Philippines. Absent an
express grant by the Spanish Government or
that of the Philippines, the local government
unit where the plaza was situated, which in
that case was the Municipality of San Carlos,
had no right to claim it as its patrimonial
property. The Court further held that whatever
right of administration the Municipality ofSan
Carlos may have exercised over said plaza
was not proprietary, but governmental in
nature. The same did not exclude the national
government. On the contrary, it was possessed
on behalf and in representation thereof, the
municipal government of San Carlos being -in the performance of its political functions -a mere agency of the Republic, acting for its
benefit.
[38]

Thus, being a property for public use within

the territorial jurisdiction of the City of Naga,
Plaza Rizal should be under the administrative
control and supervision of the said city.

Applying the above pronouncements to the

instant case, Camarines Sur had the right to
administer and possess Plaza Rizal prior to
the conversion of the then Municipality of
Naga into the independent City of Naga, as
the plaza was then part of the territorial
jurisdiction of the said province. Said right of
administration by Camarines Sur was
governmental in nature, and its possession
was on behalf of and in representation of the
Republic of the Philippines, in the
performance of its political functions.

WHEREFORE, premises considered, the

Petition for Certiorari under Rule 65 of the
Rules of Court is hereby DISMISSED. The
administrative control and supervision of
Plaza Rizal is hereby vested in the City
of Naga. Costs against petitioner.
SO ORDERED.

Thereafter, by virtue of the enactment of

Republic Act No. 305 and as specified in
Section 2, Article I thereof, the City
of Naga was created out of the territory of the
oldMunicipality of Naga. Plaza Rizal, which

G.R. No. L-58340 July 16, 1991

KAWASAKI
PORT
CORPORATION, NAIKAI

10

SERVICE
SHIPPING

CO. LTD., NAIKAI TUG BOAT SERVICE

CO.,
THE
PORT
SERVICE
CORPORATION, LICENSED LAND SEA
PILOTS ASSOCIATION, HAYAKOMA
UNYU K.K., TOKYO KISEN COMPANY,
LTD.,
OMORI
KAISOTEN,
LTD.,
TOHOKU UNYU CO., LTD. AND
SEITETSU UNYU CO., LTD., petitioners,
vs.
THE HON. AUGUSTO M. AMORES,
Judge of Br. XXIV, Court of First Instance
of Manila, and C.F. SHARP & CO.,
INC., respondents.

difficulties, C.F. Sharp Kabushiki Kaisha

failed and/or refused to pay its creditors; and
that in view of the failure and/or refusal of
said C.F. Sharp Kabushiki Kaisha to pay its
alleged obligations to defendants, the latter
have been demanding or have been attempting
to demand from C.F. Sharp & Co., Inc., the
payment of the alleged obligations to them of
C.F. Sharp Kabushiki Kaisha, notwithstanding
that C.F. Sharp & Co., Inc. is a corporation
separate and distinct from that of C.F. Sharp
Kabushiki Kaisha and that the former had no
participation whatsoever or liability in
connection with the transactions between the
latter and the defendants.

Quasha, Asperilla, Ancheta, Pea & Nolasco

for petitioners.

As alleged in the complaint, the private

respondent prayed for injunctive relief against
the petitioners' demand from the private
respondent for the payment of C.F. Sharp
Kabushiki Kaisha's liabilities to the
petitioners.

Chuidian Law Office for private respondent.

BIDIN, J.:p

As an alternative to injunction, the private

respondent prayed that a judicial declaration
be made that, as a separate and independent
corporation, it is not liable for the obligations
and liabilities of C.F. Sharp Kabushiki
Kaisha.

This is a petition for certiorari seeking to set

aside the orders of the then Court of First
Instance of Manila, *Branch XXIV in Civil
Case No. 132077: (a) dated July 13, 1981
denying the special appearances of petitioners
as defendants in said case to question the
court's jurisdiction over the persons of the
defendants and (b) dated September 22, 1981,
denying the motion for reconsideration of said
order.

Since the defendants are non-residents,

without business addresses in the Philippines
but in Japan, the private respondent prayed
for leave of court to effect extraterritorial
service of summons.

The antecedents of this case are as follows:

On June 11, 1980, the respondent judge issued

an order authorizing the private respondent to
effect extraterritorial service of summons on
defendants therein.

On May 7, 1980, the private respondent C.F.

Sharp & Co., Inc. filed a complaint for
injunction and/or declaratory relief in the then
Court of First Instance of Manila against
seventy-nine (79) Japanese corporations as
defendants, among which are the petitioners
herein. Said complaint was docketed as Civil
Case No. 132077. The complaint alleges,
among others, that the plaintiff is a
corporation organized and existing under the
laws of the Philippines; that there is another
corporation organized under the law of Japan
with the corporate name C.F. Sharp Kabushiki
Kaisha; that the plaintiff and C.F. Sharp
Kabushiki Kaisha are in all respects separate
and distinct from each other; that C.F. Sharp
Kabushiki Kaisha appears to have incurred
obligations to several creditors amongst
which are defendants, also foreign
corporations organized and existing under the
laws of Japan; that due to financial

Subsequently, private respondent filed an

urgent ex-parte motion dated June 23, 1980
for Extraterritorial Service of Summons Upon
Defendants by registered mail with return
cards pursuant to Section 17 of Rule 14 of the
Rules of Court.
Acting on said motion, the respondent judge
issued an order dated June 30, 1980 granting
the motion and authorizing extraterritorial
service of summons upon defendants to be
effected by registered mail with return cards.
On March 11, 1981, five of the petitioners,
Kawasaki Port Service Corporation, Naikai
Shipping Co., Ltd., Naikai Tug Boat Service

11

Co., Ltd., The Port Service Corporation and

Licensed Land Sea Pilots Association filed
their "Special Appearance to Question
Jurisdiction of This Honorable Court Over
Persons of Defendants" contending that the
lower court does not and cannot acquire
jurisdiction over the persons of defendants on
the grounds that private respondent's action
does not refer to its personal status; that the
action does not have for subject matter
property contemplated in Section 17 of Rule
14 of the Rules of Court, that the action does
not pray that defendants be excluded from any
interest or property in the Philippines; that no
property of the defendants has been attached;
that the action is in personam; and that the
action does not fall within any of the four
cases mentioned in Section 17, Rule 14 of the
Rules of Court.

The petitioners contend that the respondent

judge acted contrary to the provisions of
Section 17 of Rule 14 for the following
reasons: (1) private respondent's prayer for
injunction, as a consequence of its alleged
non-liability to the petitioners for debts of
C.F. Sharp Kabushiki Kaisha of Japan,
conclusively
establishes
that
private
respondent's cause of action does not affect its
status; (2) the respondent court cannot take
jurisdiction of actions against the petitioners
as they are non-residents and own no property
within the state; (3) the petitioners have not as
yet claimed a lien or interest in the property
within the Philippines at the time the action
was filed which is a requirement under
Section 17 of Rule 14; (4) extra-territorial
service on a non-resident defendant is
authorized, among others, when the subject of
the action is property within the Philippines in
which the relief demanded consists in
excluding defendant from any interest therein;
and (5) inasmuch as the reliefs prayed for by
the private respondent in the complaint are in
personam, service by registered mail cannot
be availed of because Section 17 of Rule 14
authorized this mode of service only in
actions in rem or quasi in rem.

On March 17, 1981, another three of herein

petitioners, Hayakoma Unyu K.K., Tokyo
Kisen Company, Ltd. and Omori Kaisoten,
Ltd. also filed their special appearance
adopting the same arguments as that of the
first five.
On April 28, 1981, the two other petitioners,
Tohoku Unyu Co., Ltd. and Seitetsu Unyu
Co., Ltd., filed their "Special Appearance to
Question the Jurisdiction of the Honorable
Court" over their persons adopting in toto as
theirs the "Special Appearance" dated March
11, 1981 of Kawasaki Port Service.

For its part, the private respondent countered

that (1) the action refers to its status because
the basic issue presented to the lower court for
determination is its status as a corporation
which has a personality that is separate,
distinct and independent from the personality
of another corporation, i.e., C.F. Sharp
Kabushiki Kaisha of Japan; (2) under Section
17 of Rule 14, the subject matter or property
involved in the action does not have to belong
to the defendants. The provisions of said
section contemplate of a situation where the
property belongs to the plaintiff but the
defendant has a claim over said property,
whether that claim be actual or contingent; (3)
the prayer of the plaintiff that the defendants
be excluded from any interest in the
properties of the plaintiff within the
Philippines has the effect of excluding the
defendants from the properties of the plaintiff
in the Philippines for the purpose of
answering for the debts of C.F. Sharp
Kabushiki Kaisha of Japan to the defendants
in accordance with Section 17 of Rule 14; and
(4) the action before the lower court is an
action quasi in rem as the remedies raised in
the complaint affect the personal status of the
plaintiff as a separate, distinct and

On July 13, 1981, the respondent Court issued

its order denying said special appearances.
The motion for reconsideration of said order
filed by the petitioners was also denied on
September 22, 1981.
Hence, the present petition.
After the required pleadings were filed, the
First Division of this Court, in the resolution
of April 14, 1982, gave due course to the
petition and required both parties to submit
simultaneous memoranda within thirty (30)
days from notice. Both parties complied by
submitting the required memoranda.
The main issue in this case is whether or not
private respondent's complaint for injunction
and/or declaratory relief is within the purview
of the provisions of Section 17, Rule 14 of the
Rules of Court.

12

independent corporation and relates to the

properties of the plaintiff in the Philippines
over which the petitioners have or claim an
interest, actual or contingent.

of the plaintiff is not only affected but is the

main issue at hand.
As defined, "Status means a legal personal
relationship, not temporary in nature nor
terminable at the mere will of the parties, with
which third persons and the state are
concerned" (Holzer v. Deutsche Reichsbahn
Gesellschaft, 290 NYS 181; cited in 40 Words
and Phrases, 129, Permanent Edition).

The petition is impressed with merit.

Section 17, Rule 14 of the Rules of Court
provides:
Section 17. Extraterritorial service. When
the defendant does not reside and is not found
in the Philippines and the action affects the
personal status of the plaintiff or relates to, or
the subject of which is, property within the
Philippines, in which the defendant has or
claims a lien or interest, actual or contingent,
or in which the relief demanded consists,
wholly or in part, in excluding the defendant
from any interest therein, or the property of
the defendant has been attached within the
Philippines, service may, by leave of court, be
effected out of the Philippines by personal
service as under section 7; or by publication
in a newspaper of general circulation in such
places and for such times as the court may
order, in which case a copy of the summons
and order of the court shall be sent by
registered mail to the last known address of
the defendant, or in any other manner the
court may deem sufficient. Any order granting
such leave shall specify a reasonable time,
which shall not be less than sixty (60) days
after notice, within which the defendant must
answer.

It is easy to see in the instant case, that what is

sought is a declaration not only that private
respondent is a corporation for there is no
dispute on that matter but also that it is
separate and distinct from C.F. Sharp
Kabushiki Kaisha and therefore, not liable for
the latter's indebtedness. It is evident that
monetary obligations does not, in any way,
refer to status, lights and obligations.
Obligations are more or less temporary, but
status is relatively permanent. But more
importantly, as cited in the case of (Dy Poco
v. Commissioner of Immigration, et al., 16
SCRA 618 [1966]), the prevailing rule is that
"where a declaratory judgment as to a
disputed fact would be determinative of issues
rather than a construction of definite stated
rights, status and other relations, commonly
expressed in written instrument, the case is
not one for declaratory judgment." Thus,
considering the nature of a proceeding for
declaratory judgment, wherein relief may be
sought only to declare rights and not to
determine or try issues, there is more valid
reason to adhere to the principle that a
declaratory relief proceeding is unavailable
where judgment would have to be made, only
after a judicial investigation of disputed issues
(ibid). In fact, private respondent itself
perceives that petitioners may even seek to
pierce the veil of corporate identity (Rollo, p.
63).

This Court had ruled that extraterritorial

service of summons is proper only in four (4)
instances, namely: "(1) when the action
affects the personal status of the plaintiffs: (2)
when the action relates to, or the subject of
which is, property within the Philippines, in
which the defendant has or claims a lien or
interest, actual or contingent; (3) when the
relief demanded in such action consists,
wholly or in part, in excluding the defendant
from any interest in property located in the
Philippines; and (4) when the defendant nonresident's property has been attached within
the Philippines." (De Midgely v. Ferandos, 64
SCRA 23 [1975]; The Dial Corporation v.
Soriano, 161 SCRA 737 [1988]).

Private respondent alleges that most if not all,

of the petitioners have merely demanded or
have attempted to demand from the former
the payment of the obligations of C.F. Sharp
K.K., (Rollo, p. 63). Otherwise stated, there is
no action relating to or the subject of which
are the properties of the defendants in the
Philippines for it is beyond dispute that they
have none in this jurisdiction nor can it be
said that they have claimed any lien or
interest, actual or contingent over any
property herein, for as above stated, they
merely demanded or attempted to demand

In the case at bar, private respondent has two

(2) alternative principal causes of action, to
wit: either for declaratory relief or for
injunction. Allegedly, in both cases, the status

13

from private respondent payment of the

monetary obligations of C.F. Sharp K.K., No
action in court has as yet ensued. Verily, the
fact that C.F. Sharp Philippines is an entity
separate and distinct from C.F. Sharp K.K., is
a matter of defense that can be raised by the
former at the proper time.
Finally, the alternative relief sought is
injunction, that is to enjoin petitioners from
demanding from private respondent the
payment of the obligations of C.F. Sharp
K.K., It was not prayed that petitioners be
excluded from any property located in the
Philippines, nor was it alleged, much less
shown, that the properties of the defendants, if
any, have been attached.

EUFEMIA ALMEDA and

ROMEL ALMEDA,
Petitioners,
- versus BATHALA MARKETING INDUSTRIES,
INC.,
Respondent.

Hence, as ruled by this Court, where the

complaint does not involve the personal status
of plaintiff, nor any property in the
Philippines in which defendants have or claim
an interest, or which the plaintiff has attached,
but purely an action for injunction, it is a
personal action as well as an action in
personam, not an action in rem orquasi in
rem. As a personal action, personal or
substituted service of summons on the
defendants, not extraterritorial service, is
necessary to confer jurisdiction on the court.
In an action for injunction, extra-territorial
service of summons and complaint upon the
non-resident defendants cannot subject them
to the processes of the regional trial courts
which are powerless to reach them outside the
region over which they exercise their
authority. Extra-territorial service of summons
will not confer on the court jurisdiction or
Power to compel them to obey its orders (Dial
Corporation v. Soriano, 161 SCRA 738
[1988] citing Section 3-a Interim Rules of
Court, Section 21, subpar. 1, BP Blg. 129).

D E C I S I O N
NACHURA, J.:
This is a Petition for Review
on Certiorari under Rule 45 of the Rules of
Court, of the Decision[1] of the Court of
Appeals (CA), dated September 3, 2001, in
CA-G.R. CV No. 67784, and its
Resolution[2] dated November 19, 2001. The
assailed Decision affirmed with modification
the Decision[3] of the Regional Trial Court
(RTC), Makati City, Branch 136, dated May
9, 2000 in Civil Case No. 98-411.
Sometime in May 1997, respondent Bathala
Marketing Industries, Inc., as lessee,
represented by its president Ramon H. Garcia,
renewed its Contract of Lease[4] with
Ponciano L. Almeda (Ponciano), as lessor,
husband of petitioner Eufemia and father
of petitioner Romel Almeda. Under the said
contract, Ponciano agreed to lease a portion of
the Almeda Compound, located at 2208
Pasong Tamo Street, Makati City, consisting
of 7,348.25 square meters, for a monthly

Considering that extra-territorial service of

summons on the petitioners was improper, the
same was null and void.
WHEREFORE, the petition is Granted and
the questioned orders dated July 13, 1981 and
September 22, 1981 of the respondent Judge,
are Reversed and Set Aside.
SO ORDERED.

14

rental of P1,107,348.69, for a term of four (4)

years from May 1, 1997 unless sooner
terminated as provided in the contract.[5] The
contract of lease contained the following
pertinent provisions which gave rise to the
instant case:

was executed on May 1, 1997 when the VAT

law had long been in effect.[8]
On January 26, 1998, respondent
received another letter from petitioners
informing the former that its monthly rental
should be increased by 73% pursuant to
condition No. 7 of the contract and Article
1250 of the Civil Code. Respondent opposed
petitioners demand and insisted that there was
no extraordinary inflation to warrant the
application of Article 1250 in light of the
pronouncement of this Court in various cases.

SIXTH
It
is
expressly
understood by the parties
hereto that the rental rate
stipulated is based on the
present rate of assessment on
the property, and that in case
the
assessment
should
hereafter be increased or any
new tax, charge or burden be
imposed by authorities on the
lot and building where the
leased premises are located,
LESSEE shall pay, when the
rental herein provided becomes
due, the additional rental or
charge corresponding to the
portion
hereby
leased;
provided, however, that in the
event
that
the
present
assessment or tax on said
property should be reduced,
LESSEE shall be entitled to
reduction in the stipulated
rental, likewise in proportion
to the portion leased by him;

[9]

Respondent refused to pay the VAT

and adjusted rentals as demanded by
petitioners but continued to pay the stipulated
amount set forth in their contract.
On February 18, 1998, respondent
instituted an action for declaratory relief for
purposes of determining the correct
interpretation of condition Nos. 6 and 7 of the
lease contract to prevent damage and
prejudice.[10] The case was docketed as Civil
Case No. 98-411 before the RTC of Makati.

SEVENTH
In
case
an
extraordinary inflation
or
devaluation
of
Philippine
Currency should supervene,
the value of Philippine peso at
the time of the establishment
of the obligation shall be the
basis of payment;[6]
During the effectivity of the contract,
Ponciano died. Thereafter, respondent dealt
with petitioners. In a letter[7] dated December
29, 1997, petitioners advised respondent that
the former shall assess and collect Value
Added Tax (VAT) on its monthly rentals. In
response, respondent contended that VAT may
not be imposed as the rentals fixed in the
contract of lease were supposed to include the
VAT therein, considering that their contract

On March 10, 1998, petitioners in turn

filed an action for ejectment, rescission and
damages against respondent for failure of the
latter to vacate the premises after the demand
made by the former.[11] Before respondent
could file an answer, petitioners filed a Notice
of Dismissal.[12] They subsequently refiled the
complaint before the Metropolitan Trial Court
of Makati; the case was raffled to Branch 139
and was docketed as Civil Case No. 53596.
Petitioners later moved for the
dismissal of the declaratory relief case for
being an improper remedy considering that
respondent was already in breach of the
obligation and that the case would not end the
15

litigation and settle the rights of the

parties. The trial court, however, was not
persuaded, and consequently, denied the
motion.

the contract. The court, likewise, denied their

right to collect the demanded increase in
rental, there being no extraordinary inflation
or devaluation as provided for in the seventh
clause of the contract. Because of the payment
made by respondent of the rental adjustment
demanded by petitioners, the court ordered
the restitution by the latter to the former of the
amounts paid, notwithstanding the wellestablished rule that in an action for
declaratory relief, other than a declaration of
rights and obligations, affirmative reliefs are
not sought by or awarded to the parties.
Petitioners elevated the aforesaid case to the
Court of Appeals which affirmed with
modification
the
RTC
decision. The fallo reads:

After trial on the merits, on May 9,

2000, the RTC ruled in favor of respondent
and against petitioners. The pertinent portion
of the decision reads:
WHEREFORE,
premises considered, this
Court renders judgment on the
case as follows:
1)
declaring
that
plaintiff is not liable for the
payment of Value-Added Tax
(VAT) of 10% of the rent for
[the] use of the leased
premises;

WHEREFORE,
premises
considered, the present appeal
is DISMISSED and the
appealed decision in Civil
Case No. 98-411 is hereby
AFFIRMED
with
MODIFICATION in that the
order for the return of the
balance of the rental deposits
and
of
the
amounts
representing the 10% VAT and
rental adjustment, is hereby
DELETED.

2)
declaring
that
plaintiff is not liable for the
payment
of
any
rental
adjustment, there being no
[extraordinary] inflation or
devaluation, as provided in the
Seventh Condition of the lease
contract, to justify the same;
3) holding defendants
liable to plaintiff for the total
amount of P1,119,102.19, said
amount representing payments
erroneously made by plaintiff
as VAT charges and rental
adjustment for the months of
January, February and March,
1999; and

No pronouncement as to costs.
SO ORDERED.[14]
The appellate court agreed with the
conclusions of law and the application of the
decisional rules on the matter made by the
RTC. However, it found that the trial court
exceeded its jurisdiction in granting
affirmative relief to the respondent,
particularly the restitution of its excess
payment.

4) holding defendants
liable to plaintiff for the
amount of P1,107,348.69, said
amount
representing
the
balance of plaintiffs rental
deposit still with defendants.
SO ORDERED.[13]
The trial court denied petitioners their right to
pass on to respondent the burden of paying
the VAT since it was not a new tax that would
call for the application of the sixth clause of

Petitioners now come before this Court

raising the following issues:

16

I.

declaratory relief is proper; 2) whether

respondent is liable to pay 10% VAT pursuant
to Republic Act (RA) 7716; and 3) whether
the amount of rentals due the petitioners
should be adjusted by reason of extraordinary
inflation or devaluation.

WHETHER
OR
NOT
ARTICLE 1250 OF THE
NEW CIVIL CODE IS
APPLICABLE
TO
THE
CASE AT BAR.
II.
WHETHER OR NOT THE
DOCTRINE ENUNCIATED
IN FILIPINO PIPE AND
FOUNDRY
CORP.
VS.
NAWASA CASE, 161 SCRA
32
AND
COMPANION
CASES
ARE
(sic)
APPLICABLE IN THE CASE
AT BAR.

Declaratory relief is defined as an

action by any person interested in a deed, will,
contract or other written instrument, executive
order or resolution, to determine any question
of construction or validity arising from the
instrument, executive order or regulation, or
statute, and for a declaration of his rights and
duties thereunder. The only issue that may be
raised in such a petition is the question of
construction or validity of provisions in an
instrument or statute. Corollary is the general
rule that such an action must be justified, as
no other adequate relief or remedy is available
under the circumstances. [15]

III.
WHETHER OR NOT IN NOT
APPLYING THE DOCTRINE
IN
THE
CASE
OF DEL ROSARIO VS. THE
SHELL
COMPANY
OF
THE PHILIPPINES,
164
SCRA
562,
THE
HONORABLE COURT OF
APPEALS
SERIOUSLY
ERRED ON A QUESTION
OF LAW.

Decisional law enumerates the

requisites of an action for declaratory relief, as
follows: 1) the subject matter of the
controversy must be a deed, will, contract or
other written instrument, statute, executive
order or regulation, or ordinance; 2) the terms
of said documents and the validity thereof are
doubtful and require judicial construction; 3)
there must have been no breach of the
documents in question; 4) there must be an
actual justiciable controversy or the ripening
seeds of one between persons whose interests
are adverse; 5) the issue must be ripe for
judicial determination; and 6) adequate relief
is not available through other means or other
forms of action or proceeding.[16]
It is beyond cavil that the foregoing
requisites are present in the instant case,
except that petitioners insist that respondent
was already in breach of the contract when the
petition was filed.

IV.
WHETHER OR NOT THE
FINDING
OF
THE
HONORABLE COURT OF
APPEALS
THAT
RESPONDENT
IS
NOT
LIABLE TO PAY THE 10%
VALUE ADDED TAX IS IN
ACCORDANCE WITH THE
MANDATE OF RA 7716.
V.
WHETHER
OR
NOT
DECLARATORY RELIEF IS
PROPER SINCE PLAINTIFFAPPELLEE
WAS
IN
BREACH
WHEN
THE
PETITION
FOR
DECLARATORY
RELIEF
WAS FILED BEFORE THE
TRIAL COURT.
In fine, the issues for our resolution are
as follows: 1) whether the action for

17

We do not agree.
After petitioners demanded payment of
adjusted rentals and in the months that
followed, respondent complied with the terms
and conditions set forth in their contract of
lease by paying the rentals stipulated
therein. Respondent religiously fulfilled its
obligations to petitioners even during the
pendency of the present suit. There is no
showing that respondent committed an act
constituting a breach of the subject contract of
lease. Thus, respondent is not barred from
instituting before the trial court the petition for
declaratory relief.

the suspension of the proceedings pending the

resolution of the action for declaratory relief.
We are not unmindful of the doctrine
enunciated in Teodoro, Jr. v. Mirasol[18] where
the declaratory relief action was dismissed
because the issue therein could be threshed
out in the unlawful detainer suit. Yet, again, in
that case, there was already a breach of
contract at the time of the filing of the
declaratory relief petition. This dissimilar
factual milieu proscribes the Court from
applying Teodoro to the instant case.
Given all these attendant circumstances, the
Court is disposed to entertain the instant
declaratory relief action instead of dismissing
it, notwithstanding the pendency of the
ejectment/rescission case before the trial
court. The resolution of the present petition
would write finis to the parties dispute, as it
would settle once and for all the question of
the proper interpretation of the two
contractual stipulations subject of this
controversy.

Petitioners claim that the instant petition is not

proper because a separate action for
rescission, ejectment and damages had been
commenced before another court; thus, the
construction of the subject contractual
provisions should be ventilated in the same
forum.
We are not convinced.
It is true that in Panganiban v. Pilipinas Shell
Petroleum Corporation[17] we held that the
petition for declaratory relief should be
dismissed in view of the pendency of a
separate
action
for
unlawful
detainer. However, we cannot apply the same
ruling to the instant case. In Panganiban, the
unlawful detainer case had already been
resolved by the trial court before the dismissal
of the declaratory relief case; and it was
petitioner in that case who insisted that the
action for declaratory relief be preferred over
the action for unlawful detainer. Conversely,
in the case at bench, the trial court had not yet
resolved the rescission/ejectment case during
the pendency of the declaratory relief
petition. In fact, the trial court, where the
rescission case was on appeal, itself initiated

Now, on the substantive law issues.

Petitioners repeatedly made a demand
on respondent for the payment of VAT and for
rental adjustment allegedly brought about by
extraordinary inflation or devaluation.Both the
trial court and the appellate court found no
merit in petitioners claim. We see no reason to
depart from such findings.
As to the liability of respondent for the
payment of VAT, we cite with approval the
ratiocination of the appellate court, viz.:
Clearly, the person primarily
liable for the payment of VAT
is the lessor who may choose
to pass it on to the lessee or
absorb
the
18

same. Beginning January

1,
1996, the lease of real property
in the ordinary course of
business,
whether
for
commercial or residential use,
when the gross annual receipts
exceed P500,000.00, is subject
to 10% VAT. Notwithstanding
the mandatory payment of the
10% VAT by the lessor, the
actual shifting of the said tax
burden upon the lessee is
clearly optional on the part of
the lessor, under the terms of
the statute. The word may in
the statute, generally speaking,
denotes that it is directory in
nature. It
is
generally
permissive only and operates
to confer discretion. In this
case, despite the applicability
of the rule under Sec. 99 of the
NIRC, as amended by R.A.
7716, granting the lessor the
option to pass on to the lessee
the 10% VAT, to existing
contracts of lease as of January
1, 1996, the original lessor,
Ponciano L. Almeda did not
charge the lessee-appellee the
10% VAT nor provided for its
additional imposition when
they renewed the contract of
lease in May 1997. More
significantly, said lessor did
not actually collect a 10% VAT
on the monthly rental due from
the
lessee-appellee after the
execution of the May 1997
contract
of
lease.
The
inevitable implication is that
the lessor intended not to avail
of the option granted him by
law to shift the 10% VAT upon
the lessee-appellee. x x x.[19]

contract of lease, that is, after May 1997, and

only if they pertain to the lot and the building
where
the
leased
premises
are
located. Considering that RA 7716 took effect
in 1994, the VAT cannot be considered as a
new tax in May 1997, as to fall within the
coverage of the sixth stipulation.
Neither can petitioners legitimately demand
rental adjustment because of extraordinary
inflation or devaluation.
Petitioners contend that Article 1250
of the Civil Code does not apply to this case
because the contract stipulation speaks of
extraordinary inflation or devaluation while
the Code speaks of extraordinary inflation or
deflation. They insist that the doctrine
pronounced in Del Rosario v. The Shell
Company, Phils. Limited[20] should apply.
Essential to contract construction is the
ascertainment of the intention of the
contracting parties, and such determination
must take into account the contemporaneous
and subsequent acts of the parties. This
intention, once ascertained, is deemed an
integral part of the contract.[21]
While, indeed, condition No. 7 of the contract
speaks of extraordinary inflation or
devaluation as compared to Article 1250s
extraordinary inflation or deflation, we find
that when the parties used the term
devaluation, they really did not intend to
depart from Article 1250 of the Civil
Code. Condition No. 7 of the contract should,
thus, be read in harmony with the Civil Code
provision.

In short, petitioners are estopped from shifting

to respondent the burden of paying the VAT.
Petitioners reliance on the sixth
condition of the contract is, likewise,
unavailing. This provision clearly states that
respondent can only be held liable for new
taxes imposed after the effectivity of the

That this is the intention of the parties is

evident from petitioners letter[22] dated January
26, 1998, where, in demanding rental
adjustment ostensibly based on condition No.
19

7, petitioners made explicit reference to

Article 1250 of the Civil Code, even quoting
the law verbatim. Thus, the application of Del
Rosario is
not
warranted. Rather,
jurisprudential rules on the application of
Article 1250 should be considered.

erosion of the value of the Philippine peso in

the past three or four decades, starting in the
mid-sixties, is characteristic of most
currencies. And while the Court may take
judicial notice of the decline in the purchasing
power of the Philippine currency in that span
of time, such downward trend of the peso
cannot be considered as the extraordinary
phenomenon contemplated by Article 1250 of
the Civil Code. Furthermore, absent an official
pronouncement or declaration by competent
authorities of the existence of extraordinary
inflation during a given period, the effects of
extraordinary inflation are not to be applied. [25]

Article 1250 of the Civil Code states:

In case an extraordinary
inflation or deflation of the
currency stipulated should
supervene, the value of the
currency at the time of the
establishment of the obligation
shall be the basis of payment,
unless there is an agreement to
the contrary.

WHEREFORE, premises considered, the

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

Inflation has been defined as the sharp

increase of money or credit, or both, without a
corresponding
increase
in
business
transaction. There is inflation when there is an
increase in the volume of money and credit
relative to available goods, resulting in a
substantial and continuing rise in the general
price level.[23] In a number of cases, this Court
had provided a discourse on what constitutes
extraordinary inflation, thus:
[E]xtraordinary inflation exists
when there is a decrease or
increase in the purchasing
power of the Philippine
currency which is unusual or
beyond the common fluctuation
in the value of said currency,
and such increase or decrease
could not have been reasonably
foreseen or was manifestly
beyond the contemplation of
the parties at the time of the
establishment of the obligation.
[24]

The factual circumstances obtaining in the

present case do not make out a case of
extraordinary inflation or devaluation as would
justify the application of Article 1250 of the
Civil Code. We would like to stress that the
20

21

From March
1,
1994 to February
28,
1995 P7,320.50/P14,641.00
From March
1,
1995 to February
28,
1996 P8,052.55/P16,105.10
From March
1,
1996 to February
29,
1997 P8,857.81/P17,715.61
From March
1,
1997 to February
28,
1998 P9,743.59/P19,487.17
From March
1,
1998 to February
28,
1999 P10,717.95/P21,435.89
From March
1,
1999 to February
28,
2000 P11,789.75/P23,579.48

SUBHASH C. PASRICHA and

JOSEPHINE A. PASRICHA,
Petitioners,
- versus DON LUIS DISON REALTY, INC.,
Respondent.
DECISION
NACHURA, J.:
This

is

petition

for

review

on certiorari under Rule 45 of the Rules of

Court seeking the reversal of the Decision of
[1]

[4]

the Court of Appeals (CA) dated May 26,

For Rooms 22 and 24:

1998 and its Resolution dated December 10,

[2]

Effective July
1,
1992 P10,000.00
with
an
increment of 10% every two
years.

1998 in CA-G.R. SP No. 37739 dismissing

the petition filed by petitioners Josephine and
Subhash Pasricha.

[5]

For Rooms 33 and 34:

The facts of the case, as culled from

Inc. and petitioners executed two Contracts of

Effective April
1,
1992 P5,000.00
with
an
increment of 10% every two
years.

Lease whereby the former, as lessor, agreed

For Rooms 36, 37 and 38:

the records, are as follows:

Respondent Don Luis Dison Realty,

[6]

[3]

to lease to the latter Units 22, 24, 32, 33, 34,

Effective when tenants vacate

said premises P10,000.00 with
an increment of 10% every two
years.

35, 36, 37 and 38 of the San Luis Building,

located at 1006 M.Y. Orosa cor. T.M. Kalaw

[7]

Streets, Ermita, Manila. Petitioners, in turn,

agreed to pay monthly rentals, as follows:

Petitioners were, likewise, required to pay for

For Rooms 32/35:

the cost of electric consumption, water bills

and the use of telephone cables.

From March 1, 1991 to August

31,
1991 P5,000.00/P10,000.00
From September
1,
1991 to February
29,
1992 P5,500.00/P11,000.00
From March
1,
1992 to February
28,
1993 P6,050.00/P12,100.00
From March
1,
1993 to February
28,
1994 P6,655.00/P13,310.00

[8]

The lease of Rooms 36, 37 and 38 did not

materialize leaving only Rooms 22, 24, 32,
33, 34 and 35 as subjects of the lease
contracts. While the contracts were in effect,
[9]

petitioners

dealt

with

Francis

Pacheco

(Pacheco), then General Manager of private

respondent. Thereafter, Pacheco was replaced

22

by
[10]

Roswinda

Bautista

Bautista).

good faith and willingness to pay the rents,

Petitioners religiously paid the monthly

petitioners alleged that they prepared the

rentals until May 1992.

despite

repeated

[11]

(Ms.

After that, however,

demands,

check vouchers for their monthly rentals from

petitioners

January 1993 to January 1994.

continuously refused to pay the stipulated

further

rent.Consequently,

Answer

respondent

was

averred
[18]

in

their

[17]

Petitioners
Amended

that the complaint for ejectment

constrained to refer the matter to its lawyer

was prematurely filed, as the controversy was

who, in turn, made a final demand on

not referred to the barangay for conciliation.

petitioners for the payment of the accrued

rentals
[12]

amounting

For failure of the parties to reach an amicable

toP916,585.58.

settlement, the pre-trial conference was

Because petitioners still refused to comply,

terminated. Thereafter, they submitted their

a complaint for ejectment was filed by private

respective position papers.

respondent through its representative, Ms.

Bautista, before the Metropolitan Trial Court
(MeTC) of Manila.

[13]

On November 24, 1994, the MeTC rendered a

The case was raffled to

Decision

Branch XIX and was docketed as Civil Case

ejectment.

No. 143058-CV.

complaint

for

It considered petitioners non-

held that mere willingness to pay the rent did

not amount to payment of the obligation;

stipulated rent for the leased premises starting

petitioners

July until November 1992, but claimed that

payment

such refusal was justified because of the

name

of

their

respondent

respondent failed to turn over possession of

rent, petitioners alleged that they were

the premises. The court, however, dismissed

prevented from using the units (rooms)

the complaint because of Ms. Bautistas

subject matter of the lease contract, except

alleged lack of authority to sue on behalf of

Room 35. Petitioners eventually paid their

the corporation.

monthly rent for December 1992 in the

amount ofP30,000.00, and claimed that

Deciding the case on appeal, the Regional

respondent waived its right to collect the rents

Trial Court (RTC) of Manila, Branch 1, in

for the months of July to November 1992

Civil Case No. 94-72515, reversed and set

since petitioners were prevented from using

aside the MeTC Decision in this wise:

However,

WHEREFORE, the appealed

decision is hereby reversed and
set aside and another one is
rendered ordering defendants-

they again withheld payment of rents starting

January 1993 because of respondents refusal
[16]

the

deposited

credence to petitioners claim that private

To further justify their non-payment of

to turn over Rooms 36, 37 and 38.

in

have

subject premises, the court did not give

the person authorized to receive payment.

[15]

should

company. On the matter of possession of the

internal squabble in respondent company as to

Rooms 22, 24, 32, 33, and 34.

[19]

the

payment of rentals as unjustified. The court

Petitioners admitted their failure to pay the

[14]

dismissing

To show
23

appellees and all persons

claiming rights under them, as
follows:

on certiorari.

[22]

On March

18,

1998,

petitioners filed an Omnibus Motion

[23]

to cite

to vacate the
leased
premised
(sic) and restore
possession thereof
to
plaintiffappellant;
(2) to pay plaintiffappellant the sum
of P967,915.80
representing
the
accrued rents in
arrears
as
of
November 1993,
and the rents on the
leased premises for
the
succeeding
months
in the
amounts stated in
paragraph 5 of the
complaint
until
fully paid; and
(3) to
pay
an
additional
sum
equivalent to 25%
of the rent accounts
as and for attorneys
fees plus the costs
of this suit.

Ms. Bautista for contempt; to strike down the

SO ORDERED.

motions as repetitive of their previous

(1)

MeTC and RTC Decisions as legal nullities;

and

to

conduct

hearings

and

ocular

inspections or delegate the reception of

evidence.Without resolving the aforesaid
motion,
affirmed

on May
[24]

26,

1998,

the

CA

the RTC Decision but deleted the

award of attorneys fees.

Petitioners

[25]

moved

for

the

reconsideration of the aforesaid decision.

[26]

Thereafter, they filed several motions

asking the Honorable Justice Ruben T. Reyes

to inhibit from further proceeding with the
case allegedly because of his close association
with Ms. Bautistas uncle-in-law.

[27]

In a Resolution

[28]

dated December 10, 1998,

the CA denied the motions for lack of

merit. The appellate court considered said

[20]

arguments, irrelevant and obviously dilatory.

[29]

The court adopted the MeTCs finding on

As to the motion for inhibition of the

Honorable Justice Reyes, the same was

petitioners unjustified refusal to pay the rent,

denied, as the appellate court justice stressed

which is a valid ground for ejectment. It,

that the decision and the resolution were not

however, faulted the MeTC in dismissing the

affected by extraneous matters.

case on the ground of lack of capacity to

[30]

Lastly, the

appellate court granted respondents motion

sue. Instead, it upheld Ms. Bautistas authority

for execution and directed the RTC to issue a

to represent respondent notwithstanding the

new writ of execution of its decision, with the

absence of a board resolution to that effect,

exception of the award of attorneys fees

since her authority was implied from her

which the CA deleted.

power as a general manager/treasurer of the

company.

[21]

[31]

Petitioners now come before this Court in this

petition for review on certiorari raising the

Aggrieved, petitioners elevated the matter to

following issues:

the Court of Appeals in a petition for review

24

I.

favor of the respondent

corporation
constitute
an
unconstitutional deprivation of
petitioners property without
due process of law.

Whether this ejectment

suit should be dismissed and
whether petitioners are entitled
to
damages
for
the
unauthorized and malicious
filing by Rosario (sic) Bautista
of this ejectment case, it being
clear that [Roswinda] whether
as general manager or by
virtue of her subsequent
designation by the Board of
Directors as the corporations
attorney-in-fact had no legal
capacity to institute the
ejectment suit, independently
of whether Director Pacanas
Order setting aside the SEC
revocation Order is a mere
scrap of paper.

[32]

In addition to Ms. Bautistas lack of capacity

to sue, petitioners insist that respondent
company has no standing to sue as a juridical
person in view of the suspension and eventual
revocation of its certificate of registration.
[33]

They likewise question the factual findings

of the court on the bases of their ejectment

from the subject premises. Specifically, they
fault the appellate court for not finding that:
1) their non-payment of rentals was justified;

II.

2) they were deprived of possession of all the

Whether the RTCs and the

Honorable Court of Appeals
failure and refusal to resolve
the most fundamental factual
issues in the instant ejectment
case render said decisions void
on their face by reason of the
complete abdication by the
RTC and the Honorable Justice
Ruben
Reyes
of
their constitutional duty not
only to clearly and distinctly
state the facts and the law on
which a decision is based but
also to resolve the decisive
factual issues in any given
case.

units subject of the lease contract except

Room 35; and 3) respondent violated the
terms of the contract by its continued refusal
to turn over possession of Rooms 36, 37 and
38. Petitioners

further

prayed

that

Temporary Restraining Order (TRO) be

issued enjoining the CA from enforcing its
Resolution directing the issuance of a Writ of
Execution. Thus,
Resolution

[34]

in

datedJanuary 18, 1999, this

Court directed the parties to maintain

the status quo effective immediately until

III.

further orders.

Whether the (1) failure and

refusal of Honorable Justice
Ruben Reyes to inhibit
himself, despite his admission
by reason of his silence of
petitioners accusation that the
said
Justice
enjoyed
a
$7,000.00
scholarship grant
courtesy of the uncle-in-law of
respondent
corporations
purported general manager and
(2), worse, his act of ruling
against the petitioners and in

The petition lacks merit.

We uphold the capacity of respondent
company

to

institute

the

ejectment

case. Although the Securities and Exchange

Commission (SEC) suspended and eventually
revoked respondents certificate of registration
on February 16, 1995, records show that it

25

instituted

the

action

ejectment

[39]

InNovelty Phils., Inc. v. Court of Appeals,

on December 15, 1993. Accordingly, when

[40]

the Court faulted the appellate court for

the case was commenced, its registration was

dismissing a petition solely on petitioners

not yet revoked.

Besides, as correctly held

failure to timely submit proof of authority to

by the appellate court, the SEC later set aside

sue on behalf of the corporation. In Pfizer,

its earlier orders of suspension and revocation

Inc. v. Galan,

of respondents certificate, rendering the issue

petition verified by an employment specialist

moot and academic.

despite the total absence of a board resolution

[35]

for

[41]

[36]

we upheld the sufficiency of a

authorizing her to act for and on behalf of the

We likewise affirm Ms. Bautistas capacity to

corporation. Lastly,

sue on behalf of the company despite lack of

Philippines, Inc,

corporation has no powers except those

existence. In

turn,

all of the above cases, we brushed aside

technicalities in the interest of justice. This is

corporation exercises said powers through its

not to say that we disregard the requirement

board of directors and/or its duly authorized

of prior authority to act in the name of a

officers and agents. Physical acts, like the

corporation. The relaxation of the rules

signing of documents, can be performed only

applies only to highly meritorious cases, and

by natural persons duly authorized for the

when there is substantial compliance. While it

purpose by corporate by-laws or by a specific

act of the board of directors.

[37]

is true that rules of procedure are intended to

Thus, any

promote rather than frustrate the ends of

person suing on behalf of the corporation

should

present

proof

of

justice, and while the swift unclogging of

such

court dockets is a laudable objective, we

authority. Although Ms. Bautista initially

should not insist on strict adherence to the

failed to show that she had the capacity to

sign

the

verification

and

institute

rules at the expense of substantial justice.

the

[43]

ejectment case on behalf of the company,

Certificate

[38]

presented
confirming

the
her

justice; and a deviation from the rigid

Secretarys
authority

enforcement of the rules may be allowed to

to

attain that prime objective, for, after all, the

represent the company.

dispensation of justice is the core reason for

the existence of courts.

There is ample jurisprudence holding

that subsequent and substantial compliance
in

the

interest

of

[44]

As to the denial of the motion to inhibit

may call for the relaxation of the rules of

procedure

Technical and procedural rules are intended

to help secure, not suppress, the cause of

when confronted with such question, she

immediately

we relaxed the rules of

managers status as an authorized signatory. In

Code and those that are implied from or are

its

[42]

procedure because the corporation ratified the

expressly conferred on it by the Corporation

to

Banking

Corporation v. Mondragon International

proof of authority to so represent it. A

incidental

in China

Justice Reyes, we find the same to be in

justice.

order. First, the motion to inhibit came after

26

the appellate court rendered the assailed

the expiration or violation of its terms.

decision, that is, after Justice Reyes had

[48]

already rendered his opinion on the merits of

unlawful detainer are: 1) the fact of lease by

the case. It is settled that a motion to inhibit

virtue of a contract, express or implied; 2) the

shall be denied if filed after a member of the

expiration or termination of the possessors

court had already given an opinion on the

right to hold possession; 3) withholding by

merits of the case, the rationale being that a

the lessee of possession of the land or

litigant cannot be permitted to speculate on

building after the expiration or termination of

the action of the court x x x (only to) raise an

the right to possess; 4) letter of demand upon

objection of this sort after the decision has

lessee to pay the rental or comply with the

been rendered.

Second, it is settled that

terms of the lease and vacate the premises;

mere suspicion that a judge is partial to one of

and 5) the filing of the action within one year

the parties is not enough; there should be

from the date of the last demand received by

evidence to substantiate the suspicion. Bias

the defendant.

[45]

Specifically, the essential requisites of

[49]

and prejudice cannot be presumed, especially

It

when weighed against a judges sacred pledge

petitioners

the San Luis Building. Records,

equally to the poor and the rich. There must

and

likewise,

show that respondent repeatedly demanded

be a showing of bias and prejudice stemming

that petitioners vacate the premises, but the

from an extrajudicial source, resulting in an

latter refused to heed the demand; thus, they

opinion on the merits based on something

remained in possession of the premises. The

other than what the judge learned from his

only contentious issue is whether there was

We would like to

indeed a violation of the terms of the contract:

reiterate, at this point, the policy of the Court

on the part of petitioners, whether they failed

not to tolerate acts of litigants who, for just

to pay the stipulated rent without justifiable

about any conceivable reason, seek to

cause; while on the part of respondent,

disqualify a judge (or justice) for their own

whether

purpose, under a plea of bias, hostility,

prejudice or prejudgment.

that

of lease involving nine (9) rooms of

without regard for any person and to do right

[46]

undisputed

respondent entered into two separate contracts

under his oath of office to administer justice

participation in the case.

is

it

prevented

petitioners

from

occupying the leased premises except Room

[47]

35.
We now come to the more substantive issue of
This issue involves questions of fact, the

whether or not the petitioners may be validly

resolution of which requires the evaluation of

ejected from the leased premises.

the evidence presented. The MeTC, the RTC

Unlawful detainer cases are summary in

and the CA all found that petitioners failed to

nature. In such cases, the elements to be

perform their obligation to pay the stipulated

proved and resolved are the fact of lease and

rent. It is settled doctrine that in a civil case,

27

the conclusions of fact of the trial court,

contract,

especially when affirmed by the Court of

to

Appeals, are final and conclusive, and cannot

rooms. Besides, at that time, they were

be reviewed on appeal by the Supreme Court.

already in default on their rentals for more

[50]

Albeit the rule admits of exceptions, not

one of them obtains in this case.

[55]

nowhere did they specifically refer

their

inability

to

use

the

leased

than a year.

[51]

If it were true that they were allowed

to use only one of the nine (9) rooms subject

To settle this issue once and for all, we deem

of the contract of lease, and considering that

it proper to assess the array of factual findings

the rooms were intended for a business

supporting the courts conclusion.

purpose, we cannot understand why they did

The evidence of petitioners nonpayment

of

the

is

petitioners contention that they had been

overwhelming. Petitioners, however, claim

prevented from using the rooms for more than

that such non-payment is justified by the

a year before the complaint for ejectment was

following: 1) the refusal of respondent to

filed, they should have demanded specific

allow petitioners to use the leased properties,

performance from the lessor and commenced

except room 35; 2) respondents refusal to turn

an action in court. With the execution of the

over Rooms 36, 37 and 38; and 3)

contract, petitioners were already in a position

respondents

to exercise their right to the use and

refusal

stipulated

to

accept

rent

not specifically assert their right. If we believe

payment

tendered by petitioners.

enjoyment of the property according to the

terms of the lease contract.

Petitioners justifications are belied by the

petitioners

communications

over to petitioners the keys to the leased

to

premises and petitioners, in fact, renovated

respondent prior to the filing of the complaint

the

never mentioned their alleged inability to use

the rooms.

[52]

lessor itself. Yet, they did not lift a finger to

protect their right if, indeed, there was a

electric billings without, however, raising a

violation of the contract by the lessor.

complaint about their failure to use the rooms.

their December

30,

stated

1993 letter

in

possession of the property, even as against the

questioned the method of computing their

petitioners

placed

any act of intrusion into their peaceful

In their July 26

and October 30, 1993 letters, petitioners only

Although

were

same. They, likewise, had the right to resist

payment should be made, whether to Ms.

[54]

they

right to the use and enjoyment of the

letters is that they did not know to whom

[53]

rooms. Thus,

possession of the premises and they had the

What they pointed out in their

Bautista or to Pacheco.

As borne out by

the records, the fact is that respondent turned

evidence on record. As correctly held by the

CA,

[56]

What was, instead, clearly established

in

by the evidence was petitioners non-payment

that

of rentals because ostensibly they did not

respondent failed to fulfill its part of the

know
28

to

whom

payment

should

be

made.However, this did not justify their

[58]

failure to pay, because if such were the case,

tender of payment and actually prepared

they were not without any remedy. They

vouchers for their monthly rentals. But that

should have availed of the provisions of the

was insufficient to constitute a valid tender of

Civil

the

payment. Even assuming that it was valid

consignation of payment and of the Rules of

tender, still, it would not constitute payment

Court on interpleader.

for want of consignation of the amount. Well-

Code

of

the Philippines on

Petitioners claim that they made a written

settled is the rule that tender of payment must

Article 1256 of the Civil Code

be accompanied by consignation in order that

provides:

the effects of payment may be produced.

Article 1256. If the

creditor to whom tender of
payment has been made
refuses without just cause to
accept it, the debtor shall be
released from responsibility by
the consignation of the thing or
sum due.

[59]

Moreover, Section 1, Rule 62 of the Rules of

Court provides:
Section 1. When interpleader
proper. Whenever conflicting
claims upon the same subject
matter are or may be made
against a person who claims no
interest whatever in the subject
matter, or an interest which in
whole or in part is not disputed
by the claimants, he may bring
an
action
against
the
conflicting
claimants
to
compel them to interplead and
litigate their several claims
among themselves.

Consignation
alone
shall produce the same effect
in the following cases:
xxxx
(4) When two or more
persons claim the same right to
collect;
x x x x.

Otherwise stated, an action for interpleader is

Consignation shall be made by depositing the

proper when the lessee does not know to

things due at the disposal of a judicial

whom payment of rentals should be made due

authority, before whom the tender of payment

to conflicting claims on the property (or on

shall be proved in a proper case, and the

the right to collect).

announcement of the consignation in other

not to protect a person against double liability

cases.

but to protect him against double vexation in

[57]

[60]

The remedy is afforded

respect of one liability.

[61]

In the instant case, consignation alone

would have produced the effect of payment of

Notably, instead of availing of the

the rentals. The rationale for consignation is

above remedies, petitioners opted to refrain

to avoid the performance of an obligation

from making payments.

becoming more onerous to the debtor by

reason of causes not imputable to him.

29

Neither can petitioners validly invoke the

contracts of lease contain identical provisions,

non-delivery of Rooms 36, 37 and 38 as a

to wit:

justification

for

non-payment

In case of default by the

LESSEE in the payment of
rental on the fifth (5th) day of
each month, the amount owing
shall as penalty bear interest at
the rate of FOUR percent (4%)
per month, to be paid, without
prejudice to the right of the
LESSOR to terminate his
contract, enter the premises,
and/or eject the LESSEE as
hereinafter set forth;

of

rentals. Although the two contracts embraced

the lease of nine (9) rooms, the terms of the
contracts - with their particular reference to
specific rooms and the monthly rental for
each - easily raise the inference that the
parties intended the lease of each room
separate from that of the others. There is

[62]

nothing in the contract which would lead to

the conclusion that the lease of one or more

Moreover, Article 1673

rooms was to be made dependent upon the

gives the lessor the right to judicially eject the

lease of all the nine (9) rooms. Accordingly,

lessees in case of non-payment of the monthly

the use of each room by the lessee gave rise to

rentals. A contract of lease is a consensual,

the corresponding obligation to pay the

bilateral, onerous and commutative contract

monthly

same. Notably,

by which the owner temporarily grants the use

respondent demanded payment of rentals only

of his property to another, who undertakes to

for the rooms actually delivered to, and used

pay the rent therefor.

by, petitioners.

rent, petitioners have no right to remain in the

rental

for

the

[64]

[63]

of the Civil Code

For failure to pay the

leased premises.

It may also be mentioned that the contract

specifically provides that the lease of Rooms

WHEREFORE, premises considered, the

36, 37 and 38 was to take effect only when the

petition is DENIED and the Status Quo Order

tenants

dated January

thereof

would

vacate

the

18,

1999 is

premises.Absent a clear showing that the

hereby LIFTED. The Decision of the Court

previous tenants had vacated the premises,

of Appeals datedMay 26, 1998 and its

respondent had no obligation to deliver

Resolution dated December 10, 1998 in CA-

possession

G.R. SP No. 37739 are AFFIRMED.

of

the

subject

rooms

to

petitioners. Thus, petitioners cannot use the

SO ORDERED.

non-delivery of Rooms 36, 37 and 38 as an

excuse for their failure to pay the rentals due
on the other rooms they occupied.
In

light

of

the

foregoing

disquisition,

respondent has every right to exercise his

right to eject the erring lessees. The parties

30