SECOND DIVISION
On May 8,
[G.R. No. 131282. January 4, 2002]
GABRIEL L. DUERO, petitioner, vs. HON. COURT OF APPEALS, and
BERNARDO A. ERADEL, respondents.
DECISION
QUISUMBING, J.:
This petition for certiorari assails the Decision[1] dated September 17, 1997,
of the Court of Appeals in CA-G.R. No. SP No. 2340- UDK,
entitled Bernardo Eradel vs. Hon. Ermelino G. Andal, setting aside all
proceedings in Civil Case No. 1075, Gabriel L. Duero vs. Bernardo
Eradel, before the Branch 27 of the Regional Trial Court of Tandag, Surigao
del Sur.
The pertinent facts are as follows:
Sometime in 1988, according to petitioner, private respondent Bernardo
Eradel[2] entered and occupied petitioners land covered by Tax Declaration
No. A-16-13-302, located in Baras, San Miguel, Surigao del Sur. As shown
in the tax declaration, the land had an assessed value of P5,240. When
petitioner politely informed private respondent that the land was his and
requested the latter to vacate the land, private respondent refused, but instead
threatened him with bodily harm. Despite repeated demands, private
respondent remained steadfast in his refusal to leave the land.
On June 16, 1995, petitioner filed before the RTC a complaint for Recovery
of Possession and Ownership with Damages and Attorneys Fees against
private respondent and two others, namely, Apolinario and Inocencio
Ruena. Petitioner appended to the complaint the aforementioned tax
declaration. The counsel of the Ruenas asked for extension to file their
Answer and was given until July 18, 1995. Meanwhile, petitioner and the
Ruenas executed a compromise agreement, which became the trial courts
basis for a partial judgment rendered on January 12, 1996. In this agreement,
the Ruenas through their counsel, Atty. Eusebio Avila, entered into a
Compromise Agreement with herein petitioner, Gabriel Duero. Inter alia, the
agreement stated that the Ruenas recognized and bound themselves to respect
the ownership and possession of Duero.[3] Herein private respondent Eradel
was not a party to the agreement, and he was declared in default for failure to
file his answer to the complaint.[4]
Petitioner presented his evidence ex parte on February 13, 1996.
1996, judgment was rendered in his favor, and private respondent was
ordered to peacefully vacate and turn over Lot No. 1065 Cad. 537-D to
petitioner; pay petitioner P2,000 annual rental from 1988 up the time he
vacates the land, and P5,000 as attorneys fees and the cost of the
suit.[5]Private respondent received a copy of the decision on May 25, 1996.
On June 10, 1996, private respondent filed a Motion for New Trial, alleging
that he has been occupying the land as a tenant of Artemio Laurente, Sr.,
since 1958. He explained that he turned over the complaint and summons to
Laurente in the honest belief that as landlord, the latter had a better right to
the land and was responsible to defend any adverse claim on it.However, the
trial court denied the motion for new trial.
Meanwhile, RED Conflict Case No. 1029, an administrative case between
petitioner and applicant-contestants Romeo, Artemio and Jury Laurente,
remained pending with the Office of the Regional Director of the Department
of Environment and Natural Resources in Davao City. Eventually, it was
forwarded to the DENR Regional Office in Prosperidad, Agusan del Sur.
On July 24, 1996, private respondent filed before the RTC a Petition for
Relief from Judgment, reiterating the same allegation in his Motion for New
Trial. He averred that unless there is a determination on who owned the land,
he could not be made to vacate the land. He also averred that the judgment of
the trial court was void inasmuch as the heirs of Artemio Laurente, Sr., who
are indispensable parties, were not impleaded.
On September 24, 1996, Josephine, Ana Soledad and Virginia, all surnamed
Laurente, grandchildren of Artemio who were claiming ownership of the
land, filed a Motion for Intervention. The RTC denied the motion.
On October 8, 1996, the trial court issued an order denying the Petition for
Relief from Judgment. In a Motion for Reconsideration of said order, private
respondent alleged that the RTC had no jurisdiction over the case, since the
value of the land was only P5,240 and therefore it was under the jurisdiction
of the municipal trial court. On November 22, 1996, the RTC denied the
motion for reconsideration.
On January 22, 1997, petitioner filed a Motion for Execution, which the RTC
granted on January 28. On February 18, 1997, Entry of Judgment was made
of record and a writ of execution was issued by the RTC on February 27,
1997. On March 12, 1997, private respondent filed his petition for certiorari
before the Court of Appeals.
The Court of Appeals gave due course to the petition, maintaining that
private respondent is not estopped from assailing the jurisdiction of the RTC,
Branch 27 in Tandag, Surigao del Sur, when private respondent filed with
said court his Motion for Reconsideration And/Or Annulment of
Judgment. The Court of Appeals decreed as follows:
IN THE LIGHT OF ALL THE FOREGOING, the Petition is
GRANTED. All proceedings in Gabriel L. Duero vs. Bernardo Eradel, et. al.
Civil Case 1075 filed in the Court a quo, including its Decision, Annex E of
the petition, and its Orders and Writ of Execution and the turn over of the
property to the Private Respondent by the Sheriff of the Court a quo, are
declared null and void and hereby SET ASIDE, No pronouncement as to
costs.
SO ORDERED.[6]
Petitioner now comes before this Court, alleging that the Court of Appeals
acted with grave abuse of discretion amounting to lack or in excess of
jurisdiction when it held that:
I.
THE LOWER COURT HAS NO JURISDICTION OVER THE SUBJECT
MATTER OF THE CASE.
II
PRIVATE RESPONDENT WAS NOT THEREBY ESTOPPED FROM
QUESTIONING THE JURISDICTION OF THE LOWER COURT EVEN
AFTER IT SUCCESSFULLY SOUGHT AFFIRMATIVE RELIEF
THEREFROM.
III
THE FAILURE OF PRIVATE RESPONDENT TO FILE HIS ANSWER IS
JUSTIFIED.[7]
The main issue before us is whether the Court of Appeals gravely abused its
discretion when it held that the municipal trial court had jurisdiction, and that
private respondent was not estopped from assailing the jurisdiction of the
RTC after he had filed several motions before it. The secondary issue is
whether the Court of Appeals erred in holding that private respondents
failure to file an answer to the complaint was justified.
At the outset, however, we note that petitioner through counsel submitted to
this Court pleadings that contain inaccurate statements. Thus, on page 5 of
his petition,[8] we find that to bolster the claim that the appellate court erred
in holding that the RTC had no jurisdiction, petitioner pointed to Annex
E [9] of his petition which supposedly is the Certification issued by the
Municipal Treasurer of San Miguel, Surigao, specifically containing the
notation, Note: Subject for General Revision Effective 1994. But it appears
that Annex E of his petition is not a Certification but a xerox copy of a
Declaration of Real Property. Nowhere does the document contain a
notation, Note: Subject for General Revision Effective 1994. Petitioner also
asked this Court to refer to Annex F,[10] where he said the zonal value of the
disputed land was P1.40 per sq.m., thus placing the computed value of the
land at the time the complaint was filed before the RTC at P57,113.98, hence
beyond the jurisdiction of the municipal court and within the jurisdiction of
the regional trial court. However, we find that these annexes are both merely
xerox copies. They are obviously without evidentiary weight or value.
Coming now to the principal issue, petitioner contends that respondent
appellate court acted with grave abuse of discretion. By grave abuse of
discretion is meant such capricious and whimsical exercise of judgment
which is equivalent to an excess or a lack of jurisdiction. The abuse of
discretion must be so patent and gross as to amount to an evasion of a
positive duty or a virtual refusal to perform a duty enjoined by law, or to act
at all in contemplation of law as where the power is exercised in an arbitrary
and despotic manner by reason of passion or hostility.[11] But here we find
that in its decision holding that the municipal court has jurisdiction over the
case and that private respondent was not estopped from questioning the
jurisdiction of the RTC, respondent Court of Appeals discussed the facts on
which its decision is grounded as well as the law and jurisprudence on the
matter.[12] Its action was neither whimsical nor capricious.
Was private respondent estopped from questioning the jurisdiction of the
RTC? In this case, we are in agreement with the Court of Appeals that he
was not. While participation in all stages of a case before the trial court,
including invocation of its authority in asking for affirmative relief,
effectively bars a party by estoppel from challenging the courts
jurisdiction,[13] we note that estoppel has become an equitable defense that is
both substantive and remedial and its successful invocation can bar a right
and not merely its equitable enforcement.[14] Hence, estoppel ought to be
applied with caution. For estoppel to apply, the action giving rise thereto
must be unequivocal and intentional because, if misapplied, estoppel may
become a tool of injustice.[15]
In the present case, private respondent questions the jurisdiction of RTC in
Tandag, Surigao del Sur, on legal grounds. Recall that it was petitioner who
filed the complaint against private respondent and two other parties before
the said court,[16] believing that the RTC had jurisdiction over his
complaint. But by then, Republic Act 7691[17] amending BP 129 had become
effective, such that jurisdiction already belongs not to the RTC but to the
MTC pursuant to said amendment. Private respondent, an unschooled farmer,
in the mistaken belief that since he was merely a tenant of the late Artemio
Laurente Sr., his landlord, gave the summons to a Hipolito Laurente, one of
the surviving heirs of Artemio Sr., who did not do anything about the
summons. For failure to answer the complaint, private respondent was
declared in default. He then filed a Motion for New Trial in the same court
and explained that he defaulted because of his belief that the suit ought to be
answered by his landlord. In that motion he stated that he had by then the
evidence to prove that he had a better right than petitioner over the land
because of his long, continuous and uninterrupted possession as bona-
fide tenant-lessee of the land.[18] But his motion was denied. He tried an
alternative recourse. He filed before the RTC a Motion for Relief from
Judgment. Again, the same court denied his motion, hence he moved for
reconsideration of the denial. In his Motion for Reconsideration, he raised for
the first time the RTCs lack of jurisdiction. This motion was again
denied. Note that private respondent raised the issue of lack of jurisdiction,
not when the case was already on appeal, but when the case was still before
the RTC that ruled him in default, denied his motion for new trial as well as
for relief from judgment, and denied likewise his two motions for
reconsideration. After the RTC still refused to reconsider the denial of
private respondents motion for relief from judgment, it went on to issue the
order for entry of judgment and a writ of execution.
Under these circumstances, we could not fault the Court of Appeals in
overruling the RTC and in holding that private respondent was not estopped
from questioning the jurisdiction of the regional trial court. The fundamental
rule is that, the lack of jurisdiction of the court over an action cannot be
waived by the parties, or even cured by their silence, acquiescence or even by
their express consent.[19] Further, a party may assail the jurisdiction of the
court over the action at any stage of the proceedings and even on
appeal.[20] The appellate court did not err in saying that the RTC should have
declared itself barren of jurisdiction over the action. Even if private
respondent actively participated in the proceedings before said court, the
doctrine of estoppel cannot still be properly invoked against him because the
question of lack of jurisdiction may be raised at anytime and at any stage of
the action.[21] Precedents tell us that as a general rule, the jurisdiction of a
court is not a question of acquiescence as a matter of fact, but an issue of
conferment as a matter of law.[22] Also, neither waiver nor estoppel shall
apply to confer jurisdiction upon a court, barring highly meritorious and
exceptional circumstances.[23] The Court of Appeals found support for its
ruling in our decision in Javier vs. Court of Appeals, thus:
x x x The point simply is that when a party commits error in filing his suit or
proceeding in a court that lacks jurisdiction to take cognizance of the same,
such act may not at once be deemed sufficient basis of estoppel. It could have
been the result of an honest mistake, or of divergent interpretations of
doubtful legal provisions. If any fault is to be imputed to a party taking
such course of action, part of the blame should be placed on the court
which shall entertain the suit, thereby lulling the parties into believing
that they pursued their remedies in the correct forum. Under the rules, it
is the duty of the court to dismiss an action whenever it appears that the court
has no jurisdiction over the subject matter. (Sec. 2, Rule 9, Rules of
Court) Should the Court render a judgment without jurisdiction, such
judgment may be impeached or annulled for lack of jurisdiction (Sec. 30,
Rule 132, Ibid), within ten (10) years from the finality of the same.
[Emphasis ours.][24]
Indeed, the trial court was duty-bound to take judicial notice of the
parameters of its jurisdiction and its failure to do so, makes its decision a
lawless thing.[25]
Since a decision of a court without jurisdiction is null and void, it could
logically never become final and executory, hence appeal therefrom by writ
of error would be out of the question.Resort by private respondent to a
petition for certiorari before the Court of Appeals was in order.
In holding that estoppel did not prevent private respondent from questioning
the RTCs jurisdiction, the appellate court reiterated the doctrine that estoppel
must be applied only in exceptional cases, as its misapplication could result
in a miscarriage of justice. Here, we find that petitioner, who claims
ownership of a parcel of land, filed his complaint before a court without
appropriate jurisdiction. Defendant, a farmer whose tenancy status is still
pending before the proper administrative agency concerned, could have
moved for dismissal of the case on jurisdictional grounds. But the farmer as
defendant therein could not be expected to know the nuances of jurisdiction
and related issues. This farmer, who is now the private respondent, ought not
to be penalized when he claims that he made an honest mistake when he
initially submitted his motions before the RTC, before he realized that the
controversy was outside the RTCs cognizance but within the jurisdiction of
the municipal trial court. To hold him in estoppel as the RTC did would
amount to foreclosing his avenue to obtain a proper resolution of his
case. Furthermore, if the RTCs order were to be sustained, he would be
evicted from the land prematurely, while RED Conflict Case No. 1029 would
remain unresolved. Such eviction on a technicality if allowed could result in
an injustice, if it is later found that he has a legal right to till the land he now
occupies as tenant-lessee.

Having determined that there was no grave abuse of discretion by the

appellate court in ruling that private respondent was not estopped from
questioning the jurisdiction of the RTC, we need not tarry to consider in
detail the second issue. Suffice it to say that, given the circumstances in this
case, no error was committed on this score by respondent appellate
court. Since the RTC had no jurisdiction over the case, private respondent
had justifiable reason in law not to file an answer, aside from the fact that he
believed the suit was properly his landlords concern.

WHEREFORE, the petition is DISMISSED. The assailed decision of the

Court of Appeals is AFFIRMED. The decision of the Regional Trial Court in
Civil Case No. 1075 entitled Gabriel L. Duero vs. Bernardo Eradel, its Order
that private respondent turn over the disputed land to petitioner, and the Writ
of Execution it issued, are ANNULLED and SET ASIDE. Costs against
petitioner.

SO ORDERED.
SECOND DIVISION
[G.R. No. 129638. December 8, 2003]
ANTONIO T. DONATO, petitioner, vs. COURT OF APPEALS,
FILOMENO ARCEPE, TIMOTEO BARCELONA, IGNACIO
BENDOL, THELMA P. BULICANO, ROSALINDA CAPARAS,
ROSITA DE COSTO, FELIZA DE GUZMAN, LETICIA DE LOS
REYES, ROGELIO GADDI, PAULINO GAJARDO, GERONIMO
IMPERIAL, HOMER IMPERIAL, ELVIRA LESLIE, CEFERINO
LUGANA, HECTOR PIMENTEL, NIMFA PIMENTEL, AURELIO G.
ROCERO, ILUMINADA TARA, JUANITO VALLESPIN, AND
NARCISO YABUT, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari filed on July 17, 1997 which
should be a petition for certiorari under Rule 65 of the Rules of Court. It
assails the Resolutions[1] dated March 21, 1997 and June 23, 1997 issued by
the Court of Appeals in CA-G.R. SP No. 41394.[2]
The factual background of the case is as follows:
Petitioner Antonio T. Donato is the registered owner of a real property
located at Ciriaco Tuason Street, San Andres, Manila, covered by Transfer
Certificate of Title No. 131793 issued by the Register of Deeds of the City
of Manila on November 24, 1978. On June 7, 1994, petitioner filed a
complaint before the Metropolitan Trial Court (Branch 26)
of Manila (MeTC) for forcible entry and unlawful detainer against 43 named
defendants and all unknown occupants of the subject property.[3]
Petitioner alleges that: private respondents had oral contracts of lease that
expired at the end of each month but were impliedly renewed under the same
terms by mere acquiescence or tolerance; sometime in 1992, they stopped
paying rent; on April 7, 1994, petitioner sent them a written demand to
vacate; the non-compliance with said demand letter constrained him to file
the ejectment case against them.[4]
Of the 43 named defendants, only 20 (private respondents,[5] for brevity)
filed a consolidated Answer dated June 29, 1994 wherein they denied non-
payment of rentals. They contend that they cannot be evicted because the
Urban Land Reform Law guarantees security of tenure and priority right to
purchase the subject property; and that there was a negotiation for the
purchase of the lots occupied by them but when the negotiation reached a
passive stage, they decided to continue payment of rentals and tendered
payment to petitioners counsel and thereafter initiated a petition for
consignation of the rentals in Civil Case No. 144049 while they await the
outcome of the negotiation to purchase.
Following trial under the Rule on Summary Procedure, the MeTC rendered
judgment on September 19, 1994 against the 23 non-answering defendants,
ordering them to vacate the premises occupied by each of them, and to pay
jointly and severally P10,000.00 per month from the date they last paid their
rent until the date they actually vacate, plus interest thereon at the legal rate
allowed by law, as well as P10,000.00 as attorneys fees and the costs of the
suit. As to the 20 private respondents, the MeTC issued a separate
judgment[6] on the same day sustaining their rights under the Land Reform
Law, declaring petitioners cause of action as not duly warranted by the facts
and circumstances of the case and dismissing the case without prejudice.
Not satisfied with the judgment dismissing the complaint as against the
private respondents, petitioner appealed to the Regional Trial Court (Branch
47) of Manila (RTC).[7] In a Decision[8] dated July 5, 1996, the RTC
sustained the decision of the MeTC.
Undaunted, petitioner filed a petition for review with the Court of Appeals
(CA for brevity), docketed as CA-G.R. SP No. 41394. In a Resolution dated
March 21, 1997, the CA dismissed the petition on two grounds: (a) the
certification of non-forum shopping was signed by petitioners counsel and
not by petitioner himself, in violation of Revised Circular No. 28-91;[9] and,
(b) the only annex to the petition is a certified copy of the questioned
decision but copies of the pleadings and other material portions of the record
as would support the allegations of the petition are not annexed, contrary to
Section 3, paragraph b, Rule 6 of the Revised Internal Rules of the Court of
Appeals (RIRCA).[10]
On April 17, 1997, petitioner filed a Motion for Reconsideration,[11] attaching
thereto a photocopy of the certification of non-forum shopping duly signed
by petitioner himself[12] and the relevant records of the MeTC and the
RTC.[13] Five days later, or on April 22, 1997, petitioner filed a
Supplement[14] to his motion for reconsideration submitting the duly
authenticated original of the certification of non-forum shopping signed by
petitioner.[15]
In a Resolution[16] dated June 23, 1997 the CA denied petitioners motion for
reconsideration and its supplement, ruling that petitioners subsequent
compliance did not cure the defect in the instant petition.[17]
Hence, the present petition anchored on the following grounds:
I.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
DISMISSING THE PETITION BASED ON HYPER-TECHNICAL
GROUNDS BECAUSE:
A. PETITIONER HAS SUBSTANTIALLY COMPLIED WITH SUPREME
COURT CIRCULAR NO. 28-91. MORE, PETITIONER SUBSEQUENTLY
SUBMITTED DURING THE PENDENCY OF THE PROCEEDINGS A
DULY AUTHENTICATED CERTIFICATE OF NON-FORUM SHOPPING
WHICH HE HIMSELF SIGNED AND EXECUTED IN THE UNITED
STATES.
B. PETITIONER HAS SUBSTANTIALLY COMPLIED WITH SECTION
3, RULE 6 OF THE REVISED INTERNAL RULES OF THE COURT OF
APPEALS. MORE, PETITIONER SUBSEQUENTLY SUBMITTED
DURING THE PENDENCY OF THE PROCEEDINGS COPIES OF THE
RELEVANT DOCUMENTS IN THE CASES BELOW.
C. PETITIONER HAS A MERITORIOUS APPEAL, AND HE STANDS
TO LOSE SUBSTANTIAL PROPERTY IF THE APPEAL IS NOT GIVEN
DUE COURSE. THE RULES OF PROCEDURE MUST BE LIBERALLY
CONSTRUED TO DO SUBSTANTIAL JUSTICE.
II.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT
RULING THAT ALL THE ELEMENTS OF UNLAWFUL DETAINER
ARE PRESENT IN THE CASE AT BAR.
III.
RESPONDENT COURT OF APPEALS ERRED IN NOT RULING THAT
THE RTC MANILA, BRANCH 47, COMMITTED REVERSIBLE ERROR
IN AFFIRMING THE FINDING OF MTC MANILA, BRANCH 26, THAT
PRIVATE RESPONDENTS CANNOT BE EJECTED FROM THE
SUBJECT PROPERTY WITHOUT VIOLATING THEIR SECURITY OF
TENURE EVEN IF THE TERM OF THE LEASE IS MONTH-TO-MONTH
WHICH EXPIRES AT THE END OF EACH MONTH. IN THIS REGARD,
A. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED
THAT THE RTC MANILA COMMITTED REVERSIBLE ERROR IN
NOT RULING THAT TENANTS UNDER P.D. 1517 MAY BE EVICTED
FOR NON-PAYMENT OF RENT, TERMINATION OF LEASE OR
OTHER GROUNDS FOR EJECTMENT.
B. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED
THAT THE RTC MANILA COMMITTED REVERSIBLE ERROR IN
NOT RULING THAT THE ALLEGED PRIORITY RIGHT TO BUY
THE LOT THEY OCCUPY DOES NOT APPLY WHERE THE
LANDOWNER DOES NOT INTEND TO SELL THE SUBJECT
PROPERTY, AS IN THE CASE AT BAR.
C. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED
THAT THE RTC MANILA COMMITTED REVERSIBLE ERROR IN
RULING THAT THE SUBJECT PROPERTY IS LOCATED WITHIN A
ZONAL IMPROVEMENT AREA OR APD.
D. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED
THAT THE RTC MANILA COMMITTED REVERSIBLE ERROR IN
NOT RULING THAT PRIVATE RESPONDENTS NON-COMPLIANCE
WITH THE CONDITIONS UNDER THE LAW RESULT IN THE
WAIVER OF PROTECTION AGAINST EVICTION.
E. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED
THAT THE RTC MANILA COMMITTED REVERSIBLE ERROR IN
NOT RULING THAT PRIVATE RESPONDENTS CANNOT BE
ENTITLED TO PROTECTION UNDER P.D. 2016 SINCE THE
GOVERNMENT HAS NO INTENTION OF ACQUIRING THE SUBJECT
PROPERTY.
F. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED
THAT THE RTC MANILA COMMITTED REVERSIBLE ERROR IN
FINDING THAT THERE IS AN ON-GOING NEGOTIATION FOR
THE SALE OF THE SUBJECT PROPERTY AND THAT IT RENDERS
THE EVICTION OF PRIVATE RESPONDENTS PREMATURE.
G. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED
THAT THE RTC MANILA COMMITTED REVERSIBLE ERROR IN
NOT RULING THAT THE ALLEGED CASE FOR CONSIGNATION
DOES NOT BAR THE EVICTION OF PRIVATE RESPONDENTS.
IV.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT
FINDING THAT RESPONDENTS SHOULD PAY PETITIONER A
REASONABLE COMPENSATION FOR THEIR USE AND OCCUPANCY
OF THE SUBJECT PROPERTY IN THE AMOUNT OF AT
LEAST P10,000.00 PER MONTH FROM THE DATE THEY LAST PAID
RENT UNTIL THE TIME THEY ACTUALLY VACATE THE SAME,
WITH LEGAL INTEREST AT THE MAXIMUM RATE ALLOWED BY
LAW UNTIL PAID.
V.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT
FINDING THAT RESPONDENTS SHOULD PAY PETITIONER
ATTORNEYS FEES AND EXPENSES OF LITIGATION OF AT
LEAST P20,000.00, PLUS COSTS.[18]
Petitioner submits that a relaxation of the rigid rules of technical procedure is
called for in view of the attendant circumstances showing that the objectives
of the rule on certification of non-forum shopping and the rule requiring
material portions of the record be attached to the petition have not been
glaringly violated and, more importantly, the petition is meritorious.
The proper recourse of an aggrieved party from a decision of the CA is a
petition for review on certiorari under Rule 45 of the Rules of
Court. However, if the error, subject of the recourse, is one of jurisdiction, or
the act complained of was perpetrated by a court with grave abuse of
discretion amounting to lack or excess of jurisdiction, the proper remedy
available to the aggrieved party is a petition for certiorari under Rule 65 of
the said Rules. As enunciated by the Court in Fortich vs. Corona:[19]
Anent the first issue, in order to determine whether the recourse of petitioners
is proper or not, it is necessary to draw a line between an error of judgment
and an error of jurisdiction. An error of judgment is one which the court may
commit in the exercise of its jurisdiction, and which error is reviewable only
by an appeal. On the other hand, an error of jurisdiction is one where the act
complained of was issued by the court, officer or a quasi-judicial
body without or in excess of jurisdiction, or with grave abuse of discretion
which is tantamount to lack or in excess of jurisdiction. This error is
correctible only by the extraordinary writ of certiorari.[20] (Emphasis
supplied).
Inasmuch as the present petition principally assails the dismissal of the
petition on ground of procedural flaws involving the jurisdiction of the
court a quo to entertain the petition, it falls within the ambit of a special civil
action for certiorari under Rule 65 of the Rules of Court.
At the time the instant petition for certiorari was filed, i.e., on July 17, 1997,
the prevailing rule is the newly promulgated 1997 Rules of Civil
Procedure. However, considering that the CA Resolution being assailed was
rendered on March 21, 1997, the applicable rule is the three-
month reglementary period, established by jurisprudence.[21] Petitioner
received notice of the assailed CA Resolution dismissing his petition for
review on April 4, 1997. He filed his motion reconsideration on April 17,
1997, using up only thirteen days of the 90-day period. Petitioner received
the CA Resolution denying his motion on July 3, 1997 and fourteen days
later, or on July 17, 1997, he filed a motion for 30-day extension of time to
file a petition for review which was granted by us; and petitioner duly filed
his petition on August 15, 1997, which is well-within the period of extension
granted to him.
We now go to the merits of the case.
We find the instant petition partly meritorious.
The requirement regarding the need for a certification of non-forum shopping
in cases filed before the CA and the corresponding sanction for non-
compliance thereto are found in the then prevailing Revised Circular No. 28-
91.[22] It provides that the petitioner himself must make the certification
against forum shopping and a violation thereof shall be a cause for the
summary dismissal of the multiple petition or complaint. The rationale for
the rule of personal execution of the certification by the petitioner himself is
that it is only the petitioner who has actual knowledge of whether or not he
has initiated similar actions or proceedings in other courts or tribunals; even
counsel of record may be unaware of such fact.[23] The Court has ruled that
with respect to the contents of the certification, the rule on substantial
compliance may be availed of. This is so because the requirement of strict
compliance with the rule regarding the certification of non-forum shopping
simply underscores its mandatory nature in that the certification cannot be
altogether dispensed with or its requirements completely disregarded, but it
does not thereby interdict substantial compliance with its provisions under
justifiable circumstances.[24]
The petition for review filed before the CA contains a certification against
forum shopping but said certification was signed by petitioners counsel. In
submitting the certification of non-forum shopping duly signed by himself in
his motion for reconsideration,[25] petitioner has aptly drawn the Courts
attention to the physical impossibility of filing the petition for review within
the 15-day reglementary period to appeal considering that he is a resident of
1125 South Jefferson Street, Roanoke, Virginia, U.S.A. were he to personally
accomplish and sign the certification.
We fully agree with petitioner that it was physically impossible for the
petition to have been prepared and sent to the petitioner in the United States,
for him to travel from Virginia, U.S.A. to the nearest Philippine Consulate in
Washington, D.C., U.S.A., in order to sign the certification before the
Philippine Consul, and for him to send back the petition to the Philippines
within the 15-day reglementary period. Thus, we find that petitioner has
adequately explained his failure to personally sign the certification which
justifies relaxation of the rule.
We have stressed that the rules on forum shopping, which were precisely
designed to promote and facilitate the orderly administration of justice,
should not be interpreted with such absolute literalness as to subvert its own
ultimate and legitimate objective[26] which is simply to prohibit and penalize
the evils of forum-shopping.[27] The subsequent filing of the certification duly
signed by the petitioner himself should thus be deemed substantial
compliance, pro hac vice.
In like manner, the failure of the petitioner to comply with Section 3,
paragraph b, Rule 6 of the RIRCA, that is, to append to his petition copies of
the pleadings and other material portions of the records as would support the
petition, does not justify the outright dismissal of the petition. It must be
emphasized that the RIRCA gives the appellate court a certain leeway to
require parties to submit additional documents as may be necessary in the
interest of substantial justice. Under Section 3, paragraph d of Rule 3 of the
RIRCA,[28] the CA may require the parties to complete the annexes as the
court deems necessary, and if the petition is given due course, the CA may
require the elevation of a complete record of the case as provided for under
Section 3(d)(5) of Rule 6 of the RIRCA.[29] At any rate, petitioner attached
copies of the pleadings and other material portions of the records below with
his motion for reconsideration.[30] In Jaro vs. Court of Appeals,[31] the Court
reiterated the doctrine laid down in Cusi-Hernandez vs. Diaz[32] and Piglas-
Kamao vs. National Labor Relations Commission[33] that subsequent
submission of the missing documents with the motion for reconsideration
amounts to substantial compliance which calls for the relaxation of the rules
of procedure. We find no cogent reason to depart from this doctrine.
Truly, in dismissing the petition for review, the CA had committed grave
abuse of discretion amounting to lack of jurisdiction in putting a premium on
technicalities at the expense of a just resolution of the case.
Needless to stress, "a litigation is not a game of technicalities."[34] When
technicality deserts its function of being an aid to justice, the Court is
justified in exempting from its operations a particular case.[35] Technical rules
of procedure should be used to promote, not frustrate justice. While the swift
unclogging of court dockets is a laudable objective, granting substantial
justice is an even more urgent ideal.[36]
The Courts pronouncement in Republic vs. Court of Appeals[37] is worth
echoing: cases should be determined on the merits, after full opportunity
to all parties for ventilation of their causes and defenses, rather than on
technicality or some procedural imperfections. In that way, the ends of
justice would be better served.[38] Thus, what should guide judicial action is
that a party litigant 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.[39]This guideline is especially true when the petitioner
has satisfactorily explained the lapse and fulfilled the requirements in his
motion for reconsideration,[40] as in this case.
In addition, petitioner prays that we decide the present petition on the merits
without need of remanding the case to the CA. He insists that all the elements
of unlawful detainer are present in the case. He further argues that the alleged
priority right to buy the lot they occupy does not apply where the landowner
does not intend to sell the subject property, as in the case; that respondents
cannot be entitled to protection under P.D. No. 2016 since the government
has no intention of acquiring the subject property, nor is the subject property
located within a zonal improvement area; and, that assuming that there is a
negotiation for the sale of the subject property or a pending case for
consignation of rentals, these do not bar the eviction of respondents.
We are not persuaded. We shall refrain from ruling on the foregoing issues in
the present petition for certiorari. The issues involved are factual issues
which inevitably require the weighing of evidence. These are matters that are
beyond the province of this Court in a special civil action for certiorari.
These issues are best addressed to the CA in the petition for review filed
before it. As an appellate court, it is empowered to require parties to submit
additional documents, as it may find necessary, or to receive evidence, to
promote the ends of justice, pursuant to the last paragraph of Section 9,
B.P. Blg. 129, otherwise known as The Judiciary Reorganization Act of
1980, to wit:
The Intermediate Appellate Court shall have the power to try cases and
conduct hearings, receive evidence and perform any and all acts necessary to
resolve factual issues raised in cases falling within its original and appellate
jurisdiction, including the power to grant and conduct new trials or further
proceedings.

WHEREFORE, the petition is PARTLY GRANTED. The Resolutions

dated March 21, 1997 and June 23, 1997 of the Court of Appeals in CA-G.R.
SP No. 41394 are REVERSED and SET ASIDE. The case is REMANDED
to the Court of Appeals for further proceedings in CA-G.R. No. 41394,
entitled, Antonio T. Donato vs. Hon. Judge of the Regional Trial Court of
Manila, Branch 47, Filomeno Arcepe, et al.

SO ORDERED.
THIRD DIVISION
[G.R. No. 144025. December 27, 2002]
SPS. RENE GONZAGA and LERIO GONZAGA, petitioners, vs. HON.
COURT OF APPEALS, Second Division, Manila, HON. QUIRICO G.
DEFENSOR, Judge, RTC, Branch 36, Sixth Judicial Region, Iloilo City,
and LUCKY HOMES, INC., represented by WILSON JESENA, JR., as
Manager, respondents.
DECISION
CORONA, J.:
Before this Court is a petition for review on certiorari seeking the reversal of
the decision[1] of the Court of Appeals dated December 29, 1999 and its
resolution dated June 1, 2000 in CA-G.R. SP No. 54587.
The records disclose that, sometime in 1970, petitioner-spouses purchased a
parcel of land from private respondent Lucky Homes, Inc., situated in Iloilo
and containing an area of 240 square meters. Said lot was specifically
denominated as Lot No. 19 under Transfer Certificate of Title (TCT) No.
28254 and was mortgaged to the Social Security System (SSS) as security for
their housing loan. Petitioners then started the construction of their house, not
on Lot No. 19 but on Lot No. 18, as private respondent mistakenly identified
Lot No. 18 as Lot No. 19.Upon realizing its error, private respondent,
through its general manager, informed petitioners of such mistake but the
latter offered to buy Lot No. 18 in order to widen their premises. Thus,
petitioners continued with the construction of their house. However,
petitioners defaulted in the payment of their housing loan from
SSS. Consequently, Lot No. 19 was foreclosed by SSS and petitioners
certificate of title was cancelled and a new one was issued in the name of
SSS. After Lot No. 19 was foreclosed, petitioners offered to swap Lot Nos.
18 and 19 and demanded from private respondent that their contract of sale
be reformed and another deed of sale be executed with respect to Lot No. 18,
considering that their house was built therein.However, private respondent
refused. This prompted petitioners to file, on June 13, 1996, an action for
reformation of contract and damages with the Regional Trial Court of Iloilo
City, Branch 36, which was docketed as Civil Case No. 17115.
[2]
On January 15, 1998, the trial court rendered its decision dismissing the
complaint for lack of merit and ordering herein petitioners to pay private
respondent the amount of P10,000 as moral damages and another P10,000 as
attorneys fees. The pertinent conclusion of the trial court reads as follows:
Aware of such fact, the plaintiff nonetheless continued to stay in the premises
of Lot 18 on the proposal that he would also buy the same. Plaintiff however
failed to buy Lot 18 and likewise defaulted in the payment of his loan with
the SSS involving Lot 19. Consequently Lot 19 was foreclosed and sold at
public auction. Thereafter TCT No. T-29950 was cancelled and in lieu
thereof TCT No. T-86612 (Exh. 9) was issued in favor of SSS. This being the
situation obtaining, the reformation of instruments, even if allowed, or the
swapping of Lot 18 and Lot 19 as earlier proposed by the plaintiff, is no
longer feasible considering that plaintiff is no longer the owner of Lot 19,
otherwise, defendant will be losing Lot 18 without any substitute therefore
(sic). Upon the other hand, plaintiff will be unjustly enriching himself having
in its favor both Lot 19 which was earlier mortgaged by him and
subsequently foreclosed by SSS, as well as Lot 18 where his house is
presently standing.
The logic and common sense of the situation lean heavily in favor of the
defendant. It is evident that what plaintiff had bought from the defendant is
Lot 19 covered by TCT No. 28254 which parcel of land has been properly
indicated in the instruments and not Lot 18 as claimed by the plaintiff. The
contracts being clear and unmistakable, they reflect the true intention of the
parties, besides the plaintiff failed to assail the contracts on mutual mistake,
hence the same need no longer be reformed.[3]
On June 22, 1998, a writ of execution was issued by the trial court. Thus, on
September 17, 1998, petitioners filed an urgent motion to recall writ of
execution, alleging that the court a quo had no jurisdiction to try the case as
it was vested in the Housing and Land Use Regulatory Board (HLURB)
pursuant to PD 957 (The Subdivision and Condominium Buyers Protective
Decree). Conformably, petitioners filed a new complaint against private
respondent with the HLURB. Likewise, on June 30, 1999, petitioner-spouses
filed before the Court of Appeals a petition for annulment of judgment,
premised on the ground that the trial court had no jurisdiction to try and
decide Civil Case No. 17115.
In a decision rendered on December 29, 1999, the Court of Appeals denied
the petition for annulment of judgment, relying mainly on the jurisprudential
doctrine of estoppel as laid down in the case of Tijam vs. Sibonghanoy.[4]
Their subsequent motion for reconsideration having been denied, petitioners
filed this instant petition, contending that the Court of Appeals erred in
dismissing the petition by applying the principle of estoppel, even if the
Regional Trial Court, Branch 36 of Iloilo City had no jurisdiction to decide
Civil Case No. 17115.
At the outset, it should be stressed that petitioners are seeking from us the
annulment of a trial court judgment based on lack of jurisdiction. Because it
is not an appeal, the correctness of the judgment is not in issue
here. Accordingly, there is no need to delve into the propriety of the decision
rendered by the trial court.
proceedings which lasted for two years. It was only after the trial court
rendered its decision and issued a writ of execution against them in 1998 did
petitioners first raise the issue of jurisdiction ─ and it was only because said
decision was unfavorable to them. Petitioners thus effectively waived their
right to question the courts jurisdiction over the case they themselves filed.

Petitioners claim that the recent decisions of this Court have already
abandoned the doctrine laid down in Tijam vs. Sibonghanoy.[5] We do not
agree. In countless decisions, this Court has consistently held that, while an
order or decision rendered without jurisdiction is a total nullity and may be
assailed at any stage, active participation in the proceedings in the court
which rendered the order or decision will bar such party from attacking its
jurisdiction. As we held in the leading case of Tijam vs. Sibonghanoy:[6]
A party may be estopped or barred from raising a question in different ways
and for different reasons. Thus we speak of estoppel in pais, or estoppel by
deed or by record, and of estoppel by laches.
xxx
It has been held that a party cannot invoke the jurisdiction of a court to
secure affirmative relief against his opponent and, after obtaining or failing
to obtain such relief, repudiate, or question that same jurisdiction x x x x
[T]he question whether the court had jurisdiction either of the subject matter
of the action or of the parties was not important in such cases because the
party is barred from such conduct not because the judgment or order of the
court is valid and conclusive as an adjudication, but for the reason that such
a practice can not be tolerated obviously for reasons of public policy.
Petitioners should bear the consequence of their act. They cannot be allowed
to profit from their omission to the damage and prejudice of the private
respondent. This Court frowns upon the undesirable practice of a party
submitting his case for decision and then accepting the judgment but only if
favorable, and attacking it for lack of jurisdiction if not.[13]
Public policy dictates that this Court must strongly condemn any double-
dealing by parties who are disposed to trifle with the courts by deliberately
taking inconsistent positions, in utter disregard of the elementary principles
of justice and good faith.[14] There is no denying that, in this case, petitioners
never raised the issue of jurisdiction throughout the entire proceedings in the
trial court. Instead, they voluntarily and willingly submitted themselves to
the jurisdiction of said court. It is now too late in the day for them to
repudiate the jurisdiction they were invoking all along.
WHEREFORE, the petition for review is hereby DENIED.
SO ORDERED.

Tijam has been reiterated in many succeeding cases. Thus, in Orosa vs. Court
of Appeals;[7] Ang Ping vs. Court of Appeals;[8] Salva vs. Court of
Appeals;[9] National Steel Corporation vs. Court of Appeals;[10] Province of
Bulacan vs. Court of Appeals;[11] PNOC Shipping and Transport Corporation
vs. Court of Appeals,[12] this Court affirmed the rule that a partys active
participation in all stages of the case before the trial court, which includes
invoking the courts authority to grant affirmative relief, effectively estops
such party from later challenging that same courts jurisdiction.

In the case at bar, it was petitioners themselves who invoked the jurisdiction
of the court a quo by instituting an action for reformation of contract against
private respondents. It appears that, in the proceedings before the trial court,
petitioners vigorously asserted their cause from start to finish. Not even once
did petitioners ever raise the issue of the courts jurisdiction during the entire
SECOND DIVISION
[G.R. No. 124644. February 5, 2004]
ARNEL ESCOBAL, petitioner, vs. HON. FRANCIS GARCHITORENA,
Presiding Justice of the Sandiganbayan, Atty. Luisabel Alfonso-Cortez,
Executive Clerk of Court IV of the Sandiganbayan, Hon. David C.
Naval, Presiding Judge of the Regional Trial Court of Naga City, Branch
21, Luz N. Nueca, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for certiorari with a prayer for the issuance of a temporary
restraining order and preliminary injunction filed by Arnel Escobal seeking
the nullification of the remand by the Presiding Justice of the Sandiganbayan
of the records of Criminal Case No. 90-3184 to the Regional Trial Court
(RTC) of Naga City, Branch 21.
The petition at bench arose from the following milieu:
The petitioner is a graduate of the Philippine Military Academy, a member of
the Armed Forces of the Philippines and the Philippine Constabulary, as well
as the Intelligence Group of the Philippine National Police. On March 16,
1990, the petitioner was conducting surveillance operations on drug
trafficking at the Sa Harong Caf Bar and Restaurant located along Barlin St.,
Naga City. He somehow got involved in a shooting incident, resulting in the
death of one Rodney Rafael N. Nueca. On February 6, 1991, an amended
Information was filed with the RTC of Naga City, Branch 21, docketed as
Criminal Case No. 90-3184 charging the petitioner and a certain Natividad
Bombita, Jr. alias Jun Bombita with murder. The accusatory portion of the
amended Information reads:
That on or about March 16, 1990, in the City of Naga, Philippines, and
within the jurisdiction of this Honorable Court by virtue of the Presidential
Waiver, dated June 1, 1990, with intent to kill, conspiring and confederating
together and mutually helping each other, did, then and there, willfully,
unlawfully and feloniously attack, assault and maul one Rodney Nueca and
accused 2Lt Arnel Escobal armed with a caliber .45 service pistol shoot said
Rodney Nueca thereby inflicting upon him serious, mortal and fatal wounds
which caused his death, and as a consequence thereof, complainant LUZ N.
NUECA, mother of the deceased victim, suffered actual and compensatory
damages in the amount of THREE HUNDRED SIXTY-SEVEN
THOUSAND ONE HUNDRED SEVEN & 95/100 (P367,107.95) PESOS,
Philippine Currency, and moral and exemplary damages in the amount of
ONE HUNDRED THIRTY-FIVE THOUSAND (P135,000.00) PESOS,
Philippine Currency.[1]
On March 19, 1991, the RTC issued an Order preventively suspending the
petitioner from the service under Presidential Decree No. 971, as amended by
P.D. No. 1847. When apprised of the said order, the General Headquarters of
the PNP issued on October 6, 1992 Special Order No. 91, preventively
suspending the petitioner from the service until the case was terminated.[2]
The petitioner was arrested by virtue of a warrant issued by the RTC, while
accused Bombita remained at large. The petitioner posted bail and was
granted temporary liberty.
When arraigned on April 9, 1991,[3] the petitioner, assisted by counsel,
pleaded not guilty to the offense charged. Thereafter, on December 23, 1991,
the petitioner filed a Motion to Quash[4] the Information alleging that as
mandated by Commonwealth Act No. 408,[5] in relation to Section 1,
Presidential Decree No. 1822 and Section 95 of R.A. No. 6975, the court
martial, not the RTC, had jurisdiction over criminal cases involving PNP
members and officers.
Pending the resolution of the motion, the petitioner on June 25, 1993
requested the Chief of the PNP for his reinstatement. He alleged that under
R.A. No. 6975, his suspension should last for only 90 days, and, having
served the same, he should now be reinstated. On September 23, 1993,[6] the
PNP Region V Headquarters wrote Judge David C. Naval requesting
information on whether he issued an order lifting the petitioners
suspension. The RTC did not reply. Thus, on February 22, 1994, the
petitioner filed a motion in the RTC for the lifting of the order of suspension.
He alleged that he had served the 90-day preventive suspension and pleaded
for compassionate justice. The RTC denied the motion on March 9,
1994.[7] Trial thereafter proceeded, and the prosecution rested its case. The
petitioner commenced the presentation of his evidence. On July 20, 1994, he
filed a Motion to Dismiss[8] the case. Citing Republic of the Philippines v.
Asuncion, et al.,[9] he argued that since he committed the crime in the
performance of his duties, the Sandiganbayan had exclusive jurisdiction over
the case.
On October 28, 1994, the RTC issued an Order[10] denying the motion to
dismiss. It, however, ordered the conduct of a preliminary hearing to
determine whether or not the crime charged was committed by the petitioner
in relation to his office as a member of the PNP.
In the preliminary hearing, the prosecution manifested that it was no longer
presenting any evidence in connection with the petitioners motion. It
reasoned that it had already rested its case, and that its evidence showed that
the petitioner did not commit the offense charged in connection with the
performance of his duties as a member of the Philippine Constabulary.
According to the prosecution, they were able to show the following facts: (a)
the petitioner was not wearing his uniform during the incident; (b) the
offense was committed just after midnight; (c) the petitioner was drunk when
the crime was committed; (d) the petitioner was in the company of civilians;
and, (e) the offense was committed in a beerhouse called Sa Harong Caf Bar
and Restaurant.[11]
For his part, the petitioner testified that at about 10:00 p.m. on March 15,
1990, he was at the Sa Harong Caf Bar and Restaurant at Barlin St., Naga
City, to conduct surveillance on alleged drug trafficking, pursuant to Mission
Order No. 03-04 issued by Police Superintendent Rufo R. Pulido. The
petitioner adduced in evidence the sworn statements of Benjamin Cario and
Roberto Fajardo who corroborated his testimony that he was on a
surveillance mission on the aforestated date.[12]
On July 31, 1995, the trial court issued an Order declaring that the petitioner
committed the crime charged while not in the performance of his official
function. The trial court added that upon the enactment of R.A. No.
7975,[13] the issue had become moot and academic. The amendatory law
transferred the jurisdiction over the offense charged from the Sandiganbayan
to the RTC since the petitioner did not have a salary grade of 27 as provided
for in or by Section 4(a)(1), (3) thereof. The trial court nevertheless ordered
the prosecution to amend the Information pursuant to the ruling in Republic
v. Asuncion[14] and R.A. No. 7975. The amendment consisted in the inclusion
therein of an allegation that the offense charged was not committed by the
petitioner in the performance of his duties/functions, nor in relation to his
office.
The petitioner filed a motion for the reconsideration[15] of the said order,
reiterating that based on his testimony and those of Benjamin Cario and
Roberto Fajardo, the offense charged was committed by him in relation to his
official functions. He asserted that the trial court failed to consider the
exceptions to the prohibition. He asserted that R.A. No. 7975, which was
enacted on March 30, 1995, could not be applied retroactively.[16]
The petitioner further alleged that Luz Nacario Nueca, the mother of the
victim, through counsel, categorically and unequivocably admitted in her
complaint filed with the Peoples Law Enforcement Board (PLEB) that he
was on an official mission when the crime was committed.
On November 24, 1995, the RTC made a volte face and issued an Order
reversing and setting aside its July 31, 1995 Order. It declared that based on
the petitioners evidence, he was on official mission when the shooting
occurred. It concluded that the prosecution failed to adduce controverting
evidence thereto. It likewise considered Luz Nacario Nuecas admission in
her complaint before the PLEB that the petitioner was on official mission
when the shooting happened.
The RTC ordered the public prosecutor to file a Re-Amended Information
and to allege that the offense charged was committed by the petitioner in the
performance of his duties/functions or in relation to his office; and,
conformably to R.A. No. 7975, to thereafter transmit the same, as well as the
complete records with the stenographic notes, to the Sandiganbayan, to wit:
WHEREFORE, the Order dated July 31, 1995 is hereby SET ASIDE and
RECONSIDERED, and it is hereby declared that after preliminary hearing,
this Court has found that the offense charged in the Information herein was
committed by the accused in his relation to his function and duty as member
of the then Philippine Constabulary.
Conformably with R.A. No. 7975 and the ruling of the Supreme Court in
Republic v. Asuncion, et al., G.R. No. 180208, March 11, 1994:
(1) The City Prosecutor is hereby ordered to file a Re-Amended Information
alleging that the offense charged was committed by the Accused in the
performance of his duties/functions or in relation to his office, within fifteen
(15) days from receipt hereof;
(2) After the filing of the Re-Amended Information, the complete records of
this case, together with the transcripts of the stenographic notes taken during
the entire proceedings herein, are hereby ordered transmitted immediately to
the Honorable Sandiganbayan, through its Clerk of Court, Manila, for
appropriate proceedings.[17]
On January 8, 1996, the Presiding Justice of the Sandiganbayan ordered the
Executive Clerk of Court IV, Atty. Luisabel Alfonso-Cortez, to return the
records of Criminal Case No. 90-3184 to the court of origin, RTC of Naga
City, Branch 21. It reasoned that under P.D. No. 1606, as amended by R.A.
No. 7975,[18] the RTC retained jurisdiction over the case, considering that the
petitioner had a salary grade of 23. Furthermore, the prosecution had already
rested its case and the petitioner had commenced presenting his evidence in
the RTC; following the rule on continuity of jurisdiction, the latter court
should continue with the case and render judgment therein after trial.
Upon the remand of the records, the RTC set the case for trial on May 3,
1996, for the petitioner to continue presenting his evidence. Instead of
adducing his evidence, the petitioner filed a petition for certiorari, assailing
the Order of the Presiding Justice of the Sandiganbayan remanding the
records of the case to the RTC.
The threshold issue for resolution is whether or not the Presiding Justice of
the Sandiganbayan committed a grave abuse of his discretion amounting to
excess or lack of jurisdiction in ordering the remand of the case to the RTC.
The petitioner contends that when the amended information was filed with
the RTC on February 6, 1991, P.D. No. 1606 was still in effect. Under
Section 4(a) of the decree, the Sandiganbayan had exclusive jurisdiction over
the case against him as he was charged with homicide with the imposable
penalty of reclusion temporal, and the crime was committed while in the
performance of his duties. He further asserts that although P.D. No. 1606, as
amended by P.D. No. 1861 and by R.A. No. 7975 provides that crimes
committed by members and officers of the PNP with a salary grade below 27
committed in relation to office are within the exclusive jurisdiction of the
proper RTC, the amendment thus introduced by R.A. No. 7975 should not be
applied retroactively. This is so, the petitioner asserts, because under Section
7 of R.A. No. 7975, only those cases where trial has not begun in the
Sandiganbayan upon the effectivity of the law should be referred to the
proper trial court.
The private complainant agrees with the contention of the petitioner. In
contrast, the Office of the Special Prosecutor contends that the Presiding
Justice of the Sandiganbayan acted in accordance with law when he ordered
the remand of the case to the RTC. It asserts that R.A. No. 7975 should be
applied retroactively. Although the Sandiganbayan had jurisdiction over the
crime committed by the petitioner when the amended information was filed
with the RTC, by the time it resolved petitioners motion to dismiss on July
31, 1995, R.A. No. 7975 had already taken effect. Thus, the law should be
given retroactive effect.
The Ruling of the Court
The respondent Presiding Justice acted in accordance with law and the
rulings of this Court when he ordered the remand of the case to the RTC, the
court of origin.
The jurisdiction of the court over criminal cases is determined by the
allegations in the Information or the Complaint and the statute in effect at the
time of the commencement of the action, unless such statute provides for a
retroactive application thereof. The jurisdictional requirements must be
alleged in the Information.[19] Such jurisdiction of the court acquired at the
inception of the case continues until the case is terminated.[20]
Under Section 4(a) of P.D. No. 1606 as amended by P.D. No. 1861, the
Sandiganbayan had exclusive jurisdiction in all cases involving the
following:
(1) Violations of Republic Act No. 3019, as amended, otherwise known as
the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and
Chapter II, Section 2, Title VII of the Revised Penal Code;
(2) Other offenses or felonies committed by public officers and employees in
relation to their office, including those employed in government-owned or
controlled corporations, whether simple or complexed with other crimes,
where the penalty prescribed by law is higher than prision correccional or
imprisonment for six (6) years, or a fine of P6,000.00 .[21]
However, for the Sandiganbayan to have exclusive jurisdiction under the said
law over crimes committed by public officers in relation to their office, it is
essential that the facts showing the intimate relation between the office of the
offender and the discharge of official duties must be alleged in the
Information. It is not enough to merely allege in the Information that the
crime charged was committed by the offender in relation to his office
because that would be a conclusion of law.[22] The amended Information filed
with the RTC against the petitioner does not contain any allegation showing
the intimate relation between his office and the discharge of his
duties. Hence, the RTC had jurisdiction over the offense charged when on
November 24, 1995, it ordered the re-amendment of the Information to
include therein an allegation that the petitioner committed the crime in
relation to office. The trial court erred when it ordered the elevation of the
records to the Sandiganbayan. It bears stressing that R.A. No. 7975 amending
P.D. No. 1606 was already in effect and under Section 2 of the law:
In cases where none of the principal accused are occupying positions
corresponding to salary grade 27 or higher, as prescribed in the said Republic
Act No. 6758, or PNP officers occupying the rank of superintendent or
higher, or their equivalent, exclusive jurisdiction thereof shall be vested in
the proper Regional Trial Court, Metropolitan Trial Court, Municipal Trial
Court, and Municipal Circuit Trial Court, as the case may be, pursuant to
their respective jurisdiction as provided in Batas Pambansa Blg. 129.
Under the law, even if the offender committed the crime charged in relation
to his office but occupies a position corresponding to a salary grade below
27, the proper Regional Trial Court or Municipal Trial Court, as the case may
be, shall have exclusive jurisdiction over the case. In this case, the petitioner
was a Police Senior Inspector, with salary grade 23. He was charged with
homicide punishable by reclusion temporal. Hence, the RTC had exclusive
jurisdiction over the crime charged conformably to Sections 20 and 32 of
Batas Pambansa Blg. 129, as amended by Section 2 of R.A. No. 7691.
The petitioners contention that R.A. No. 7975 should not be applied
retroactively has no legal basis. It bears stressing that R.A. No. 7975 is a
substantive procedural law which may be applied retroactively.[23]
IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED. No
pronouncement as to costs.
SO ORDERED.
EN BANC
G.R. No. 155001 May 5, 2003
DEMOSTHENES P. AGAN, JR., JOSEPH B. CATAHAN, JOSE MARI
B. REUNILLA, MANUEL ANTONIO B. BOÑE, MAMERTO S.
CLARA, REUEL E. DIMALANTA, MORY V. DOMALAON,
CONRADO G. DIMAANO, LOLITA R. HIZON, REMEDIOS P.
ADOLFO, BIENVENIDO C. HILARIO, MIASCOR WORKERS
UNION - NATIONAL LABOR UNION (MWU-NLU), and
PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION
(PALEA), petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC.,
MANILA INTERNATIONAL AIRPORT AUTHORITY,
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS
and SECRETARY LEANDRO M. MENDOZA, in his capacity as Head
of the Department of Transportation and Communications, respondents,
MIASCOR GROUNDHANDLING CORPORATION, DNATA-WINGS
AVIATION SYSTEMS CORPORATION, MACROASIA-EUREST
SERVICES, INC., MACROASIA-MENZIES AIRPORT SERVICES
CORPORATION, MIASCOR CATERING SERVICES
CORPORATION, MIASCOR AIRCRAFT MAINTENANCE
CORPORATION, and MIASCOR LOGISTICS
CORPORATION, petitioners-in-intervention,
x---------------------------------------------------------x
G.R. No. 155547 May 5, 2003
SALACNIB F. BATERINA, CLAVEL A. MARTINEZ and
CONSTANTINO G. JARAULA, petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC.,
MANILA INTERNATIONAL AIRPORT AUTHORITY,
DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS, DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS, SECRETARY LEANDRO M. MENDOZA, in his
capacity as Head of the Department of Transportation and
Communications, and SECRETARY SIMEON A. DATUMANONG, in
his capacity as Head of the Department of Public Works and
Highways, respondents,
JACINTO V. PARAS, RAFAEL P. NANTES, EDUARDO C.
ZIALCITA, WILLY BUYSON VILLARAMA, PROSPERO C.
NOGRALES, PROSPERO A. PICHAY, JR., HARLIN CAST
ABAYON, and BENASING O. MACARANBON, respondents-
intervenors,
x---------------------------------------------------------x
G.R. No. 155661 May 5, 2003
CEFERINO C. LOPEZ, RAMON M. SALES, ALFREDO B.
VALENCIA, MA. TERESA V. GAERLAN, LEONARDO DE LA
ROSA, DINA C. DE LEON, VIRGIE CATAMIN RONALD
SCHLOBOM, ANGELITO SANTOS, MA. LUISA M. PALCON and
SAMAHANG MANGGAGAWA SA PALIPARAN NG PILIPINAS
(SMPP), petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC.,
MANILA INTERNATIONAL AIRPORT AUTHORITY,
DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS, SECRETARY LEANDRO M. MENDOZA, in
his capacity as Head of the Department of Transportation and
Communications, respondents.
PUNO, J.:
Petitioners and petitioners-in-intervention filed the instant petitions for
prohibition under Rule 65 of the Revised Rules of Court seeking to prohibit
the Manila International Airport Authority (MIAA) and the Department of
Transportation and Communications (DOTC) and its Secretary from
implementing the following agreements executed by the Philippine
Government through the DOTC and the MIAA and the Philippine
International Air Terminals Co., Inc. (PIATCO): (1) the Concession
Agreement signed on July 12, 1997, (2) the Amended and Restated
Concession Agreement dated November 26, 1999, (3) the First Supplement
to the Amended and Restated Concession Agreement dated August 27, 1999,
(4) the Second Supplement to the Amended and Restated Concession
Agreement dated September 4, 2000, and (5) the Third Supplement to the
Amended and Restated Concession Agreement dated June 22, 2001
(collectively, the PIATCO Contracts).
The facts are as follows:
In August 1989, the DOTC engaged the services of Aeroport de Paris (ADP)
to conduct a comprehensive study of the Ninoy Aquino International Airport
(NAIA) and determine whether the present airport can cope with the traffic
development up to the year 2010. The study consisted of two parts: first,
traffic forecasts, capacity of existing facilities, NAIA future requirements,
proposed master plans and development plans; and second, presentation of
the preliminary design of the passenger terminal building. The ADP
submitted a Draft Final Report to the DOTC in December 1989.
Some time in 1993, six business leaders consisting of John Gokongwei,
Andrew Gotianun, Henry Sy, Sr., Lucio Tan, George Ty and Alfonso
Yuchengco met with then President Fidel V. Ramos to explore the possibility
of investing in the construction and operation of a new international airport
terminal. To signify their commitment to pursue the project, they formed the
Asia's Emerging Dragon Corp. (AEDC) which was registered with the
Securities and Exchange Commission (SEC) on September 15, 1993.
On October 5, 1994, AEDC submitted an unsolicited proposal to the
Government through the DOTC/MIAA for the development of NAIA
International Passenger Terminal III (NAIA IPT III) under a build-operate-
and-transfer arrangement pursuant to RA 6957 as amended by RA 7718
(BOT Law).1
On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting
the Prequalification Bids and Awards Committee (PBAC) for the
implementation of the NAIA IPT III project.
On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal
of AEDC to the National Economic and Development Authority (NEDA). A
revised proposal, however, was forwarded by the DOTC to NEDA on
December 13, 1995. On January 5, 1996, the NEDA Investment
Coordinating Council (NEDA ICC) – Technical Board favorably endorsed
the project to the ICC – Cabinet Committee which approved the same,
subject to certain conditions, on January 19, 1996. On February 13, 1996, the
NEDA passed Board Resolution No. 2 which approved the NAIA IPT III
project.
On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two
daily newspapers of an invitation for competitive or comparative proposals
on AEDC's unsolicited proposal, in accordance with Sec. 4-A of RA 6957, as
amended. The alternative bidders were required to submit three (3) sealed
envelopes on or before 5:00 p.m. of September 20, 1996. The first envelope
should contain the Prequalification Documents, the second envelope the
Technical Proposal, and the third envelope the Financial Proposal of the
proponent.
On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing the
availment of the Bid Documents and the submission of the comparative bid
proposals. Interested firms were permitted to obtain the Request for Proposal
Documents beginning June 28, 1996, upon submission of a written
application and payment of a non-refundable fee of P50,000.00 (US$2,000).
The Bid Documents issued by the PBAC provided among others that the
proponent must have adequate capability to sustain the financing requirement
for the detailed engineering, design, construction, operation, and
maintenance phases of the project. The proponent would be evaluated based
on its ability to provide a minimum amount of equity to the project, and its
capacity to secure external financing for the project.
On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders
to a pre-bid conference on July 29, 1996.
On August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the
Bid Documents. The following amendments were made on the Bid
Documents:
a. Aside from the fixed Annual Guaranteed Payment, the proponent shall
include in its financial proposal an additional percentage of gross revenue
share of the Government, as follows:
i. First 5 years 5.0%
ii. Next 10 years 7.5%
iii. Next 10 years 10.0%
b. The amount of the fixed Annual Guaranteed Payment shall be subject of
the price challenge. Proponent may offer an Annual Guaranteed Payment
which need not be of equal amount, but payment of which shall start upon
site possession.
c. The project proponent must have adequate capability to sustain the
financing requirement for the detailed engineering, design, construction,
and/or operation and maintenance phases of the project as the case may be.
For purposes of pre-qualification, this capability shall be measured in terms
of:
i. Proof of the availability of the project proponent and/or the consortium to
provide the minimum amount of equity for the project; and
ii. a letter testimonial from reputable banks attesting that the project
proponent and/or the members of the consortium are banking with them, that
the project proponent and/or the members are of good financial standing, and
have adequate resources.
d. The basis for the prequalification shall be the proponent's compliance with
the minimum technical and financial requirements provided in the Bid
Documents and the IRR of the BOT Law. The minimum amount of equity
shall be 30% of the Project Cost.
e. Amendments to the draft Concession Agreement shall be issued from time
to time. Said amendments shall only cover items that would not materially
affect the preparation of the proponent's proposal.
On August 29, 1996, the Second Pre-Bid Conference was held where certain
clarifications were made. Upon the request of prospective bidder People's Air
Cargo & Warehousing Co., Inc (Paircargo), the PBAC warranted that based
on Sec. 11.6, Rule 11 of the Implementing Rules and Regulations of the BOT
Law, only the proposed Annual Guaranteed Payment submitted by the
challengers would be revealed to AEDC, and that the challengers' technical
and financial proposals would remain confidential. The PBAC also clarified
that the list of revenue sources contained in Annex 4.2a of the Bid
Documents was merely indicative and that other revenue sources may be
included by the proponent, subject to approval by DOTC/MIAA.
Furthermore, the PBAC clarified that only those fees and charges
denominated as Public Utility Fees would be subject to regulation, and those
charges which would be actually deemed Public Utility Fees could still be
revised, depending on the outcome of PBAC's query on the matter with the
Department of Justice.
In September 1996, the PBAC issued Bid Bulletin No. 5, entitled "Answers
to the Queries of PAIRCARGO as Per Letter Dated September 3 and 10,
1996." Paircargo's queries and the PBAC's responses were as follows:
1. It is difficult for Paircargo and Associates to meet the required minimum
equity requirement as prescribed in Section 8.3.4 of the Bid Documents
considering that the capitalization of each member company is so structured
to meet the requirements and needs of their current respective business
undertaking/activities. In order to comply with this equity requirement,
Paircargo is requesting PBAC to just allow each member of (sic)
corporation of the Joint Venture to just execute an agreement that embodies
a commitment to infuse the required capital in case the project is awarded to
the Joint Venture instead of increasing each corporation's current authorized
capital stock just for prequalification purposes.
In prequalification, the agency is interested in one's financial capability at the
time of prequalification, not future or potential capability.
A commitment to put up equity once awarded the project is not enough to
establish that "present" financial capability. However, total financial
capability of all member companies of the Consortium, to be established by
submitting the respective companies' audited financial statements, shall be
acceptable.
2. At present, Paircargo is negotiating with banks and other institutions for
the extension of a Performance Security to the joint venture in the event that
the Concessions Agreement (sic) is awarded to them. However, Paircargo is
being required to submit a copy of the draft concession as one of the
documentary requirements. Therefore, Paircargo is requesting that they'd
(sic) be furnished copy of the approved negotiated agreement between the
PBAC and the AEDC at the soonest possible time.
A copy of the draft Concession Agreement is included in the Bid Documents.
Any material changes would be made known to prospective challengers
through bid bulletins. However, a final version will be issued before the
award of contract.
The PBAC also stated that it would require AEDC to sign Supplement C of
the Bid Documents (Acceptance of Criteria and Waiver of Rights to Enjoin
Project) and to submit the same with the required Bid Security.
On September 20, 1996, the consortium composed of People's Air Cargo and
Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc.
(PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo
Consortium) submitted their competitive proposal to the PBAC. On
September 23, 1996, the PBAC opened the first envelope containing the
prequalification documents of the Paircargo Consortium. On the following
day, September 24, 1996, the PBAC prequalified the Paircargo Consortium.
On September 26, 1996, AEDC informed the PBAC in writing of its
reservations as regards the Paircargo Consortium, which include:
a. The lack of corporate approvals and financial capability of PAIRCARGO;
b. The lack of corporate approvals and financial capability of PAGS;
c. The prohibition imposed by RA 337, as amended (the General Banking
Act) on the amount that Security Bank could legally invest in the project;
d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint
Venture, for prequalification purposes; and
e. The appointment of Lufthansa as the facility operator, in view of the
Philippine requirement in the operation of a public utility.
The PBAC gave its reply on October 2, 1996, informing AEDC that it had
considered the issues raised by the latter, and that based on the documents
submitted by Paircargo and the established prequalification criteria, the
PBAC had found that the challenger, Paircargo, had prequalified to
undertake the project. The Secretary of the DOTC approved the finding of
the PBAC.
The PBAC then proceeded with the opening of the second envelope of the
Paircargo Consortium which contained its Technical Proposal.
On October 3, 1996, AEDC reiterated its objections, particularly with respect
to Paircargo's financial capability, in view of the restrictions imposed by
Section 21-B of the General Banking Act and Sections 1380 and 1381 of the
Manual Regulations for Banks and Other Financial Intermediaries. On
October 7, 1996, AEDC again manifested its objections and requested that it
be furnished with excerpts of the PBAC meeting and the accompanying
technical evaluation report where each of the issues they raised were
addressed.
On October 16, 1996, the PBAC opened the third envelope submitted by
AEDC and the Paircargo Consortium containing their respective financial
proposals. Both proponents offered to build the NAIA Passenger Terminal III
for at least $350 million at no cost to the government and to pay the
government: 5% share in gross revenues for the first five years of operation,
7.5% share in gross revenues for the next ten years of operation, and 10%
share in gross revenues for the last ten years of operation, in accordance with
the Bid Documents. However, in addition to the foregoing, AEDC offered to
pay the government a total of P135 million as guaranteed payment for 27
years while Paircargo Consortium offered to pay the government a total of
P17.75 billion for the same period.
Thus, the PBAC formally informed AEDC that it had accepted the price
proposal submitted by the Paircargo Consortium, and gave AEDC 30
working days or until November 28, 1996 within which to match the said
bid, otherwise, the project would be awarded to Paircargo.
As AEDC failed to match the proposal within the 30-day period, then DOTC
Secretary Amado Lagdameo, on December 11, 1996, issued a notice to
Paircargo Consortium regarding AEDC's failure to match the proposal.
On February 27, 1997, Paircargo Consortium incorporated into Philippine
International Airport Terminals Co., Inc. (PIATCO).
AEDC subsequently protested the alleged undue preference given to
PIATCO and reiterated its objections as regards the prequalification of
PIATCO.
On April 11, 1997, the DOTC submitted the concession agreement for the
second-pass approval of the NEDA-ICC.
On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a
Petition for Declaration of Nullity of the Proceedings, Mandamus and
Injunction against the Secretary of the DOTC, the Chairman of the PBAC,
the voting members of the PBAC and Pantaleon D. Alvarez, in his capacity
as Chairman of the PBAC Technical Committee.
On April 17, 1997, the NEDA-ICC conducted an ad referendum to facilitate
the approval, on a no-objection basis, of the BOT agreement between the
DOTC and PIATCO. As the ad referendum gathered only four (4) of the
required six (6) signatures, the NEDA merely noted the agreement.
On July 9, 1997, the DOTC issued the notice of award for the project to
PIATCO.
On July 12, 1997, the Government, through then DOTC Secretary Arturo T.
Enrile, and PIATCO, through its President, Henry T. Go, signed the
"Concession Agreement for the Build-Operate-and-Transfer Arrangement of
the Ninoy Aquino International Airport Passenger Terminal III" (1997
Concession Agreement). The Government granted PIATCO the franchise to
operate and maintain the said terminal during the concession period and to
collect the fees, rentals and other charges in accordance with the rates or
schedules stipulated in the 1997 Concession Agreement. The Agreement
provided that the concession period shall be for twenty-five (25) years
commencing from the in-service date, and may be renewed at the option of
the Government for a period not exceeding twenty-five (25) years. At the end
of the concession period, PIATCO shall transfer the development facility to
MIAA.
On November 26, 1998, the Government and PIATCO signed an Amended
and Restated Concession Agreement (ARCA). Among the provisions of the
1997 Concession Agreement that were amended by the ARCA were: Sec.
1.11 pertaining to the definition of "certificate of completion"; Sec. 2.05
pertaining to the Special Obligations of GRP; Sec. 3.02 (a) dealing with the
exclusivity of the franchise given to the Concessionaire; Sec. 4.04
concerning the assignment by Concessionaire of its interest in the
Development Facility; Sec. 5.08 (c) dealing with the proceeds of
Concessionaire's insurance; Sec. 5.10 with respect to the temporary take-over
of operations by GRP; Sec. 5.16 pertaining to the taxes, duties and other
imposts that may be levied on the Concessionaire; Sec. 6.03 as regards the
periodic adjustment of public utility fees and charges; the entire Article VIII
concerning the provisions on the termination of the contract; and Sec. 10.02
providing for the venue of the arbitration proceedings in case a dispute or
controversy arises between the parties to the agreement.
Subsequently, the Government and PIATCO signed three Supplements to the
ARCA. The First Supplement was signed on August 27, 1999; the Second
Supplement on September 4, 2000; and the Third Supplement on June 22,
2001 (collectively, Supplements).
The First Supplement to the ARCA amended Sec. 1.36 of the ARCA
defining "Revenues" or "Gross Revenues"; Sec. 2.05 (d) of the ARCA
referring to the obligation of MIAA to provide sufficient funds for the
upkeep, maintenance, repair and/or replacement of all airport facilities and
equipment which are owned or operated by MIAA; and further providing
additional special obligations on the part of GRP aside from those already
enumerated in Sec. 2.05 of the ARCA. The First Supplement also provided a
stipulation as regards the construction of a surface road to connect NAIA
Terminal II and Terminal III in lieu of the proposed access tunnel crossing
Runway 13/31; the swapping of obligations between GRP and PIATCO
regarding the improvement of Sales Road; and the changes in the timetable.
It also amended Sec. 6.01 (c) of the ARCA pertaining to the Disposition of
Terminal Fees; Sec. 6.02 of the ARCA by inserting an introductory
paragraph; and Sec. 6.02 (a) (iii) of the ARCA referring to the Payments of
Percentage Share in Gross Revenues.
The Second Supplement to the ARCA contained provisions concerning the
clearing, removal, demolition or disposal of subterranean structures
uncovered or discovered at the site of the construction of the terminal by the
Concessionaire. It defined the scope of works; it provided for the procedure
for the demolition of the said structures and the consideration for the same
which the GRP shall pay PIATCO; it provided for time extensions,
incremental and consequential costs and losses consequent to the existence of
such structures; and it provided for some additional obligations on the part of
PIATCO as regards the said structures.
Finally, the Third Supplement provided for the obligations of the
Concessionaire as regards the construction of the surface road connecting
Terminals II and III.
Meanwhile, the MIAA which is charged with the maintenance and operation
of the NAIA Terminals I and II, had existing concession contracts with
various service providers to offer international airline airport services, such
as in-flight catering, passenger handling, ramp and ground support, aircraft
maintenance and provisions, cargo handling and warehousing, and other
services, to several international airlines at the NAIA. Some of these service
providers are the Miascor Group, DNATA-Wings Aviation Systems Corp.,
and the MacroAsia Group. Miascor, DNATA and MacroAsia, together with
Philippine Airlines (PAL), are the dominant players in the industry with an
aggregate market share of 70%.
On September 17, 2002, the workers of the international airline service
providers, claiming that they stand to lose their employment upon the
implementation of the questioned agreements, filed before this Court a
petition for prohibition to enjoin the enforcement of said agreements.2
On October 15, 2002, the service providers, joining the cause of the
petitioning workers, filed a motion for intervention and a petition-in-
intervention.
On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and
Constantino Jaraula filed a similar petition with this Court.3
On November 6, 2002, several employees of the MIAA likewise filed a
petition assailing the legality of the various agreements.4
On December 11, 2002. another group of Congressmen, Hon. Jacinto V.
Paras, Rafael P. Nantes, Eduardo C. Zialcita, Willie B. Villarama, Prospero
C. Nograles, Prospero A. Pichay, Jr., Harlin Cast Abayon and Benasing O.
Macaranbon, moved to intervene in the case as Respondents-Intervenors.
They filed their Comment-In-Intervention defending the validity of the
assailed agreements and praying for the dismissal of the petitions.
During the pendency of the case before this Court, President Gloria
Macapagal Arroyo, on November 29, 2002, in her speech at the 2002 Golden
Shell Export Awards at Malacañang Palace, stated that she will not "honor
(PIATCO) contracts which the Executive Branch's legal offices have
concluded (as) null and void."5
Respondent PIATCO filed its Comments to the present petitions on
November 7 and 27, 2002. The Office of the Solicitor General and the Office
of the Government Corporate Counsel filed their respective Comments in
behalf of the public respondents.
On December 10, 2002, the Court heard the case on oral argument. After the
oral argument, the Court then resolved in open court to require the parties to
file simultaneously their respective Memoranda in amplification of the issues
heard in the oral arguments within 30 days and to explore the possibility of
arbitration or mediation as provided in the challenged contracts.
In their consolidated Memorandum, the Office of the Solicitor General and
the Office of the Government Corporate Counsel prayed that the present
petitions be given due course and that judgment be rendered declaring the
1997 Concession Agreement, the ARCA and the Supplements thereto void
for being contrary to the Constitution, the BOT Law and its Implementing
Rules and Regulations.
On March 6, 2003, respondent PIATCO informed the Court that on March 4,
2003 PIATCO commenced arbitration proceedings before the International
Chamber of Commerce, International Court of Arbitration (ICC) by filing a
Request for Arbitration with the Secretariat of the ICC against the
Government of the Republic of the Philippines acting through the DOTC and
MIAA.
In the present cases, the Court is again faced with the task of resolving
complicated issues made difficult by their intersecting legal and economic
implications. The Court is aware of the far reaching fall out effects of the
ruling which it makes today. For more than a century and whenever the
exigencies of the times demand it, this Court has never shirked from its
solemn duty to dispense justice and resolve "actual controversies involving
rights which are legally demandable and enforceable, and to determine
whether or not there has been grave abuse of discretion amounting to lack or
excess of jurisdiction."6 To be sure, this Court will not begin to do otherwise
today.
We shall first dispose of the procedural issues raised by respondent
PIATCO which they allege will bar the resolution of the instant controversy.
Petitioners' Legal Standing to File
the present Petitions
a. G.R. Nos. 155001 and 155661
In G.R. No. 155001 individual petitioners are employees of various service
providers7 having separate concession contracts with MIAA and continuing
service agreements with various international airlines to provide in-flight
catering, passenger handling, ramp and ground support, aircraft maintenance
and provisions, cargo handling and warehousing and other services. Also
included as petitioners are labor unions MIASCOR Workers Union-National
Labor Union and Philippine Airlines Employees Association. These
petitioners filed the instant action for prohibition as taxpayers and as parties
whose rights and interests stand to be violated by the implementation of the
PIATCO Contracts.
Petitioners-Intervenors in the same case are all corporations organized and
existing under Philippine laws engaged in the business of providing in-flight
catering, passenger handling, ramp and ground support, aircraft maintenance
and provisions, cargo handling and warehousing and other services to several
international airlines at the Ninoy Aquino International Airport. Petitioners-
Intervenors allege that as tax-paying international airline and airport-related
service operators, each one of them stands to be irreparably injured by the
implementation of the PIATCO Contracts. Each of the petitioners-
intervenors have separate and subsisting concession agreements with MIAA
and with various international airlines which they allege are being interfered
with and violated by respondent PIATCO.
In G.R. No. 155661, petitioners constitute employees of MIAA and
Samahang Manggagawa sa Paliparan ng Pilipinas - a legitimate labor union
and accredited as the sole and exclusive bargaining agent of all the
employees in MIAA. Petitioners anchor their petition for prohibition on the
nullity of the contracts entered into by the Government and PIATCO
regarding the build-operate-and-transfer of the NAIA IPT III. They filed the
petition as taxpayers and persons who have a legitimate interest to protect in
the implementation of the PIATCO Contracts.
Petitioners in both cases raise the argument that the PIATCO Contracts
contain stipulations which directly contravene numerous provisions of the
Constitution, specific provisions of the BOT Law and its Implementing Rules
and Regulations, and public policy. Petitioners contend that the DOTC and
the MIAA, by entering into said contracts, have committed grave abuse of
discretion amounting to lack or excess of jurisdiction which can be remedied
only by a writ of prohibition, there being no plain, speedy or adequate
remedy in the ordinary course of law.
In particular, petitioners assail the provisions in the 1997 Concession
Agreement and the ARCA which grant PIATCO the exclusive right to
operate a commercial international passenger terminal within the Island of
Luzon, except those international airports already existing at the time of the
execution of the agreement. The contracts further provide that upon the
commencement of operations at the NAIA IPT III, the Government shall
cause the closure of Ninoy Aquino International Airport Passenger Terminals
I and II as international passenger terminals. With respect to existing
concession agreements between MIAA and international airport service
providers regarding certain services or operations, the 1997 Concession
Agreement and the ARCA uniformly provide that such services or operations
will not be carried over to the NAIA IPT III and PIATCO is under no
obligation to permit such carry over except through a separate agreement
duly entered into with PIATCO.8
With respect to the petitioning service providers and their employees, upon
the commencement of operations of the NAIA IPT III, they allege that they
will be effectively barred from providing international airline airport services
at the NAIA Terminals I and II as all international airlines and passengers
will be diverted to the NAIA IPT III. The petitioning service providers will
thus be compelled to contract with PIATCO alone for such services, with no
assurance that subsisting contracts with MIAA and other international
airlines will be respected. Petitioning service providers stress that despite the
very competitive market, the substantial capital investments required and the
high rate of fees, they entered into their respective contracts with the MIAA
with the understanding that the said contracts will be in force for the
stipulated period, and thereafter, renewed so as to allow each of the
petitioning service providers to recoup their investments and obtain a
reasonable return thereon.
Petitioning employees of various service providers at the NAIA Terminals I
and II and of MIAA on the other hand allege that with the closure of the
NAIA Terminals I and II as international passenger terminals under the
PIATCO Contracts, they stand to lose employment.
The question on legal standing is whether such parties have "alleged such a
personal stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the court
so largely depends for illumination of difficult constitutional
questions."9 Accordingly, it has been held that the interest of a person
assailing the constitutionality of a statute must be direct and personal. He
must be able to show, not only that the law or any government act is invalid,
but also that he sustained or is in imminent danger of sustaining some direct
injury as a result of its enforcement, and not merely that he suffers thereby in
some indefinite way. It must appear that the person complaining has been or
is about to be denied some right or privilege to which he is lawfully entitled
or that he is about to be subjected to some burdens or penalties by reason of
the statute or act complained of.10
We hold that petitioners have the requisite standing. In the above-mentioned
cases, petitioners have a direct and substantial interest to protect by reason of
the implementation of the PIATCO Contracts. They stand to lose their source
of livelihood, a property right which is zealously protected by the
Constitution. Moreover, subsisting concession agreements between MIAA
and petitioners-intervenors and service contracts between international
airlines and petitioners-intervenors stand to be nullified or terminated by the
operation of the NAIA IPT III under the PIATCO Contracts. The financial
prejudice brought about by the PIATCO Contracts on petitioners and
petitioners-intervenors in these cases are legitimate interests sufficient to
confer on them the requisite standing to file the instant petitions.
b. G.R. No. 155547
In G.R. No. 155547, petitioners filed the petition for prohibition as members
of the House of Representatives, citizens and taxpayers. They allege that as
members of the House of Representatives, they are especially interested in
the PIATCO Contracts, because the contracts compel the Government and/or
the House of Representatives to appropriate funds necessary to comply with
the provisions therein.11 They cite provisions of the PIATCO Contracts
which require disbursement of unappropriated amounts in compliance with
the contractual obligations of the Government. They allege that the
Government obligations in the PIATCO Contracts which compel government
expenditure without appropriation is a curtailment of their prerogatives as
legislators, contrary to the mandate of the Constitution that "[n]o money shall
be paid out of the treasury except in pursuance of an appropriation made by
law."12
Standing is a peculiar concept in constitutional law because in some cases,
suits are not brought by parties who have been personally injured by the
operation of a law or any other government act but by concerned citizens,
taxpayers or voters who actually sue in the public interest. Although we are
not unmindful of the cases of Imus Electric Co. v. Municipality of
Imus13 and Gonzales v. Raquiza14 wherein this Court held that
appropriation must be made only on amounts immediately
demandable, public interest demands that we take a more liberal view in
determining whether the petitioners suing as legislators, taxpayers and
citizens have locus standi to file the instant petition. In Kilosbayan, Inc.
v. Guingona,15 this Court held "[i]n line with the liberal policy of this Court
on locus standi, ordinary taxpayers, members of Congress, and even
association of planters, and non-profit civic organizations were allowed to
initiate and prosecute actions before this Court to question the
constitutionality or validity of laws, acts, decisions, rulings, or orders of
various government agencies or instrumentalities."16 Further, "insofar as
taxpayers' suits are concerned . . . (this Court) is not devoid of discretion as
to whether or not it should be entertained."17 As such ". . . even if, strictly
speaking, they [the petitioners] are not covered by the definition, it is still
within the wide discretion of the Court to waive the requirement and so
remove the impediment to its addressing and resolving the serious
constitutional questions raised."18 In view of the serious legal questions
involved and their impact on public interest, we resolve to grant standing to
the petitioners.
Other Procedural Matters
Respondent PIATCO further alleges that this Court is without jurisdiction to
review the instant cases as factual issues are involved which this Court is ill-
equipped to resolve. Moreover, PIATCO alleges that submission of this
controversy to this Court at the first instance is a violation of the rule on
hierarchy of courts. They contend that trial courts have concurrent
jurisdiction with this Court with respect to a special civil action for
prohibition and hence, following the rule on hierarchy of courts, resort must
first be had before the trial courts.
After a thorough study and careful evaluation of the issues involved, this
Court is of the view that the crux of the instant controversy involves
significant legal questions. The facts necessary to resolve these legal
questions are well established and, hence, need not be determined by a trial
court.
The rule on hierarchy of courts will not also prevent this Court from
assuming jurisdiction over the cases at bar. The said rule may be relaxed
when the redress desired cannot be obtained in the appropriate courts or
where exceptional and compelling circumstances justify availment of a
remedy within and calling for the exercise of this Court's primary
jurisdiction.19
It is easy to discern that exceptional circumstances exist in the cases at bar
that call for the relaxation of the rule. Both petitioners and respondents agree
that these cases are of transcendental importance as they involve the
construction and operation of the country's premier international airport.
Moreover, the crucial issues submitted for resolution are of first impression
and they entail the proper legal interpretation of key provisions of the
Constitution, the BOT Law and its Implementing Rules and Regulations.
Thus, considering the nature of the controversy before the Court, procedural
bars may be lowered to give way for the speedy disposition of the instant
cases.
Legal Effect of the Commencement
of Arbitration Proceedings by
PIATCO
There is one more procedural obstacle which must be overcome. The Court is
aware that arbitration proceedings pursuant to Section 10.02 of the ARCA
have been filed at the instance of respondent PIATCO. Again, we hold that
the arbitration step taken by PIATCO will not oust this Court of its
jurisdiction over the cases at bar.
In Del Monte Corporation-USA v. Court of Appeals,20 even after finding that
the arbitration clause in the Distributorship Agreement in question is valid
and the dispute between the parties is arbitrable, this Court affirmed the trial
court's decision denying petitioner's Motion to Suspend Proceedings pursuant
to the arbitration clause under the contract. In so ruling, this Court held that
as contracts produce legal effect between the parties, their assigns and heirs,
only the parties to the Distributorship Agreement are bound by its terms,
including the arbitration clause stipulated therein. This Court ruled that
arbitration proceedings could be called for but only with respect to the
parties to the contract in question. Considering that there are parties to the
case who are neither parties to the Distributorship Agreement nor heirs or
assigns of the parties thereto, this Court, citing its previous ruling in Salas, Jr.
v. Laperal Realty Corporation,21 held that to tolerate the splitting of
proceedings by allowing arbitration as to some of the parties on the one hand
and trial for the others on the other hand would, in effect, result
in multiplicity of suits, duplicitous procedure and unnecessary
delay.22 Thus, we ruled that the interest of justice would best be served if the
trial court hears and adjudicates the case in a single and complete
proceeding.
It is established that petitioners in the present cases who have presented
legitimate interests in the resolution of the controversy are not parties to the
PIATCO Contracts. Accordingly, they cannot be bound by the arbitration
clause provided for in the ARCA and hence, cannot be compelled to submit
to arbitration proceedings. A speedy and decisive resolution of all the
critical issues in the present controversy, including those raised by
petitioners, cannot be made before an arbitral tribunal. The object of
arbitration is precisely to allow an expeditious determination of a dispute.
This objective would not be met if this Court were to allow the parties to
settle the cases by arbitration as there are certain issues involving non-parties
to the PIATCO Contracts which the arbitral tribunal will not be equipped to
resolve.
Now, to the merits of the instant controversy.
I enough basis to believe that the challenger can comply with the required 30%
Is PIATCO a qualified bidder?
Public respondents argue that the Paircargo Consortium, PIATCO's
predecessor, was not a duly pre-qualified bidder on the unsolicited proposal
submitted by AEDC as the Paircargo Consortium failed to meet the financial
capability required under the BOT Law and the Bid Documents. They allege
that in computing the ability of the Paircargo Consortium to meet the
minimum equity requirements for the project, the entire net worth of
Security Bank, a member of the consortium, should not be considered.
PIATCO relies, on the other hand, on the strength of the Memorandum dated
October 14, 1996 issued by the DOTC Undersecretary Primitivo C. Cal
stating that the Paircargo Consortium is found to have a combined net worth
of P3,900,000,000.00, sufficient to meet the equity requirements of the
project. The said Memorandum was in response to a letter from Mr. Antonio
Henson of AEDC to President Fidel V. Ramos questioning the financial
capability of the Paircargo Consortium on the ground that it does not have
the financial resources to put up the required minimum equity of
P2,700,000,000.00. This contention is based on the restriction under R.A.
No. 337, as amended or the General Banking Act that a commercial bank
cannot invest in any single enterprise in an amount more than 15% of its net
worth. In the said Memorandum, Undersecretary Cal opined:
The Bid Documents, as clarified through Bid Bulletin Nos. 3 and 5, require
that financial capability will be evaluated based on total financial capability
of all the member companies of the [Paircargo] Consortium. In this
connection, the Challenger was found to have a combined net worth of
P3,926,421,242.00 that could support a project costing approximately P13
Billion.
It is not a requirement that the net worth must be "unrestricted." To impose
that as a requirement now will be nothing less than unfair.
The financial statement or the net worth is not the sole basis in establishing
financial capability. As stated in Bid Bulletin No. 3, financial capability may
also be established by testimonial letters issued by reputable banks. The
Challenger has complied with this requirement.
To recap, net worth reflected in the Financial Statement should not be taken
as the amount of the money to be used to answer the required thirty percent
(30%) equity of the challenger but rather to be used in establishing if there is
equity. In fact, proof of sufficient equity is required as one of the conditions
for award of contract (Section 12.1 IRR of the BOT Law) but not for pre-
qualification (Section 5.4 of the same document).23
Under the BOT Law, in case of a build-operate-and-transfer arrangement, the
contract shall be awarded to the bidder "who, having satisfied the minimum
financial, technical, organizational and legal standards" required by the
law, has submitted the lowest bid and most favorable terms of the
project.24 Further, the 1994 Implementing Rules and Regulations of the BOT
Law provide:
Section 5.4 Pre-qualification Requirements.
xxx xxx xxx
c. Financial Capability: The project proponent must have adequate capability
to sustain the financing requirements for the detailed engineering design,
construction and/or operation and maintenance phases of the project, as the
case may be. For purposes of pre-qualification, this capability shall be
measured in terms of (i) proof of the ability of the project proponent
and/or the consortium to provide a minimum amount of equity to the
project, and (ii) a letter testimonial from reputable banks attesting that
the project proponent and/or members of the consortium are banking
with them, that they are in good financial standing, and that they have
adequate resources. The government agency/LGU concerned shall
determine on a project-to-project basis and before pre-qualification, the
minimum amount of equity needed. (emphasis supplied)
Pursuant to this provision, the PBAC issued PBAC Bulletin No. 3 dated
August 16, 1996 amending the financial capability requirements for pre-
qualification of the project proponent as follows:
6. Basis of Pre-qualification
The basis for the pre-qualification shall be on the compliance of the
proponent to the minimum technical and financial requirements provided in
the Bid Documents and in the IRR of the BOT Law, R.A. No. 6957, as
amended by R.A. 7718.
The minimum amount of equity to which the proponent's financial capability
will be based shall be thirty percent (30%) of the project cost instead of
the twenty percent (20%) specified in Section 3.6.4 of the Bid
Documents. This is to correlate with the required debt-to-equity ratio of
70:30 in Section 2.01a of the draft concession agreement. The debt portion of
the project financing should not exceed 70% of the actual project cost.
Accordingly, based on the above provisions of law, the Paircargo
Consortium or any challenger to the unsolicited proposal of AEDC has to
show that it possesses the requisite financial capability to undertake the
project in the minimum amount of 30% of the project cost through (i)
proof of the ability to provide a minimum amount of equity to the project,
and (ii) a letter testimonial from reputable banks attesting that the project
proponent or members of the consortium are banking with them, that they are
in good financial standing, and that they have adequate resources.
As the minimum project cost was estimated to be US$350,000,000.00 or
roughly P9,183,650,000.00,25 the Paircargo Consortium had to show to the
satisfaction of the PBAC that it had the ability to provide the minimum
equity for the project in the amount of at least P2,755,095,000.00.
Paircargo's Audited Financial Statements as of 1993 and 1994 indicated that
it had a net worth of P2,783,592.00 and P3,123,515.00 respectively.26 PAGS'
Audited Financial Statements as of 1995 indicate that it has approximately
P26,735,700.00 to invest as its equity for the project.27 Security Bank's
Audited Financial Statements as of 1995 show that it has a net worth
equivalent to its capital funds in the amount of P3,523,504,377.00.28
We agree with public respondents that with respect to Security Bank,
the entire amount of its net worth could not be invested in a single
undertaking or enterprise, whether allied or non-allied in accordance with the
provisions of R.A. No. 337, as amended or the General Banking Act:
Sec. 21-B. The provisions in this or in any other Act to the contrary
notwithstanding, the Monetary Board, whenever it shall deem appropriate
and necessary to further national development objectives or support national
priority projects, may authorize a commercial bank, a bank authorized to
provide commercial banking services, as well as a government-owned
and controlled bank, to operate under an expanded commercial banking
authority and by virtue thereof exercise, in addition to powers
authorized for commercial banks, the powers of an Investment House as
provided in Presidential Decree No. 129, invest in the equity of a non-
allied undertaking, or own a majority or all of the equity in a financial
intermediary other than a commercial bank or a bank authorized to provide
commercial banking services: Provided, That (a) the total investment in
equities shall not exceed fifty percent (50%) of the net worth of the bank; (b)
the equity investment in any one enterprise whether allied or non-allied
shall not exceed fifteen percent (15%) of the net worth of the bank; (c)
the equity investment of the bank, or of its wholly or majority-owned
subsidiary, in a single non-allied undertaking shall not exceed thirty-five
percent (35%) of the total equity in the enterprise nor shall it exceed thirty-
five percent (35%) of the voting stock in that enterprise; and (d) the equity
investment in other banks shall be deducted from the investing bank's net
worth for purposes of computing the prescribed ratio of net worth to risk
assets.
xxx xxx xxx
Further, the 1993 Manual of Regulations for Banks provides:
SECTION X383. Other Limitations and Restrictions. — The following
limitations and restrictions shall also apply regarding equity investments of
banks.
a. In any single enterprise. — The equity investments of banks in any single
enterprise shall not exceed at any time fifteen percent (15%) of the net worth
of the investing bank as defined in Sec. X106 and Subsec. X121.5.
Thus, the maximum amount that Security Bank could validly invest in the
Paircargo Consortium is only P528,525,656.55, representing 15% of its
entire net worth. The total net worth therefore of the Paircargo Consortium,
after considering the maximum amounts that may be validly invested by
each of its members is P558,384,871.55 or only 6.08% of the project
cost,29 an amount substantially less than the prescribed minimum equity
investment required for the project in the amount of P2,755,095,000.00 or
30% of the project cost.
The purpose of pre-qualification in any public bidding is to determine, at the
earliest opportunity, the ability of the bidder to undertake the project. Thus,
with respect to the bidder's financial capacity at the pre-qualification stage,
the law requires the government agency to examine and determine the ability
of the bidder to fund the entire cost of the project by considering the
maximum amounts that each bidder may invest in the project at the
time of pre-qualification.
The PBAC has determined that any prospective bidder for the construction,
operation and maintenance of the NAIA IPT III project should prove that it
has the ability to provide equity in the minimum amount of 30% of the
project cost, in accordance with the 70:30 debt-to-equity ratio prescribed in
the Bid Documents. Thus, in the case of Paircargo Consortium, the PBAC
should determine the maximum amounts that each member of the
consortium may commit for the construction, operation and maintenance of
the NAIA IPT III project at the time of pre-qualification. With respect to
Security Bank, the maximum amount which may be invested by it would
only be 15% of its net worth in view of the restrictions imposed by the
General Banking Act. Disregarding the investment ceilings provided by
applicable law would not result in a proper evaluation of whether or not a
bidder is pre-qualified to undertake the project as for all intents and purposes,
such ceiling or legal restriction determines the true maximum
amount which a bidder may invest in the project.
Further, the determination of whether or not a bidder is pre-qualified to
undertake the project requires an evaluation of the financial capacity of the
said bidder at the time the bid is submitted based on the required
documents presented by the bidder. The PBAC should not be allowed to
speculate on the future financial ability of the bidder to undertake the
project on the basis of documents submitted. This would open doors to abuse
and defeat the very purpose of a public bidding. This is especially true in the
case at bar which involves the investment of billions of pesos by the project
proponent. The relevant government authority is duty-bound to ensure that
the awardee of the contract possesses the minimum required financial
capability to complete the project. To allow the PBAC to estimate the
bidder's future financial capability would not secure the viability and
integrity of the project. A restrictive and conservative application of the rules
and procedures of public bidding is necessary not only to protect the
impartiality and regularity of the proceedings but also to ensure the financial
and technical reliability of the project. It has been held that:
The basic rule in public bidding is that bids should be evaluated based on the
required documents submitted before and not after the opening of bids.
Otherwise, the foundation of a fair and competitive public bidding would be
defeated. Strict observance of the rules, regulations, and guidelines of the
bidding process is the only safeguard to a fair, honest and competitive
public bidding.30
Thus, if the maximum amount of equity that a bidder may invest in the
project at the time the bids are submittedfalls short of the minimum
amounts required to be put up by the bidder, said bidder should be properly
disqualified. Considering that at the pre-qualification stage, the maximum
amounts which the Paircargo Consortium may invest in the project fell short
of the minimum amounts prescribed by the PBAC, we hold that Paircargo
Consortium was not a qualified bidder. Thus the award of the contract by the
PBAC to the Paircargo Consortium, a disqualified bidder, is null and void.
While it would be proper at this juncture to end the resolution of the instant
controversy, as the legal effects of the disqualification of respondent
PIATCO's predecessor would come into play and necessarily result in the
nullity of all the subsequent contracts entered by it in pursuance of the
project, the Court feels that it is necessary to discuss in full the pressing
issues of the present controversy for a complete resolution thereof.
II
Is the 1997 Concession Agreement valid?
Petitioners and public respondents contend that the 1997 Concession
Agreement is invalid as it contains provisions that substantially depart from
the draft Concession Agreement included in the Bid Documents. They
maintain that a substantial departure from the draft Concession Agreement is
a violation of public policy and renders the 1997 Concession Agreement null
and void.
PIATCO maintains, however, that the Concession Agreement attached to the
Bid Documents is intended to be a draft, i.e., subject to change, alteration or
modification, and that this intention was clear to all participants, including
AEDC, and DOTC/MIAA. It argued further that said intention is expressed
in Part C (6) of Bid Bulletin No. 3 issued by the PBAC which states:
6. Amendments to the Draft Concessions Agreement
Amendments to the Draft Concessions Agreement shall be issued from time
to time. Said amendments shall only cover items that would not materially
affect the preparation of the proponent's proposal.
By its very nature, public bidding aims to protect the public interest by
giving the public the best possible advantages through open competition.
Thus:
Competition must be legitimate, fair and honest. In the field of government
contract law, competition requires, not only `bidding upon a common
standard, a common basis, upon the same thing, the same subject matter, the
same undertaking,' but also that it be legitimate, fair and honest; and not
designed to injure or defraud the government.31
An essential element of a publicly bidded contract is that all bidders must be
on equal footing. Not simply in terms of application of the procedural rules
and regulations imposed by the relevant government agency, but more
importantly, on the contract bidded upon. Each bidder must be able to bid on
the same thing. The rationale is obvious. If the winning bidder is allowed to
later include or modify certain provisions in the contract awarded such that
the contract is altered in any material respect, then the essence of fair
competition in the public bidding is destroyed. A public bidding would
indeed be a farce if after the contract is awarded, the winning bidder may
modify the contract and include provisions which are favorable to it that
were not previously made available to the other bidders. Thus:
It is inherent in public biddings that there shall be a fair competition among
the bidders. The specifications in such biddings provide the common ground
or basis for the bidders. The specifications should, accordingly, operate
equally or indiscriminately upon all bidders.32
The same rule was restated by Chief Justice Stuart of the Supreme Court of
Minnesota:
The law is well settled that where, as in this case, municipal authorities can
only let a contract for public work to the lowest responsible bidder, the
proposals and specifications therefore must be so framed as to permit free
and full competition. Nor can they enter into a contract with the best
bidder containing substantial provisions beneficial to him, not included
or contemplated in the terms and specifications upon which the bids
were invited.33
In fact, in the PBAC Bid Bulletin No. 3 cited by PIATCO to support its
argument that the draft concession agreement is subject to amendment, the
pertinent portion of which was quoted above, the PBAC also clarified
that "[s]aid amendments shall only cover items that would not materially
affect the preparation of the proponent's proposal."
While we concede that a winning bidder is not precluded from modifying or
amending certain provisions of the contract bidded upon, such changes must
not constitute substantial or material amendments that would alter the
basic parameters of the contract and would constitute a denial to the
other bidders of the opportunity to bid on the same terms. Hence, the
determination of whether or not a modification or amendment of a contract
bidded out constitutes a substantial amendment rests on whether the contract,
when taken as a whole, would contain substantially different terms and
conditions that would have the effect of altering the technical and/or financial
proposals previously submitted by other bidders. The alterations and
modifications in the contract executed between the government and the
winning bidder must be such as to render such executed contract to be an
entirely different contract from the one that was bidded upon.
In the case of Caltex (Philippines), Inc. v. Delgado Brothers, Inc.,34 this
Court quoted with approval the ruling of the trial court that an amendment to
a contract awarded through public bidding, when such subsequent
amendment was made without a new public bidding, is null and void:
The Court agrees with the contention of counsel for the plaintiffs that the due
execution of a contract after public bidding is a limitation upon the right of
the contracting parties to alter or amend it without another public bidding, for
otherwise what would a public bidding be good for if after the execution
of a contract after public bidding, the contracting parties may alter or
amend the contract, or even cancel it, at their will?Public biddings are
held for the protection of the public, and to give the public the best possible
advantages by means of open competition between the bidders. He who bids
or offers the best terms is awarded the contract subject of the bid, and it is
obvious that such protection and best possible advantages to the public will
disappear if the parties to a contract executed after public bidding may alter
or amend it without another previous public bidding.35
Hence, the question that comes to fore is this: is the 1997 Concession
Agreement the same agreement that was offered for public bidding, i.e., the
draft Concession Agreement attached to the Bid Documents? A close
comparison of the draft Concession Agreement attached to the Bid
Documents and the 1997 Concession Agreement reveals that the documents
differ in at least two material respects:
a. Modification on the Public
Utility Revenues and Non-Public
Utility Revenues that may be
collected by PIATCO
The fees that may be imposed and collected by PIATCO under the draft
Concession Agreement and the 1997 Concession Agreement may be
classified into three distinct categories: (1) fees which are subject to periodic
adjustment of once every two years in accordance with a prescribed
parametric formula and adjustments are made effective only upon written
approval by MIAA; (2) fees other than those included in the first category
which maybe adjusted by PIATCO whenever it deems necessary without
need for consent of DOTC/MIAA; and (3) new fees and charges that may be
imposed by PIATCO which have not been previously imposed or collected at
the Ninoy Aquino International Airport Passenger Terminal I, pursuant to
Administrative Order No. 1, Series of 1993, as amended. The glaring
distinctions between the draft Concession Agreement and the 1997
Concession Agreement lie in the types of fees included in each category and
the extent of the supervision and regulation which MIAA is allowed to
exercise in relation thereto.
For fees under the first category, i.e., those which are subject to periodic
adjustment in accordance with a prescribed parametric formula and effective
only upon written approval by MIAA, the draft Concession
Agreementincludes the following:36
(1) aircraft parking fees;
(2) aircraft tacking fees;
(3) groundhandling fees;
(4) rentals and airline offices;
(5) check-in counter rentals; and
(6) porterage fees.
Under the 1997 Concession Agreement, fees which are subject to
adjustment and effective upon MIAA approval are classified as "Public
Utility Revenues" and include:37
(1) aircraft parking fees;
(2) aircraft tacking fees;
(3) check-in counter fees; and
(4) Terminal Fees.
The implication of the reduced number of fees that are subject to MIAA
approval is best appreciated in relation to fees included in the second
category identified above. Under the 1997 Concession Agreement, fees
which PIATCO may adjust whenever it deems necessary without need for
consent of DOTC/MIAA are "Non-Public Utility Revenues" and is defined
as "all other income not classified as Public Utility Revenues derived from
operations of the Terminal and the Terminal Complex."38 Thus, under the
1997 Concession Agreement, ground handling fees, rentals from airline
offices and porterage fees are no longer subject to MIAA regulation.
Further, under Section 6.03 of the draft Concession Agreement, MIAA
reserves the right to regulate (1) lobby and vehicular parking fees and (2)
other new fees and charges that may be imposed by PIATCO. Such
regulation may be made by periodic adjustment and is effective only upon
written approval of MIAA. The full text of said provision is quoted below:
Section 6.03. Periodic Adjustment in Fees and Charges. Adjustments in the
aircraft parking fees, aircraft tacking fees, groundhandling fees, rentals and
airline offices, check-in-counter rentals and porterage fees shall be allowed
only once every two years and in accordance with the Parametric Formula
attached hereto as Annex F. Provided that adjustments shall be made
effective only after the written express approval of the MIAA. Provided,
further, that such approval of the MIAA, shall be contingent only on the
conformity of the adjustments with the above said parametric formula. The
first adjustment shall be made prior to the In-Service Date of the Terminal.
The MIAA reserves the right to regulate under the foregoing terms and
conditions the lobby and vehicular parking fees and other new fees and
charges as contemplated in paragraph 2 of Section 6.01 if in its judgment
the users of the airport shall be deprived of a free option for the services
they cover.39
On the other hand, the equivalent provision under the 1997 Concession
Agreement reads:
Section 6.03 Periodic Adjustment in Fees and Charges.
xxx xxx xxx
(c) Concessionaire shall at all times be judicious in fixing fees and charges
constituting Non-Public Utility Revenues in order to ensure that End Users
are not unreasonably deprived of services. While the vehicular parking fee,
porterage fee and greeter/well wisher fee constitute Non-Public Utility
Revenues of Concessionaire, GRP may intervene and require
Concessionaire to explain and justify the fee it may set from time to
time, if in the reasonable opinion of GRP the said fees have become
exorbitant resulting in the unreasonable deprivation of End Users of such
services.40
Thus, under the 1997 Concession Agreement, with respect to (1) vehicular
parking fee, (2) porterage fee and (3) greeter/well wisher fee, all that MIAA
can do is to require PIATCO to explain and justify the fees set by PIATCO.
In the draft Concession Agreement, vehicular parking fee is subject to
MIAA regulation and approval under the second paragraph of Section 6.03
thereof while porterage fee is covered by the first paragraph of the same
provision. There is an obvious relaxation of the extent of control and
regulation by MIAA with respect to the particular fees that may be charged
by PIATCO.
Moreover, with respect to the third category of fees that may be imposed
and collected by PIATCO, i.e., new fees and charges that may be imposed by
PIATCO which have not been previously imposed or collected at the Ninoy
Aquino International Airport Passenger Terminal I, under Section 6.03 of
the draft Concession Agreement MIAA has reserved the right to regulate
the same under the same conditions that MIAA may regulate fees under the
first category, i.e., periodic adjustment of once every two years in accordance
with a prescribed parametric formula and effective only upon written
approval by MIAA. However, under the 1997 Concession
Agreement, adjustment of fees under the third category is not subject to
MIAA regulation.
With respect to terminal fees that may be charged by PIATCO,41 as shown
earlier, this was included within the category of "Public Utility Revenues"
under the 1997 Concession Agreement. This classification is significant
because under the 1997 Concession Agreement, "Public Utility Revenues"
are subject to an "Interim Adjustment" of fees upon the occurrence of certain
extraordinary events specified in the agreement.42 However, under the draft
Concession Agreement, terminal fees are not included in the types of fees
that may be subject to "Interim Adjustment."43
Finally, under the 1997 Concession Agreement, "Public Utility Revenues,"
except terminal fees, are denominated in US Dollars44 while payments to the
Government are in Philippine Pesos. In the draft Concession Agreement,no
such stipulation was included. By stipulating that "Public Utility Revenues"
will be paid to PIATCO in US Dollars while payments by PIATCO to the
Government are in Philippine currency under the 1997 Concession
Agreement, PIATCO is able to enjoy the benefits of depreciations of the
Philippine Peso, while being effectively insulated from the detrimental
effects of exchange rate fluctuations.
When taken as a whole, the changes under the 1997 Concession Agreement
with respect to reduction in the types of fees that are subject to MIAA
regulation and the relaxation of such regulation with respect to other fees are
significant amendments that substantially distinguish the draft Concession
Agreement from the 1997 Concession Agreement. The 1997 Concession
Agreement, in this respect, clearly gives PIATCO more favorable terms
than what was available to other bidders at the time the contract was
bidded out. It is not very difficult to see that the changes in the 1997
Concession Agreement translate to direct and concrete financial
advantages for PIATCO which were not available at the time the contract
was offered for bidding. It cannot be denied that under the 1997 Concession
Agreement only "Public Utility Revenues" are subject to MIAA regulation.
Adjustments of all other fees imposed and collected by PIATCO are entirely
within its control. Moreover, with respect to terminal fees, under the 1997
Concession Agreement, the same is further subject to "Interim Adjustments"
not previously stipulated in the draft Concession Agreement. Finally, the
change in the currency stipulated for "Public Utility Revenues" under the
1997 Concession Agreement, except terminal fees, gives PIATCO an added
benefit which was not available at the time of bidding.
b. Assumption by the
Government of the liabilities of
PIATCO in the event of the latter's
default thereof
Under the draft Concession Agreement, default by PIATCO of any of its
obligations to creditors who have provided, loaned or advanced funds for the
NAIA IPT III project does not result in the assumption by the Government of
these liabilities. In fact, nowhere in the said contract does default of
PIATCO's loans figure in the agreement. Such default does not directly result
in any concomitant right or obligation in favor of the Government.
However, the 1997 Concession Agreement provides:
Section 4.04 Assignment.
xxx xxx xxx
(b) In the event Concessionaire should default in the payment of an
Attendant Liability, and the default has resulted in the acceleration of the
payment due date of the Attendant Liability prior to its stated date of
maturity, the Unpaid Creditors and Concessionaire shall immediately inform
GRP in writing of such default. GRP shall, within one hundred eighty (180)
Days from receipt of the joint written notice of the Unpaid Creditors and
Concessionaire, either (i) take over the Development Facility and assume the
Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified, to be
substituted as concessionaire and operator of the Development Facility in
accordance with the terms and conditions hereof, or designate a qualified
operator acceptable to GRP to operate the Development Facility, likewise
under the terms and conditions of this Agreement; Provided that if at the end
of the 180-day period GRP shall not have served the Unpaid Creditors and
Concessionaire written notice of its choice, GRP shall be deemed to have
elected to take over the Development Facility with the concomitant
assumption of Attendant Liabilities.
(c) If GRP should, by written notice, allow the Unpaid Creditors to be
substituted as concessionaire, the latter shall form and organize a concession
company qualified to take over the operation of the Development Facility. If
the concession company should elect to designate an operator for the
Development Facility, the concession company shall in good faith identify
and designate a qualified operator acceptable to GRP within one hundred
eighty (180) days from receipt of GRP's written notice. If the concession
company, acting in good faith and with due diligence, is unable to designate
a qualified operator within the aforesaid period, then GRP shall at the end of
the 180-day period take over the Development Facility and assume Attendant
Liabilities.
The term "Attendant Liabilities" under the 1997 Concession Agreement is
defined as:
Attendant Liabilities refer to all amounts recorded and from time to time
outstanding in the books of the Concessionaire as owing to Unpaid
Creditors who have provided, loaned or advanced funds actually used
for the Project, including all interests, penalties, associated fees, charges,
surcharges, indemnities, reimbursements and other related expenses, and
further including amounts owed by Concessionaire to its suppliers,
contractors and sub-contractors.
Under the above quoted portions of Section 4.04 in relation to the definition
of "Attendant Liabilities," default by PIATCO of its loans used to finance
the NAIA IPT III project triggers the occurrence of certain events that
leads to the assumption by the Government of the liability for the loans.
Only in one instance may the Government escape the assumption of
PIATCO's liabilities, i.e., when the Government so elects and allows a
qualified operator to take over as Concessionaire. However, this
circumstance is dependent on the existence and availability of a qualified
operator who is willing to take over the rights and obligations of
PIATCO under the contract, a circumstance that is not entirely within
the control of the Government.
Without going into the validity of this provision at this juncture, suffice it to
state that Section 4.04 of the 1997 Concession Agreement may be considered
a form of security for the loans PIATCO has obtained to finance the project,
an option that was not made available in the draft Concession Agreement.
Section 4.04 is an important amendment to the 1997 Concession Agreement
because it grants PIATCO a financial advantage or benefit which was not
previously made available during the bidding process. This financial
advantage is a significant modification that translates to better terms and
conditions for PIATCO.
PIATCO, however, argues that the parties to the bidding procedure
acknowledge that the draft Concession Agreement is subject to amendment
because the Bid Documents permit financing or borrowing. They claim that
it was the lenders who proposed the amendments to the draft Concession
Agreement which resulted in the 1997 Concession Agreement.
We agree that it is not inconsistent with the rationale and purpose of the BOT
Law to allow the project proponent or the winning bidder to obtain financing
for the project, especially in this case which involves the construction,
operation and maintenance of the NAIA IPT III. Expectedly, compliance by
the project proponent of its undertakings therein would involve a substantial
amount of investment. It is therefore inevitable for the awardee of the
contract to seek alternate sources of funds to support the project. Be that as it
may, this Court maintains that amendments to the contract bidded upon
should always conform to the general policy on public bidding if such
procedure is to be faithful to its real nature and purpose. By its very nature
and characteristic, competitive public bidding aims to protect the public
interest by giving the public the best possible advantages through open
competition.45 It has been held that the three principles in public bidding are
(1) the offer to the public; (2) opportunity for competition; and (3) a basis for
the exact comparison of bids. A regulation of the matter which excludes any
of these factors destroys the distinctive character of the system and thwarts
the purpose of its adoption.46 These are the basic parameters which every
awardee of a contract bidded out must conform to, requirements of financing
and borrowing notwithstanding. Thus, upon a concrete showing that, as in
this case, the contract signed by the government and the contract-awardee is
an entirely different contract from the contract bidded, courts should not
hesitate to strike down said contract in its entirety for violation of public
policy on public bidding. A strict adherence on the principles, rules and
regulations on public bidding must be sustained if only to preserve the
integrity and the faith of the general public on the procedure.
Public bidding is a standard practice for procuring government contracts for
public service and for furnishing supplies and other materials. It aims to
secure for the government the lowest possible price under the most favorable
terms and conditions, to curtail favoritism in the award of government
contracts and avoid suspicion of anomalies and it places all bidders in equal
footing.47 Any government action which permits any substantial variance
between the conditions under which the bids are invited and the contract
executed after the award thereof is a grave abuse of discretion
amounting to lack or excess of jurisdiction which warrants proper
judicial action.
In view of the above discussion, the fact that the foregoing substantial
amendments were made on the 1997 Concession Agreement renders the
same null and void for being contrary to public policy. These amendments
convert the 1997 Concession Agreement to an entirely different
agreement from the contract bidded out or the draft Concession Agreement.
It is not difficult to see that the amendments on (1) the types of fees or
charges that are subject to MIAA regulation or control and the extent thereof
and (2) the assumption by the Government, under certain conditions, of the
liabilities of PIATCO directly translates concrete financial advantages to
PIATCO that were previously not available during the bidding process.
These amendments cannot be taken as merely supplements to or
implementing provisions of those already existing in the draft Concession
Agreement. The amendments discussed above present new terms and
conditions which provide financial benefit to PIATCO which may have
altered the technical and financial parameters of other bidders had they
known that such terms were available.
III
Direct Government Guarantee
Article IV, Section 4.04(b) and (c), in relation to Article 1.06, of the 1997
Concession Agreement provides:
Section 4.04 Assignment
xxx xxx xxx
(b) In the event Concessionaire should default in the payment of an
Attendant Liability, and the default resulted in the acceleration of the
payment due date of the Attendant Liability prior to its stated date of
maturity, the Unpaid Creditors and Concessionaire shall immediately inform
GRP in writing of such default. GRP shall within one hundred eighty (180)
days from receipt of the joint written notice of the Unpaid Creditors and
Concessionaire, either (i) take over the Development Facility and assume the
Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified to be
substituted as concessionaire and operator of the Development facility in
accordance with the terms and conditions hereof, or designate a qualified
operator acceptable to GRP to operate the Development Facility, likewise
under the terms and conditions of this Agreement; Provided, that if at the end
of the 180-day period GRP shall not have served the Unpaid Creditors and
Concessionaire written notice of its choice, GRP shall be deemed to have
elected to take over the Development Facility with the concomitant
assumption of Attendant Liabilities.
(c) If GRP, by written notice, allow the Unpaid Creditors to be substituted as
concessionaire, the latter shall form and organize a concession company
qualified to takeover the operation of the Development Facility. If the
concession company should elect to designate an operator for the
Development Facility, the concession company shall in good faith identify
and designate a qualified operator acceptable to GRP within one hundred
eighty (180) days from receipt of GRP's written notice. If the concession
company, acting in good faith and with due diligence, is unable to designate
a qualified operator within the aforesaid period, then GRP shall at the end of
the 180-day period take over the Development Facility and assume
Attendant Liabilities.
….
Section 1.06. Attendant Liabilities
Attendant Liabilities refer to all amounts recorded and from time to time
outstanding in the books of the Concessionaire as owing to Unpaid
Creditors who have provided, loaned or advanced funds actually used for
the Project, including all interests, penalties, associated fees, charges,
surcharges, indemnities, reimbursements and other related expenses, and
further including amounts owed by Concessionaire to its suppliers,
contractors and sub-contractors.48
It is clear from the above-quoted provisions that Government, in the event
that PIATCO defaults in its loan obligations, is obligated to pay "all
amounts recorded and from time to time outstanding from the books" of
PIATCO which the latter owes to its creditors.49 These amounts include "all
interests, penalties, associated fees, charges, surcharges, indemnities,
reimbursements and other related expenses."50 This obligation of the
Government to pay PIATCO's creditors upon PIATCO's default would arise
if the Government opts to take over NAIA IPT III. It should be noted,
however, that even if the Government chooses the second option, which is to
allow PIATCO's unpaid creditors operate NAIA IPT III, the Government is
still at a risk of being liable to PIATCO's creditors should the latter be unable
to designate a qualified operator within the prescribed period.51 In
effect, whatever option the Government chooses to take in the event of
PIATCO's failure to fulfill its loan obligations, the Government is still at
a risk of assuming PIATCO's outstanding loans. This is due to the fact
that the Government would only be free from assuming PIATCO's debts if
the unpaid creditors would be able to designate a qualified operator within
the period provided for in the contract. Thus, the Government's assumption
of liability is virtually out of its control. The Government under the
circumstances provided for in the 1997 Concession Agreement is at the
mercy of the existence, availability and willingness of a qualified operator.
The above contractual provisions constitute a direct government guarantee
which is prohibited by law.
One of the main impetus for the enactment of the BOT Law is the lack of
government funds to construct the infrastructure and development projects
necessary for economic growth and development. This is why private sector
resources are being tapped in order to finance these projects. The BOT law
allows the private sector to participate, and is in fact encouraged to do so by
way of incentives, such as minimizing the unstable flow of
returns,52 provided that the government would not have to unnecessarily
expend scarcely available funds for the project itself. As such, direct
guarantee, subsidy and equity by the government in these projects are strictly
prohibited.53 This is but logical for if the government would in the end
still be at a risk of paying the debts incurred by the private entity in the
BOT projects, then the purpose of the law is subverted.
Section 2(n) of the BOT Law defines direct guarantee as follows:
(n) Direct government guarantee — An agreement whereby the government
or any of its agencies or local government units assume responsibility for
the repayment of debt directly incurred by the project proponent in
implementing the project in case of a loan default.
Clearly by providing that the Government "assumes" the attendant liabilities,
which consists of PIATCO's unpaid debts, the 1997 Concession Agreement
provided for a direct government guarantee for the debts incurred by
PIATCO in the implementation of the NAIA IPT III project. It is of no
moment that the relevant sections are subsumed under the title of
"assignment". The provisions providing for direct government guarantee
which is prohibited by law is clear from the terms thereof.
The fact that the ARCA superseded the 1997 Concession Agreement did not
cure this fatal defect. Article IV, Section 4.04(c), in relation to Article I,
Section 1.06, of the ARCA provides:
Section 4.04 Security
xxx xxx xxx
(c) GRP agrees with Concessionaire (PIATCO) that it shall negotiate in
good faith and enter into direct agreement with the Senior Lenders, or
with an agent of such Senior Lenders (which agreement shall be subject to
the approval of the Bangko Sentral ng Pilipinas), in such form as may be
reasonably acceptable to both GRP and Senior Lenders, with regard, inter
alia, to the following parameters:
xxx xxx xxx
(iv) If the Concessionaire [PIATCO] is in default under a payment
obligation owed to the Senior Lenders, and as a result thereof the Senior
Lenders have become entitled to accelerate the Senior Loans, the Senior
Lenders shall have the right to notify GRP of the same, and without prejudice
to any other rights of the Senior Lenders or any Senior Lenders' agent may
have (including without limitation under security interests granted in favor of
the Senior Lenders), to either in good faith identify and designate a nominee
which is qualified under sub-clause (viii)(y) below to operate the
Development Facility [NAIA Terminal 3] or transfer the Concessionaire's
[PIATCO] rights and obligations under this Agreement to a transferee which
is qualified under sub-clause (viii) below;
xxx xxx xxx
(vi) if the Senior Lenders, acting in good faith and using reasonable efforts,
are unable to designate a nominee or effect a transfer in terms and conditions
satisfactory to the Senior Lenders within one hundred eighty (180) days after
giving GRP notice as referred to respectively in (iv) or (v) above, then GRP
and the Senior Lenders shall endeavor in good faith to enter into any other
arrangement relating to the Development Facility [NAIA Terminal 3] (other
than a turnover of the Development Facility [NAIA Terminal 3] to GRP)
within the following one hundred eighty (180) days. If no
agreement relating to the Development Facility [NAIA Terminal 3] is
arrived at by GRP and the Senior Lenders within the said 180-day period,
then at the end thereof the Development Facility [NAIA Terminal 3] shall
be transferred by the Concessionaire [PIATCO] to GRP or its designee
and GRP shall make a termination payment to Concessionaire
[PIATCO] equal to the Appraised Value (as hereinafter defined) of the
Development Facility [NAIA Terminal 3] or the sum of the Attendant
Liabilities, if greater. Notwithstanding Section 8.01(c) hereof, this
Agreement shall be deemed terminated upon the transfer of the Development
Facility [NAIA Terminal 3] to GRP pursuant hereto;
xxx xxx xxx
Section 1.06. Attendant Liabilities
Attendant Liabilities refer to all amounts in each case supported by
verifiable evidence from time to time owed or which may become owing by
Concessionaire [PIATCO] to Senior Lenders or any other persons or
entities who have provided, loaned, or advanced funds or provided
financial facilities to Concessionaire [PIATCO] for the Project [NAIA
Terminal 3], including, without limitation, all principal, interest,
associated fees, charges, reimbursements, and other related
expenses (including the fees, charges and expenses of any agents or trustees
of such persons or entities), whether payable at maturity, by acceleration or
otherwise, and further including amounts owed by Concessionaire [PIATCO]
to its professional consultants and advisers, suppliers, contractors and sub-
contractors.54
It is clear from the foregoing contractual provisions that in the event that
PIATCO fails to fulfill its loan obligations to its Senior Lenders, the
Government is obligated to directly negotiate and enter into an agreement
relating to NAIA IPT III with the Senior Lenders, should the latter fail to
appoint a qualified nominee or transferee who will take the place of
PIATCO. If the Senior Lenders and the Government are unable to enter into
an agreement after the prescribed period, the Government must then pay
PIATCO, upon transfer of NAIA IPT III to the Government, termination
payment equal to the appraised value of the project or the value of the
attendant liabilities whichever is greater. Attendant liabilities as defined in
the ARCA includes all amounts owed or thereafter may be owed by PIATCO
not only to the Senior Lenders with whom PIATCO has defaulted in its loan
obligations but to all other persons who may have loaned, advanced funds or
provided any other type of financial facilities to PIATCO for NAIA IPT III.
The amount of PIATCO's debt that the Government would have to pay as a
result of PIATCO's default in its loan obligations -- in case no qualified
nominee or transferee is appointed by the Senior Lenders and no other
agreement relating to NAIA IPT III has been reached between the
Government and the Senior Lenders -- includes, but is not limited to, "all
principal, interest, associated fees, charges, reimbursements, and other
related expenses . . . whether payable at maturity, by acceleration or
otherwise."55
It is clear from the foregoing that the ARCA provides for a direct
guarantee by the government to pay PIATCO's loans not only to its
Senior Lenders but all other entities who provided PIATCO funds or
services upon PIATCO's default in its loan obligation with its Senior
Lenders. The fact that the Government's obligation to pay PIATCO's lenders
for the latter's obligation would only arise after the Senior Lenders fail to
appoint a qualified nominee or transferee does not detract from the fact that,
should the conditions as stated in the contract occur, the ARCA still obligates
the Government to pay any and all amounts owed by PIATCO to its lenders
in connection with NAIA IPT III. Worse, the conditions that would make the
Government liable for PIATCO's debts is triggered by PIATCO's own
default of its loan obligations to its Senior Lenders to which loan contracts
the Government was never a party to. The Government was not even given
an option as to what course of action it should take in case PIATCO
defaulted in the payment of its senior loans. The Government, upon
PIATCO's default, would be merely notified by the Senior Lenders of the
same and it is the Senior Lenders who are authorized to appoint a qualified
nominee or transferee. Should the Senior Lenders fail to make such an
appointment, the Government is then automatically obligated to "directly
deal and negotiate" with the Senior Lenders regarding NAIA IPT III. The
only way the Government would not be liable for PIATCO's debt is for a
qualified nominee or transferee to be appointed in place of PIATCO to
continue the construction, operation and maintenance of NAIA IPT III. This
"pre-condition", however, will not take the contract out of the ambit of a
direct guarantee by the government as the existence, availability and
willingness of a qualified nominee or transferee is totally out of the
government's control. As such the Government is virtually at the mercy of
PIATCO (that it would not default on its loan obligations to its Senior
Lenders), the Senior Lenders (that they would appoint a qualified nominee or
transferee or agree to some other arrangement with the Government) and the
existence of a qualified nominee or transferee who is able and willing to take
the place of PIATCO in NAIA IPT III.
The proscription against government guarantee in any form is one of the
policy considerations behind the BOT Law. Clearly, in the present case,
the ARCA obligates the Government to pay for all loans, advances and
obligations arising out of financial facilities extended to PIATCO for the
implementation of the NAIA IPT III project should PIATCO default in its
loan obligations to its Senior Lenders and the latter fails to appoint a
qualified nominee or transferee. This in effect would make the Government
liable for PIATCO's loans should the conditions as set forth in the ARCA
arise. This is a form of direct government guarantee.
The BOT Law and its implementing rules provide that in order for an
unsolicited proposal for a BOT project may be accepted, the following
conditions must first be met: (1) the project involves a new concept in
technology and/or is not part of the list of priority projects, (2) no direct
government guarantee, subsidy or equity is required, and (3) the
government agency or local government unit has invited by publication other
interested parties to a public bidding and conducted the same.56 The failure to
meet any of the above conditions will result in the denial of the proposal. It is
further provided that the presence of direct government guarantee, subsidy or
equity will "necessarily disqualify a proposal from being treated and
accepted as an unsolicited proposal."57 The BOT Law clearly and strictly
prohibits direct government guarantee, subsidy and equity in unsolicited
proposals that the mere inclusion of a provision to that effect is fatal and is
sufficient to deny the proposal. It stands to reason therefore that if a proposal
can be denied by reason of the existence of direct government guarantee,
then its inclusion in the contract executed after the said proposal has been
accepted is likewise sufficient to invalidate the contract itself. A prohibited
provision, the inclusion of which would result in the denial of a proposal
cannot, and should not, be allowed to later on be inserted in the contract
resulting from the said proposal. The basic rules of justice and fair play alone
militate against such an occurrence and must not, therefore, be countenanced
particularly in this instance where the government is exposed to the risk of
shouldering hundreds of million of dollars in debt.
This Court has long and consistently adhered to the legal maxim that those
that cannot be done directly cannot be done indirectly.58 To declare the
PIATCO contracts valid despite the clear statutory prohibition against a
direct government guarantee would not only make a mockery of what
the BOT Law seeks to prevent -- which is to expose the government to
the risk of incurring a monetary obligation resulting from a contract of
loan between the project proponent and its lenders and to which the
Government is not a party to -- but would also render the BOT Law
useless for what it seeks to achieve –- to make use of the resources of the
private sector in the "financing, operation and maintenance of
infrastructure and development projects"59which are necessary for
national growth and development but which the government,
unfortunately, could ill-afford to finance at this point in time.
IV
Temporary takeover of business affected with public interest
Article XII, Section 17 of the 1987 Constitution provides:
Section 17. In times of national emergency, when the public interest so
requires, the State may, during the emergency and under reasonable terms
prescribed by it, temporarily take over or direct the operation of any privately
owned public utility or business affected with public interest.
The above provision pertains to the right of the State in times of national
emergency, and in the exercise of its police power, to temporarily take over
the operation of any business affected with public interest. In the 1986
Constitutional Commission, the term "national emergency" was defined to
include threat from external aggression, calamities or national disasters, but
not strikes "unless it is of such proportion that would paralyze government
service."60 The duration of the emergency itself is the determining factor as
to how long the temporary takeover by the government would last.61 The
temporary takeover by the government extends only to the operation of the
business and not to the ownership thereof. As such the government is not
required to compensate the private entity-owner of the said business as
there is no transfer of ownership, whether permanent or temporary. The
private entity-owner affected by the temporary takeover cannot, likewise,
claim just compensation for the use of the said business and its properties as
the temporary takeover by the government is in exercise of its police
power and not of its power of eminent domain.
Article V, Section 5.10 (c) of the 1997 Concession Agreement provides:
Section 5.10 Temporary Take-over of operations by GRP.
….
(c) In the event the development Facility or any part thereof and/or the
operations of Concessionaire or any part thereof, become the subject matter
of or be included in any notice, notification, or declaration concerning or
relating to acquisition, seizure or appropriation by GRP in times of war or
national emergency, GRP shall, by written notice to Concessionaire,
immediately take over the operations of the Terminal and/or the Terminal
Complex. During such take over by GRP, the Concession Period shall be
suspended; provided, that upon termination of war, hostilities or national
emergency, the operations shall be returned to Concessionaire, at which time,
the Concession period shall commence to run again. Concessionaire shall be
entitled to reasonable compensation for the duration of the temporary
take over by GRP, which compensation shall take into account the
reasonable cost for the use of the Terminal and/or Terminal Complex,
(which is in the amount at least equal to the debt service requirements of
Concessionaire, if the temporary take over should occur at the time when
Concessionaire is still servicing debts owed to project lenders), any loss or
damage to the Development Facility, and other consequential damages. If the
parties cannot agree on the reasonable compensation of Concessionaire, or on
the liability of GRP as aforesaid, the matter shall be resolved in accordance
with Section 10.01 [Arbitration]. Any amount determined to be payable by
GRP to Concessionaire shall be offset from the amount next payable by
Concessionaire to GRP.62
PIATCO cannot, by mere contractual stipulation, contravene the
Constitutional provision on temporary government takeover and
obligate the government to pay "reasonable cost for the use of the
Terminal and/or Terminal Complex."63 Article XII, section 17 of the 1987
Constitution envisions a situation wherein the exigencies of the times
necessitate the government to "temporarily take over or direct the operation
of any privately owned public utility or business affected with public
interest." It is the welfare and interest of the public which is the paramount
consideration in determining whether or not to temporarily take over a
particular business. Clearly, the State in effecting the temporary takeover is
exercising its police power. Police power is the "most essential, insistent, and
illimitable of powers."64 Its exercise therefore must not be unreasonably
hampered nor its exercise be a source of obligation by the government in the
absence of damage due to arbitrariness of its exercise.65 Thus, requiring the
government to pay reasonable compensation for the reasonable use of the
property pursuant to the operation of the business contravenes the
Constitution.
V
Regulation of Monopolies
A monopoly is "a privilege or peculiar advantage vested in one or more
persons or companies, consisting in the exclusive right (or power) to carry on
a particular business or trade, manufacture a particular article, or control the
sale of a particular commodity."66 The 1987 Constitution strictly regulates
monopolies, whether private or public, and even provides for their
prohibition if public interest so requires. Article XII, Section 19 of the 1987
Constitution states:
Sec. 19. The state shall regulate or prohibit monopolies when the public
interest so requires. No combinations in restraint of trade or unfair
competition shall be allowed.
Clearly, monopolies are not per se prohibited by the Constitution but may be
permitted to exist to aid the government in carrying on an enterprise or to aid
in the performance of various services and functions in the interest of the
public.67 Nonetheless, a determination must first be made as to whether
public interest requires a monopoly. As monopolies are subject to abuses that
can inflict severe prejudice to the public, they are subject to a higher level of
State regulation than an ordinary business undertaking.
In the cases at bar, PIATCO, under the 1997 Concession Agreement and the
ARCA, is granted the "exclusive rightto operate a commercial international
passenger terminal within the Island of Luzon" at the NAIA IPT III.68 This is
with the exception of already existing international airports in Luzon such as
those located in the Subic Bay Freeport Special Economic Zone
("SBFSEZ"), Clark Special Economic Zone ("CSEZ") and in Laoag
City.69 As such, upon commencement of PIATCO's operation of NAIA IPT
III, Terminals 1 and 2 of NAIA would cease to function as international
passenger terminals. This, however, does not prevent MIAA to use Terminals
1 and 2 as domestic passenger terminals or in any other manner as it may
deem appropriate except those activities that would compete with NAIA IPT
III in the latter's operation as an international passenger terminal.70 The right
granted to PIATCO to exclusively operate NAIA IPT III would be for a
period of twenty-five (25) years from the In-Service Date71 and renewable
for another twenty-five (25) years at the option of the government.72 Both
the 1997 Concession Agreement and the ARCA further provide that, in
view of the exclusive right granted to PIATCO, the concession contracts
of the service providers currently servicing Terminals 1 and 2 would no
longer be renewed and those concession contracts whose expiration are
subsequent to the In-Service Date would cease to be effective on the said
date.73
The operation of an international passenger airport terminal is no doubt an
undertaking imbued with public interest. In entering into a Build–Operate-
and-Transfer contract for the construction, operation and maintenance of
NAIA IPT III, the government has determined that public interest would be
served better if private sector resources were used in its construction and an
exclusive right to operate be granted to the private entity undertaking the said
project, in this case PIATCO. Nonetheless, the privilege given to PIATCO is
subject to reasonable regulation and supervision by the Government through
the MIAA, which is the government agency authorized to operate the NAIA
complex, as well as DOTC, the department to which MIAA is attached.74
This is in accord with the Constitutional mandate that a monopoly which is
not prohibited must be regulated.75 While it is the declared policy of the BOT
Law to encourage private sector participation by "providing a climate of
minimum government regulations,"76 the same does not mean that
Government must completely surrender its sovereign power to protect public
interest in the operation of a public utility as a monopoly. The operation of
said public utility can not be done in an arbitrary manner to the detriment of
the public which it seeks to serve. The right granted to the public utility may
be exclusive but the exercise of the right cannot run riot. Thus, while
PIATCO may be authorized to exclusively operate NAIA IPT III as an
international passenger terminal, the Government, through the MIAA, has
the right and the duty to ensure that it is done in accord with public interest.
PIATCO's right to operate NAIA IPT III cannot also violate the rights of
third parties.
Section 3.01(e) of the 1997 Concession Agreement and the ARCA provide:
3.01 Concession Period
xxx xxx xxx
(e) GRP confirms that certain concession agreements relative to certain
services and operations currently being undertaken at the Ninoy Aquino
International Airport passenger Terminal I have a validity period extending
beyond the In-Service Date. GRP through DOTC/MIAA, confirms that
these services and operations shall not be carried over to the Terminal and
the Concessionaire is under no legal obligation to permit such carry-
over except through a separate agreement duly entered into with
Concessionaire. In the event Concessionaire becomes involved in any
litigation initiated by any such concessionaire or operator, GRP undertakes
and hereby holds Concessionaire free and harmless on full indemnity basis
from and against any loss and/or any liability resulting from any such
litigation, including the cost of litigation and the reasonable fees paid or
payable to Concessionaire's counsel of choice, all such amounts shall be fully
deductible by way of an offset from any amount which the Concessionaire is
bound to pay GRP under this Agreement.
During the oral arguments on December 10, 2002, the counsel for the
petitioners-in-intervention for G.R. No. 155001 stated that there are two
service providers whose contracts are still existing and whose validity
extends beyond the In-Service Date. One contract remains valid until 2008
and the other until 2010.77
We hold that while the service providers presently operating at NAIA
Terminal 1 do not have an absolute right for the renewal or the extension of
their respective contracts, those contracts whose duration extends beyond
NAIA IPT III's In-Service-Date should not be unduly prejudiced. These
contracts must be respected not just by the parties thereto but also by third
parties. PIATCO cannot, by law and certainly not by contract, render a valid
and binding contract nugatory. PIATCO, by the mere expedient of claiming
an exclusive right to operate, cannot require the Government to break its
contractual obligations to the service providers. In contrast to the arrastre and
stevedoring service providers in the case of Anglo-Fil Trading Corporation
v. Lazaro78 whose contracts consist of temporary hold-over permits, the
affected service providers in the cases at bar, have a valid and binding
contract with the Government, through MIAA, whose period of effectivity,
as well as the other terms and conditions thereof, cannot be violated.
In fine, the efficient functioning of NAIA IPT III is imbued with public
interest. The provisions of the 1997 Concession Agreement and the ARCA
did not strip government, thru the MIAA, of its right to supervise the
operation of the whole NAIA complex, including NAIA IPT III. As the
primary government agency tasked with the job,79 it is MIAA's responsibility
to ensure that whoever by contract is given the right to operate NAIA IPT III
will do so within the bounds of the law and with due regard to the rights of
third parties and above all, the interest of the public.
VI
CONCLUSION
In sum, this Court rules that in view of the absence of the requisite financial
capacity of the Paircargo Consortium, predecessor of respondent PIATCO,
the award by the PBAC of the contract for the construction, operation and
maintenance of the NAIA IPT III is null and void. Further, considering that
the 1997 Concession Agreement contains material and substantial
amendments, which amendments had the effect of converting the 1997
Concession Agreement into an entirely different agreement from the contract
bidded upon, the 1997 Concession Agreement is similarly null and void for
being contrary to public policy. The provisions under Sections 4.04(b) and
(c) in relation to Section 1.06 of the 1997 Concession Agreement and Section
4.04(c) in relation to Section 1.06 of the ARCA, which constitute a direct
government guarantee expressly prohibited by, among others, the BOT Law
and its Implementing Rules and Regulations are also null and void. The
Supplements, being accessory contracts to the ARCA, are likewise null and
void.
WHEREFORE, the 1997 Concession Agreement, the Amended and
Restated Concession Agreement and the Supplements thereto are set aside
for being null and void.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Ynares-Santiago, Sandoval-Gutierrez, Austria-
Martinez, Corona, and Carpio-Morales, JJ., concur.
Vitug, J., see separate (dissenting) opinion.
Panganiban, J., please see separate opinion.
Quisumbing, J., no jurisdiction, please see separate opinion of J. Vitug in
which he concurs.
Carpio, J., no part.
Callejo, Sr., J., also concur in the separate opinion of J. Panganiban.
Azcuna, J., joins the separate opinion of J. Vitug.
SEPARATE OPINIONS
VITUG, J.:
This Court is bereft of jurisdiction to hear the petitions at bar. The
Constitution provides that the Supreme Court shall exercise original
jurisdiction over, among other actual controversies, petitions for certiorari,
prohibition, mandamus, quo warranto, and habeas corpus.1 The cases in
question, although denominated to be petitions for prohibition, actually pray
for the nullification of the PIATCO contracts and to restrain respondents
from implementing said agreements for being illegal and unconstitutional.
Section 2, Rule 65 of the Rules of Court states:
"When the proceedings of any tribunal, corporation, board, officer or person,
whether exercising judicial, quasi-judicial or ministerial functions, are
without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal
or any other plain, speedy and adequate remedy in the ordinary course of
law, a person aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that judgment be rendered
commanding the respondent to desist from further proceedings in the action
or matter specified therein, or otherwise granting such incidental reliefs as
law and justice may require."
The rule is explicit. A petition for prohibition may be filed against a tribunal,
corporation, board, officer or person, exercising judicial, quasi-judicial or
ministerial functions. What the petitions seek from respondents do not
involve judicial, quasi-judicial or ministerial functions. In prohibition, only
legal issues affecting the jurisdiction of the tribunal, board or officer
involved may be resolved on the basis of undisputed facts.2 The parties
allege, respectively, contentious evidentiary facts. It would be difficult, if not
anomalous, to decide the jurisdictional issue on the basis of the contradictory
factual submissions made by the parties.3 As the Court has so often exhorted,
it is not a trier of facts.
The petitions, in effect, are in the nature of actions for declaratory relief
under Rule 63 of the Rules of Court. The Rules provide that any person
interested under a contract may, before breach or violation thereof, bring an
action in the appropriate Regional Trial Court to determine any question of
construction or validity arising, and for a declaration of his rights or duties
thereunder.4 The Supreme Court assumes no jurisdiction over petitions for
declaratory relief which are cognizable by regional trial courts.5
As I have so expressed in Tolentino vs. Secretary of Finance,6 reiterated in
Santiago vs. Guingona, Jr.7 , the Supreme Court should not be thought of as
having been tasked with the awesome responsibility of overseeing the entire
bureaucracy. Pervasive and limitless, such as it may seem to be under the
1987 Constitution, judicial power still succumbs to the paramount doctrine of
separation of powers. The Court may not at good liberty intrude, in the guise
of sovereign imprimatur, into every affair of government. What significance
can still then remain of the time-honored and widely acclaimed principle of
separation of powers if, at every turn, the Court allows itself to pass upon at
will the disposition of a co-equal, independent and coordinate branch in our
system of government. I dread to think of the so varied uncertainties that
such an undue interference can lead to.
Accordingly, I vote for the dismissal of the petition.
Quisumbing, and Azcuna, JJ., concur.
PANGANIBAN, J.:
The five contracts for the construction and the operation of Ninoy Aquino
International Airport (NAIA) Terminal III, the subject of the consolidated
Petitions before the Court, are replete with outright violations of law, public
policy and the Constitution. The only proper thing to do is declare them all
null and void ab initio and let the chips fall where they may. Fiat iustitia ruat
coelum.
The facts leading to this controversy are already well presented in
the ponencia. I shall not burden the readers with a retelling thereof. Instead, I
will cut to the chase and directly address the two sets of gut issues:
1. The first issue is procedural: Does the Supreme Court have original
jurisdiction to hear and decide the Petitions? Corollarily, do petitioners have
locus standi and should this Court decide the cases without any mandatory
referral to arbitration?
2. The second one is substantive in character: Did the subject contracts
violate the Constitution, the laws, and public policy to such an extent as to
render all of them void and inexistent?
My answer to all the above questions is a firm "Yes."
The Procedural Issue:
Jurisdiction, Standing and Arbitration
Definitely and surely, the issues involved in these Petitions are clearly of
transcendental importance and of national interest. The subject contracts
pertain to the construction and the operation of the country's premiere
international airport terminal - an ultramodern world-class public utility that
will play a major role in the country's economic development and serve to
project a positive image of our country abroad. The five build-operate-&-
transfer (BOT) contracts, while entailing the investment of billions of pesos
in capital and the availment of several hundred millions of dollars in loans,
contain provisions that tend to establish a monopoly, require the
disbursements of public funds sans appropriations, and provide government
guarantees in violation of statutory prohibitions, as well as other provisions
equally offensive to law, public policy and the Constitution. Public interest
will inevitably be affected thereby.
Thus, objections to these Petitions, grounded upon (a) the hierarchy of
courts, (b) the need for arbitration prior to court action, and (c) the alleged
lack of sufficient personality, standing or interest, being in the main
procedural matters, must now be set aside, as they have been in past cases.
This Court must be permitted to perform its constitutional duty of
determining whether the other agencies of government have acted within the
limits of the Constitution and the laws, or if they have gravely abused the
discretion entrusted to them.1
Hierarchy of Courts
The Court has, in the past, held that questions relating to gargantuan
government contracts ought to be settled without delay.2 This holding applies
with greater force to the instant cases. Respondent Piatco is partly correct in
averring that petitioners can obtain relief from the regional trial courts via an
action to annul the contracts.
Nevertheless, the unavoidable consequence of having to await the rendition
and the finality of any such judgment would be a prolonged state of
uncertainty that would be prejudicial to the nation, the parties and the general
public. And, in light of the feared loss of jobs of the petitioning workers,
consequent to the inevitable pretermination of contracts of the petitioning
service providers that will follow upon the heels of the impending opening of
NAIA Terminal III, the need for relief is patently urgent, and therefore, direct
resort to this Court through the special civil action of prohibition is thus
justified.3
Contrary to Piatco's argument that the resolution of the issues raised in the
Petitions will require delving into factual questions,4 I submit that their
disposition ultimately turns on questions of law.5 Further, many of the
significant and relevant factual questions can be easily addressed by an
examination of the documents submitted by the parties. In any event, the
Petitions raise some novel questions involving the application of the
amended BOT Law, which this Court has seen fit to tackle.
Arbitration
Should the dispute be referred to arbitration prior to judicial recourse?
Respondent Piatco claims that Section 10.02 of the Amended and Restated
Concession Agreement (ARCA) provides for arbitration under the auspices
of the International Chamber of Commerce to settle any dispute or
controversy or claim arising in connection with the Concession Agreement,
its amendments and supplements. The government disagrees, however,
insisting that there can be no arbitration based on Section 10.02 of the
ARCA, since all the Piatco contracts are void ab initio. Therefore, all
contractual provisions, including Section 10.02 of the ARCA, are likewise
void, inexistent and inoperative. To support its stand, the government
cites Chavez v. Presidential Commission on Good Government:6"The void
agreement will not be rendered operative by the parties' alleged performance
(partial or full) of their respective prestations. A contract that violates the
Constitution and the law is null and void ab initio and vests no rights and
creates no obligations. It produces no legal effect at all."
As will be discussed at length later, the Piatco contracts are indeed void in
their entirety; thus, a resort to the aforesaid provision on arbitration is
unavailing. Besides, petitioners and petitioners-in-intervention have pointed
out that, even granting arguendo that the arbitration clause remained a valid
provision, it still cannot bind them inasmuch as they are not parties to the
Piatco contracts. And in the final analysis, it is unarguable that the arbitration
process provided for under Section 10.02 of the ARCA, to be undertaken by
a panel of three (3) arbitrators appointed in accordance with the Rules of
Arbitration of the International Chamber of Commerce, will not be able to
address, determine and definitively resolve the constitutional and legal
questions that have been raised in the Petitions before us.
Locus Standi
Given this Court's previous decisions in cases of similar import, no one will
seriously doubt that, being taxpayers and members of the House of
Representatives, Petitioners Baterina et al. have locus standi to bring the
Petition in GR No. 155547. In Albano v. Reyes,7 this Court held that the
petitioner therein, suing as a citizen, taxpayer and member of the House of
Representatives, was sufficiently clothed with standing to bring the suit
questioning the validity of the assailed contract. The Court cited the fact that
public interest was involved, in view of the important role of the Manila
International Container Terminal (MICT) in the country's economic
development and the magnitude of the financial consideration. This,
notwithstanding the fact that expenditure of public funds was not required
under the assailed contract.
In the cases presently under consideration, petitioners' personal and
substantial interest in the controversy is shown by the fact that certain
provisions in the Piatco contracts create obligations on the part of
government (through the DOTC and the MIAA) to disburse public funds
without prior congressional appropriations.
Petitioners thus correctly assert that the injury to them has a twofold aspect:
(1) they are adversely affected as taxpayers on account of the illegal
disbursement of public funds; and (2) they are prejudiced qua legislators,
since the contractual provisions requiring the government to incur
expenditures without appropriations also operate as limitations upon the
exclusive power and prerogative of Congress over the public purse. As
members of the House of Representatives, they are actually deprived of
discretion insofar as the inclusion of those items of expenditure in the budget
is concerned. To prevent such encroachment upon the legislative privilege
and obviate injury to the institution of which they are members, petitioners-
legislators have locus standi to bring suit.
Messrs. Agan et al. and Lopez et al., are likewise taxpayers and thus
possessed of standing to challenge the illegal disbursement of public funds.
Messrs. Agan et al., in particular, are employees (or representatives of
employees) of various service providers that have (1) existing concession
agreements with the MIAA to provide airport services necessary to the
operation of the NAIA and (2) service agreements to furnish essential
support services to the international airlines operating at the NAIA.
On the other hand, Messrs. Lopez et al. are employees of the MIAA. These
petitioners (Messrs. Agan et al. and Messrs. Lopez et al.) are confronted with
the prospect of being laid off from their jobs and losing their means of
livelihood when their employer-companies are forced to shut down or
otherwise retrench and cut back on manpower. Such development would
result from the imminent implementation of certain provisions in the
contracts that tend toward the creation of a monopoly in favor of Piatco, its
subsidiaries and related companies.
Petitioners-in-intervention are service providers in the business of furnishing
airport-related services to international airlines and passengers in the NAIA
and are therefore competitors of Piatco as far as that line of business is
concerned. On account of provisions in the Piatco contracts, petitioners-in-
intervention have to enter into a written contract with Piatco so as not to be
shut out of NAIA Terminal III and barred from doing business there. Since
there is no provision to ensure or safeguard free and fair competition, they
are literally at its mercy. They claim injury on account of their deprivation of
property (business) and of the liberty to contract, without due process of law.
And even if petitioners and petitioners-in-intervention were not sufficiently
clothed with legal standing, I have at the outset already established that,
given its impact on the public and on national interest, this controversy is
laden with transcendental importance and constitutional significance. Hence,
I do not hesitate to adopt the same position as was enunciated in Kilosbayan
v. Guingona Jr.8 that "in cases of transcendental importance, the Court may
relax the standing requirements and allow a suit to prosper even when there
is no direct injury to the party claiming the right of judicial review."9
The Substantive Issue:
Violations of the Constitution and the Laws
From the Outset, the Bidding Process Was Flawed and Tainted
After studying the documents submitted and arguments advanced by the
parties, I have no doubt that, right at the outset, Piatco was not qualified to
participate in the bidding process for the Terminal III project, but was
nevertheless permitted to do so. It even won the bidding and was helped
along by what appears to be a series of collusive and corrosive acts.
The build-operate-and-transfer (BOT) project for the NAIA Passenger
Terminal III comes under the category of an "unsolicited proposal," which is
the subject of Section 4-A of the BOT Law.10 The unsolicited proposal was
originally submitted by the Asia's Emerging Dragon Corporation (AEDC) to
the Department of Transportation and Communications (DOTC) and the
Manila International Airport Authority (MIAA), which reviewed and
approved the proposal.
The draft of the concession agreement as negotiated between AEDC and
DOTC/MIAA was endorsed to the National Economic Development
Authority (NEDA-ICC), which in turn reviewed it on the basis of its scope,
economic viability, financial indicators and risks; and thereafter approved it
for bidding.
The DOTC/MIAA then prepared the Bid Documents, incorporating therein
the negotiated Draft Concession Agreement, and published invitations for
public bidding, i.e., for the submission of comparative or competitive
proposals. Piatco's predecessor-in-interest, the Paircargo Consortium, was the
only company that submitted a competitive bid or price challenge.
At this point, I must emphasize that the law requires the award of a BOT
project to the bidder that has satisfied the minimum requirements; and met
the technical, financial, organizational and legal standards provided in the
BOT Law. Section 5 of this statute states:
"Sec. 5. Public bidding of projects. - . . .
"In the case of a build-operate-and-transfer arrangement, the contract shall be
awarded to the bidder who, having satisfied the minimum financial,
technical, organizational and legal standards required by this Act, has
submitted the lowest bid and most favorable terms for the project, based on
the present value of its proposed tolls, fees, rentals and charges over a fixed
term for the facility to be constructed, rehabilitated, operated and maintained
according to the prescribed minimum design and performance standards,
plans and specifications. . . ." (Emphasis supplied.)
The same provision requires that the price challenge via public bidding "must
be conducted under a two-envelope/two-stage system: the first envelope to
contain the technical proposal and the second envelope to contain the
financial proposal." Moreover, the 1994 Implementing Rules and
Regulations (IRR) provide that only those bidders that have passed the
prequalification stage are permitted to have their two envelopes reviewed.
In other words, prospective bidders must prequalify by submitting their
prequalification documents for evaluation; and only the pre-qualified bidders
would be entitled to have their bids opened, evaluated and appreciated. On
the other hand, disqualified bidders are to be informed of the reason for their
disqualification. This procedure was confirmed and reiterated in the Bid
Documents, which I quote thus: "Prequalified proponents will be considered
eligible to move to second stage technical proposal evaluation. The second
and third envelopes of pre-disqualified proponents will be returned."11
Aside from complying with the legal and technical requirements (track
record or experience of the firm and its key personnel), a project proponent
desiring to prequalify must also demonstrate its financial capacity to
undertake the project. To establish such capability, a proponent must prove
that it is able to raise the minimum amount of equity required for the project
and to procure the loans or financing needed for it. Section 5.4(c) of the 1994
IRR provides:
"Sec. 5.4. Prequalification Requirements. - To pre-qualify, a project
proponent must comply with the following requirements:
xxx xxx xxx
"c. Financial Capability. The project proponent must have adequate
capability to sustain the financing requirements for the detailed engineering
design, construction, and/or operation and maintenance phases of the project,
as the case may be. For purposes of prequalification, this capability shall be
measured in terms of: (i) proof of the ability of the project proponent and/or
the consortium to provide a minimum amount of equity to the project, and (ii)
a letter testimonial from reputable banks attesting that the project proponent
and/or members of the consortium are banking with them, that they are in
good financial standing, and that they have adequate resources. The
government Agency/LGU concerned shall determine on a project-to-project
basis, and before prequalification, the minimum amount of equity needed. . .
. ." (Italics supplied)
Since the minimum amount of equity for the project was set at 30
percent12 of the minimum project cost of US$350 million, the minimum
amount of equity required of any proponent stood at US$105 million.
Converted to pesos at the exchange rate then of P26.239 to US$1.00 (as
quoted by the Bangko Sentral ng Pilipinas), the peso equivalent of the
minimum equity was P2,755,095,000.
However, the combined equity or net worth of the Paircargo consortium
stood at only P558,384,871.55.13 This amount was only slightly over 6
percent of the minimum project cost and very much short of the required
minimum equity, which was equivalent to 30 percent of the project cost.
Such deficiency should have immediately caused the disqualification of the
Paircargo consortium. This matter was brought to the attention of the
Prequalification and Bidding Committee (PBAC).
Notwithstanding the glaring deficiency, DOTC Undersecretary Primitivo C.
Cal, concurrent chair of the PBAC, declared in a Memorandum dated 14
October 1996 that "the Challenger (Paircargo consortium) was found to
have a combined net worth of P3,926,421,242.00 that could support a
project costing approximately P13 billion." To justify his conclusion, he
asserted: "It is not a requirement that the networth must be `unrestricted'. To
impose this as a requirement now will be nothing less than unfair."
He further opined, "(T)he networth reflected in the Financial Statement
should not be taken as the amount of money to be used to answer the
required thirty (30%) percent equity of the challenger but rather to be used
in establishing if there is enough basis to believe that the challenger can
comply with the required 30% equity. In fact, proof of sufficient equity is
required as one of the conditions for award of contract (Sec. 12.1 of IRR of
the BOT Law) but not for prequalification (Sec. 5.4 of same document)."
On the basis of the foregoing dubious declaration, the Paircargo consortium
was deemed prequalified and thus permitted to proceed to the other stages of
the bidding process.
By virtue of the prequalified status conferred upon the Paircargo,
Undersecretary Cal's findings in effect relieved the consortium of the need to
comply with the financial capability requirement imposed by the BOT Law
and IRR. This position is unmistakably and squarely at odds with the
Supreme Court's consistent doctrine emphasizing the strict application of
pertinent rules, regulations and guidelines for the public bidding process, in
order to place each bidder - actual or potential - on the same footing. Thus, it
is unarguably irregular and contrary to the very concept of public bidding to
permit a variance between the conditions under which bids are invited and
those under which proposals are submitted and approved.
Republic v. Capulong,14 teaches that if one bidder is relieved from having to
conform to the conditions that impose some duty upon it, that bidder is not
contracting in fair competition with those bidders that propose to be bound
by all conditions. The essence of public bidding is, after all, an opportunity
for fair competition and a basis for the precise comparison of bids.15 Thus,
each bidder must bid under the same conditions; and be subject to the same
guidelines, requirements and limitations. The desired result is to be able to
determine the best offer or lowest bid, all things being equal.
Inasmuch as the Paircargo consortium did not possess the minimum equity
equivalent to 30 percent of the minimum project cost, it should not have been
prequalified or allowed to participate further in the bidding. The
Prequalification and Bidding Committee (PBAC) should therefore not have
opened the two envelopes of the consortium containing its technical and
financial proposals; required AEDC to match the consortium's bid; 16 or
awarded the Concession Agreement to the consortium's successor-in-interest,
Piatco.
As there was effectively no public bidding to speak of, the entire bidding
process having been flawed and tainted from the very outset, therefore, the
award of the concession to Paircargo's successor Piatco was void, and the
Concession Agreement executed with the latter was likewise void ab initio.
For this reason, Piatco cannot and should not be allowed to benefit from that
Agreement.17
AEDC Was Deprived of the Right to Match PIATCO's Price Challenge
In DOTC PBAC Bid Bulletin No. 4 (par. 3), Undersecretary Cal declared
that, for purposes of matching the price challenge of Piatco, AEDC as
originator of the unsolicited proposal would be permitted access only to the
schedule of proposed Annual Guaranteed Payments submitted by Piatco, and
not to the latter's financial and technical proposals that constituted the basis
for the price challenge in the first place. This was supposedly in keeping with
Section 11.6 of the 1994 IRR, which provides that proprietary information is
to be respected, protected and treated with utmost confidentiality, and is
therefore not to form part of the bidding/tender and related documents.
This pronouncement, I believe, was a grievous misapplication of the
mentioned provision. The "proprietary information" referred to in Section
11.6 of the IRR pertains only to the proprietary information of
the originator of an unsolicited proposal, and not to those belonging to
a challenger. The reason for the protection accorded proprietary information
at all is the fact that, according to Section 4-A of the BOT Law as amended,
a proposal qualifies as an "unsolicited proposal" when it pertains to a project
that involves "a new concept or technology", and/or a project that is not on
the government's list of priority projects.
To be considered as utilizing a new concept or technology, a project must
involve the possession of exclusive rights (worldwide or regional) over a
process; or possession of intellectual property rights over a design,
methodology or engineering concept.18 Patently, the intent of the BOT Law
is to encourage individuals and groups to come up with creative innovations,
fresh ideas and new technology. Hence, the significance and necessity of
protecting proprietary information in connection with unsolicited proposals.
And to make the encouragement real, the law also extends to such
individuals and groups what amounts to a "right of first refusal" to undertake
the project they conceptualized, involving the use of new technology or
concepts, through the mechanism of matching a price challenge.
A competing bid is never just any figure conjured from out of the blue; it is
arrived at after studying economic, financial, technical and other, factors; it is
likewise based on certain assumptions as to the nature of the business, the
market potentials, the probable demand for the product or service, the future
behavior of cost items, political and other risks, and so on. It is thus self-
evident that in order to be able to intelligently match a bid or price challenge,
a bidder must be given access to the assumptions and the calculations that
went into crafting the competing bid.
In this instance, the financial and technical proposals of Piatco would have
provided AEDC with the necessary information to enable it to make a
reasonably informed matching bid. To put it more simply, a bidder unable to
access the competitor's assumptions will never figure out how the competing
bid came about; requiring him to "counter-propose" is like having him shoot
at a target in the dark while blindfolded.
By withholding from AEDC the challenger's financial and technical
proposals containing the critical information it needed, Undersecretary Cal
actually and effectively deprived AEDC of the ability to match the price
challenge. One could say that AEDC did not have the benefit of a "level
playing field." It seems to me, though, that AEDC was actually shut out of
the game altogether.
At the end of the day, the bottom line is that the validity and the propriety of
the award to Piatco had been irreparably impaired.
Delayed Issuance of the Notice of Award Violated the BOT Law and the
IRR
Section 9.5 of the IRR requires that the Notice of Award must indicate the
time frame within which the winner of the bidding (and therefore the
prospective awardee) shall submit the prescribed performance security, proof
of commitment of equity contributions, and indications of sources of
financing (loans); and, in the case of joint ventures, an agreement showing
that the members are jointly and severally responsible for the obligations of
the project proponent under the contract.
The purpose of having a definite and firm timetable for the submission of the
aforementioned requirements is not only to prevent delays in the project
implementation, but also to expose and weed out unqualified proponents,
who might have unceremoniously slipped through the earlier prequalification
process, by compelling them to put their money where their mouths are, so to
speak.
Nevertheless, this provision can be easily circumvented by merely
postponing the actual issuance of the Notice of Award, in order to give the
favored proponent sufficient time to comply with the requirements. Hence, to
avert or minimize the manipulation of the post-bidding process, the IRR not
only set out the precise sequence of events occurring between the completion
of the evaluation of the technical bids and the issuance of the Notice of
Award, but also specified the timetables for each such event. Definite
allowable extensions of time were provided for, as were the consequences of
a failure to meet a particular deadline.
In particular, Section 9.1 of the 1994 IRR prescribed that within 30 calendar
days from the time the second-stage evaluation shall have been completed,
the Committee must come to a decision whether or not to award the contract
and, within 7 days therefrom, the Notice of Award must be approved by the
head of agency or local government unit (LGU) concerned, and its issuance
must follow within another 7 days thereafter.
Section 9.2 of the IRR set the procedure applicable to projects involving
substantial government undertakings as follows: Within 7 days after the
decision to award is made, the draft contract shall be submitted to the ICC for
clearance on a no-objection basis. If the draft contract includes government
undertakings already previously approved, then the submission shall be for
information only.
However, should there be additional or new provisions different from the
original government undertakings, the draft shall have to be reviewed and
approved. The ICC has 15 working days to act thereon, and unless otherwise
specified, its failure to act on the contract within the specified time frame
signifies that the agency or LGU may proceed with the award. The head of
agency or LGU shall approve the Notice of Award within seven days of the
clearance by the ICC on a no-objection basis, and the Notice itself has to be
issued within seven days thereafter.
The highly regulated time-frames within which the agents of government
were to act evinced the intent to impose upon them the duty to act
expeditiously throughout the process, to the end that the project be
prosecuted and implemented without delay. This regulated scenario was
likewise intended to discourage collusion and substantially reduce the
opportunity for agents of government to abuse their discretion in the course
of the award process.
Despite the clear timetables set out in the IRR, several lengthy and still-
unexplained delays occurred in the award process, as can be observed from
the presentation made by the counsel for public respondents,19 quoted
hereinbelow:
"11 Dec. 1996 - The Paircargo Joint Venture was informed by the PBAC that
AEDC failed to match and that negotiations preparatory to Notice of Award
should be commenced. This was the decision to award that should have
commenced the running of the 7-day period to approve the Notice of Award,
as per Section 9.1 of the IRR, or to submit the draft contract to the ICC for
approval conformably with Section 9.2.
"01 April 1997 - The PBAC resolved that a copy of the final draft of the
Concession Agreement be submitted to the NEDA for clearance on a no-
objection basis. This resolution came more than 3 months too late as it
should have been made on the 20th of December 1996 at the latest.
"16 April 1997 - The PBAC resolved that the period of signing the
Concession Agreement be extended by 15 days.
"18 April 1997 - NEDA approved the Concession Agreement. Again this is
more than 3 months too late as the NEDA's decision should have been
released on the 16th of January 1997 or fifteen days after it should have been
submitted to it for review.
"09 July 1997 - The Notice of Award was issued to PIATCO. Following the
provisions of the IRR, the Notice of Award should have been issued fourteen
days after NEDA's approval, or the 28th of January 1997. In any case, even if
it were to be assumed that the release of NEDA's approval on the 18th of
April was timely, the Notice of Award should have been issued on the 9th of
May 1997. In both cases, therefore, the release of the Notice of Award
occurred in a decidedly less than timely fashion."
This chronology of events bespeaks an unmistakable disregard, if not
disdain, by the persons in charge of the award process for the time limitations
prescribed by the IRR. Their attitude flies in the face of this Court's solemn
pronouncement in Republic v. Capulong,20 that "strict observance of the
rules, regulations and guidelines of the bidding process is the only safeguard
to a fair, honest and competitive public bidding."
From the foregoing, the only conclusion that can possibly be drawn is that
the BOT law and its IRR were repeatedly violated with unmitigated impunity
- and by agents of government, no less! On account of such violation, the
award of the contract to Piatco, which undoubtedly gained time and benefited
from the delays, must be deemed null and void from the beginning.
Further Amendments Resulted in a Substantially Different Contract,
Awarded Without Public Bidding
But the violations and desecrations did not stop there. After the PBAC made
its decision on December 11, 1996 to award the contract to Piatco, the latter
negotiated changes to the Contract bidded out and ended up with what
amounts to a substantially new contract without any public bidding. This
Contract was subsequently further amended four more times through
negotiation and without any bidding. Thus, the contract actually executed
between Piatco and DOTC/MIAA on July 12, 1997 (the Concession
Agreement or "CA") differed from the contract bidded out (the draft
concession agreement or "DCA") in the following very significant respects:
1. The CA inserted stipulations creating a monopoly in favor of Piatco in the
business of providing airport-related services for international airlines and
passengers.21
2. The CA provided that government is to answer for Piatco's unpaid loans
and debts (lumped under the term Attendant Liabilities) in the event Piatco
fails to pay its senior lenders.22
3. The CA provided that in case of termination of the contract due to the fault
of government, government shall pay all expenses that Piatco incurred for the
project plus the appraised value of the Terminal.23
4. The CA imposed new and special obligations on government, including
delivery of clean possession of the site for the terminal; acquisition of
additional land at the government's expense for construction of road
networks required by Piatco's approved plans and specifications; and
assistance to Piatco in securing site utilities, as well as all necessary permits,
licenses and authorizations.24
5. Where Section 3.02 of the DCA requires government to refrain from
competing with the contractor with respect to the operation of NAIA
Terminal III, Section 3.02(b) of the CA excludes and prohibits everyone,
including government, from directly or indirectly competing with Piatco,
with respect to the operation of, as well as operations in, NAIA Terminal
III. Operations in is sufficiently broad to encompass all retail and other
commercial business enterprises operating within Terminal III, inclusive of
the businesses of providing various airport-related services to international
airlines, within the scope of the prohibition.
6. Under Section 6.01 of the DCA, the following fees are subject to the
written approval of MIAA: lease/rental charges, concession privilege fees for
passenger services, food services, transportation utility concessions,
groundhandling, catering and miscellaneous concession fees, porterage fees,
greeter/well-wisher fees, carpark fees, advertising fees, VIP facilities fees
and others. Moreover, adjustments to the groundhandling fees, rentals and
porterage fees are permitted only once every two years and in accordance
with a parametric formula, per DCA Section 6.03. However, the CA as
executed with Piatco provides in Section 6.06 that all the aforesaid fees,
rentals and charges may be adjusted without MIAA's approval or
intervention. Neither are the adjustments to these fees and charges subject to
or limited by any parametric formula.25
7. Section 1.29 of the DCA provides that the terminal fees, aircraft tacking
fees, aircraft parking fees, check-in counter fees and other fees are to be
quoted and paid in Philippine pesos. But per Section 1.33 of the CA, all the
aforesaid fees save the terminal fee are denominated in US Dollars.
8. Under Section 8.07 of the DCA, the term attendant liabilities refers
to liabilities pertinent to NAIA Terminal III, such as payment of lease rentals
and performance of other obligations under the Land Lease Agreement; the
obligations under the Tenant Agreements; and payment of all taxes, fees,
charges and assessments of whatever kind that may be imposed on NAIA
Terminal III or parts thereof. But in Section 1.06 of the CA, Attendant
Liabilities refers to unpaid debts of Piatco: "All amounts recorded and from
time to time outstanding in the books of (Piatco) as owing to Unpaid
Creditors who have provided, loaned or advanced funds actually used for the
Project, including all interests, penalties, associated fees, charges,
surcharges, indemnities, reimbursements and other related expenses, and
further including amounts owed by [Piatco] to its suppliers, contractors and
subcontractors."
9. Per Sections 8.04 and 8.06 of the DCA, government may, on account of
the contractors breach, rescind the contract and select one of four options:
(a) take over the terminal and assume all its attendant liabilities; (b) allow the
contractor's creditors to assign the Project to another entity acceptable to
DOTC/MIAA; (c) pay the contractor rent for the facilities and equipment the
DOTC may utilize; or (d) purchase the terminal at a price established by
independent appraisers. Depending on the option selected, government may
take immediate possession and control of the terminal and its operations.
Government will be obligated to compensate the contractor for the
"equivalent or proportionate contract costs actually disbursed," but only
where government is the one in breach of the contract. But under Section
8.06(a) of the CA, whether on account of Piatco's breach of contract or its
inability to pay its creditors, government is obliged to either (a) take over
Terminal III and assume all of Piatco's debts or (b) permit the qualified
unpaid creditors to be substituted in place of Piatco or to designate a new
operator. And in the event of government's breach of contract, Piatco may
compel it to purchase the terminal at fair market value, per Section 8.06(b) of
the CA.
10. Under the DCA, any delay by Piatco in the payment of the amounts due
the government constitutes breach of contract. However, under the CA, such
delay does not necessarily constitute breach of contract, since Piatco is
permitted to suspend payments to the government in order to first satisfy the
claims of its secured creditors, per Section 8.04(d) of the CA.
It goes without saying that the amendment of the Contract bidded out (the
DCA or draft concession agreement) - in such substantial manner, without
any public bidding, and after the bidding process had been concluded on
December 11, 1996 - is violative of public policy on public biddings, as well
as the spirit and intent of the BOT Law. The whole point of going through the
public bidding exercise was completely lost. Its very rationale was totally
subverted by permitting Piatco to amend the contract for which public
bidding had already been concluded. Competitive bidding aims to obtain the
best deal possible by fostering transparency and preventing favoritism,
collusion and fraud in the awarding of contracts. That is the reason why
procedural rules pertaining to public bidding demand strict observance.26
In a relatively early case, Caltex v. Delgado Brothers,27 this Court made it
clear that substantive amendments to a contract for which a public bidding
has already been finished should only be awarded after another public
bidding:
"The due execution of a contract after public bidding is a limitation upon the
right of the contracting parties to alter or amend it without another public
bidding, for otherwise what would a public bidding be good for if after the
execution of a contract after public bidding, the contracting parties may alter
or amend the contract, or even cancel it, at their will? Public biddings are
held for the protection of the public, and to give the public the best possible
advantages by means of open competition between the bidders. He who bids
or offers the best terms is awarded the contract subject of the bid, and it is
obvious that such protection and best possible advantages to the public will
disappear if the parties to a contract executed after public bidding may alter
or amend it without another previous public bidding."28
The aforementioned case dealt with the unauthorized amendment of a
contract executed after public bidding; in the situation before us, the
amendments were made also after the bidding, but prior to execution. Be that
as it may, the same rationale underlying Caltex applies to the present
situation with equal force. Allowing the winning bidder to renegotiate the
contract for which the bidding process has ended is tantamount to permitting
it to put in anything it wants. Here, the winning bidder (Piatco) did not even
bother to wait until after actual execution of the contract before rushing to
amend it. Perhaps it believed that if the changes were made to a contract
already won through bidding (DCA) instead of waiting until it is executed,
the amendments would not be noticed or discovered by the public.
In a later case, Mata v. San Diego,29 this Court reiterated its ruling as
follows:
"It is true that modification of government contracts, after the same had been
awarded after a public bidding, is not allowed because such modification
serves to nullify the effects of the bidding and whatever advantages the
Government had secured thereby and may also result in manifest injustice to
the other bidders. This prohibition, however, refers to a change in vital and
essential particulars of the agreement which results in a substantially new
contract."
Piatco's counter-argument may be summed up thus: There was nothing in the
1994 IRR that prohibited further negotiations and eventual amendments to
the DCA even after the bidding had been concluded. In fact, PBAC Bid
Bulletin No. 3 states: "[A]mendments to the Draft Concession Agreement
shall be issued from time to time. Said amendments will only cover items that
would not materially affect the preparation of the proponent's proposal."
I submit that accepting such warped argument will result in perverting the
policy underlying public bidding. The BOT Law cannot be said to allow the
negotiation of contractual stipulations resulting in a substantially new
contract after the bidding process and price challenge had been concluded. In
fact, the BOT Law, in recognition of the time, money and effort invested in
an unsolicited proposal, accords its originator the privilege of matching the
challenger's bid.
Section 4-A of the BOT Law specifically refers to a "lower price proposal"
by a competing bidder; and to the right of the original proponent "to match
the price" of the challenger. Thus, only the price proposals are in play.
The terms, conditions and stipulations in the contract for which public
bidding has been concluded are understood to remain intact and not be
subject to further negotiation. Otherwise, the very essence of public bidding
will be destroyed - there will be no basis for an exact comparison between
bids.
Moreover, Piatco misinterpreted the meaning behind PBAC Bid Bulletin No.
3. The phrase amendments . . . from time to time refers only to those
amendments to the draft concession agreement issued by the PBAC prior to
the submission of the price challenge; it certainly does not include or permit
amendments negotiated for and introduced after the bidding process, has
been terminated.
Piatco's Concession Agreement Was Further Amended, (ARCA) Again
Without Public Bidding
Not satisfied with the Concession Agreement, Piatco - once more without
bothering with public bidding - negotiated with government for still more
substantial changes. The result was the Amended and Restated Concession
Agreement (ARCA) executed on November 26, 1998. The following changes
were introduced:
1. The definition of Attendant Liabilities was further amended with the result
that the unpaid loans of Piatco, for which government may be required to
answer, are no longer limited to only those loans recorded in Piatco's books
or loans whose proceeds were actually used in the Terminal III project.30
2. Although the contract may be terminated due to breach by Piatco, it will
not be liable to pay the government any Liquidated Damages if a new
operator is designated to take over the operation of the terminal.31
3. The Liquidated Damages which government becomes liable for in case of
its breach of contract were substantially increased.32
4. Government's right to appoint a comptroller for Piatco in case the latter
encounters liquidity problems was deleted.33
5. Government is made liable for Incremental and Consequential Costs and
Losses in case it fails to comply or cause any third party under its direct or
indirect control to comply with the special obligations imposed on
government.34
6. The insurance policies obtained by Piatco covering the terminal are now
required to be assigned to the Senior Lenders as security for the loans;
previously, their proceeds were to be used to repair and rehabilitate the
facility in case of damage.35
7. Government bound itself to set the initial rate of the terminal fee, to be
charged when Terminal III begins operations, at an amount higher than
US$20.36
8. Government waived its defense of the illegality of the contract and even
agreed to be liable to pay damages to Piatco in the event the contract was
declared illegal.37
9. Even though government may be entitled to terminate the ARCA on
account of breach by Piatco, government is still liable to pay Piatco the
appraised value of Terminal III or the Attendant Liabilities, if the termination
occurs before the In-Service Date.38 This condition contravenes the BOT
Law provision on termination compensation.
10. Government is obligated to take the administrative action required for
Piatco's imposition, collection and application of all Public Utility
Revenues.39 No such obligation existed previously.
11. Government is now also obligated to perform and cause other persons
and entities under its direct or indirect control to perform all acts necessary to
perfect the security interests to be created in favor of Piatco's Senior
Lenders.40 No such obligation existed previously.
12. DOTC/MIAA's right of intervention in instances where Piatco's Non-
Public Utility Revenues become exorbitant or excessive has been removed.41
13. The illegality and unenforceability of the ARCA or any of its material
provisions was made an event of default on the part of government only, thus
constituting a ground for Piatco to terminate the ARCA.42
14. Amounts due from and payable by government under the contract were
made payable on demand - net of taxes, levies, imposts, duties, charges or
fees of any kind except as required by law.43
15. The Parametric Formula in the contract, which is utilized to compute for
adjustments/increases to the public utility revenues (i.e., aircraft parking and
tacking fees, check-in counter fee and terminal fee), was revised to permit
Piatco to input its more costly short-term borrowing rates instead of the
longer-terms rates in the computations for adjustments, with the end result
that the changes will redound to its greater financial benefit.
16. The Certificate of Completion simply deleted the successful
performance-testing of the terminal facility in accordance with defined
performance standards as a pre-condition for government's acceptance of the
terminal facility.44
In sum, the foregoing revisions and amendments as embodied in the ARCA
constitute very material alterations of the terms and conditions of the CA,
and give further manifestly undue advantage to Piatco at the expense of
government. Piatco claims that the changes to the CA were necessitated by
the demands of its foreign lenders. However, no proof whatsoever has been
adduced to buttress this claim.
In any event, it is quite patent that the sum total of the aforementioned
changes resulted in drastically weakening the position of government to a
degree that seems quite excessive, even from the standpoint of a
businessperson who regularly transacts with banks and foreign lenders, is
familiar with their mind-set, and understands what motivates them. On the
other hand, whatever it was that impelled government officials concerned to
accede to those grossly disadvantageous changes, I can only hazard a guess.
There is no question in my mind that the ARCA was unauthorized and illegal
for lack of public bidding and for being patently disadvantageous to
government.
The Three Supplements Imposed New Obligations on Government, Also
Without Prior Public Bidding
After Piatco had managed to breach the protective rampart of public bidding,
it recklessly went on a rampage of further assaults on the ARCA.
The First Supplement Is as Void as the ARCA
In the First Supplement ("FS") executed on August 27, 1999, the following
changes were made to the ARCA:
1. The amounts payable by Piatco to government were reduced by allowing
additional exceptions to the Gross Revenues in which government is
supposed to participate.45
2. Made part of the properties which government is obliged to construct
and/or maintain and keep in good repair are (a) the access road connecting
Terminals II and III - the construction of this access road is the obligation of
Piatco, in lieu of its obligation to construct an Access Tunnel connecting
Terminals II and III; and (b) the taxilane and taxiway - these are likewise part
of Piatco's obligations, since they are part and parcel of the project as
described in Clause 1.3 of the Bid Documents .46
3. The MIAA is obligated to provide funding for the maintenance and repair
of the airports and facilities owned or operated by it and by third persons
under its control. It will also be liable to Piatco for the latter's losses,
expenses and damages as well as liability to third persons, in case MIAA
fails to perform such obligations. In addition, MIAA will also be liable for
the incremental and consequential costs of the remedial work done by Piatco
on account of the former's default.47
4. The FS also imposed on government ten (10) "Additional Special
Obligations," including the following:
(a) Working for the removal of the general aviation traffic from the NAIA
airport complex48
(b) Providing through MIAA the land required by Piatco for the taxilane and
one taxiway at no cost to Piatco49
(c) Implementing the government's existing storm drainage master plan50
(d) Coordinating with DPWH the financing, the implementation and the
completion of the following works before the In-Service Date: three left-
turning overpasses (EDSA to Tramo St., Tramo to Andrews Ave., and
Manlunas Road to Sales Ave.);51 and a road upgrade and improvement
program involving widening, repair and resurfacing of Sales Road, Andrews
Avenue and Manlunas Road; improvement of Nichols Interchange; and
removal of squatters along Andrews Avenue.52
(e) Dealing directly with BCDA and the Phil. Air Force in acquiring
additional land or right of way for the road upgrade and improvement
program.53
5. Government is required to work for the immediate reversion to MIAA of
the Nayong Pilipino National Park.54
6. Government's share in the terminal fees collected was revised from a flat
rate of P180 to 36 percent thereof; together with government's percentage
share in the gross revenues of Piatco, the amount will be remitted to
government in pesos instead of US dollars.55 This amendment enables Piatco
to benefit from the further erosion of the peso-dollar exchange rate, while
preventing government from building up its foreign exchange reserves.
7. All payments from Piatco to government are now to be invoiced to MIAA,
and payments are to accrue to the latter's exclusive benefit.56 This move
appears to be in support of the funds MIAA advanced to DPWH.
I must emphasize that the First Supplement is void in two respects. First, it is
merely an amendment to the ARCA, upon which it is wholly dependent;
therefore, since the ARCA is void, inexistent and not capable of being
ratified or amended, it follows that the FS too is void, inexistent and
inoperative. Second, even assuming arguendo that the ARCA is somehow
remotely valid, nonetheless the FS, in imposing significant new obligations
upon government, altered the fundamental terms and stipulations of the
ARCA, thus necessitating a public bidding all over again. That the FS was
entered into sans public bidding renders it utterly void and inoperative.
The Second Supplement Is Similarly Void and Inexistent
The Second Supplement ("SS") was executed between the government and
Piatco on September 4, 2000. It calls for Piatco, acting not as concessionaire
of NAIA Terminal III but as a public works contractor, to undertake - in the
government's stead - the clearing, removal, demolition and disposal of
improvements, subterranean obstructions and waste materials at the project
site.57
The scope of the works, the procedures involved, and the obligations of the
contractor are provided for in Parts II and III of the SS. Section 4.1 sets out
the compensation to be paid, listing specific rates per cubic meter of
materials for each phase of the work - excavation, leveling, removal and
disposal, backfilling and dewatering. The amounts collectible by Piatco are
to be offset against the Annual Guaranteed Payments it must pay
government.
Though denominated as Second Supplement, it was nothing less than an
entirely new public works contract. Yet it, too, did not undergo any public
bidding, for which reason it is also void and inoperative.
Not surprisingly, Piatco had to subcontract the works to a certain Wintrack
Builders, a firm reputedly owned by a former high-ranking DOTC official.
But that is another story altogether.
The Third Supplement Is Likewise Void and Inexistent
The Third Supplement ("TS"), executed between the government and Piatco
on June 22, 2001, passed on to the government certain obligations of Piatco
as Terminal III concessionaire, with respect to the surface road connecting
Terminals II and III.
By way of background, at the inception of and forming part of the NAIA
Terminal III project was the proposed construction of an access tunnel
crossing Runway 13/31, which. would connect Terminal III to Terminal II.
The Bid Documents in Section 4.1.2.3[B][i] declared that the said access
tunnel was subject to further negotiation; but for purposes of the bidding, the
proponent should submit a bid for it as well. Therefore, the tunnel was
supposed to be part and parcel of the Terminal III project.
However, in Section 5 of the First Supplement, the parties declared that the
access tunnel was not economically viable at that time. In lieu thereof, the
parties agreed that a surface access road (now called the T2-T3 Road) was to
be constructed by Piatco to connect the two terminals. Since it was plainly in
substitution of the tunnel, the surface road construction should likewise be
considered part and parcel of the same project, and therefore part of Piatco's
obligation as well. While the access tunnel was estimated to cost about P800
million, the surface road would have a price tag in the vicinity of about P100
million, thus producing significant savings for Piatco.
Yet, the Third Supplement, while confirming that Piatco would construct the
T2-T3 Road, nevertheless shifted to government some of the obligations
pertaining to the former, as follows:
1. Government is now obliged to remove at its own expense all tenants,
squatters, improvements and/or waste materials on the site where the T2-T3
road is to be constructed.58 There was no similar obligation on the part of
government insofar as the access tunnel was concerned.
2. Should government fail to carry out its obligation as above described,
Piatco may undertake it on government's behalf, subject to the terms and
conditions (including compensation payments) contained in the Second
Supplement.59
3. MIAA will answer for the operation, maintenance and repair of the T2-T3
Road.60
The TS depends upon and is intended to supplement the ARCA as well as the
First Supplement, both of which are void and inexistent and not capable of
being ratified or amended. It follows that the TS is likewise void, inexistent
and inoperative. And even if, hypothetically speaking, both ARCA and FS
are valid, still, the Third Supplement - imposing as it does significant new
obligations upon government - would in effect alter the terms and
stipulations of the ARCA in material respects, thus necessitating another
public bidding. Since the TS was not subjected to public bidding, it is
consequently utterly void as well. At any rate, the TS created new monetary
obligations on the part of government, for which there were no prior
appropriations. Hence it follows that the same is void ab initio.
In patiently tracing the progress of the Piatco contracts from their inception
up to the present, I noted that the whole process was riddled with significant
lapses, if not outright irregularity and wholesale violations of law and public
policy. The rationale of beginning at the beginning, so to speak, will become
evident when the question of what to do with the five Piatco contracts is
discussed later on.
In the meantime, I shall take up specific, provisions or changes in the
contracts and highlight the more prominent objectionable features.
Government Directly Guarantees Piatco Debts
Certainly the most discussed provision in the parties' arguments is the one
creating an unauthorized, direct government guarantee of Piatco's obligations
in favor of the lenders.
Section 4-A of the BOT Law as amended states that unsolicited proposals,
such as the NAIA Terminal III Project, may be accepted by government
provided inter alia that no direct government guarantee, subsidy or equity is
required. In short, such guarantee is prohibited in unsolicited proposals.
Section 2(n) of the same legislation defines direct government guarantee as
"an agreement whereby the government or any of its agencies or local
government units (will) assume responsibility for the repayment of debt
directly incurred by the project proponent in implementing the project in case
of a loan default."
Both the CA and the ARCA have provisions that undeniably create such
prohibited government guarantee. Section 4.04 (c)(iv) to (vi) of the ARCA,
which is similar to Section 4.04 of the CA, provides thus:
"(iv) that if Concessionaire is in default under a payment obligation owed to
the Senior Lenders, and as a result thereof the Senior Lenders have become
entitled to accelerate the Senior Loans, the Senior Lenders shall have the
right to notify GRP of the same . . .;
(v) . . . the Senior Lenders may after written notification to GRP, transfer the
Concessionaire's rights and obligations to a transferee . . .;
(vi) if the Senior Lenders . . . are unable to . . . effect a transfer . . ., then GRP
and the Senior Lenders shall endeavor . . . to enter into any other
arrangement relating to the Development Facility . . . If no agreement
relating to the Development Facility is arrived at by GRP and the Senior
Lenders within the said 180-day period, then at the end thereof the
Development Facility shall be transferred by the Concessionaire to GRP or
its designee and GRP shall make a termination payment to Concessionaire
equal to the Appraised Value (as hereinafter defined) of the Development
Facility or the sum of the Attendant Liabilities, if greater. . . ."
In turn, the term Attendant Liabilities is defined in Section 1.06 of the ARCA
as follows:
"Attendant Liabilities refer to all amounts in each case supported by
verifiable evidence from time to time owed or which may become, owing by
Concessionaire to Senior Lenders or any other persons or entities who have
provided, loaned or advanced funds or provided financial facilities to
Concessionaire for the Project, including, without limitation, all principal,
interest, associated fees, charges, reimbursements, and other related expenses
(including the fees, charges and expenses of any agents or trustees of such
persons or entities), whether payable at maturity, by acceleration or
otherwise, and further including amounts owed by Concessionaire to its
professional consultants and advisers, suppliers, contractors and sub-
contractors."
Government's agreement to pay becomes effective in the event of
a default by Piatco on any of its loan obligations to the Senior Lenders, and
the amount to be paid by government is the greater of either the Appraised
Value of Terminal III or the aggregate amount of the moneys owed by
Piatco - whether to the Senior Lenders or to other entities, including its
suppliers, contractors and subcontractors. In effect, therefore, this agreement
already constitutes the prohibited assumption by government of
responsibility for repayment of Piatco's debts in case of a loan default. In
fine, a direct government guarantee.
It matters not that there is a roundabout procedure prescribed by Section
4.04(c)(iv), (v) and (vi) that would require, first, an attempt (albeit
unsuccessful) by the Senior Lenders to transfer Piatco's rights to a transferee
of their choice; and, second, an effort (equally unsuccessful) to "enter into
any other arrangement" with the government regarding the Terminal III
facility, before government is required to make good on its guarantee. What
is abundantly clear is the fact that, in the devious labyrinthine process
detailed in the aforesaid section, it is entirely within the Senior Lenders'
power, prerogative and control - exercisable via a mere refusal or inability to
agree upon "a transferee" or "any other arrangement" regarding the terminal
facility - to push the process forward to the ultimate contractual cul-de-sac,
wherein government will be compelled to abjectly surrender and make good
on its guarantee of payment.
Piatco also argues that there is no proviso requiring government to pay the
Senior Lenders in the event of Piatco's default. This is literally true, in the
sense that Section 4.04(c)(vi) of ARCA speaks of government making the
termination payment to Piatco, not to the lenders. However, it is almost a
certainty that the Senior Lenders will already have made Piatco sign over to
them, ahead of time, its right to receive such payments from government;
and/or they may already have had themselves appointed its attorneys-in-fact
for the purpose of collecting and receiving such payments.
Nevertheless, as petitioners-in-intervention pointed out in their
Memorandum,61 the termination payment is to be made to Piatco, not to the
lenders; and there is no provision anywhere in the contract documents to
prevent it from diverting the proceeds to its own benefit and/or to ensure that
it will necessarily use the same to pay off the Senior Lenders and other
creditors, in order to avert the foreclosure of the mortgage and other liens on
the terminal facility. Such deficiency puts the interests of government at
great risk. Indeed, if the unthinkable were to happen, government would be
paying several hundreds of millions of dollars, but the mortgage liens on the
facility may still be foreclosed by the Senior Lenders just the same.
Consequently, the Piatco contracts are also objectionable for grievously
failing to adequately protect government's interests. More accurately, the
contracts would consistently weaken and do away with protection of
government interests. As such, they are therefore grossly lopsided in favor of
Piatco and/or its Senior Lenders.
While on this subject, it is well to recall the earlier discussion regarding a
particularly noticeable alteration of the concept of "Attendant Liabilities." In
Section 1.06 of the CA defining the term, the Piatco debts to be assumed/paid
by government were qualified by the phrases recorded and from time to time
outstanding in the books of the Concessionaire and actually used for the
project. These phrases were eliminated from the ARCA's definition of
Attendant Liabilities.
Since no explanation has been forthcoming from Piatco as to the possible
justification for such a drastic change, the only conclusion, possible is that it
intends to have all of its debts covered by the guarantee, regardless of
whether or not they are disclosed in its books. This has particular reference to
those borrowings which were obtained in violation of the loan covenants
requiring Piatco to maintain a minimum 70:30 debt-to-equity ratio, and even
if the loan proceeds were not actually used for the project itself.
This point brings us back to the guarantee itself. In Section 4.04(c)(vi) of
ARCA, the amount which government has guaranteed to pay as termination
payment is the greater of either (i) the Appraised Value of the terminal
facility or (ii) the aggregate of the Attendant Liabilities. Given that the
Attendant Liabilities may include practically any Piatco debt under the sun, it
is highly conceivable that their sum may greatly exceed the appraised value
of the facility, and government may end up paying very much more than the
real worth of Terminal III. (So why did government have to bother with
public bidding anyway?)
In the final analysis, Section 4.04(c)(iv) to (vi) of the ARCA is diametrically
at odds with the spirit and the intent of the BOT Law. The law meant to
mobilize private resources (the private sector) to take on the burden and the
risks of financing the construction, operation and maintenance of relevant
infrastructure and development projects for the simple reason that
government is not in a position to do so. By the same token, government
guarantee was prohibited, since it would merely defeat the purpose and
raison d'être of a build-operate-and-transfer project to be undertaken by the
private sector.
To the extent that the project proponent is able to obtain loans to fund the
project, those risks are shared between the project proponent on the one
hand, and its banks and other lenders on the other. But where the proponent
or its lenders manage to cajol or coerce the government into extending a
guarantee of payment of the loan obligations, the risks assumed by the
lenders are passed right back to government. I cannot understand why, in the
instant case, government cheerfully assented to re-assuming the risks of the
project when it gave the prohibited guarantee and thus simply negated the
very purpose of the BOT Law and the protection it gives the government.
Contract Termination Provisions in the Piatco Contracts Are Void
The BOT Law as amended provides for contract termination as follows:
"Sec. 7. Contract Termination. - In the event that a project is revoked,
cancelled or terminated by the government through no fault of the project
proponent or by mutual agreement, the Government shall compensate the
said project proponent for its actual expenses incurred in the project plus a
reasonable rate of return thereon not exceeding that stated in the contract as
of the date of such revocation, cancellation or termination: Provided, That
the interest of the Government in this instances [sic] shall be duly insured
with the Government Service Insurance System or any other insurance entity
duly accredited by the Office of the Insurance Commissioner: Provided,
finally, That the cost of the insurance coverage shall be included in the terms
and conditions of the bidding referred to above.
"In the event that the government defaults on certain major obligations in the
contract and such failure is not remediable or if remediable shall remain
unremedied for an unreasonable length of time, the project
proponent/contractor may, by prior notice to the concerned national
government agency or local government unit specifying the turn-over date,
terminate the contract. The project proponent/contractor shall be reasonably
compensated by the Government for equivalent or proportionate contract cost
as defined in the contract."
The foregoing statutory provision in effect provides for the following limited
instances when termination compensation may be allowed:
1. Termination by the government through no fault of the project proponent
2. Termination upon the parties' mutual agreement
3. Termination by the proponent due to government's default on certain
major contractual obligations
To emphasize, the law does not permit compensation for the project
proponent when contract termination is due to the proponent's own fault or
breach of contract.
This principle was clearly violated in the Piatco Contracts. The ARCA
stipulates that government is to pay termination compensation to Piatco even
when termination is initiated by government for the following causes:
"(i) Failure of Concessionaire to finish the Works in all material respects in
accordance with the Tender Design and the Timetable;
(ii) Commission by Concessionaire of a material breach of this Agreement . .
.;
(iii) . . . a change in control of Concessionaire arising from the sale,
assignment, transfer or other disposition of capital stock which results in an
ownership structure violative of statutory or constitutional limitations;
(iv) A pattern of continuing or repeated non-compliance, willful violation, or
non-performance of other terms and conditions hereof which is hereby
deemed a material breach of this Agreement . . ."62
As if that were not bad enough, the ARCA also inserted into Section 8.01 the
phrase "Subject to Section 4.04." The effect of this insertion is that in those
instances where government may terminate the contract on account of
Piatco's breach, and it is nevertheless required under the ARCA to make
termination compensation to Piatco even though unauthorized by law, such
compensation is to be equivalent to the payment amount guaranteed by
government - either a) the Appraised Value of the terminal facility or (b) the
aggregate of the Attendant Liabilities, whichever amount is greater!
Clearly, this condition is not in line with Section 7 of the BOT Law. That
provision permits a project proponent to recover the actual expenses it
incurred in the prosecution of the project plus a reasonable rate of return not
in excess of that provided in the contract; or to be compensated for the
equivalent or proportionate contract cost as defined in the contract, in case
the government is in default on certain major contractual obligations.
Furthermore, in those instances where such termination compensation is
authorized by the BOT Law, it is indispensable that the interest of
government be duly insured. Section 5.08 the ARCA mandates insurance
coverage for the terminal facility; but all insurance policies are to be
assigned, and all proceeds are payable, to the Senior Lenders. In brief, the
interest being secured by such coverage is that of the Senior Lenders, not that
of government. This can hardly be considered compliance with law.
In essence, the ARCA provisions on termination compensation result in
another unauthorized government guarantee, this time in favor of Piatco.
A Prohibited Direct Government Subsidy, Which at the Same Time Is an
Assault on the National Honor
Still another contractual provision offensive to law and public policy is
Section 8.01(d) of the ARCA, which is a "bolder and badder" version of
Section 8.04(d) of the CA.
It will be recalled that Section 4-A of the BOT Law as amended prohibits not
only direct government guarantees, but likewise a direct government
subsidy for unsolicited proposals. Section 13.2. b. iii. of the 1999 IRR defines
a direct government subsidy as encompassing "an agreement whereby the
Government . . . will . . . postpone any payments due from the proponent."
Despite the statutory ban, Section 8.01 (d) of the ARCA provides thus:
"(d) The provisions of Section 8.01(a) notwithstanding, and for the purpose
of preventing a disruption of the operations in the Terminal and/or Terminal
Complex, in the event that at any time Concessionaire is of the reasonable
opinion that it shall be unable to meet a payment obligation owed to the
Senior Lenders, Concessionaire shall give prompt notice to GRP, through
DOTC/MIAA and to the Senior Lenders. In such circumstances, the Senior
Lenders (or the Senior Lenders' Representative) may ensure that after making
provision for administrative expenses and depreciation, the cash resources of
Concessionaire shall first be used and applied to meet all payment
obligations owed to the Senior Lenders. Any excess cash, after meeting such
payment obligations, shall be earmarked for the payment of all sums payable
by Concessionaire to GRP under this Agreement. If by reason of the
foregoing GRP should be unable to collect in full all payments due to GRP
under this Agreement, then the unpaid balance shall be payable within a 90-
day grace period counted from the relevant due date, with interest per annum
at the rate equal to the average 91-day Treasury Bill Rate as of the auction
date immediately preceding the relevant due date. If payment is not effected
by Concessionaire within the grace period, then a spread of five (5%) percent
over the applicable 91-day Treasury Bill Rate shall be added on the unpaid
amount commencing on the expiry of the grace period up to the day of full
payment. When the temporary illiquidity of Concessionaire shall have been
corrected and the cash position of Concessionaire should indicate its ability
to meet its maturing obligations, then the provisions set forth under this
Section 8.01(d) shall cease to apply. The foregoing remedial measures shall
be applicable only while there remains unpaid and outstanding amounts
owed to the Senior Lenders." (Emphasis supplied)
By any manner of interpretation or application, Section 8.01(d) of the ARCA
clearly mandates the indefinitepostponement of payment of all of Piatco's
obligations to the government, in order to ensure that Piatco's obligations to
the Senior Lenders are paid in full first. That is nothing more or less than the
direct government subsidy prohibited by the BOT Law and the IRR. The fact
that Piatco will pay interest on the unpaid amounts owed to government does
not change the situation or render the prohibited subsidy any less
unacceptable.
But beyond the clear violations of law, there are larger issues involved in the
ARCA. Earlier, I mentioned that Section 8.01(d) of the ARCA completely
eliminated the proviso in Section 8.04(d) of the CA which gave government
the right to appoint a financial controller to manage the cash position of
Piatco during situations of financial distress. Not only has government been
deprived of any means of monitoring and managing the situation; worse, as
can be seen from Section 8.01(d) above-quoted, the Senior Lenders have
effectively locked in on the right to exercise financial controllership over
Piatco and to allocate its cash resources to the payment of all amounts owed
to the Senior Lenders before allowing any payment to be made to
government.
In brief, this particular provision of the ARCA has placed in the hands of
foreign lenders the power and the authority to determine how much (if at all)
and when the Philippine government (as grantor of the franchise) may be
allowed to receive from Piatco. In that situation, government will be at the
mercy of the foreign lenders. This is a situation completely contrary to the
rationale of the BOT Law and to public policy.
The aforesaid provision rouses mixed emotions - shame and disgust at
the parties' (especially the government officials') docile submission and
abject servitude and surrender to the imperious and excessive demands
of the foreign lenders, on the one hand; and vehement outrage at the
affront to the sovereignty of the Republic and to the national honor, on
the other. It is indeed time to put an end to such an unbearable,
dishonorable situation.
The Piatco Contracts Unarguably Violate Constitutional Injunctions
I will now discuss the manner in which the Piatco Contracts offended the
Constitution.
The Exclusive Right Granted to Piatco to Operate a Public Utility Is
Prohibited by the Constitution
While Section 2.02 of the ARCA spoke of granting to Piatco "a franchise to
operate and maintain the Terminal Complex," Section 3.02(a) of the same
ARCA granted to Piatco, for the entire term of the concession agreement,
"the exclusive right to operate a commercial international passenger
terminal within the Island of Luzon" with the exception of those three
terminals already existing63 at the time of execution of the ARCA.
Section 11 of Article XII of the Constitution prohibits the grant of a
"franchise, certificate, or any other form of authorization for the operation of
a public utility" that is "exclusive in character."
In its Opinion No. 078, Series of 1995, the Department of justice held that
"the NAIA Terminal III which . . . is a 'terminal for public use' is a public
utility." Consequently, the constitutional prohibition against the exclusivity
of a franchise applies to the franchise for the operation of NAIA Terminal III
as well.
What was granted to Piatco was not merely a franchise, but an "exclusive
right" to operate an international passenger terminal within the "Island of
Luzon." What this grant effectively means is that the government is now
estopped from exercising its inherent power to award any other person
another franchise or a right to operate such a public utility, in the event
public interest in Luzon requires it. This restriction is highly detrimental to
government and to the public interest. Former Secretary of Justice Hernando
B. Perez expressed this point well in his Memorandum for the President
dated 21 May 2002:
"Section 3.02 on 'Exclusivity'
"This provision gives to PIATCO (the Concessionaire) the exclusive right to
operate a commercial international airport within the Island of Luzon with
the exception of those already existing at the time of the execution of the
Agreement, such as the airports at Subic, Clark and Laoag City. In the case
of the Clark International Airport, however, the provision restricts its
operation beyond its design capacity of 850,000 passengers per annum and
the operation of new terminal facilities therein until after the new NAIA
Terminal III shall have consistently reached or exceeded its design capacity
of ten (10) million passenger capacity per year for three (3) consecutive years
during the concession period.
"This is an onerous and disadvantageous provision. It effectively grants
PIATCO a monopoly in Luzon and ties the hands of government in the matter
of developing new airports which may be found expedient and necessary in
carrying out any future plan for an inter-modal transportation system in
Luzon.
"Additionally, it imposes an unreasonable restriction on the operation of the
Clark International Airport which could adversely affect the operation and
development of the Clark Special Economic Zone to the economic prejudice
of the local constituencies that are being benefited by its operation."
(Emphasis supplied)
While it cannot be gainsaid that an enterprise that is a public utility may
happen to constitute a monopoly on account of the very nature of its business
and the absence of competition, such a situation does not however constitute
justification to violate the constitutional prohibition and grant an exclusive
franchise or exclusive right to operate a public utility.
Piatco's contention that the Constitution does not actually prohibit
monopolies is beside the point. As correctly argued,64 the existence of a
monopoly by a public utility is a situation created by circumstances that do
not encourage competition. This situation is different from the grant of a
franchise to operate a public utility, a privilege granted by government. Of
course, the grant of a franchise may result in a monopoly. But making such
franchise exclusive is what is expressly proscribed by the Constitution.
Actually, the aforementioned Section 3.02 of the ARCA more than just
guaranteed exclusivity; it also guaranteed that the government will not
improve or expand the facilities at Clark - and in fact is required to put a cap
on the latter's operations - until after Terminal III shall have been operated at
or beyond its peak capacity for three consecutive years.65 As counsel for
public respondents pointed out, in the real world where the rate of influx of
international passengers can fluctuate substantially from year to year, it may
take many years before Terminal III sees three consecutive years' operations
at peak capacity. The Diosdado Macapagal International Airport may thus
end up stagnating for a long time. Indeed, in order to ensure greater profits
for Piatco, the economic progress of a region has had to be sacrificed.
The Piatco Contracts Violate the Time Limitation on Franchises
Section 11 of Article XII of the Constitution also provides that "no franchise,
certificate or any other form of authorization for the operation of a public
utility shall be . . . for a longer period than fifty years." After all, a franchise
held for an unreasonably long time would likely give rise to the same evils as
a monopoly.
The Piatco Contracts have come up with an innovative way to circumvent the
prohibition and obtain an extension. This fact can be gleaned from Section
8.03(b) of the ARCA, which I quote thus:
"Sec. 8.03. Termination Procedure and Consequences of Termination. -
a) x x x xxx xxx
b) In the event the Agreement is terminated pursuant to Section 8.01 (b)
hereof, Concessionaire shall be entitled to collect the Liquidated Damages
specified in Annex 'G'. The full payment by GRP to Concessionaire of the
Liquidated Damages shall be a condition precedent to the transfer by
Concessionaire to GRP of the Development Facility. Prior to the full
payment of the Liquidated Damages, Concessionaire shall to the extent
practicable continue to operate the Terminal and the Terminal Complex and
shall be entitled to retain and withhold all payments to GRP for the purpose
of offsetting the same against the Liquidated Damages. Upon full payment of
the Liquidated Damages, Concessionaire shall immediately transfer the
Development Facility to GRP on 'as-is-where-is' basis."
The aforesaid easy payment scheme is less beneficial than it first appears.
Although it enables government to avoid having to make outright payment of
an obligation that will likely run into billions of pesos, this easy payment
plan will nevertheless cost government considerable loss of income, which it
would earn if it were to operate Terminal III by itself. Inasmuch as payments
to the concessionaire (Piatco) will be on "installment basis," interest charges
on the remaining unpaid balance would undoubtedly cause the total
outstanding balance to swell. Piatco would thus be entitled to remain in the
driver's seat and keep operating the terminal for an indefinite length of time.
The Contracts Create Two Monopolies for Piatco
By way of background, two monopolies were actually created by the Piatco
contracts. The first and more obvious one refers to the business of operating
an international passenger terminal in Luzon, the business end of which
involves providing international airlines with parking space for their aircraft,
and airline passengers with the use of departure and arrival areas, check-in
counters, information systems, conveyor systems, security equipment and
paraphernalia, immigrations and customs processing areas; and amenities
such as comfort rooms, restaurants and shops.
In furtherance of the first monopoly, the Piatco Contracts stipulate that the
NAIA Terminal III will be the only facility to be operated as an international
passenger terminal;66 that NAIA Terminals I and II will no longer be
operated as such;67 and that no one (including the government) will be
allowed to compete with Piatco in the operation of an international passenger
terminal in the NAIA Complex.68 Given that, at this time, the government
and Piatco are the only ones engaged in the business of operating an
international passenger terminal, I am not acutely concerned with this
particular monopolistic situation.
There was however another monopoly within the NAIA created by the
subject contracts for Piatco - in the business of providing international
airlines with the following: groundhandling, in-flight catering, cargo
handling, and aircraft repair and maintenance services. These are lines of
business activity in which are engaged many service providers (including the
petitioners-in-intervention), who will be adversely affected upon full
implementation of the Piatco Contracts, particularly Sections 3.01(d)69 and
(e)70 of both the ARCA and the CA.
On the one hand, Section 3.02(a) of the ARCA makes Terminal III the only
international passenger terminal at the NAIA, and therefore the only place
within the NAIA Complex where the business of providing airport-related
services to international airlines may be conducted. On the other hand,
Section 3.01(d) of the ARCA requires government, through the MIAA, not to
allow service providers with expired MIAA contracts to renew or extend
their contracts to render airport-related services to airlines. Meanwhile,
Section 3.01(e) of the ARCA requires government, through the DOTC and
MIAA, not to allow service providers - those with subsisting concession
agreements for services and operations being conducted at Terminal I - to
carry over their concession agreements, services and operations to Terminal
III, unless they first enter into a separate agreement with Piatco.
The aforementioned provisions vest in Piatco effective and exclusive control
over which service provider may and may not operate at Terminal III and
render the airport-related services needed by international airlines. It thereby
possesses the power to exclude competition. By necessary implication, it also
has effective control over the fees and charges that will be imposed and
collected by these service providers.
This intention is exceedingly clear in the declaration by Piatco that it is
"completely within its rights to exclude any party that it has not contracted
with from NAIA Terminal III."71
Worse, there is nothing whatsoever in the Piatco Contracts that can serve to
restrict, control or regulate the concessionaire's discretion and power to reject
any service provider and/or impose any term or condition it may see fit in
any contract it enters into with a service provider. In brief, there is no
safeguard whatsoever to ensure free and fair competition in the service-
provider sector.
In the meantime, and not surprisingly, Piatco is first in line, ready to exploit
the unique business opportunity. It announced72 that it has accredited three
groundhandlers for Terminal III. Aside from the Philippine Airlines, the
other accredited entities are the Philippine Airport and Ground Services
Globeground, Inc. ("PAGSGlobeground") and the Orbit Air Systems, Inc.
("Orbit"). PAGSGlobeground is a wholly-owned subsidiary of the Philippine
Airport and Ground Services, Inc. or PAGS,73 while Orbit is a wholly-owned
subsidiary of Friendship Holdings, Inc.,74 which is in turn owned 80 percent
by PAGS.75 PAGS is a service provider owned 60 percent by the Cheng
Family;76 it is a stockholder of 35 percent of Piatco77 and is the latter's
designated contractor-operator for NAIA Terminal III.78
Such entry into and domination of the airport-related services sector appear
to be very much in line with the following provisions contained in the First
Addendum to the Piatco Shareholders Agreement,79 executed on July 6,
1999, which appear to constitute a sort of master plan to create a monopoly
and combinations in restraint of trade:
"11. The Shareholders shall ensure:
a. x x x xxx x x x.;
b. That (Phil. Airport and Ground Services, Inc.) PAGS and/or its designated
Affiliates shall, at all times during the Concession Period, be exclusively
authorized by (PIATCO) to engage in the provision of ground-handling,
catering and fueling services within the Terminal Complex.
c. That PAIRCARGO and/or its designated Affiliate shall, during the
Concession Period, be the only entities authorized to construct and operate a
warehouse for all cargo handling and related services within the Site."
Precisely, proscribed by our Constitution are the monopoly and the restraint
of trade being fostered by the Piatco Contracts through the erection of
barriers to the entry of other service providers into Terminal III. In Tatad v.
Secretary of the Department of Energy,80 the Court ruled:
". . . [S]ection 19 of Article XII of the Constitution . . . mandates: 'The State
shall regulate or prohibit monopolies when the public interest so requires. No
combinations in restraint of trade or unfair competition shall be allowed.'
"A monopoly is a privilege or peculiar advantage vested in one or more
persons or companies, consisting in the exclusive right or power to carry on a
particular business or trade, manufacture a particular article, or control the
sale or the whole supply of a particular commodity. It is a form of market
structure in which one or only a few firms dominate the total sales of a
product or service. On the other hand, a combination in restraint of trade is
an agreement or understanding between two or more persons, in the form of
a contract, trust, pool, holding company, or other form of association, for the
purpose of unduly restricting competition, monopolizing trade and commerce
in a certain commodity, controlling its production, distribution and price, or
otherwise interfering with freedom of trade without statutory authority.
Combination in restraint of trade refers to the means while monopoly refers
to the end.
"x x x xxx xxx
"Section 19, Article XII of our Constitution is anti-trust in history and in
spirit. It espouses competition. The desirability of competition is the reason
for the prohibition against restraint of trade, the reason for the interdiction of
unfair competition, and the reason for regulation of unmitigated monopolies.
Competition is thus the underlying principle of [S]ection 19, Article XII of
our Constitution, . . ."81
Gokongwei Jr. v. Securities and Exchange Commission82 elucidates the
criteria to be employed: "A 'monopoly' embraces any combination the
tendency of which is to prevent competition in the broad and general sense,
or to control prices to the detriment of the public. In short, it is the
concentration of business in the hands of a few. The material consideration
in determining its existence is not that prices are raised and competition
actually excluded, but that power exists to raise prices or exclude
competition when desired."83 (Emphasis supplied)
The Contracts Encourage Monopolistic Pricing, Too
Aside from creating a monopoly, the Piatco contracts also give the
concessionaire virtually limitless power over the charging of fees, rentals and
so forth. What little "oversight function" the government might be able and
minded to exercise is less than sufficient to protect the public interest, as can
be gleaned from the following provisions:
"Sec. 6.06. Adjustment of Non-Public Utility Fees and Charges
"For fees, rentals and charges constituting Non-Public Utility Revenues,
Concessionaire may make any adjustments it deems appropriate without need
for the consent of GRP or any government agency subject to Sec. 6.03(c)."
Section 6.03(c) in turn provides:
"(c) Concessionaire shall at all times be judicious in fixing fees and charges
constituting Non-Public Utility Revenues in order to ensure that End Users
are not unreasonably deprived of services. While the vehicular parking fee,
porterage fee and greeter/wellwisher fee constitute Non-Public Utility
Revenues of Concessionaire, GRP may require Concessionaire to explain
and justify the fee it may set from time to time, if in the reasonable opinion
of GRP the said fees have become exorbitant resulting in the unreasonable
deprivation of End Users of such services."
It will be noted that the above-quoted provision has no teeth, so the
concessionaire can defy the government without fear of any sanction.
Moreover, Section 6.06 - taken together with Section 6.03(c) of the ARCA -
falls short of the standard set by the BOT Law as amended, which expressly
requires in Section 2(b) that the project proponent is "allowed to charge
facility users appropriate tolls, fees, rentals and charges not exceeding those
proposed in its bid or as negotiated and incorporated in the contract x x x."
The Piatco Contracts Violate Constitutional Prohibitions Against
Impairment of Contracts and Deprivation of Property Without Due Process
Earlier, I discussed how Section 3.01(e)84 of both the CA and the ARCA
requires government, through DOTC/MIAA, not to permit the carry-over to
Terminal III of the services and operations of certain service providers
currently operating at Terminal I with subsisting contracts.
By the In-Service Date, Terminal III shall be the only facility to be operated
as an international passenger terminal at the NAIA;85 thus, Terminals I and II
shall no longer operate as such,86 and no one shall be allowed to compete
with Piatco in the operation of an international passenger terminal in the
NAIA.87 The bottom line is that, as of the In-Service Date, Terminal III will
be the only terminal where the business of providing airport-related services
to international airlines and passengers may be conducted at all.
Consequently, government through the DOTC/MIAA will be compelled to
cease honoring existing contracts with service providers after the In-Service
Date, as they cannot be allowed to operate in Terminal III.
In short, the CA and the ARCA obligate and constrain government to break
its existing contracts with these service providers.
Notably, government is not in a position to require Piatco to accommodate
the displaced service providers, and it would be unrealistic to think that these
service providers can perform their service contracts in some other
international airport outside Luzon. Obviously, then, these displaced service
providers are - to borrow a quaint expression - up the river without a paddle.
In plainer terms, they will have lost their businesses entirely, in the blink of
an eye.
What we have here is a set of contractual provisions that impair the
obligation of contracts and contravene the constitutional prohibition against
deprivation of property without due process of law.88
Moreover, since the displaced service providers, being unable to operate, will
be forced to close shop, their respective employees - among them Messrs.
Agan and Lopez et al. - have very grave cause for concern, as they will find
themselves out of employment and bereft of their means of livelihood. This
situation comprises still another violation of the constitution prohibition
against deprivation of property without due process.
True, doing business at the NAIA may be viewed more as a privilege than as
a right. Nonetheless, where that privilege has been availed of by the
petitioners-in-intervention service providers for years on end, a situation
arises, similar to that in American Inter-fashion v. GTEB.89 We held therein
that a privilege enjoyed for seven years "evolved into some form of property
right which should not be removed x x x arbitrarily and without due
process." Said pronouncement is particularly relevant and applicable to the
situation at bar because the livelihood of the employees of petitioners-
intervenors are at stake.
The Piatco Contracts Violate Constitutional Prohibition
Against Deprivation of Liberty Without Due Process
The Piatco Contracts by locking out existing service providers from entry
into Terminal III and restricting entry of future service providers, thereby
infringed upon the freedom - guaranteed to and heretofore enjoyed by
international airlines - to contract with local service providers of their choice,
and vice versa.
Both the service providers and their client airlines will be deprived of
the right to liberty, which includes the right to enter into all
contracts,90 and/or the right to make a contract in relation to one's business.91
By Creating New Financial Obligations for Government,
Supplements to the ARCA Violate the Constitutional
Ban on Disbursement of Public Funds Without Valid Appropriation
Clearly prohibited by the Constitution is the disbursement of public funds out
of the treasury, except in pursuance of an appropriation made by law.92 The
immediate effect of this constitutional ban is that all the various agencies of
government are constrained to limit their expenditures to the amounts
appropriated by law for each fiscal year; and to carefully count their cash
before taking on contractual commitments. Giving flesh and form to the
injunction of the fundamental law, Sections 46 and 47 of Executive Order
292, otherwise known as the Administrative Code of 1987, provide as
follows:
"Sec. 46. Appropriation Before Entering into Contract. - (1) No contract
involving the expenditure of public funds shall be entered into unless there is
an appropriation therefor, the unexpended balance of which, free of other
obligations, is sufficient to cover the proposed expenditure; and . .
"Sec. 47. Certificate Showing Appropriation to Meet Contract. - Except in
the case of a contract for personal service, for supplies for current
consumption or to be carried in stock not exceeding the estimated
consumption for three (3) months, or banking transactions of government-
owned or controlled banks, no contract involving the expenditure of public
funds by any government agency shall be entered into or authorized unless
the proper accounting official of the agency concerned shall have certified to
the officer entering into the obligation that funds have been duly appropriated
for the purpose and that the amount necessary to cover the proposed contract
for the current calendar year is available for expenditure on account thereof,
subject to verification by the auditor concerned. The certificate signed by the
proper accounting official and the auditor who verified it, shall be attached to
and become an integral part of the proposed contract, and the sum so
certified shall not thereafter be available for expenditure for any other
purpose until the obligation of the government agency concerned under the
contract is fully extinguished."
Referring to the aforequoted provisions, this Court has held that "(I)t is quite
evident from the tenor of the language of the law that the existence of
appropriations and the availability of funds are indispensable pre-requisites
to or conditions sine qua non for the execution of government contracts. The
obvious intent is to impose such conditions as a priori requisites to the
validity of the proposed contract."93
Notwithstanding the constitutional ban, statutory mandates and
Jurisprudential precedents, the three Supplements to the ARCA, which were
not approved by NEDA, imposed on government the additional burden of
spending public moneys without prior appropriation.
In the First Supplement ("FS") dated August 27, 1999, the following
requirements were imposed on the government:
• To construct, maintain and keep in good repair and operating condition all
airport support services, facilities, equipment and infrastructure owned
and/or operated by MIAA, which are not part of the Project or which are
located outside the Site, even though constructed by Concessionaire -
including the access road connecting Terminals II and III and the taxilane,
taxiways and runways
• To obligate the MIAA to provide funding for the upkeep, maintenance and
repair of the airports and facilities owned or operated by it and by third
persons under its control in order to ensure compliance with international
standards; and holding MIAA liable to Piatco for the latter's losses, expenses
and damages as well as for the latter's liability to third persons, in case MIAA
fails to perform such obligations; in addition, MIAA will also be liable for
the incremental and consequential costs of the remedial work done by Piatco
on account of the former's default.
• Section 4 of the FS imposed on government ten (10) "Additional Special
Obligations," including the following:
o Providing thru MIAA the land required by Piatco for the
taxilane and one taxiway, at no cost to Piatco
o Implementing the government's existing storm drainage
master plan
o Coordinating with DPWH the financing, implementation and
completion of the following works before the In-Service
Date: three left-turning overpasses (Edsa to Tramo St.,
Tramo to Andrews Ave., and Manlunas Road to Sales Ave.)
and a road upgrade and improvement program involving
widening, repair and resurfacing of Sales Road, Andrews
Avenue and Manlunas Road; improvement of Nichols
 Interchange; and removal of squatters along Andrews
Avenue
o Dealing directly with BCDA and the Philippine Air Force in
acquiring additional land or right of way for the road
upgrade and improvement program
o Requiring government to work for the immediate reversion
to MIAA of the Nayong Pilipino National Park, in order to
permit the building of the second west parallel taxiway
• Section 5 of the FS also provides that in lieu of the access tunnel, a surface
access road (T2-T3) will be constructed. This provision requires government
to expend funds to purchase additional land from Nayong Pilipino and to
clear the same in order to be able to deliver clean possession of the site to
Piatco, as required in Section 5(c) of the FS.
On the other hand, the Third Supplement ("TS") obligates the government to
deliver, within 120 days from date thereof, clean possession of the land on
which the T2-T3 Road is to be constructed.
The foregoing contractual stipulations undeniably impose on government the
expenditures of public funds not included in any congressional appropriation
or authorized by any other statute. Piatco however attempts to take these
stipulations out of the ambit of Sections 46 and 47 of the Administrative
Code by characterizing them as stipulations for compliance on a "best-efforts
basis" only.
To determine whether the additional obligations under the Supplements may
really be undertaken on a best-efforts basis only, the nature of each of these
obligations must be examined in the context of its relevance and significance
to the Terminal III Project, as well as of any adverse impact that may result if
such obligation is not performed or undertaken on time. In short, the criteria
for determining whether the best-efforts basis will apply is whether the
obligations are critical to the success of the Project and, accordingly,
whether failure to perform them (or to perform them on time) could result in
a material breach of the contract.
Viewed in this light, the "Additional Special Obligations" set out in Section 4
of the FS take on a different aspect. In particular, each of the following may
all be deemed to play a major role in the successful and timely prosecution of
the Terminal III Project: the obtention of land required by PIATCO for the
taxilane and taxiway; the implementation of government's existing storm
drainage master plan; and coordination with DPWH for the completion of the
three left-turning overpasses before the In-Service Date, as well as
acquisition and delivery of additional land for the construction of the T2-T3
access road.
Conversely, failure to deliver on any of these obligations may conceivably
result in substantial prejudice to the concessionaire, to such an extent as to
constitute a material breach of the Piatco Contracts. Whereupon, the
concessionaire may outrightly terminate the Contracts pursuant to Section
8.01(b)(i) and (ii) of the ARCA and seek payment of Liquidated Damages in
accordance with Section 8.02(a) of the ARCA; or the concessionaire may
instead require government to pay the Incremental and Consequential Losses
under Section 1.23 of the ARCA.94The logical conclusion then is that the
obligations in the Supplements are not to be performed on a best-efforts basis
only, but are unarguably mandatory in character.
Regarding MIAA's obligation to coordinate with the DPWH for the complete
implementation of the road upgrading and improvement program for Sales,
Andrews and Manlunas Roads (which provide access to the Terminal III site)
prior to the In-Service Date, it is essential to take note of the fact that there
was a pressing need to complete the program before the opening of Terminal
III.95 For that reason, the MIAA was compelled to enter into a memorandum
of agreement with the DPWH in order to ensure the timely completion of the
road widening and improvement program. MIAA agreed to advance the total
amount of P410.11 million to DPWH for the works, while the latter was
committed to do the following:
"2.2.8. Reimburse all advance payments to MIAA including but not limited
to interest, fees, plus other costs of money within the periods CY2004 and
CY2006 with payment of no less than One Hundred Million Pesos
(PhP100M) every year.
"2.2.9. Perform all acts necessary to include in its CY2004 to CY2006
budget allocation the repayments for the advances made by MIAA, to ensure
that the advances are fully repaid by CY2006. For this purpose, DPWH shall
include the amounts to be appropriated for reimbursement to MIAA in the
"Not Needing Clearance" column of their Agency Budget Matrix (ABM)
submitted to the Department of Budget and Management."
It can be easily inferred, then, that DPWH did not set aside enough funds to
be able to complete the upgrading program for the crucially situated access
roads prior to the targeted opening date of Terminal III; and that, had MIAA
not agreed to lend the P410 Million, DPWH would not have been able to
complete the program on time. As a consequence, government would have
been in breach of a material obligation. Hence, this particular undertaking of
government may likewise not be construed as being for best-efforts
compliance only.
They also Infringe on the Legislative Prerogative and Power Over the
Public Purse
But the particularly sad thing about this transaction between MIAA and
DPWH is the fact that both agencies were maneuvered into (or allowed
themselves to be maneuvered into) an agreement that would ensure delivery
of upgraded roads for Piatco's benefit, using funds not allocated for that
purpose. The agreement would then be presented to Congress as a done deal.
Congress would thus be obliged to uphold the agreement and support it with
the necessary allocations and appropriations for three years, in order to
enable DPWH to deliver on its committed repayments to MIAA. The net
result is an infringement on the legislative power over the public purse and a
diminution of Congress' control over expenditures of public funds - a
development that would not have come about, were it not for the
Supplements. Very clever but very illegal!
EPILOGUE
What Do We Do Now?
In the final analysis, there remains but one ultimate question, which I raised
during the Oral Argument on December 10, 2002: What do we do with the
Piatco Contracts and Terminal III?96 (Feeding directly into the resolution
of the decisive question is the other nagging issue: Why should we bother
with determining the legality and validity of these contracts, when the
Terminal itself has already been built and is practically complete?)
Prescinding from all the foregoing disquisition, I find that all the Piatco
contracts, without exception, are void ab initio, and therefore inoperative.
Even the very process by which the contracts came into being - the bidding
and the award - has been riddled with irregularities galore and blatant
violations of law and public policy, far too many to ignore. There is thus no
conceivable way, as proposed by some, of saving one (the original
Concession Agreement) while junking all the rest.
Neither is it possible to argue for the retention of the Draft Concession
Agreement (referred to in the various pleadings as the Contract Bidded Out)
as the contract that should be kept in force and effect to govern the situation,
inasmuch as it was never executed by the parties. What Piatco and the
government executed was the Concession Agreement which is entirely
different from the Draft Concession Agreement.
Ultimately, though, it would be tantamount to an outrageous, grievous and
unforgivable mutilation of public policy and an insult to ourselves if we opt
to keep in place a contract - any contract - for to do so would assume that we
agree to having Piatco continue as the concessionaire for Terminal III.
Despite all the insidious contraventions of the Constitution, law and public
policy Piatco perpetrated, keeping Piatco on as concessionaire and even
rewarding it by allowing it to operate and profit from Terminal III - instead
of imposing upon it the stiffest sanctions permissible under the laws - is
unconscionable.
It is no exaggeration to say that Piatco may not really mind which contract
we decide to keep in place. For all it may care, we can do just as well without
one, if we only let it continue and operate the facility. After all, the real
money will come not from building the Terminal, but from actually
operating it for fifty or more years and charging whatever it feels like,
without any competition at all. This scenario must not be allowed to happen.
If the Piatco contracts are junked altogether as I think they should be, should
not AEDC automatically be considered the winning bidder and therefore
allowed to operate the facility? My answer is a stone-cold 'No'. AEDC never
won the bidding, never signed any contract, and never built any facility. Why
should it be allowed to automatically step in and benefit from the greed of
another?
Should government pay at all for reasonable expenses incurred in the
construction of the Terminal? Indeed it should, otherwise it will be unjustly
enriching itself at the expense of Piatco and, in particular, its funders,
contractors and investors - both local and foreign. After all, there is no
question that the State needs and will make use of Terminal III, it being part
and parcel of the critical infrastructure and transportation-related programs of
government.
In Melchor v. Commission on Audit,97 this Court held that even if the contract
therein was void, the principle of payment by quantum meruit was found
applicable, and the contractor was allowed to recover the reasonable value of
the thing or services rendered (regardless of any agreement as to
the supposed value), in order to avoid unjust enrichment on the part of
government. The principle of quantum meruit was likewise applied in Eslao
v. Commission on Audit,98 because to deny payment for a building almost
completed and already occupied would be to permit government to unjustly
enrich itself at the expense of the contractor. The same principle was applied
in Republic v. Court of Appeals.99

One possible practical solution would be for government - in view of the

nullity of the Piatco contracts and of the fact that Terminal III has already
been built and is almost finished - to bid out the operation of the facility
under the same or analogous principles as build-operate-and-transfer
projects. To be imposed, however, is the condition that the winning bidder
must pay the builder of the facility a price fixed by government based
on quantum meruit; on the real, reasonable - not inflated - value of the built
facility.

How the payment or series of payments to the builder, funders, investors and
contractors will be staggered and scheduled, will have to be built into the
bids, along with the annual guaranteed payments to government. In this
manner, this whole sordid mess could result in something truly beneficial for
all, especially for the Filipino people.

WHEREFORE, I vote to grant the Petitions and to declare the subject

contracts NULL and VOID.
EN BANC
G.R. No. 154599 January 21, 2004
THE LIGA NG MGA BARANGAY NATIONAL, petitioner,
vs.
THE CITY MAYOR OF MANILA, HON. JOSE ATIENZA, JR., and
THE CITY COUNCIL OF MANILA, respondents.
DECISION
DAVIDE, JR., C.J.:
This petition for certiorari under Rule 65 of the Rules of Court seeks the
nullification of Manila City Ordinance No. 8039, Series of 2002,1 and
respondent City Mayor’s Executive Order No. 011, Series of 2002,2 dated 15
August 2002 , for being patently contrary to law.
The antecedents are as follows:
Petitioner Liga ng mga Barangay National (Liga for brevity) is the national
organization of all the barangays in the Philippines, which pursuant to
Section 492 of Republic Act No. 7160, otherwise known as The Local
Government Code of 1991, constitutes the duly elected presidents of highly-
urbanized cities, provincial chapters, the metropolitan Manila Chapter, and
metropolitan political subdivision chapters.
Section 493 of that law provides that "[t]he liga at the municipal, city,
provincial, metropolitan political subdivision, and national levels directly
elect a president, a vice-president, and five (5) members of the board of
directors." All other matters not provided for in the law affecting the internal
organization of the leagues of local government units shall be governed by
their respective constitution and by-laws, which must always conform to the
provisions of the Constitution and existing laws.3
On 16 March 2000, the Liga adopted and ratified its own Constitution and
By-laws to govern its internal organization.4 Section 1, third paragraph,
Article XI of said Constitution and By-Laws states:
All other election matters not covered in this Article shall be governed by the
"Liga Election Code" or such other rules as may be promulgated by the
National Liga Executive Board in conformity with the provisions of existing
laws.
By virtue of the above-cited provision, the Liga adopted and ratified its own
Election Code.5 Section 1.2, Article I of the Liga Election Code states:
1.2 Liga ng mga Barangay Provincial, Metropolitan, HUC/ICC
Chapters. There shall be nationwide synchronized elections for the
provincial, metropolitan, and HUC/ICC chapters to be held on the third
Monday of the month immediately after the month when the synchronized
elections in paragraph 1.1 above was held. The incumbent Liga chapter
president concerned duly assisted by the proper government agency, office or
department, e.g. Provincial/City/NCR/Regional Director, shall convene all
the duly elected Component City/Municipal Chapter Presidents and all the
current elected Punong Barangays (for HUC/ICC) of the respective chapters
in any public place within its area of jurisdiction for the purpose of
reorganizing and electing the officers and directors of the provincial,
metropolitan or HUC/ICC Liga chapters. Said president duly assisted by the
government officer aforementioned, shall notify, in writing, all the above
concerned at least fifteen (15) days before the scheduled election meeting on
the exact date, time, place and requirements of the said meeting.
The Liga thereafter came out with its Calendar of Activities and Guidelines
in the Implementation of the Liga Election Code of 2002,6 setting on 21
October 2002 the synchronized elections for highly urbanized city chapters,
such as the Liga Chapter of Manila, together with independent component
city, provincial, and metropolitan chapters.lawphi1.net
On 28 June 2002, respondent City Council of Manila enacted Ordinance No.
8039, Series of 2002, providing, among other things, for the election of
representatives of the District Chapters in the City Chapter of Manila and
setting the elections for both chapters thirty days after the barangay elections.
Section 3 (A) and (B) of the assailed ordinance read:
SEC. 3. Representation Chapters. — Every Barangay shall be represented in
the said Liga Chapters … by the Punong Barangay…or, in his absence or
incapacity, by the kagawad duly elected for the purpose among its
members….
A. District Chapter
All elected Barangay Chairman in each District shall elect from among
themselves the President, Vice-President and five (5) members of the
Board….
B. City Chapter
The District Chapter representatives shall automatically become members of
the Board and they shall elect from among themselves a President, Vice-
President, Secretary, Treasurer, Auditor and create other positions as it may
deem necessary for the management of the chapter.
The assailed ordinance was later transmitted to respondent City Mayor Jose
L. Atienza, Jr., for his signature and approval.
On 16 July 2002, upon being informed that the ordinance had been
forwarded to the Office of the City Mayor, still unnumbered and yet to be
officially released, the Liga sent respondent Mayor of Manila a letter
requesting him that said ordinance be vetoed considering that it encroached
upon, or even assumed, the functions of the Liga through legislation, a
function which was clearly beyond the ambit of the powers of the City
Council.7
Respondent Mayor, however, signed and approved the assailed city
ordinance and issued on 15 August 2002 Executive Order No. 011, Series of
2002, to implement the ordinance.
Hence, on 27 August 2002, the Liga filed the instant petition raising the
following issues:
I Complaint in Intervention with Urgent Motion for the Issuance of Temporary
WHETHER OR NOT THE RESPONDENT CITY COUNCIL OF MANILA
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF OR IN EXCESS OF JURISDICTION, WHEN IT ENACTED
CITY ORDINANCE NO. 8039 S. 2002 PURPOSELY TO GOVERN THE
ELECTIONS OF THE MANILA CHAPTER OF THE LIGA NG MGA
BARANGAYS AND WHICH PROVIDES A DIFFERENT MANNER OF
ELECTING ITS OFFICERS, DESPITE THE FACT THAT SAID
CHAPTER’S ELECTIONS, AND THE ELECTIONS OF ALL OTHER
CHAPTERS OF THE LIGA NG MGA BARANGAYS FOR THAT
MATTER, ARE BY LAW MANDATED TO BE GOVERNED BY THE
LIGA CONSTITUTION AND BY-LAWS AND THE LIGA ELECTION
CODE.
II
WHETHER OR NOT THE RESPONDENT CITY MAYOR OF MANILA
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF OR IN EXCESS OF JURISDICTION WHEN HE ISSUED
EXECUTIVE ORDER NO. 011 TO IMPLEMENT THE QUESTIONED
CITY ORDINANCE NO. 8039 S. 2002.
In support of its petition, the Liga argues that City Ordinance No. 8039,
Series of 2002, and Executive Order No. 011, Series of 2002, contradict the
Liga Election Code and are therefore invalid. There exists neither rhyme nor
reason, not to mention the absence of legal basis, for the Manila City Council
to encroach upon, or even assume, the functions of the Liga by prescribing,
through legislation, the manner of conducting the Liga elections other than
what has been provided for by the Liga Constitution and By-laws and the
Liga Election Code. Accordingly, the subject ordinance is an ultra vires act
of the respondents and, as such, should be declared null and void.
As for its prayer for the issuance of a temporary restraining order, the
petitioner cites as reason therefor the fact that under Section 5 of the assailed
city ordinance, the Manila District Chapter elections would be held thirty
days after the regular barangay elections. Hence, it argued that the issuance
of a temporary restraining order and/or preliminary injunction would be
imperative to prevent the implementation of the ordinance and executive
order.
On 12 September 2002, Barangay Chairman Arnel Peña, in his capacity as a
member of the Liga ng mga Barangay in the City Chapter of Manila, filed a
Restraining Order and/or Preliminary Injunction.8 He supports the position of
the Liga and prays for the declaration of the questioned ordinance and
executive order, as well as the elections of the Liga ng mga Barangay
pursuant thereto, to be null and void. The assailed ordinance prescribing for
an "indirect manner of election" amended, in effect, the provisions of the
Local Government Code of 1991, which provides for the election of the Liga
officers at large. It also violated and curtailed the rights of the petitioner and
intervenor, as well as the other 896 Barangay Chairmen in the City of
Manila, to vote and be voted upon in a direct election.
On 25 October 2002, the Office of the Solicitor General (OSG) filed a
Manifestation in lieu of Comment.9 It supports the petition of the Liga,
arguing that the assailed city ordinance and executive order are clearly
inconsistent with the express public policy enunciated in R.A. No. 7160.
Local political subdivisions are able to legislate only by virtue of a valid
delegation of legislative power from the national legislature. They are mere
agents vested with what is called the power of subordinate legislation. Thus,
the enactments in question, which are local in origin, cannot prevail against
the decree, which has the force and effect of law.
On the issue of non-observance by the petitioners of the hierarchy-of-courts
rule, the OSG posits that technical rules of procedure should be relaxed in the
instant petition. While Batas Pambansa Blg. 129, as amended, grants original
jurisdiction over cases of this nature to the Regional Trial Court (RTC), the
exigency of the present petition, however, calls for the relaxation of this rule.
Section 496 (should be Section 491) of the Local Government Code of 1991
primarily intended that the Liga ng mga Barangay determine the
representation of the Liga in the sanggunians for the immediate ventilation,
articulation, and crystallization of issues affecting barangay government
administration. Thus, the immediate resolution of this petition is a must.
On the other hand, the respondents defend the validity of the assailed
ordinance and executive order and pray for the dismissal of the present
petition on the following grounds: (1) certiorari under Rule 65 of the Rules
of Court is unavailing; (2) the petition should not be entertained by this Court
in view of the pendency before the Regional Trial Court of Manila of two
actions or petitions questioning the subject ordinance and executive order;
(3) the petitioner is guilty of forum shopping; and (4) the act sought to be
enjoined is fait accompli.
The respondents maintain that certiorari is an extraordinary remedy available
to one aggrieved by the decision of a tribunal, officer, or board exercising
judicial or quasi-judicial functions. The City Council and City Mayor of
Manila are not the "board" and "officer" contemplated in Rule 65 of the
Rules of Court because both do not exercise judicial functions. The
enactment of the subject ordinance and issuance of the questioned executive
order are legislative and executive functions, respectively, and thus, do not
fall within the ambit of "judicial functions." They are both within the
prerogatives, powers, and authority of the City Council and City Mayor of
Manila, respectively. Furthermore, the petition failed to show with certainty
that the respondents acted without or in excess of jurisdiction or with grave
abuse of discretion.
The respondents also asseverate that the petitioner cannot claim that it has no
other recourse in addressing its grievance other than this petition for
certiorari. As a matter of fact, there are two cases pending before Branches
33 and 51 of the RTC of Manila (one is for mandamus; the other, for
declaratory relief) and three in the Court of Appeals (one is for prohibition;
the two other cases, for quo warranto), which are all akin to the present
petition in the sense that the relief being sought therein is the declaration of
the invalidity of the subject ordinance. Clearly, the petitioner may ask the
RTC or the Court of Appeals the relief being prayed for before this Court.
Moreover, the petitioner failed to prove discernible compelling reasons
attending the present petition that would warrant cognizance of the present
petition by this Court.
Besides, according to the respondents, the petitioner has transgressed the
proscription against forum-shopping in filing the instant suit. Although the
parties in the other pending cases and in this petition are different individuals
or entities, they represent the same interest.
With regard to petitioner's prayer for temporary restraining order and/ or
preliminary injunction in its petition, the respondents maintain that the same
had become moot and academic in view of the elections of officers of the
City Liga ng mga Barangay on 15 September 2002 and their subsequent
assumption to their respective offices.10 Since the acts to be enjoined are now
fait accompli, this petition for certiorari with an application for provisional
remedies must necessarily fail. Thus, where the records show that during the
pendency of the case certain events or circumstances had taken place that
render the case moot and academic, the petition for certiorari must be
dismissed.
After due deliberation on the pleadings filed, we resolve to dismiss this
petition for certiorari.
First, the respondents neither acted in any judicial or quasi-judicial capacity
nor arrogated unto themselves any judicial or quasi-judicial prerogatives. A
petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure is a
special civil action that may be invoked only against a tribunal, board, or
officer exercising judicial or quasi-judicial functions.
Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:
SECTION 1. Petition for certiorari. — When any tribunal, board or officer
exercising judicial or quasi-judicial functions has acted without or in excess
of its or his jurisdiction, or with grave abuse of discretion amounting to lack
or excess of jurisdiction, and there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such incidental
reliefs as law and justice may require.
Elsewise stated, for a writ of certiorari to issue, the following requisites must
concur: (1) it must be directed against a tribunal, board, or officer exercising
judicial or quasi-judicial functions; (2) the tribunal, board, or officer must
have acted without or in excess of jurisdiction or with grave abuse of
discretion amounting lack or excess of jurisdiction; and (3) there is no appeal
or any plain, speedy, and adequate remedy in the ordinary course of law.
A respondent is said to be exercising judicial function where he has the
power to determine what the law is and what the legal rights of the parties
are, and then undertakes to determine these questions and adjudicate upon
the rights of the parties.11
Quasi-judicial function, on the other hand, is "a term which applies to the
actions, discretion, etc., of public administrative officers or bodies …
required to investigate facts or ascertain the existence of facts, hold hearings,
and draw conclusions from them as a basis for their official action and to
exercise discretion of a judicial nature."12
Before a tribunal, board, or officer may exercise judicial or quasi-judicial
acts, it is necessary that there be a law that gives rise to some specific rights
of persons or property under which adverse claims to such rights are made,
and the controversy ensuing therefrom is brought before a tribunal, board, or
officer clothed with power and authority to determine the law and adjudicate
the respective rights of the contending parties.13
The respondents do not fall within the ambit of tribunal, board, or officer
exercising judicial or quasi-judicial functions. As correctly pointed out by the
respondents, the enactment by the City Council of Manila of the assailed
ordinance and the issuance by respondent Mayor of the questioned executive
order were done in the exercise of legislative and executive functions,
respectively, and not of judicial or quasi-judicial functions. On this score
alone, certiorari will not lie.
Second, although the instant petition is styled as a petition for certiorari, in
essence, it seeks the declaration by this Court of the unconstitutionality or
illegality of the questioned ordinance and executive order. It, thus, partakes
of the nature of a petition for declaratory relief over which this Court has
only appellate, not original, jurisdiction.14 Section 5, Article VIII of the
Constitution provides:
Sec. 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting ambassadors, other
public ministers and consuls, and over petitions for certiorari, prohibition,
mandamus, quo warranto, and habeas corpus.
(2) Review, revise, reverse, modify, or affirm on appeal or certiorari as the
law or the Rules of Court may provide, final judgments and orders of lower
courts in:
(a) All cases in which the constitutionality or validity of any treaty,
international or executive agreement, law, presidential decree, proclamation,
order, instruction, ordinance, or regulation is in question. (Italics supplied).
As such, this petition must necessary fail, as this Court does not have original
jurisdiction over a petition for declaratory relief even if only questions of law
are involved.15
Third, even granting arguendo that the present petition is ripe for the
extraordinary writ of certiorari, there is here a clear disregard of the
hierarchy of courts. No special and important reason or exceptional and
compelling circumstance has been adduced by the petitioner or the intervenor
why direct recourse to this Court should be allowed.
We have held that this Court’s original jurisdiction to issue a writ
of certiorari (as well as of prohibition, mandamus, quo warranto, habeas
corpus and injunction) is not exclusive, but is concurrent with the Regional
Trial Courts and the Court of Appeals in certain cases. As aptly stated in
People v. Cuaresma:16
This concurrence of jurisdiction is not, however, to be taken as according to
parties seeking any of the writs an absolute, unrestrained freedom of choice
of the court to which application therefor0 will be directed. There is after all
a hierarchy of courts. That hierarchy is determinative of the venue of appeals,
and also serves as a general determinant of the appropriate forum for
petitions for the extraordinary writs. A becoming regard of that judicial
hierarchy most certainly indicates that petitions for the issuance of
extraordinary writs against first level ("inferior") courts should be filed with
the Regional Trial Court, and those against the latter, with the Court of
Appeals. A direct invocation of the Supreme Court’s original jurisdiction to
issue these writs should be allowed only when there are special and
important reasons therefor, clearly and specifically set out in the petition.
This is [an] established policy. It is a policy necessary to prevent inordinate
demands upon the Court’s time and attention which are better devoted to
those matters within its exclusive jurisdiction, and to prevent further over-
crowding of the Court’s docket.
As we have said in Santiago v. Vasquez,17 the propensity of litigants and
lawyers to disregard the hierarchy of courts in our judicial system by seeking
relief directly from this Court must be put to a halt for two reasons: (1) it
would be an imposition upon the precious time of this Court; and (2) it would
cause an inevitable and resultant delay, intended or otherwise, in the
adjudication of cases, which in some instances had to be remanded or
referred to the lower court as the proper forum under the rules of procedure,
or as better equipped to resolve the issues because this Court is not a trier of
facts.
Thus, we shall reaffirm the judicial policy that this Court will not entertain
direct resort to it unless the redress desired cannot be obtained in the
appropriate courts, and exceptional and compelling circumstances justify the
availment of the extraordinary remedy of writ of certiorari, calling for the
exercise of its primary jurisdiction.18
Petitioner’s reliance on Pimentel v. Aguirre19 is misplaced because the non-
observance of the hierarchy-of-courts rule was not an issue therein. Besides,
what was sought to be nullified in the petition for certiorari and prohibition
therein was an act of the President of the Philippines, which would have
greatly affected all local government units. We reiterated therein that when
an act of the legislative department is seriously alleged to have infringed the
Constitution, settling the controversy becomes the duty of this Court. The
same is true when what is seriously alleged to be unconstitutional is an act of
the President, who in our constitutional scheme is coequal with Congress.
We hesitate to rule that the petitioner and the intervenor are guilty of forum-
shopping. Forum-shopping exists where the elements of litis pendentia are
present or when a final judgment in one case will amount to res judicata in
the other. For litis pendentia to exist, the following requisites must be
present: (1) identity of parties, or at least such parties as are representing the
same interests in both actions; (2) identity of rights asserted and reliefs
prayed for, the reliefs being founded on the same facts; and (3) identity with
respect to the two preceding particulars in the two cases, 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.20
In the instant petition, and as admitted by the respondents, the parties in this
case and in the alleged other pending cases are different individuals or
entities; thus, forum-shopping cannot be said to exist. Moreover, even
assuming that those five petitions are indeed pending before the RTC of
Manila and the Court of Appeals, we can only guess the causes of action and
issues raised before those courts, considering that the respondents failed to
furnish this Court with copies of the said petitions.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
THIRD DIVISION
[G.R. No. 139791. December 12, 2003]
MANILA BANKERS LIFE INSURANCE CORPORATION, petitioner,
vs. EDDY NG KOK WEI, respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari assailing the
Decision[1] dated March 26, 1999 and Resolution[2] dated August 5, 1999 of
the Court of Appeals in CA-G.R. CV No. 40504, entitled Eddy Ng Kok Wei
vs. Manila Bankers Life Insurance Corporation.
The factual antecedents as borne by the records are:
Eddy Ng Kok Wei, respondent, is a Singaporean businessman who ventured
into investing in the Philippines. On November 29, 1988, respondent, in a
Letter of Intent addressed to Manila Bankers Life Insurance Corporation,
petitioner, expressed his intention to purchase a condominium unit at Valle
Verde Terraces.
Subsequently or on December 5, 1988, respondent paid petitioner a
reservation fee of P50,000.00 for the purchase of a 46-square meter
condominium unit (Unit 703) valued at P860,922.00. On January 16, 1989,
respondent paid 90% of the purchase price in the sum of P729,830.00.
Consequently, petitioner, through its President, Mr. Antonio G. Puyat,
executed a Contract to Sell in favor of the respondent. The contract expressly
states that the subject condominium unit shall substantially be completed and
delivered to the respondent within fifteen (15) months from February 8, 1989
or on May 8, 1990, and that (S)hould there be no substantial completion and
fail(ure) to deliver the unit on the date specified, a penalty of 1% of the total
amount paid (by respondent) shall be charged against (petitioner).
Considering that the stipulated 15-month period was at hand, respondent
returned to the Philippines sometime in April, 1990.
In a letter dated April 5, 1990, petitioner, through its Senior Assistant Vice-
President, Mr. Mario G. Zavalla, informed respondent of the substantial
completion of his condominium unit, however, due to various uncontrollable
forces (such as coup d etat attempts, typhoon and steel and cement shortage),
the final turnover is reset to May 31, 1990.
Meanwhile, on July 5, 1990, upon receipt of petitioners notice of delivery
dated May 31, 1990, respondent again flew back to Manila. He found the
unit still uninhabitable for lack of water and electric facilities.
Once more, petitioner issued another notice to move-in addressed to its
building administrator advising the latter that respondent is scheduled to
move in on August 22, 1990.
On October 5, 1990, respondent returned to the Philippines only to find that
his condominium unit was still unlivable. Exasperated, he was constrained to
send petitioner a letter dated November 21, 1990 demanding payment for the
damages he sustained. But petitioner ignored such demand, prompting
respondent to file with the Regional Trial Court, Branch 150, MakatiCity, a
complaint against the former for specific performance and damages,
docketed as Civil Case No. 90-3440.
Meanwhile, during the pendency of the case, respondent finally accepted the
condominium unit and on April 12, 1991, occupied the same. Thus,
respondents cause of action has been limited to his claim for damages.
On December 18, 1992, the trial court rendered a Decision[3] finding the
petitioner liable for payment of damages due to the delay in the performance
of its obligation to the respondent.The dispositive portion reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendant, ordering Manila Bankers Life Insurance Corporation to pay
plaintiff Eddy Ng Kok Wei the following:
1. One percent (1%) of the total amount plaintiff paid defendant;
2. P100,000.00 as moral damages;
3. P50,000.00 as exemplary damages;
4. P25,000.00 by way of attorneys fees; and
Cost of suit.
SO ORDERED.
On appeal, the Court of Appeals, in a Decision dated March 26, 1999,
affirmed in toto the trial courts award of damages in favor of the respondent.
Unsatisfied, petitioner filed a motion for reconsideration but was denied by
the Appellate Court in a Resolution dated August 5, 1999.
Hence, this petition for review on certiorari. Petitioner contends that the trial
court has no jurisdiction over the instant case; and that the Court of Appeals
erred in affirming the trial courts finding that petitioner incurred
unreasonable delay in the delivery of the condominium unit to respondent.
On petitioners contention that the trial court has no jurisdiction over the
instant case, Section 1 (c) of Presidential Decree No. 1344, as amended,
provides:
SECTION 1. In the exercise of its functions to regulate the real estate trade
and business and in addition to its powers provided for in Presidential Decree
No. 957, the National Housing Authority [now Housing and Land Use
Regulatory Board (HLURB)][4] shall have exclusive jurisdiction to hear and
decide cases of the following nature:
xxx
C. Cases involving specific performance of contractual and statutory
obligations filed by buyers of subdivision lots or condominium units against
the owner, developer, dealer, broker or salesman.
x x x.
Pursuant to the above provisions, it is the HLURB which has jurisdiction
over the instant case. We have consistently held that complaints for specific
performance with damages by a lot or condominium unit buyer against the
owner or developer falls under the exclusive jurisdiction of the HLURB.[5]
While it may be true that the trial court is without jurisdiction over the case,
petitioners active participation in the proceedings estopped it from assailing
such lack of it. We have held that it is an undesirable practice of a party
participating in the proceedings and submitting its case for decision and then
accepting the judgment, only if favorable, and attacking it for lack of
jurisdiction, when adverse.[6]
Here, petitioner failed to raise the question of jurisdiction before the trial
court and the Appellate Court. In effect, petitioner confirmed and ratified the
trial courts jurisdiction over this case. Certainly, it is now in estoppel and can
no longer question the trial courts jurisdiction.

On petitioners claim that it did not incur delay, suffice it to say that this is a
factual issue. Time and again, we have ruled that the factual findings of the
trial court are given weight when supported by substantial evidence and
carries more weight when affirmed by the Court of Appeals.[7] Whether or
not petitioner incurred delay and thus, liable to pay damages as a result
thereof, are indeed factual questions.

The jurisdiction of this Court in a petition for review on certiorari under

Rule 45 of the 1997 Rules of Civil Procedure, as amended, is limited to
reviewing only errors of law, not of fact, unless the factual findings being
assailed are not supported by evidence on record or the impugned judgment
is based on a misapprehension of facts.[8] These exceptions are not present
here.

WHEREFORE, the petition is DENIED. The assailed Decision dated March

26, 1999 and Resolution dated August 5, 1999 of the Court of Appeals are
hereby AFFIRMED IN TOTO.

Costs against the petitioner.

SO ORDERED.
FIRST DIVISION
[A.M. No. MTJ-01-1370. April 25, 2003]
OFFICE OF THE COURT ADMINISTRATOR, complainant, vs.
JUDGE AGUSTIN T. SARDIDO, Municipal Trial Court of Koronadal,
South Cotabato, respondent.
DECISION
CARPIO, J.:
The Case
This is an administrative case against respondent Judge Agustin T. Sardido
(Judge Sardido) formerly presiding judge of the Municipal Trial Court of
Koronadal, South Cotabato, for gross ignorance of the law. Judge Sardido
issued an Order dated 20 October 1998 excluding Judge Braulio Hurtado, Jr.
(Judge Hurtado) of the Regional Trial Court of Kabacan, North Cotabato as
one of the accused in an Amended Information.[1] Judge Sardido ruled that
Supreme Court Circular No. 3-89 requires that Judge Hurtado be dropped
from the Amended Information and his case be forwarded to the Court.
The Facts
Private complainant Teresita Aguirre Magbanua accused Oscar Pagunsan
and Danilo Ong of the crime of Falsification by Private Individual and Use of
Falsified Document.[2] The Amended Information included Judge
Hurtado. The case, docketed as Criminal Case No. 14071, was raffled to
Judge Sardido, then presiding judge of the Municipal Trial Court of
Koronadal, South Cotabato (MTC-Koronadal).
In a Deed of Absolute Sale dated 8 August 1993, private complainant
Magbanua and six other vendors allegedly sold two parcels of land, covered
by TCT Nos. 47873 and 33633 and located at the commercial district of
Koronadal, to Davao Realty Development Corporation, represented by
accused Ong, with co-accused Pagunsan, as broker. Judge Hurtado, who at
that time was the Clerk of Court of RTC-Koronadal and ex-officio notary
public, notarized the Deed of Absolute Sale.
However, private complainant Magbanua denies signing the Deed of
Absolute Sale dated 8 August 1993 which states that the consideration for the
sale was only P600,000.00. Private complainant asserts that what she and the
other vendors signed was a Deed of Absolute Sale dated 6 August 1996 for a
consideration of P16,000,000.00. Under the terms of the sale, the vendee
agreed to pay for the capital gains tax. The consideration in the 8 August
1993 Deed of Absolute Sale was apparently undervalued. Subsequently, the
Bureau of Internal Revenue assessed the vendors a deficiency capital gains
tax of P1,023,375.00.
Judge Hurtado filed a motion praying that the criminal complaint against him
be forwarded to the Supreme Court. Judge Hurtado claimed that Circular No.
3-89 dated 6 February 1989 requires all cases involving justices and judges
of the lower courts, whether or not such complaints deal with acts apparently
unrelated to the discharge of their official functions, such as acts of
immorality, estafa, crimes against persons and property, etc. to be forwarded
to the Supreme Court. Judge Hurtado asserted that since the case against him
is one involving a judge of a lower court, the same should be forwarded to
the Supreme Court pursuant to Circular No. 3-89.
The Provincial Prosecutor opposed Judge Hurtados motion, arguing that the
case against Judge Hurtado is not within the scope of Circular No. 3-89 since
it is not an IBP-initiated case. Moreover, the offense charged was committed
in 1993 when Judge Hurtado was still a clerk of court and ex-officio notary
public.
On 20 October 1998, Judge Sardido issued an Order, the pertinent portions of
which read:
The issue to be resolved in the instant case is, whether the case of Judge
Hurtado, who is charged for acts committed prior to his appointment as an
RTC Judge, falls within the purview of the afore-said Circular No. 3-89.
It is the humble submission of the Court that the case of Judge Hurtado, an
RTC Judge of the Regional Trial Court of Kabacan, North Cotabato, falls
within the meaning and intent of the said circular.
For reasons being, firstly, the said circular provides that all cases involving
justices and judges of lower courts shall be forwarded to the Supreme Court
for appropriate action, whether or not such complaints deal with acts
apparently unrelated to the discharge of their official functions, and
regardless of the nature of the crime, without any qualification whether the
crime was committed before or during his tenure of office. Under the law on
Legal Hermeneutics, if the law does not qualify we must not qualify.
Secondly, it would sound, to the mind of the Court, awkward for a first level
court to be trying an incumbent judge of a second level court.
For reasons afore-stated, this Court can not and shall not try this case as
against Judge Hurtado, unless the Honorable Supreme Court would order
otherwise.
Wherefore, the foregoing premises duly considered, the name of Judge
Braulio L. Hurtado, Jr. is ordered excluded from the amended information
and the case against him is ordered forwarded to the Honorable Supreme
Court, pursuant to the afore-said Circular No. 3-89 of the Supreme Court,
dated February 9, 1989.
Accordingly, Maxima S. Borja (Borja), Stenographer I and Acting Clerk of
Court II of the MTC-Koronadal, South Cotabato, wrote a letter dated 21 July
1999 forwarding the criminal case against Judge Hurtado to the Court
Administrator for appropriate action.
Then Court Administrator Alfredo L. Benipayo issued a Memorandum dated
25 October 2000 pointing out that Circular No. 3-89 refers only to
administrative complaints filed with the IBP against justices and judges of
lower courts. The Circular does not apply to criminal cases filed before trial
courts against such justices and judges.
Thus, in the Resolution of 6 December 2000, the Court directed that the letter
of Acting Clerk of Court Borja be returned to the MTC-Koronadal together
with the records of the criminal case. The Court directed Judge Sardido to
explain in writing why he should not be held liable for gross ignorance of the
law for excluding Judge Hurtado from the Amended Information and for
transmitting the records of Judge Hurtados case to the Court.
In his Explanation dated 26 January 2001, Judge Sardido reasoned out that he
excluded Judge Hurtado because Circular No. 3-89 directs the IBP to
forward to the Supreme Court for appropriate action all cases involving
justices and judges of lower courts x x x. Judge Sardido claims that the
Circular likewise applies to courts in cases involving justices or judges of the
lower courts, especially so in this case where Judge Hurtado was charged
with falsification of public document as a notary public while he was still the
Clerk of Court of the Regional Trial Court of the 11th Judicial Region in
Koronadal, South Cotabato.
In the Resolution of 28 March 2001, the Court referred this case to the Office
of the Court Administrator (OCA) for evaluation, report and
recommendation. On 10 July 2001, the OCA submitted a Memorandum
recommending that this case be re-docketed as a regular administrative
matter.
Judge Sardido filed his Manifestation dated 20 September 2001 stating that
he is submitting the case for decision based on the pleadings and records
already filed. Judge Sardido insisted that he did what he had done in all
honesty and good faith.
OCAs Findings and Conclusions
The OCA found that Judge Sardido erred in excluding Judge Hurtado as one
of the accused in the Amended Information in Criminal Case No. 14071. The
OCA held that Circular No. 3-89, which is Judge Sardidos basis in issuing
the Order of 20 October 1998, refers to administrative complaints filed with
the IBP against justices and judges of lower courts. The Circular does not
apply to criminal cases filed against justices and judges of lower courts. The
OCA recommended that a fine of P5,000.00 be imposed on Judge Sardido
for gross ignorance of the law.
The Courts Ruling
The Court issued Circular No. 3-89 in response to a letter dated 19 December
1988 by then IBP President Leon M. Garcia, seeking clarification of the
Courts En Banc Resolution of 29 November 1998 in RE: Letter of then
Acting Presiding Justice Rodolfo A. Nocon[3] and Associate Justices
Reynato Puno[4] and Alfredo Marigomen[5] of the Court of Appeals.
A certain Atty. Eduardo R. Balaoing had filed a complaint against Court of
Appeals Justices Nocon, Puno and Marigomen relating to a petition filed
before their division. In its En Banc Resolution of 29 November 1988, the
Court required the IBP to refer to the Supreme Court for appropriate action
the complaint[6] filed by Atty. Balaoing with the IBP Commission on Bar
Discipline. The Court stated that the power to discipline justices and judges
of the lower courts is within the Courts exclusive power and authority as
provided in Section 11, Article VII of the 1987 Constitution.[7] The Court
Administrator publicized the En Banc Resolution of 29 November 1988 by
issuing Circular No. 17 dated 20 December 1988.
The Court issued Circular No. 3-89 on 6 February 1989 clarifying the En
Banc Resolution of 29 November 1988. Circular No. 3-89 provides in part as
follows:
(1) The IBP (Board of Governors and Commission on Bar Discipline)
shall forward to the Supreme Court for appropriate action all cases
involving justices and judges of lower courts, whether or not such complaints
deal with acts apparently unrelated to the discharge of their official functions,
such as acts of immorality, estafa, crimes against persons and property, etc. x
x x. (Emphasis supplied)
Circular No. 3-89 clarified the second paragraph, Section 1 of Rule 139-B of
the Rules of Court which states that:
The IBP Board of Governors may, motu proprio or upon referral by the
Supreme Court or by a Chapter Board of Officers, or at the instance of any
person, initiate and prosecute proper charges against erring attorneys
including those in the government service. (Emphasis supplied).
As clarified, the phrase attorneys x x x in the government service in Section 1
of Rule 139-B does not include justices of appellate courts and judges of
lower courts who are not subject to the disciplining authority of the IBP. All
administrative cases against justices of appellate courts and judges of lower
courts fall exclusively within the jurisdiction of the Supreme Court.
However, Rule 139-B refers to Disbarment and Discipline of Attorneys
which is administrative and not criminal in nature. The cases referred to in
Circular No. 3-89 are administrative cases for disbarment, suspension or
discipline of attorneys, including justices of appellate courts and judges of
the lower courts. The Court has vested the IBP with the power to initiate and
prosecute administrative cases against erring lawyers.[8] However, under
Circular No. 3-89, the Court has directed the IBP to refer to the Supreme
Court for appropriate action all administrative cases filed with IBP against
justices of appellate courts and judges of the lower courts. As mandated by
the Constitution, the Court exercises the exclusive power to discipline
administratively justices of appellate courts and judges of lower courts.
Circular No. 3-89 does not refer to criminal cases against erring justices of
appellate courts or judges of lower courts. Trial courts retain jurisdiction over
the criminal aspect of offenses committed by justices of appellate
courts[9] and judges of lower courts. This is clear from the Circular directing
the IBP, and not the trial courts, to refer all administrative cases filed against
justices of appellate courts and judges of lower courts to the Supreme
Court. The case filed against Judge Hurtado is not an administrative case
filed with the IBP. It is a criminal case filed with the trial court under its
jurisdiction as prescribed by law.
The acts or omissions of a judge may well constitute at the same time both a
criminal act and an administrative offense. Whether the criminal case against
Judge Hurtado relates to an act committed before or after he became a judge
is of no moment. Neither is it material that an MTC judge will be trying an
RTC judge in the criminal case. A criminal case against an attorney or judge
is distinct and separate from an administrative case against him. The
dismissal of the criminal case does not warrant the dismissal of an
administrative case arising from the same set of facts. The quantum of
evidence that is required in the latter is only preponderance of evidence, and
not proof beyond reasonable doubt which is required in criminal cases.[10] As
held in Gatchalian Promotions Talents Pool, Inc. v. Naldoza:[11]
Administrative cases against lawyers belong to a class of their own. They are
distinct from and they may proceed independently of civil and criminal
cases.
The burden of proof for these types of cases differ. In a criminal case, proof
beyond reasonable doubt is necessary; in an administrative case for
disbarment or suspension, clearly preponderant evidence is all that is
required. Thus, a criminal prosecution will not constitute a prejudicial
question even if the same facts and circumstances are attendant in the
administrative proceedings.
It should be emphasized that a finding of guilt in the criminal case will not
necessarily result in a finding of liability in the administrative case.
Conversely, respondents acquittal does not necessarily exculpate him
administratively. In the same vein, the trial courts finding of civil liability
against the respondent will not inexorably lead to a similar finding in the
administrative action before this Court. Neither will a favorable disposition
in the civil action absolve the administrative liability of the lawyer. The basic
premise is that criminal and civil cases are altogether different from
administrative matters, such that the disposition in the first two will not
inevitably govern the third and vice versa. For this reason, it would be well to
remember the Courts ruling in In re Almacen, which we quote:
x x x Disciplinary proceedings against lawyers are sui generis. Neither
purely civil nor purely criminal, they do not involve a trial of an action or a
suit, but are rather investigations by the Court into the conduct of one of its
officers. Not being intended to inflict punishment, [they are] in no sense a
criminal prosecution. Accordingly, there is neither a plaintiff nor a
prosecutor therein. [They] may be initiated by the Court motu proprio. Public
interest is [their] primary objective, and the real question for determination is
whether or not the attorney is still a fit person to be allowed the privileges as
such. Hence, in the exercise of its disciplinary powers, the Court merely calls
upon a member of the Bar to account for his actuations as an officer of the
Court with the end in view of preserving the purity of the legal profession
and the proper and honest administration of justice by purging the profession
of members who by their misconduct have prove[n] themselves no longer impropriety to protect the image and integrity of the judiciary.[19] The Court
worthy to be entrusted with the duties and responsibilities pertaining to the may still impose a fine on Judge Sardido in the instant case despite his
office of an attorney. x x x dismissal from the service.

A judge is called upon to exhibit more than just a cursory acquaintance with
statutes and procedural rules. He must be conversant with basic legal
principles and well-settled doctrines.He should strive for excellence and seek
the truth with passion.[12] Judge Sardido failed in this regard. He erred in
excluding Judge Hurtado as one of the accused in the Amended Information
and in forwarding the criminal case against Judge Hurtado to the Court.
WHEREFORE, respondent Judge Agustin T. Sardido is FINED Ten
Thousand Pesos (P10,000.00) for gross ignorance of the law. The fine may
be deducted from his accrued leave credits.
SO ORDERED.

One last point. This administrative case against Judge Sardido started before
the amendment[13] of Rule 140 classifying gross ignorance of the law a
serious offense punishable by a fine of more than P20,000.00 but not
exceeding P40,000.00. The amendment cannot apply retroactively to Judge
Sardidos case. However, the fine of P5,000.00 recommended by the OCA is
too light a penalty considering that this is not the first offense of Judge
Sardido.

In RE: Hold Departure Order Issued by Judge Agustin T. Sardido,[14] the

Court reprimanded Judge Sardido for issuing a hold-departure order contrary
to Circular No. 39-97. In Cabilao v. Judge Sardido,[15] the Court fined Judge
Sardido P5,000.00 for gross ignorance of the law, grave abuse of discretion
and gross misconduct. The Court gave a stern warning to Judge Sardido that
a commission of the same or similar act would be dealt with more
severely. In Almeron v. Judge Sardido,[16] the Court imposed on Judge
Sardido a stiffer fine of P10,000.00 for gross ignorance of the law. He was
again sternly warned that the commission of the same or similar act in the
future would be dealt with more severely including, if warranted, his
dismissal from the service.

In a more recent administrative case, Torcende v. Judge Sardido,[17] the

Court found Judge Sardido again guilty of gross ignorance of the law and of
gross misconduct. This time the Court dismissed Judge Sardido from the
service with forfeiture of his retirement benefits, except accrued leave
credits. The dismissal was with prejudice to reemployment in any branch of
the government or any of its agencies or instrumentalities, including
government-owned and controlled corporations.

The records of the OCA further disclose that Judge Sardido has other similar
administrative complaints[18] still pending against him. Such an unflattering
service record erodes the peoples faith and confidence in the judiciary. It is
the duty of every member of the bench to avoid any impression of
THIRD DIVISION
[G.R. No. 151149. September 7, 2004]
GEORGE KATON, petitioner, vs. MANUEL PALANCA JR.,
LORENZO AGUSTIN, JESUS GAPILANGO and JUAN
FRESNILLO, respondents.
DECISION
PANGANIBAN, J.:
Where prescription, lack of jurisdiction or failure to state a cause of action
clearly appear from the complaint filed with the trial court, the action may be
dismissed motu proprio by the Court of Appeals, even if the case has been
elevated for review on different grounds. Verily, the dismissal of such cases
appropriately ends useless litigations.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court,
assailing the December 8, 2000 Decision[2] and the November 20, 2001
Resolution[3] of the Court of Appeals in CA-GR SP No. 57496. The assailed
Decision disposed as follows:
Assuming that petitioner is correct in saying that he has the exclusive right in
applying for the patent over the land in question, it appears that his action is
already barred by laches because he slept on his alleged right for almost 23
years from the time the original certificate of title has been issued to
respondent Manuel Palanca, Jr., or after 35 years from the time the land was
certified as agricultural land. In addition, the proper party in the annulment of
patents or titles acquired through fraud is the State; thus, the petitioners
action is deemed misplaced as he really does not have any right to assert or
protect. What he had during the time he requested for the re-classification of
the land was the privilege of applying for the patent over the same upon the
lands conversion from forest to agricultural.
WHEREFORE, the petition is hereby DISMISSED. No pronouncement as to
cost.[4]
The assailed Resolution, on the other hand, denied the Motion for
Reconsideration filed by petitioner. It affirmed the RTCs dismissal of his
Complaint in Civil Case No. 3231, not on the grounds relied upon by the trial
court, but because of prescription and lack of jurisdiction.
The Antecedent Facts
The CA narrates the antecedent facts as follows:
On August 2, 1963, herein [P]etitioner [George Katon] filed a request with
the District Office of the Bureau of Forestry in Puerto Princesa, Palawan, for
the re-classification of a piece of real property known as Sombrero Island,
located in Tagpait, Aborlan, Palawan, which consists of approximately 18
hectares. Said property is within Timberland Block of LC Project No. 10-C
of Aborlan, Palawan, per BF Map LC No. 1582.
Thereafter, the Bureau of Forestry District Office, Puerto Princesa, Palawan,
ordered the inspection, investigation and survey of the land subject of the
petitioners request for eventual conversion or re-classification from forest to
agricultural land, and thereafter for George Katon to apply for a homestead
patent.
Gabriel Mandocdoc (now retired Land Classification Investigator) undertook
the investigation, inspection and survey of the area in the presence of the
petitioner, his brother Rodolfo Katon (deceased) and his cousin,
[R]espondent Manuel Palanca, Jr. During said survey, there were no actual
occupants on the island but there were some coconut trees claimed to have
been planted by petitioner and [R]espondent Manuel Palanca, Jr. (alleged
overseer of petitioner) who went to the island from time to time to undertake
development work, like planting of additional coconut trees.
The application for conversion of the whole Sombrero Island was favorably
endorsed by the Forestry District Office of Puerto Princesa to its main office
in Manila for appropriate action. The names of Felicisimo Corpuz, Clemente
Magdayao and Jesus Gapilango and Juan Fresnillo were included in the
endorsement as co-applicants of the petitioner.
In a letter dated September 23, 1965, then Asst. Director of Forestry R.J.L.
Utleg informed the Director of Lands, Manila, that since the subject land was
no longer needed for forest purposes, the same is therefore certified and
released as agricultural land for disposition under the Public Land Act.
Petitioner contends that the whole area known as Sombrero Island had been
classified from forest land to agricultural land and certified available for
disposition upon his request and at his instance. However, Mr. Lucio Valera,
then [l]and investigator of the District Land Office, Puerto
Princesa, Palawan, favorably endorsed the request of [R]espondents Manuel
Palanca Jr. and Lorenzo Agustin, for authority to survey on November 15,
1965. On November 22, a second endorsement was issued by Palawan
District Officer Diomedes De Guzman with specific instruction to survey
vacant portions of Sombrero Islandfor the respondents consisting of five (5)
hectares each. On December 10, 1965, Survey Authority No. R III-342-65
was issued authorizing Deputy Public Land Surveyor Eduardo Salvador to
survey ten (10) hectares of Sombrero Island for the respondents. On
December 23, 1990, [R]espondent Lorenzo Agustin filed a homestead patent
application for a portion of the subject island consisting of an area of 4.3
hectares.
Records show that on November 8, 1996, [R]espondent Juan Fresnillo filed a
homestead patent application for a portion of the island comprising 8.5
hectares. Records also reveal that [R]espondent Jesus Gapilango filed a
homestead application on June 8, 1972. Respondent Manuel Palanca, Jr. was
issued Homestead Patent No. 145927 and OCT No. G-7089 on March 3,
1977[5] with an area of 6.84 hectares of Sombrero Island.
Petitioner assails the validity of the homestead patents and original
certificates of title covering certain portions of Sombrero Island issued in
favor of respondents on the ground that the same were obtained through
fraud. Petitioner prays for the reconveyance of the whole island in his favor.
On the other hand, [R]espondent Manuel Palanca, Jr. claims that he himself
requested for the reclassification of the island in dispute and that on or about
the time of such request, [R]espondents Fresnillo, Palanca and Gapilango
already occupied their respective areas and introduced numerous
improvements. In addition, Palanca said that petitioner never filed any
homestead application for the island.Respondents deny that Gabriel
Mandocdoc undertook the inspection and survey of the island.
According to Mandocdoc, the island was uninhabited but the respondents
insist that they already had their respective occupancy and improvements on
the island. Palanca denies that he is a mere overseer of the petitioner because
he said he was acting for himself in developing his own area and not as
anybodys caretaker.
Respondents aver that they are all bona fide and lawful possessors of their
respective portions and have declared said portions for taxation purposes and
that they have been faithfully paying taxes thereon for twenty years.
Respondents contend that the petitioner has no legal capacity to sue insofar
as the island is concerned because an action for reconveyance can only be
brought by the owner and not a mere homestead applicant and that petitioner
is guilty of estoppel by laches for his failure to assert his right over the land
for an unreasonable and unexplained period of time.
In the instant case, petitioner seeks to nullify the homestead patents and
original certificates of title issued in favor of the respondents covering certain
portions of the Sombrero Island as well as the reconveyance of the whole
island in his favor. The petitioner claims that he has the exclusive right to file
an application for homestead patent over the whole island since it was he
who requested for its conversion from forest land to agricultural land.[6]
Respondents filed their Answer with Special and/or Affirmative Defenses
and Counterclaim in due time. On June 30, 1999, they also filed a Motion to
Dismiss on the ground of the alleged defiance by petitioner of the trial courts
Order to amend his Complaint so he could thus effect a substitution by the
legal heirs of the deceased, Respondent Gapilango. The Motion to Dismiss
was granted by the RTC in its Order dated July 29, 1999.
Petitioners Motion for Reconsideration of the July 29, 1999 Order was
denied by the trial court in its Resolution dated December 17, 1999, for being
a third and prohibited motion. In his Petition for Certiorari before the CA,
petitioner charged the trial court with grave abuse of discretion on the ground
that the denied Motion was his first and only Motion for Reconsideration of
the aforesaid Order.
Ruling of the Court of Appeals
Instead of limiting itself to the allegation of grave abuse of discretion, the CA
ruled on the merits. It held that while petitioner had caused the
reclassification of Sombrero Island from forest to agricultural land, he never
applied for a homestead patent under the Public Land Act. Hence, he never
acquired title to that land.
The CA added that the annulment and cancellation of a homestead patent and
the reversion of the property to the State were matters between the latter and
the homestead grantee.Unless and until the government takes steps to annul
the grant, the homesteaders right thereto stands.
Finally, granting arguendo that petitioner had the exclusive right to apply for
a patent to the land in question, he was already barred by laches for having
slept on his right for almost 23 years from the time Respondent Palancas title
had been issued.
In the Assailed Resolution, the CA acknowledged that it had erred when it
ruled on the merits of the case. It agreed with petitioner that the trial court
had acted without jurisdiction in perfunctorily dismissing his September 10,
1999 Motion for Reconsideration, on the erroneous ground that it was a third
and prohibited motion when it was actually only his first motion.
Nonetheless, the Complaint was dismissed motu proprio by the challenged
Resolution of the CA Special Division of five members with two justices
dissenting pursuant to its residual prerogative under Section 1 of Rule 9 of
the Rules of Court.
From the allegations of the Complaint, the appellate court opined that
petitioner clearly had no standing to seek reconveyance of the disputed land,
because he neither held title to it nor even applied for a homestead patent. It
reiterated that only the State could sue for cancellation of the title issued
upon a homestead patent, and for reversion of the land to the public domain.
Finally, it ruled that prescription had already barred the action for
reconveyance. First, petitioners action was brought 24 years after the
issuance of Palancas homestead patent. Under the Public Land Act, such
action should have been taken within ten years from the issuance of the
homestead certificate of title. Second, it appears from the submission (Annex
F of the Complaint) of petitioner himself that Respondents Fresnillo and
Palanca had been occupying six hectares of the island since 1965, or 33 years
before he took legal steps to assert his right to the property. His action was
filed beyond the 30-year prescriptive period under Articles 1141 and 1137 of
the Civil Code.
[7]
Hence, this Petition.
Issues
In his Memorandum, petitioner raises the following issues:
1. Is the Court of Appeals correct in resolving the Petition for Certiorari
based on an issue not raised (the merits of the case) in the Petition?
2. Is the Court of Appeals correct in invoking its alleged residual prerogative
under Section 1, Rule 9 of the 1997 Rules of Civil Procedure in resolving the
Petition on an issue not raised in the Petition?[8]
The Courts Ruling
The Petition has no merit.
First Issue:
Propriety of Ruling on the Merits
This is not the first time that petitioner has taken issue with the propriety of
the CAs ruling on the merits. He raised it with the appellate court when he
moved for reconsideration of its December 8, 2000 Decision. The CA even
corrected itself in its November 20, 2001 Resolution, as follows:
Upon another review of the case, the Court concedes that it may indeed have
lost its way and been waylaid by the variety, complexity and seeming
importance of the interests and issues involved in the case below, the
apparent reluctance of the judges, five in all, to hear the case, and the volume
of the conflicting, often confusing, submissions bearing on incidental
matters. We stand corrected.[9]
That explanation should have been enough to settle the issue. The CAs
Resolution on this point has rendered petitioners issue moot. Hence, there is
no need to discuss it further.Suffice it to say that the appellate court indeed
acted ultra jurisdictio in ruling on the merits of the case when the only issue
that could have been, and was in fact, raised was the alleged grave abuse of
discretion committed by the trial court in denying petitioners Motion for
Reconsideration. Settled is the doctrine that the sole office of a writ of
certiorari is the correction of errors of jurisdiction. Such writ does not include
a review of the evidence,[10] more so when no determination of the merits has
yet been made by the trial court, as in this case.
Second Issue:
Dismissal for Prescription
and Lack of Jurisdiction
Petitioner next submits that the CA erroneously invoked its residual
prerogatives under Section 1 of Rule 9 of the Rules of Court when it motu
proprio dismissed the Petition for lack of jurisdiction and
prescription. According to him, residual prerogative refers to the power that
the trial court, in the exercise of its original jurisdiction, may still validly
exercise even after perfection of an appeal. It follows that such powers are
not possessed by an appellate court.
Petitioner has confused what the CA adverted to as its residual prerogatives
under Section 1 of Rule 9 of the Rules of Court with the residual jurisdiction
of trial courts over cases appealed to the CA.
Under Section 1 of Rule 9 of the Rules of Court, defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived,
except when (1) lack of jurisdiction over the subject matter, (2) litis
pendentia, (3) res judicata and (4) prescription are evident from the
pleadings or the evidence on record. In the four excepted instances, the court
shall motu proprio dismiss the claim or action. In Gumabon v. Larin[11] we
explained thus:
x x x [T]he motu proprio dismissal of a case was traditionally limited to
instances when the court clearly had no jurisdiction over the subject matter
and when the plaintiff did not appear during trial, failed to prosecute his
action for an unreasonable length of time or neglected to comply with the
rules or with any order of the court. Outside of these instances, any motu
proprio dismissal would amount to a violation of the right of the plaintiff to
be heard. Except for qualifying and expanding Section 2, Rule 9, and Section
3, Rule 17, of the Revised Rules of Court, the amendatory 1997 Rules of
Civil Procedure brought about no radical change. Under the new rules, a
court may motu proprio dismiss a claim when it appears from the pleadings
or evidence on record that it has no jurisdiction over the subject
matter; when there is another cause of action pending between the same
parties for the same cause, or where the action is barred by a prior judgment
or by statute of limitations. x x x.[12] (Italics supplied)
On the other hand, residual jurisdiction is embodied in Section 9 of Rule 41
of the Rules of Court, as follows:
SEC. 9. Perfection of appeal; effect thereof. A partys appeal by notice of
appeal is deemed perfected as to him upon the filing of the notice of appeal
in due time.
A partys appeal by record on appeal is deemed perfected as to him with
respect to the subject matter thereof upon the approval of the record on
appeal filed in due time.
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.
In appeals by record on appeal, the court loses jurisdiction only over the
subject matter thereof upon the approval of the records on appeal filed in due
time and the expiration of the time to appeal of the other parties.
In either case, prior to the transmittal of the original record or the record on
appeal, the court may issue orders for the protection and preservation of the
rights of the parties which do not involve any matter litigated by the appeal,
approve compromises, permit appeals of indigent litigants, order execution
pending appeal in accordance with Section 2 of Rule 39, and allow
withdrawal of the appeal. (Italics supplied)
The residual jurisdiction of trial courts is available at a stage in which the
court is normally deemed to have lost jurisdiction over the case or the subject
matter involved in the appeal.This stage is reached upon the perfection of the
appeals by the parties or upon the approval of the records on appeal, but prior
to the transmittal of the original records or the records on appeal.[13] In either
instance, the trial court still retains its so-called residual jurisdiction to issue
protective orders, approve compromises, permit appeals of indigent litigants,
order execution pending appeal, and allow the withdrawal of the appeal.
The CAs motu proprio dismissal of petitioners Complaint could not have
been based, therefore, on residual jurisdiction under Rule 41. Undeniably,
such order of dismissal was not one for the protection and preservation of the
rights of the parties, pending the disposition of the case on appeal. What the
CA referred to as residual prerogatives were the general residual powers of
the courts to dismiss an action motu proprio upon the grounds mentioned in
Section 1 of Rule 9 of the Rules of Court and under authority of Section 2 of
Rule 1[14] of the same rules.
To be sure, the CA had the excepted instances in mind when it dismissed the
Complaint motu proprio on more fundamental grounds directly bearing on
the lower courts lack of jurisdiction[15] and for prescription of the
action. Indeed, when a court has no jurisdiction over the subject matter, the
only power it has is to dismiss the action.[16]
Jurisdiction over the subject matter is conferred by law and is determined by
the allegations in the complaint and the character of the relief sought.[17] In
his Complaint for Nullification of Applications for Homestead and Original
Certificate of Title No. G-7089 and for Reconveyance of Title,[18] petitioner
averred:
2. That on November 10, 1965, without the knowledge of [petitioner,
Respondent] Manuel Palanca Jr., [petitioners] cousin, in connivance with his
co-[respondent], Lorenzo Agustin, x x x fraudulently and in bad faith:
2.1. x x x made the request for authority to survey as a pre-requisite to the
filing of an application for homestead patent in his name and that of his Co-
[Respondent] Agustin, [despite being] fully aware that [Petitioner] KATON
had previously applied or requested for re-classification and certification of
the same land from forest land to agricultural land which request was
favorably acted upon and approved as mentioned earlier; a clear case of
intrinsic fraud and misrepresentation;
xxxxxxxxx
2.3. In stating in his application for homestead patent that he was applying
for the VACANT PORTION of Sombrero Island where there was none, the
same constituted another clear case of fraud and misrepresentation;
3. That the issuance of Homestead Patent No. 145927 and OCT No. G-7089
in the name of [Respondent] Manuel Palanca Jr. and the filing of Homestead
Patent Applications in the names of [respondents], Lorenzo Agustin, Jesus
Gapilango and Juan Fresnillo[,] having been done fraudulently and in bad
faith, are ipso facto null and void and of no effect whatsoever.[19]
xxxxxxxxx
x x x. By a wrongful act or a willful omission and intending the effects with
natural necessity arise knowing from such act or omission, [Respondent
Palanca] on account of his blood relation, first degree cousins, trust,
interdependence and intimacy is guilty of intrinsic fraud [sic]. x x x.[20]
Thereupon, petitioner prayed, among others, for a judgment (1) nullifying the
homestead patent applications of Respondents Agustin, Fresnillo and
Gapilango as well as HomesteadPatent No. 145927 and OCT No. G-7089 in
the name of Respondent Palanca; and (2) ordering the director of the Land
Management Bureau to reconvey the Sombrero Island to petitioner.[21]
The question is, did the Complaint sufficiently allege an action for
declaration of nullity of the free patent and certificate of title or,
alternatively, for reconveyance? Or did it plead merely for reversion?
The Complaint did not sufficiently make a case for any of such actions, over
which the trial court could have exercised jurisdiction.
In an action for nullification of title or declaration of its nullity, the complaint
must contain the following allegations: 1) that the contested land
was privately owned by the plaintiffprior to the issuance of the assailed
certificate of title to the defendant; and 2) that the defendant perpetuated a
fraud or committed a mistake in obtaining a document of title over the parcel
of land claimed by the plaintiff.[22] In these cases, the nullity arises not from
fraud or deceit, but from the fact that the director of the Land Management
Bureau had no jurisdiction to bestow title; hence, the issued patent or
certificate of title was void ab initio.[23]
In an alternative action for reconveyance, the certificate of title is also
respected as incontrovertible, but the transfer of the property or title thereto is
sought to be nullified on the ground that it was wrongfully or erroneously
registered in the defendants name.[24] As with an annulment of title, a
complaint must allege two facts that, if admitted, would entitle the plaintiff to
recover title to the disputed land: (1) that the plaintiff was the owner of the
land, and (2) that the defendant illegally dispossessed the plaintiff of the
property.[25] Therefore, the defendant who acquired the property through
mistake or fraud is bound to hold and reconvey to the plaintiff the property or
the title thereto.[26]
In the present case, nowhere in the Complaint did petitioner allege that he
had previously held title to the land in question. On the contrary, he
acknowledged that the disputed island was public land,[27] that it had never
been privately titled in his name, and that he had not applied for a homestead
under the provisions of the Public Land Act.[28] This Court has held that a
complaint by a private party who alleges that a homestead patent was
obtained by fraudulent means, and who consequently prays for its annulment,
does not state a cause of action; hence, such complaint must be dismissed. [29]
Neither can petitioners case be one for reversion. Section 101 of the Public
Land Act categorically declares that only the solicitor general or the officer
in his stead may institute such an action.[30] A private person may not bring
an action for reversion or any other action that would have the effect of
canceling a free patent and its derivative title, with the result that the land
thereby covered would again form part of the public domain.[31]
Thus, when the plaintiff admits in the complaint that the disputed land will
revert to the public domain even if the title is canceled or amended, the
action is for reversion; and the proper party who may bring action is the
government, to which the property will revert.[32] A mere homestead
applicant, not being the real party in interest, has no cause of action in a suit
for reconveyance.[33] As it is, vested rights over the land applied for under a
homestead may be validly claimed only by the applicant, after approval by
the director of the Land Management Bureau of the formers final proof of
homestead patent. [34]
Consequently, the dismissal of the Complaint is proper not only because of
lack of jurisdiction, but also because of the utter absence of a cause of
action,[35] a defense raised by respondents in their Answer.[36] Section 2 of
Rule 3 of the Rules of Court[37] ordains that every action must be prosecuted is essential only, to repeat, is that the facts demonstrating the lapse of the
or defended in the name of the real party in interest, who stands to be prescriptive period be otherwise sufficiently and satisfactorily apparent on
benefited or injured by the judgment in the suit. Indeed, one who has no right the record; either in the averments of the plaintiff's complaint, or otherwise
or interest to protect has no cause of action by which to invoke, as a party- established by the evidence."[45] (Italics supplied)
plaintiff, the jurisdiction of the court.[38]
Clearly then, the CA did not err in dismissing the present case. After all, if
Finally, assuming that petitioner is the proper party to bring the action for and when they are able to do so, courts must endeavor to settle entire
annulment of title or its reconveyance, the case should still be dismissed for controversies before them to prevent future litigations.[46]
being time-barred.[39] It is not disputed that a homestead patent and an
Original Certificate of Title was issued to Palanca on February 21, WHEREFORE, the Petition is hereby DENIED, and the assailed
1977,[40] while the Complaint was filed only on October 6, 1998. Clearly, the Resolution AFFIRMED. The dismissal of the Complaint in Civil Case No.
suit was brought way past ten years from the date of the issuance of the 3231 is SUSTAINED on the grounds of lack of jurisdiction, failure to state a
Certificate, the prescriptive period for reconveyance of fraudulently cause of action and prescription. Costs against petitioner.
registered real property.[41]
SO ORDERED.
It must likewise be stressed that Palancas title -- which attained the status of
indefeasibility one year from the issuance of the patent and the Certificate of
Title in February 1977 -- is no longer open to review on the ground of actual
fraud. Ybanez v. Intermediate Appellate Court[42] ruled that a certificate of
title, issued under an administrative proceeding pursuant to a homestead
patent, is as indefeasible as one issued under a judicial registration
proceeding one year from its issuance; provided, however, that the land
covered by it is disposable public land, as in this case.

In Aldovino v. Alunan,[43] the Court has held that when the plaintiffs own
complaint shows clearly that the action has prescribed, such action may be
dismissed even if the defense of prescription has not been invoked by the
defendant. In Gicano v. Gegato,[44] we also explained thus:

"x x x [T]rial courts have authority and discretion to dismiss an action on the
ground of prescription when the parties' pleadings or other facts on record
show it to be indeed time-barred; (Francisco v. Robles, Feb. 15, 1954; Sison
v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v.
Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529;
Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis of a
motion to dismiss (Sec. 1,f, Rule 16, Rules of Court), or an answer which
sets up such ground as an affirmative defense (Sec. 5, Rule 16), or even if the
ground is alleged after judgment on the merits, as in a motion for
reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the defense has
not been asserted at all, as where no statement thereof is found in the
pleadings (Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission
House, 27 SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil. 821); or where a
defendant has been declared in default (PNB v. Perez, 16 SCRA 270). What
THIRD DIVISION DECISION

NACHURA, J.:

VENANCIO FIGUEROA y CERVANTES,[1] G.R. No. 147406

Petitioner, When is a litigant estopped by laches from assailing the jurisdiction of a

tribunal? This is the paramount issue raised in this petition for review of
the February 28, 2001Decision[2] of the Court of Appeals (CA) in CA-G.R.
CR No. 22697.
Present:

Pertinent are the following antecedent facts and proceedings:

QUISUMBING, J.,*

YNARES-SANTIAGO,
On July 8, 1994, an information[3] for reckless imprudence resulting in
- versus - Chairperson, homicide was filed against the petitioner before the Regional Trial Court
AUSTRIA-MARTINEZ, (RTC) of Bulacan, Branch 18.[4]The case was docketed as Criminal Case No.
2235-M-94.[5] Trial on the merits ensued and on August 19, 1998, the trial
NACHURA, and court convicted the petitioner as charged.[6] In his appeal before the CA, the
petitioner questioned, among others, for the first time, the trial courts
REYES, JJ. jurisdiction.[7]

The appellate court, however, in the challenged decision, considered the

petitioner to have actively participated in the trial and to have belatedly
PEOPLE OF THE PHILIPPINES, Promulgated: attacked the jurisdiction of the RTC; thus, he was already estopped by laches
from asserting the trial courts lack of jurisdiction. Finding no other ground to
Respondent.
reverse the trial courts decision, the CA affirmed the petitioners conviction
July 14, 2008 but modified the penalty imposed and the damages awarded.[8]

x------------------------------------------------------------------------------------x Dissatisfied, the petitioner filed the instant petition for review
on certiorari raising the following issues for our resolution:

a. Does the fact that the petitioner failed to raise the issue of jurisdiction
during the trial of this case, which was initiated and filed by the public
prosecutor before the wrong court, constitute laches in relation to the
doctrine laid down in Tijam v. Sibonghanoy, notwithstanding the fact that
said issue was immediately raised in petitioners appeal to the Honorable
Court of Appeals? Conversely, does the active participation of the petitioner
in the trial of his case, which is initiated and filed not by him but by the
public prosecutor, amount to estoppel?
b. Does the admission of the petitioner that it is difficult to immediately stop
a bus while it is running at 40 kilometers per hour for the purpose of
avoiding a person who unexpectedly crossed the road, constitute enough
incriminating evidence to warrant his conviction for the crime charged?
c. Is the Honorable Court of Appeals justified in considering the place of
accident as falling within Item 4 of Section 35 (b) of the Land Transportation
and Traffic Code, and subsequently ruling that the speed limit thereto is only
20 kilometers per hour, when no evidence whatsoever to that effect was ever
presented by the prosecution during the trial of this case?
d. Is the Honorable Court of Appeals justified in convicting the petitioner for
homicide through reckless imprudence (the legally correct designation is
reckless imprudence resulting to homicide) with violation of the Land
Transportation and Traffic Code when the prosecution did not prove this
during the trial and, more importantly, the information filed against the
petitioner does not contain an allegation to that effect?
e. Does the uncontroverted testimony of the defense witness Leonardo
Hernal that the victim unexpectedly crossed the road resulting in him getting
hit by the bus driven by the petitioner not enough evidence to acquit him of
the crime charged?[9]
Applied uniformly is the familiar rule that the jurisdiction of the court to hear
and decide a case is conferred by the law in force at the time of the institution
of the action, unless such statute provides for a retroactive application
thereof.[10] In this case, at the time the criminal information for reckless
imprudence resulting in homicide with violation of the Automobile Law
(now Land Transportation and Traffic Code) was filed, Section 32(2)
of Batas Pambansa (B.P.) Blg. 129[11] had already been amended by
Republic Act No. 7691.[12] The said provision thus reads:
Sec. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts
and Municipal Circuit Trial Courts in Criminal Cases.Except in cases falling
within the exclusive original jurisdiction of Regional Trial Courts and the
Sandiganbayan, the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts shall exercise:
xxxx
(2) Exclusive original jurisdiction over all offenses punishable with
imprisonment not exceeding six (6) years irrespective of the amount of fine,
and regardless of other imposable accessory or other penalties, including the
civil liability arising from such offenses or predicated thereon, irrespective of
kind, nature, value or amount thereof: Provided, however, That in offenses
involving damage to property through criminal negligence, they shall have
exclusive original jurisdiction thereof.
As the imposable penalty for the crime charged herein is prision
correccional in its medium and maximum periods or imprisonment for 2
years, 4 months and 1 day to 6 years,[13] jurisdiction to hear and try the same
is conferred on the Municipal Trial Courts (MTCs). Clearly, therefore, the
RTC of Bulacan does not have jurisdiction over Criminal Case No. 2235-M-
94.
While both the appellate court and the Solicitor General acknowledge this
fact, they nevertheless are of the position that the principle of estoppel by
laches has already precluded the petitioner from questioning the jurisdiction
of the RTCthe trial went on for 4 years with the petitioner actively
participating therein and without him ever raising the jurisdictional
infirmity. The petitioner, for his part, counters that the lack of jurisdiction of
a court over the subject matter may be raised at any time even for the first
time on appeal. As undue delay is further absent herein, the principle of
laches will not be applicable.
To settle once and for all this problem of jurisdiction vis--vis estoppel by
laches, which continuously confounds the bench and the bar, we shall
analyze the various Court decisions on the matter.
As early as 1901, this Court has declared that unless jurisdiction has been
conferred by some legislative act, no court or tribunal can act on a matter
submitted to it.[14] We went on to state in U.S. v. De La Santa[15] that:
It has been frequently held that a lack of jurisdiction over the subject-matter
is fatal, and subject to objection at any stage of the proceedings, either in the
court below or on appeal (Ency. of Pl. & Pr., vol. 12, p. 189, and large array
of cases there cited), and indeed, where the subject-matter is not within
the jurisdiction, the court may dismiss the proceeding ex mero motu.
(4 Ill., 133; 190 Ind., 79; Chipman vs. Waterbury, 59 Conn., 496.)
Jurisdiction over the subject-matter in a judicial proceeding is conferred by
the sovereign authority which organizes the court; it is given only by law and
in the manner prescribed by law and an objection based on the lack of such
jurisdiction can not be waived by the parties. x x x[16]
Later, in People v. Casiano,[17] the Court explained:
4. The operation of the principle of estoppel on the question of jurisdiction
seemingly depends upon whether the lower court actually had jurisdiction
or not. If it had nojurisdiction, but the case was tried and decided upon
the theory that it had jurisdiction, the parties are not barred, on appeal,
from assailing such jurisdiction, for the same must exist as a matter of
law, and may not be conferred by consent of the parties or by estoppel (5
C.J.S., 861-863). However, if the lower court had jurisdiction, and the case
was heard and decided upon a given theory, such, for instance, as that the
court had no jurisdiction, the party who induced it to adopt such theory will
not be permitted, on appeal, to assume an inconsistent positionthat the lower
court had jurisdiction. Here, the principle of estoppel applies. The rule that
jurisdiction is conferred by law, and does not depend upon the will of the
parties, has nobearing thereon. Thus, Corpus Juris Secundum says:
Where accused has secured a decision that the indictment is void, or has been
granted an instruction based on its defective character directing the jury to
acquit, he is estopped, when subsequently indicted, to assert that the former
indictment was valid. In such case, there may be a new prosecution whether
the indictment in the former prosecution was good or bad. Similarly, where,
after the jury was impaneled and sworn, the court on accused's motion
quashed the information on the erroneous assumption that the court had no
jurisdiction, accused cannot successfully plead former jeopardy to a new
information. x x x (22 C.J.S., sec. 252, pp. 388-389; italics ours.)
Where accused procured a prior conviction to be set aside on the ground that
the court was without jurisdiction, he is estopped subsequently to assert, in
support of a defense of previous jeopardy, that such court had jurisdiction.
(22 C.J.S. p. 378.)[18]
But in Pindagan Agricultural Co., Inc. v. Dans,[19] the Court, in not
sustaining the plea of lack of jurisdiction by the plaintiff-appellee therein,
made the following observations:
It is surprising why it is only now, after the decision has been rendered, that
the plaintiff-appellee presents the question of this Courts jurisdiction over the
case. Republic Act No. 2613 was enacted on August 1, 1959. This case was
argued on January 29, 1960. Notwithstanding this fact, the jurisdiction of this
Court was never impugned until the adverse decision of this Court was
handed down. The conduct of counsel leads us to believe that they must have
always been of the belief that notwithstanding said enactment of Republic
Act 2613 this Court has jurisdiction of the case, such conduct being born out
of a conviction that the actual real value of the properties in question actually
exceeds the jurisdictional amount of this Court (over P200,000). Our minute
resolution in G.R. No. L-10096, Hyson Tan, et al. vs. Filipinas Compaa de
Seguros, et al., of March 23, 1956, a parallel case, is applicable to the
conduct of plaintiff-appellee in this case, thus:
x x x that an appellant who files his brief and submits his case to the Court of
Appeals for decision, without questioning the latters jurisdiction until
decision is rendered therein, should be considered as having voluntarily
waived so much of his claim as would exceed the jurisdiction of said
Appellate Court; for the reason that a contrary rule would encourage the
undesirable practice of appellants submitting their cases for decision to the
Court of Appeals in expectation of favorable judgment, but with intent of
attacking its jurisdiction should the decision be unfavorable: x x x[20]
Then came our ruling in Tijam v. Sibonghanoy[21] that a party may be barred
by laches from invoking lack of jurisdiction at a late hour for the purpose of
annulling everything done in the case with the active participation of said
party invoking the plea. We expounded, thus:
A party may be estopped or barred from raising a question in different ways
and for different reasons. Thus, we speak of estoppel in pais, of estoppel by
deed or by record, and of estoppel by laches.
Laches, in a general sense, is failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence,
could or should have been done earlier; it is negligence or omission to assert
a right within a reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it.
The doctrine of laches or of stale demands is based upon grounds of public
policy which requires, for the peace of society, the discouragement of stale
claims and, unlike the statute of limitations, is not a mere question of time
but is principally a question of the inequity or unfairness of permitting a right
or claim to be enforced or asserted.
It has been held that a party cannot invoke the jurisdiction of a court to
secure affirmative relief against his opponent and, after obtaining or failing
to obtain such relief, repudiate or question that same jurisdiction (Dean vs.
Dean, 136 Or. 694, 86 A.L.R. 79). In the case just cited, by way of
explaining the rule, it was further said that the question whether the court had
jurisdiction either of the subject matter of the action or of the parties was not
important in such cases because the party is barred from such conduct not
because the judgment or order of the court is valid and conclusive as an
adjudication, but for the reason that such a practice cannot be
toleratedobviously for reasons of public policy.
Furthermore, it has also been held that after voluntarily submitting a cause
and encountering an adverse decision on the merits, it is too late for the loser
to question the jurisdiction or power of the court (Pease vs. Rathbun-Jones
etc., 243 U.S. 273, 61 L. Ed. 715, 37 S.Ct. 283; St. Louis etc. vs. McBride,
141 U.S. 127, 35 L. Ed. 659). And in Littleton vs. Burgess, 16 Wyo. 58, the
Court said that it is not right for a party who has affirmed and invoked the
jurisdiction of a court in a particular matter to secure an affirmative relief, to
afterwards deny that same jurisdiction to escape a penalty.
Upon this same principle is what We said in the three cases mentioned in the
resolution of the Court of Appeals of May 20, 1963 (supra)to the effect that
we frown upon the undesirable practice of a party submitting his case for
decision and then accepting the judgment, only if favorable, and attacking it
for lack of jurisdiction, when adverseas well as in Pindagan etc. vs. Dans et
al., G.R. L-14591, September 26, 1962; Montelibano et al. vs. Bacolod-
Murcia Milling Co., Inc., G.R. L-15092; Young Men Labor Union etc. vs.
The Court of Industrial Relations et al., G.R. L-20307, Feb. 26, 1965, and
Mejia vs. Lucas, 100 Phil. p. 277.
The facts of this case show that from the time the Surety became a quasi-
party on July 31, 1948, it could have raised the question of the lack of
jurisdiction of the Court of First Instance of Cebu to take cognizance of the
present action by reason of the sum of money involved which, according to
the law then in force, was within the original exclusive jurisdiction of inferior
courts. It failed to do so. Instead, at several stages of the proceedings in the
court a quo, as well as in the Court of Appeals, it invoked the jurisdiction of
said courts to obtain affirmative relief and submitted its case for a final
adjudication on the merits. It was only after an adverse decision was rendered
by the Court of Appeals that it finally woke up to raise the question of
jurisdiction. Were we to sanction such conduct on its part, We would in
effect be declaring as useless all the proceedings had in the present case since
it was commenced on July 19, 1948 and compel the judgment creditors to go
up their Calvary once more. The inequity and unfairness of this is not only
patent but revolting.[22]
For quite a time since we made this pronouncement in Sibonghanoy, courts
and tribunals, in resolving issues that involve the belated invocation of lack
of jurisdiction, have applied the principle of estoppel by laches. Thus,
in Calimlim v. Ramirez,[23] we pointed out that Sibonghanoy was developing
into a general rule rather than the exception:
A rule that had been settled by unquestioned acceptance and upheld in
decisions so numerous to cite is that the jurisdiction of a court over the
subject-matter of the action is a matter of law and may not be conferred by
consent or agreement of the parties. The lack of jurisdiction of a court may
be raised at any stage of the proceedings, even on appeal. This doctrine has
been qualified by recent pronouncements which stemmed principally from
the ruling in the cited case of Sibonghanoy. It is to be regretted, however, that
the holding in said case had been applied to situations which were obviously
not contemplated therein. The exceptional circumstance involved
in Sibonghanoy which justified the departure from the accepted concept of
non-waivability of objection to jurisdiction has been ignored and, instead a
blanket doctrine had been repeatedly upheld that rendered the supposed
ruling in Sibonghanoy not as the exception, but rather the general rule,
virtually overthrowing altogether the time-honored principle that the issue of
jurisdiction is not lost by waiver or by estoppel.
In Sibonghanoy, the defense of lack of jurisdiction of the court that rendered
the questioned ruling was held to be barred by estoppel by laches. It was
ruled that the lack of jurisdiction having been raised for the first time in a
motion to dismiss filed almost fifteen (15) years after the questioned ruling
had been rendered, such a plea may no longer be raised for being barred by
laches. As defined in said case, laches is failure or neglect, for an
unreasonable and unexplained length of time, to do that which, by exercising
due diligence, could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a presumption
that the party entitled to assert has abandoned it or declined to assert it.[24]
In Calimlim, despite the fact that the one who benefited from the plea of lack
of jurisdiction was the one who invoked the courts jurisdiction, and who later
obtained an adverse judgment therein, we refused to apply the ruling
in Sibonghanoy. The Court accorded supremacy to the time-honored
principle that the issue of jurisdiction is not lost by waiver or by
estoppel.
Yet, in subsequent cases decided after Calimlim, which by sheer volume are
too plentiful to mention, the Sibonghanoy doctrine, as foretold in Calimlim,
became the rule rather than the exception. As such, in Soliven v. Fastforms
Philippines, Inc.,[25] the Court ruled:
While it is true that jurisdiction may be raised at any time, this rule
presupposes that estoppel has not supervened. In the instant case, respondent
actively participated in all stages of the proceedings before the trial court and
invoked its authority by asking for an affirmative relief. Clearly, respondent
is estopped from challenging the trial courts jurisdiction, especially when an
adverse judgment has been rendered. In PNOC Shipping and Transport
Corporation vs. Court of Appeals, we held:
Moreover, we note that petitioner did not question at all the jurisdiction of
the lower court x x x in its answers to both the amended complaint and the
second amended complaint.It did so only in its motion for reconsideration of
the decision of the lower court after it had received an adverse decision. As
this Court held in Pantranco North Express, Inc. vs. Court of Appeals (G.R.
No. 105180, July 5, 1993, 224 SCRA 477, 491), participation in all stages of
the case before the trial court, that included invoking its authority in asking
for affirmative relief, effectively barred petitioner by estoppel from
challenging the courts jurisdiction. Notably, from the time it filed its answer
to the second amended complaint on April 16, 1985, petitioner did not
question the lower courts jurisdiction. It was only on December 29,
1989 when it filed its motion for reconsideration of the lower courts decision
that petitioner raised the question of the lower courts lack of
jurisdiction. Petitioner thus foreclosed its right to raise the issue of
jurisdiction by its own inaction. (italics ours)
Similarly, in the subsequent case of Sta. Lucia Realty and Development, Inc.
vs. Cabrigas, we ruled:
In the case at bar, it was found by the trial court in its 30 September
1996 decision in LCR Case No. Q-60161(93) that private respondents (who
filed the petition for reconstitution of titles) failed to comply with both
sections 12 and 13 of RA 26 and therefore, it had no jurisdiction over the
subject matter of the case. However, private respondents never questioned
the trial courts jurisdiction over its petition for reconstitution throughout the
duration of LCR Case No. Q-60161(93). On the contrary, private respondents
actively participated in the reconstitution proceedings by filing pleadings and
presenting its evidence. They invoked the trial courts jurisdiction in order to
obtain affirmative relief the reconstitution of their titles. Private respondents
have thus foreclosed their right to raise the issue of jurisdiction by their own
actions.
The Court has constantly upheld the doctrine that while jurisdiction may be
assailed at any stage, a litigants participation in all stages of the case before
the trial court, including the invocation of its authority in asking for
affirmative relief, bars such party from challenging the courts
jurisdiction (PNOC Shipping and Transport Corporation vs. Court of
Appeals, 297 SCRA 402 [1998]). A party cannot invoke the jurisdiction of a
court to secure affirmative relief against his opponent and after obtaining or
failing to obtain such relief, repudiate or question that same
jurisdiction (Asset Privatization Trust vs. Court of Appeals, 300 SCRA 579
[1998]; Province of Bulacan vs. Court of Appeals, 299 SCRA 442
[1998]). The Court frowns upon the undesirable practice of a party
participating in the proceedings and submitting his case for decision and
then accepting judgment, only if favorable, and attacking it for lack of
jurisdiction, when adverse (Producers Bank of the Philippines vs. NLRC,
298 SCRA 517 [1998], citing Ilocos Sur Electric Cooperative, Inc. vs.
NLRC, 241 SCRA 36 [1995]). (italics ours)[26]
Noteworthy, however, is that, in the 2005 case of Metromedia Times
Corporation v. Pastorin,[27] where the issue of lack of jurisdiction was raised
only in the National Labor Relations Commission (NLRC) on appeal, we
stated, after examining the doctrines of jurisdiction vis--vis estoppel, that the
ruling in Sibonghanoy stands as an exception, rather than the general
rule. Metromedia, thus, was not estopped from assailing the jurisdiction of
the labor arbiter before the NLRC on appeal.[28]
Later, in Francel Realty Corporation v. Sycip,[29] the Court clarified that:
Petitioner argues that the CAs affirmation of the trial courts dismissal of its
case was erroneous, considering that a full-blown trial had already been
conducted. In effect, it contends that lack of jurisdiction could no longer be
used as a ground for dismissal after trial had ensued and ended.
The above argument is anchored on estoppel by laches, which has been used
quite successfully in a number of cases to thwart dismissals based on lack of
jurisdiction. Tijam v. Sibonghanoy, in which this doctrine was espoused, held
that a party may be barred from questioning a courts jurisdiction after being
invoked to secure affirmative relief against its opponent. In fine, laches
prevents the issue of lack of jurisdiction from being raised for the first time
on appeal by a litigant whose purpose is to annul everything done in a trial in
which it has actively participated.
Laches is defined as the failure or neglect for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence,
could or should have been done earlier; it is negligence or omission to assert
a right within a reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it.
The ruling in Sibonghanoy on the matter of jurisdiction is, however, the
exception rather than the rule. Estoppel by laches may be invoked to bar the
issue of lack of jurisdiction only in cases in which the factual milieu is
analogous to that in the cited case. In such controversies, laches should be
clearly present; that is, lack of jurisdiction must have been raised so belatedly
as to warrant the presumption that the party entitled to assert it had
abandoned or declined to assert it. That Sibonghanoy applies only to
exceptional circumstances is clarified in Calimlim v. Ramirez, which we
quote:
A rule that had been settled by unquestioned acceptance and upheld in
decisions so numerous to cite is that the jurisdiction of a court over the
subject-matter of the action is a matter of law and may not be conferred by
consent or agreement of the parties. The lack of jurisdiction of a court may
be raised at any stage of the proceedings, even on appeal. This doctrine has
been qualified by recent pronouncements which stemmed principally from
the ruling in the cited case of Sibonghanoy. It is to be regretted, however,
that the holding in said case had been applied to situations which were
obviously not contemplated therein. The exceptional circumstance involved
in Sibonghanoy which justified the departure from the accepted concept of
non-waivability of objection to jurisdiction has been ignored and, instead a
blanket doctrine had been repeatedly upheld that rendered the supposed
ruling in Sibonghanoy not as the exception, but rather the general rule,
virtually overthrowing altogether the time-honored principle that the issue of
jurisdiction is not lost by waiver or by estoppel.
Indeed, the general rule remains: a courts lack of jurisdiction may be raised
at any stage of the proceedings, even on appeal. The reason is that
jurisdiction is conferred by law, and lack of it affects the very authority of the
court to take cognizance of and to render judgment on the action. Moreover,
jurisdiction is determined by the averments of the complaint, not by the
defenses contained in the answer.[30]
Also, in Mangaliag v. Catubig-Pastoral,[31] even if the pleader of lack of
jurisdiction actively took part in the trial proceedings by presenting a witness
to seek exoneration, the Court, reiterating the doctrine in Calimlim, said:
Private respondent argues that the defense of lack of jurisdiction may be
waived by estoppel through active participation in the trial. Such, however,
is not the general rule but an exception, best characterized by the peculiar
circumstances in Tijam vs. Sibonghanoy. In Sibonghanoy, the party invoking
lack of jurisdiction did so only after fifteen years and at a stage when the
proceedings had already been elevated to the CA. Sibonghanoy is an
exceptional case because of the presence of laches, which was defined
therein as failure or neglect for an unreasonable and unexplained length of
time to do that which, by exercising due diligence, could or should have been
done earlier; it is the negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert has
abandoned it or declined to assert it.[32]
And in the more recent Regalado v. Go,[33] the Court again emphasized
that laches should be clearly present for the Sibonghanoy doctrine to be
applicable, thus:
Laches is defined as the failure or neglect for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence,
could or should have been done earlier, it is negligence or omission to assert
a right within a reasonable length of time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it.
The ruling in People v. Regalario that was based on the landmark doctrine
enunciated in Tijam v. Sibonghanoy on the matter of jurisdiction
by estoppel is the exception rather than the rule. Estoppel by laches may be
invoked to bar the issue of lack of jurisdiction only in cases in which the
factual milieu is analogous to that in the cited case. In such
controversies, lachesshould have been clearly present; that is, lack of
jurisdiction must have been raised so belatedly as to warrant the presumption
that the party entitled to assert it had abandoned or declined to assert it.
In Sibonghanoy, the defense of lack of jurisdiction was raised for the first
time in a motion to dismiss filed by the Surety almost 15 years after the
questioned ruling had been rendered. At several stages of the proceedings, in
the court a quo as well as in the Court of Appeals, the Surety invoked the
jurisdiction of the said courts to obtain affirmative relief and submitted its
case for final adjudication on the merits. It was only when the adverse
decision was rendered by the Court of Appeals that it finally woke up to raise
the question of jurisdiction.
Clearly, the factual settings attendant in Sibonghanoy are not present in the
case at bar. Petitioner Atty. Regalado, after the receipt of the Court of
Appeals resolution finding her guilty of contempt, promptly filed a Motion
for Reconsideration assailing the said courts jurisdiction based on procedural
infirmity in initiating the action. Her compliance with the appellate courts
directive to show cause why she should not be cited for contempt and filing a
single piece of pleading to that effect could not be considered as an active
participation in the judicial proceedings so as to take the case within the
milieu of Sibonghanoy. Rather, it is the natural fear to disobey the mandate
of the court that could lead to dire consequences that impelled her to
comply.[34]
The Court, thus, wavered on when to apply the exceptional circumstance
in Sibonghanoy and on when to apply the general rule enunciated as early as
in De La Santa and expounded at length in Calimlim. The general rule
should, however, be, as it has always been, that the issue of jurisdiction may
be raised at any stage of the proceedings, even on appeal, and is not lost by
waiver or by estoppel. Estoppel by laches, to bar a litigant from asserting the
courts absence or lack of jurisdiction, only supervenes in exceptional cases
similar to the factual milieu of Tijam v. Sibonghanoy. Indeed, the fact that a
person attempts to invoke unauthorized jurisdiction of a court does not estop
him from thereafter challenging its jurisdiction over the subject matter, since
such jurisdiction must arise by law and not by mere consent of the
parties. This is especially true where the person seeking to invoke
unauthorized jurisdiction of the court does not thereby secure any advantage
or the adverse party does not suffer any harm.[35]
Applying the said doctrine to the instant case, the petitioner is in no way
estopped by laches in assailing the jurisdiction of the RTC, considering that
he raised the lack thereof in his appeal before the appellate court. At that
time, no considerable period had yet elapsed for laches to attach. True, delay
alone, though unreasonable, will not sustain the defense of estoppel by
laches unless it further appears that the party, knowing his rights, has not
sought to enforce them until the condition of the party pleading laches has in
good faith become so changed that he cannot be restored to his former state,
if the rights be then enforced, due to loss of evidence, change of title,
intervention of equities, and other causes.[36] In applying the principle of
estoppel by laches in the exceptional case of Sibonghanoy, the Court therein
considered the patent and revolting inequity and unfairness of having the
judgment creditors go up their Calvary once more after more or less 15
years.[37] The same, however, does not obtain in the instant case.
We note at this point that estoppel, being in the nature of a forfeiture, is not
favored by law. It is to be applied rarelyonly from necessity, and only in
extraordinary circumstances. The doctrine must be applied with great care
and the equity must be strong in its favor.[38] When misapplied, the doctrine
of estoppel may be a most effective weapon for the accomplishment of
injustice.[39] Moreover, a judgment rendered without jurisdiction over the
subject matter is void.[40] Hence, the Revised Rules of Court provides for
remedies in attacking judgments rendered by courts or tribunals that have no
jurisdiction over the concerned cases. No laches will even attach when the
judgment is null and void for want of jurisdiction.[41] As we have stated
in Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs of Alberto Cruz,[42]
It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial
officer or government agency, over the nature and subject matter of a petition
or complaint is determined by the material allegations therein and the
character of the relief prayed for, irrespective of whether the petitioner or
complainant is entitled to any or all such reliefs. Jurisdiction over the nature
and subject matter of an action is conferred by the Constitution and the law,
and not by the consent or waiver of the parties where the court otherwise
would have no jurisdiction over the nature or subject matter of the
action. Nor can it be acquired through, or waived by, any act or omission of
the parties. Moreover, estoppel does not apply to confer jurisdiction to a
tribunal that has none over the cause of action. x x x

Indeed, the jurisdiction of the court or tribunal is not affected by the defenses
or theories set up by the defendant or respondent in his answer or motion to
dismiss. Jurisdiction should be determined by considering not only the status
or the relationship of the parties but also the nature of the issues or questions
that is the subject of the controversy. x x x
x The proceedings before a court or tribunal without jurisdiction, including
its decision, are null and void, hence, susceptible to direct and collateral
attacks.[43]

With the above considerations, we find it unnecessary to resolve the other

issues raised in the petition.
 REYES, R.T., J.:

THIRD DIVISION

CAN the Sandiganbayan try a government scholar** accused, along with her
brother, of swindling government funds?

HANNAH EUNICE D. SERANA, G.R. No. 162059

MAAARI bang litisin ng Sandiganbayan ang isang iskolar ng bayan, at
Petitioner, ang kanyang kapatid, na kapwa pinararatangan ng estafa ng pera ng
Present: bayan?

YNARES-SANTIAGO, J., The jurisdictional question is posed in this petition for certiorari assailing the
Resolutions[1] of the Sandiganbayan, Fifth Division, denying petitioners
Chairperson, motion to quash the information and her motion for reconsideration.

- versus - AUSTRIA-MARTINEZ,

CORONA,* The Antecedents

NACHURA, and

REYES, JJ. Petitioner Hannah Eunice D. Serana was a senior student of the University of
the Philippines-Cebu. A student of a state university is known as a
government scholar. She was appointed by then President Joseph Estrada
on December 21, 1999 as a student regent of UP, to serve a one-year term
SANDIGANBAYAN and Promulgated:
starting January 1, 2000 and ending on December 31, 2000.
PEOPLE OF THE PHILIPPINES,

Respondents. January 22, 2008

x--------------------------------------------------x
DECISION
In the early part of 2000, petitioner discussed with President Estrada the
renovation of Vinzons Hall Annex in UP Diliman.[2] On September 4, 2000,
petitioner, with her siblings and relatives, registered with the Securities and
Exchange Commission the Office of the Student Regent Foundation, Inc.
(OSRFI).[3]
One of the projects of the OSRFI was the renovation of the Vinzons Hall
Annex.[4] President Estrada gave Fifteen Million Pesos (P15,000,000.00) to
the OSRFI as financial assistance for the proposed renovation. The source of
the funds, according to the information, was the Office of the President.
The renovation of Vinzons Hall Annex failed to materialize.[5] The
succeeding student regent, Kristine Clare Bugayong, and Christine Jill De
Guzman, Secretary General of the KASAMA sa U.P., a system-wide alliance
of student councils within the state university, consequently filed a complaint
for Malversation of Public Funds and Property with the Office of the
Ombudsman.[6]
On July 3, 2003, the Ombudsman, after due investigation, found probable
cause to indict petitioner and her brother Jade Ian D. Serana for estafa,
docketed as Criminal Case No. 27819 of the Sandiganbayan.[7] The
Information reads:
The undersigned Special Prosecution Officer III, Office of the Special
Prosecutor, hereby accuses HANNAH EUNICE D. SERANA
and JADE IAN D. SERANA of the crime of Estafa, defined and penalized
under Paragraph 2(a), Article 315 of the Revised Penal Code, as amended
committed as follows:
That on October, 24, 2000, or sometime prior or subsequent thereto, in
Quezon City, Metro Manila, Philippines, and within the jurisdiction of this
Honorable Court, above-named accused, HANNAH EUNICE D.
SERANA, a high-ranking public officer, being then the Student Regent of
the University of the Philippines, Diliman, Quezon City, while in the
performance of her official functions, committing the offense in relation to
her office and taking advantage of her position, with intent to
gain, conspiring with her brother, JADE IAN D. SERANA, a private
individual, did then and there wilfully, unlawfully and feloniously defraud
the government by falsely and fraudulently representing to former President
Joseph Ejercito Estrada that the renovation of the Vinzons Hall of the
University of the Philippines will be renovated and renamed as President
Joseph Ejercito Estrada Student Hall, and for which purpose accused
HANNAH EUNICE D. SERANA requested the amount of
FIFTEEN MILLION PESOS (P15,000,000.00), Philippine Currency, from
the Office of the President, and the latter relying and believing on said false
pretenses and misrepresentation gave and delivered to said accused Land
Bank Check No. 91353 dated October 24, 2000 in the amount of FIFTEEN
MILLION PESOS (P15,000,000.00), which check was subsequently
encashed by accused Jade Ian D. Serana on October 25, 2000 and
misappropriated for their personal use and benefit, and despite repeated
demands made upon the accused for them to return aforesaid amount, the
said accused failed and refused to do so to the damage and prejudice of the
government in the aforesaid amount.
CONTRARY TO LAW. (Underscoring supplied)
Petitioner moved to quash the information. She claimed that the
Sandiganbayan does not have any jurisdiction over the offense charged or
over her person, in her capacity as UP student regent.
Petitioner claimed that Republic Act (R.A.) No. 3019, as amended by R.A.
No. 8249, enumerates the crimes or offenses over which the Sandiganbayan
has jurisdiction.[8]It has no jurisdiction over the crime of estafa.[9] It only has
jurisdiction over crimes covered by Title VII, Chapter II, Section 2 (Crimes
Committed by Public Officers), Book II of the Revised Penal Code
(RPC). Estafa falling under Title X, Chapter VI (Crimes Against Property),
Book II of the RPC is not within the Sandiganbayans jurisdiction.
She also argued that it was President Estrada, not the government, that was
duped. Even assuming that she received the P15,000,000.00, that amount
came from Estrada, not from the coffers of the government.[10]
Petitioner likewise posited that the Sandiganbayan had no jurisdiction over
her person. As a student regent, she was not a public officer since she merely
represented her peers, in contrast to the other regents who held their positions
in an ex officio capacity. She added that she was a simple student and did not
receive any salary as a student regent.
She further contended that she had no power or authority to receive monies
or funds. Such power was vested with the Board of Regents (BOR) as a
whole. Since it was not alleged in the information that it was among her
functions or duties to receive funds, or that the crime was committed in
connection with her official functions, the same is beyond the jurisdiction of
the Sandiganbayan citing the case of Soller v. Sandiganbayan.[11]
The Ombudsman opposed the motion.[12] It disputed petitioners interpretation
of the law. Section 4(b) of Presidential Decree (P.D.) No. 1606 clearly
contains the catch-all phrase in relation to office, thus, the Sandiganbayan
has jurisdiction over the charges against petitioner. In the same breath, the
prosecution countered that the source of the money is a matter of defense. It
should be threshed out during a full-blown trial.[13]
According to the Ombudsman, petitioner, despite her protestations, was a
public officer. As a member of the BOR, she had the general powers of
administration and exercised the corporate powers of UP. Based on Mechems
definition of a public office, petitioners stance that she was not compensated,
hence, not a public officer, is erroneous. Compensation is not an essential
part of public office. Parenthetically, compensation has been interpreted to
include allowances. By this definition, petitioner was compensated.[14]
Sandiganbayan Disposition
In a Resolution dated November 14, 2003, the Sandiganbayan denied
petitioners motion for lack of merit.[15] It ratiocinated:
The focal point in controversy is the jurisdiction of the Sandiganbayan over
this case.
It is extremely erroneous to hold that only criminal offenses covered by
Chapter II, Section 2, Title VII, Book II of the Revised Penal Code are within
the jurisdiction of this Court. As correctly pointed out by the prosecution,
Section 4(b) of R.A. 8249 provides that the Sandiganbayan also has
jurisdiction over other offenses committed by public officials and employees
in relation to their office. From this provision, there is no single doubt that
this Court has jurisdiction over the offense of estafa committed by a public
official in relation to his office.
Accused-movants claim that being merely a member in representation of the
student body, she was never a public officer since she never received any
compensation nor does she fall under Salary Grade 27, is of no moment, in
view of the express provision of Section 4 of Republic Act No. 8249 which
provides:
Sec. 4. Jurisdiction The Sandiganbayan shall exercise exclusive original
jurisdiction in all cases involving:
(A) x x x
(1) Officials of the executive branch occupying the positions of regional
director and higher, otherwise classified as Grade 27 and higher, of the
Compensation and Position Classification Act of 1989 (Republic Act No.
6758), specifically including:
xxxx
(g) Presidents, directors or trustees, or managers of government-owned or
controlled corporations, state universities or educational institutions or
foundations. (Italics supplied)
It is very clear from the aforequoted provision that the Sandiganbayan has
original exclusive jurisdiction over all offenses involving the officials
enumerated in subsection (g), irrespective of their salary grades, because the
primordial consideration in the inclusion of these officials is the nature of
their responsibilities and functions.
Is accused-movant included in the contemplated provision of law?
A meticulous review of the existing Charter of the University of the
Philippines reveals that the Board of Regents, to which accused-movant
belongs, exclusively exercises the general powers of administration and
corporate powers in the university, such as: 1) To receive and appropriate to
the ends specified by law such sums as may be provided by law for the
support of the university; 2) To prescribe rules for its own government and to
enact for the government of the university such general ordinances and
regulations, not contrary to law, as are consistent with the purposes of the
university; and 3) To appoint, on recommendation of the President of the
University, professors, instructors, lecturers and other employees of the
University; to fix their compensation, hours of service, and such other duties
and conditions as it may deem proper; to grant to them in its discretion leave
of absence under such regulations as it may promulgate, any other provisions
of law to the contrary notwithstanding, and to remove them for cause after an
investigation and hearing shall have been had.
It is well-established in corporation law that the corporation can act only
through its board of directors, or board of trustees in the case of non-stock
corporations. The board of directors or trustees, therefore, is the governing
body of the corporation.
It is unmistakably evident that the Board of Regents of the University of
the Philippines is performing functions similar to those of the Board of
Trustees of a non-stock corporation. This draws to fore the conclusion that
being a member of such board, accused-movant undoubtedly falls within the
category of public officials upon whom this Court is vested with original
exclusive jurisdiction, regardless of the fact that she does not occupy a
position classified as Salary Grade 27 or higher under the Compensation and
Position Classification Act of 1989.
Finally, this court finds that accused-movants contention that the same
of P15 Million was received from former President Estrada and not from the
coffers of the government, is a matter a defense that should be properly
ventilated during the trial on the merits of this case.[16]
On November 19, 2003, petitioner filed a motion for reconsideration.[17] The
motion was denied with finality in a Resolution dated February 4, 2004.[18]
Issue
Petitioner is now before this Court, contending that THE
RESPONDENT COURT COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACKAND/OR EXCESS OF
JURISDICTION IN NOT QUASHING THE
INFORMATION AND DISMISING THE CASE NOTWITHSTANDING
THAT IS HAS NO JURISDICTION OVER THE OFFENSE CHARGED IN
THE INFORMATION.[19]
In her discussion, she reiterates her four-fold argument below, namely: (a)
the Sandiganbayan has no jurisdiction over estafa; (b) petitioner is not a
public officer with Salary Grade 27 and she paid her tuition fees; (c) the
offense charged was not committed in relation to her office; (d) the funds in
question personally came from President Estrada, not from the government.
Our Ruling
The petition cannot be granted.
Preliminarily, the denial of a motion to
quash is not correctible by certiorari.
We would ordinarily dismiss this petition for certiorari outright on
procedural grounds. Well-established is the rule that when a motion to quash
in a criminal case is denied, the remedy is not a petition for certiorari, but for
petitioners to go to trial, without prejudice to reiterating the special defenses
invoked in their motion to quash.[20]Remedial measures as regards
interlocutory orders, such as a motion to quash, are frowned upon and often
dismissed.[21] The evident reason for this rule is to avoid multiplicity of
appeals in a single action.[22]
In Newsweek, Inc. v. Intermediate Appellate Court,[23] the Court clearly
explained and illustrated the rule and the exceptions, thus:
As a general rule, an order denying a motion to dismiss is merely
interlocutory and cannot be subject of appeal until final judgment or order is
rendered. (Sec. 2 of Rule 41). The ordinary procedure to be followed in such
a case is to file an answer, go to trial and if the decision is adverse, reiterate
the issue on appeal from the final judgment. The same rule applies to an
order denying a motion to quash, except that instead of filing an answer a
plea is entered and no appeal lies from a judgment of acquittal.
This general rule is subject to certain exceptions. If the court, in denying the
motion to dismiss or motion to quash, acts without or in excess of
jurisdiction or with grave abuse of discretion, then certiorari or prohibition
lies. The reason is that it would be unfair to require the defendant or accused
to undergo the ordeal and expense of a trial if the court has no jurisdiction
over the subject matter or offense, or is not the court of proper venue, or if
the denial of the motion to dismiss or motion to quash is made with grave
abuse of discretion or a whimsical and capricious exercise of judgment. In
such cases, the ordinary remedy of appeal cannot be plain and adequate. The
following are a few examples of the exceptions to the general rule.
In De Jesus v. Garcia (19 SCRA 554), upon the denial of a motion to dismiss
based on lack of jurisdiction over the subject matter, this Court granted the
petition for certiorari and prohibition against the City Court of Manila and
directed the respondent court to dismiss the case.
In Lopez v. City Judge (18 SCRA 616), upon the denial of a motion to quash
based on lack of jurisdiction over the offense, this Court granted the petition
for prohibition and enjoined the respondent court from further proceeding in
the case.
In Enriquez v. Macadaeg (84 Phil. 674), upon the denial of a motion to
dismiss based on improper venue, this Court granted the petition for
prohibition and enjoined the respondent judge from taking cognizance of the
case except to dismiss the same.
In Manalo v. Mariano (69 SCRA 80), upon the denial of a motion to dismiss
based on bar by prior judgment, this Court granted the petition
for certiorari and directed the respondent judge to dismiss the case.
In Yuviengco v. Dacuycuy (105 SCRA 668), upon the denial of a motion to
dismiss based on the Statute of Frauds, this Court granted the petition
for certiorari and dismissed the amended complaint.
In Tacas v. Cariaso (72 SCRA 527), this Court granted the petition
for certiorari after the motion to quash based on double jeopardy was denied
by respondent judge and ordered him to desist from further action in the
criminal case except to dismiss the same.
In People v. Ramos (83 SCRA 11), the order denying the motion to quash
based on prescription was set aside on certiorari and the criminal case was
dismissed by this Court.[24]
We do not find the Sandiganbayan to have committed a grave abuse of
discretion.
The jurisdiction of the Sandiganbayan is
set by P.D. No. 1606, as amended, not by
R.A. No. 3019, as amended.
We first address petitioners contention that the jurisdiction of the
Sandiganbayan is determined by Section 4 of R.A. No. 3019 (The Anti-Graft
and Corrupt Practices Act, as amended). We note that petitioner refers to
Section 4 of the said law yet quotes Section 4 of P.D. No. 1606, as amended,
in her motion to quash before the Sandiganbayan.[25]She repeats the reference
in the instant petition for certiorari[26] and in her memorandum of
authorities.[27]
We cannot bring ourselves to write this off as a mere clerical or
typographical error. It bears stressing that petitioner repeated this claim twice
despite corrections made by the Sandiganbayan.[28]
Her claim has no basis in law. It is P.D. No. 1606, as amended, rather than
R.A. No. 3019, as amended, that determines the jurisdiction of the
Sandiganbayan. A brief legislative history of the statute creating the
Sandiganbayan is in order. The Sandiganbayan was created by P.D. No.
1486, promulgated by then President Ferdinand E. Marcos on June 11,
1978. It was promulgated to attain the highest norms of official conduct
required of public officers and employees, based on the concept that public
officers and employees shall serve with the highest degree of responsibility,
integrity, loyalty and efficiency and shall remain at all times accountable to
the people.[29]
P.D. No. 1486 was, in turn, amended by P.D. No. 1606 which was
promulgated on December 10, 1978. P.D. No. 1606 expanded the jurisdiction
of the Sandiganbayan.[30]
P.D. No. 1606 was later amended by P.D. No. 1861 on March 23, 1983,
further altering the Sandiganbayan jurisdiction. R.A. No. 7975 approved on
March 30, 1995 made succeeding amendments to P.D. No. 1606, which was
again amended on February 5, 1997 by R.A. No. 8249. Section 4 of R.A. No.
8249 further modified the jurisdiction of the Sandiganbayan. As it now
stands, the Sandiganbayan has jurisdiction over the following:
Sec. 4. Jurisdiction. - The Sandiganbayan shall exercise exclusive original
jurisdiction in all cases involving:
A. Violations of Republic Act No. 3019, as amended, other known as the
Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter
II, Section 2, Title VII, Book II of the Revised Penal Code, where one or
more of the accused are officials occupying the following positions in the
government, whether in a permanent, acting or interim capacity, at the time
of the commission of the offense:
(1) Officials of the executive branch occupying the positions of regional
director and higher, otherwise classified as Grade 27 and higher, of the
Compensation and Position Classification Act of 989 (Republic Act No.
6758), specifically including:
(a) Provincial governors, vice-governors, members of the sangguniang
panlalawigan, and provincial treasurers, assessors, engineers, and other city
department heads;
(b) City mayor, vice-mayors, members of the sangguniang panlungsod, city
treasurers, assessors, engineers, and other city department heads;
(c) Officials of the diplomatic service occupying the position of consul and
higher;
(d) Philippine army and air force colonels, naval captains, and all officers of
higher rank;
(e) Officers of the Philippine National Police while occupying the position of
provincial director and those holding the rank of senior superintended or
higher;
(f) City and provincial prosecutors and their assistants, and officials and
prosecutors in the Office of the Ombudsman and special prosecutor;
(g) Presidents, directors or trustees, or managers of government-owned or
controlled corporations, state universities or educational institutions or
foundations.
(2) Members of Congress and officials thereof classified as Grade 27 and up
under the Compensation and Position Classification Act of 1989;
(3) Members of the judiciary without prejudice to the provisions of the
Constitution;
(4) Chairmen and members of Constitutional Commission, without prejudice
to the provisions of the Constitution; and
(5) All other national and local officials classified as Grade 27 and higher
under the Compensation and Position Classification Act of 1989.
B. Other offenses of felonies whether simple or complexed with other crimes
committed by the public officials and employees mentioned in subsection a
of this section in relation to their office.
C. Civil and criminal cases filed pursuant to and in connection with
Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986.
In cases where none of the accused are occupying positions corresponding to
Salary Grade 27 or higher, as prescribed in the said Republic Act No. 6758,
or military and PNP officer mentioned above, exclusive original jurisdiction
thereof shall be vested in the proper regional court, metropolitan trial court,
municipal trial court, and municipal circuit trial court, as the case may be,
pursuant to their respective jurisdictions as provided in Batas Pambansa Blg.
129, as amended.
The Sandiganbayan shall exercise exclusive appellate jurisdiction over final
judgments, resolutions or order of regional trial courts whether in the
exercise of their own original jurisdiction or of their appellate jurisdiction as
herein provided.
The Sandiganbayan shall have exclusive original jurisdiction over petitions
for the issuance of the writs of mandamus, prohibition, certiorari, habeas
corpus, injunctions, and other ancillary writs and processes in aid of its
appellate jurisdiction and over petitions of similar nature, including quo
warranto, arising or that may arise in cases filed or which may be filed under
Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986: Provided, That the
jurisdiction over these petitions shall not be exclusive of the Supreme Court.
The procedure prescribed in Batas Pambansa Blg. 129, as well as the
implementing rules that the Supreme Court has promulgated and may
thereafter promulgate, relative to appeals/petitions for review to the Court of
Appeals, shall apply to appeals and petitions for review filed with the
Sandiganbayan. In all cases elevated to the Sandiganbayan and from the
Sandiganbayan to the Supreme Court, the Office of the Ombudsman, through
its special prosecutor, shall represent the People of the Philippines, except in
cases filed pursuant to Executive Order Nos. 1, 2, 14 and 14-A, issued in
1986.
In case private individuals are charged as co-principals, accomplices or
accessories with the public officers or employees, including those employed
in government-owned or controlled corporations, they shall be tried jointly
with said public officers and employees in the proper courts which shall
exercise exclusive jurisdiction over them.
Any provisions of law or Rules of Court to the contrary notwithstanding, the
criminal action and the corresponding civil action for the recovery of civil
liability shall, at all times, be simultaneously instituted with, and jointly and fraternal connections, and professional employment all giving rise to
determined in, the same proceeding by the Sandiganbayan or the appropriate intimacy which assures free access to such public officer.
courts, the filing of the criminal action being deemed to necessarily carry
with it the filing of the civil action, and no right to reserve the filing such
civil action separately from the criminal action shall be recognized: Provided, (b) It shall be unlawful for any person knowingly to induce or cause any
however, That where the civil action had heretofore been filed separately but
public official to commit any of the offenses defined in Section 3 hereof.
judgment therein has not yet been rendered, and the criminal case is hereafter
filed with the Sandiganbayan or the appropriate court, said civil action shall
be transferred to the Sandiganbayan or the appropriate court, as the case may
be, for consolidation and joint determination with the criminal action, In fine, the two statutes differ in that P.D. No. 1606, as amended, defines the
otherwise the separate civil action shall be deemed abandoned. jurisdiction of the Sandiganbayan while R.A. No. 3019, as amended, defines
graft and corrupt practices and provides for their penalties.

Upon the other hand, R.A. No. 3019 is a penal statute approved on August
17, 1960. The said law represses certain acts of public officers and private Sandiganbayan has jurisdiction over
persons alike which constitute graft or corrupt practices or which may lead
the offense of estafa.
thereto.[31] Pursuant to Section 10 of R.A. No. 3019, all prosecutions for
violation of the said law should be filed with the Sandiganbayan.[32]

Relying on Section 4 of P.D. No. 1606, petitioner contends that estafa is not
among those crimes cognizable by the Sandiganbayan. We note that in
R.A. No. 3019 does not contain an enumeration of the cases over which the
hoisting this argument, petitioner isolated the first paragraph of Section 4 of
Sandiganbayan has jurisdiction. In fact, Section 4 of R.A. No. 3019
P.D. No. 1606, without regard to the succeeding paragraphs of the said
erroneously cited by petitioner, deals not with the jurisdiction of the
provision.
Sandiganbayan but with prohibition on private individuals. We quote:

The rule is well-established in this jurisdiction that statutes should receive a

Section 4. Prohibition on private individuals. (a) It shall be unlawful for any
sensible construction so as to avoid an unjust or an absurd
person having family or close personal relation with any public official to
conclusion.[33] Interpretatio talis in ambiguis semper fienda est, ut evitetur
capitalize or exploit or take advantage of such family or close personal
inconveniens et absurdum. Where there is ambiguity, such interpretation as
relation by directly or indirectly requesting or receiving any present, gift or
will avoid inconvenience and absurdity is to be adopted. Kung saan
material or pecuniary advantage from any other person having some
mayroong kalabuan, ang pagpapaliwanag ay hindi dapat maging
business, transaction, application, request or contract with the government, in
mahirap at katawa-tawa.
which such public official has to intervene. Family relation shall include the
spouse or relatives by consanguinity or affinity in the third civil degree. The
word close personal relation shall include close personal friendship, social
Every section, provision or clause of the statute must be expounded by
reference to each other in order to arrive at the effect contemplated by the
legislature.[34] The intention of the legislator must be ascertained from the
whole text of the law and every part of the act is to be taken into view.[35] In
other words, petitioners interpretation lies in direct opposition to the rule that
a statute must be interpreted as a whole under the principle that the best
interpreter of a statute is the statute itself.[36] Optima statuti interpretatrix est
ipsum statutum. Ang isang batas ay marapat na bigyan ng kahulugan sa
kanyang kabuuan sa ilalim ng prinsipyo na ang pinakamainam na
interpretasyon ay ang mismong batas.
Section 4(B) of P.D. No. 1606 reads:
B. Other offenses or felonies whether simple or complexed with other crimes
committed by the public officials and employees mentioned in subsection a
of this section in relation to their office.
Evidently, the Sandiganbayan has jurisdiction over other felonies committed
by public officials in relation to their office. We see no plausible or sensible
reason to exclude estafaas one of the offenses included in Section 4(B) of
P.D. No. 1606. Plainly, estafa is one of those other felonies. The jurisdiction
is simply subject to the twin requirements that (a) the offense is committed
by public officials and employees mentioned in Section 4(A) of P.D. No.
1606, as amended, and that (b) the offense is committed in relation to their
office.
In Perlas, Jr. v. People,[37] the Court had occasion to explain that the
Sandiganbayan has jurisdiction over an indictment for estafa versus a
director of the National Parks Development Committee, a government
instrumentality. The Court held then:
The National Parks Development Committee was created originally as an
Executive Committee on January 14, 1963, for the development of the
Quezon Memorial, Luneta and other national parks (Executive Order No.
30). It was later designated as the National Parks Development Committee
(NPDC) on February 7, 1974 (E.O. No. 69). On January 9, 1966, Mrs.
Imelda R. Marcos and Teodoro F. Valencia were designated Chairman and
Vice-Chairman respectively (E.O. No. 3). Despite an attempt to transfer it to
the Bureau of Forest Development, Department of Natural Resources,
on December 1, 1975 (Letter of Implementation No. 39, issued pursuant to
PD No. 830, dated November 27, 1975), the NPDC has remained under the
Office of the President (E.O. No. 709, dated July 27, 1981).
Since 1977 to 1981, the annual appropriations decrees listed NPDC as a
regular government agency under the Office of the President and allotments
for its maintenance and operating expenses were issued direct to NPDC
(Exh. 10-A, Perlas, Item Nos. 2, 3).
The Sandiganbayans jurisdiction over estafa was reiterated with greater
firmness in Bondoc v. Sandiganbayan.[38] Pertinent parts of the Courts ruling
in Bondoc read:
Furthermore, it is not legally possible to transfer Bondocs cases to the
Regional Trial Court, for the simple reason that the latter would not have
jurisdiction over the offenses. As already above intimated, the inability of the
Sandiganbayan to hold a joint trial of Bondocs cases and those of the
government employees separately charged for the same crimes, has not
altered the nature of the offenses charged, as estafa thru falsification
punishable by penalties higher than prision correccional or imprisonment of
six years, or a fine of P6,000.00, committed by government employees in
conspiracy with private persons, including Bondoc. These crimes are within
the exclusive, original jurisdiction of the Sandiganbayan. They simply cannot
be taken cognizance of by the regular courts, apart from the fact that even if
the cases could be so transferred, a joint trial would nonetheless not be
possible.
Petitioner UP student regent
is a public officer.
Petitioner also contends that she is not a public officer. She does not receive
any salary or remuneration as a UP student regent. This is not the first or
likely the last time that We will be called upon to define a public
officer. In Khan, Jr. v. Office of the Ombudsman, We ruled that it is difficult
to pin down the definition of a public officer.[39] The 1987 Constitution does
not define who are public officers. Rather, the varied definitions and
concepts are found in different statutes and jurisprudence.
In Aparri v. Court of Appeals,[40] the Court held that:
A public office is the right, authority, and duty created and conferred by law,
by which for a given period, either fixed by law or enduring at the pleasure
of the creating power, an individual is invested with some portion of the
sovereign functions of the government, to be exercise by him for the benefit
of the public ([Mechem Public Offices and Officers,] Sec. 1). The right to
hold a public office under our political system is therefore not a natural
right. It exists, when it exists at all only because and by virtue of some law
expressly or impliedly creating and conferring it (Mechem Ibid., Sec.
64). There is no such thing as a vested interest or an estate in an office, or
even an absolute right to hold office. Excepting constitutional offices which
provide for special immunity as regards salary and tenure, no one can be said
to have any vested right in an office or its salary (42 Am. Jur. 881).
In Laurel v. Desierto,[41] the Court adopted the definition of Mechem of a
public office:
A public office is the right, authority and duty, created and conferred by law,
by which, for a given period, either fixed by law or enduring at the pleasure
of the creating power, an individual is invested with some portion of the
sovereign functions of the government, to be exercised by him for the benefit
of the public. The individual so invested is a public officer.[42]
Petitioner claims that she is not a public officer with Salary Grade 27; she is,
in fact, a regular tuition fee-paying student. This is likewise bereft of merit. It
is not only the salary grade that determines the jurisdiction of the
Sandiganbayan. The Sandiganbayan also has jurisdiction over other
officers enumerated in P.D. No. 1606. In Geduspan v.
People,[43] We held that while the first part of Section 4(A) covers only
officials with
Salary Grade 27 and higher, its second part specifically includes other
executive officials whose positions may not be of Salary Grade 27 and higher
but who are by express provision of law placed under the jurisdiction of the
said court. Petitioner falls under the jurisdiction of the Sandiganbayan as she
is placed there by express provision of law.[44]
Section 4(A)(1)(g) of P.D. No. 1606 explictly vested the Sandiganbayan with
jurisdiction over Presidents, directors or trustees, or managers of
government-owned or controlled corporations, state universities or
educational institutions or foundations. Petitioner falls under this
category. As the Sandiganbayan pointed out, the BOR performs functions
similar to those of a board of trustees of a non-stock corporation.[45] By
express mandate of law, petitioner is, indeed, a public officer as
contemplated by P.D. No. 1606.

Moreover, it is well established that compensation is not an essential element
of public office.[46] At most, it is merely incidental to the public office.[47]
Delegation of sovereign functions is essential in the public office. An
investment in an individual of some portion of the sovereign functions of the
government, to be exercised by him for the benefit of the public makes one a
public officer.[48]
The administration of the UP is a sovereign function in line with Article XIV
of the Constitution. UP performs a legitimate governmental function by
providing advanced instruction in literature, philosophy, the sciences, and
arts, and giving professional and technical training.[49] Moreover, UP is
maintained by the Government and it declares no dividends and is not a
corporation created for profit.[50]
The offense charged was committed
in relation to public office, according
to the Information.
Petitioner likewise argues that even assuming that she is a public officer, the
Sandiganbayan would still not have jurisdiction over the offense because it
was not committed in relation to her office.
According to petitioner, she had no power or authority to act without the
approval of the BOR. She adds there was no Board Resolution issued by the
BOR authorizing her to contract with then President Estrada; and that her
acts were not ratified by the governing body of the state
university. Resultantly, her act was done in a private capacity and not in
relation to public office.
It is axiomatic that jurisdiction is determined by the averments in the
information.[51] More than that, jurisdiction is not affected by the pleas or the
theories set up by defendant or respondent in an answer, a motion to dismiss,
or a motion to quash.[52] Otherwise, jurisdiction would become dependent
almost entirely upon the whims of defendant or respondent.[53]
In the case at bench, the information alleged, in no uncertain terms that
petitioner, being then a student regent of U.P., while in the performance of
her official functions, committing the offense in relation to her office and
taking advantage of her position, with intent to gain, conspiring with her
brother, JADE IAN D. SERANA, a private individual, did then and there
wilfully, unlawfully and feloniously defraud the government x x
x. (Underscoring supplied)
Clearly, there was no grave abuse of discretion on the part of the
Sandiganbayan when it did not quash the information based on this ground.
Source of funds is a defense that should
be raised during trial on the merits.
It is contended anew that the amount came from President Estradas private
funds and not from the government coffers. Petitioner insists the charge has
no leg to stand on.
We cannot agree. The information alleges that the funds came from the
Office of the President and not its then occupant, President Joseph Ejercito
Estrada. Under the information, it is averred that petitioner requested the We admonish petitioners counsel to be more careful and accurate in his
amount of Fifteen Million Pesos (P15,000,000.00), Philippine citation. A lawyers conduct before the court should be characterized by
Currency, from the Office of the President, and the latter relying and candor and fairness.[57]The administration of justice would gravely suffer if
believing on said false pretenses and misrepresentation gave and delivered to lawyers do not act with complete candor and honesty before the courts.[58]
said accused Land Bank Check No. 91353 dated October 24, 2000 in the
amount of Fifteen Million Pesos (P15,000,000.00).
WHEREFORE, the petition is DENIED for lack of merit.

Again, the Court sustains the Sandiganbayan observation that the source of
the P15,000,000 is a matter of defense that should be ventilated during the SO ORDERED.
trial on the merits of the instant case.[54]

A lawyer owes candor, fairness

and honesty to the Court.

As a parting note, petitioners counsel, Renato G. dela Cruz, misrepresented

his reference to Section 4 of P.D. No. 1606 as a quotation from Section 4 of
R.A. No. 3019. A review of his motion to quash, the instant petition
for certiorari and his memorandum, unveils the misquotation. We urge
petitioners counsel to observe Canon 10 of the Code of Professional
Responsibility, specifically Rule 10.02 of the Rules stating that a lawyer shall
not misquote or misrepresent.

The Court stressed the importance of this rule in Pangan v. Ramos,[55] where
Atty Dionisio D. Ramos used the name Pedro D.D. Ramos in connection
with a criminal case. The Court ruled that Atty. Ramos resorted to deception
by using a name different from that with which he was authorized. We
severely reprimanded Atty. Ramos and warned that a repetition may warrant
suspension or disbarment.[56]
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 198755 June 5, 2013
ALBERTO PAT-OG, SR., Petitioner,
vs.
CIVIL SERVICE COMMISSION, Respondent.
DECISION
MENDOZA, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, which seeks to set aside the April 6, 2011 Decision1 of the
Court of Appeals (CA) in CA-G.R. SP No. 101700, affirming the April 11,
2007 Decision2 of the Civil Service Commission (CSC), which ordered the
dismissal of petitioner Alberto Pat-og, Sr. (Pat-og) from the service for grave
misconduct.
The Facts
On September 13, 2003, Robert Bang-on (Bang-on), then a 14-year old
second year high school student of the Antadao National High School in
Sagada, Mountain Province, tiled an affidavit-complaint against Pat-og, a
third year high school teacher of the same school, before the Civil Service
Commission-Cordillera Administrative Region (CSC-CAR).
Bang-on alleged that on the morning of August 26, 2003, he attended his
class at the basketball court of the school, where Pat-og and his third year
students were also holding a separate class; that he and some of his
classmates joined Pat-og’s third year students who were practicing basketball
shots; that Pat-og later instructed them to form two lines; that thinking that
three lines were to be formed, he stayed in between the two lines; that Pat-og
then held his right arm and punched his stomach without warning for failing
to follow instructions; and that as a result, he suffered stomach pain for
several days and was confined in a hospital from September 10-12, 2003, as
evidenced by a medico-legal certificate, which stated that he sustained a
contusion hematoma in the hypogastric area.
Regarding the same incident, Bang-on filed a criminal case against Pat-og for
the crime of Less Serious Physical Injury with the Regional Trial Court
(RTC) of Bontoc, Mountain Province.
Taking cognizance of the administrative case, the CSC-CAR directed Pat-og
to file his counter-affidavit. He denied the charges hurled against him and
claimed that when he was conducting his Music, Arts, Physical Education
and Health (MAPEH) class, composed of third year students, he instructed
the girls to play volleyball and the boys to play basketball; that he later
directed the boys to form two lines; that after the boys failed to follow his
repeated instructions, he scolded them in a loud voice and wrested the ball
from them; that while approaching them, he noticed that there were male
students who were not members of his class who had joined the shooting
practice; that one of those male students was Bang-on, who was supposed to
be having his own MAPEH class under another teacher; that he then glared at
them, continued scolding them and dismissed the class for their failure to
follow instructions; and that he offered the sworn statement of other students
to prove that he did not box Bang-on.
On June 1, 2004, the CSC-CAR found the existence of a prima faciecase for
misconduct and formally charged Pat-og.
While the proceedings of the administrative case were ongoing, the RTC
rendered its judgment in the criminal case and found Pat-og guilty of the
offense of slight physical injury. He was meted the penalty of imprisonment
from eleven (11) to twenty (20) days. Following his application for
probation, the decision became final and executory and judgment was
entered.
Meanwhile, in the administrative case, a pre-hearing conference was
conducted after repeated postponement by Pat-og. With the approval of the
CSC-CAR, the prosecution submitted its position paper in lieu of a formal
presentation of evidence and formally offered its evidence, which included
the decision in the criminal case. It offered the affidavits of Raymund
Atuban, a classmate of Bang-on; and James Domanog, a third year high
school student, who both witnessed Pat-og hit Bang-on in the stomach.
For his defense, Pat-og offered the testimonies of his witnesses - Emiliano
Dontongan (Dontongan), a teacher in another school, who alleged that he
was a member of the Municipal Council for the Protection of Children, and
that, in such capacity, he investigated the incident and came to the conclusion
that it did not happen at all; and Ernest Kimmot, who testified that he was in
the basketball court at the time but did not see such incident. Pat-og also
presented the affidavits of thirteen other witnesses to prove that he did not
punch Bang-on.
Ruling of the CSC-CAR
In its Decision,3 dated September 19, 2006, the CSC-CAR found Pat-og
guilty and disposed as follows:
WHEREFORE, all premises told, respondent Alberto Pat-og, Sr., Teacher
Antadao National High School, is hereby found guilty of Simple Misconduct.
Under the Uniform Rules on Administrative Cases in the Civil Service, the
imposable penalty on the first offense of Simple Misconduct is suspension of
one (1) month and one (1) day to six (6) months.
Due to seriousness of the resulting injury to the fragile body of the minor
victim, the CSC-CAR hereby imposed upon respondent the maximum
penalty attached to the offense which is six months suspension without pay.
The CSC-CAR gave greater weight to the version posited by the prosecution,
finding that a blow was indeed inflicted by Pat-og on Bang-on. It found that
Pat-og had a motive for doing so - his students’ failure to follow his repeated
instructions which angered him. Nevertheless, the CSCCAR ruled that a
motive was not necessary to establish guilt if the perpetrator of the offense
was positively identified. The positive identification of Pat-og was duly
proven by the corroborative testimonies of the prosecution witnesses, who
were found to be credible and disinterested. The testimony of defense
witness, Dontongan, was not given credence considering that the students he
interviewed for his investigation claimed that Pat-og was not even angry at
the time of the incident, contrary to the latter’s own admission.
The CSC-CAR held that the actions of Pat-og clearly transgressed the proper
norms of conduct required of a public official, and the gravity of the offense
was further magnified by the seriousness of the injury of Bang-on which
required a healing period of more than ten (10) days. It pointed out that,
being his teacher, Pat-og’s substitute parental authority did not give him
license to physically chastise a misbehaving student. The CSC-CAR added
that the fact that Pat-og applied for probation in the criminal case, instead of
filing an appeal, further convinced it of his guilt.
The CSC-CAR believed that the act committed by Pat-og was sufficient to
find him guilty of Grave Misconduct. It, however, found the corresponding
penalty of dismissal from the service too harsh under the circumstances.
Thus, it adjudged petitioner guilty of Simple Misconduct and imposed the
maximum penalty of suspension for six (6) months.
On December 11, 2006, the motion for reconsideration filed by Pat-og was
denied for lack of merit.4
The Ruling of the CSC
In its Resolution,5 dated April 11, 2007, the CSC dismissed Pat-og’s appeal
and affirmed with modification the decision of the CSC-CAR as follows:
WHEREFORE, foregoing premises considered, the instant appeal is hereby
DISMISSED. The decision of the CSC-CAR is affirmed with the
modification that Alberto Pat-og, Sr., is adjudged guilty of grave misconduct,
for which he is meted out the penalty of dismissal from the service with all
its accessory penalties of cancellation of eligibilities, perpetual
disqualification from reemployment in the government service, and forfeiture
of retirement benefits.6
After evaluating the records, the CSC sustained the CSC-CAR’s conclusion
that there existed substantial evidence to sustain the finding that Pat-og did
punch Bang-on in the stomach. It gave greater weight to the positive
statements of Bang-on and his witnesses over the bare denial of Patog. It also
highlighted the fact that Pat-og failed to adduce evidence of any ill motive on
the part of Bang-on in filing the administrative case against him. It likewise
gave credence to the medico-legal certificate showing that Bang-on suffered
a hematoma contusion in his hypogastric area.
The CSC ruled that the affidavits of Bang-on’s witnesses were not bereft of
evidentiary value even if Pat-og was not afforded a chance to cross-examine
the witnesses of Bang-on. It is of no moment because the cross- examination
of witnesses is not an indispensable requirement of administrative due
process.
The CSC noted that Pat-og did not question but, instead, fully acquiesced in
his conviction in the criminal case for slight physical injury, which was based
on the same set of facts and circumstances, and involved the same parties and
issues. It, thus, considered his prior criminal conviction as evidence against
him in the administrative case.
Finding that his act of punching his student displayed a flagrant and wanton
disregard of the dignity of a person, reminiscent of corporal punishment that
had since been outlawed for being harsh, unjust, and cruel, the CSC upgraded
Pat-og’s offense from Simple Misconduct to Grave Misconduct and ordered
his dismissal from the service.
Pat-og filed a motion for reconsideration, questioning for the first time the
jurisdiction of CSC over the case. He contended that administrative charges
against a public school teacher should have been initially heard by a
committee to be constituted pursuant to the Magna Carta for Public School
Teachers.
On November 5, 2007, the CSC denied his motion for reconsideration.7 It
ruled that Pat-og was estopped from challenging its jurisdiction considering
that he actively participated in the administrative proceedings against him,
raising the issue of jurisdiction only after his appeal was dismissed by the
CSC.
Ruling of the Court of Appeals
In its assailed April 6, 2011 Decision,8 the CA affirmed the resolutions of the
CSC. It agreed that Pat-og was estopped from questioning the jurisdiction of
the CSC as the records clearly showed that he actively participated in the
proceedings. It was of the view that Pat-og was not denied due process when
he failed to cross-examine Bang-on and his witnesses because he was given
the opportunity to be heard and present his evidence before the CSC-CAR
and the CSC.
The CA also held that the CSC committed no error in taking into account the
conviction of Pat-og in the criminal case. It stated that his conviction was not
the sole basis of the CSC for his dismissal from the service because there was
substantial evidence proving that Pat-og had indeed hit Bang-on.
In its assailed Resolution,9 dated September 13, 2011, the CA denied the
motion for reconsideration filed by Pat-og.
Hence, the present petition with the following
Assignment of Errors
WHETHER OR NOT RESPONDENT COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT AFFIRMED
THE SUPREME PENALTY OF DISMISSAL FROM SERVICE WITH
FORFEITURE OF RETIREMENT BENEFITS AGAINST THE
PETITIONER WITHOUT CONSIDERING PETITIONER’S LONG
YEARS OF GOVERNMENT SERVICE?
WHETHER OR NOT RESPONDENT COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT RULED
THAT PETITIONER IS ESTOPPED FROM QUESTIONING THE
JURISDICTION OF THE CIVIL SERVICE COMMISSION TO HEAR
AND DECIDE THE ADMINISTRATIVE CASE AGAINST HIM?
WHETHER OR NOT RESPONDENT COURT OF APPEALS SERIOUSLY
ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION IN
DISMISSING THE APPEAL DESPITE LACK OF SUBSTANTIAL
EVIDENCE?
On Jurisdiction
Pat-og contends that Section 9 of Republic Act (R.A.) No. 4670, otherwise
known as the Magna Carta for Public School Teachers, provides that
administrative charges against a public school teacher shall be heard initially
by a committee constituted under said section. As no committee was ever
formed, the petitioner posits that he was denied due process and that the CSC
did not have the jurisdiction to hear and decide his administrative case. He
further argues that notwithstanding the fact that the issue of jurisdiction was
raised for the first time on appeal, the rule remains that estoppel does not
confer jurisdiction on a tribunal that has no jurisdiction over the cause of
action or subject matter of the case.
The Court cannot sustain his position.
The petitioner’s argument that the administrative case against him can only
proceed under R.A. No. 4670 is misplaced.
In Puse v. Santos-Puse,10 it was held that the CSC, the Department of
Education (DepEd) and the Board of Professional Teachers-Professional
Regulatory Commission (PRC) have concurrent jurisdiction over
administrative cases against public school teachers.
Under Article IX-B of the 1987 Constitution, the CSC is the body charged
with the establishment and administration of a career civil service which
embraces all branches and agencies of the government.11 Executive Order
(E.O.) No. 292 (the Administrative Code of 1987)12 and Presidential Decree
(P.D.) No. 807 (the Civil Service Decree of the Philippines)13 expressly
provide that the CSC has the power to hear and decide administrative
disciplinary cases instituted with it or brought to it on appeal. Thus, the CSC,
as the central personnel agency of the government, has the inherent power to
supervise and discipline all members of the civil service, including public
school teachers.
Indeed, under Section 9 of R.A. No. 4670, the jurisdiction over
administrative cases of public school teachers is lodged with the
investigating committee constituted therein.14 Also, under Section 23 of R.A.
No. 7836 (the Philippine Teachers Professionalization Act of 1994), the
Board of Professional Teachers is given the power, after due notice and
hearing, to suspend or revoke the certificate of registration of a professional
teacher for causes enumerated therein.15
Concurrent jurisdiction is that which is possessed over the same parties or
subject matter at the same time by two or more separate tribunals. When the
law bestows upon a government body the jurisdiction to hear and decide
cases involving specific matters, it is to be presumed that such jurisdiction is
exclusive unless it be proved that another body is likewise vested with the
same jurisdiction, in which case, both bodies have concurrent jurisdiction
over the matter.16
Where concurrent jurisdiction exists in several tribunals, the body that first
takes cognizance of the complaint shall exercise jurisdiction to the exclusion
of the others. In this case, it was CSC which first acquired jurisdiction over
the case because the complaint was filed before it. Thus, it had the authority
to proceed and decide the case to the exclusion of the DepEd and the Board
of Professional Teachers.17
In CSC v. Alfonso,18 it was held that special laws, such as R.A. No. 4670, do
not divest the CSC of its inherent power to supervise and discipline all
members of the civil service, including public school teachers. Pat-og, as a
public school teacher, is first and foremost, a civil servant accountable to the
people and answerable to the CSC for complaints lodged against him as a
public servant. To hold that R.A. No. 4670 divests the CSC of its power to
discipline public school teachers would negate the very purpose for which
the CSC was established and would impliedly amend the Constitution itself.
To further drive home the point, it was ruled in CSC v. Macud19 that R.A.
No. 4670, in imposing a separate set of procedural requirements in
connection with administrative proceedings against public school teachers,
should be construed to refer only to the specific procedure to be followed in
administrative investigations conducted by the DepEd. By no means, then,
did R.A. No. 4670 confer an exclusive disciplinary authority over public
school teachers on the DepEd.
At any rate, granting that the CSC was without jurisdiction, the petitioner is
indeed estopped from raising the issue. Although the rule states that a
jurisdictional question may be raised at any time, such rule admits of the
exception where, as in this case, estoppel has supervened.20 Here, instead of
opposing the CSC’s exercise of jurisdiction, the petitioner invoked the same
by actively participating in the proceedings before the CSC-CAR and by
even filing his appeal before the CSC itself; only raising the issue of
jurisdiction later in his motion for reconsideration after the CSC denied his
appeal. This Court has time and again frowned upon the undesirable practice
of a party submitting his case for decision and then accepting the judgment
only if favorable, but attacking it for lack of jurisdiction when adverse.21
On Administrative Due Process
On due process, Pat-og asserts that the affidavits of the complainant and his
witnesses are of questionable veracity having been subscribed in Bontoc,
which is nearly 30 kilometers from the residences of the parties.
Furthermore, he claimed that considering that the said affiants never testified,
he was never afforded the opportunity to cross-examine them. Therefore,
their affidavits were mere hearsay and insufficient to prove his guilt.
The petitioner does not persuade.
The essence of due process is simply to be heard, or as applied to
administrative proceedings, a fair and reasonable opportunity to explain
one’s side, or an opportunity to seek a reconsideration of the action or ruling
complained of.22 Administrative due process cannot be fully equated with
due process in its strict judicial sense. In administrative proceedings, a formal
or trial-type hearing is not always necessary23 and technical rules of
procedure are not strictly applied. Hence, the right to cross-examine is not an
indispensable aspect of administrative due process.24 The petitioner cannot,
therefore, argue that the affidavit of Bang-on and his witnesses are hearsay
and insufficient to prove his guilt.
At any rate, having actively participated in the proceedings before the CSC-
CAR, the CSC, and the CA, the petitioner was apparently afforded every
opportunity to explain his side and seek reconsideration of the ruling against
him.1âwphi1
As to the issue of the veracity of the affidavits, such is a question of fact
which cannot now be raised before the Court under Rule 45 of the Rules of
Court. The CSC-CAR, the CSC and the CA did not, therefore, err in giving
credence to the affidavits of the complainants and his witnesses, and in
consequently ruling that there was substantial evidence to support the finding
of misconduct on the part of the petitioner.
On the Penalty
Assuming that he did box Bang-on, Pat-og argues that there is no substantial
evidence to prove that he did so with a clear intent to violate the law or in
flagrant disregard of the established rule, as required for a finding of grave
misconduct. He insists that he was not motivated by bad faith or ill will
because he acted in the belief that, as a teacher, he was exercising authority
over Bang-on in loco parentis, and was, accordingly, within his rights to
discipline his student. Citing his 33 years in the government service without
any adverse record against him and the fact that he is at the edge of
retirement, being already 62 years old, the petitioner prays that, in the name
of substantial and compassionate justice, the CSC-CAR’s finding of simple
misconduct and the concomitant penalty of suspension should be upheld,
instead of dismissal.
The Court agrees in part.
Misconduct means intentional wrongdoing or deliberate violation of a rule of
law or standard of behavior. To constitute an administrative offense,
misconduct should relate to or be connected with the performance of the
official functions and duties of a public officer. In grave misconduct, as
distinguished from simple misconduct, the elements of corruption, clear
intent to violate the law or t1agrant disregard of an established rule must be
manifest.25
Teachers are duly licensed professionals who must not only be competent in
the practice of their noble profession, but must also possess dignity and a
reputation with high moral values. They must strictly adhere to, observe, and
practice the set of ethical and moral principles, standards, and values laid
down in the Code of Ethics of Professional Teachers, which apply to all
teachers in schools in the Philippines, whether public or private, as provided
in the preamble of the said Code.26 Section 8 of Article VIII of the same
Code expressly provides that "a teacher shall not inflict corporal punishment
on offending learners."
Clearly then, petitioner cannot argue that in punching Bang-on, he was
exercising his right as a teacher in loco parentis to discipline his student. It is
beyond cavil that the petitioner, as a public school teacher, deliberately
violated his Code of Ethics. Such violation is a flagrant disregard for the
established rule contained in the said Code tantamount to grave misconduct.
Under Section 52(A)(2) of Rule IV of the Uniform Rules on Administrative
Cases in the Civil Service, the penalty for grave misconduct is dismissal from
the service, which carries with it the cancellation of eligibility, forfeiture of
retirement benefits and perpetual disqualification from reemployment in the
government service.27 This penalty must, however, be tempered with
compassion as there was sut1icient provocation on the part of Bang-on.
Considering further the mitigating circumstances that the petitioner has been
in the government service for 33 years, that this is his first offense and that
he is at the cusp of retirement, the Court finds the penalty of suspension for
six months as appropriate under the circumstances.

WHEREFORE, the Court PARTIALLY GRANTS the petition and

MODIFIES the April 6, 2011 Decision of the Court of Appeals in CA-G.R.
SP No. 101700. Accordingly, Alberto Pat-og, Sr. is found GUlLTY of Grave
Misconduct, but the penalty is reduced from dismissal from the service to
SUSPENSION for SIX MONTHS.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 173946 June 19, 2013
BOSTON EQUITY RESOURCES, INC., Petitioner,
vs.
COURT OF APPEALS AND LOLITA G. TOLEDO, Respondents.
DECISION
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari seeking to reverse and
set aside: (1) the Decision,1 dated 28 February 2006 and (2) the
Resolution,2 dated 1 August 2006 of the Court of Appeals in CA-G.R. SP
No. 88586. The challenged decision granted herein respondent's petition for
certiorari upon a finding that the trial court committed grave abuse of
discretion in denying respondent's motion to dismiss the complaint against
her.3 Based on this finding, the Court of Appeals reversed and set aside the
Orders, dated 8 November 20044 and 22 December 2004,5respectively, of the
Regional Trial Court (RTC) of Manila, Branch 24.
The Facts
On 24 December 1997, petitioner filed a complaint for sum of money with a
prayer for the issuance of a writ of preliminary attachment against the
spouses Manuel and Lolita Toledo.6 Herein respondent filed an Answer dated
19 March 1998 but on 7 May 1998, she filed a Motion for Leave to Admit
Amended Answer7 in which she alleged, among others, that her husband and
co-defendant, Manuel Toledo (Manuel), is already dead.8 The death
certificate9 of Manuel states "13 July 1995" as the date of death. As a result,
petitioner filed a motion, dated 5 August 1999, to require respondent to
disclose the heirs of Manuel.10 In compliance with the verbal order of the
court during the 11 October 1999 hearing of the case, respondent submitted
the required names and addresses of the heirs.11 Petitioner then filed a
Motion for Substitution,12 dated 18 January 2000, praying that Manuel be
substituted by his children as party-defendants. It appears that this motion
was granted by the trial court in an Order dated 9 October 2000.13
Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-
trial order containing, among others, the dates of hearing of the case.14
The trial of the case then proceeded. Herein petitioner, as plaintiff, presented
its evidence and its exhibits were thereafter admitted.
On 26 May 2004, the reception of evidence for herein respondent was
cancelled upon agreement of the parties. On 24 September 2004, counsel for
herein respondent was given a period of fifteen days within which to file a
demurrer to evidence.15 However, on 7 October 2004, respondent instead
filed a motion to dismiss the complaint, citing the following as grounds: (1)
that the complaint failed to implead an indispensable party or a real party in
interest; hence, the case must be dismissed for failure to state a cause of
action; (2) that the trial court did not acquire jurisdiction over the person of
Manuel pursuant to Section 5, Rule 86 of the Revised Rules of Court; (3) that
the trial court erred in ordering the substitution of the deceased Manuel by
his heirs; and (4) that the court must also dismiss the case against Lolita
Toledo in accordance with Section 6, Rule 86 of the Rules of Court.16
The trial court, in an Order dated 8 November 2004, denied the motion to
dismiss for having been filed out of time, citing Section 1, Rule 16 of the
1997 Rules of Court which states that: "Within the time for but before filing
the answer to the complaint or pleading asserting a claim, a motion to
dismiss may be made x x x."17 Respondent’s motion for reconsideration of
the order of denial was likewise denied on the ground that "defendants’
attack on the jurisdiction of this Court is now barred by estoppel by laches"
since respondent failed to raise the issue despite several chances to do so.18
Aggrieved, respondent filed a petition for certiorari with the Court of
Appeals alleging that the trial court seriously erred and gravely abused its
discretion in denying her motion to dismiss despite discovery, during the trial
of the case, of evidence that would constitute a ground for dismissal of the
case.19
The Court of Appeals granted the petition based on the following grounds:
It is elementary that courts acquire jurisdiction over the person of the
defendant x x x only when the latter voluntarily appeared or submitted to the
court or by coercive process issued by the court to him, x x x. In this case, it
is undisputed that when petitioner Boston filed the complaint on December
24, 1997, defendant Manuel S. Toledo was already dead, x x x. Such being
the case, the court a quo could not have acquired jurisdiction over the person
of defendant Manuel S. Toledo.
x x x the court a quo’s denial of respondent’s motion to dismiss was based on
its finding that respondent’s attack on the jurisdiction of the court was
already barred by laches as respondent failed to raise the said ground in its
[sic] amended answer and during the pre-trial, despite her active participation
in the proceedings.
However, x x x it is well-settled that issue on jurisdiction may be raised at
any stage of the proceeding, even for the first time on appeal. By timely
raising the issue on jurisdiction in her motion to dismiss x x x respondent is
not estopped from raising the question on jurisdiction.
Moreover, when issue on jurisdiction was raised by respondent, the court a
quo had not yet decided the case, hence, there is no basis for the court a quo
to invoke estoppel to justify its denial of the motion for reconsideration;
It should be stressed that when the complaint was filed, defendant Manuel S.
Toledo was already dead. The complaint should have impleaded the estate of
Manuel S. Toledo as defendant, not only the wife, considering that the estate
of Manuel S. Toledo is an indispensable party, which stands to be benefited
or be injured in the outcome of the case. x x x
xxxx
Respondent’s motion to dismiss the complaint should have been granted by
public respondent judge as the same was in order. Considering that the
obligation of Manuel S. Toledo is solidary with another debtor, x x x, the
claim x x x should be filed against the estate of Manuel S. Toledo, in
conformity with the provision of Section 6, Rule 86 of the Rules of Court, x
x x.20
The Court of Appeals denied petitioner’s motion for reconsideration. Hence,
this petition.
The Issues
Petitioner claims that the Court of Appeals erred in not holding that:
1. Respondent is already estopped from questioning the trial court’s
jurisdiction;
2. Petitioner never failed to implead an indispensable party as the estate of
Manuel is not an indispensable party;
3. The inclusion of Manuel as party-defendant is a mere misjoinder of party
not warranting the dismissal of the case before the lower court; and
4. Since the estate of Manuel is not an indispensable party, it is not necessary
that petitioner file its claim against the estate of Manuel.
In essence, what is at issue here is the correctness of the trial court’s orders
denying respondent’s motion to dismiss.
The Ruling of the Court
We find merit in the petition.
Motion to dismiss filed out of time
To begin with, the Court of Appeals erred in granting the writ of certiorari in
favor of respondent. Well settled is the rule that the special civil action for
certiorari is not the proper remedy to assail the denial by the trial court of a
motion to dismiss. The order of the trial court denying a motion to dismiss is
merely interlocutory, as it neither terminates nor finally disposes of a case
and still leaves something to be done by the court before a case is finally
decided on the merits.21 Therefore, "the proper remedy in such a case is to
appeal after a decision has been rendered."22
As the Supreme Court held in Indiana Aerospace University v. Comm. on
Higher Education:23
A writ of certiorari is not intended to correct every controversial
interlocutory ruling; it is resorted only to correct a grave abuse of discretion
or a whimsical exercise of judgment equivalent to lack of jurisdiction. Its
function is limited to keeping an inferior court within its jurisdiction and to
relieve persons from arbitrary acts – acts which courts or judges have no
power or authority in law to perform. It is not designed to correct erroneous
findings and conclusions made by the courts. (Emphasis supplied)
Even assuming that certiorari is the proper remedy, the trial court did not
commit grave abuse of discretion in denying respondent’s motion to dismiss.
It, in fact, acted correctly when it issued the questioned orders as
respondent’s motion to dismiss was filed SIX YEARS AND FIVE
MONTHS AFTER SHE FILED HER AMENDED ANSWER. This
circumstance alone already warranted the outright dismissal of the motion for
having been filed in clear contravention of the express mandate of Section 1,
Rule 16, of the Revised Rules of Court. Under this provision, a motion to
dismiss shall be filed within the time for but before the filing of an answer to
the complaint or pleading asserting a claim.24
More importantly, respondent’s motion to dismiss was filed after petitioner
has completed the presentation of its evidence in the trial court, giving
credence to petitioner’s and the trial court’s conclusion that the filing of the
motion to dismiss was a mere ploy on the part of respondent to delay the
prompt resolution of the case against her.
Also worth mentioning is the fact that respondent’s motion to dismiss under
consideration herein is not the first motion to dismiss she filed in the trial
court. It appears that she had filed an earlier motion to dismiss26 on the sole
ground of the unenforceability of petitioner’s claim under the Statute of
Frauds, which motion was denied by the trial court. More telling is the
following narration of the trial court in its Order denying respondent’s
motion for reconsideration of the denial of her motion to dismiss:
As can be gleaned from the records, with the admission of plaintiff’s
exhibits, reception of defendants’ evidence was set on March 31, and April
23, 2004 x x x . On motion of the defendants, the hearing on March 31, 2004
was cancelled.
On April 14, 2004, defendants sought the issuance of subpoena ad
testificandum and duces tecum to one Gina M. Madulid, to appear and testify
for the defendants on April 23, 2004. Reception of defendants’ evidence was
again deferred to May 26, June 2 and June 30, 2004, x x x.
On May 13, 2004, defendants sought again the issuance of a subpoena duces
tecum and ad testificandum to the said Gina Madulid. On May 26, 2004,
reception of defendants [sic] evidence was cancelled upon the agreement of
the parties. On July 28, 2004, in the absence of defendants’ witness, hearing
was reset to September 24 and October 8, 2004 x x x.
On September 24, 2004, counsel for defendants was given a period of fifteen
(15) days to file a demurrer to evidence. On October 7, 2004, defendants
filed instead a Motion to Dismiss x x x.27
Respondent’s act of filing multiple motions, such as the first and earlier
motion to dismiss and then the motion to dismiss at issue here, as well as
several motions for postponement, lends credibility to the position taken by
petitioner, which is shared by the trial court, that respondent is
deliberately impeding the early disposition of this case. The filing of the
second motion to dismiss was, therefore, "not only improper but also
dilatory."28 Thus, the trial court, "far from deviating or straying off course
from established jurisprudence on the matter, x x x had in fact faithfully
observed the law and legal precedents in this case."29 The Court of Appeals,
therefore, erred not only in entertaining respondent’s petition for certiorari, it
likewise erred in ruling that the trial court committed grave abuse of
discretion when it denied respondent’s motion to dismiss.
On whether or not respondent is estopped from
questioning the jurisdiction of the trial court
At the outset, it must be here stated that, as the succeeding discussions will
demonstrate, jurisdiction over the person of Manuel should not be an issue in
this case. A protracted discourse on jurisdiction is, nevertheless, demanded
by the fact that jurisdiction has been raised as an issue from the lower court,
to the Court of Appeals and, finally, before this Court. For the sake of clarity,
and in order to finally settle the controversy and fully dispose of all the issues
in this case, it was deemed imperative to resolve the issue of jurisdiction.
1. Aspects of Jurisdiction
Petitioner calls attention to the fact that respondent’s motion to dismiss
questioning the trial court’s jurisdiction was filed more than six years after
her amended answer was filed. According to petitioner, respondent had
several opportunities, at various stages of the proceedings, to assail the trial
court’s jurisdiction but never did so for six straight years. Citing the doctrine
laid down in the case of Tijam, et al. v. Sibonghanoy, et al.30 petitioner
claimed that respondent’s failure to raise the question of jurisdiction at an
earlier stage bars her from later questioning it, especially since she actively
participated in the proceedings conducted by the trial court.
Petitioner’s argument is misplaced, in that, it failed to consider that the
concept of jurisdiction has several aspects, namely: (1) jurisdiction over the
subject matter; (2) jurisdiction over the parties; (3) jurisdiction over the
issues of the case; and (4) in cases involving property, jurisdiction over the
res or the thing which is the subject of the litigation.31
The aspect of jurisdiction which may be barred from being assailed as a
result of estoppel by laches is jurisdiction over the subject matter. Thus, in
Tijam, the case relied upon by petitioner, the issue involved was the authority
of the then Court of First Instance to hear a case for the collection of a sum of
money in the amount of ₱1,908.00 which amount was, at that time, within
the exclusive original jurisdiction of the municipal courts.
In subsequent cases citing the ruling of the Court in Tijam, what was
likewise at issue was the jurisdiction of the trial court over the subject matter
of the case. Accordingly, in Spouses Gonzaga v. Court of Appeals,32 the
issue for consideration was the authority of the regional trial court to hear
and decide an action for reformation of contract and damages involving a
subdivision lot, it being argued therein that jurisdiction is vested in the
Housing and Land Use Regulatory Board pursuant to PD 957 (The
Subdivision and Condominium Buyers Protective Decree). In Lee v.
Presiding Judge, MTC, Legaspi City,33 petitioners argued that the respondent
municipal trial court had no jurisdiction over the complaint for ejectment
because the issue of ownership was raised in the pleadings. Finally, in People
v. Casuga,34 accused-appellant claimed that the crime of grave slander, of
which she was charged, falls within the concurrent jurisdiction of municipal
courts or city courts and the then courts of first instance, and that the
judgment of the court of first instance, to which she had appealed the
municipal court's conviction, should be deemed null and void for want of
jurisdiction as her appeal should have been filed with the Court of Appeals or
the Supreme Court.
In all of these cases, the Supreme Court barred the attack on the jurisdiction
of the respective courts concerned over the subject matter of the case based
on estoppel by laches, declaring that parties cannot be allowed to belatedly
adopt an inconsistent posture by attacking the jurisdiction of a court to which
they submitted their cause voluntarily.35
Here, what respondent was questioning in her motion to dismiss before the
trial court was that court’s jurisdiction over the person of defendant Manuel.
Thus, the principle of estoppel by laches finds no application in this case.
Instead, the principles relating to jurisdiction over the person of the parties
are pertinent herein.
The Rules of Court provide:
RULE 9
EFFECT OF FAILURE TO PLEAD
Section 1. Defenses and objections not pleaded. – Defenses and objections
not pleaded either in a motion to dismiss or in the answer are deemed
waived. However, when it appears from the pleadings or the evidence on
record that the court has no jurisdiction over the subject matter, that there is
another action pending between the same parties for the same cause, or that
the action is barred by a prior judgment or by statute of limitations, the court
shall dismiss the claim.
RULE 15
MOTIONS
Sec. 8. Omnibus motion. – Subject to the provisions of Section 1 of Rule 9, a
motion attacking a pleading, order, judgment, or proceeding shall include all
objections then available, and all objections not so included shall be deemed
waived.
Based on the foregoing provisions, the "objection on jurisdictional grounds
which is not waived even if not alleged in a motion to dismiss or the answer
is lack of jurisdiction over the subject matter. x x x Lack of jurisdiction over
the subject matter can always be raised anytime, even for the first time on
appeal, since jurisdictional issues cannot be waived x x x subject, however,
to the principle of estoppel by laches."36
Since the defense of lack of jurisdiction over the person of a party to a case is
not one of those defenses which are not deemed waived under Section 1 of
Rule 9, such defense must be invoked when an answer or a motion to dismiss
is filed in order to prevent a waiver of the defense.37 If the objection is not
raised either in a motion to dismiss or in the answer, the objection to the
jurisdiction over the person of the plaintiff or the defendant is deemed
waived by virtue of the first sentence of the above-quoted Section 1 of Rule 9
of the Rules of Court.38
The Court of Appeals, therefore, erred when it made a sweeping
pronouncement in its questioned decision, stating that "issue on jurisdiction
may be raised at any stage of the proceeding, even for the first time on
appeal" and that, therefore, respondent timely raised the issue in her motion
to dismiss and is, consequently, not estopped from raising the question of
jurisdiction. As the question of jurisdiction involved here is that over the
person of the defendant Manuel, the same is deemed waived if not raised in
the answer or a motion to dismiss. In any case, respondent cannot claim the
defense since "lack of jurisdiction over the person, being subject to waiver, is
a personal defense which can only be asserted by the party who can thereby
waive it by silence."39
2. Jurisdiction over the person of a defendant is acquired through a valid
service of summons; trial court did not acquire jurisdiction over the person of
Manuel Toledo
In the first place, jurisdiction over the person of Manuel was never acquired
by the trial court. A defendant is informed of a case against him when he
receives summons. "Summons is a writ by which the defendant is notified of
the action brought against him. Service of such writ is the means by which
the court acquires jurisdiction over his person."40
In the case at bar, the trial court did not acquire jurisdiction over the person
of Manuel since there was no valid service of summons upon him, precisely
because he was already dead even before the complaint against him and his
wife was filed in the trial court. The issues presented in this case are similar
to those in the case of Sarsaba v. Vda. de Te.41
In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was
illegally dismissed from employment and ordering the payment of his
monetary claims. To satisfy the claim, a truck in the possession of Sereno’s
employer was levied upon by a sheriff of the NLRC, accompanied by Sereno
and his lawyer, Rogelio Sarsaba, the petitioner in that case. A complaint for
recovery of motor vehicle and damages, with prayer for the delivery of the
truck pendente lite was eventually filed against Sarsaba, Sereno, the NLRC
sheriff and the NLRC by the registered owner of the truck. After his motion
to dismiss was denied by the trial court, petitioner Sarsaba filed his answer.
Later on, however, he filed an omnibus motion to dismiss citing, as one of
the grounds, lack of jurisdiction over one of the principal defendants, in view
of the fact that Sereno was already dead when the complaint for recovery of
possession was filed.
Although the factual milieu of the present case is not exactly similar to that
of Sarsaba, one of the issues submitted for resolution in both cases is similar:
whether or not a case, where one of the named defendants was already dead
at the time of its filing, should be dismissed so that the claim may be pursued
instead in the proceedings for the settlement of the estate of the deceased
defendant. The petitioner in the Sarsaba Case claimed, as did respondent
herein, that since one of the defendants died before summons was served on
him, the trial court should have dismissed the complaint against all the
defendants and the claim should be filed against the estate of the deceased
defendant. The petitioner in Sarsaba, therefore, prayed that the complaint be
dismissed, not only against Sereno, but as to all the defendants, considering
that the RTC did not acquire jurisdiction over the person of Sereno.42 This is
exactly the same prayer made by respondent herein in her motion to dismiss.
The Court, in the Sarsaba Case, resolved the issue in this wise:
x x x We cannot countenance petitioner’s argument that the complaint
against the other defendants should have been dismissed, considering that the
RTC never acquired jurisdiction over the person of Sereno. The court’s
failure to acquire jurisdiction over one’s person is a defense which is
personal to the person claiming it. Obviously, it is now impossible for Sereno
to invoke the same in view of his death. Neither can petitioner invoke such
ground, on behalf of Sereno, so as to reap the benefit of having the case
dismissed against all of the defendants. Failure to serve summons on
Sereno’s person will not be a cause for the dismissal of the complaint against
the other defendants, considering that they have been served with copies of
the summons and complaints and have long submitted their respective
responsive pleadings. In fact, the other defendants in the complaint were
given the chance to raise all possible defenses and objections personal to
them in their respective motions to dismiss and their subsequent
answers.43 (Emphasis supplied.)
Hence, the Supreme Court affirmed the dismissal by the trial court of the
complaint against Sereno only.
Based on the foregoing pronouncements, there is no basis for dismissing the
complaint against respondent herein. Thus, as already emphasized above, the
trial court correctly denied her motion to dismiss.
On whether or not the estate of Manuel
Toledo is an indispensable party
Rule 3, Section 7 of the 1997 Rules of Court states:
SEC. 7. Compulsory joinder of indispensable parties. – Parties-in-interest
without whom no final determination can be had of an action shall be joined
either as plaintiffs or defendants.
An indispensable party is one who has such an interest in the controversy or
subject matter of a case that a final adjudication cannot be made in his or her
absence, without injuring or affecting that interest. He or she is a party who
has not only an interest in the subject matter of the controversy, but "an
interest of such nature that a final decree cannot be made without affecting
that interest or leaving the controversy in such a condition that its final
determination may be wholly inconsistent with equity and good conscience.
It has also been considered that an indispensable party is a person in whose
absence there cannot be a determination between the parties already before
the court which is effective, complete or equitable." Further, an indispensable
party is one who must be included in an action before it may properly
proceed.44
On the other hand, a "person is not an indispensable party if his interest in the
controversy or subject matter is separable from the interest of the other
parties, so that it will not necessarily be directly or injuriously affected by a
decree which does complete justice between them. Also, a person is not an
indispensable party if his presence would merely permit complete relief
between him or her and those already parties to the action, or if he or she has
no interest in the subject matter of the action." It is not a sufficient reason to
declare a person to be an indispensable party simply because his or her
presence will avoid multiple litigations.45
Applying the foregoing pronouncements to the case at bar, it is clear that the
estate of Manuel is not an indispensable party to the collection case, for the
simple reason that the obligation of Manuel and his wife, respondent herein,
is solidary.
The contract between petitioner, on the one hand and respondent and
respondent’s husband, on the other, states:
FOR VALUE RECEIVED, I/We jointly and severally46 (in solemn) promise
to pay BOSTON EQUITY RESOURCES, INC. x x x the sum of PESOS:
[ONE MILLION FOUR HUNDRED (₱1,400,000.00)] x x x.47
The provisions and stipulations of the contract were then followed by the
respective signatures of respondent as "MAKER" and her husband as "CO-
MAKER."48 Thus, pursuant to Article 1216 of the Civil Code, petitioner may
collect the entire amount of the obligation from respondent only. The
aforementioned provision states: "The creditor may proceed against any one
of the solidary debtors or some or all of them simultaneously. The demand
made against one of them shall not be an obstacle to those which may
subsequently be directed against the others, so long as the debt has not been
fully collected."
In other words, the collection case can proceed and the demands of petitioner
can be satisfied by respondent only, even without impleading the estate of
Manuel. Consequently, the estate of Manuel is not an indispensable party to
petitioner’s complaint for sum of money.
However, the Court of Appeals, agreeing with the contention of respondent,
held that the claim of petitioner should have been filed against the estate of
Manuel in accordance with Sections 5 and 6 of Rule 86 of the Rules of
Court. The aforementioned provisions provide:
SEC. 5. Claims which must be filed under the notice. If not filed, barred;
exceptions. All claims for money against the decedent, arising from contract,
express or implied, whether the same be due, not due, or contingent, all
claims for funeral expenses and judgment for money against the decedent,
must be filed within the time limited in the notice; otherwise, they are barred
forever, except that they may be set forth as counterclaims in any action that
the executor or administrator may bring against the claimants. x x x.
SEC. 6. Solidary obligation of decedent. Where the obligation of the
decedent is solidary with another debtor, the claim shall be filed against the
decedent as if he were the only debtor, without prejudice to the right of the
estate to recover contribution from the other debtor. x x x.
The Court of Appeals erred in its interpretation of the above-quoted
provisions.
In construing Section 6, Rule 87 of the old Rules of Court, the precursor of
Section 6, Rule 86 of the Revised Rules of Court, which latter provision has
been retained in the present Rules of Court without any revisions, the
Supreme Court, in the case of Manila Surety & Fidelity Co., Inc. v.
Villarama, et. al.,49 held:50
Construing Section 698 of the Code of Civil Procedure from whence [Section
6, Rule 87] was taken, this Court held that where two persons are bound in
solidum for the same debt and one of them dies, the whole indebtedness can
be proved against the estate of the latter, the decedent’s liability being
absolute and primary; x x x. It is evident from the foregoing that Section 6 of
Rule 87 provides the procedure should the creditor desire to go against the
deceased debtor, but there is certainly nothing in the said provision making
compliance with such procedure a condition precedent before an ordinary
action against the surviving solidary debtors, should the creditor choose to
demand payment from the latter, could be entertained to the extent that
failure to observe the same would deprive the court jurisdiction to take
cognizance of the action against the surviving debtors. Upon the other hand,
the Civil Code expressly allows the creditor to proceed against any one of the
solidary debtors or some or all of them simultaneously. There is, therefore,
nothing improper in the creditor’s filing of an action against the surviving
solidary debtors alone, instead of instituting a proceeding for the settlement
of the estate of the deceased debtor wherein his claim could be filed.
The foregoing ruling was reiterated and expounded in the later case of
Philippine National Bank v. Asuncion51where the Supreme Court
pronounced:
A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals
that nothing therein prevents a creditor from proceeding against the surviving
solidary debtors. Said provision merely sets up the procedure in enforcing
collection in case a creditor chooses to pursue his claim against the estate of
the deceased solidary debtor. The rule has been set forth that a creditor (in a
solidary obligation) has the option whether to file or not to file a claim
against the estate of the solidary debtor. x x x
xxxx
It is crystal clear that Article 1216 of the New Civil Code is the applicable
provision in this matter. Said provision gives the creditor the right to
"proceed against anyone of the solidary debtors or some or all of them
simultaneously." The choice is undoubtedly left to the solidary creditor to
determine against whom he will enforce collection. In case of the death of
one of the solidary debtors, he (the creditor) may, if he so chooses, proceed
against the surviving solidary debtors without necessity of filing a claim in
the estate of the deceased debtors. It is not mandatory for him to have the
case dismissed as against the surviving debtors and file its claim against the
estate of the deceased solidary debtor, x x x. For to require the creditor to
proceed against the estate, making it a condition precedent for any collection
action against the surviving debtors to prosper, would deprive him of his
substantive rightsprovided by Article 1216 of the New Civil Code.
(Emphasis supplied.)
As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules
of Court were applied literally, Article 1216 of the New Civil Code would, in
effect, be repealed since under the Rules of Court, petitioner has no choice
but to proceed against the estate of [the deceased debtor] only. Obviously,
this provision diminishes the [creditor’s] right under the New Civil Code to
proceed against any one, some or all of the solidary debtors. Such a
construction is not sanctioned by principle, which is too well settled to
require citation, that a substantive law cannot be amended by a procedural
rule. Otherwise stated, Section 6, Rule 86 of the Revised Rules of Court
cannot be made to prevail over Article 1216 of the New Civil Code, the
former being merely procedural, while the latter, substantive.
Based on the foregoing, the estate of Manuel is not an indispensable party
and the case can proceed as against respondent only. That petitioner opted to
collect from respondent and not from the estate of Manuel is evidenced by its
opposition to respondent’s motion to dismiss asserting that the case, as
against her, should be dismissed so that petitioner can proceed against the
estate of Manuel.
On whether or not the inclusion of Manuel as
party defendant is a misjoinder of party
Section 11 of Rule 3 of the Rules of Court states that "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."
Based on the last sentence of the afore-quoted provision of law, a misjoined
party must have the capacity to sue or be sued in the event that the claim by
or against the misjoined party is pursued in a separate case. In this case,
therefore, the inclusion of Manuel in the complaint cannot be considered a
misjoinder, as in fact, the action would have proceeded against him had he
been alive at the time the collection case was filed by petitioner. This being
the case, the remedy provided by Section 11 of Rule 3 does not obtain here.
The name of Manuel as party-defendant cannot simply be dropped from the
case. Instead, the procedure taken by the Court in Sarsaba v. Vda. de
Te,52whose facts, as mentioned earlier, resemble those of this case, should be
followed herein. There, the Supreme Court agreed with the trial court when it
resolved the issue of jurisdiction over the person of the deceased Sereno in
this wise:
As correctly pointed by defendants, the Honorable Court has not acquired
jurisdiction over the person of Patricio Sereno since there was indeed no
valid service of summons insofar as Patricio Sereno is concerned. Patricio
Sereno died before the summons, together with a copy of the complaint and
its annexes, could be served upon him.
However, the failure to effect service of summons unto Patricio Sereno, one
of the defendants herein, does not render the action DISMISSIBLE,
considering that the three (3) other defendants, x x x, were validly served
with summons and the case with respect to the answering defendants may
still proceed independently. Be it recalled that the three (3) answering
defendants have previously filed a Motion to Dismiss the Complaint which
was denied by the Court.
Hence, only the case against Patricio Sereno will be DISMISSED and the
same may be filed as a claim against the estate of Patricio Sereno, but the
case with respect to the three (3) other accused [sic] will proceed. (Emphasis
supplied.)53
As a result, the case, as against Manuel, must be dismissed.
In addition, the dismissal of the case against Manuel is further warranted by
Section 1 of Rule 3 of the Rules of Court, which states that: only natural or
juridical persons, or entities authorized by law may be parties in a civil
action." Applying this provision of law, the Court, in the case of Ventura v.
Militante,54 held:
Parties may be either plaintiffs or defendants. x x x. In order to maintain an
action in a court of justice, the plaintiff must have an actual legal existence,
that is, he, she or it must be a person in law and possessed of a legal entity as
either a natural or an artificial person, and no suit can be lawfully prosecuted
save in the name of such a person.
The rule is no different as regards party defendants. It is incumbent upon a
plaintiff, when he institutes a judicial proceeding, to name the proper party
defendant to his cause of action. In a suit or proceeding in personam of an
adversary character, the court can acquire no jurisdiction for the purpose of
trial or judgment until a party defendant who actually or legally exists and is
legally capable of being sued, is brought before it. It has even been held that
the question of the legal personality of a party defendant is a question of
substance going to the jurisdiction of the court and not one of procedure.
The original complaint of petitioner named the "estate of Carlos Ngo as
represented by surviving spouse Ms. Sulpicia Ventura" as the
defendant.1âwphi1 Petitioner moved to dismiss the same on the ground that
the defendant as named in the complaint had no legal personality. We agree.
x x x. Considering that capacity to be sued is a correlative of the capacity to
sue, to the same extent, a decedent does not have the capacity to be sued and
may not be named a party defendant in a court action. (Emphases supplied.)
Indeed, where the defendant is neither a natural nor a juridical person or an
entity authorized by law, the complaint may be dismissed on the ground that
the pleading asserting the claim states no cause of action or for failure to
state a cause of action pursuant to Section 1(g) of Rule 16 of the Rules of
Court, because a complaint cannot possibly state a cause of action against
one who cannot be a party to a civil action.55
The court shall forthwith order said legal representative or representatives to
appear and be substituted within a period of thirty (30) days from notice.
(Emphasis supplied.)
Here, since Manuel was already dead at the time of the filing of the
complaint, the court never acquired jurisdiction over his person and, in
effect, there was no party to be substituted.
WHEREFORE, the petition is GRANTED. The Decision dated 28 February
2006 and the Resolution dated 1 August 2006 of the Court of Appeals in CA-
G.R. SP No. 88586 are REVERSED and SET ASIDE. The Orders of the
Regional Trial Court dated 8 November 2004 and 22 December 2004,
respectively, in Civil Case No. 97-86672, are REINSTATED. The Regional
Trial Court, Branch 24, Manila is hereby DIRECTED to proceed with the
trial of Civil Case No. 97-86672 against respondent Lolita G. Toledo only, in
accordance with the above pronouncements of the Court, and to decide the
case with dispatch.
SO ORDERED.

Since the proper course of action against the wrongful inclusion of Manuel as
party-defendant is the dismissal of the case as against him, thus did the trial
court err when it ordered the substitution of Manuel by his heirs. Substitution
is proper only where the party to be substituted died during the pendency of
the case, as expressly provided for by Section 16, Rule 3 of the Rules of
Court, which states:

Death of party;duty of counsel. – Whenever a party to a pending action dies,

and the claim is not thereby extinguished, it shall be the duty of his counsel
to inform the court within thirty (30) days after such death of the fact thereof,
and to give the name and address of his legal representative or
representatives. x x x

The heirs of the deceased may be allowed to be substituted for the deceased,
without requiring the appointment of an executor or administrator x x x.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 168539 March 25, 2014
PEOPLE OF THE PHILIPPINES, Petitioner,
vs.
HENRY T. GO, Respondent.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari assailing the
Resolution1 of the Third Division2 of the Sandiganbayan (SB) dated June 2,
2005 which quashed the Information filed against herein respondent for
alleged violation of Section 3 (g) of Republic Act No. 3019 (R.A. 3019),
otherwise known as the Anti-Graft and Corrupt Practices Act.
The Information filed against respondent is an offshoot of this Court's
Decision3 in Agan, Jr. v. Philippine International Air Terminals Co., Inc.
which nullified the various contracts awarded by the Government, through
the Department of Transportation and Communications (DOTC), to
Philippine Air Terminals, Co., Inc. (PIATCO) for the construction, operation
and maintenance of the Ninoy Aquino International Airport International
Passenger Terminal III (NAIA IPT III). Subsequent to the above Decision, a
certain Ma. Cecilia L. Pesayco filed a complaint with the Office of the
Ombudsman against several individuals for alleged violation of R.A. 3019.
Among those charged was herein respondent, who was then the Chairman
and President of PIATCO, for having supposedly conspired with then DOTC
Secretary Arturo Enrile (Secretary Enrile) in entering into a contract which is
grossly and manifestly disadvantageous to the government.
On September 16, 2004, the Office of the Deputy Ombudsman for Luzon
found probable cause to indict, among others, herein respondent for violation
of Section 3(g) of R.A. 3019. While there was likewise a finding of probable
cause against Secretary Enrile, he was no longer indicted because he died
prior to the issuance of the resolution finding probable cause.
Thus, in an Information dated January 13, 2005, respondent was charged
before the SB as follows:
On or about July 12, 1997, or sometime prior or subsequent thereto, in Pasay
City, Metro Manila, Philippines and within the jurisdiction of this Honorable
Court, the late ARTURO ENRILE, then Secretary of the Department of
Transportation and Communications (DOTC), committing the offense in
relation to his office and taking advantage of the same, in conspiracy with
accused, HENRY T. GO, Chairman and President of the Philippine
International Air Terminals, Co., Inc. (PIATCO), did then and there,
willfully, unlawfully and criminally enter into a Concession Agreement, after
the project for the construction of the Ninoy Aquino International Airport
International Passenger Terminal III (NAIA IPT III) was awarded to
Paircargo Consortium/PIATCO, which Concession Agreement substantially
amended the draft Concession Agreement covering the construction of the
NAIA IPT III under Republic Act 6957, as amended by Republic Act 7718
(BOT law), specifically the provision on Public Utility Revenues, as well as
the assumption by the government of the liabilities of PIATCO in the event
of the latter's default under Article IV, Section 4.04 (b) and (c) in relation to
Article 1.06 of the Concession Agreement, which terms are more beneficial
to PIATCO while manifestly and grossly disadvantageous to the government
of the Republic of the Philippines.4
The case was docketed as Criminal Case No. 28090.
On March 10, 2005, the SB issued an Order, to wit:
The prosecution is given a period of ten (10) days from today within which
to show cause why this case should not be dismissed for lack of jurisdiction
over the person of the accused considering that the accused is a private
person and the public official Arturo Enrile, his alleged co-conspirator, is
already deceased, and not an accused in this case.5
The prosecution complied with the above Order contending that the SB has
already acquired jurisdiction over the person of respondent by reason of his
voluntary appearance, when he filed a motion for consolidation and when he
posted bail. The prosecution also argued that the SB has exclusive
jurisdiction over respondent's case, even if he is a private person, because he
was alleged to have conspired with a public officer.6
On April 28, 2005, respondent filed a Motion to Quash7 the Information filed
against him on the ground that the operative facts adduced therein do not
constitute an offense under Section 3(g) of R.A. 3019. Respondent, citing the
show cause order of the SB, also contended that, independently of the
deceased Secretary Enrile, the public officer with whom he was alleged to
have conspired, respondent, who is not a public officer nor was capacitated
by any official authority as a government agent, may not be prosecuted for
violation of Section 3(g) of R.A. 3019.
The prosecution filed its Opposition.8
On June 2, 2005, the SB issued its assailed Resolution, pertinent portions of
which read thus:
Acting on the Motion to Quash filed by accused Henry T. Go dated April 22,
2005, and it appearing that Henry T. Go, the lone accused in this case is a
private person and his alleged co-conspirator-public official was already
deceased long before this case was filed in court, for lack of jurisdiction over
the person of the accused, the Court grants the Motion to Quash and the
Information filed in this case is hereby ordered quashed and dismissed.9
Hence, the instant petition raising the following issues, to wit:
I
WHETHER OR NOT THE COURT A QUO GRAVELY ERRED AND
DECIDED A QUESTION OF SUBSTANCE IN A MANNER NOT IN
ACCORD WITH LAW OR APPLICABLE JURISPRUDENCE IN
GRANTING THE DEMURRER TO EVIDENCE AND IN DISMISSING
CRIMINAL CASE NO. 28090 ON THE GROUND THAT IT HAS NO
JURISDICTION OVER THE PERSON OF RESPONDENT GO.
II
WHETHER OR NOT THE COURT A QUO GRAVELY ERRED AND
DECIDED A QUESTION OF SUBSTANCE IN A MANNER NOT IN
ACCORD WITH LAW OR APPLICABLE JURISPRUDENCE, IN
RULING THAT IT HAS NO JURISDICTION OVER THE PERSON OF
RESPONDENT GO DESPITE THE IRREFUTABLE FACT THAT HE
HAS ALREADY POSTED BAIL FOR HIS PROVISIONAL LIBERTY
III
WHETHER OR NOT THE COURT A QUO GRAVELY ERRED WHEN,
IN COMPLETE DISREGARD OF THE EQUAL PROTECTION CLAUSE
OF THE CONSTITUTION, IT QUASHED THE INFORMATION AND
DISMISSED CRIMINAL CASE NO. 2809010
The Court finds the petition meritorious.
Section 3 (g) of R.A. 3019 provides:
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:
xxxx
(g) Entering, on behalf of the Government, into any contract or transaction
manifestly and grossly disadvantageous to the same, whether or not the
public officer profited or will profit thereby.
The elements of the above provision are:
(1) that the accused is a public officer;
(2) that he entered into a contract or transaction on behalf of the government;
and
(3) that such contract or transaction is grossly and manifestly
disadvantageous to the government.11
At the outset, it bears to reiterate the settled rule that private persons, when
acting in conspiracy with public officers, may be indicted and, if found
guilty, held liable for the pertinent offenses under Section 3 of R.A. 3019, in
consonance with the avowed policy of the anti-graft law to repress certain
acts of public officers and private persons alike constituting graft or corrupt
practices act or which may lead thereto.12 This is the controlling doctrine as
enunciated by this Court in previous cases, among which is a case involving
herein private respondent.13
The only question that needs to be settled in the present petition is whether
herein respondent, a private person, may be indicted for conspiracy in
violating Section 3(g) of R.A. 3019 even if the public officer, with whom he
was alleged to have conspired, has died prior to the filing of the Information.
Respondent contends that by reason of the death of Secretary Enrile, there is
no public officer who was charged in the Information and, as such,
prosecution against respondent may not prosper.
The Court is not persuaded.
It is true that by reason of Secretary Enrile's death, there is no longer any
public officer with whom respondent can be charged for violation of R.A.
3019. It does not mean, however, that the allegation of conspiracy between
them can no longer be proved or that their alleged conspiracy is already
expunged. The only thing extinguished by the death of Secretary Enrile is his
criminal liability. His death did not extinguish the crime nor did it remove
the basis of the charge of conspiracy between him and private respondent.
Stated differently, the death of Secretary Enrile does not mean that there was
no public officer who allegedly violated Section 3 (g) of R.A. 3019. In fact,
the Office of the Deputy Ombudsman for Luzon found probable cause to
indict Secretary Enrile for infringement of Sections 3 (e) and (g) of R.A.
3019.14 Were it not for his death, he should have been charged.
The requirement before a private person may be indicted for violation of
Section 3(g) of R.A. 3019, among others, is that such private person must be
alleged to have acted in conspiracy with a public officer. The law, however,
does not require that such person must, in all instances, be indicted together
with the public officer. If circumstances exist where the public officer may
no longer be charged in court, as in the present case where the public officer
has already died, the private person may be indicted alone.
Indeed, it is not necessary to join all alleged co-conspirators in an indictment
for conspiracy.15 If two or more persons enter into a conspiracy, any act done
by any of them pursuant to the agreement is, in contemplation of law, the act
of each of them and they are jointly responsible therefor.16 This means that
everything said, written or done by any of the conspirators in execution or
furtherance of the common purpose is deemed to have been said, done, or
written by each of them and it makes no difference whether the actual actor
is alive or dead, sane or insane at the time of trial.17 The death of one of two
or more conspirators does not prevent the conviction of the survivor or
survivors.18 Thus, this Court held that:
x x x [a] conspiracy is in its nature a joint offense. One person cannot
conspire alone. The crime depends upon the joint act or intent of two or more
persons. Yet, it does not follow that one person cannot be convicted of
conspiracy. So long as the acquittal or death of a co-conspirator does not
remove the bases of a charge for conspiracy, one defendant may be found
guilty of the offense.19
The Court agrees with petitioner's contention that, as alleged in the
Information filed against respondent, which is deemed hypothetically
admitted in the latter's Motion to Quash, he (respondent) conspired with
Secretary Enrile in violating Section 3 (g) of R.A. 3019 and that in
conspiracy, the act of one is the act of all. Hence, the criminal liability
incurred by a co-conspirator is also incurred by the other co-conspirators.
Moreover, the Court agrees with petitioner that the avowed policy of the
State and the legislative intent to repress "acts of public officers and private
persons alike, which constitute graft or corrupt practices,"20 would be
frustrated if the death of a public officer would bar the prosecution of a
private person who conspired with such public officer in violating the Anti-
Graft Law.
In this regard, this Court's disquisition in the early case of People v.
Peralta21 as to the nature of and the principles governing conspiracy, as
construed under Philippine jurisdiction, is instructive, to wit:
x x x A conspiracy exists when two or more persons come to an agreement
concerning the commission of a felony and decide to commit it. Generally,
conspiracy is not a crime except when the law specifically provides a penalty
therefor as in treason, rebellion and sedition. The crime of conspiracy known
to the common law is not an indictable offense in the Philippines. An
agreement to commit a crime is a reprehensible act from the view-point of
morality, but as long as the conspirators do not perform overt acts in
furtherance of their malevolent design, the sovereignty of the State is not
outraged and the tranquility of the public remains undisturbed.
However, when in resolute execution of a common scheme, a felony is
committed by two or more malefactors, the existence of a conspiracy
assumes pivotal importance in the determination of the liability of the
perpetrators. In stressing the significance of conspiracy in criminal law, this
Court in U.S. vs. Infante and Barreto opined that
While it is true that the penalties cannot be imposed for the mere act of
conspiring to commit a crime unless the statute specifically prescribes a
penalty therefor, nevertheless the existence of a conspiracy to commit a
crime is in many cases a fact of vital importance, when considered together
with the other evidence of record, in establishing the existence, of the
consummated crime and its commission by the conspirators.
Once an express or implied conspiracy is proved, all of the conspirators are
liable as co-principals regardless of the extent and character of their
respective active participation in the commission of the crime or crimes
perpetrated in furtherance of the conspiracy because in contemplation of law
the act of one is the act of all. The foregoing rule is anchored on the sound
principle that "when two or more persons unite to accomplish a criminal
object, whether through the physical volition of one, or all, proceeding
severally or collectively, each individual whose evil will actively contributes
to the wrong-doing is in law responsible for the whole, the same as though
performed by himself alone." Although it is axiomatic that no one is liable
for acts other than his own, "when two or more persons agree or conspire to
commit a crime, each is responsible for all the acts of the others, done in
furtherance of the agreement or conspiracy." The imposition of collective
liability upon the conspirators is clearly explained in one case where this
Court held that x x x it is impossible to graduate the separate liability of each
(conspirator) without taking into consideration the close and inseparable
relation of each of them with the criminal act, for the commission of which
they all acted by common agreement x x x. The crime must therefore in view
of the solidarity of the act and intent which existed between the x x x
accused, be regarded as the act of the band or party created by them, and they
are all equally responsible x x x
Verily, the moment it is established that the malefactors conspired and
confederated in the commission of the felony proved, collective liability of
the accused conspirators attaches by reason of the conspiracy, and the court
shall not speculate nor even investigate as to the actual degree of
participation of each of the perpetrators present at the scene of the crime. Of
course, as to any conspirator who was remote from the situs of aggression, he
could be drawn within the enveloping ambit of the conspiracy if it be proved
that through his moral ascendancy over the rest of the conspirators the latter
were moved or impelled to carry out the conspiracy.
In fine, the convergence of the wills of the conspirators in the scheming and
execution of the crime amply justifies the imputation to all of them the act of
any one of them. It is in this light that conspiracy is generally viewed not as a
separate indictable offense, but a rule for collectivizing criminal liability.
xxxx
x x x A time-honored rule in the corpus of our jurisprudence is that once
conspiracy is proved, all of the conspirators who acted in furtherance of the
common design are liable as co-principals. This rule of collective criminal
liability emanates from the ensnaring nature of conspiracy. The concerted
action of the conspirators in consummating their common purpose is a patent
display of their evil partnership, and for the consequences of such criminal
enterprise they must be held solidarily liable.22
This is not to say, however, that private respondent should be found guilty of
conspiring with Secretary Enrile. It is settled that the absence or presence of
conspiracy is factual in nature and involves evidentiary matters.23 Hence, the
allegation of conspiracy against respondent is better left ventilated before the
trial court during trial, where respondent can adduce evidence to prove or
disprove its presence.
Respondent claims in his Manifestation and Motion24 as well as in his Urgent
Motion to Resolve25 that in a different case, he was likewise indicted before
the SB for conspiracy with the late Secretary Enrile in violating the same
Section 3 (g) of R.A. 3019 by allegedly entering into another agreement
(Side Agreement) which is separate from the Concession Agreement subject
of the present case. The case was docketed as Criminal Case No. 28091.
Here, the SB, through a Resolution, granted respondent's motion to quash the
Information on the ground that the SB has no jurisdiction over the person of
respondent. The prosecution questioned the said SB Resolution before this
Court via a petition for review on certiorari. The petition was docketed as
G.R. No. 168919. In a minute resolution dated August 31, 2005, this Court
denied the petition finding no reversible error on the part of the SB. This
Resolution became final and executory on January 11, 2006. Respondent
now argues that this Court's resolution in G.R. No. 168919 should be applied
in the instant case.
The Court does not agree. Respondent should be reminded that prior to this
Court's ruling in G.R. No. 168919, he already posted bail for his provisional
liberty. In fact, he even filed a Motion for Consolidation26 in Criminal Case
No. 28091. The Court agrees with petitioner's contention that private
respondent's act of posting bail and filing his Motion for Consolidation vests
the SB with jurisdiction over his person. The rule is well settled that the act
of an accused in posting bail or in filing motions seeking affirmative relief is
tantamount to submission of his person to the jurisdiction of the court.27
Thus, it has been held that:
When a defendant in a criminal case is brought before a competent court by
virtue of a warrant of arrest or otherwise, in order to avoid the submission of
his body to the jurisdiction of the court he must raise the question of the
court’s jurisdiction over his person at the very earliest opportunity. If he
gives bail, demurs to the complaint or files any dilatory plea or pleads to the
merits, he thereby gives the court jurisdiction over his person. (State ex rel.
John Brown vs. Fitzgerald, 51 Minn., 534)
xxxx
As ruled in La Naval Drug vs. CA [236 SCRA 78, 86]:
"[L]ack of jurisdiction over the person of the defendant may be waived either
expressly or impliedly. When a defendant voluntarily appears, he is deemed
to have submitted himself to the jurisdiction of the court. If he so wishes not
to waive this defense, he must do so seasonably by motion for the purpose of
objecting to the jurisdiction of the court; otherwise, he shall be deemed to
have submitted himself to that jurisdiction."
Moreover, "[w]here the appearance is by motion for the purpose of objecting
to the jurisdiction of the court over the person, it must be for the sole and
separate purpose of objecting to said jurisdiction. If the appearance is for any
other purpose, the defendant is deemed to have submitted himself to the
jurisdiction of the court. Such an appearance gives the court jurisdiction over
the person."
Verily, petitioner’s participation in the proceedings before the
Sandiganbayan was not confined to his opposition to the issuance of a
warrant of arrest but also covered other matters which called for respondent
court’s exercise of its jurisdiction. Petitioner may not be heard now to deny
said court’s jurisdiction over him. x x x.28
In the instant case, respondent did not make any special appearance to
question the jurisdiction of the SB over his person prior to his posting of bail
and filing his Motion for Consolidation. In fact, his Motion to Quash the
Information in Criminal Case No. 28090 only came after the SB issued an
Order requiring the prosecution to show cause why the case should not be
dismissed for lack of jurisdiction over his person.
As a recapitulation, it would not be amiss to point out that the instant case
involves a contract entered into by public officers representing the
government. More importantly, the SB is a special criminal court which has
exclusive original jurisdiction in all cases involving violations of R.A. 3019
committed by certain public officers, as enumerated in P.D. 1606 as amended
by R.A. 8249. This includes private individuals who are charged as co-
principals, accomplices or accessories with the said public officers. In the
instant case, respondent is being charged for violation of Section 3(g) of R.A.
3019, in conspiracy with then Secretary Enrile. Ideally, under the law, both
respondent and Secretary Enrile should have been charged before and tried
jointly by the Sandiganbayan. However, by reason of the death of the latter,
this can no longer be done. Nonetheless, for reasons already discussed, it
does not follow that the SB is already divested of its jurisdiction over the
person of and the case involving herein respondent. To rule otherwise would
mean that the power of a court to decide a case would no longer be based on
the law defining its jurisdiction but on other factors, such as the death of one
of the alleged offenders.

Lastly, the issues raised in the present petition involve matters which are
mere incidents in the main case and the main case has already been pending
for over nine (9) years. Thus, a referral of the case to the Regional Trial
Court would further delay the resolution of the main case and it would, by no
means, promote respondent's right to a speedy trial and a speedy disposition
of his case.

WHEREFORE, the petition is GRANTED. The Resolution of the

Sandiganbayan dated June 2, 2005, granting respondent's Motion to Quash,
is hereby REVERSED and SET ASIDE. The Sandiganbayan is forthwith
DIRECTED to proceed with deliberate dispatch in the disposition of
Criminal Case No. 28090.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 175723 February 4, 2014
THE CITY OF MANILA, represented by MAYOR JOSE L. ATIENZA,
JR., and MS. LIBERTY M. TOLEDO, in her capacity as the City
Treasurer of Manila, Petitioners,
vs.
HON. CARIDAD H. GRECIA-CUERDO, in her capacity as Presiding
Judge of the Regional Trial Court, Branch 112, Pasay City; SM MART,
INC.; SM PRIME HOLDINGS, INC.; STAR APPLIANCES CENTER;
SUPERVALUE, INC.; ACE HARDWARE PHILIPPINES, INC.;
WATSON PERSONAL CARE STORES, PHILS., INC.; JOLLIMART
PHILS., CORP.; SURPLUS MARKETING CORPORATION and
SIGNATURE LINES, Respondents.
DECISION
PERALTA, J.:
Before the Court is a special civil action for certiorari under Rule 65 of the
Rules of Court seeking to reverse and set aside the Resolutions1 dated April
6, 2006 and November 29, 2006 of the Court of Appeals (CA) in CA-G.R.
SP No. 87948.
The antecedents of the case, as summarized by the CA, are as follows:
The record shows that petitioner City of Manila, through its treasurer,
petitioner Liberty Toledo, assessed taxes for the taxable period from January
to December 2002 against private respondents SM Mart, Inc., SM Prime
Holdings, Inc., Star Appliances Center, Supervalue, Inc., Ace Hardware
Philippines, Inc., Watsons Personal Care Stores Phils., Inc., Jollimart
Philippines Corp., Surplus Marketing Corp. and Signature Lines. In addition
to the taxes purportedly due from private respondents pursuant to Section 14,
15, 16, 17 of the Revised Revenue Code of Manila (RRCM), said assessment
covered the local business taxes petitioners were authorized to collect under
Section 21 of the same Code. Because payment of the taxes assessed was a
precondition for the issuance of their business permits, private respondents
were constrained to pay the ₱19,316,458.77 assessment under protest.
On January 24, 2004, private respondents filed [with the Regional Trial
Court of Pasay City] the complaint denominated as one for "Refund or
Recovery of Illegally and/or Erroneously-Collected Local Business Tax,
Prohibition with Prayer to Issue TRO and Writ of Preliminary Injunction"
which was docketed as Civil Case No. 04-0019-CFM before public
respondent's sala [at Branch 112]. In the amended complaint they filed on
February 16, 2004, private respondents alleged that, in relation to Section 21
thereof, Sections 14, 15, 16, 17, 18, 19 and 20 of the RRCM were violative
of the limitations and guidelines under Section 143 (h) of Republic Act. No.
7160 [Local Government Code] on double taxation. They further averred that
petitioner city's Ordinance No. 8011 which amended pertinent portions of the
RRCM had already been declared to be illegal and unconstitutional by the
Department of Justice.2
In its Order3 dated July 9, 2004, the RTC granted private respondents'
application for a writ of preliminary injunction.
Petitioners filed a Motion for Reconsideration4 but the RTC denied it in its
Order5 dated October 15, 2004.
Petitioners then filed a special civil action for certiorari with the CA assailing
the July 9, 2004 and October 15, 2004 Orders of the RTC.6
In its Resolution promulgated on April 6, 2006, the CA dismissed petitioners'
petition for certiorari holding that it has no jurisdiction over the said petition.
The CA ruled that since appellate jurisdiction over private respondents'
complaint for tax refund, which was filed with the RTC, is vested in the
Court of Tax Appeals (CTA), pursuant to its expanded jurisdiction under
Republic Act No. 9282 (RA 9282), it follows that a petition for certiorari
seeking nullification of an interlocutory order issued in the said case should,
likewise, be filed with the CTA.
Petitioners filed a Motion for Reconsideration,7 but the CA denied it in its To plaintiff SM Mart, Inc. - P 11,462,525.02
Resolution dated November 29, 2006.

Hence, the present petition raising the following issues: To plaintiff SM Prime Holdings, Inc. - 3,118,104.63

I- Whether or not the Honorable Court of Appeals gravely erred in

To plaintiff Star Appliances Center - 2,152,316.54
dismissing the case for lack of jurisdiction.

II- Whether or not the Honorable Regional Trial Court gravely abuse[d] its To plaintiff Supervalue, Inc. - 1,362,750.34
discretion amounting to lack or excess of jurisdiction in enjoining by issuing
a Writ of Injunction the petitioners, their agents and/or authorized
To plaintiff Ace Hardware Phils., Inc. - 419,689.04
representatives from implementing Section 21 of the Revised Revenue Code
of Manila, as amended, against private respondents.
To plaintiff Watsons Personal Care Health - 231,453.62
III- Whether or not the Honorable Regional Trial Court gravely abuse[d] its
discretion amounting to lack or excess of jurisdiction in issuing the Writ of
Stores Phils., Inc.
Injunction despite failure of private respondents to make a written claim for
tax credit or refund with the City Treasurer of Manila.
To plaintiff Jollimart Phils., Corp. - 140,908.54
IV- Whether or not the Honorable Regional Trial Court gravely abuse[d] its
discretion amounting to lack or excess of jurisdiction considering that under To plaintiff Surplus Marketing Corp. - 220,204.70
Section 21 of the Manila Revenue Code, as amended, they are mere
collecting agents of the City Government.
To plaintiff Signature Mktg. Corp. - 94,906.34
V- Whether or not the Honorable Regional Trial Court gravely abuse[d] its
discretion amounting to lack or excess of jurisdiction in issuing the Writ of TOTAL: - P 19,316,458.77
Injunction because petitioner City of Manila and its constituents would result
to greater damage and prejudice thereof. (sic)8 Defendants are further enjoined from collecting taxes under Section 21,
Without first resolving the above issues, this Court finds that the instant Revenue Code of Manila from herein plaintiff.
petition should be denied for being moot and academic. SO ORDERED.10
Upon perusal of the original records of the instant case, this Court discovered The parties did not inform the Court but based on the records, the above
that a Decision9 in the main case had already been rendered by the RTC on Decision had already become final and executory per the Certificate of
August 13, 2007, the dispositive portion of which reads as follows: Finality11 issued by the same trial court on October 20, 2008. In fact, a Writ
WHEREFORE, in view of the foregoing, this Court hereby renders of Execution12 was issued by the RTC on November 25, 2009. In view of the
JUDGMENT in favor of the plaintiff and against the defendant to grant a tax foregoing, it clearly appears that the issues raised in the present petition,
refund or credit for taxes paid pursuant to Section 21 of the Revenue Code of which merely involve the incident on the preliminary injunction issued by the
the City of Manila as amended for the year 2002 in the following amounts: RTC, have already become moot and academic considering that the trial
court, in its decision on the merits in the main case, has already ruled in favor
of respondents and that the same decision is now final and executory. Well
entrenched is the rule that where the issues have become moot and academic,
there is no justiciable controversy, thereby rendering the resolution of the
same of no practical use or value.13
In any case, the Court finds it necessary to resolve the issue on jurisdiction
raised by petitioners owing to its significance and for future guidance of both
bench and bar. It is a settled principle that courts will decide a question
otherwise moot and academic if it is capable of repetition, yet evading
review.14
However, before proceeding, to resolve the question on jurisdiction, the
Court deems it proper to likewise address a procedural error which
petitioners committed.
Petitioners availed of the wrong remedy when they filed the instant special
civil action for certiorari under Rule 65 of the Rules of Court in assailing the
Resolutions of the CA which dismissed their petition filed with the said court
and their motion for reconsideration of such dismissal. There is no dispute
that the assailed Resolutions of the CA are in the nature of a final order as
they disposed of the petition completely. It is settled that in cases where an
assailed judgment or order is considered final, the remedy of the aggrieved
party is appeal. Hence, in the instant case, petitioner should have filed a
petition for review on certiorari under Rule 45, which is a continuation of the
appellate process over the original case.15
Petitioners should be reminded of the equally-settled rule that a special civil
action for certiorari under Rule 65 is an original or independent action based
on grave abuse of discretion amounting to lack or excess of jurisdiction and it
will lie only if there is no appeal or any other plain, speedy, and adequate
remedy in the ordinary course of law.16 As such, it cannot be a substitute for
a lost appeal.17
Nonetheless, in accordance with the liberal spirit pervading the Rules of
Court and in the interest of substantial justice, this Court has, before, treated
a petition for certiorari as a petition for review on certiorari, particularly (1)
if the petition for certiorari was filed within the reglementary period within
which to file a petition for review on certiorari; (2) when errors of judgment
are averred; and (3) when there is sufficient reason to justify the relaxation of
the rules.18 Considering that the present petition was filed within the 15-day
reglementary period for filing a petition for review on certiorari under Rule
45, that an error of judgment is averred, and because of the significance of
the issue on jurisdiction, the Court deems it proper and justified to relax the
rules and, thus, treat the instant petition for certiorari as a petition for review
on certiorari.
Having disposed of the procedural aspect, we now turn to the central issue in
this case. The basic question posed before this Court is whether or not the
CTA has jurisdiction over a special civil action for certiorari assailing an
interlocutory order issued by the RTC in a local tax case.
This Court rules in the affirmative.
On June 16, 1954, Congress enacted Republic Act No. 1125 (RA 1125)
creating the CTA and giving to the said court jurisdiction over the following:
(1) Decisions of the Collector of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising under
the National Internal Revenue Code or other law or part of law administered
by the Bureau of Internal Revenue;
(2) Decisions of the Commissioner of Customs in cases involving liability for
customs duties, fees or other money charges; seizure, detention or release of
property affected fines, forfeitures or other penalties imposed in relation
thereto; or other matters arising under the Customs Law or other law or part
of law administered by the Bureau of Customs; and
(3) Decisions of provincial or City Boards of Assessment Appeals in cases
involving the assessment and taxation of real property or other matters
arising under the Assessment Law, including rules and regulations relative
thereto.
On March 30, 2004, the Legislature passed into law Republic Act No. 9282
(RA 9282) amending RA 1125 by expanding the jurisdiction of the CTA,
enlarging its membership and elevating its rank to the level of a collegiate
court with special jurisdiction. Pertinent portions of the amendatory act
provides thus:
Sec. 7. Jurisdiction. - The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue or other laws administered by the Bureau of
Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties in relations thereto, or other matters arising under the
National Internal Revenue Code or other laws administered by the Bureau of
Internal Revenue, where the National Internal Revenue Code provides a
specific period of action, in which case the inaction shall be deemed a denial;
3. Decisions, orders or resolutions of the Regional Trial Courts in local tax
cases originally decided or resolved by them in the exercise of their original
or appellate jurisdiction;
4. Decisions of the Commissioner of Customs in cases involving liability for
customs duties, fees or other money charges, seizure, detention or release of
property affected, fines, forfeitures or other penalties in relation thereto, or
other matters arising under the Customs Law or other laws administered by
the Bureau of Customs;
5. Decisions of the Central Board of Assessment Appeals in the exercise of
its appellate jurisdiction over cases involving the assessment and taxation of
real property originally decided by the provincial or city board of assessment
appeals;
6. Decisions of the Secretary of Finance on customs cases elevated to him
automatically for review from decisions of the Commissioner of Customs
which are adverse to the Government under Section 2315 of the Tariff and
Customs Code;
7. Decisions of the Secretary of Trade and Industry, in the case of
nonagricultural product, commodity or article, and the Secretary of
Agriculture in the case of agricultural product, commodity or article,
involving dumping and countervailing duties under Section 301 and 302,
respectively, of the Tariff and Customs Code, and safeguard measures under
Republic Act No. 8800, where either party may appeal the decision to
impose or not to impose said duties.
b. Jurisdiction over cases involving criminal offenses as herein provided:
1. Exclusive original jurisdiction over all criminal offenses arising from
violations of the National Internal Revenue Code or Tariff and Customs
Code and other laws administered by the Bureau of Internal Revenue or the
Bureau of Customs: Provided, however, That offenses or felonies mentioned
in this paragraph where the principal amount of taxes and fees, exclusive of
charges and penalties, claimed is less than One million pesos
(₱1,000,000.00) or where there is no specified amount claimed shall be tried
by the regular Courts and the jurisdiction of the CTA shall be appellate. Any
provision of law or the Rules of Court to the contrary notwithstanding, the
criminal action and the corresponding civil action for the recovery of civil
liability for taxes and penalties shall at all times be simultaneously instituted
with, and jointly determined in the same proceeding by the CTA, the filing of
the criminal action being deemed to necessarily carry with it the filing of the
civil action, and no right to reserve the filing of such civil action separately
from the criminal action will be recognized.
2. Exclusive appellate jurisdiction in criminal offenses:
a. Over appeals from the judgments, resolutions or orders of the Regional
Trial Courts in tax cases originally decided by them, in their respected
territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of the
Regional Trial Courts in the exercise of their appellate jurisdiction over tax
cases originally decided by the Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts in their respective jurisdiction.
c. Jurisdiction over tax collection cases as herein provided:
1. Exclusive original jurisdiction in tax collection cases involving final and
executory assessments for taxes, fees, charges and penalties: Provides,
however, that collection cases where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is less than One million pesos
(₱1,000,000.00) shall be tried by the proper Municipal Trial Court,
Metropolitan Trial Court and Regional Trial Court.
2. Exclusive appellate jurisdiction in tax collection cases:
a. Over appeals from the judgments, resolutions or orders of the Regional
Trial Courts in tax collection cases originally decided by them, in their
respective territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of the
Regional Trial Courts in the Exercise of their appellate jurisdiction over tax
collection cases originally decided by the Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective
jurisdiction.19
A perusal of the above provisions would show that, while it is clearly stated
that the CTA has exclusive appellate jurisdiction over decisions, orders or
resolutions of the RTCs in local tax cases originally decided or resolved by
them in the exercise of their original or appellate jurisdiction, there is no
categorical statement under RA 1125 as well as the amendatory RA 9282,
which provides that th e CTA has jurisdiction over petitions for certiorari
assailing interlocutory orders issued by the RTC in local tax cases filed
before it.
The prevailing doctrine is that the authority to issue writs of certiorari
involves the exercise of original jurisdiction which must be expressly
conferred by the Constitution or by law and cannot be implied from the mere
existence of appellate jurisdiction.20 Thus, in the cases of Pimentel v.
COMELEC,21 Garcia v. De Jesus,22 Veloria v. COMELEC,23Department of
Agrarian Reform Adjudication Board v. Lubrica,24 and Garcia v.
Sandiganbayan,25 this Court has ruled against the jurisdiction of courts or
tribunals over petitions for certiorari on the ground that there is no law which
expressly gives these tribunals such power.26 It must be observed, however,
that with the exception of Garcia v. Sandiganbayan,27 these rulings pertain
not to regular courts but to tribunals exercising quasi-judicial powers. With
respect to the Sandiganbayan, Republic Act No. 824928 now provides that the
special criminal court has exclusive original jurisdiction over petitions for the
issuance of the writs of mandamus, prohibition, certiorari, habeas corpus,
injunctions, and other ancillary writs and processes in aid of its appellate
jurisdiction.
In the same manner, Section 5 (1), Article VIII of the 1987 Constitution
grants power to the Supreme Court, in the exercise of its original jurisdiction,
to issue writs of certiorari, prohibition and mandamus. With respect to the
Court of Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives
the appellate court, also in the exercise of its original jurisdiction, the power
to issue, among others, a writ of certiorari,whether or not in aid of its
appellate jurisdiction. As to Regional Trial Courts, the power to issue a writ
of certiorari, in the exercise of their original jurisdiction, is provided under
Section 21 of BP 129.
The foregoing notwithstanding, while there is no express grant of such
power, with respect to the CTA, Section 1, Article VIII of the 1987
Constitution provides, nonetheless, that judicial power shall be vested in one
Supreme Court and in such lower courts as may be established by law and
that judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable,
and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
On the strength of the above constitutional provisions, it can be fairly
interpreted that the power of the CTA includes that of determining whether
or not there has been grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of the RTC in issuing an interlocutory order in
cases falling within the exclusive appellate jurisdiction of the tax court. It,
thus, follows that the CTA, by constitutional mandate, is vested with
jurisdiction to issue writs of certiorari in these cases.
Indeed, in order for any appellate court to effectively exercise its appellate
jurisdiction, it must have the authority to issue, among others, a writ of
certiorari. In transferring exclusive jurisdiction over appealed tax cases to the
CTA, it can reasonably be assumed that the law intended to transfer also such
power as is deemed necessary, if not indispensable, in aid of such appellate
jurisdiction. There is no perceivable reason why the transfer should only be
considered as partial, not total.
Consistent with the above pronouncement, this Court has held as early as the
case of J.M. Tuason & Co., Inc. v. Jaramillo, et al.29 that "if a case may be
appealed to a particular court or judicial tribunal or body, then said court or
judicial tribunal or body has jurisdiction to issue the extraordinary writ of
certiorari, in aid of its appellate jurisdiction."30 This principle was affirmed in
De Jesus v. Court of Appeals,31 where the Court stated that "a court may
issue a writ of certiorari in aid of its appellate jurisdiction if said court has
jurisdiction to review, by appeal or writ of error, the final orders or decisions
of the lower court."32 The rulings in J.M. Tuason and De Jesus were
reiterated in the more recent cases of Galang, Jr. v. Geronimo33 and Bulilis v.
Nuez.34
Furthermore, Section 6, Rule 135 of the present Rules of Court provides that
when by law, jurisdiction is conferred on a court or judicial officer, all
auxiliary writs, processes and other means necessary to carry it into effect
may be employed by such court or officer.
If this Court were to sustain petitioners' contention that jurisdiction over their
certiorari petition lies with the CA, this Court would be confirming the
exercise by two judicial bodies, the CA and the CTA, of jurisdiction over
basically the same subject matter – precisely the split-jurisdiction situation
which is anathema to the orderly administration of justice.35 The Court
cannot accept that such was the legislative motive, especially considering
that the law expressly confers on the CTA, the tribunal with the specialized
competence over tax and tariff matters, the role of judicial review over local
tax cases without mention of any other court that may exercise such power.
Thus, the Court agrees with the ruling of the CA that since appellate
jurisdiction over private respondents' complaint for tax refund is vested in the
CTA, it follows that a petition for certiorari seeking nullification of an
interlocutory order issued in the said case should, likewise, be filed with the
same court. To rule otherwise would lead to an absurd situation where one
court decides an appeal in the main case while another court rules on an
incident in the very same case.
Stated differently, it would be somewhat incongruent with the pronounced
judicial abhorrence to split jurisdiction to conclude that the intention of the
law is to divide the authority over a local tax case filed with the RTC by
giving to the CA or this Court jurisdiction to issue a writ of certiorari against
interlocutory orders of the RTC but giving to the CTA the jurisdiction over
the appeal from the decision of the trial court in the same case. It is more in
consonance with logic and legal soundness to conclude that the grant of
appellate jurisdiction to the CTA over tax cases filed in and decided by the
RTC carries with it the power to issue a writ of certiorari when necessary in
aid of such appellate jurisdiction. The supervisory power or jurisdiction of
the CTA to issue a writ of certiorari in aid of its appellate jurisdiction should
co-exist with, and be a complement to, its appellate jurisdiction to review, by
appeal, the final orders and decisions of the RTC, in order to have complete
supervision over the acts of the latter.36
A grant of appellate jurisdiction implies that there is included in it the power
necessary to exercise it effectively, to make all orders that will preserve the
subject of the action, and to give effect to the final determination of the
appeal. It carries with it the power to protect that jurisdiction and to make the
decisions of the court thereunder effective. The court, in aid of its appellate
jurisdiction, has authority to control all auxiliary and incidental matters
necessary to the efficient and proper exercise of that jurisdiction.1âwphi1 For
this purpose, it may, when necessary, prohibit or restrain the performance of
any act which might interfere with the proper exercise of its rightful
jurisdiction in cases pending before it.37
Lastly, it would not be amiss to point out that a court which is endowed with
a particular jurisdiction should have powers which are necessary to enable it
to act effectively within such jurisdiction. These should be regarded as
powers which are inherent in its jurisdiction and the court must possess them
in order to enforce its rules of practice and to suppress any abuses of its
process and to defeat any attempted thwarting of such process.
In this regard, Section 1 of RA 9282 states that the CTA shall be of the same
level as the CA and shall possess all the inherent powers of a court of justice.
Indeed, courts possess certain inherent powers which may be said to be
implied from a general grant of jurisdiction, in addition to those expressly
conferred on them. These inherent powers are such powers as are necessary
for the ordinary and efficient exercise of jurisdiction; or are essential to the
existence, dignity and functions of the courts, as well as to the due
administration of justice; or are directly appropriate, convenient and suitable
to the execution of their granted powers; and include the power to maintain
the court's jurisdiction and render it effective in behalf of the litigants.38

Thus, this Court has held that "while a court may be expressly granted the
incidental powers necessary to effectuate its jurisdiction, a grant of
jurisdiction, in the absence of prohibitive legislation, implies the necessary
and usual incidental powers essential to effectuate it, and, subject to existing
laws and constitutional provisions, every regularly constituted court has
power to do all things that are reasonably necessary for the administration of
justice within the scope of its jurisdiction and for the enforcement of its
judgments and mandates."39 Hence, demands, matters or questions ancillary
or incidental to, or growing out of, the main action, and coming within the
above principles, may be taken cognizance of by the court and determined,
since such jurisdiction is in aid of its authority over the principal matter, even
though the court may thus be called on to consider and decide matters which,
as original causes of action, would not be within its cognizance.40

Based on the foregoing disquisitions, it can be reasonably concluded that the

authority of the CTA to take cognizance of petitions for certiorari
questioning interlocutory orders issued by the RTC in a local tax case is
included in the powers granted by the Constitution as well as inherent in the
exercise of its appellate jurisdiction.

Finally, it would bear to point out that this Court is not abandoning the rule
that, insofar as quasi-judicial tribunals are concerned, the authority to issue
writs of certiorari must still be expressly conferred by the Constitution or by
law and cannot be implied from the mere existence of their appellate
jurisdiction. This doctrine remains as it applies only to quasi-judicial bodies.

WHEREFORE, the petition is DENIED.

SO ORDERED.
FIRST DIVISION
G.R. No. 176508, January 12, 2015
SAINT MARY CRUSADE TO ALLEVIATE POVERTY OF
BRETHREN FOUNDATION, INC., Petitioner, v.HON. TEODORO T.
RIEL, ACTING PRESIDING JUDGE, REGIONAL TRIAL COURT,
NATIONAL CAPITAL JUDICIAL REGION, BRANCH 85, QUEZON
CITY, Respondent.
UNIVERSITY OF THE PHILIPPINES, Intervenor.
DECISION
BERSAMIN, J.:
A petition for the judicial reconstitution of a Torrens title must strictly
comply with the requirements prescribed in Republic Act No. 26;1 otherwise,
the petition should be dismissed.
This case is a direct resort to the Court by petition
for certiorari and mandamus. The petitioner applied for the judicial
reconstitution of Original Certificate of Title (OCT) No. 1609 of the Register
of Deeds of Quezon City, and for the issuance of a new OCT in place
thereof, docketed as L.R.C. Case No. Q-18987 (04), but respondent Acting
Presiding Judge of Branch 85 of the Regional Trial Court (RTC) in Quezon
City dismissed the petition for reconstitution through the assailed order dated
September 12, 2006. The petitioner alleges that the respondent Judge thereby
committed grave abuse of discretion and unlawful neglect of performance of
an act specifically enjoined upon him. Equally assailed is the ensuing denial
of its motion for reconsideration through the order dated February 5, 2007.
The antecedents follow.
On October 28, 2004, the petitioner claimed in its petition for reconstitution
that the original copy of OCT No. 1609 had been burnt and lost in the fire
that gutted the Quezon City Register of Deeds in the late 80’s. Initially,
respondent Judge gave due course to the petition, but after the preliminary
hearing, he dismissed the petition for reconstitution through the first assailed
order of September 12, 2006,2 to wit:chanroblesvirtuallawlibrary
With the receipt of Report dated July 14, 2006 from Land Registration
Authority (LRA) recommending that the petition be dismissed, and
considering the Opposition filed by the Republic of the Philippines and
University of the Philippines, the above-entitled petition is hereby ordered
DISMISSED.
On October 11, 2006, the petitioner moved for reconsideration of the
dismissal,3 attaching the following documents to support its petition for
reconstitution, namely: (1) the copy of the original application for
registration dated January 27, 1955; (2) the notice of initial hearing dated
June 23, 1955; (3) the letter of transmittal to the Court of First Instance in
Quezon City; (4) the copy of the Spanish Testimonial Title No. 3261054
dated March 25, 1977 in the name of Eladio Tiburcio; (5) the copy of Tax
Assessment No. 14238; and (6) the approved Plan SWD-37457.
On February 5, 2007, the RTC denied the motion for reconsideration for lack
of any cogent or justifiable ground to
reconsider.4chanRoblesvirtualLawlibrary
Hence, on February 22, 2007, the petitioner came directly to the Court
alleging that respondent Judge had “unfairly abused his discretion and
unlawfully neglected the performance of an act which is specifically enjoined
upon him as a duly [sic] under Rule 7, Section 8, of the Revised Rules of
Court;”5that “in finally dismissing the herein subject Petition for
Reconsideration, respondent Honorable Acting Presiding Judge has acted
without and in excess of his authority and with grave abuse of discretion to
the further damage and prejudice of the herein petitioner;”6 and that it had no
other remedy in the course of law except through the present petition
for certiorari and mandamus.cralawred
Issues
The Court directed respondent Judge and the Office of the Solicitor General
(OSG) to comment on the petition for certiorari and mandamus. Respondent
Judge submitted his comment on May 23, 2007,7 and the OSG its comment
on July 19, 2007.8 On November 13, 2007, the University of the Philippines
(UP) sought leave to intervene, attaching to its motion the intended
comment/opposition-in-intervention.9 The motion for the UP’s intervention
was granted on November 28, 2007.10 In turn, the petitioner presented its
consolidated reply on February 8, 2008.11 The parties, except respondent
Judge, then filed their memoranda in compliance with the Court’s directive.
Respondent Judge justified the dismissal of the petition for reconstitution by
citing the opposition by the OSG and the UP, as well as the recommendation
of the Land Registration Authority (LRA). He pointed out that the petitioner
did not present its purported Torrens title to be reconstituted; that the
petitioner’s claim was doubtful given the magnitude of 4,304,623 square
meters as the land area involved;12 and that the UP’s ownership of the portion
of land covered by petitioner’s claim had long been settled by the Court in a
long line of cases.13chanRoblesvirtualLawlibrary
The OSG and the UP argued that by directly coming to the Court by petition
for certiorari and mandamus, the petitioner had availed itself of the wrong
remedies to substitute for its lost appeal; that the correct recourse for the
petitioner was an appeal considering that the two assailed orders already
finally disposed of the case; that the petitioner intended its petition
for certiorari and mandamus to reverse the final orders;14 that the petitioner
further failed to observe the doctrine of hierarchy of courts, despite the Court
of Appeals (CA) having concurrent jurisdiction with the Court over special
civil actions under Rule 65;15that the RTC would have gravely erred had it
proceeded on the petition for reconstitution despite the petitioner not having
notified the adjoining owners of the land or other parties with interest over
the land;16 that the petitioner had no factual and legal bases for reconstitution
due to its failure to prove the existence and validity of the certificate of title
sought to be reconstituted, in addition to the ownership of the land covered
by the petition for reconstitution being already settled in a long line of cases;
that the petitioner’s claim over the land was derived from the Deed of
Assignment executed by one Marcelino Tiburcio – the same person whose
claim had long been settled and disposed of in Tiburcio v. People’s Homesite
and Housing Corporation and University of the Philippines (106 Phil. 477),
which vested title in the UP, and in Cañero v. University of the
Philippines (437 SCRA 630); and that the Deed of Transfer and Conveyance
dated November 26, 1925 executed by Tiburcio in favor of St. Mary Village
Association, Inc. was not a basis for the judicial reconstitution of title
accepted under Section 2 of Republic Act No. 26.
In its memorandum, the petitioner indicates that the RTC gravely abused its
discretion amounting to lack or excess of its jurisdiction in dismissing its
petition for reconstitution on the basis of the recommendation of the LRA
and the opposition of the Republic and the UP despite having initially given
due course to the petition for reconstitution. It urges that the dismissal should
be overturned because it was not given a chance to comment on the
recommendation of the LRA, or to controvert the oppositions filed.17 It
contends that the LRA report did not substantiate the allegation of dismissal
of the application for registration of Marcelino Tiburcio on October 17, 1955,
in addition to the veracity of the report being questionable by virtue of its not
having been under oath.18chanRoblesvirtualLawlibrary
Ruling
The petition for certiorari and mandamus, being devoid of procedural and
substantive merit, is dismissed.
Firstly, certiorari, being an extraordinary remedy, is granted only under the
conditions defined by the Rules of Court. The conditions are that: (1) the
respondent tribunal, board or officer exercising judicial or quasi-judicial
functions has acted without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction; and (2)
there is no appeal, or any plain, speedy, and adequate remedy in the ordinary
course of law.19Without jurisdiction means that the court acted with absolute
lack of authority; there is excess of jurisdiction when the court transcends its
power or acts without any statutory authority; grave abuse of discretion
implies such capricious and whimsical exercise of judgment as to be
equivalent to lack or excess of jurisdiction; in other words, power is
exercised in an arbitrary or despotic manner by reason of passion, prejudice,
or personal hostility; and such exercise is so patent or so gross as to amount
to an evasion of a positive duty or to a virtual refusal either to perform the
duty enjoined or to act at all in contemplation of
law.20chanRoblesvirtualLawlibrary
The petition for certiorari and mandamus did not show how respondent
Judge could have been guilty of lacking or exceeding his jurisdiction, or
could have gravely abused his discretion amounting to lack or excess of
jurisdiction. Under Section 1221 of Republic Act No. 26, the law on the
judicial reconstitution of a Torrens title, the Regional Trial Court (as the
successor of the Court of First Instance) had the original and exclusive
jurisdiction to act on the petition for judicial reconstitution of title. Hence,
the RTC neither lacked nor exceeded its authority in acting on and
dismissing the petition. Nor did respondent Judge gravely abuse his
discretion amounting to lack or excess of jurisdiction considering that the
petition for reconstitution involved land already registered in the name of the
UP, as confirmed by the LRA. Instead, it would have been contrary to law
had respondent Judge dealt with and granted the petition for judicial
reconstitution of title of the petitioner.
Secondly, the petitioner did not present the duplicate or certified copy of
OCT No. 1609. Thereby, it disobeyed Section 2 and Section 3 of Republic
Act No. 26, the provisions that expressly listed the acceptable bases for
judicial reconstitution of an existing Torrens title, to
wit:chanroblesvirtuallawlibrary
Sec. 2. Original certificates of title shall be reconstituted from such of the
sources hereunder enumerated as may be available, in the following order:
(a) The owner's duplicate of the certificate of title;
(b) The co-owner's, mortgagee's, or lessee's duplicate of the certificate of
title;
(c) A certified copy of the certificate of title, previously issued by the register
of deeds or by a legal custodian thereof;
(d) An authenticated copy of the decree of registration or patent, as the case
may be, pursuant to which the original certificate of title was issued;
(e) A document, on file in the registry of deeds, by which the property, the
description of which is given in said document, is mortgaged, leased or
encumbered, or an authenticated copy of said document showing that its
original had been registered; and
(f) Any other document which, in the judgment of the court, is sufficient and
proper basis for reconstituting the lost or destroyed certificate of title.
Sec. 3. Transfer certificates of title shall be reconstituted from such of the
sources hereunder enumerated as may be available, in the following order:
(a) The owner's duplicate of the certificate of title;
(b) The co-owner's, mortgagee's, or lessee's duplicate of the certificate of
title;
(c) A certified copy of the certificate of title, previously issued by the register
of deeds or by a legal custodian thereof;
(d) The deed of transfer or other document, on file in the registry of deeds,
containing the description of the property, or an authenticated copy thereof,
showing that its original had been registered, and pursuant to which the lost
or destroyed transfer certificate of title was issued;
(e) A document, on file in the registry of deeds, by which the property, the
description of which is given in said document, is mortgaged, leased or
encumbered, or an authenticated copy of said document showing that its
original had been registered; and
(f) Any other document which, in the judgment of the court, is sufficient and
proper basis for reconstituting the lost or destroyed certificate of title.
Thirdly, with the questioned orders of the RTC having finally disposed of the
application for judicial reconstitution, nothing more was left for the RTC to
do in the case. As of then, therefore, the correct recourse for the petitioner open the dissolute avenues of graft to unscrupulous land-grabbers who prey
was to appeal to the Court of Appeals by notice of appeal within 15 days like vultures upon the campus of respondent UP. By such actions, they
from notice of the denial of its motion for reconsideration. By allowing the wittingly or unwittingly aid the hucksters who want to earn a quick buck by
period of appeal to elapse without taking action, it squandered its right to misleading the gullible to buy the Philippine counterpart of the proverbial
appeal. Its present resort to certiorari is impermissible, for an extraordinary London Bridge. It is well past time for courts and lawyers to cease wasting
remedy like certiorari cannot be a substitute for a lost appeal. That the their time and resources on these worthless causes and take judicial notice of
extraordinary remedy of certiorari is not an alternative to an available the fact that respondent UP’s title had already been validated countless times
remedy in the ordinary course of law is clear from Section 1 of Rule 65, by this Court. Any ruling deviating from such doctrine is to be viewed as a
which requires that there must be no appeal, or any plain, speedy, and deliberate intent to sabotage the rule of law and will no longer be
adequate remedy in the ordinary course of law. Indeed, no error of judgment countenanced.25
by a court will be corrected by certiorari, which corrects only jurisdictional
errors.22chanRoblesvirtualLawlibrary
WHEREFORE, the Court DISMISSES the petition
Fourthly, the filing of the instant special civil action directly in this Court is for certiorari and mandamus for lack of merit; and ORDERS the petitioner
in disregard of the doctrine of hierarchy of courts. Although the Court has to pay the costs of suit.
concurrent jurisdiction with the Court of Appeals in issuing the writ
of certiorari, direct resort is allowed only when there are special, extra- SO ORDERED.cralawlawlibrary
ordinary or compelling reasons that justify the same. The Court enforces the
observance of the hierarchy of courts in order to free itself from unnecessary,
frivolous and impertinent cases and thus afford time for it to deal with the
more fundamental and more essential tasks that the Constitution has assigned
to it.23 There being no special, important or compelling reason, the petitioner
thereby violated the observance of the hierarchy of courts, warranting the
dismissal of the petition for certiorari.

Finally, the land covered by the petition for judicial reconstitution related to
the same area that formed the UP campus. The UP’s registered ownership of
the land comprising its campus has long been settled under the law.
Accordingly, the dismissal of the petition for judicial reconstitution by
respondent Judge only safeguarded the UP’s registered ownership. In so
doing, respondent Judge actually heeded the clear warnings to the lower
courts and the Law Profession in general against mounting or abetting any
attack against such ownership. One such warning was that in Cañero v.
University of the Philippines,24 as follows:chanroblesvirtuallawlibrary

We strongly admonish courts and unscrupulous lawyers to stop entertaining

spurious cases seeking further to assail respondent UP’s title. These cases
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 191894 July 15, 2015
DANILO A. DUNCANO, Petitioner,
vs.
HON. SANDIGANBAYAN (2nd DIVISION), and HON. OFFICE OF
THE SPECIAL PROSECUTOR, Respondents.
DECISION
PERALTA, J.:
This petition for certiorari under Rule 65 of the Rules of Court (Rules) with
prayer for issuance of preliminary injunction and/or temporary restraining
order seeks to reverse and set aside the August 18, 2009 Resolution1 and
February 8, 2010 Order2 of respondent Sandiganbayan Second Division in
Criminal Case No. SB-09-CRM-0080, which denied petitioner's Motion to
Dismiss on the ground of la9k of jurisdiction.
The facts are plain and undisputed.
Petitioner Danilo A. Duncano is, at the time material to the case, the
Regional Director of the Bureau of Internal Revenue (BIR) with Salary
Grade 26 as classified under Republic Act (R.A.) No. 6758.3 On March 24,
2009,4 the Office of the Special Prosecutor (OSP), Office of the Ombudsman,
filed a criminal case against him for violation of Section 8, in relation to
Section 11 of R.A. No. 6713,5 allegedly committed as follows:
That on or about April 15, 2003, or sometime prior or subsequent thereto, in
Quezon City, Philippines, and within the jurisdiction of this Honorable
Court, accused DANILODUNCANO y ACIDO, a high ranking public
officer, being the Regional Director of Revenue Region No. 7, of the Bureau
of Internal Revenue, Quezon City, and as such is under an obligation to
accomplish and submit declarations under oath of his assets, liabilities and
net worth and financial and business interests, did then and there, wilfully,
unlawfully and criminally fail to disclose in his Sworn Statement of Assets
and Liabilities and Networth (SALN) for the year 2002, his financial and
business interests/connection in Documail Provides Corporation and Don
Plus Trading of which he and his family are the registered owners thereof,
and the 1993 Nissan Patrol motor vehicle registered in the name of his son
VINCENT LOUIS P. DUNCANO which are part of his assets, to the damage
and prejudice of public interest.
CONTRARY TO LAW.6
Prior to his arraignment, petitioner filed a Motion to Dismiss With Prayer to
Defer the Issuance of Warrant of Arrest7before respondent Sandiganbayan
Second Division. As the OSP alleged, he admitted that he is a Regional
Director with Salary Grade 26. Citing Inding v. Sandiganbayan8 and Serana
v. Sandiganbayan, et al.,9 he asserted that under Presidential Decree (P.D.)
No. 1606, as amended by Section 4 (A) (1) of R.A No. 8249,10 the
Sandiganbayan has no jurisdiction to try and hear the case because he is an
official of the executive branch occupying the position of a Regional Director
but with a compensation that is classified as below Salary Grade 27.
In its Opposition,11 the OSP argued that a reading of Section 4 (A) (1) (a) to
(g) of the subject law would clearly show that the qualification as to Salary
Grade 27 and higher applies only to officials of the executive branch other
than the Regional Director and those specifically enumerated. This is so
since the term "Regional Director" and "higher" are separated by the
conjunction "and," which signifies that these two positions are different,
apart and distinct, words but are conjoined together "relating one to the
other" to give effect to the purpose of the law. The fact that the position of
Regional Director was specifically mentioned without indication as to its
salary grade signifies the lawmakers’ intention that officials occupying such
position, regardless of salary grade, fall within the original and exclusive
jurisdiction of the Sandiganbayan. This issue, it is claimed, was already
resolved in Inding. Finally, the OSP contended that the filing of the motion to
dismiss is premature considering that the Sandiganbayan has yet to acquire
jurisdiction over the person of the accused.
Still not to be outdone, petitioner invoked the applicability of Cuyco v.
Sandiganbayan12 and Organo v. Sandiganbayan13 in his rejoinder.
On August 18, 2009, the Sandiganbayan Second Division promulgated its
Resolution, disposing: WHEREFORE, in the light of the foregoing, the Court
hereby DENIES the instant Motion to Dismiss for being devoid of merit. Let
a Warrant of Arrest be therefore issued against the accused.
SO ORDERED.14
The respondent court ruled that the position of Regional Director is one of
those exceptions where the Sandiganbayan has jurisdiction even if such
position is not Salary Grade 27. It was opined that Section 4 (A) (1) of R.A
No. 8249 unequivocally provides that respondent court has jurisdiction over
officials of the executive branch of the government occupying the position of
regional director and higher, otherwise classified as Salary Grade 27 and
higher, of R.A. No. 6758, including those officials who are expressly
enumerated in subparagraphs (a) to (g). In support of the ruling, this Court’s
pronouncements in Indingand Binay v. Sandiganbayan15 were cited.
Petitioner filed a Motion for Reconsideration, but it was denied;16 Hence, this
petition.
Instead of issuing a temporary restraining order or writ of preliminary
injunction, the Court required respondents to file a comment on the petition
without necessarily giving due course thereto.17 Upon compliance of the
OSP, a Rejoinder (supposedly a Reply) was filed by petitioner.
At the heart of the controversy is the determination of whether, according to
P.D. No. 1606, as amended by Section 4 (A) (1) of R.A No. 8249, only
Regional Directors with Salary Grade of 27 and higher, as classified under
R.A. No. 6758, fall within the exclusive jurisdiction of the Sandiganbayan.
Arguing that he is not included among the public officials specifically
enumerated in Section 4 (A) (1) (a) to (g) of the law and heavily relying as
well on Cuyco, petitioner insists that respondent court lacks jurisdiction over
him, who is merely a Regional Director with Salary Grade 26. On the
contrary, the OSP maintains that a Regional Director, irrespective of salary
grade, falls within the exclusive original jurisdiction of the Sandiganbayan.
We find merit in the petition.
The creation of the Sandiganbayan was mandated by Section 5, Article XIII
of the 1973 Constitution.18 By virtue of the powers vested in him by the
Constitution and pursuant to Proclamation No. 1081, dated September 21,
1972, former President Ferdinand E. Marcos issued P.D. No. 1486.19 The
decree was later amended by P.D. No. 1606,20Section 20 of Batas Pambansa
Blg. 129,21 P.D. No. 1860,22 and P.D. No. 1861.23
With the advent of the 1987 Constitution, the special court was retained as
provided for in Section 4, Article XI thereof.24 Aside from Executive Order
Nos. 1425 and 14-a,26 and R.A. 7080,27 which expanded the jurisdiction of the
Sandiganbayan, P.D. No. 1606 was further modified by R.A. No.
7975,28 R.A. No. 8249,29 and just this year, R.A. No. 10660.30
For the purpose of this case, the relevant provision is Section 4 of R.A. No.
8249, which states: SEC. 4. Section 4 of the same decree is hereby further
amended to read as follows:
"SEC. 4. Jurisdiction.– The Sandiganbayan shall exercise exclusive original
jurisdiction in all cases involving:
"A. Violations of Republic Act No. 3019, as amended, otherwise known as
the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and
Chapter II, Section 2, Title VII, Book II of the Revised Penal Code, where
one or more of the accused are officials occupying the following positions in
the government, whether in a permanent, acting or interim capacity, at the
time of the commission of the offense:
"(1) Officials of the executive branch occupying the positions of regional
director and higher, otherwise classified as Grade ‘27’ and higher, of the
Compensation and Position Classification Act of 1989 (Republic Act No.
6758), specifically including:
"(a) Provincial governors, vice-governors, members of the sangguniang
panlalawigan, and provincial treasurers, assessors, engineers, and other
provincial department heads;
"(b) City mayor, vice-mayors, members of the sangguniang panlungsod, city
treasurers, assessors, engineers, and other city department heads;
"(c) Officials of the diplomatic service occupying the position of consul and
higher;
"(d) Philippine army and air force colonels, naval captains, and all officers of
higher rank;
"(e) Officers of the Philippine National Police while occupying the position
of provincial director and those holding the rank of senior superintendent or
higher;
"(f) City and provincial prosecutors and their assistants, and officials and
prosecutors in the Office of the Ombudsman and special prosecutor;
"(g) Presidents, directors or trustees, or managers of government-owned or
controlled corporations, state universities or educational institutions or
foundations.
"(2) Members of Congress and officials thereof classified as Grade ‘27’ and
up under the Compensation and Position Classification Act of 1989;
"(3) Members of the judiciary without prejudice to the provisions of the
Constitution;
"(4) Chairmen and members of Constitutional Commission, without
prejudice to the provisions of the Constitution; and
"(5) All other national and local officials classified as Grade ‘27’ and higher
under the Compensation and Position Classification Act of 1989.
"B. Other offenses or felonies whether simple or complexed with other
crimes committed by the public officials and employees mentioned in
subsection a of this section in relation to their office.
"C. Civil and criminal cases filed pursuant to and in connection with
Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986.
x x x"
Based on the afore-quoted, those that fall within the original jurisdiction of
the Sandiganbayan are: (1) officials of the executive branch with Salary
Grade 27 or higher, and (2) officials specifically enumerated in Section 4 (A)
(1) (a) to (g), regardless of their salary grades.31 While the first part of
Section 4 (A) covers only officials of the executive branch with Salary Grade
27 and higher, its second part specifically includes other executive officials
whose positions may not be of Salary Grade 27 and higher but who are by
express provision of law placed under the jurisdiction of the
Sandiganbayan.32
That the phrase "otherwise classified as Grade ‘27’ and higher" qualifies
"regional director and higher" is apparent from the Sponsorship Speech of
Senator Raul S. Roco on Senate Bill Nos. 1353and 844, which eventually
became R.A. Nos. 7975 and 8249, respectively:
As proposed by the Committee, the Sandiganbayan shall exercise original
jurisdiction over the cases assigned to it only in instances where one or more
of the principal accused are officials occupying the positions of regional
director and higher or are otherwise classified as Grade 27 and higher by the
Compensation and Position Classification Act of 1989, whether in a
permanent, acting or interim capacity at the time of the commission of the
offense. The jurisdiction, therefore, refers to a certain grade upwards, which
shall remain with the Sandiganbayan.33 (Emphasis supplied)
To speed up trial in the Sandiganbayan, Republic Act No. 7975 was enacted
for that Court to concentrate on the "larger fish" and leave the "small fry" to
the lower courts. This law became effective on May 6, 1995 and it provided a
two-pronged solution to the clogging of the dockets of that court, to wit:
It divested the Sandiganbayan of jurisdiction over public officials whose
salary grades were at Grade "26" or lower, devolving thereby these cases to
the lower courts, and retaining the jurisdiction of the Sandiganbayan only
over public officials whose salary grades were at Grade "27" or higher and
over other specific public officials holding important positions in government
regardless of salary grade; x x x34 (Emphasis supplied)
The legislative intent is to allow the Sandiganbayan to devote its time and
expertise to big-time cases involving the so-called "big fishes" in the
government rather than those accused who are of limited means who stand
trial for "petty crimes," the so-called "small fry," which, in turn, helps the
court decongest its dockets.35
Yet, those that are classified as Salary Grade 26 and below may still fall
within the jurisdiction of the Sandiganbayan, provided that they hold the
positions enumerated by the law.36 In this category, it is the position held, not
the salary grade, which determines the jurisdiction of the
Sandiganbayan.37 The specific inclusion constitutes an exception to the
general qualification relating to "officials of the executive branch occupying
the positions of regional director and higher, otherwise classified as Grade
‘27’ and higher, of the Compensation and Position Classification Act of
1989."38 As ruled in Inding:
Following this disquisition, the paragraph of Section 4 which provides that if
the accused is occupying a position lower than SG 27, the proper trial court
has jurisdiction, can only be properly interpreted as applying to those cases
where the principal accused is occupying a position lower than SG 27 and
not among those specifically included in the enumeration in Section 4 a. (1)
(a) to (g). Stated otherwise, except for those officials specifically included in
Section 4 a. (1) (a) to (g), regardless of their salary grades, over whom the
Sandiganbayan has jurisdiction, all other public officials below SG 27 shall
be under the jurisdiction of the proper trial courts "where none of the
principal accused are occupying positions corresponding to SG 27 or higher."
By this construction, the entire Section 4 is given effect. The cardinal rule,
after all, in statutory construction is that the particular words, clauses and
phrases should not be studied as detached and isolated expressions, but the
whole and every part of the statute must be considered in fixing the meaning
of any of its parts and in order to produce a harmonious whole. And courts
should adopt a construction that will give effect to every part of a statute, if
at all possible. Ut magis valeat quam pereat or that construction is to be
sought which gives effect to the whole of the statute – its every word.39
Thus, to cite a few, We have held that a member of the Sangguniang
Panlungsod,40 a department manager of the Philippine Health Insurance
Corporation (Philhealth),41 a student regent of the University of the
Philippines,42 and a Head of the Legal Department and Chief of the
Documentation with corresponding ranks of Vice-Presidents and Assistant
Vice-President of the Armed Forces of the Philippines Retirement and
Separation Benefits System (AFP-RSBS)43 fall within the jurisdiction of the
Sandiganbayan.
Petitioner is not an executive official with Salary Grade 27 or higher. Neither
does he hold any position particularly enumerated in Section 4 (A) (1) (a) to
(g). As he correctly argues, his case is, in fact, on all fours with
Cuyco.1avvphi1Therein, the accused was the Regional Director of the Land
Transportation Office, Region IX, Zamboanga City, but at the time of the
commission of the crime in 1992, his position was classified as Director II
with Salary Grade 26.44It was opined: Petitioner contends that at the time of
the commission of the offense in 1992, he was occupying the position of
Director II, Salary Grade 26, hence, jurisdiction over the cases falls with the
Regional Trial Court.
We sustain petitioner's contention.
The Sandiganbayan has no jurisdiction over violations of Section 3(a) and
(e), Republic Act No. 3019, as amended, unless committed by public
officials and employees occupying positions of regional director and higher
with Salary Grade "27" or higher, under the Compensation and Position
Classification Act of 1989 (Republic Act No. 6758) in relation to their office.
In ruling in favor of its jurisdiction, even though petitioner admittedly
occupied the position of Director II with Salary Grade "26" under the
Compensation and Position Classification Act of 1989 (Republic Act No.
6758), the Sandiganbayan incurred in serious error of jurisdiction, and acted
with grave abuse of discretion amounting to lack of jurisdiction in
suspending petitioner from office, entitling petitioner to the reliefs prayed
for.45
In the same way, a certification issued by the OIC – Assistant Chief,
Personnel Division of the BIR shows that, although petitioner is a Regional
Director of the BIR, his position is classified as Director II with Salary Grade
26.46
There is no merit in the OSP’s allegation that the petition was prematurely
filed on the ground that respondent court has not yet acquired jurisdiction
over the person of petitioner. Records disclose that when a warrant of arrest
was issued by respondent court, petitioner voluntarily surrendered and posted
a cash bond on September 17, 2009.Also, he was arraigned on April 14,
2010,prior to the filing of the petition on April 30, 2010.
WHEREFORE, the foregoing considered, the instant petition for certiorari is
GRANTED. The August 18, 2009 Resolution and February 8, 2010 Order of
the Sandiganbayan Second Division, which denied petitioner's Motion to
Dismiss on the ground of lack of jurisdiction, are REVERSED AND SET
ASIDE.

SO ORDERED.
SECOND DIVISION Irrigation and Power Project (Casecnan Project) in Pantabangan, Nueva Ecija
and Alfonso Castaneda, Nueva Vizcaya. The Casecnan Project is a combined
G.R. No. 196278, June 17, 2015 irrigation and hydroelectric power generation facility using the Pantabangan
Dam in Nueva Ecija.
CE CASECNAN WATER AND ENERGY COMPANY,
INC., Petitioner, v. THE PROVINCE OF NUEVA ECIJA, THE OFFICE
On September 29, 2003, petitioner and NIA executed a Supplemental
OF THE PROVINCIAL ASSESSOR OF NUEVA ECIJA, AND THE
Agreement6 amending Article II of the Casecnan Contract which pertains to
OFFICE OF THE PROVINCIAL TREASURER OF NUEVA ECIJA,
payment of taxes. Article 2.2 thereof states that NIA must reimburse
AS REPRESENTED BY HON. AURELIO UMALI, HON. FLORANTE
petitioner for real property taxes (RPT) provided the same was paid upon
FAJARDO AND HON. EDILBERTO PANCHO, RESPECTIVELY, OR
NIA's directive and with the concurrence of the Department of Finance.
THEIR LAWFUL SUCCESSORS, RESPONDENTS, NATIONAL
IRRIGATION ADMINISTRATION AND DEPARTMENT OF
On September 6, 2005, petitioner received from the Office of the Provincial
FINANCE, AS NECESSARY PARTIES.
Assessor a Notice of Assessment of Real Property dated August 2, 2005,
DECISION which indicates that for the years 2002 to 2005, its RPT due was
P248,676,349.60. Petitioner assailed the assessment with the Nueva Ecija
DEL CASTILLO, J.: Local Board of Assessment Appeals (Nueva Ecija LBAA) which dismissed it
on January 26, 2006. Undeterred, petitioner filed a Notice of Appeal with the
The Court of Tax Appeals (CTA) has exclusive jurisdiction over a special
Nueva Ecija Central Board of Assessment Appeals (Nueva Ecija CBAA).
civil action for certiorari assailing an interlocutory order issued by the
During the pendency thereof, respondents collected from petitioner the RPT
Regional Trial Court (RTC) in a local tax case.
due under the said assessment as well as those pertaining to the years 2006
up to the second quarter of 2008, totalling P363,703,606.88. Petitioner paid
This Petition for Review on Certiorari1 assails the November 2, 2010
the assessed RPT under protest; it also initiated proceedings questioning the
Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 108441 which
validity of the collection with respect to the years 2006 up to the second
dismissed for lack of jurisdiction the Petition for Certiorari of petitioner CE
quarter of 2008. Thereafter, petitioner received a letter7 dated July 9, 2008
Casecnan Water and Energy Company, Inc. (petitioner) against the Province
from the Office of the Provincial Treasurer stating that it has RPT in arrears
of Nueva Ecija, the Office of the Provincial Assessor of Nueva Ecija (Office
for the years 2002 up to the second quarter of 2008 amounting to
of the Provincial Assessor) and the Office of the Provincial Treasurer of
P1,277,474,342.10. Petitioner received another letter8 dated August 29, 2008
Nueva Ecija (Office of the Provincial Treasurer) (respondents). Also assailed
from the same office clarifying that its arrearages in RPT actually amounted
is the March 24, 2011 Resolution3 of the CA denying petitioner's Motion for
to P1,279,997,722.70 (2008 RPT Reassessment). Again, petitioner
Reconsideration.4
questioned this assessment through an appeal before the Nueva Ecija LBAA.
While the same was pending, petitioner received from respondents a letter
Factual Antecedents
dated September 10, 2008 demanding payment for its alleged RPT
arrearages.
On June 26, 1995, petitioner and the National Irrigation Administration
(NIA) entered into a build-operate-transfer (BOT) contract known as the
Hence, on September 23, 2008, petitioner filed with the RTC of San Jose
"Amended and Restated Casecnan Project Agreement"5(Casecnan Contract)
City, Nueva Ecija a Complaint9for injunction and damages with application
relative to the construction and development of the Casecnan Multi-Purpose
for temporary restraining order (TRO) and preliminary injunction10 praying
to restrain the collection of the 2008 RPT Reassessment. Petitioner
emphasized, among others, that it was not the one which should pay the taxes
but NIA.
Ruling of the Regional Trial Court
On September 24, 2008, the RTC denied petitioner's application for a 72-
hour TRO.11
Meanwhile, petitioner received from the Office of the Provincial Treasurer a
letter dated September 22, 2008 further demanding payment for RPT
covering the third quarter of 2008 (2008-3Q Assessment). Thus, petitioner
filed on September 29, 2008 an Amended Complaint12 asking the RTC to
likewise enjoin respondents from collecting RPT based on the 2008-3 Q
Assessment in the amount of P53,346,755.18.
On October 2, 2008, the RTC issued a 20-day TRO13 enjoining respondents
from collecting from petitioner the RPT covered by the 2008 RPT
Reassessment amounting to P1,279,997,722.70, including surcharges and
penalties.
Subsequently, however, the RTC denied petitioner's application for writ of
preliminary injunction in its Order14 of October 24, 2008. It also denied
petitioner's Motion for Reconsideration thereof in an Order15dated January
30, 2009.
On April 24, 2009, petitioner filed with the CA a Petition
for Certiorari16 under Rule 65 of the Rules of Court seeking to annul and set
aside the aforementioned October 24, 2008 and January 30,2009 RTC
Orders.
Riding of the Court of Appeals
In its November 2, 2010 Decision,17 the CA observed that the Petition
for Certiorari before it was actually an offshoot of the 2008 RPT
Reassessment. And since in resolving the issue of whether the RTC
committed grave abuse of discretion in denying petitioner's application for a
writ of preliminary injunction, the issue of the validity of the assessment and
the collection of the RPT against petitioner must also be resolved, thus
jurisdiction over the case lies within the Court of Tax Appeals (CTA).
Hence, the CA ruled:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, the Petition for Certiorari is hereby
DENIED DUE COURSE and accordingly, DISMISSED for lack of
jurisdiction.
SO ORDERED.18cralawlawlibrary
Petitioner sought reconsideration; however, it was denied in a
Resolution19 dated March 24, 2011.
Undaunted, petitioner filed this Petition imputing upon the CA grave error
in:chanroblesvirtuallawlibrary
xxx ruling that it is the Court of Tax Appeals (and not the Court of Appeals)
which has jurisdiction over the CA Injunction Case.20cralawlawlibrary
Petitioner's Arguments
In its Petition21 and Reply22, petitioner argues that it is the CA, not the CTA,
which has jurisdiction over the subject matter of its Petition for Certiorari.
Petitioner maintains that its petition relates to an ordinary civil action for
injunction and not to a local tax case. It insists that in both the RTC
injunction case and the Petition for Certiorari before the CA, petitioner was
not protesting respondents' assessment of RPT against it; what it was seeking
was respondents' enjoinment from committing or continuing to commit acts
that would probably violate its right. In particular, petitioner points out that
the RTC injunction case was intended to enjoin respondents from collecting
payment during the pendency of the case with the LBAA challenging the
validity of the 2008 RPT Reassessment. Petitioner explains that the said
injunction case was filed with the RTC because the LBAA has no injunctive
power.
Respondents' Arguments
In their Comment,23 respondents argue that in resolving the issue on the
propriety of issuing a writ of injunction, the CA will have to inevitably pass
upon the propriety of the assessment of RPT on the Casecnan Project, a local
tax matter which is within the jurisdiction of the CTA. Respondents also
echo the CA pronouncement that petitioner failed to exhaust administrative
remedies with respect to the assessment and collection of
RPT.chanRoblesvirtualLawlibrary
Our Ruling
There is no merit in the Petition.
It is the CTA which has the power to rule on a Petition
for Certiorari assailing an interlocutory order of the RTC relating to a local
tax case.
Jurisdiction over the subject matter is required for a court to act on any
controversy. It is conferred by law and not by the consent or waiver upon a
court. As such, if a court lacks jurisdiction over an action, it cannot decide
the case on the merits and must dismiss it.24
With respect to the CTA, its jurisdiction was expanded and its rank elevated
to that of a collegiate court with special jurisdiction by virtue of Republic Act
No. 9282.25 This expanded jurisdiction of the CTA includes its exclusive
appellate jurisdiction to review by appeal the decisions, orders or resolutions
of the RTC in local tax cases originally decided or resolved by the RTC in
the exercise of its original or appellate jurisdiction.26
In the recent case of City of Manila v. Grecia-Cuerdo,27 the Court ruled that
the CTA likewise has the jurisdiction to issue writs of certiorari or to
determine whether there has been grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the RTC in issuing an
interlocutory order in cases falling within the CTA's exclusive appellate
jurisdiction, thus:chanroblesvirtuallawlibrary
The foregoing notwithstanding, while there is no express grant of such
power, with respect to the CTA, Section 1, Article VIII of the 1987
Constitution provides, nonetheless, that judicial power shall be vested in one
Supreme Court and in such lower courts as may be established by law and
that judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable,
and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
On the strength of the above constitutional provisions, it can be fairly
interpreted that the power of the CTA includes that of determining
whether or not there has been grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the RTC in issuing an
interlocutory order in cases falling within the exclusive appellate
jurisdiction of the tax court. It, thus, follows that the CTA, by
constitutional mandate, is vested with jurisdiction to issue writs
of certiorari in these cases.28 (Citations omitted and emphasis supplied)
Further, the Court in City of Manila, citing J. M. Tuason & Co., Inc. v.
Jaramillo,29De Jesus v. Court of Appeals,30 as well as the more recent cases
of Galang, Jr. v. Hon. Judge Geronimo31 and Bulilis v. Nuez32 held
that:chanroblesvirtuallawlibrary
Consistent with the above pronouncement, this Court has held as early as the
case of J.M. Tuason & Co., Inc. v. Jaramillo, et al. that 'if a case may be
appealed to a particular court or judicial tribunal or body, then said court or
judicial tribunal or body has jurisdiction to issue the extraordinary writ
of certiorari, in aid of its appellate jurisdiction.' This principle was affirmed
in De Jesus v. Court of Appeals, where the Court stated that 'a court may
issue a writ of certiorari in aid of its appellate jurisdiction if said court has
jurisdiction to review, by appeal or writ of error, the final orders or decisions
of the lower court.' The rulings in J.M. Tuason and De Jesus were reiterated
in the more recent cases of Galang, Jr. v. Geronimo and Bulilis v. Nuez.
Furthermore, Section 6, Rule 135 of the present Rules of Court provides that
when by law, jurisdiction is conferred on a court or judicial officer, all
auxiliary writs, processes and other means necessary to carry it into effect
may be employed by such court or officer.33(Citations omitted)
Anent petitioner's contention that it is the CA which has jurisdiction over
a certiorari petition assailing an interlocutory order issued by the RTC in a
local tax case, the Court had this to say:chanroblesvirtuallawlibrary
If this Court were to sustain petitioners' contention that jurisdiction over
their certioraripetition lies with the CA, this Court would be confirming the
exercise by two judicial bodies, the CA and the CTA, of jurisdiction over
basically the same subject matter - precisely the split-jurisdiction situation
which is anathema to the orderly administration of justice. The Court
cannot accept that such was the legislative motive, especially considering
that the law expressly confers on the CTA, the tribunal with the
specialized competence over tax and tariff matters, the role of judicial
review over local tax cases without mention of any other court that may
exercise such power. Thus, the Court agrees with the ruling of the CA that
since appellate jurisdiction over private respondents' complaint for tax refund
is vested in the CTA, it follows that a petition for certiorari seeking
nullification of an interlocutory order issued in the said case should, likewise,
be filed with the same court. To rule otherwise would lead to an absurd
situation where one court decides an appeal in the main case while another
court rules on an incident in the very same case.
xxxx
A grant of appellate jurisdiction implies that there is included in it the power
necessary to exercise it effectively, to make all orders that will preserve the
subject of the action, and to give effect to the final determination of the
appeal. It carries with it the power to protect that jurisdiction and to make the
decisions of the court thereunder effective. The court, in aid of its appellate
jurisdiction, has authority to control all auxiliary and incidental matters
necessary to the efficient and proper exercise of that jurisdiction. For this
purpose, it may, when necessary, prohibit or restrain the performance of any
act which might interfere with the proper exercise of its rightful jurisdiction
in cases pending before it.34 (Citations omitted and emphasis supplied)
Given these, it is settled that it is the CTA which has exclusive jurisdiction
over a special civil action for certiorari assailing an interlocutory order
issued by the RTC in a local tax case.
The RTC injunction case is a local tax case.
In maintaining that it is the CA that has jurisdiction over
petitioner's certiorari petition, the latter argues that the injunction case it
filed with the RTC is not a local tax case but an ordinary civil action. It
insists that it is not protesting the assessment of RPT against it but only prays
that respondents be enjoined from collecting the same.
The Court finds, however, that in praying to restrain the collection of RPT,
petitioner also implicitly questions the propriety of the assessment of such
RPT. This is because in ruling as to whether to restrain the collection, the
RTC must first necessarily rule on the propriety of the assessment. In other
words, in filing an action for injunction to restrain collection, petitioner was
in effect also challenging the validity of the RPT assessment. As aptly
discussed by the CA:chanroblesvirtuallawlibrary
xxx [T]he original action filed with the RTC is one for Injunction, with an
application for Temporary Restraining Order and a Writ of Preliminary
Injunction to enjoin the province of Nueva Ecija from further collecting the
alleged real property tax liability assessed against it. Simply because the
action is an application for irvjunctive relief does not necessarily mean that it
may no longer be considered as a local tax case. The subject matter and the
issues, not the name or designation of the remedy, should control. While an
ancillary action for injunction may not be a main case, the court [still has] to
determine, even in a preliminary matter, the applicable tax laws, rules and
jurisprudence, x x x35cralawlawlibrary
Moreover, in National Power Corporation v. Municipal Government of
Navotas,36 as well as in City of Lapu-Lapu v. Philippine Economic Zone
Authority,37 this Court already held that local tax cases include RPT.
No doubt, the injunction case before the RTC is a local tax case. And as
earlier discussed, a certioraripetition questioning an interlocutory order
issued in a local tax case falls under the jurisdiction of the CTA. Thus, the
CA correctly dismissed the Petition for Certiorari before it for lack of
jurisdiction.cralawred
WHEREFORE, the Petition is DENIED. The November 2, 2010 Decision
and March 24, 2011 Resolution of the Court of Appeals in CA-G.R. SP No.
108441 are AFFIRMED.

SO ORDERED.chanroblesvirtuallawlibrary
EN BANC financing of public-private partnership agreement of the Quezon City
Government and National Housing Authority (NHA) with the private
G.R. No. 210551, June 30, 2015 sector.3 Under certain conditions, a tax credit shall be enjoyed by taxpayers
JOSE J. FERRER, JR., Petitioner, v. CITY MAYOR HERBERT regularly paying the special assessment:
chanRoblesvirtualLawlibrary
BAUTISTA, CITY COUNCIL OF QUEZON CITY, CITY
TREASURER OF QUEZON CITY, AND CITY ASSESSOR OF SECTION 7. TAX CREDIT. Taxpayers dutifully paying the special
QUEZON CITY, Respondents. assessment tax as imposed by this ordinance shall enjoy a tax credit. The tax
credit may be availed of only after five (5) years of continue[d] payment.
DECISION
Further, the taxpayer availing this tax credit must be a taxpayer in good
PERALTA, J.: standing as certified by the City Treasurer and City Assessor.

Before this Court is a petition for certiorari under Rule 65 of the Rules of The tax credit to be granted shall be equivalent to the total amount of the
Court with prayer for the issuance of a temporary restraining order (TRO) special assessment paid by the property owner, which shall be given as
seeking to declare unconstitutional and illegal Ordinance Nos. SP-2095, S- follows:
2011 and SP-2235, S-2013 on the Socialized Housing Tax and Garbage Fee, chanRoblesvirtualLawlibrary
respectively, which are being imposed by the respondents.
1. 6th year - 20%
The Case
2. 7th year - 20%
On October 17, 2011,1 respondent Quezon City Council enacted Ordinance
3. 8th year - 20%
No. SP-2095, S-2011,2 or the Socialized Housing Tax of Quezon City,
Section 3 of which provides:
4. 9th year - 20%
chanRoblesvirtualLawlibrary

SECTION 3. IMPOSITION. A special assessment equivalent to one-half 5. 10th year - 20%

percent (0.5%) on the assessed value of land in excess of One Hundred chanroblesvirtuallawlibrary
Thousand Pesos (Php100,000.00) shall be collected by the City Treasurer
Furthermore, only the registered owners may avail of the tax credit and may
which shall accrue to the Socialized Housing Programs of the Quezon City
not be continued by the subsequent property owners even if they are buyers
Government. The special assessment shall accrue to the General Fund under
in good faith, heirs or possessor of a right in whatever legal capacity over the
a special account to be established for the purpose.
subject property.4
chanroblesvirtuallawlibrary
chanroblesvirtuallawlibrary
Effective for five (5) years, the Socialized Housing Tax (SHT) shall be
On the other hand, Ordinance No. SP-2235, S-20135 was enacted on
utilized by the Quezon City Government for the following projects: (a) land
December 16, 2013 and took effect ten days after when it was approved by
purchase/land banking; (b) improvement of current/existing socialized
respondent City Mayor.6 The proceeds collected from the garbage fees on
housing facilities; (c) land development; (d) construction of core houses,
residential properties shall be deposited solely and exclusively in an
sanitary cores, medium-rise buildings and other similar structures; and (e)
earmarked special account under the general fund to be utilized for garbage
collections.7 Section 1 of the Ordinance set forth the schedule and manner for
the collection of garbage fees:
chanRoblesvirtualLawlibrary
SECTION 1. The City Government of Quezon City in conformity with and
in relation to Republic Act No. 7160, otherwise known as the Local
Government Code of 1991 HEREBY IMPOSES THE FOLLOWING
SCHEDULE AND MANNER FOR THE ANNUAL COLLECTION OF
GARBAGE FEES, AS FOLLOWS:
On all domestic households in Quezon City;
On high-rise Condominium Units
a) High-rise Condominium – The Homeowners Association of high- rise
condominiums shall pay the annual garbage fee on the total size of the
entire condominium and socialized Housing Unit and an additional
garbage fee shall be collected based on area occupied for every unit
already sold or being amortized.
b) High-rise apartment units – Owners of high-rise apartment units shall pay
the annual garbage fee on the total lot size of the entire apartment and an
additional garbage fee based on the schedule prescribed herein for every
unit occupied.

LAND AREA
Less than 200 sq. m.
201 sq. m. – 500 sq. m.
The collection of the garbage fee shall accrue on the first day of January and
IMPOSABLE FEE
shall be paid simultaneously with the payment of the real property tax, but
PHP 100.00 not later than the first quarter installment.8 In case a household owner refuses
to pay, a penalty of 25% of the garbage fee due, plus an interest of 2% per
PHP 200.00 month or a fraction thereof, shall be charged.9ChanRoblesVirtualawlibrary

501 sq. m. – 1,000 sq. m.
1,001 sq. m. – 1,500 sq. m.
1,501 sq. m. – 2,000 sq. m. or more
On all condominium unit and socialized housing projects/units in Quezon
City;
FLOOR AREA
Less than 40 sq. m.
41 sq. m. – 60 sq. m.
61 sq. m. – 100 sq. m.
PHP 300.00 Petitioner alleges that he is a registered co-owner of a 371-square-meter
residential property in Quezon City which is covered by Transfer Certificate
PHP 400.00
of Title (TCT) No. 216288, and that, on January 7, 2014, he paid his realty
PHP 500.00 tax which already included the garbage fee in the sum of
Php100.00.10ChanRoblesVirtualawlibrary
The instant petition was filed on January 17, 2014. We issued a TRO on
February 5, 2014, which enjoined the enforcement of Ordinance Nos. SP-
IMPOSABLE FEE 2095 and SP-2235 and required respondents to comment on the petition
without necessarily giving due course thereto.11ChanRoblesVirtualawlibrary
PHP25.00
Respondents filed their Comment12 with urgent motion to dissolve the TRO
PHP50.00
on February 17, 2014. Thereafter, petitioner filed a Reply and a
PHP75.00 Memorandum on March 3, 2014 and September 8, 2014, respectively.

Procedural Matters
101 sq. m. – 150 sq. m. PHP100.00

151 sq. m. – 200 sq. [m.] or more PHP200.00

A. Propriety of a Petition for Certiorari

Respondents are of the view that this petition for certiorari is improper since
they are not tribunals, boards or officers exercising judicial or quasi-judicial
functions. Petitioner, however, counters that in enacting Ordinance Nos. SP-
2095 and SP-2235, the Quezon City Council exercised quasi-judicial
function because the ordinances ruled against the property owners who must
pay the SHT and the garbage fee, exacting from them funds for basic
essential public services that they should not be held liable. Even if a Rule 65
petition is improper, petitioner still asserts that this Court, in a number of
cases like in Rosario v. Court of Appeals,13 has taken cognizance of an
improper remedy in the interest of justice.
We agree that respondents neither acted in any judicial or quasi-judicial
capacity nor arrogated unto themselves any judicial or quasi-judicial
prerogatives.
A respondent is said to be exercising judicial function where he has the
power to determine what the law is and what the legal rights of the parties
are, and then undertakes to determine these questions and adjudicate upon
the rights of the parties.
Quasi-judicial function, on the other hand, is “a term which applies to the
actions, discretion, etc., of public administrative officers or bodies …
required to investigate facts or ascertain the existence of facts, hold hearings,
and draw conclusions from them as a basis for their official action and to
exercise discretion of a judicial nature.”
Before a tribunal, board, or officer may exercise judicial or quasi-judicial
acts, it is necessary that there be a law that gives rise to some specific rights
of persons or property under which adverse claims to such rights are made,
and the controversy ensuing therefrom is brought before a tribunal, board, or
officer clothed with power and authority to determine the law and adjudicate
the respective rights of the contending parties.14
chanroblesvirtuallawlibrary
For a writ of certiorari to issue, the following requisites must concur: (1) it
must be directed against a tribunal, board, or officer exercising judicial or
quasi-judicial functions; (2) the tribunal, board, or officer must have 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. The
enactment by the Quezon City Council of the assailed ordinances was done
in the exercise of its legislative, not judicial or quasi-judicial, function. Under
Republic Act (R.A.) No. 7160, or the Local Government Code of
1991 (LGC), local legislative power shall be exercised by the Sangguniang
Panlungsod for the city.15 Said law likewise is specific in providing that the
power to impose a tax, fee, or charge, or to generate revenue shall be
exercised by the sanggunian of the local government unit concerned through
an appropriate ordinance.16ChanRoblesVirtualawlibrary
Also, although the instant petition is styled as a petition for certiorari, it
essentially seeks to declare the unconstitutionality and illegality of the
questioned ordinances. It, thus, partakes of the nature of a petition for
declaratory relief over which this Court has only appellate, not original,
jurisdiction.17ChanRoblesVirtualawlibrary
Despite these, a petition for declaratory relief may be treated as one for
prohibition or mandamus, over which We exercise original jurisdiction, in
cases with far-reaching implications or one which raises transcendental
issues or questions that need to be resolved for the public good.18 The judicial
policy is that this Court will entertain direct resort to it when the redress
sought cannot be obtained in the proper courts or when exceptional and
compelling circumstances warrant availment of a remedy within and calling
for the exercise of Our primary jurisdiction.19ChanRoblesVirtualawlibrary
Section 2, Rule 65 of the Rules of Court lay down under what circumstances
a petition for prohibition may be filed:
chanRoblesvirtualLawlibrary
SEC. 2. Petition for prohibition. - When the proceedings of any tribunal,
corporation, board, officer or person, whether exercising judicial, quasi-
judicial or ministerial functions, are without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any other plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with certainty and
praying that judgment be rendered commanding the respondent to desist
from further proceeding in the action or matter specified therein, or otherwise
granting such incidental reliefs as law and justice may require.
chanroblesvirtuallawlibrary
In a petition for prohibition against any tribunal, corporation, board, or
person – whether exercising judicial, quasi-judicial, or ministerial functions –
who has acted without or in excess of jurisdiction or with grave abuse of
discretion, the petitioner prays that judgment be rendered, commanding the
respondents to desist from further proceeding in the action or matter
specified in the petition. In this case, petitioner's primary intention is to
prevent respondents from implementing Ordinance Nos. SP-2095 and SP-
2235. Obviously, the writ being sought is in the nature of a prohibition,
commanding desistance.
We consider that respondents City Mayor, City Treasurer, and City Assessor
are performing ministerialfunctions. A ministerial function is one that an
officer or tribunal performs in the context of a given set of facts, in a
prescribed manner and without regard for the exercise of his or its own
judgment, upon the propriety or impropriety of the act done.20 Respondent
Mayor, as chief executive of the city government, exercises such powers and
performs such duties and functions as provided for by the LGC and other
laws.21 Particularly, he has the duty to ensure that all taxes and other
revenues of the city are collected, and that city funds are applied to the
payment of expenses and settlement of obligations of the city, in accordance
with law or ordinance.22 On the other hand, under the LGC, all local taxes,
fees, and charges shall be collected by the provincial, city, municipal, or
barangay treasurer, or their duly-authorized deputies, while the assessor shall
take charge, among others, of ensuring that all laws and policies governing
the appraisal and assessment of real properties for taxation purposes are
properly executed.23Anent the SHT, the Department of Finance (DOF) Local
Finance Circular No. 1-97, dated April 16, 1997, is more specific:
chanRoblesvirtualLawlibrary
6.3 The Assessor’s office of the Id.ntified LGU shall:
a. immediately undertake an inventory of lands within its jurisdiction
which shall be subject to the levy of the Social Housing Tax (SHT)
by the local sanggunian concerned;
b. inform the affected registered owners of the effectivity of the SHT; a
list of the lands and registered owners shall also be posted in 3
conspicuous places in the city/municipality;
c. furnish the Treasurer’s office and the local sanggunian concerned of
the list of lands affected;
6.4 The Treasurer’s office shall:
a. collect the Social Housing Tax on top of the Real Property Tax, SEF
Tax and other special assessments;
b. report to the DOF, thru the Bureau of Local Government Finance,
and the Mayor’s office the monthly collections on Social Housing
Tax (SHT). An annual report should likewise be submitted to the
HUDCC on the total revenues raised during the year pursuant to Sec.
43, R.A. 7279 and the manner in which the same was disbursed.
Petitioner has adduced special and important reasons as to why direct
recourse to Us should be allowed. Aside from presenting a novel question of
law, this case calls for immediate resolution since the challenged ordinances
adversely affect the property interests of all paying constituents of Quezon
City. As well, this petition serves as a test case for the guidance of other local
government units (LGUs). Indeed, the petition at bar is of transcendental
importance warranting a relaxation of the doctrine of hierarchy of courts.
In Social Justice Society (SJS) Officers, et al. v. Lim,24 the Court cited the
case of Senator Jaworski v. Phil. Amusement & Gaming Corp.,25 where We
ratiocinated:
chanRoblesvirtualLawlibrary
Granting arguendo that the present action cannot be properly treated as a
petition for prohibition, the transcendental importance of the issues
involved in this case warrants that we set aside the technical defects and
take primary jurisdiction over the petition at bar. x x x This is in
accordance with the well-entrenched principle that rules of procedure
are not inflexible tools designed to hinder or delay, but to facilitate and
promote the administration of justice. Their strict and rigid application,
which would result in technicalities that tend to frustrate, rather than
promote substantial justice, must always be eschewed.26
chanroblesvirtuallawlibrary
B. Locus Standi of Petitioner
Respondents challenge petitioner’s legal standing to file this case on the
ground that, in relation to Section 3 of Ordinance No. SP-2095, petitioner
failed to allege his ownership of a property that has an assessed value of
more than Php100,000.00 and, with respect to Ordinance No. SP-2335, by
what standing or personality he filed the case to nullify the same. According
to respondents, the petition is not a class suit, and that, for not having
specifically alleged that petitioner filed the case as a taxpayer, it could only
be surmised whether he is a party-in-interest who stands to be directly
benefited or injured by the judgment in this case.
It is a general rule that every action must be prosecuted or defended in the
name of the real party-in-interest, who stands to be benefited or injured by
the judgment in the suit, or the party entitled to the avails of the suit.
Jurisprudence defines interest as "material interest, an interest in issue and to
be affected by the decree, as distinguished from mere interest in the question
involved, or a mere incidental interest. By real interest is meant a present
substantial interest, as distinguished from a mere expectancy or a future,
contingent, subordinate, or consequential interest." "To qualify a person to be
a real party-in-interest in whose name an action must be prosecuted, he must
appear to be the present real owner of the right sought to be enforced."27
chanroblesvirtuallawlibrary
“Legal standing” or locus standi calls for more than just a generalized
grievance.28 The concept has been defined as a personal and substantial
interest in the case such that the party has sustained or will sustain direct
injury as a result of the governmental act that is being challenged.29 The gist
of the question of standing is whether a party alleges such personal stake in
the outcome of the controversy as to assure that concrete adverseness which
sharpens the presentation of issues upon which the court depends for
illumination of difficult constitutional
questions.30ChanRoblesVirtualawlibrary
A party challenging the constitutionality of a law, act, or statute must show
“not only that the law is invalid, but also that he has sustained or is in
immediate, or imminent danger of sustaining some direct injury as a result of
its enforcement, and not merely that he suffers thereby in some indefinite
way.” It must be shown that he has been, or is about to be, denied some right
or privilege to which he is lawfully entitled, or that he is about to be
subjected to some burdens or penalties by reason of the statute complained
of.31ChanRoblesVirtualawlibrary
Tested by the foregoing, petitioner in this case clearly has legal standing to
file the petition. He is a real party-in-interest to assail the constitutionality
and legality of Ordinance Nos. SP-2095 and SP-2235 because respondents
did not dispute that he is a registered co-owner of a residential property in
Quezon City and that he paid property tax which already included the SHT
and the garbage fee. He has substantial right to seek a refund of the payments
he made and to stop future imposition. While he is a lone petitioner, his
cause of action to declare the validity of the subject ordinances is substantial
and of paramount interest to similarly situated property owners in Quezon
City.
C. Litis Pendentia
Respondents move for the dismissal of this petition on the ground of litis
pendentia. They claim that, as early as February 22, 2012, a case
entitled Alliance of Quezon City Homeowners, Inc., et al., v. Hon. Herbert
Bautista, et al., docketed as Civil Case No. Q-12-7-820, has been pending in
the Quezon City Regional Trial Court, Branch 104, which assails the legality
of Ordinance No. SP-2095. Relying on City of Makati, et al. v. Municipality
(now City) of Taguig, et al.,32 respondents assert that there is substantial
identity of parties between the two cases because petitioner herein and
plaintiffs in the civil case filed their respective cases as taxpayers of Quezon
City.
For petitioner, however, respondents’ contention is untenable since he is not
a party in Alliance and does not even have the remotest identity or
association with the plaintiffs in said civil case. Moreover, respondents’
arguments would deprive this Court of its jurisdiction to determine the
constitutionality of laws under Section 5, Article VIII of the 1987
Constitution.33ChanRoblesVirtualawlibrary
Litis pendentia is a Latin term which literally means “a pending suit” and is
variously referred to in some decisions as lis pendens and auter action
pendant.34 While it is normally connected with the control which the court
has on a property involved in a suit during the continuance proceedings, it is
more interposed as a ground for the dismissal of a civil action pending in
court.35 In Film Development Council of the Philippines v. SM Prime
Holdings, Inc.,36 We elucidated:
chanRoblesvirtualLawlibrary
Litis pendentia, as a ground for the dismissal of a civil action, refers to a
situation where two actions are pending between the same parties for the
same cause of action, so that one of them becomes unnecessary and
vexatious. It is based on the policy against multiplicity of suit and authorizes
a court to dismiss a case motu proprio.
xxxx
The requisites in order that an action may be dismissed on the ground of litis
pendentiaare: (a) the identity of parties, or at least such as representing the
same interest in both actions; (b) the identity of rights asserted and relief
prayed for, the relief being founded on the same facts, and (c) the identity of
the two cases such that judgment in one, regardless of which party is
successful, would amount to res judicata in the other.
xxxx
The underlying principle of litis pendentia is the theory that a party is not
allowed to vex another more than once regarding the same subject matter and
for the same cause of action. This theory is founded on the public policy that
the same subject matter should not be the subject of controversy in courts
more than once, in order that possible conflicting judgments may be avoided
for the sake of the stability of the rights and status of persons, and also to
avoid the costs and expenses incident to numerous suits.
Among the several tests resorted to in ascertaining whether two suits relate to
a single or common cause of action are: (1) whether the same evidence
would support and sustain both the first and second causes of action; and (2)
whether the defenses in one case may be used to substantiate the complaint in
the other.
The determination of whether there is an identity of causes of action for
purposes of litis pendentia is inextricably linked with that of res judicata,
each constituting an element of the other. In either case, both relate to the
sound practice of including, in a single litigation, the disposition of all issues
relating to a cause of action that is before a court.37
chanroblesvirtuallawlibrary
There is substantial identity of the parties when there is a community of
interest between a party in the first case and a party in the second case albeit
the latter was not impleaded in the first case.38 Moreover, the fact that the
positions of the parties are reversed, i.e., the plaintiffs in the first case are the
defendants in the second case or vice-versa, does not negate the identity of
parties for purposes of determining whether the case is dismissible on the
ground of litis pendentia.39ChanRoblesVirtualawlibrary
In this case, it is notable that respondents failed to attach any pleading
connected with the alleged civil case pending before the Quezon City trial
court. Granting that there is substantial identity of parties between said case
and this petition, dismissal on the ground of litis pendentia still cannot be had
in view of the absence of the second and third requisites. There is no way for
Us to determine whether both cases are based on the same set of facts that
require the presentation of the same evidence. Even if founded on the same
set of facts, the rights asserted and reliefs prayed for could be different.
Moreover, there is no basis to rule that the two cases are intimately related
and/or intertwined with one another such that the judgment that may be
rendered in one, regardless of which party would be successful, would
amount to res judicata in the other.
D. Failure to Exhaust Administrative Remedies
Respondents contend that petitioner failed to exhaust administrative remedies
for his non-compliance with Section 187 of the LGC, which mandates:
chanRoblesvirtualLawlibrary
Section 187. Procedure for Approval and Effectivity of Tax Ordinances and
Revenue Measures; Mandatory Public Hearings. – The procedure for
approval of local tax ordinances and revenue measures shall be in accordance
with the provisions of this Code: Provided, That public hearings shall be
conducted for the purpose prior to the enactment thereof: Provided, further,
That any question on the constitutionality or legality of tax ordinances or
revenue measures may be raised on appeal within thirty (30) days from the
effectivity thereof to the Secretary of Justice who shall render a decision
within sixty (60) days from the date of receipt of the appeal: Provided,
however, That such appeal shall not have the effect of suspending the
effectivity of the ordinance and the accrual and payment of the tax, fee, or
charge levied therein: Provided, finally, That within thirty (30) days after
receipt of the decision or the lapse of the sixty-day period without the
Secretary of Justice acting upon the appeal, the aggrieved party may file
appropriate proceedings with a court of competent jurisdiction.
chanroblesvirtuallawlibrary
The provision, the constitutionality of which was sustained in Drilon v.
Lim,40 has been construed as mandatory41 considering that –
A municipal tax ordinance empowers a local government unit to impose
taxes. The power to tax is the most effective instrument to raise needed
revenues to finance and support the myriad activities of local government
units for the delivery of basic services essential to the promotion of the
general welfare and enhancement of peace, progress, and prosperity of the
people. Consequently, any delay in implementing tax measures would be to
the detriment of the public. It is for this reason that protests over tax
ordinances are required to be done within certain time frames. x x x.42
chanroblesvirtuallawlibrary
The obligatory nature of Section 187 was underscored in Hagonoy Market
Vendor Asso. v. Municipality of Hagonoy:43cralawlawlibrary
x x x [T]he timeframe fixed by law for parties to avail of their legal remedies
before competent courts is not a “mere technicality” that can be easily
brushed aside. The periods stated in Section 187 of the Local Government
Code are mandatory. x x x Being its lifeblood, collection of revenues by the
government is of paramount importance. The funds for the operation of its
agencies and provision of basic services to its inhabitants are largely derived
from its revenues and collections. Thus, it is essential that the validity of
revenue measures is not left uncertain for a considerable length of time.
Hence, the law provided a time limit for an aggrieved party to assail the
legality of revenue measures and tax ordinances.”44
chanroblesvirtuallawlibrary
Despite these cases, the Court, in Ongsuco, et al. v. Hon. Malones,45 held that
there was no need for petitioners therein to exhaust administrative remedies
before resorting to the courts, considering that there was only a pure question
of law, the parties did not dispute any factual matter on which they had to
present evidence. Likewise, in Cagayan Electric Power and Light Co., Inc. v.
City of Cagayan de Oro,46We relaxed the application of the rules in view of
the more substantive matters. For the same reasons, this petition is an
exception to the general rule.
Substantive Issues
Petitioner asserts that the protection of real properties from informal settlers
and the collection of garbage are basic and essential duties and functions of
the Quezon City Government. By imposing the SHT and the garbage fee, the
latter has shown a penchant and pattern to collect taxes to pay for public
services that could be covered by its revenues from taxes imposed on
property, idle land, business, transfer, amusement, etc., as well as the Internal
Revenue Allotment (IRA) from the National Government. For petitioner, it is
noteworthy that respondents did not raise the issue that the Quezon City
Government is in dire financial state and desperately needs money to fund
housing for informal settlers and to pay for garbage collection. In fact, it has
not denied that its revenue collection in 2012 is in the sum of P13.69 billion.
Moreover, the imposition of the SHT and the garbage fee cannot be justified
by the Quezon City Government as an exercise of its power to create sources
of income under Section 5, Article X of the 1987 Constitution.47 According
to petitioner, the constitutional provision is not a carte blanche for the LGU
to tax everything under its territorial and political jurisdiction as the
provision itself admits of guidelines and limitations.
Petitioner further claims that the annual property tax is an ad valorem tax, a
percentage of the assessed value of the property, which is subject to revision
every three (3) years in order to reflect an increase in the market value of the
property. The SHT and the garbage fee are actually increases in the property
tax which are not based on the assessed value of the property or its
reassessment every three years; hence, in violation of Sections 232 and 233
of the LGC.48ChanRoblesVirtualawlibrary
For their part, respondents relied on the presumption in favor of the
constitutionality of Ordinance Nos. SP-2095 and SP-2235,
invoking Victorias Milling Co., Inc. v. Municipality of Victorias,
etc.,49People v. Siton, et al.,50 and Hon. Ermita v. Hon. Aldecoa-
Delorino.51 They argue that the burden of establishing the invalidity of an
ordinance rests heavily upon the party challenging its constitutionality. They
insist that the questioned ordinances are proper exercises of police power
similar to Telecom. & Broadcast Attys. of the Phils., Inc. v.
COMELEC52 and Social Justice Society (SJS), et al. v. Hon. Atienza,
Jr.53 and that their enactment finds basis in the social justice principle
enshrined in Section 9,54 Article II of the 1987 Constitution.
As to the issue of publication, respondents argue that where the law provides
for its own effectivity, publication in the Official Gazette is not necessary so
long as it is not punitive in character, citing Balbuna, et al. v. Hon. Secretary
of Education, et al.55 and Askay v. Cosalan.56 Thus, Ordinance No. SP-2095
took effect after its publication, while Ordinance No. SP-2235 became
effective after its approval on December 26, 2013.
Additionally, the parties articulate the following positions:
On the Socialized Housing Tax
Respondents emphasize that the SHT is pursuant to the social justice
principle found in Sections 1 and 2, Article XIII57 of the 1987 Constitution
and Sections 2 (a)58 and 4359 of R.A. No. 7279, or the “Urban Development
and Housing Act of 1992 (UDHA).
Relying on Manila Race Horse Trainers Assn., Inc. v. De La
Fuente,60 and Victorias Milling Co., Inc. v. Municipality of Victorias,
etc.,61 respondents assert that Ordinance No. SP-2095 applies equally to all
real property owners without discrimination. There is no way that the
ordinance could violate the equal protection clause because real property
owners and informal settlers do not belong to the same class.
Ordinance No. SP-2095 is also not oppressive since the tax rate being
imposed is consistent with the UDHA. While the law authorizes LGUs to
collect SHT on properties with an assessed value of more than P50,000.00,
the questioned ordinance only covers properties with an assessed value
exceeding P100,000.00. As well, the ordinance provides for a tax credit
equivalent to the total amount of the special assessment paid by the property
owner beginning in the sixth (6th) year of the effectivity of the ordinance.
On the contrary, petitioner claims that the collection of the SHT is
tantamount to a penalty imposed on real property owners due to the failure of
respondent Quezon City Mayor and Council to perform their duty to secure
and protect real property owners from informal settlers, thereby burdening
them with the expenses to provide funds for housing. For petitioner, the SHT
cannot be viewed as a “charity” from real property owners since it is forced,
not voluntary.
Also, petitioner argues that the collection of the SHT is a kind of class
legislation that violates the right of property owners to equal protection of the
laws since it favors informal settlers who occupy property not their own and
pay no taxes over law-abiding real property owners who pay income and
realty taxes.
Petitioner further contends that respondents’ characterization of the SHT as
“nothing more than an advance payment on the real property tax” has no
statutory basis. Allegedly, property tax cannot be collected before it is due
because, under the LGC, chartered cities are authorized to impose property
tax based on the assessed value and the general revision of assessment that is
made every three (3) years.
As to the rationale of SHT stated in Ordinance No. SP-2095, which, in turn,
was based on Section 43 of the UDHA, petitioner asserts that there is no
specific provision in the 1987 Constitution stating that the ownership and
enjoyment of property bear a social function. And even if there is, it is
seriously doubtful and far-fetched that the principle means that property
owners should provide funds for the housing of informal settlers and for
home site development. Social justice and police power, petitioner believes,
does not mean imposing a tax on one, or that one has to give up something,
for the benefit of another. At best, the principle that property ownership and
enjoyment bear a social function is but a reiteration of the Civil Law
principle that property should not be enjoyed and abused to the injury of
other properties and the community, and that the use of the property may be
restricted by police power, the exercise of which is not involved in this case.
Finally, petitioner alleges that 6 Bistekvilles will be constructed out of the
SHT collected. Bistek is the monicker of respondent City Mayor.
The Bistekvilles makes it clear, therefore, that politicians will take the credit
for the tax imposed on real property owners.
On the Garbage Fee
Respondents claim that Ordinance No. S-2235, which is an exercise of police
power, collects on the average from every household a garbage fee in the
meager amount of thirty-three (33) centavos per day compared with the sum
of P1,659.83 that the Quezon City Government annually spends for every
household for garbage collection and waste
management.62ChanRoblesVirtualawlibrary
In addition, there is no double taxation because the ordinance involves a fee.
Even assuming that the garbage fee is a tax, the same cannot be a direct
duplicate tax as it is imposed on a different subject matter and is of a
different kind or character. Based on Villanueva, et al. v. City of
Iloilo63 and Victorias Milling Co., Inc. v. Municipality of Victorias,
etc.,64 there is no “taxing twice” because the real property tax is imposed on
ownership based on its assessed value, while the garbage fee is required on
the domestic household. The only reference to the property is the
determination of the applicable rate and the facility of collection.
Petitioner argues, however, that Ordinance No. S-2235 cannot be justified as
an exercise of police power. The cases of Calalang v. Williams,65Patalinghug
v. Court of Appeals,66 and Social Justice Society (SJS), et al. v. Hon. Atienza,
Jr.,67 which were cited by respondents, are inapplicable since the assailed
ordinance is a revenue measure and does not regulate the disposal or other
aspect of garbage.
The subject ordinance, for petitioner, is discriminatory as it collects garbage
fee only from domestic households and not from restaurants, food courts, fast
food chains, and other commercial dining places that spew garbage much
more than residential property owners.
Petitioner likewise contends that the imposition of garbage fee is tantamount
to double taxation because garbage collection is a basic and essential public
service that should be paid out from property tax, business tax, transfer tax,
amusement tax, community tax certificate, other taxes, and the IRA of the
Quezon City Government. To bolster the claim, he states that the revenue
collection of the Quezon City Government reached Php13.69 billion in 2012.
A small portion of said amount could be spent for garbage collection and
other essential services.
It is further noted that the Quezon City Government already collects garbage
fee under Section 4768 of R.A. No. 9003, or the Ecological Solid Waste
Management Act of 2000, which authorizes LGUs to impose fees in amounts
sufficient to pay the costs of preparing, adopting, and implementing a solid
waste management plan, and that LGUs have access to the Solid Waste
Management (SWM) Fund created under Section 4669 of the same law. Also,
according to petitioner, it is evident that Ordinance No. S-2235 is
inconsistent with R.A. No. 9003 for while the law encourages segregation,
composting, and recycling of waste, the ordinance only emphasizes the
collection and payment of garbage fee; while the law calls for an active
involvement of the barangay in the collection, segregation, and recycling of
garbage, the ordinance skips such mandate.

Lastly, in challenging the ordinance, petitioner avers that the garbage fee was
collected even if the required publication of its approval had not yet elapsed.
He notes that on January 7, 2014, he paid his realty tax which already
included the garbage fee.
The Court’s Ruling
Respondents correctly argued that an ordinance, as in every law, is presumed
valid.
An ordinance carries with it the presumption of validity. The question of
reasonableness though is open to judicial inquiry. Much should be left thus to
the discretion of municipal authorities. Courts will go slow in writing off an
ordinance as unreasonable unless the amount is so excessive as to be
prohibitive, arbitrary, unreasonable, oppressive, or confiscatory. A rule
which has gained acceptance is that factors relevant to such an inquiry are the
municipal conditions as a whole and the nature of the business made subject
to imposition.70
chanroblesvirtuallawlibrary
For an ordinance to be valid though, it must not only be within the corporate
powers of the LGU to enact and must be passed according to the procedure
prescribed by law, it should also conform to the following requirements: (1)
not contrary to the Constitution or any statute; (2) not unfair or oppressive;
(3) not partial or discriminatory; (4) not prohibit but may regulate trade; (5)
general and consistent with public policy; and (6) not unreasonable.71 As
jurisprudence indicates, the tests are divided into the formal (i.e., whether the
ordinance was enacted within the corporate powers of the LGU and whether
it was passed in accordance with the procedure prescribed by law), and the
substantive (i.e., involving inherent merit, like the conformity of the
ordinance with the limitations under the Constitution and the statutes, as well
as with the requirements of fairness and reason, and its consistency with
public policy).72ChanRoblesVirtualawlibrary
An ordinance must pass muster under the test of constitutionality and the test
of consistency with the prevailing laws.73 If not, it is void.74 Ordinance
should uphold the principle of the supremacy of the Constitution.75 As to
conformity with existing statutes, Batangas CATV, Inc. v. Court of
Appeals76 has this to say:
chanRoblesvirtualLawlibrary
It is a fundamental principle that municipal ordinances are inferior in status
and subordinate to the laws of the state. An ordinance in conflict with a state
law of general character and statewide application is universally held to be
invalid. The principle is frequently expressed in the declaration that
municipal authorities, under a general grant of power, cannot adopt
ordinances which infringe the spirit of a state law or repugnant to the general
policy of the state. In every power to pass ordinances given to a municipality,
there is an implied restriction that the ordinances shall be consistent with the
general law. In the language of Justice Isagani Cruz (ret.), this Court,
in Magtajas vs. Pryce Properties Corp., Inc., ruled that:
chanRoblesvirtualLawlibrary
The rationale of the requirement that the ordinances should not contravene a
statute is obvious. Municipal governments are only agents of the national
government. Local councils exercise only delegated legislative powers
conferred on them by Congress as the national lawmaking body. The
delegate cannot be superior to the principal or exercise powers higher than
those of the latter. It is a heresy to suggest that the local government units
can undo the acts of Congress, from which they have derived their power in
the first place, and negate by mere ordinance the mandate of the statute.
chanroblesvirtuallawlibrary
Municipal corporations owe their origin to, and derive their powers and
rights wholly from the legislature. It breathes into them the breath of life,
without which they cannot exist. As it creates, so it may destroy. As it may
destroy, it may abridge and control. Unless there is some constitutional
limitation on the right, the legislature might, by a single act, and if we can
suppose it capable of so great a folly and so great a wrong, sweep from
existence all of the municipal corporations in the State, and the corporation
could not prevent it. We know of no limitation on the right so far as to the
corporation themselves are concerned. They are, so to phrase it, the mere
tenants at will of the legislature.
This basic relationship between the national legislature and the local
government units has not been enfeebled by the new provisions in the
Constitution strengthening the policy of local autonomy. Without meaning to
detract from that policy, we here confirm that Congress retains control of the
local government units although in significantly reduced degree now than
under our previous Constitutions. The power to create still includes the
power to destroy. The power to grant still includes the power to withhold or
recall. True, there are certain notable innovations in the Constitution, like the
direct conferment on the local government units of the power to tax, which
cannot now be withdrawn by mere statute. By and large, however, the
national legislature is still the principal of the local government units, which
cannot defy its will or modify or violate it.77
chanroblesvirtuallawlibrary
LGUs must be reminded that they merely form part of the whole; that the
policy of ensuring the autonomy of local governments was never intended by
the drafters of the 1987 Constitution to create an imperium in imperio and
install an intra-sovereign political subdivision independent of a single
sovereign state.78 “[M]unicipal corporations are bodies politic and corporate,
created not only as local units of local self-government, but as governmental
agencies of the state. The legislature, by establishing a municipal
corporation, does not divest the State of any of its sovereignty; absolve itself
from its right and duty to administer the public affairs of the entire state; or
divest itself of any power over the inhabitants of the district which it
possesses before the charter was granted.”79ChanRoblesVirtualawlibrary
LGUs are able to legislate only by virtue of a valid delegation of legislative
power from the national legislature; they are mere agents vested with what is
called the power of subordinate legislation.80“Congress enacted the LGC as
the implementing law for the delegation to the various LGUs of the State’s
great powers, namely: the police power, the power of eminent domain, and
the power of taxation. The LGC was fashioned to delineate the specific
parameters and limitations to be complied with by each LGU in the exercise
of these delegated powers with the view of making each LGU a fully
functioning subdivision of the State subject to the constitutional and statutory
limitations.”81ChanRoblesVirtualawlibrary
Specifically, with regard to the power of taxation, it is indubitably the most
effective instrument to raise needed revenues in financing and supporting
myriad activities of the LGUs for the delivery of basic services essential to
the promotion of the general welfare and the enhancement of peace, progress,
and prosperity of the people.82 As this Court opined in National Power Corp.
v. City of Cabanatuan:83cralawlawlibrary
In recent years, the increasing social challenges of the times expanded the
scope of state activity, and taxation has become a tool to realize social justice
and the equitable distribution of wealth, economic progress and the
protection of local industries as well as public welfare and similar objectives.
Taxation assumes even greater significance with the ratification of the 1987
Constitution. Thenceforth, the power to tax is no longer vested exclusively
on Congress; local legislative bodies are now given direct authority to levy
taxes, fees and other charges pursuant to Article X, Section 5 of the 1987
Constitution, viz:
chanRoblesvirtualLawlibrary
“Section 5. Each Local Government unit shall have the power to create its
own sources of revenue, to levy taxes, fees and charges subject to such
guidelines and limitations as the Congress may provide, consistent with the
basic policy of local autonomy. Such taxes, fees and charges shall accrue
exclusively to the local governments.”
chanroblesvirtuallawlibrary
This paradigm shift results from the realization that genuine development can
be achieved only by strengthening local autonomy and promoting
decentralization of governance. For a long time, the country’s highly
centralized government structure has bred a culture of dependence among
local government leaders upon the national leadership. It has also “dampened
the spirit of initiative, innovation and imaginative resilience in matters of
local development on the part of local government leaders.” The only way to
shatter this culture of dependence is to give the LGUs a wider role in the
delivery of basic services, and confer them sufficient powers to generate their
own sources for the purpose. To achieve this goal, Section 3 of Article X of
the 1987 Constitution mandates Congress to enact a local government code
that will, consistent with the basic policy of local autonomy, set the
guidelines and limitations to this grant of taxing powers x x x84
chanroblesvirtuallawlibrary
Fairly recently, We also stated in Pelizloy Realty Corporation v. Province of
Benguet85 that:
chanRoblesvirtualLawlibrary
The rule governing the taxing power of provinces, cities, municipalities and
barangays is summarized in Icard v. City Council of Baguio:
chanRoblesvirtualLawlibrary
It is settled that a municipal corporation unlike a sovereign state is clothed
with no inherent power of taxation. The charter or statute must plainly show
an intent to confer that power or the municipality, cannot assume it. And the
power when granted is to be construed in strictissimi juris. Any doubt or
ambiguity arising out of the term used in granting that power must be
resolved against the municipality. Inferences, implications, deductions – all
these – have no place in the interpretation of the taxing power of a municipal
corporation. [Underscoring supplied]
xxxx
Per Section 5, Article X of the 1987 Constitution, “the power to tax is no
longer vested exclusively on Congress; local legislative bodies are now given
direct authority to levy taxes, fees and other charges.” Nevertheless, such
authority is “subject to such guidelines and limitations as the Congress may
provide.”
chanroblesvirtuallawlibrary
In conformity with Section 3, Article X of the 1987 Constitution, Congress
enacted Republic Act No. 7160, otherwise known as the Local Government
Code of 1991. Book II of the LGC governs local taxation and fiscal
matters.86
chanroblesvirtuallawlibrary
Indeed, LGUs have no inherent power to tax except to the extent that such
power might be delegated to them either by the basic law or by the
statute.87 “Under the now prevailing Constitution, where there is neither a
grant nor a prohibition by statute, the tax power must be deemed to exist
although Congress may provide statutory limitations and guidelines. The
basic rationale for the current rule is to safeguard the viability and self-
sufficiency of local government units by directly granting them general and
broad tax powers. Nevertheless, the fundamental law did not intend the
delegation to be absolute and unconditional; the constitutional objective
obviously is to ensure that, while the local government units are being
strengthened and made more autonomous, the legislature must still see to it
that (a) the taxpayer will not be over-burdened or saddled with multiple and
unreasonable impositions; (b) each local government unit will have its fair
share of available resources; (c) the resources of the national government will
not be unduly disturbed; and (d) local taxation will be fair, uniform, and
just.”88ChanRoblesVirtualawlibrary
Subject to the provisions of the LGC and consistent with the basic policy of
local autonomy, every LGU is now empowered and authorized to create its
own sources of revenue and to levy taxes, fees, and charges which shall
accrue exclusively to the local government unit as well as to apply its
resources and assets for productive, developmental, or welfare purposes, in
the exercise or furtherance of their governmental or proprietary powers and
functions.89 The relevant provisions of the LGC which establish the
parameters of the taxing power of the LGUs are as follows:
chanRoblesvirtualLawlibrary
SECTION 130. Fundamental Principles. – The following fundamental
principles shall govern the exercise of the taxing and other revenue-raising
powers of local government units:
(a) Taxation shall be uniform in each local government unit;
(b) Taxes, fees, charges and other impositions shall:
chanRoblesvirtualLawlibrary
(1) be equitable and based as far as practicable on the taxpayer’s ability to
pay;
(2) be levied and collected only for public purposes;

(3) not be unjust, excessive, oppressive, or confiscatory;
(4) not be contrary to law, public policy, national economic policy, or in
restraint of trade;
(c) The collection of local taxes, fees, charges and other impositions shall in
no case be let to any private person;
(d) The revenue collected pursuant to the provisions of this Code shall inure
solely to the benefit of, and be subject to the disposition by, the local
government unit levying the tax, fee, charge or other imposition unless
otherwise specifically provided herein; and,
(e) Each local government unit shall, as far as practicable, evolve a
progressive system of taxation.
chanroblesvirtuallawlibrary
SECTION 133. Common Limitations on the Taxing Powers of Local
Government Units. – Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following:
chanRoblesvirtualLawlibrary
(a) Income tax, except when levied on banks and other financial institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis
causa, except as otherwise provided herein;
(d) Customs duties, registration fees of vessel and wharfage on wharves,
tonnage dues, and all other kinds of customs fees, charges and dues except
wharfage on wharves constructed and maintained by the local government
unit concerned;
(e) Taxes, fees, and charges and other impositions upon goods carried into or
out of, or passing through, the territorial jurisdictions of local government
units in the guise of charges for wharfage, tolls for bridges or otherwise, or
other taxes, fees, or charges in any form whatsoever upon such goods or
merchandise;
(f) Taxes, fees or charges on agricultural and aquatic products when sold by
marginal farmers or fishermen;
(g) Taxes on business enterprises certified to by the Board of Investments as
pioneer or non-pioneer for a period of six (6) and four (4) years, respectively
from the date of registration;
(h) Excise taxes on articles enumerated under the National Internal Revenue
Code, as amended, and taxes, fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or
similar transactions on goods or services except as otherwise provided
herein;
(j) Taxes on the gross receipts of transportation contractors and persons
engaged in the transportation of passengers or freight by hire and common
carriers by air, land or water, except as provided in this Code;
(k) Taxes on premiums paid by way of reinsurance or retrocession;
(l) Taxes, fees or charges for the registration of motor vehicles and for the
issuance of all kinds of licenses or permits for the driving thereof, except
tricycles;
(m) Taxes, fees, or other charges on Philippine products actually exported,
except as otherwise provided herein;
(n) Taxes, fees, or charges, on Countryside and Barangay Business
Enterprises and cooperatives duly registered under R.A. No. 6810 and
Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938)
otherwise known as the “Cooperative Code of the Philippines” respectively;
and

(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities, and local government units.
chanroblesvirtuallawlibrary
SECTION 151. Scope of Taxing Powers. – Except as otherwise provided in
this Code, the city, may levy the taxes, fees, and charges which the province
or municipality may impose: Provided, however, That the taxes, fees and
charges levied and collected by highly urbanized and independent component
cities shall accrue to them and distributed in accordance with the provisions
of this Code.
The rates of taxes that the city may levy may exceed the maximum rates
allowed for the province or municipality by not more than fifty percent
(50%) except the rates of professional and amusement taxes.
SECTION 186. Power To Levy Other Taxes, Fees or Charges. – Local
government units may exercise the power to levy taxes, fees or charges on
any base or subject not otherwise specifically enumerated herein or taxed
under the provisions of the National Internal Revenue Code, as amended, or
other applicable laws: Provided, That the taxes, fees, or charges shall not be
unjust, excessive, oppressive, confiscatory or contrary to declared national
policy: Provided, further, That the ordinance levying such taxes, fees or
charges shall not be enacted without any prior public hearing conducted for
the purpose.
chanroblesvirtuallawlibrary
On the Socialized Housing Tax
Contrary to petitioner’s submission, the 1987 Constitution explicitly
espouses the view that the use of property bears a social function and that all
economic agents shall contribute to the common good.90 The Court already
recognized this in Social Justice Society (SJS), et al. v. Hon. Atienza,
Jr.:91cralawlawlibrary
Property has not only an individual function, insofar as it has to provide for
the needs of the owner, but also a social function insofar as it has to provide
for the needs of the other members of society. The principle is this:
chanRoblesvirtualLawlibrary
Police power proceeds from the principle that every holder of property,
however absolute and unqualified may be his title, holds it under the implied
liability that his use of it shall not be injurious to the equal enjoyment of
others having an equal right to the enjoyment of their property, nor injurious
to the right of the community. Rights of property, like all other social and
conventional rights, are subject to reasonable limitations in their enjoyment
as shall prevent them from being injurious, and to such reasonable restraints
and regulations established by law as the legislature, under the governing and
controlling power vested in them by the constitution, may think necessary
and expedient.92
chanroblesvirtuallawlibrary
Police power, which flows from the recognition that salus populi est suprema
lex (the welfare of the people is the supreme law), is the plenary power
vested in the legislature to make statutes and ordinances to promote the
health, morals, peace, education, good order or safety and general welfare of
the people.93 Property rights of individuals may be subjected to restraints and
burdens in order to fulfill the objectives of the government in the exercise of
police power. 94 In this jurisdiction, it is well-entrenched that taxation may be
made the implement of the state’s police
power.95ChanRoblesVirtualawlibrary
Ordinance No. SP-2095 imposes a Socialized Housing Tax equivalent to
0.5% on the assessed value of land in excess of Php100,000.00. This special
assessment is the same tax referred to in R.A. No. 7279 or the UDHA.96 The
SHT is one of the sources of funds for urban development and housing
program.97Section 43 of the law provides:
chanRoblesvirtualLawlibrary
Sec. 43. Socialized Housing Tax. – Consistent with the constitutional
principle that the ownership and enjoyment of property bear a social function
and to raise funds for the Program, all local government units are hereby
authorized to impose an additional one-half percent (0.5%) tax on the
assessed value of all lands in urban areas in excess of Fifty thousand pesos
(P50,000.00).
chanroblesvirtuallawlibrary
The rationale of the SHT is found in the preambular clauses of the subject
ordinance, to wit:
chanRoblesvirtualLawlibrary
WHEREAS, the imposition of additional tax is intended to provide the City
Government with sufficient funds to initiate, implement and undertake
Socialized Housing Projects and other related preliminary activities;
WHEREAS, the imposition of 0.5% tax will benefit the Socialized Housing
Programs and Projects of the City Government, specifically the marginalized
sector through the acquisition of properties for human settlements;
WHEREAS, the removal of the urban blight will definitely increase fair
market value of properties in the city[.]
chanroblesvirtuallawlibrary
The above-quoted are consistent with the UDHA, which the LGUs are
charged to implement in their respective localities in coordination with the
Housing and Urban Development Coordinating Council, the national housing
agencies, the Presidential Commission for the Urban Poor, the private sector,
and other non-government organizations.98 It is the declared policy of the
State to undertake a comprehensive and continuing urban development and
housing program that shall, among others, uplift the conditions of the
underprivileged and homeless citizens in urban areas and in resettlement
areas, and provide for the rational use and development of urban land in
order to bring about, among others, reduction in urban dysfunctions,
particularly those that adversely affect public health, safety and ecology, and
access to land and housing by the underprivileged and homeless
citizens.99 Urban renewal and resettlement shall include the rehabilitation and
development of blighted and slum areas100 and the resettlement of program
beneficiaries in accordance with the provisions of the
UDHA.101ChanRoblesVirtualawlibrary
Under the UDHA, socialized housing102 shall be the primary strategy in
providing shelter for the underprivileged and homeless.103 The LGU or the
NHA, in cooperation with the private developers and concerned agencies,
shall provide socialized housing or resettlement areas with basic services and
facilities such as potable water, power and electricity, and an adequate power
distribution system, sewerage facilities, and an efficient and adequate solid
waste disposal system; and access to primary roads and transportation
facilities.104 The provisions for health, education, communications, security,
recreation, relief and welfare shall also be planned and be given priority for
implementation by the LGU and concerned agencies in cooperation with the
private sector and the beneficiaries
themselves.105ChanRoblesVirtualawlibrary
Moreover, within two years from the effectivity of the UDHA, the LGUs, in
coordination with the NHA, are directed to implement the relocation and
resettlement of persons living in danger areas such as esteros, railroad tracks,
garbage dumps, riverbanks, shorelines, waterways, and other public places
like sidewalks, roads, parks, and playgrounds.106 In coordination with the
NHA, the LGUs shall provide relocation or resettlement sites with basic
services and facilities and access to employment and livelihood opportunities
sufficient to meet the basic needs of the affected
families.107ChanRoblesVirtualawlibrary
Clearly, the SHT charged by the Quezon City Government is a tax which is
within its power to impose. Aside from the specific authority vested by
Section 43 of the UDHA, cities are allowed to exercise such other powers
and discharge such other functions and responsibilities as are necessary,
appropriate, or incidental to efficient and effective provision of the basic
services and facilities which include, among others, programs and projects
for low-cost housing and other mass dwellings.108 The collections made
accrue to its socialized housing programs and projects. The tax is not a pure
exercise of taxing power or merely to raise revenue; it is levied with a
regulatory purpose. The levy is primarily in the exercise of the police power
for the general welfare of the entire city. It is greatly imbued with public
interest. Removing slum areas in Quezon City is not only beneficial to the
underprivileged and homeless constituents but advantageous to the real
property owners as well. The situation will improve the value of the their
property investments, fully enjoying the same in view of an orderly, secure,
and safe community, and will enhance the quality of life of the poor, making
them law-abiding constituents and better consumers of business products.
Though broad and far-reaching, police power is subordinate to constitutional
limitations and is subject to the requirement that its exercise must be
reasonable and for the public good.109 In the words of City of Manila v. Hon.
Laguio, Jr.:110cralawlawlibrary
The police power granted to local government units must always be
exercised with utmost observance of the rights of the people to due process
and equal protection of the law. Such power cannot be exercised
whimsically, arbitrarily or despotically as its exercise is subject to a
qualification, limitation or restriction demanded by the respect and regard
due to the prescription of the fundamental law, particularly those forming
part of the Bill of Rights. Individual rights, it bears emphasis, may be
adversely affected only to the extent that may fairly be required by the
legitimate demands of public interest or public welfare. Due process requires
the intrinsic validity of the law in interfering with the rights of the person to
his life, liberty and property.
xxxx
To successfully invoke the exercise of police power as the rationale for the
enactment of the Ordinance, and to free it from the imputation of
constitutional infirmity, not only must it appear that the interests of the public
generally, as distinguished from those of a particular class, require an
interference with private rights, but the means adopted must be reasonably
necessary for the accomplishment of the purpose and not unduly oppressive
upon individuals. It must be evident that no other alternative for the
accomplishment of the purpose less intrusive of private rights can work. A
reasonable relation must exist between the purposes of the police measure
and the means employed for its accomplishment, for even under the guise of
protecting the public interest, personal rights and those pertaining to private
property will not be permitted to be arbitrarily invaded.
Lacking a concurrence of these two requisites, the police measure shall be
struck down as an arbitrary intrusion into private rights – a violation of the
due process clause.111
chanroblesvirtuallawlibrary
As with the State, LGUs may be considered as having properly exercised
their police power only if there is a lawful subject and a lawful method or, to
be precise, if the following requisites are met: (1) the interests of the public
generally, as distinguished from those of a particular class, require its
exercise and (2) the means employed are reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon
individuals.112ChanRoblesVirtualawlibrary
In this case, petitioner argues that the SHT is a penalty imposed on real
property owners because it burdens them with expenses to provide funds for
the housing of informal settlers, and that it is a class legislation since it favors
the latter who occupy properties which is not their own and pay no taxes.
We disagree.
Equal protection requires that all persons or things similarly situated should
be treated alike, both as to rights conferred and responsibilities
imposed.113 The guarantee means that no person or class of persons shall be
denied the same protection of laws which is enjoyed by other persons or
other classes in like circumstances.114 Similar subjects should not be treated
differently so as to give undue favor to some and unjustly discriminate
against others.115 The law may, therefore, treat and regulate one class
differently from another class provided there are real and substantial
differences to distinguish one class from
another.116ChanRoblesVirtualawlibrary
An ordinance based on reasonable classification does not violate the
constitutional guaranty of the equal protection of the law. The requirements
for a valid and reasonable classification are: (1) it must rest on substantial
distinctions; (2) it must be germane to the purpose of the law; (3) it must not
be limited to existing conditions only; and (4) it must apply equally to all
members of the same class.117ChanRoblesVirtualawlibrary
For the purpose of undertaking a comprehensive and continuing urban
development and housing program, the disparities between a real property
owner and an informal settler as two distinct classes are too obvious and need
not be discussed at length. The differentiation conforms to the practical
dictates of justice and equity and is not discriminatory within the meaning of
the Constitution. Notably, the public purpose of a tax may legally exist even
if the motive which impelled the legislature to impose the tax was to favor
one over another.118 It is inherent in the power to tax that a State is free to
select the subjects of taxation.119 Inequities which result from a singling out
of one particular class for taxation or exemption infringe no constitutional
limitation.120ChanRoblesVirtualawlibrary
Further, the reasonableness of Ordinance No. SP-2095 cannot be disputed. It
is not confiscatory or oppressive since the tax being imposed therein is below
what the UDHA actually allows. As pointed out by respondents, while the
law authorizes LGUs to collect SHT on lands with an assessed value of more
than P50,000.00, the questioned ordinance only covers lands with an
assessed value exceeding P100,000.00. Even better, on certain conditions,
the ordinance grants a tax credit equivalent to the total amount of the special
assessment paid beginning in the sixth (6th) year of its effectivity. Far from
being obnoxious, the provisions of the subject ordinance are fair and just.
On the Garbage Fee
In the United States of America, it has been held that the authority of a
municipality to regulate garbage falls within its police power to protect
public health, safety, and welfare.121 As opined, the purposes and policy
underpinnings of the police power to regulate the collection and disposal of
solid waste are: (1) to preserve and protect the public health and welfare as
well as the environment by minimizing or eliminating a source of disease and
preventing and abating nuisances; and (2) to defray costs and ensure financial
stability of the system for the benefit of the entire community, with the sum
of all charges marshalled and designed to pay for the expense of a systemic
refuse disposal scheme.122ChanRoblesVirtualawlibrary
Ordinances regulating waste removal carry a strong presumption of
validity.123 Not surprisingly, the overwhelming majority of U.S. cases
addressing a city's authority to impose mandatory garbage service and fees
have upheld the ordinances against constitutional and statutory
challenges.124ChanRoblesVirtualawlibrary
A municipality has an affirmative duty to supervise and control the collection
of garbage within its corporate limits.125 The LGC specifically assigns the
responsibility of regulation and oversight of solid waste to local governing
bodies because the Legislature determined that such bodies were in the best
position to develop efficient waste management programs.126 To impose on
local governments the responsibility to regulate solid waste but not grant
them the authority necessary to fulfill the same would lead to an absurd
result.”127 As held in one U.S. case:
chanRoblesvirtualLawlibrary
x x x When a municipality has general authority to regulate a particular
subject matter, the manner and means of exercising those powers, where not
specifically prescribed by the legislature, are left to the discretion of the
municipal authorities. x x x Leaving the manner of exercising municipal
powers to the discretion of municipal authorities "implies a range of
reasonableness within which a municipality's exercise of discretion will not
be interfered with or upset by the judiciary."128
chanroblesvirtuallawlibrary
In this jurisdiction, pursuant to Section 16 of the LGC and in the proper
exercise of its corporate powers under Section 22 of the same,
the Sangguniang Panlungsod of Quezon City, like other local legislative
bodies, is empowered to enact ordinances, approve resolutions, and
appropriate funds for the general welfare of the city and its
inhabitants.129 Section 16 of the LGC provides:
chanRoblesvirtualLawlibrary
SECTION 16. General Welfare. – Every local government unit shall exercise
the powers expressly granted, those necessarily implied therefrom, as well as
powers necessary, appropriate, or incidental for its efficient and effective
governance, and those which are essential to the promotion of the general
welfare. Within their respective territorial jurisdictions, local government
units shall ensure and support, among other things, the preservation and
enrichment of culture, promote health and safety, enhance the right of the
people to a balanced ecology, encourage and support the development of
appropriate and self-reliant scientific and technological capabilities, improve
public morals, enhance economic prosperity and social justice, promote full
employment among their residents, maintain peace and order, and preserve
the comfort and convenience of their inhabitants.
chanroblesvirtuallawlibrary
The general welfare clause is the delegation in statutory form of the police
power of the State to LGUs.130The provisions related thereto are liberally
interpreted to give more powers to LGUs in accelerating economic
development and upgrading the quality of life for the people in the
community.131 Wide discretion is vested on the legislative authority to
determine not only what the interests of the public require but also what
measures are necessary for the protection of such interests since
the Sanggunian is in the best position to determine the needs of its
constituents.132ChanRoblesVirtualawlibrary
One of the operative principles of decentralization is that, subject to the
provisions of the LGC and national policies, the LGUs shall share with the
national government the responsibility in the management and maintenance
of ecological balance within their territorial jurisdiction.133 In this regard,
cities are allowed to exercise such other powers and discharge such other
functions and responsibilities as are necessary, appropriate, or incidental to
efficient and effective provision of the basic services and facilities which
include, among others, solid waste disposal system or environmental
management system and services or facilities related to general hygiene and
sanitation.134 R.A. No. 9003, or the Ecological Solid Waste Management Act
of 2000,135 affirms this authority as it expresses that the LGUs shall be
primarily responsible for the implementation and enforcement of its
provisions within their respective jurisdictions while establishing a
cooperative effort among the national government, other local government
units, non-government organizations, and the private
sector.136ChanRoblesVirtualawlibrary
Necessarily, LGUs are statutorily sanctioned to impose and collect such
reasonable fees and charges for services rendered.137 “Charges” refer to
pecuniary liability, as rents or fees against persons or property, while “Fee”
means a charge fixed by law or ordinance for the regulation or inspection of
a business or activity.138ChanRoblesVirtualawlibrary
The fee imposed for garbage collections under Ordinance No. SP-2235 is a
charge fixed for the regulation of an activity. The basis for this could be
discerned from the foreword of said Ordinance, to wit:
chanRoblesvirtualLawlibrary
WHEREAS, Quezon City being the largest and premiere city in the
Philippines in terms of population and urban geographical areas, apart from
being competent and efficient in the delivery of public service, apparently
requires a big budgetary allocation in order to address the problems relative
and connected to the prompt and efficient delivery of basic services such as
the effective system of waste management, public information programs on
proper garbage and proper waste disposal, including the imposition of waste
regulatory measures;
WHEREAS, to help augment the funds to be spent for the city’s waste
management system, the City Government through the Sangguniang
Panlungsod deems it necessary to impose a schedule of reasonable fees or
charges for the garbage collection services for residential (domestic
household) that it renders to the public.
chanroblesvirtuallawlibrary
Certainly, as opposed to petitioner’s opinion, the garbage fee is not a tax.
In Smart Communications, Inc. v. Municipality of Malvar, Batangas,139 the
Court had the occasion to distinguish these two concepts:
chanRoblesvirtualLawlibrary
In Progressive Development Corporation v. Quezon City, the Court declared
that “if the generating of revenue is the primary purpose and regulation is
merely incidental, the imposition is a tax; but if regulation is the primary
purpose, the fact that incidentally revenue is also obtained does not make the
imposition a tax.”
In Victorias Milling Co., Inc. v. Municipality of Victorias, the Court
reiterated that the purpose and effect of the imposition determine whether it
is a tax or a fee, and that the lack of any standards for such imposition gives
the presumption that the same is a tax.
We accordingly say that the designation given by the municipal authorities
does not decide whether the imposition is properly a license tax or a license
fee. The determining factors are the purpose and effect of the imposition as
may be apparent from the provisions of the ordinance. Thus, “[w]hen no
police inspection, supervision, or regulation is provided, nor any standard set
for the applicant to establish, or that he agrees to attain or maintain, but any
and all persons engaged in the business designated, without qualification or
hindrance, may come, and a license on payment of the stipulated sum will
issue, to do business, subject to no prescribed rule of conduct and under no
guardian eye, but according to the unrestrained judgment or fancy of the
applicant and licensee, the presumption is strong that the power of taxation,
and not the police power, is being exercised.”
chanroblesvirtuallawlibrary
In Georgia, U.S.A., assessments for garbage collection services have been
consistently treated as a fee and not a tax.140 In another U.S. case,141 the
garbage fee was considered as a "service charge" rather than a tax as it was
actually a fee for a service given by the city which had previously been
provided at no cost to its citizens.
Hence, not being a tax, the contention that the garbage fee under Ordinance
No. SP-2235 violates the rule on double taxation142 must necessarily fail.
Nonetheless, although a special charge, tax, or assessment may be imposed
by a municipal corporation, it must be reasonably commensurate to the cost
of providing the garbage service.143 To pass judicial scrutiny, a regulatory fee
must not produce revenue in excess of the cost of the regulation because such
fee will be construed as an illegal tax when the revenue generated by the
regulation exceeds the cost of the regulation.144ChanRoblesVirtualawlibrary
Petitioner argues that the Quezon City Government already collects garbage
fee under Section 47 of R.A. No. 9003, which authorizes LGUs to impose
fees in amounts sufficient to pay the costs of preparing, adopting, and
implementing a solid waste management plan, and that it has access to the
SWM Fund under Section 46 of the same law. Moreover, Ordinance No. S-
2235 is inconsistent with R.A. No. 9003, because the ordinance emphasizes
the collection and payment of garbage fee with no concern for segregation,
composting and recycling of wastes. It also skips the mandate of the law
calling for the active involvement of the barangay in the collection,
segregation, and recycling of garbage.
We now turn to the pertinent provisions of R.A. No. 9003.
Under R.A. No. 9003, it is the declared policy of the State to adopt a
systematic, comprehensive and ecological solid waste management program
which shall, among others, ensure the proper segregation, collection,
transport, storage, treatment and disposal of solid waste through the
formulation and adoption of the best environmental practices in ecological
waste management.145 The law provides that segregation and collection of
solid waste shall be conducted at the barangay level, specifically for
biodegradable, compostable and reusable wastes, while the collection of non-
recyclable materials and special wastes shall be the responsibility of the
municipality or city.146 Mandatory segregation of solid wastes shall primarily
be conducted at the source, to include household, institutional, industrial,
commercial and agricultural sources.147Segregation at source refers to a solid
waste management practice of separating, at the point of origin, different
materials found in solid waste in order to promote recycling and re-use of
resources and to reduce the volume of waste for collection and
disposal.148 Based on Rule XVII of the Department of Environment and
Natural Resources (DENR) Administrative Order No. 2001-34, Series of
2001,149 which is the Implementing Rules and Regulations (IRR) of R.A. No.
9003, barangays shall be responsible for the collection, segregation, and
recycling of biodegradable, recyclable, compostable and reusable
wastes.150 For the purpose, a Materials Recovery Facility (MRF), which shall
receive biodegradable wastes for composting and mixed non-biodegradable
wastes for final segregation, re-use and recycling, is to be established in
every barangay or cluster of barangays.151ChanRoblesVirtualawlibrary
According to R.A. 9003, an LGU, through its local solid waste management
board, is mandated by law to prepare a 10-year solid waste management plan
consistent with the National Solid Waste Management Framework.152 The
plan shall be for the re-use, recycling and composting of wastes generated in
its jurisdiction; ensure the efficient management of solid waste generated
within its jurisdiction; and place primary emphasis on implementation of all
feasible re-use, recycling, and composting programs while identifying the
amount of landfill and transformation capacity that will be needed for solid
waste which cannot be re-used, recycled, or composted.153 One of the
components of the solid waste management plan is source reduction:
chanRoblesvirtualLawlibrary
(e) Source reduction – The source reduction component shall include a
program and implementation schedule which shows the methods by which
the LGU will, in combination with the recycling and composting
components, reduce a sufficient amount of solid waste disposed of in
accordance with the diversion requirements of Section 20.
The source reduction component shall describe the following:
chanRoblesvirtualLawlibrary
(1) strategies in reducing the volume of solid waste generated at source;
(2) measures for implementing such strategies and the resources necessary to
carry out such activities;
(3) other appropriate waste reduction technologies that may also be
considered, provided that such technologies conform with the standards set
pursuant to this Act;
(4) the types of wastes to be reduced pursuant to Section 15 of this Act;
(5) the methods that the LGU will use to determine the categories of solid
wastes to be diverted from disposal at a disposal facility through re-use,
recycling and composting; and
(6) new facilities and of expansion of existing facilities which will be needed
to implement re-use, recycling and composting.
chanroblesvirtuallawlibrary
The LGU source reduction component shall include the evaluation and
identification of rate structures and fees for the purpose of reducing the
amount of waste generated, and other source reduction strategies, including
but not limited to, programs and economic incentives provided under Sec. 45
of this Act to reduce the use of non-recyclable materials, replace disposable
materials and products with reusable materials and products, reduce
packaging, and increase the efficiency of the use of paper, cardboard, glass,
metal, and other materials. The waste reduction activities of the community
shall also take into account, among others, local capability, economic
viability, technical requirements, social concerns, disposition of residual
waste and environmental impact: Provided, That, projection of future
facilities needed and estimated cost shall be incorporated in the plan. x x x154
chanroblesvirtuallawlibrary
The solid waste management plan shall also include an implementation
schedule for solid waste diversion:
chanRoblesvirtualLawlibrary
SEC. 20. Establishing Mandatory Solid Waste Diversion. – Each LGU plan
shall include an implementation schedule which shows that within five (5)
years after the effectivity of this Act, the LGU shall divert at least 25% of all
solid waste from waste disposal facilities through re-use, recycling, and
composting activities and other resource recovery activities: Provided, That
the waste diversion goals shall be increased every three (3) years
thereafter: Provided, further, That nothing in this Section prohibits a local
government unit from implementing re-use, recycling, and composting
activities designed to exceed the goal.
chanroblesvirtuallawlibrary
The baseline for the twenty-five percent (25%) shall be derived from the
waste characterization result155that each LGU is mandated to
undertake.156ChanRoblesVirtualawlibrary
In accordance with Section 46 of R.A. No. 9003, the LGUs are entitled to
avail of the SWM Fund on the basis of their approved solid waste
management plan. Aside from this, they may also impose SWM Fees under
Section 47 of the law, which states:
chanRoblesvirtualLawlibrary
SEC. 47. Authority to Collect Solid Waste Management Fees – The local
government unit shall impose fees in amounts sufficient to pay the costs of
preparing, adopting, and implementing a solid waste management plan
prepared pursuant to this Act. The fees shall be based on the following
minimum factors:
chanRoblesvirtualLawlibrary
(a) types of solid waste;
(b) amount/volume of waste; and
(c) distance of the transfer station to the waste management facility.
chanroblesvirtuallawlibrary
The fees shall be used to pay the actual costs incurred by the LGU in
collecting the local fees. In determining the amounts of the fees, an LGU
shall include only those costs directly related to the adoption and
implementation of the plan and the setting and collection of the local fees.
chanroblesvirtuallawlibrary
Rule XVII of the IRR of R.A. No. 9003 sets forth the details:
chanRoblesvirtualLawlibrary
Section 1. Power to Collect Solid Waste Management Fees. – The Local
SWM Board/Local SWM Cluster Board shall impose fees on the SWM
services provided for by the LGU and/or any authorized organization or unit.
In determining the amounts of the fees, a Local SWM Board/Local SWM
Cluster Board shall include only those costs directly related to the adoption
and implementation of the SWM Plan and the setting and collection of the
local fees. This power to impose fees may be ceded to the private sector and
civil society groups which have been duly accredited by the Local SWM
Board/Local SWM Cluster Board; provided, the SWM fees shall be covered
by a Contract or Memorandum of Agreement between the respective board
and the private sector or civil society group.
The fees shall pay for the costs of preparing, adopting and implementing a
SWM Plan prepared pursuant to the Act. Further, the fees shall also be used
to pay the actual costs incurred in collecting the local fees and for project
sustainability.
Section 2. Basis of SWM Service Fees
Reasonable SWM service fees shall be computed based on but not limited to
the following minimum factors:
chanRoblesvirtualLawlibrary
a) Types of solid waste to include special waste
b) amount/volume of waste
c) distance of the transfer station to the waste management facility
d) capacity or type of LGU constituency
e) cost of construction
f) cost of management
g) type of technology
chanroblesvirtuallawlibrary
Section 3. Collection of Fees. – Fees may be collected corresponding to the
following levels:
chanRoblesvirtualLawlibrary
a) Barangay – The Barangay may impose fees for collection and segregation
of biodegradable, compostable and reusable wastes from households,
commerce, other sources of domestic wastes, and for the use of Barangay
MRFs. The computation of the fees shall be established by the respective
SWM boards. The manner of collection of the fees shall be dependent on the
style of administration of respective Barangay Councils. However, all
transactions shall follow the Commission on Audit rules on collection of
fees.
b) Municipality – The municipal and city councils may impose fees on the
barangay MRFs for the collection and transport of non-recyclable and special
wastes and for the disposal of these into the sanitary landfill. The level and
procedure for exacting fees shall be defined by the Local SWM Board/Local
SWM Cluster Board and supported by LGU ordinances, however, payments
shall be consistent with the accounting system of government. of the Constitution and the provisions of the LGC that an ordinance must be
equitable and based as far as practicable on the taxpayer’s ability to pay, and
c) Private Sector/Civil Society Group – On the basis of the stipulations of not unjust, excessive, oppressive,
contract or Memorandum of Agreement, the private sector or civil society confiscatory.158ChanRoblesVirtualawlibrary
group shall impose fees for collection, transport and tipping in their SLFs.
Receipts and invoices shall be issued to the paying public or to the In the subject ordinance, the rates of the imposable fee depend on land or
government. floor area and whether the payee is an occupant of a lot, condominium, social
chanroblesvirtuallawlibrary housing project or apartment. For easy reference, the relevant provision is
again quoted below:
From the afore-quoted provisions, it is clear that the authority of a chanRoblesvirtualLawlibrary
municipality or city to impose fees is limited to the collection and transport
of non-recyclable and special wastes and for the disposal of these into the On all domestic households in Quezon City;
sanitary landfill. Barangays, on the other hand, have the authority to impose
fees for the collection and segregation of biodegradable, compostable and LAND AREA IMPOSABLE FEE
reusable wastes from households, commerce, other sources of domestic
Less than 200 sq. m. PHP 100.00
wastes, and for the use of barangay MRFs. This is but consistent with Section
10 of R.A. No. 9003 directing that segregation and collection of 201 sq. m. – 500 sq. m. PHP 200.00
biodegradable, compostable and reusable wastes shall be conducted at the
barangay level, while the collection of non-recyclable materials and special 501 sq. m. – 1,000 sq. m. PHP 300.00
wastes shall be the responsibility of the municipality or city.
1,001 sq. m. – 1,500 sq. m. PHP 400.00
In this case, the alleged bases of Ordinance No. S-2235 in imposing the
garbage fee is the volume of waste currently generated by each person in 1,501 sq. m. – 2,000 sq. m. or
PHP 500.00
Quezon City, which purportedly stands at 0.66 kilogram per day, and the more
increasing trend of waste generation for the past three years.157 Respondents
On all condominium unit and socialized housing projects/units in Quezon
did not elaborate any further. The figure presented does not reflect the
City;
specific types of wastes generated – whether residential, market, commercial,
industrial, construction/demolition, street waste, agricultural, agro-industrial, FLOOR AREA IMPOSABLE FEE
institutional, etc. It is reasonable, therefore, for the Court to presume that
such amount pertains to the totality of wastes, without any distinction, Less than 40 sq. m. PHP25.00
generated by Quezon City constituents. To reiterate, however, the authority
of a municipality or city to impose fees extends only to those related to the 41 sq. m. – 60 sq. m. PHP50.00
collection and transport of non-recyclable and special wastes.
61 sq. m. – 100 sq. m. PHP75.00
Granting, for the sake of argument, that the 0.66 kilogram of solid waste per
101 sq. m. – 150 sq. m. PHP100.00
day refers only to non-recyclable and special wastes, still, We cannot sustain
the validity of Ordinance No. S-2235. It violates the equal protection clause
151 sq. m. – 200 sq. [m.] or
PHP200.00
more
On high-rise Condominium Units
a) High-rise Condominium – The Homeowners Association of high rise
condominiums shall pay the annual garbage fee on the total size of the
entire condominium and socialized Housing Unit and an additional
garbage fee shall be collected based on area occupied for every unit
already sold or being amortized.
b) High-rise apartment units – Owners of high-rise apartment units shall pay
the annual garbage fee on the total lot size of the entire apartment and an
additional garbage fee based on the schedule prescribed herein for every
unit occupied.
For the purpose of garbage collection, there is, in fact, no substantial
distinction between an occupant of a lot, on one hand, and an occupant of a
unit in a condominium, socialized housing project or apartment, on the other
hand. Most likely, garbage output produced by these types of occupants is
uniform and does not vary to a large degree; thus, a similar schedule of fee is
both just and equitable.159ChanRoblesVirtualawlibrary
The rates being charged by the ordinance are unjust and inequitable: a
resident of a 200 sq. m. unit in a condominium or socialized housing project
has to pay twice the amount than a resident of a lot similar in size; unlike unit
occupants, all occupants of a lot with an area of 200 sq. m. and less have to
pay a fixed rate of Php100.00; and the same amount of garbage fee is
imposed regardless of whether the resident is from a condominium or from a
socialized housing project.
Indeed, the classifications under Ordinance No. S-2235 are not germane to its
declared purpose of “promoting shared responsibility with the residents to
attack their common mindless attitude in over-consuming the present
resources and in generating waste.”160 Instead of simplistically categorizing
the payee into land or floor occupant of a lot or unit of a condominium,
socialized housing project or apartment, respondent City Council should
have considered factors that could truly measure the amount of wastes
generated and the appropriate fee for its collection. Factors include, among
others, household age and size, accessibility to waste collection, population
density of the barangay or district, capacity to pay, and actual occupancy of
the property. R.A. No. 9003 may also be looked into for guidance. Under
said law, SWM service fees may be computed based on minimum factors
such as types of solid waste to include special waste, amount/volume of
waste, distance of the transfer station to the waste management facility,
capacity or type of LGU constituency, cost of construction, cost of
management, and type of technology. With respect to utility rates set by
municipalities, a municipality has the right to classify consumers under
reasonable classifications based upon factors such as the cost of service, the
purpose for which the service or the product is received, the quantity or the
amount received, the different character of the service furnished, the time of
its use or any other matter which presents a substantial difference as a ground
of distinction.161cralawlawlibrary
[A] lack of uniformity in the rate charged is not necessarily unlawful
discrimination. The establishment of classifications and the charging of
different rates for the several classes is not unreasonable and does not violate
the requirements of equality and uniformity. Discrimination to be unlawful
must draw an unfair line or strike an unfair balance between those in like
circumstances having equal rights and privileges. Discrimination with respect
to rates charged does not vitiate unless it is arbitrary and without a reasonable
fact basis or justification.162
chanroblesvirtuallawlibrary
On top of an unreasonable classification, the penalty clause of Ordinance No.
SP-2235, which states:
chanRoblesvirtualLawlibrary
SECTION 3. Penalty Clause – A penalty of 25% of the garbage fee due plus
an interest of 2% per month or a fraction thereof (interest) shall be charged
against a household owner who refuses to pay the garbage fee herein
imposed.
chanroblesvirtuallawlibrary
lacks the limitation required by Section 168 of the LGC, which provides:
chanRoblesvirtualLawlibrary
SECTION 168. Surcharges and Penalties on Unpaid Taxes, Fees, or
Charges. – The sanggunian may impose a surcharge not exceeding twenty-
five (25%) of the amount of taxes, fees or charges not paid on time and an
interest at the rate not exceeding two percent (2%) per month of the unpaid
taxes, fees or charges including surcharges, until such amount is fully paid
but in no case shall the total interest on the unpaid amount or portion
thereof exceed thirty-six (36) months. (Emphasis supplied)
chanroblesvirtuallawlibrary
Finally, on the issue of publication of the two challenged ordinances.
Petitioner argues that the garbage fee was collected even if the required
publication of its approval had not yet elapsed. He notes that he paid his
realty tax on January 7, 2014 which already included the garbage fee.
Respondents counter that if the law provides for its own effectivity,
publication in the Official Gazette is not necessary so long as it is not penal
in nature. Allegedly, Ordinance No. SP-2095 took effect after its publication
while Ordinance No. SP-2235 became effective after its approval on
December 26, 2013.
The pertinent provisions of the LGC state:
chanRoblesvirtualLawlibrary
SECTION 59. Effectivity of Ordinances or Resolutions. – (a) Unless
otherwise stated in the ordinance or the resolution approving the local
development plan and public investment program, the same shall take effect
after ten (10) days from the date a copy thereof is posted in a bulletin
board at the entrance of the provincial capitol or city, municipal, or barangay
hall, as the case may be, and in at least two (2) other conspicuous places in
the local government unit concerned.
(b) The secretary to the sanggunian concerned shall cause the posting of an
ordinance or resolution in the bulletin board at the entrance of the provincial
capitol and the city, municipal, or barangay hall in at least two (2)
conspicuous places in the local government unit concerned not later than five
(5) days after approval thereof.
The text of the ordinance or resolution shall be disseminated and posted in
Filipino or English and in the language or dialect understood by the majority
of the people in the local government unit concerned, and the secretary to the
sanggunian shall record such fact in a book kept for the purpose, stating the
dates of approval and posting.
(c) The gist of all ordinances with penal sanctions shall be published in a
newspaper of general circulation within the province where the local
legislative body concerned belongs. In the absence of any newspaper of
general circulation within the province, posting of such ordinances shall be
made in all municipalities and cities of the province where the sanggunian of
origin is situated.
(d) In the case of highly urbanized and independent component cities, the
main features of the ordinance or resolution duly enacted or adopted shall, in
addition to being posted, be published once in a local newspaper of
general circulation within the city: Provided, That in the absence thereof
the ordinance or resolution shall be published in any newspaper of
general circulation.
SECTION 188. Publication of Tax Ordinances and Revenue Measures. –
Within ten (10) days after their approval, certified true copies of all
provincial, city, and municipal tax ordinances or revenue measures shall
be published in full for three (3) consecutive days in a newspaper of local
circulation: Provided, however, That in provinces, cities and municipalities
where there are no newspapers of local circulation, the same may be posted
in at least two (2) conspicuous and publicly accessible places. (Emphasis
supplied)
chanroblesvirtuallawlibrary
On October 17, 2011, respondent Quezon City Council enacted Ordinance
No. SP-2095, which provides that it would take effect after its publication in
a newspaper of general circulation.163 On the other hand, Ordinance No. SP-
2235, which was passed by the City Council on December 16, 2013, provides
that it would be effective upon its approval.164 Ten (10) days after its
enactment, or on December 26, 2013, respondent City Mayor approved the
same.165ChanRoblesVirtualawlibrary
The case records are bereft of any evidence to prove petitioner’s negative
allegation that respondents did not comply with the posting and publication
requirements of the law. Thus, We are constrained not to give credit to his
unsupported claim.

WHEREFORE, the petition is PARTIALLY GRANTED. The

constitutionality and legality of Ordinance No. SP-2095, S-2011, or the
“Socialized Housing Tax of Quezon City,” is SUSTAINED for being
consistent with Section 43 of Republic Act No. 7279. On the other hand,
Ordinance No. SP-2235, S-2013, which collects an annual garbage fee on all
domestic households in Quezon City, is hereby declared
as UNCONSTITUTIONAL AND ILLEGAL. Respondents
are DIRECTED to REFUND with reasonable dispatch the sums of money
collected relative to its enforcement.

The temporary restraining order issued by the Court on February 5, 2014

is LIFTED with respect to Ordinance No. SP-2095. In contrast, respondents
are PERMANENTLY ENJOINED from taking any further action to
enforce Ordinance No. SP. 2235.

SO ORDERED.cralawlawlibrary
THIRD DIVISION
G.R. No. 192463, July 13, 2015
OMAIRA LOMONDOT AND SARIPA
LOMONDOT, Petitioners, v. HON. RASAD G. BALINDONG,
PRESIDING JUDGE, SHARI'A DISTRICT COURT, 4TH SHARI'A
JUDICIAL DISTRICT, MARAWI CITY, LANAO DEL SUR AND
AMBOG PANGANDAMUN AND SIMBANATAO
DIACA, Respondents.
DECISION
PERALTA, J.:
Before us is a petition for certiorari with prayer for the issuance of a writ of
demolition seeking to annul the Order1 dated November 9, 2009 of the
Shari'a District Court (SDC), Fourth Shari'a Judicial District, Marawi City,
issued in Civil Case No. 055-91, denying petitioners' motion for the issuance
of a writ of demolition, and the Orders2 dated January 5, 2010 and February
10, 2010 denying petitioners' first and second motions for reconsideration,
respectively.
The antecedent facts are as follows:LawlibraryofCRAlaw
On August 16, 1991, petitioners Omaira and Saripa Lomondot filed with the
SDC, Marawi City, a complaint for recovery of possession and damages with
prayer for mandatory injunction and temporary restraining order against
respondents Ambog Pangandamun (Pangandamun) and Simbanatao Diaca
(Diaca). Petitioners claimed that they are the owners by succession of a
parcel of land located at Bangon, Marawi City, consisting an area of about
800 sq. meters; that respondent Pangandamun illegally entered and
encroached 100 sq. meter of their land, while respondent Diaca occupied 200
sq. meters, as indicated in Exhibits “A” and “K” submitted as evidence.
Respondents filed their Answer arguing that they are the owners of the land
alleged to be illegally occupied. Trial thereafter ensued.
On January 31, 2005, the SDC rendered a Decision,3 the dispositive portion
of which reads:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
WHEREFORE, judgment is rendered as follows:LawlibraryofCRAlaw
1. DECLARING plaintiffs owners of the 800 square meter land borrowed
and turned over by BPI and described in the complaint and Exhibits “A” and
“K”;
2. ORDERING defendants to VACATE the portions or areas they illegally
encroached as indicated in Exhibits “A” and “K” and to REMOVE whatever
improvements thereat introduced;
3. ORDERING defendants to jointly and severally pay plaintiffs (a)
P50,000.00 as moral damages; (b) P30,000.00 as exemplary damages; (C)
P50,000.00 as attorney's fees and the costs of the suit.
SO ORDERED 4
Respondents filed an appeal5 with us and petitioners were required to file
their Comment thereto. In a Resolution6 dated March 28, 2007, we dismissed
the petition for failure of respondents to sufficiently show that a grave abuse
of discretion was committed by the SDC as the decision was in accord with
the facts and the applicable law and jurisprudence. Respondents' motion for
reconsideration was denied with finality on September 17, 2007.7 The SDC
Decision dated January 31, 2005 became final and executory on October 31,
2007 and an entry of judgment8 was subsequently made.
Petitioners filed a motion9 for issuance of a writ of execution with prayer for
a writ of demolition.
On February 7, 2008, the SDC granted the motion10 for a writ of execution
and the writ was issued with the following fallo:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
NOW THEREFORE, you are hereby commanded to cause the execution of
the aforesaid judgment. If defendants do not vacate the premises and remove
the improvements, you must secure a special order of the court to destroy,
demolish or remove the improvements on the property. The total amount
awarded to and demanded by the prevailing party is P150,000.00 (damages,
attorney's fees and the cost) which defendants must satisfy, pursuant to
Section 8 (d) and (e), Rule 39, Rules of Court. 11
12
The Sheriff then sent a demand letter to respondents for their compliance.
On February 3, 2009, petitioners filed a Motion13 for the Issuance of a Writ
of Demolition to implement the SDC Decision dated January 31, 2005. The
motion was set for hearing.
On March 4, 2009, the SDC issued an Order14 reading as
follows:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
The plaintiffs, the prevailing party, filed a Motion for Writ of Demolition and
the motion was set for hearing on February 16, 2009. On this date, the
plaintiffs, without counsel, appeared. The defendants failed to appear. Thus,
the court issued an order submitting the motion for resolution.
Resolution of the motion for issuance of a Writ of Demolition should be held
in abeyance. First, defendant Ambog Pangandamun has filed on February 6,
2009 an Urgent Manifestation praying deferment of the hearing on the
motion for writ of execution. Second, Atty. Dimnatang T. Saro filed on
February 13, 2009 a Notice of Appearance with Motion to Postpone the
hearing set on February 16, 2009 to study the records of the case as the
records are not yet in his possession. Third, the recent periodic report dated
January 26, 2009 of the Sheriff shows Sultan Alioden of Kabasaran is
negotiating the parties whereby the defendant Ambog Pangandamun will be
made to pay the five (5)-meter land of the plaintiffs encroached by him and
that what remains to be ironed out is the fixing of the amount.
WHEREFORE, the resolution on the Motion for Writ of Demolition is
HELD IN ABEYANCE. The Sheriff is DIRECTED to exert efforts to bring
the parties back to the negotiating table seeing to it that Sultan Alioden of
Kabasaran is involved in the negotiation. Atty. Saro is REQUIRED to file his
comment on the motion for writ of execution within fifteen (15) days from
notice to guide the court in resolving the incident in the event the negotiation
fails.
SO ORDERED.15
On May 5, 2009, the SDC issued another Order16 which held in abeyance the
resolution of the motion for issuance of a writ of demolition and granted an
ocular inspection or actual measurement of petitioners' 800-sq.-meter land.
The SDC issued another Order17 dated May 14, 2009, which stated, among
others, that:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
While the decision has become final and executory and a Writ of Execution
has been issued, there are instances when a Writ of Execution cannot be
enforced as when there is a supervening event that prevents the Sheriff to
execute a Writ of Execution.
The defendants claimed they have not encroached as they have already
complied with the Writ of Execution and their buildings are not within the
area claimed by the plaintiffs. This to the Court is the supervening event, thus
the order granting the request of Atty. Jimmy Saro, counsel for the
defendants, to conduct a survey to determine whether there is encroachment
or not. Thus, the Order dated May 5, 2009.
Wherefore, Engr. Hakim Laut Balt is hereby commissioned to conduct a
survey of the 800 square meters claimed by the plaintiffs. Said Eng. Balt is
given a period of one (1) month from notice within which to conduct the
survey in the presence of the parties.18

19
On November 9, 2009, the SDC issued the assailed Order denying
petitioners' motion for demolition. The Order reads in
full:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
It was on February 3, 2009 that the plaintiffs filed a Motion for Issuance of a
Writ of Demolition. The defendants filed their comment thereto on March
24, 2009. They prayed that an ocular inspection and/or actual measurement
of the 800 square meter land of the plaintiffs be made which the court
granted, in the greater interest of justice, considering that defendants claimed
to have complied with the writ of execution, hence there is no more
encroachment of plaintiffs’ land.
The intercession of concerned leaders to effect amicable settlement and the
order to conduct a survey justified the holding in abeyance of the resolution
of the pending incident, motion for writ of demolition.
After attempts for settlement failed and after the commissioned Geodetic
Engineer to conduct the needed survey asked for relief, plaintiffs asked anew
for a writ of demolition. Defendants opposed the grant of the motion,
alleging compliance with the writ of execution, and prayed for appointment
of another Geodetic Engineer to conduct a survey and actual measurement of
plaintiffs' 800 square meter land.
At this point in time, the court cannot issue a special order to destroy,
demolish or remove defendants' houses, considering their claim that they no
longer encroach any portion of plaintiffs’ land.
Gleaned from Engineer Hakim Laut Balt's Narrative Report, he could have
conducted the required survey had not the plaintiffs dictated him where to
start the survey.
WHERFORE, the motion for issuance of a writ of demolition is DENIED. A
survey is still the best way to find out if indeed defendants' houses are within
plaintiffs' 800 square meter land. Parties are, therefore, directed to choose
and submit to the court their preferred Geodetic Engineer to conduct the
survey within ten (10) days from notice. 20
Petitioners filed their motion for reconsideration which the SDC denied in an
Order21 dated January 5, 2010 saying that the motion failed to state the
timeliness of the filing of said motion and failed to comply with the
requirements of notice of hearing. Petitioners' second motion for
reconsideration was also denied in an Order22 dated February 10, 2010. The
SDC directed the parties to choose and submit their preferred Geodetic
Engineer to conduct the survey within 15 days from notice.
Undaunted, petitioners filed with the CA-Cagayan de Oro City a petition
for certiorari assailing the Orders issued by the SDC on November 9, 2009,
January 5, 2010 and February 10, 2010.
In a Resolution23 dated April 27, 2010, the CA dismissed the petition for lack
of jurisdiction, saying, among others, that:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
xxxx
In pursuing the creation of Shari'a Appellate Court, the Supreme Court En
Banc even approved A.M. No. 99-4-06, otherwise known as Resolution
Authorizing the Organization of the Shari'a Appellate Court.
However, the Shari'a Appellate Court has not yet been organized until the
present. We, on our part, therefore, cannot take cognizance of the instant case
because it emanates from the Shari'a Courts, which is not among those
courts, bodies or tribunals enumerated under Chapter 1, Section 9 of [Batas]
Pambansa Bilang 129, as amended over which We can exercise appellate
jurisdiction. Thus, the instant Petition should be filed directly with the
Supreme Court.24
Petitioners filed the instant petition for certiorari assailing the SDC Orders,
invoking the following grounds:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
RESPONDENT JUDGE, HONORABLE RASAD G. BALINDONG,
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION OR IN EXCESS OF JURISDICTION IN
DENYING THE MOTION FOR ISSUANCE OF THE WRIT OF
DEMOLITION AFTER THE WRIT OF EXECUTION ISSUED BY THE
COURT COULD NOT BE IMPLEMENTED AND INSTEAD DIRECT
THE CONDUCT OF THE SURVEY.
RESPONDENT JUDGE HAD COMMITTED GRAVE ABUSE OF
DISCRETION IN MAKING IT APPEAR THAT HE WAS IN COURT AT
HIS SALA IN MARAWI CITY LAST JANUARY 28, 2010 WHEN THE
PARTIES WERE PRESENT AND HE WAS NOT THERE. 25
Preliminarily, we would deal with a procedural matter. Petitioners, after
receipt of the SDC Order denying their second motion for reconsideration of
the Order denying their motion for the issuance of a writ of demolition, filed
a petition for certiorari with the CA. The CA dismissed the petition for lack
of jurisdiction in a Resolution dated April 27, 2010 saying that, under RA
9054, it is the Shari’a Appellate Court (SAC) which shall exercise
jurisdiction over petition for certiorari; that, however, since SAC has not yet
been organized, it cannot take cognizance of the case as it emanates from the
Shari’a Courts, which is not among those courts, bodies or tribunals
enumerated under Chapter 1, Section 9 of Batas Pambansa Bilang 129, as
amended, over which it can exercise appellate jurisdiction.
Under Republic Act No. 9054, An Act to Strengthen and Expand the Organic
Act for the Autonomous Region in Muslim Mindanao, amending for the
purpose Republic Act No. 6734, entitled, "An Act Providing for the
Autonomous Region in Muslim Mindanao, as amended", the Shari'a
Appellate Court shall exercise appellate jurisdiction over petitions for
certiorari of decisions of the Shari'a District Courts. In Villagracia v. Fifth
(5th) Shari’a District Court,26 we said:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
x x x We call for the organization of the court system created under Republic
Act No. 9054 to effectively enforce the Muslim legal system in our country.
After all, the Muslim legal system – a legal system complete with its own
civil, criminal, commercial, political, international, and religious laws — is
part of the law of the land, and Shari’a courts are part of the Philippine
judicial system.
The Shari’a Appellate Court created under Republic Act No. 9054 shall
exercise appellate jurisdiction over all cases tried in the Shari’a District
Courts. It shall also exercise original jurisdiction over petitions for certiorari,
prohibition, mandamus, habeas corpus, and other auxiliary writs and
processes in aid of its appellate jurisdiction.The decisions of the Shari’a
Appellate Court shall be final and executory, without prejudice to the
original and appellate jurisdiction of this court.27
and
In Tomawis v. Hon. Balindong,28 we stated that:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
x x x [t]he Shari’a Appellate Court has yet to be organized with the
appointment of a Presiding Justice and two Associate Justices. Until such
time that the Shari’a Appellate Court shall have been organized, however,
appeals or petitions from final orders or decisions of the SDC filed with the
CA shall be referred to a Special Division to be organized in any of the CA
stations preferably composed of Muslim CA Justices.29
Notably, Tomawis case was decided on March 5, 2010, while the CA
decision was rendered on April 27, 2010. The CA's reason for dismissing the
petition, i.e., the decision came from SDC which the CA has no appellate
jurisdiction is erroneous for failure to follow the Tomawis ruling. However,
we need not remand the case, as we have, on several occasions,30 passed
upon and resolved petitions and cases emanating from Shari’a courts.
Petitioners contend that their land was specific and shown by the areas drawn
in Exhibits “A” and “K” and by oral and documentary evidence on record
showing that respondents have occupied portions of their
land, i.e., respondent Pangandamun's house encroached a 100 sq. meter
portion, while respondent Diaca occupied 200 sq. meters; and that the SDC
had rendered a decision ordering respondents to vacate the portions or areas
they had illegally encroached as indicated in Exhibits “A” and “K” and to
remove whatever improvements thereat introduced. Such decision had
already attained finality and a corresponding entry of judgment had been
made and a writ of execution was issued. Petitioners' claim that the SDC's
order for a conduct of a survey to determine whether respondents' land are
within petitioners' 800-sq.-meter land would, in effect, be amending a final
and executory decision.
Only respondent Pangandamun filed his Comment, arguing that petitioners'
motion for the issuance of a writ of demolition has no factual and legal basis
because his houses are clearly outside the 800-sq.-meter land of petitioners;
that his house had been constructed in 1964 within full view of the
petitioners but none of them ever questioned the same.
We find for the petitioners.
The SDC Decision dated January 31, 2005 ordered respondents to vacate the
portions or areas they had illegally encroached as indicated in Exhibits "A"
and "K" and to remove whatever improvements thereat introduced. Thus,
petitioners had established that they are recovering possession of 100 sq.
meters of their land which was occupied by respondent Pangandamun's
house as indicated in Exhibit "K-1", and 200 sq. meter portion being
occupied by Diaca as indicated in Exhibit "K-2". Such decision had become
final and executory after we affirmed the same and an entry of judgment was
made. Such decision can no longer be modified or amended. In Dacanay v.
Yrastorza, Sr.,31 we explained the concept of a final and executory judgment,
thus:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
Once a judgment attains finality, it becomes immutable and unalterable. A
final and executory judgment may no longer be modified in any respect, even
if the modification is meant to correct what is perceived to be an erroneous
conclusion of fact or law and regardless of whether the modification is
attempted to be made by the court rendering it or by the highest court of the
land. This is the doctrine of finality of judgment. It is grounded on
fundamental considerations of public policy and sound practice that, at the
risk of occasional errors, the judgments or orders of courts must become final
at some definite time fixed by law. Otherwise, there will be no end to
litigations, thus negating 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.32
However, the SDC later found that while the decision has become final and
executory and a writ of execution has been issued, there are instances when a
writ of execution cannot be enforced as when there is a supervening event
that prevents the sheriff to execute the writ of execution. It found that
respondents' claim that their buildings are not within the area claimed by
petitioners is a supervening event and ordered a survey of the land, hence,
denied the motion for a writ of demolition.
We do not agree.
It is settled that there are recognized exceptions to the execution as a matter
of right of a final and immutable judgment, and one of which is a
supervening event.
In Abrigo v. Flores,33 we said:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
We deem it highly relevant to point out that a supervening event is an
exception to the execution as a matter of right of a final and immutable
judgment rule, only if it directly affects the matter already litigated and
settled, or substantially changes the rights or relations of the parties therein as
to render the execution unjust, impossible or inequitable. A supervening
event consists of facts that transpire after the judgment became final and
executory, or of new circumstances that develop after the judgment attained
finality, including matters that the parties were not aware of prior to or
during the trial because such matters were not yet in existence at that time. In
that event, the interested party may properly seek the stay of execution or the
quashal of the writ of execution, or he may move the court to modify or alter
the judgment in order to harmonize it with justice and the supervening event.
The party who alleges a supervening event to stay the execution should
necessarily establish the facts by competent evidence; otherwise, it would
become all too easy to frustrate the conclusive effects of a final and
immutable judgment.34
In this case, the matter of whether respondents' houses intruded petitioners'
land is the issue in the recovery of possession complaint filed by petitioners
in the SDC which was already ruled upon, thus cannot be considered a
supervening event that would stay the execution of a final and immutable
judgment. To allow a survey as ordered by the SDC to determine whether
respondents' houses are within petitioners' land is tantamount to modifying a
decision which had already attained finality.
We find that the SDC committed grave abuse of discretion when it denied
petitioners' motion for the issuance a writ of demolition. The issuance of a
special order of demolition would certainly be the necessary and logical
consequence of the execution of the final and immutable decision.35 Section
10(d) of Rule 39, Rules of Court provides:LawlibraryofCRAlaw
court, issued upon motion of the judgment obligee after due hearing and after
the former has failed to remove the same within a reasonable time fixed by
the court.
Notably, this case was decided in 2005 and its execution has already been
delayed for years now. It is almost trite to say that execution is the fruit and
end of the suit and is the life of law.36 A judgment, if left unexecuted, would
be nothing but an empty victory for the prevailing party.37redarclaw
WHEREFORE, the petition is GRANTED. The Orders dated November 9,
2009, January 5, 2010 and February 10, 2010, of the Shari'a District Court,
Fourth Shari'a Judicial District, Marawi City are
hereby CANCELLED and SET ASIDE. The Shari'a District Court is
hereby ORDERED to ISSUE a writ of demolition to enforce its Decision
dated January 31, 2005 in Civil Case No. 055-91.
Let a copy of this Decision be furnished the Presiding Justice of the Court of
Appeals for whatever action he may undertake in light of our pronouncement
in the Tomawis v. Hon. Balindong case quoted earlier on the creation of a
Special Division to handle appeals or petitions from trial orders or decisions
of the Shari’a District Court.
SO ORDERED.cralawlawlibrary

ChanRoblesVirtualawlibrary

Section 10. Execution of judgments for specific act. —

xxxx

(d) Removal of improvements on property subject of execution.- when the

property subject of the execution contains improvements constructed or
planted by the judgment obligor or his agent, the officer shall not destroy,
demolish or remove said improvements except upon special order of the
EN BANC
G.R. No. 209447, August 11, 2015
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT
(PCGG), Petitioner, v. HON. WINLOVE M. DUMAYAS, PRESIDING
JUDGE, REGIONAL TRIAL COURT, BRANCH 59, MAKATI CITY
AND UNITED COCONUT PLANTERS BANK (UCPB), Respondents.
[G.R. NO. 210901]
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT
(PCGG), Petitioner, v. HON. WINLOVE M. DUMAYAS, PRESIDING
JUDGE, REGIONAL TRIAL COURT, BRANCH 59, MAKATI CITY
AND UNITED COCONUT PLANTERS LIFE ASSURANCE
CORPORATION (COCOLIFE), Respondents.
DECISION
VILLARAMA, JR., J.:
It is an important fundamental principle in our judicial system that every
litigation must come to an end. Litigation must end and terminate sometime
and somewhere, and it is essential to an effective and efficient administration
of justice that, once a judgment has become final, the winning party be, not
through a mere subterfuge, deprived of the fruits of the verdict.1 Adherence
to the principle impacts upon the lives of about three million poor farmers
who have long waited to benefit from the outcome of the 27-year battle for
the judicial recovery of assets acquired through illegal conversion of the
coconut levies collected during the Marcos regime into private funds.
The Case
Before us are the consolidated petitions seeking the reversal of the following
Orders2 issued by respondent Presiding Judge of the Regional Trial Court
(RTC) of Makati City, Branch 59: (a) Order dated April 29, 2013 denying
petitioner’s motion to dismiss the complaint in Civil Case No. 12-
1251; (b) Order dated June 28, 2013 denying the motion for reconsideration
filed by petitioner; (c) Omnibus Order dated May 15, 2013 denying
petitioner’s motion to dismiss the complaint in Civil Case No. 12-1252; and
(d) Order dated December 4, 2013 denying the motion for reconsideration
filed by petitioner.
The Antecedents
The factual background of this case is gathered from the records and the
decisions of this Court involving the coconut levy funds. We reproduce the
pertinent portions of the January 24, 2012 Decision in COCOFED v.
Republic3:LawlibraryofCRAlaw
In 1971, Republic Act No. (R.A.) 6260 was enacted creating the Coconut
Investment Company (CIC) to administer the Coconut Investment
Fund (CIF), which, under Section 8 thereof, was to be sourced from a PhP
0.55 levy on the sale of every 100 kg. of copra. Of the PhP 0.55 levy of
which the copra seller was, or ought to be, issued COCOFUND receipts,
PhP 0.02 was placed at the disposition of COCOFED, the national
association of coconut producers declared by the Philippine Coconut
Administration (PHILCOA, now PCA) as having the largest membership.
The declaration of martial law in September 1972 saw the issuance of several
presidential decrees (“P.Ds.”) purportedly designed to improve the coconut
industry through the collection and use of the coconut levy fund. While
coming generally from impositions on the first sale of copra, the coconut
levy fund came under various names x x x. Charged with the duty of
collecting and administering the Fund was PCA. Like COCOFED with
which it had a legal linkage, the PCA, by statutory provisions scattered in
different coco levy decrees, had its share of the coco levy.
The following were some of the issuances on the coco levy, its collection and
utilization, how the proceeds of the levy will be managed and by whom, and
the purpose it was supposed to serve:LawlibraryofCRAlaw
1. P.D. No. 276 established the Coconut Consumers Stabilization Fund
(CCSF) and declared the proceeds of the CCSF levy as trust fund, to be
utilized to subsidize the sale of coconut-based products, thus stabilizing the
price of edible oil.
2. P.D. No. 582 created the Coconut Industry Development Fund (CIDF) to
finance the operation of a hybrid coconut seed farm.
3. Then came P.D. No. 755 providing under its Section 1 the
following:LawlibraryofCRAlaw
It is hereby declared that the policy of the State is to provide readily available
credit facilities to the coconut farmers at a preferential rates; that this policy
can be expeditiously and efficiently realized by the implementation of the
“Agreement for the Acquisition of a Commercial Bank for the benefit of
Coconut Farmers” executed by the [PCA] x x x; and that the [PCA] is hereby
authorized to distribute, for free, the shares of stock of the bank it acquired to
the coconut farmers x x x.Towards achieving the policy thus declared, P.D.
No. 755, under its Section 2, authorized PCA to utilize the CCSF and the
CIDF collections to acquire a commercial bank and deposit the CCSF levy
collections in said bank, interest free, the deposit withdrawable only when
the bank has attained a certain level of sufficiency in its equity capital. The
same section also decreed that all levies PCA is authorized to collect shall
not be considered as special and/or fiduciary funds or form part of the
general funds of the government within the contemplation of P.D. No. 711.
4. P.D. No. 961 codified the various laws relating to the development of
coconut/palm oil industries.
5. The relevant provisions of P.D. No. 961, as later amended by P.D. No.
1468 (Revised Coconut Industry Code), read:LawlibraryofCRAlaw
ARTICLE III
Levies
Section 1. Coconut Consumers Stabilization Fund Levy. – The [PCA] is
hereby empowered to impose and collect x x x the Coconut Consumers
Stabilization Fund Levy x x x.
xxxx
Section 5. Exemption. — The [CCSF] and the [CIDF] as well as all
disbursements as herein authorized, shall not be construed x x x as special
and/or fiduciary funds, or as part of the general funds of the national
government within the contemplation of PD 711; x x x the intention being
that said Fund and the disbursements thereof as herein authorized for the
benefit of the coconut farmers shall be owned by them in their private
capacities: x x x. (Emphasis supplied.)
6. Letter of Instructions No. (LOI) 926, Series of 1979, made reference to
the creation, out of other coco levy funds, of the Coconut Industry
Investment Fund (CIIF) in P.D. No. 1468 and entrusted a portion of the
CIIF levy to UCPB for investment, on behalf of coconut farmers, in oil
mills and other private corporations, with the following equity ownership
structure:
Section 2. Organization of the Cooperative Endeavor. – The [UCPB], in its
capacity as the investment arm of the coconut farmers thru the [CIIF] x x x is
hereby directed to invest, on behalf of the coconut farmers, such portion of
the CIIF x x x in private corporations x x x under the following
guidelines:LawlibraryofCRAlaw
a) The coconut farmers shall own or control at least x x x (50%) of the
outstanding voting capital stock of the private corporation [acquired] thru
the CIIF and/or corporation owned or controlled by the farmers thru the CIIF
x x x. (Words in bracket added.)
Through the years, a part of the coconut levy funds went directly or
indirectly to [finance] various projects and/or was converted into different
assets or investments. Of particular relevance to this case was their use to
acquire the First United Bank (FUB), later renamed UCPB, and the
acquisition by UCPB, through the CIIF companies, of a large block of SMC
shares.
xxxx
Shortly after the execution of the PCA-Cojuangco, Jr. Agreement, President
Marcos issued, on July 29, 1975, P.D. No. 755 directing, as earlier narrated,
PCA to use the CCSF and CIDF to acquire a commercial bank to provide
coco farmers with “readily available credit facilities at preferential rate,”
and PCA “to distribute, for free,” the bank shares to coconut farmers.
Then came the 1986 EDSA event. One of the priorities of then President
Corazon C. Aquino’s revolutionary government was the recovery of ill-
gotten wealth reportedly amassed by the Marcos family and close relatives,
their nominees and associates. Apropos thereto, she issued Executive Order
Nos. (E.Os.) 1, 2 and 14, as amended by E.O. 14-A, all Series of 1986. E.O.
1 created the PCGG and provided it with the tools and processes it may avail
of in the recovery efforts; E.O. No. 2 asserted that the ill-gotten assets and
properties come in the form of shares of stocks, etc.; while E.O. No. 14
conferred on the Sandiganbayan exclusive and original jurisdiction over ill-
gotten wealth cases, with the proviso that “technical rules of procedure and
evidence shall not be applied strictly” to the civil cases filed under the E.O.
Pursuant to these issuances, the PCGG issued numerous orders of
sequestration, among which were those handed out, as earlier
mentioned, against shares of stock in UCPB purportedly owned by or
registered in the names of (a) more than a million coconut farmers and
(b) the CIIF companies, including the SMC shares held by the CIIF
companies. On July 31, 1987, the PCGG instituted before the
Sandiganbayan a recovery suit docketed thereat as CC No. 0033.
After the filing and subsequent amendments of the complaint in CC 0033,
Lobregat, COCOFED, et al., and Ballares, et al., purportedly representing
over a million coconut farmers, sought and were allowed to intervene.
Meanwhile, the following incidents/events transpired:LawlibraryofCRAlaw
1. On the postulate, inter alia, that its coco-farmer members own at least
51% of the outstanding capital stock of UCPB, the CIIF companies, etc.,
COCOFED, et al., on November 29, 1989, filed Class Action Omnibus
Motion praying for the lifting of the orders of sequestration referred to above
and for a chance to present evidence to prove the coconut farmers’ ownership
of the UCPB and CIIF shares. The plea to present evidence was denied;
2. Later, the Republic moved for and secured approval of a motion for
separate trial which paved the way for the subdivision of the causes of action
in CC 0033, each detailing how the assets subject thereof were acquired and
the key roles the principal played;
3. Civil Case 0033, pursuant to an order of the Sandiganbayan would be
subdivided into eight complaints, docketed as CC 0033-A to CC 0033-H.
xxxx
4. On February 23, 2001, Lobregat, COCOFED, Ballares, et al., filed a Class
Action Omnibus Motion to enjoin the PCGG from voting the sequestered
UCPB shares and the SMC shares registered in the names of the CIIF
companies. The Sandiganbayan, by Order of February 28, 2001, granted the
motion, sending the Republic to come to this Court on certiorari, docketed
as G.R. Nos. 147062-64, to annul said order; and
5. By Decision of December 14, 2001, in G.R. Nos. 147062-64 (Republic v.
COCOFED), the Court declared the coco levy funds as prima facie public
funds. And purchased as the sequestered UCPB shares were by such funds,
beneficial ownership thereon and the corollary voting rights prima facie
pertain, according to the Court, to the government.4 (Additional emphasis,
italics and underscoring supplied)
As mentioned in the above-cited case, the amended complaint in Civil Case
No. 0033 revolved around the provisional take-over by the PCGG of
COCOFED, Cocomark, and Coconut Investment Company and their assets
and the sequestration of shares of stock in UCPB CIIF corporations (CIIF oil
mills and the 14 CIIF holding companies), or CIIF companies, so-called for
having been either organized, acquired and/or funded as UCPB subsidiaries
with the use of the CIIF levy. The basic complaint also contained allegations
about the alleged misuse of the coconut levy funds to buy out the majority of
the outstanding shares of stock of San Miguel Corporation (SMC).5redarclaw
The proceedings relevant to this case pertain to Civil Case No. 0033-A
entitled, Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr.,
et al., Defendants, COCOFED, et al., BALLARES, et al., Class Action
Movants (Re: Anomalous Purchase and Use of [FUB] now [UCPB]), and
Civil Case No. 0033-F entitled, Republic of the Philippines, Plaintiff, v.
Eduardo M. Cojuangco, Jr., et al., Defendants (Re: Acquisition of San
Miguel Corporation Shares of Stock).
The Sandiganbayan rendered partial summary judgments in Civil Case No.
0033-A and 0033-F on July 11, 2003 and May 7, 2004, respectively. In our
Decision dated January 24, 2012 in COCOFED v. Republic,6 we affirmed
with modification the said partial summary judgments and also upheld the
Sandiganbayan’s ruling that the coconut levy funds are special public funds
of the Government. Citing Republic v. COCOFED7 which resolved the issue
of whether the PCGG has the right to vote the sequestered shares, we
declared that the coconut levy funds are not only affected with public interest
but are, in fact, prima facie public funds. We also upheld the
Sandiganbayan’s ruling that Sections 1 and 2 of P.D. 755, Section 3, Article
III of P.D. 961, and the implementing regulations of the PCA, are
unconstitutional “for allowing the use and/or the distribution of properties
acquired through the coconut levy funds to private individuals for their own
direct benefit and absolute ownership.” As to the ownership of the six CIIF
companies, the 14 holding companies, and the CIIF block of SMC shares of
stock, we held these to be owned by the Government, having likewise been
acquired using the coconut levy funds. Accordingly, “the properties subject
of the January 24, 2012 Decision were declared owned by and ordered
reconveyed to the Government, to be used only for the benefit of all coconut
farmers and for the development of the coconut industry.”8redarclaw
Under the Resolution dated September 4, 2012, we denied with finality the
motion for reconsideration filed by the petitioners in G.R. Nos. 177857-58.
The dispositive portion of the September 4, 2012 Resolution in Philippine
Coconut Producers Federation, Inc. (COCOFED) v. Republic of the
Philippines9 thus reads:LawlibraryofCRAlaw
WHEREFORE, the Court resolves to DENY with FINALITY the instant
Motion for Reconsideration dated February 14, 2012 for lack of merit.
The Court further resolves to CLARIFY that the 753,848,312 SMC Series 1
preferred shares of the CIIF companies converted from the CIIF block of
SMC shares, with all the dividend earnings as well as all increments arising
from, but not limited to, the exercise of preemptive rights subject of the
September 17, 2009 Resolution, shall now be the subject matter of the
January 24, 2012 Decision and shall be declared owned by the Government
and be used only for the benefit of all coconut farmers and for the
development of the coconut industry.
As modified, the fallo of the January 24, 2012 Decision shall read, as
follows:LawlibraryofCRAlaw
WHEREFORE, the petitions in G.R. Nos. 177857-58 and 178793 are
hereby DENIED. The Partial Summary Judgment dated July 11, 2003 in
Civil Case No. 0033-A as reiterated with modification in Resolution dated
June 5, 2007, as well as the Partial Summary Judgment dated May 7, 2004 in
Civil Case No. 0033-F, which was effectively amended in Resolution dated
May 11, 2007, are AFFIRMED with MODIFICATION, only with respect
to those issues subject of the petitions in G.R. Nos. 177857-58 and 178193.
However, the issues raised in G.R. No. 180705 in relation to Partial
Summary Judgment dated July 11, 2003 and Resolution dated June 5, 2007
in Civil Case No. 0033-A, shall be decided by this Court in a separate
decision.
The Partial Summary Judgment in Civil Case No. 0033-A dated July 11,
2003, is hereby MODIFIED, and shall read as follows:LawlibraryofCRAlaw
WHEREFORE, in view of the foregoing, We rule as
follows:LawlibraryofCRAlaw
SUMMARY OF THE COURT’S RULING.
A. Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY
JUDGMENT dated April 11, 2001 filed by Defendant Maria Clara L.
Lobregat, COCOFED, et al., and Ballares, et al.
The Class Action Motion for Separate Summary Judgment dated April 11,
2001 filed by defendant Maria Clara L. Lobregat, COCOFED, et al. and
Ballares, et al., is hereby DENIED for lack of merit.
B. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE:
COCOFED, ET AL. AND BALLARES, ET AL.) dated April 22, 2002 filed
by Plaintiff.
1. a. The portion of Section 1 of P.D. No. 755, which
reads:LawlibraryofCRAlaw
x x x and that the Philippine Coconut Authority is hereby authorized
to distribute, for free, the shares of stock of the bank it acquired to
the coconut farmers under such rules and regulations it may
promulgate.
taken in relation to Section 2 of the same P.D., is unconstitutional: (i)
for having allowed the use of the CCSF to benefit directly private
interest by the outright and unconditional grant of absolute
ownership of the FUB/UCPB shares paid for by PCA entirely with
the CCSF to the undefined “coconut farmers”, which negated or
circumvented the national policy or public purpose declared by P.D.
No. 755 to accelerate the growth and development of the coconut
industry and achieve its vertical integration; and (ii) for having
unduly delegated legislative power to the PCA.
b. The implementing regulations issued by PCA, namely,
Administrative Order No. 1, Series of 1975 and Resolution No. 074-
78 are likewise invalid for their failure to see to it that the
distribution of shares serve exclusively or at least primarily or
directly the aforementioned public purpose or national policy
declared by P.D. No. 755.
2. Section 2 of P.D. No. 755 which mandated that the coconut levy
funds shall not be considered special and/or fiduciary funds nor part
of the general funds of the national government and similar
provisions of Sec. 5, Art. III, P.D. No. 961 and Sec. 5, Art. III, P.D.
No. 1468 contravene the provisions of the Constitution, particularly,
Art. IX (D), Sec. 2; and Article VI, Sec. 29 (3).
3. Lobregat, COCOFED, et al. and Ballares, et al. have not legally and
validly obtained title of ownership over the subject UCPB shares by
virtue of P.D. No. 755, the Agreement dated May 25, 1975 between
the PCA and defendant Cojuangco, and PCA implementing rules,
namely, Adm. Order No. 1, s. 1975 and Resolution No. 074-78.
4. The so-called “Farmers’ UCPB shares” covered by 64.98% of the
UCPB shares of stock, which formed part of the 72.2% of the shares
of stock of the former FUB and now of the UCPB, the entire
consideration of which was charged by PCA to the CCSF, are hereby
declared conclusively owned by, the Plaintiff Republic of the
Philippines.
xxxx
SO ORDERED.
The Partial Summary Judgment in Civil Case No. 0033-F dated May 7, 2004,
is hereby MODIFIED, and shall read as follows:LawlibraryofCRAlaw
WHEREFORE, the MOTION FOR EXECUTION OF PARTIAL
SUMMARY JUDGMENT (RE: CIIF BLOCK OF SMC SHARES OF
STOCK) dated August 8, 2005 of the plaintiff is hereby denied for lack of
merit. However, this Court orders the severance of this particular claim of
Plaintiff. The Partial Summary Judgment dated May 7, 2004 is now
considered a separate final and appealable judgment with respect to the said
CIIF Block of SMC shares of stock.
The Partial Summary Judgment rendered on May 7, 2004 is modified by
deleting the last paragraph of the dispositive portion, which will now read, as
follows:LawlibraryofCRAlaw
WHEREFORE, in view of the foregoing, we hold that:
The Motion for Partial Summary Judgment (Re: Defendants CIIF
Companies, 14 Holding Companies and Cocofed, et al.) filed by Plaintiff is
hereby GRANTED. ACCORDINGLY, THE CIIF COMPANIES,
NAMELY:
1. Southern Luzon Coconut Oil Mills (SOLCOM);
 2. Cagayan de Oro Oil Co., Inc. (CAGOIL);
3. Iligan Coconut Industries, Inc. (ILICOCO);
4. San Pablo Manufacturing Corp. (SPMC);
5. Granexport Manufacturing Corp. (GRANEX); and
6. Legaspi Oil Co., Inc. (LEGOIL),
AS WELL AS THE 14 HOLDING COMPANIES, NAMELY:
1. Soriano Shares, Inc.;
2. ACS Investors, Inc.;
3. Roxas Shares, Inc.;
4. Arc Investors; Inc.;
5. Toda Holdings, Inc.;
6. AP Holdings, Inc.;
7. Fernandez Holdings, Inc.;
8. SMC Officers Corps, Inc.;
9. Te Deum Resources, Inc.;
10. Anglo Ventures, Inc.;
11. Randy Allied Ventures, Inc.;
12. Rock Steel Resources, Inc.;
13. Valhalla Properties Ltd., Inc.; and
14. First Meridian Development, Inc.
AND THE CONVERTED SMC SERIES 1 PREFERRED SHARES
TOTALING 753,848,312 SHARES SUBJECT OF THE RESOLUTION
OF THE COURT DATED SEPTEMBER 17, 2009 TOGETHER WITH
ALL DIVIDENDS DECLARED, PAID OR ISSUED THEREON
AFTER THAT DATE, AS WELL AS ANYINCREMENTS THERETO
ARISING FROM, BUT NOT LIMITED TO, EXERCISE OF PRE-
EMPTIVE RIGHTS ARE DECLARED OWNED BY THE
GOVERNMENT TO BE USED ONLY FOR THE BENEFIT OF ALL
COCONUT FARMERS AND FOR THE DEVELOPMENT OF THE
COCONUT INDUSTRY, AND ORDERED RECONVEYED TO THE
GOVERNMENT.
THE COURT AFFIRMS THE RESOLUTIONS ISSUED BY THE
SANDIGANBAYAN ON JUNE 5, 2007 IN CIVIL CASE NO. 0033-A
AND ON MAY 11, 2007 IN CIVIL CASE NO. 0033-F, THAT THERE
IS NO MORE NECESSITY OF FURTHER TRIAL WITH RESPECT
TO THE ISSUE OF OWNERSHIP OF (1) THE SEQUESTERED UCPB
SHARES, (2) THE CIIF FLOCK OF SMC SHARES, AND (3) THE
CIIF COMPANIES, AS THEY HAVE FINALLY BEEN
ADJUDICATED IN THE AFOREMENTIONED PARTIAL
SUMMARY JUDGMENTS DATED JULY 11, 2003 AND MAY 7, 2004.
SO ORDERED.
Costs against petitioners COCOFED, et al. in G.R. Nos. 177857-58 and
Danilo S. Ursua in G.R. No. 178193.
No further pleadings shall be entertained. Let Entry of Judgment be made in
due course.
SO ORDERED.10 (Boldface in the original; additional underscoring
supplied)
On December 28, 2012, a petition for declaratory relief11 was filed by
respondent UCPB in the RTC of Makati City (Civil Case No. 12-1251)
against the six CIIF oil mills and 14 holding companies (CIIF companies),
PCGG and other corporations “similarly situated.” A similar petition12 was
also filed by respondent United Coconut Planters Life Assurance Corporation
(COCOLIFE) against the same defendants (Civil Case No. 12-1252).
Civil Case No. 12-1251

UCPB alleged that the capital or equity used in establishing the CIIF
companies was not exclusively sourced from the coconut levy funds. It
claimed that while P633 Million was invested by it as Administrator of the
CIIF, as universal bank it also invested around P112 million in the six oil
mill companies or oil mills group (CIIF OMG). As to the 14 holding
companies, UCPB claimed that while it had the funds in mid-1983 to
purchase the 33,133,266 shares in SMC then being sold by the Soriano
Group for the price of P1.656 Billion to Mr. Eduardo M. Cojuangco, Jr., it
could not, under banking laws, directly engage in the business of brewery. To
make the equity investment, the 14 holding companies were established by
the CIIF OMG to serve as corporate vehicles for the investment in SMC
shares (CIIF SMC Block of Shares).
With the foregoing supposed equity in the CIIF companies and contributions
to the acquisition of the SMC shares, UCPB claims 11.03% indirect
ownership valued at P7.84 Billion, based on the P71.04 Billion present value
of the said sequestered shares (P56.5 Billion redemption price of the
redeemed shares plus P14.54 Billion dividends and accrued interests for the
account of the 14 holding companies). UCPB thus prayed for a judgment
declaring the rights and duties of [UCPB] affirming and confirming
[UCPB’s] proportionate right, title and interest in the Oil Mills Group
Companies, its indirect equity of the 14 Coconut Industry Investment Funds
(“CIIF”) Holding Companies and the San Miguel Corporation (“SMC”)
Shares, the dividends thereon and the proceeds of the redemption thereof and
that any disbursement or disposition thereof should x x x respect and take
into account [UCPB’s] right, title and interest thereto.13
PCGG filed a motion to dismiss citing the following grounds: (1) lack of
jurisdiction over the subject matter of the case; (2) the January 24, 2012
Decision of the Supreme Court cannot be the proper subject of a petition for
declaratory relief; (3) a petition for declaratory relief is unavailing since the
alleged right or interest of UCPB over the CIIF companies and the CIIF
Block of SMC Shares had long been breached or violated upon the issuance
of the writ of sequestration against the said companies and shares of stock by
the PCGG, which thereafter assumed their administration and voted the
shares of stock; (4) UCPB is now estopped from asserting its alleged right
over the subject companies and shares of stock, having failed to enforce it for
a long time (25 years) from the date of filing by PCGG of the complaint in
the Sandiganbayan in 1987 until the Supreme Court decided with finality the
issue of ownership of the subject sequestered companies and shares of stock
on September 4, 2012; and (5) the petition is defective, as it failed to implead
an indispensable party, the Republic of the Philippines.13-aredarclaw
UCPB opposed the motion contending that the subject of its petition is not
the Supreme Court Decision dated January 24, 2012 but the proper
documents establishing UCPB’s ownership over the subject companies and
shares of stock. It further asserted that there is no actual breach of right or
estoppel that would bar UCPB’s claim considering that it was not even a
party to any previous legal suit involving the subject properties.13-bredarclaw
On April 29, 2013, respondent Judge issued the first assailed Order denying
the motion to dismiss and directing the PCGG to file its Answer. PCGG’s
motion for reconsideration was likewise denied under the Order dated June
28, 2013.
Civil Case No. 12-1252
COCOLIFE raised similar claims of ownership in the subject companies and
shares of stock by virtue of its being a stockholder, owning 146,610,567
UCPB shares independently of its right as direct shareholder of the CIIF
OMG and the 14 holding companies, as well as the CIIF SMC Block of
Shares. It alleged that on December 18, 1985, it purchased from UCPB
shares of stock in four CIIF oil companies. Using funds coming from
COCOLIFE and UCPB, the CIIF OMG was able to raise the money for the
purchase of the 33,133,266 common shares in SMC. Consequently,
COCOLIFE’s percentage ownership in the CIIF SMC Block of Shares being
held by the 14 holding companies is 11.01%. According to COCOLIFE, its
investment in the CIIF OMG is evidenced by certificates of stock issued by
San Pablo Manufacturing Corp., Southern Luzon Coconut Oil Mills,
Granexport Manufacturing Corp. and Legaspi Oil Co., Inc.
Like UCPB, COCOLIFE asserted that the CIIF OMG and 14 CIIF holding
companies are not wholly owned by the Government. Since it was not
impleaded in the complaint filed by the PCGG for the recovery of allegedly
ill-gotten properties (CIIF companies and CIIF SMC Block of Shares),
COCOLIFE argued that it should not be deprived of its proportionate interest
(11.01%) in the said properties sequestered by PCGG. It thus prayed that
judgment be rendered by the RTC declaring the rights and duties of
COCOLIFE affirming and confirming COCOLIFE’s proportionate interest in
the four CIIF oil companies, its indirect equity in the 14 CIIF holding
companies and the CIIF SMC Block of Shares including the proceeds or their
equivalent, and that any disbursement or disposition thereof should preserve,
respect and take into account COCOLIFE’s right and interest.
Civil Case No. 12-1252 was consolidated with Civil Case No. 12-1251.
PCGG likewise moved to dismiss the petition in Civil Case No. 12-1252 on
the same grounds it raised in Civil Case No. 12-1251.
The Omnibus Order dated May 15, 2013 denied the motion to dismiss and
further required PCGG to file its Answer. PCGG’s motion for
reconsideration was likewise denied by respondent Judge on December 4,
2013.
Petitioner’s Arguments
PCGG contends that respondent judge gravely abused his discretion in not
dismissing the petitions for declaratory relief, which merely aim to re-
litigate the issue of ownership already passed upon by the Sandiganbayan
under the Partial Summary Judgment rendered in Civil Case No. 0033-F and
the January 24, 2012 Decision of this Court in COCOFED v. Republic.14 It
argues that the RTC has no jurisdiction over the acts performed by PCGG
pursuant to its quasi-judicial functions, particularly those relating to the
issuance of writs of sequestration, and that all cases involving ill-gotten
wealth assets are under the unquestionable jurisdiction of the Sandiganbayan.
Contrary to the asseveration of respondents UCPB and COCOLIFE, PCGG
maintains that their petitions for declaratory relief actually seek to modify or
alter the Decision of this Court in COCOFED v. Republic, which has become
final and executory. PCGG also contends that documents like stock
certificates cannot be a proper subject of a petition for declaratory relief
considering that the phrase “other written instruments” contemplated by the
Rules of Court pertains to a written document constituting a contract upon
which rights and obligations are created, which terms could be interpreted by
the courts so as to avoid any conflicting interests between the
parties. Further, the alleged ownership or title of UCPB and COCOLIFE
have already been breached or violated by the issuance of writs of
sequestration over the subject properties.
On account of their inaction for more than 25 years that the issue of
ownership over the sequestered CIIF companies and CIIF SMC Block of
Shares were being litigated, PCGG argues that UCPB and COCOLIFE are
now estopped from asserting any such right in the said properties. And as to
their non-participation in the cases before the Sandiganbayan, PCGG asserts
it has no legal obligation to implead UCPB and COCOLIFE, as held
in Universal Broadcasting Corporation v.
Sandiganbayan (5th Div.).15redarclaw
Respondents’ Arguments
Respondents question the authority of Commissioner Vicente L. Gengos, Jr.
in filing the present petitions before the Court and signing the Verification
and Certification Against Forum Shopping. They point out that the PCGG is
a collegial body created by virtue of EO 1, and it may function only as such
“Commission.” Consequently, the present action should have been properly
authorized by all members of the Commission.
On the issue of jurisdiction, UCPB and COCOLIFE argue that since they
have properly alleged a case for declaratory relief, jurisdiction over the
subject matter lies in the regular courts such as the RTC of Makati City.
Having filed a motion to dismiss, PCGG is deemed to have admitted the
material allegations of the complaint, specifically that UCPB and
COCOLIFE had jointly acquired the six CIIF oil mills by investing direct
equity of P112 Million (UCPB) and P112 Million (COCOLIFE) for the four
CIIF oil mills. Citing San Miguel Corporation v. Kahn16 where this Court
held that the Sandiganbayan has no jurisdiction if the subject matter of the
case does not involve or has no relation to the recovery of ill-gotten wealth,
UCPB and COCOLIFE insist that the subject matter of their petitions is the
declaration of their rights under corporate documents, which in turn relate to
UCPB and COCOLIFE’s investments not sourced from the coconut levy
funds. It is thus the allegations in the complaint that determine the cause of
action and what court has jurisdiction over such cause of action, and not the
defenses raised in the motion to dismiss and/or answer.
In the same vein, UCPB and COCOLIFE posit that, contrary to PCGG’s
position, proceeding to hear the cases below will not pave the way for re-
examining the findings of this Court in its Decision in COCOFED v.
Republic. This is because the subject matter of the petitions for declaratory
relief is not the coconut levy funds but their own investments in the CIIF
OMG and consequent indirect ownership of the CIIF SMC Block of Shares.
Neither do their petitions seek to lift the sequestration orders as these pertain
only to those shares in CIIF OMG which were acquired by UCPB as
Administrator, using coconut levy funds. While respondents adhere to the
wisdom of the Decision in COCOFED v. Republic, it is their position that the
ruling therein does not affect their respective claims to 11% proportional
equity stake in the CIIF OMG companies. Moreover, since they were not
impleaded in Sandiganbayan Civil Case No. 0033-F and in G.R. Nos.
177857-58 and 178193, respondents maintain that they are not bound by any
adjudication of ownership rendered therein.
Respondents further contend that the writ of sequestration issued by the
Sandiganbayan cannot be considered a breach which gives rise to a cause of
action in favor of any of the parties. There was no “injury” on the part of
UCPB and COCOLIFE despite the sequestration proceedings because they
were not impleaded as a party in the sequestration case. They point out that
their title and interest in the subject properties remained unaffected by the
sequestration by PCGG considering that the CIIF companies had not done
anything to disown or deny UCPB and COCOLIFE’s stockholdings, as in
fact, in their Answer to the petition for declaratory relief, these companies
expressly admitted the existence of respondents’ stockholdings in each
respective company. Also, the CIIF OMG were all in agreement that there is
a need for declaratory relief judgment on respondents’ claims in the
sequestered properties notwithstanding the final decision of this Court which
resolved the issue of ownership in favor of the Government.
On February 26, 2014 in G.R. No. 210901, we issued a temporary restraining
order (TRO) immediately enjoining the respondent judge, the RTC of Makati
City, Branch 59, their representatives, agents or other persons acting on their
behalf, from proceeding with the hearing of the petitions for declaratory
relief in Civil Case Nos. 12-1251 and 12-1252.17 Likewise, a TRO was
issued in G.R. No. 209447 enjoining the respondent judge from further
hearing the said petitions for declaratory relief.18redarclaw
Issues
The issues generated by this controversy are the
following:LawlibraryofCRAlaw
1) Non-compliance with the rule on Verification and Certification of Non-
Forum Shopping which was signed by only one PCGG Commissioner;
2) Lack of jurisdiction over the subject matter of Civil Case Nos. 12-1251
and 12-1252;
3) Non-compliance with the requisites of a petition for declaratory relief
complied with; and
4) Application of res judicata and/or laches as bar to the suits for declaratory
relief filed by UCPB and COCOLIFE.
Our Ruling
The petitions are meritorious.
Alleged Lack of Authority of PCGG
Commissioner Vicente L. Gengos, Jr.
to file the present petition
Under Rule 46, Section 3, paragraph 3 of the 1997 Rules of Civil
Procedure, as amended, petitions for certiorari must be verified and
accompanied by a sworn certification of non-forum shopping.19 A pleading is
verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his personal knowledge or based on
authentic records.20 The party need not sign the verification. A party’s
representative, lawyer or any person who personally knows the truth of the
facts alleged in the pleading may sign the verification.21redarclaw
On the other hand, a certification of non-forum shopping is a certification
under oath by the plaintiff or principal party in the complaint or other
initiatory pleading asserting a claim for relief or in a sworn certification
annexed thereto and simultaneously filed therewith, (a) that he has not
theretofore commenced any action or filed any claim involving the same
issues in any court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; (b) if there is
such other pending action or claim, a complete statement of the present status
thereof; and (c) if he should thereafter learn that the same or similar action or
claim has been filed or is pending, he shall report that fact within five (5)
days therefrom to the court wherein his aforesaid complaint or initiatory
pleading has been filed.22redarclaw
It is obligatory that the one signing the verification and certification against
forum shopping on behalf of the principal party or the other petitioners has
the authority to do the same.23 We hold that the signature of only one
Commissioner of petitioner PCGG in the verification and certification
against forum shopping is not a fatal defect.
It has been consistently held that the verification of a pleading is only a
formal, not a jurisdictional, requirement. The purpose of requiring a
verification is to secure an assurance that the allegations in the petition are
true and correct, not merely speculative. This requirement is simply a
condition affecting the form of pleadings, and noncompliance therewith does
not necessarily render the pleading fatally defective.24redarclaw
As to the certification of non-forum shopping, a rigid application of the rules
should not defeat the PCGG’s mandate under EO 1, EO 2, EO 14 and EO 14-
A to prosecute cases for the recovery of ill-gotten wealth, and to conserve
sequestered assets and corporations, which are in custodia legis, under its
administration. Indeed, relaxation of the rules is warranted in this case
involving coconut levy funds previously declared by this Court as “affected
with public interest” and judicially determined as public funds. Relevantly,
after the promulgation of the decision of this Court in COCOFED v.
Republic, EO 180 was issued on March 18, 2015 reiterating the
Government’s policy to ensure that all coco levy funds and coco levy assets
be utilized “solely and exclusively for the benefit of all the coconut farmers
and for the development of the coconut industry.” In line with such policy,
Section 3 thereof provides:LawlibraryofCRAlaw
Section 3. Actions to Preserve, Protect and Recover Coco Levy Assets. The
Office of the Solicitor General (OSG), the Presidential Commission on Good
Government (PCGG), and any other concerned government agency shall,
under the general supervision of the Secretary of Justice, file the proper
pleadings or institute and maintain the necessary legal actions to preserve,
protect, or recover the Government’s rights and interests in the Coco
Levy Assets and to prevent any dissipation or reduction in their
value. (Emphasis and underscoring supplied)
Apropos PCGG v. Cojuangco, Jr.,25 involving the issue of who has the right
to vote the sequestered SMC shares, we gave due course to the petition for
certiorari and mandamus despite the lack of signature of the Solicitor
General; but it was signed by two special counsels and the verification was
signed by Commissioner Herminio Mendoza. We noted the extraordinary
circumstances in the filing of the petition by the said government officials
that justified a liberal interpretation of the rules.
The RTC has no jurisdiction over
suits involving the sequestered coco
levy assets and coco levy funds.
Jurisdiction is defined as the power and authority of a court to hear, try, and
decide a case.26 Jurisdiction over the subject matter is conferred by the
Constitution or by law and is determined by the allegations of the complaint
and the relief prayed for, regardless of whether the plaintiff is entitled to
recovery upon all or some of the claims prayed for therein. Jurisdiction is
not acquired by agreement or consent of the parties, and neither does it
depend upon the defenses raised in the answer or in a motion to
dismiss.27redarclaw
Under Section 4 (C) of P.D. No. 1606, as amended by R.A. No. 7975 and
R.A. No. 8249, the jurisdiction of the Sandiganbayan included suits for
recovery of ill-gotten wealth and related cases:LawlibraryofCRAlaw
(C) Civil and criminal cases filed pursuant to and in connection with
Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986.
xxxx
The Sandiganbayan shall have exclusive original jurisdiction over petitions
for the issuance of the writs of mandamus, prohibition, certiorari, habeas
corpus, injunctions, and other ancillary writs and processes in aid of its
appellate jurisdiction and over petitions of similar nature, including quo
warranto, arising or that may arise in cases filed or which may be filed under
Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986: Provided, That the
jurisdiction over these petitions shall not be exclusive of the Supreme
Court. (Italics in the original; emphasis supplied)
In PCGG v. Peña,28 we made the following clarification on the extent of the
Sandiganbayan’s jurisdiction:LawlibraryofCRAlaw
x x x Under section 2 of the President’s Executive Order No. 14 issued on
May 7, 1986, all cases of the Commission regarding “the Funds, Moneys,
Assets, and Properties Illegally Acquired or Misappropriated by Former
President Ferdinand Marcos, Mrs. Imelda Romualdez Marcos, their Close
Relatives, Subordinates, Business Associates, Dummies, Agents, or
Nominees” whether civil or criminal, are lodged within the “exclusive and
original jurisdiction of the Sandiganbayan” and all incidents arising from,
incidental to, or related to, such cases necessarily fall likewise under the
Sandiganbayan’s exclusive and original jurisdiction, subject to review on
certiorari exclusively by the Supreme Court.29 (Emphasis supplied)
Soriano III v. Yuzon30 reiterated the above ruling, thus:LawlibraryofCRAlaw
Now, that exclusive jurisdiction conferred on the Sandiganbayan would
evidently extend not only to the principal causes of action, i.e., the recovery
of alleged ill-gotten wealth, but also to “all incidents arising from,
incidental to, or related to, such cases,” such as the dispute over the sale of
the shares, the propriety of the issuance of ancillary writs or provisional
remedies relative thereto, the sequestration thereof, which may not be made
the subject of separate actions or proceedings in another forum. As explained
by the Court in Peña:LawlibraryofCRAlaw
“The rationale of the exclusivity of such jurisdiction is readily understood.
Given the magnitude of the past regime’s ‘organized pillage’ and the
ingenuity of the plunderers and pillagers with the assistance of the experts
and best legal minds available in the market, it is a matter of sheer necessity
to restrict access to the lower courts, which would have tied into knots and
made impossible the commission’s gigantic task of recovering the
plundered wealth of the nation, whom the past regime in the process had
saddled and laid prostrate with a huge $27 billion foreign debt that has since
ballooned to $28.5 billion.” (italics and emphasis supplied.) (Additional
emphasis supplied)
Respondents’ petitions for declaratory relief filed in the RTC asserted their
claim of ownership over the sequestered CIIF companies and indirectly the
CIIF SMC Block of Shares, in the following percentages: 11.03% (UCPB)
and 11.01% (COCOLIFE). Undeniably, these are related to the ill-gotten
wealth cases (Civil Case Nos. 0033-A and 0033-F) involving the issue of
ownership of the aforesaid sequestered companies and shares of stock, which
have been tried and decided by the Sandiganbayan, and the decision had
been appealed to and finally disposed of by this Court in G.R. Nos. 177857-
5831 (COCOFED and Lobregat, et. al’s ownership claim over the CIIF
companies and CIIF SMC Block of Shares) and G.R. No. 18070532 (Eduardo
M. Cojuangco, Jr.’s claim over UCPB shares under an Agreement with
PCA).
Contrary to respondents’ contention, the subject matter of their petitions for
declaratory relief, i.e., their purported contribution to the acquisition of four
CIIF OMG companies and the 14 holding companies, as well as indirect
ownership of a portion of the CIIF SMC Block of Shares, is inextricably
intertwined with the issue of ownership judicially settled in the
aforementioned appeals from the Partial Summary Judgments rendered in
Civil Case Nos. 0033-A and 0033-F.
The allegation that no coconut levy funds were actually used to purchase
stockholdings in the CIIF companies is of no moment. Since the CIIF
companies and CIIF SMC Block of Shares have long been sequestered and
placed under the administration of the PCGG, the latter’s functions may not
be interfered with by a co-equal court. In Republic v. Investa
Corporation33 involving the propriety of dilution of the Government’s
percentage in the stockholdings of a sequestered corporation (DOMSAT), we
held that it is the Sandiganbayan and not the Securities and Exchange
Commission (SEC) which has jurisdiction over the petition filed by the
Republic and DOMSAT. As conservator of sequestered shares, PCGG has
the duty to ensure that the sequestered properties are not dissipated under its
watch.
Previously, this Court affirmed the jurisdiction of the RTC in a suit also
involving a claim of ownership in the sequestered corporation, and ruled in
this wise:34redarclaw
We disagree with the RTC and the CA on the issue of jurisdiction. While
there can be no dispute that PCOC was sequestered, the fact of sequestration
alone did not automatically oust the RTC of jurisdiction to decide upon the
question of ownership of the subject gaming and office equipment. The
PCGG must be a party to the suit in order that the Sandiganbayan’s
exclusive jurisdiction may be correctly invoked. This is deducible from no
less than E.O. No. 14, the “Peña” and “Nepomuceno” cases relied upon by
both subordinates courts. Note that in Section 2 of E.O. No. 14 which
provides:LawlibraryofCRAlaw
“Section 2. The Presidential Commission on Good Government shall file all
such cases, whether civil or criminal, with the Sandiganbayan, which shall
have exclusive and original jurisdiction thereof.”
it speaks of the PCGG as party-plaintiff. On the other hand, the PCGG was
impleaded as co-defendant in both the “Peña” and “Nepomuceno” cases. But
here, the PCGG does not appear in either capacity, as the complaint is solely
between PAGCOR and respondents PCOC and Marcelo. The “Peña” and
“Nepomuceno” cases which recognize the independence of the PCGG and
the Sandiganbayan in sequestration cases, therefore, cannot be invoked in the
instant case so as to divest the RTC of its jurisdiction, under Section 19 of
B.P. 129, over PAGCOR’s action for recovery of personal
property.35 (Emphasis supplied)
In Cuenca v. PCGG,36 we upheld the exclusive jurisdiction of the
Sandiganbayan over all incidents affecting the shares of a sequestered
corporation considering that the action before the RTC is inexorably
entwined with the Government’s case for recovery of ill-gotten wealth
pending with the Sandiganbayan. Thus:LawlibraryofCRAlaw
Petitioners contend that even if UHC was indeed sequestered, jurisdiction
over the subject matter of petitioners’ Complaint for enforcement or
rescission of contract between petitioners and respondents belonged to the
RTC and not the Sandiganbayan. Petitioners cited Philippine Amusement and
Gaming Corporation v. Court of Appeals, x x x, this Court held that the fact
of sequestration alone did not automatically oust the RTC of jurisdiction to
decide upon the question of ownership of the disputed gaming and office
equipment as PCGG must be a party to the suit in order that the
Sandiganbayan’s exclusive jurisdiction may be correctly invoked, and as
Section 2 of EO 14 was duly applied in PCGG v. Peña and PCGG v.
Nepomuceno, which ineluctably spoke of respondent PCGG as a party-
litigant.
xxxx
Sandiganbayan has exclusive jurisdiction over the instant case
A rigorous examination of the antecedent facts and existing records at hand
shows that Sandiganbayan has exclusive jurisdiction over the instant case.
Thus, the petition must fail for the following reasons:LawlibraryofCRAlaw
First, it is a fact that the shares of stock of UHC and CDCP, the subject
matter of Civil Case No. 91-2721 before the Makati City RTC, were also the
subject matter of an ill-gotten wealth case, specifically Civil Case No. 0016
before the Sandiganbayan. In Civil Case No. 91-2721 of the Makati City
RTC, petitioners prayed for a judgment either transferring the UHC shares or
restoring and reconveying the PNCC shares to them. In the event a final
judgment is rendered in said Makati City RTC case in favor of petitioners,
then such adjudication tends to render moot and academic the judgment to be
rendered in Sandiganbayan Civil Case No. 0016 considering that the legal
ownership of either the UHC or PNCC shares would now be transferred to
petitioners Rodolfo Cuenca and CIC. Such adverse judgment would run
counter to the rights of ownership of the government over the UHC and
PNCC shares in question. x x x
Moreover, inasmuch as UHC was impleaded in Civil Case No. 0016 as a
defendant and was listed among the corporations beneficially owned or
controlled by petitioner Cuenca, the issue of the latter’s right to acquire
ownership of UHC shares is inexorably intertwined with the right of the
Republic of the Philippines, through PCGG, to retain ownership of said
UHC shares.
It must be borne in mind that the Sandiganbayan was created in 1978
pursuant to Presidential Decree No. (PD) 1606. Said law has been amended
during the interim period after the Edsa Revolution of 1986 and before the
1987 Constitution was drafted, passed, and ratified. Thus, the executive
issuances during such period before the ratification of the 1987 Constitution
had the force and effect of laws. Specifically, then President Corazon C.
Aquino issued the following Executive Orders which amended PD 1606 in so
far as the jurisdiction of the Sandiganbayan over civil and criminal cases
instituted and prosecuted by the PCGG is
concerned, viz:LawlibraryofCRAlaw
xxxx
Bearing on the jurisdiction of the Sandiganbayan over cases of ill-gotten
wealth, EO 14, Secs. 1 and 2 provide:LawlibraryofCRAlaw
SECTION 1. Any provision of the law to the contrary notwithstanding,
the Presidential Commission on Good Government with the assistance of
the Office of the Solicitor General and other government agencies, is
hereby empowered to file and prosecute all cases investigated by it
under Executive Order No. 1, dated February 28, 1986 and Executive
Order No. 2, dated March 12, 1986, as may be warranted by its findings.
SECTION 2. The Presidential Commission on Good Government shall file
all such cases, whether civil or criminal, with the Sandiganbayan, which shall
have exclusive and original jurisdiction thereof. (Emphasis supplied.)
Notably, these amendments had been duly recognized and reflected in
subsequent amendments to PD 1606, specifically Republic Act Nos. 7975
and 8249.
In the light of the foregoing provisions, it is clear that it is the
Sandiganbayan and not the Makati City RTC that has jurisdiction over the
disputed UHC and PNCC shares, being the alleged “ill-gotten wealth” of
former President Ferdinand E. Marcos and petitioner Cuenca. The fact
that the Makati City RTC civil case involved the performance of contractual
obligations relative to the UHC shares is of no importance. The benchmark
is whether said UHC shares are alleged to be ill-gotten wealth of the
Marcoses and their perceived cronies. More importantly, the interests of
orderly administration of justice dictate that all incidents affecting the
UHC shares and PCGG’s right of supervision or control over the UHC
must be addressed to and resolved by the Sandiganbayan. Indeed, the law
and courts frown upon split jurisdiction and the resultant multiplicity of suits,
which result in much lost time, wasted effort, more expenses, and irreparable
injury to the public interest.
Second, the UHC shares in dispute were sequestered by respondent PCGG.
Sequestration is a provisional remedy or freeze order issued by the PCGG
designed to prevent the disposal and dissipation of ill-gotten wealth. The
power to sequester property means to
place or cause to be placed under [PCGG’s] possession or control said
property, or any building or office wherein any such property or any records
pertaining thereto may be found, including business enterprises and entities,
for the purpose of preventing the destruction of, and otherwise conserving
and preserving the same, until it can be determined, through appropriate
judicial proceedings, whether the property was in truth ill-gotten. (Silverio v.
PCGG, 155 SCRA 60 [1987]).
Considering that the UHC shares were already sequestered, enabling the
PCGG to exercise the power of supervision, possession, and control over
said shares, then such power would collide with the legal custody of the
Makati City RTC over the UHC shares subject of Civil Case No. 91-
2721. Whatever the outcome of Civil Case No. 91-2721, whether from
enforcement or rescission of the contract, would directly militate on PCGG’s
control and management of IRC and UHC, and consequently hamper or
interfere with its mandate to recover ill-gotten wealth. As aptly pointed out
by respondents, petitioners’ action is inexorably entwined with the
Government’s action for the recovery of ill-gotten wealth – the subject of
the pending case before the Sandiganbayan. Verily, the transfer of shares of
stock of UHC to petitioners or the return of the shares of stock of CDCP
(now PNCC) will wreak havoc on the sequestration case as both UHC and
CDCP are subject of sequestration by PCGG.
Third, Philippine Amusement and Gaming Corporation and Holiday Inn
(Phils.), Inc. are not analogous to the case at bar. The first dealt with
ownership of gaming and office equipment, which is distinct from and will
not impact on the sequestration issue of PCOC. The second dealt with an
ordinary civil case for performance of a contractual obligation which did not
in any way affect the sequestration proceeding of NRHDCI; thus, the
complaint-in-intervention of Holiday Inn (Phils.), Inc. was properly denied
for lack of jurisdiction over the subject matter.
In both cases cited by petitioners, there was a substantial distinction
between the sequestration proceedings and the subject matter of the
actions. This does not prevail in the instant case, as the ownership of the
shares of stock of the sequestered companies, UHC and CDCP, is the
subject matter of a pending case and thus addressed to the exclusive
jurisdiction of the Sandiganbayan.
Sec. 2 of EO 14 pertinently provides: “The Presidential Commission on
Good Government shall file all such cases, whether civil or criminal, with the
Sandiganbayan, which shall have exclusive and original jurisdiction thereof.”
The above proviso has been squarely applied in Peña, where this Court held
that the exclusive jurisdiction conferred on the Sandiganbayan would
evidently extend not only to the principal causes of action, that is, recovery
of alleged ill-gotten wealth, but also to all incidents arising from, incidental
to, or related to such cases, including a dispute over the sale of the shares, the
propriety of the issuance of ancillary writs of relative provisional remedies,
and the sequestration of the shares, which may not be made the subject of
separate actions or proceedings in another forum. Indeed, the issue of the
ownership of the sequestered companies, UHC and PNCC, as well as IRC’s
ownership of them, is undeniably related to the recovery of the alleged ill-
gotten wealth and can be squarely addressed via the exclusive jurisdiction
of the Sandiganbayan.
Fourth, while it is clear that the exclusive jurisdiction of the Sandiganbayan
only encompasses cases where PCGG is impleaded, such requirement is
satisfied in the instant case. The appellate court clearly granted PCGG’s
petition for certiorari in CA-G.R. SP No. 49686, assailing the trial court’s
denial of its Motion for Leave to Intervene with Motion to Dismiss. Thus, the
trial court’s April 20, 1998 Order was reversed and set aside by the appellate
court through its assailed Decision. Consequently, PCGG was granted the
right to intervene and thus became properly impleaded in the instant case.
Without doubt, the trial court has no jurisdiction to hear and decide Civil
Case No. 91-2721.37 (Additional emphasis supplied)
In the light of the foregoing, it is clear that the Sandiganbayan has exclusive
jurisdiction over the subject matter of Civil Case Nos. 12-1251 and 12-1252.
First, the subject matters of respondents’ petitions in Civil Case Nos. 0033-A
and 0033-F filed by the PCGG against Eduardo M. Cojuangco, et al. are the
same, i.e., the ownership of CIIF companies and CIIF SMC Block of Shares,
which were claimed by the Government as acquired by the defendants using
public funds (coco levy funds). In the interest of orderly administration of
justice and the policy against multiplicity of suits, it is but proper
that all incidents affecting the coconut levy funds and assets be addressed
and resolved by the Sandiganbayan. Claims of ownership of a portion of the
subject CIIF companies and SMC shares by private entities such as UCPB
and COCOLIFE are inextricably related to the aforementioned ill-gotten
wealth cases filed in the Sandiganbayan.
Second, UCPB, along with the CIIF companies and CIIF SMC Block of
Shares, were duly sequestered by the PCGG and had been under the latter’s
administration for more than 25 years. With the final determination made by
this Court in COCOFED v. Republic that these properties unquestionably
belong to the Government as they were acquired using the coconut levy
funds, the PCGG can now exercise full acts of ownership as evident from the
latest executive issuance, EO 180, by President Benigno Simeon C. Aquino
III.
Third, aside from their sequestration by PCGG, the ownership of the
aforesaid assets is the subject matter in both Civil Case Nos. 12-1251 and 12-
1252 filed in the RTC and Civil Case Nos. 0033-A and 0033-F in the
Sandiganbayan. Respondents’ assertion that the subject matter of their
petitions for declaratory relief is different due to private funds used in buying
shares in UCPB and CIIF oil mills is but a feeble attempt to create an
exception to the Sandiganbayan’s exclusive jurisdiction. As underscored
in Cuenca v. PCGG,38 the benchmark is whether such shares of UCPB and
CIIF oil mills are alleged to be ill-gotten wealth of the Marcoses and their
perceived cronies, which is sufficient to bring the case within the exclusive
jurisdiction of the Sandiganbayan pursuant to existing laws and decrees.
Fourth, the requirement in Peña and Nepomuceno that the PCGG must be a
party to the suit in order to invoke the Sandiganbayan’s exclusive jurisdiction
was satisfied in this case. PCGG was impleaded as co-defendant in Civil
Case Nos. 12-1251 and 12-1252. It even filed a motion to dismiss in both
cases and appealed from the denial of said motions by respondent judge.
Thus, while the Republic itself was not impleaded in the petitions for
declaratory relief, PCGG was formally made a party thereto.
Applicability of Res Judicata
The doctrine of res judicata provides that a final judgment on the merits
rendered by a court of competent jurisdiction is conclusive as to the rights of
the parties and their privies and constitutes an absolute bar to subsequent
actions involving the same claim, demand, or cause of action.39 The
following requisites must obtain for the application of the doctrine: (1) the
former judgment or order must be final; (2) it must be a judgment or order on
the merits, that is, it was rendered after a consideration of the evidence or
stipulations submitted by the parties at the trial of the case; (3) it must have
been rendered by a court having jurisdiction over the subject matter and the
parties; and (4) there must be, between the first and second actions, identity
of parties, of subject matter and of cause of action. This requisite is satisfied
if the two actions are substantially between the same parties.40redarclaw
There is no question regarding compliance with the first, second and third
requisites. However, respondents maintain that while they adhere to the
Decision in COCOFED v. Republic, said decision did not affect their right or
title to the subject properties since the subject matter in their petitions for
declaratory relief is not the coconut levy funds but their own private funds
used by them in purchasing shares from UCPB and CIIF companies, that in
turn resulted in their indirect ownership of the CIIF SMC Block of Shares in
their respective proportions: 11.03% (UCPB) and 11.01% (COCOLIFE).
Respondents further assert that they are not bound by the adjudication of
ownership in COCOFED v. Republic considering that they were not
impleaded as defendants in Civil Case Nos. 0033-A and 0033-F.
We disagree.
In Universal Broadcasting Corporation v. Sandiganbayan (5th Div.),41 we
reiterated that it is not necessary to implead companies which are the res of
suits for recovery of ill-gotten wealth. We held that –
Petitioner submits that the Sandiganbayan never acquired jurisdiction over it
as it was not impleaded as a party-defendant in Civil Case No. 0035.
The submission has no merit.
The Price Mansion property is an asset alleged to be ill-gotten. Like UBC, it
is listed as among the properties of Benjamin Romualdez. For sure, UBC is
among the corporations listed as alleged repositories of shares of stock
controlled by Romualdez.
In Republic v. Sandiganbayan, the Court held that there is no need to
implead firms which are merely the res of the actions in ill-gotten wealth
cases and that judgment may simply be directed against the assets,
thus:LawlibraryofCRAlaw
C. Impleading Unnecessary Re Firms which are the Res of the Actions
And as to corporations organized with ill-gotten wealth, but are not
themselves guilty of misappropriation, fraud or other illicit conduct – in other
words, the companies themselves are the object or thing involved in the
action, the res thereof - there is no need to implead them either. Indeed,
their impleading is not proper on the strength alone of their having been
formed with ill-gotten funds, absent any other particular wrongdoing on their
part. The judgment may simply be directed against the shares of stock
shown to have been issued in consideration of ill-gotten wealth. x x x
x x x In this light, they are simply the res in the actions for the recovery of
illegally acquired wealth, and there is, in principle, no cause of action against
them and no ground to implead them as defendants in said actions. x x
x 42 (Additional emphasis supplied)
The doctrine of res judicata has two aspects. The first, known as “bar by
prior judgment,” or “estoppel by verdict,” is the effect of a judgment as a bar
to the prosecution of a second action upon the same claim, demand or cause
of action. The second, known as “conclusiveness of judgment,” otherwise
known as the rule of auter action pendent, ordains that issues actually and
directly resolved in a former suit cannot again be raised in any future case
between the same parties involving a different cause of action.43redarclaw
[C]onclusiveness of judgment – states that a fact or question which was in
issue in a former suit and there was judicially passed upon and determined by
a court of competent jurisdiction, is conclusively settled by the judgment
therein as far as the parties to that action and persons in privity with them are
concerned and cannot be again litigated in any future action between such
parties or their privies, in the same court or any other court of concurrent
jurisdiction on either the same or different cause of action, while the
judgment remains unreversed by proper authority. It has been held that in
order that a judgment in one action can be conclusive as to a particular matter
in another action between the same parties or their privies, it is essential that
the issue be identical. If a particular point or question is in issue in the
second action, and the judgment will depend on the determination of that
particular point or question, a former judgment between the same parties
or their privies will be final and conclusive in the second if that same point
or question was in issue and adjudicated in the first suit. Identity of cause
of action is not required but merely identity of issues.44 (Emphasis and
italics supplied)
We have applied the doctrine of conclusiveness of judgment in a previous
case involving ownership of shares of stock in a sequestered corporation, as
follows:LawlibraryofCRAlaw
In cases wherein the doctrine of “conclusiveness of judgment” applies, there
is, as in Civil Case No. 0034 and Civil Case No. 0188 identity of issues not
necessarily identity of causes of action. The prior adjudication of the
Sandiganbayan affirmed by this Court in G.R. No. 140615, as to the
ownership of the 1/7 Piedras shares of Arambulo, is conclusive in the
second case, as it has been judicially resolved.
The filing of Civil Case No. 0188, although it has a different cause of action
from Civil Case No. 0034, will not enable the PCGG to escape the operation
of the principle of res judicata. A case litigated once shall not be relitigated
in another action as it would violate the interest of the State to put an end to
litigation – republicae ut sit litium and the policy that no man shall be vexed
twice for the same cause – nemo debet bis vexari et eadem causa. Once a
litigant’s rights had been adjudicated in a valid final judgment by a
competent court, he should not be granted an unbridled license to come back
for another try.45 (Additional italcis and emphasis supplied)
We hold that res judicata under the second aspect (conclusiveness of
judgment) is applicable in this case. The issue of ownership of the
sequestered CIIF companies and CIIF SMC Block of Shares was directly and
actually resolved by the Sandiganbayan and affirmed by this Court
in COCOFED v. Republic. More important, in the said decision, we
categorically affirmed the resolutions issued by the Sandiganbayan in Civil
Case Nos. 0033-A and 0033-F “THAT THERE IS NO MORE NECESSITY
OF FURTHER TRIAL WITH RESPECT TO THE ISSUE OF OWNERSHIP
OF (1) THE SEQUESTERED UCPB SHARES, (2) THE CIIF BLOCK OF
SMC SHARES, AND (3) THE CIIF COMPANIES, AS THEY HAVE
FINALLY BEEN ADJUDICATED IN THE AFOREMENTIONED
PARTIAL SUMMARY JUDGMENTS DATED JULY 11, 2003 AND MAY
7, 2004.” Among the admitted facts set forth in the Order dated February 23,
2004 is the acquisition by UCPB of the “controlling interests” in the six
CIIF oil mills. The Partial Summary Judgment further quoted from the
Answer to Third Amended Complaint (Subdivided) with Compulsory
Counterclaims dated January 7, 2000 filed by the CIIF oil mills and 14
holding companies, in which they also alleged that pursuant to the authority
granted to it by P.D. 961 and P.D. 1568, “UCPB acquired controlling
interests” in the six CIIF oil mills.46redarclaw
In the same decision we specifically upheld the Sandiganbayan’s findings
and conclusion on the issue of ownership of the CIIF OMG, the 14 holding
companies and the CIIF SMC Block of Shares, viz.:LawlibraryofCRAlaw
The CIIF Companies and the CIIF Block
of SMC shares are public funds/assets
From the foregoing discussions, it is fairly established that the coconut levy
funds are special public funds. Consequently, any property purchased by
means of the coconut levy funds should likewise be treated as public
funds or public property, subject to burdens and restrictions attached by
law to such property.
In this case, the 6 CIIF Oil Mills were acquired by the UCPB using
coconut levy funds. On the other hand, the 14 CIIF holding companies
are wholly owned subsidiaries of the CIIF Oil Mills. Conversely, these
companies were acquired using or whose capitalization comes from the
coconut levy funds. However, as in the case of UCPB, UCPB itself
distributed a part of its investments in the CIIF oil mills to coconut farmers,
and retained a part thereof as administrator. The portion distributed to the
supposed coconut farmers followed the procedure outlined in PCA
Resolution No. 033-78. And as the administrator of the CIIF holding
companies, the UCPB authorized the acquisition of the SMC shares. In fact,
these companies were formed or organized solely for the purpose of holding
the SMC shares. As found by the Sandiganbayan, the 14 CIIF holding
companies used borrowed funds from the UCPB to acquire the SMC shares
in the aggregate amount of P1.656 Billion.
Since the CIIF companies and the CIIF block of SMC shares were acquired
using coconut levy funds – funds, which have been established to be public
in character – it goes without saying that these acquired corporations and
assets ought to be regarded and treated as government assets. Being
government properties, they are accordingly owned by the Government, for
the coconut industry pursuant to currently existing laws.
It may be conceded hypothetically, as COCOFED, et al. urge, that the 14
CIIF holding companies acquired the SMC shares in question using advances
from the CIIF companies and from UCPB loans. But there can be no
gainsaying that the same advances and UCPB loans are public in character,
constituting as they do assets of the 14 holding companies, which in turn are
wholly-owned subsidiaries of the 6 CIIF Oil Mills. And these oil mills were
organized, capitalized and/or financed using coconut levy funds. In net
effect, the CIIF block of SMC shares are simply the fruits of the coconut levy
funds acquired at the expense of the coconut industry. In Republic v.
COCOFED, the en bancCourt, speaking through Justice (later Chief Justice)
Artemio Panganiban, stated: “Because the subject UCPB shares were
acquired with government funds, the government becomes their prima facie
beneficial and true owner.” By parity of reasoning, the adverted block of
SMC shares, acquired as they were with government funds, belong to the
government as, at the very least, their beneficial and true owner.
We thus affirm the decision of the Sandiganbayan on this point. But as We
have earlier discussed, reiterating our holding in Republic v. COCOFED, the
State’s avowed policy or purpose in creating the coconut levy fund is for the
development of the entire coconut industry, which is one of the major
industries that promotes sustained economic stability, and not merely the
livelihood of a significant segment of the population. Accordingly, We
sustain the ruling of the Sandiganbayan in CC No. 0033-F that the CIIF
companies and the CIIF block of SMC shares are public funds
necessarily owned by the Government. We, however, modify the same in
the following wise: These shares shall belong to the Government, which
shall be used only for the benefit of the coconut farmers and for the
development of the coconut industry.47 (Emphasis and underscoring
supplied)
are barred by our January 24, 2012 Decision which settled with finality the
issue of ownership of the CIIF oil mills, the 14 holding companies and CIIF
SMC Block of Shares, we deem it unnecessary to address the other issues
presented.
WHEREFORE, the petitions are GRANTED. The Orders dated April 29,
2013 and June 28, 2013 in Civil Case No. 12-1251; and Omnibus Order
dated May 15, 2013 (Branch 138) and Order dated December 4, 2013 in
Civil Case Nos. 12-1251 and 12-1252 (consolidated petitions) of
the Regional Trial Court of Makati City, Branch 59, are
hereby ANNULLED and SET ASIDE. The petitions in Civil Case Nos. 12-
1251 and 12-1252 filed by UCPB and COCOLIFE, respectively,
are DISMISSED.
No pronouncement as to costs.
SO ORDERED.cralawlawlibrary

In G.R. No. 180705, separately decided by this Court on November 27, 2012,
we also affirmed the Sandiganbayan’s decision nullifying the shares of stock
transfer to Eduardo M. Cojuangco, Jr. We held that as the coconut levy
funds partake of the nature of taxes and can only be used for public purpose,
and importantly, for the purpose for which it was exacted, i.e., the
development, rehabilitation and stabilization of the coconut industry, they
cannot be used to benefit––whether directly or indirectly––private
individuals, be it by way of a commission, or as the PCA-Cojuangco
Agreement words it, compensation. Accordingly, the UCPB shares of stock
representing the 7.22% fully paid shares subject of the petition, with all
dividends declared, paid or issued thereon, as well as any increments thereto
arising from, but not limited to, the exercise of pre-emptive rights, were
ordered reconveyed to the Government of the Republic of the Philippines,
which shall “be used only for the benefit of all coconut farmers and for the
development of the coconut industry.”48redarclaw

Having resolved that subject matter jurisdiction pertains to the

Sandiganbayan and not the RTC, and that the petitions for declaratory relief
SECOND DIVISION
January 25, 2016
G.R. No. 198172
REGULUS DEVELOPMENT, INC., Petitioner,
vs.
ANTONIO DELA CRUZ, Respondent.
DECISION
BRION, J.:
Before us is a petition for review on certiorari filed by petitioner Regulus
Development, Inc. (petitioner) to challenge the November 23, 2010
Decision1 and August 10, 2011 resolution2 of the Court of Appeals (CA) in
CA-G.R. SP No. 105290. CA Associate Justice Juan Q. Enriquez, Jr. penned
the rulings, concurred in by Associate Justices Ramon M. Bato, Jr. and
Fiorito S. Macalino.
ANTECEDENT FACTS
The petitioner is the owner of an apartment (San Juan Apartments) located at
San Juan Street, Pasay City. Antonio dela Cruz (respondent) leased two units
(Unit 2002-A and Unit 2002-B) of the San Juan Apartments in 1993 and
1994. The contract of lease for each of the two units similarly provides a
lease period of one (1) month, subject to automatic renewals, unless
terminated by the petitioner upon written notice.
The petitioner sent the respondent a letter to terminate the lease of the two
subject units. Due to the respondent’s refusal to vacate the units, the
petitioner filed a complaint3 for ejectment before the Metropolitan Trial
Court (MTC) of Pasay City, Manila, on May 1, 2001.
The MTC resolved the case in the petitioner’s favor and ordered the
respondent to vacate the premises, and pay the rentals due until the
respondent actually complies.4
The respondent appealed to the Regional Trial Court (RTC). Pending appeal,
the respondent consigned the monthly rentals to the RTC due to the
petitioner’s refusal to receive the rentals.
The RTC affirmed5 the decision of the MTC in toto and denied the motion
for reconsideration filed by the respondent.
CA-G.R. SP No. 69504: Dismissal of Ejectment Case
In a Petition for Review filed by the respondent, the CA reversed the lower
courts’ decisions and dismissed the ejectment case.6 On March 19, 2003,
the dismissal of the case became final and executory.7
Orders dated July 25, 2003 and November 28, 2003 for payment of rentals
due under lease contracts
The petitioner filed a motion (to withdraw funds deposited by the defendant-
appellant as lessee)8 praying for the withdrawal of the rentals consigned by
the respondent with the RTC.
In an order dated July 25, 2003,9 the RTC granted the petitioner’s motion.
The RTC explained that the effect of the complaint’s dismissal would mean
that there was no complaint filed at all. The petitioner, however, is entitled to
the amount of rentals for the use and occupation of the subject units, as
provided in the executed contracts of lease and on the basis of justice and
equity.
The court denied the respondent’s motion for reconsideration10 in an order
dated November 28, 2003.11
On the petitioner’s motion, the RTC issued a writ of execution on December
18, 2003, to cause the enforcement of its order dated July 25, 2003.12
CA-G.R. SP No. 81277: Affirmed RTC Orders
The respondent filed a petition for certiorari under Rule 65 before the CA to
assail the RTC Orders dated July 25, 2003 and November 28, 2003 (RTC
orders), which granted the petitioner’s motion to withdraw funds.
The CA dismissed13 the petition and held that the assailed RTC Orders were
issued pursuant to its equity jurisdiction, in accordance with Section 5,
Rule 39,14 and Rules 515 and 616 of Rule 135 of the Rules of Court. The
respondent’s motion for reconsideration was similarly denied.
G.R. SP No. 171429: Affirmed CA Ruling on RTC Orders
The respondent filed a petition for review on certiorari before this Court to
assail the decision of the CA in CA-G.R. SP No. 81277. In a resolution dated
June 7, 2006,17 we denied the petition for insufficiency in form and for
failure to show any reversible error committed by the CA.
Our resolution became final and executory and an entry of judgment18 was
issued.
Execution of RTC Orders
The petitioner returned to the RTC and moved for the issuance of a writ of
execution to allow it to proceed against the supersedeas bond the respondent
posted, representing rentals for the leased properties from May 2001 to
October 2001, and to withdraw the lease payments deposited by respondent
from November 2001 until August 2003.19 The RTC granted the motion.20
The RTC issued an Alias Writ of Execution21 dated April 26, 2007, allowing
the withdrawal of the rental deposits and the value of the supersedeas bond.
The petitioner claimed that the withdrawn deposits, supersedeas bond, and
payments directly made by the respondent to the petitioner, were insufficient
to cover rentals due for the period of May 2001 to May 2004. Hence, the
petitioner filed a manifestation and motion22 dated October 23, 2007, praying
that the RTC levy upon the respondent’s property covered by Transfer
Certificate of Title (TCT) No. 136829 to satisfy the judgment credit.
The RTC granted the petitioner’s motion in an order dated June 30,
2008.23 The respondent filed a motion for reconsideration which was denied
by the RTC in an order dated August 26, 2008.24
CA-G.R. SP No. 105290: Assailed the levy of the respondent’s property
On October 3, 2008, the respondent filed with the CA a Petition for
Certiorari25 with application for issuance of a temporary restraining order.
The petition sought to nullify and set aside the orders of the RTC directing
the levy of the respondent’s real property. The CA dismissed the petition.
Thereafter, the respondent filed a motion for reconsideration26 dated
November 3, 2008.
Pursuant to the order dated June 30, 2008, a public auction for the
respondent’s property covered by TCT No. 136829 was held on November 4,
2008,27 where the petitioner was declared highest bidder. Subsequently, the
Certificate of Sale28 in favor of the petitioner was registered.
Meanwhile, on January 7, 2010, the respondent redeemed the property with
the RTC Clerk of Court, paying the equivalent of the petitioner’s bid price
with legal interest. The petitioner filed a motion to release funds29 for the
release of the redemption price paid. The RTC granted30 the motion.
On February 12, 2010, the respondent filed a manifestation and
motion31 before the CA to withdraw the petition for the reason that the
redemption of the property and release of the price paid rendered the petition
moot and academic.
Thereafter, the petitioner received the CA decision dated November 23,
2010, which reversed and set aside the orders of the RTC directing the levy
of the respondent’s property. The CA held that while the approval of the
petitioner’s motion to withdraw the consigned rentals and the
posted supersedeas bond was within the RTC’s jurisdiction, the RTC had no
jurisdiction to levy on the respondent’s real property.
The CA explained that the approval of the levy on the respondent’s real
property could not be considered as a case pending appeal, because the
decision of the MTC had already become final and executory. As such, the
matter of execution of the judgment lies with the MTC where the complaint
for ejectment was originally filed and presented.
The CA ordered the RTC to remand the case to the MTC for execution. The
petitioner filed its motion for reconsideration which was denied32 by the CA.
THE PETITION
The petitioner filed the present petition for review on certiorari to challenge
the CA ruling in CA-G.R. SP No. 105290 which held that the RTC had no
jurisdiction to levy on the respondent’s real property.
The petitioner argues: first, that the RTC’s release of the consigned rentals
and levy were ordered in the exercise of its equity jurisdiction; second, that
the respondent’s petition in CA-G.R. SP No. 105290 was already moot and
academic with the conduct of the auction sale and redemption of the
respondent’s real property; third, that the petition in CAG. R. SP No. 105290
should have been dismissed outright for lack of signature under oath on the
Verification and Certification against Forum Shopping.
The respondent duly filed its comment33 and refuted the petitioner’s
arguments. On the first argument, respondent merely reiterated the CA’s
conclusion that the RTC had no jurisdiction to order the levy on respondent’s
real property as it no longer falls under the allowed execution pending
appeal. On the second argument, the respondent contended that the levy on
execution and sale at public auction were null and void, hence the CA
decision is not moot and academic. On the third argument, the respondent
simply argued that it was too late to raise the alleged formal defect as an
issue.
THE ISSUE
The petitioner poses the core issue of whether the RTC had jurisdiction to
levy on the respondent’s real property.
OUR RULING
We grant the petition.
Procedural issue: Lack of notarial seal on the Verification and
Certification against Forum Shopping is not fatal to the petition.
The petitioner alleged that the assailed CA petition should have been
dismissed since the notary public failed to affix his seal on the attached
Verification and Certification against Forum Shopping.
We cannot uphold the petitioner’s argument.
The lack of notarial seal in the notarial certificate34 is a defect in a document
that is required to be executed under oath.
Nevertheless, a defect in the verification does not necessarily render the
pleading fatally defective. The court may order its submission or correction,
or act on the pleading if the attending circumstances are such that strict
compliance with the Rule may be dispensed with in order that the ends of
justice may be served.35
Noncompliance or a defect in a certification against forum shopping, unlike
in the case of a verification, is generally not curable by its subsequent
submission or correction, unless the covering Rule is relaxed on the ground
of "substantial compliance" or based on the presence of "special
circumstances or compelling reasons."36 Although the submission of a
certificate against forum shopping is deemed obligatory, it is not however
jurisdictional.37
In the present case, the Verification and Certification against Forum
Shopping were in fact submitted. An examination of these documents shows
that the notary public’s signature and stamp were duly affixed. Except for the
notarial seal, all the requirements for the verification and certification
documents were complied with.
The rule is that courts should not be unduly strict on procedural lapses that
do not really impair the proper administration of justice. The higher objective
of procedural rules is to ensure that the substantive rights of the parties are
protected. Litigations should, as much as possible, be decided on the merits
and not on technicalities. Every party-litigant must be afforded ample
opportunity for the proper and just determination of his case, free from the
unacceptable plea of technicalities.38
The CA correctly refused to dismiss and instead gave due course to the
petition as it substantially complied with the requirements on the Verification
and Certification against Forum Shopping.
An issue on jurisdiction prevents the petition from becoming "moot and
academic."
The petitioner claims that the assailed CA petition should have been
dismissed because the subsequent redemption of the property by the
respondent and the release of the price paid to the petitioner rendered the
case moot and academic.
A case or issue is considered moot and academic when it ceases to present a
justiciable controversy because of supervening events, rendering the
adjudication of the case or the resolution of the issue without any practical
use or value.39 Courts generally decline jurisdiction over such case or dismiss
it on the ground of mootness except when, among others, the case is capable
of repetition yet evades judicial review.40
The CA found that there is an issue on whether the RTC had jurisdiction to
issue the orders directing the levy of the respondent’s property. The issue on
jurisdiction is a justiciable controversy that prevented the assailed CA
petition from becoming moot and academic.
It is well-settled in jurisprudence that jurisdiction is vested by law and cannot
be conferred or waived by the parties. "Even on appeal and even if the
reviewing parties did not raise the issue of jurisdiction, the reviewing court is
not precluded from ruling that the lower court had no jurisdiction over the
case."41
Even assuming that the case has been rendered moot due to the respondent’s
redemption of the property, the CA may still entertain the jurisdictional issue
since it poses a situation capable of repetition yet evading judicial review.
Under this perspective, the CA correctly exercised its jurisdiction over the
petition.
Equity jurisdiction versus appellate jurisdiction of the RTC
The appellate jurisdiction of courts is conferred by law. The appellate court
acquires jurisdiction over the subject matter and parties when an appeal is
perfected.42
On the other hand, equity jurisdiction aims to provide complete justice in
cases where a court of law is unable to adapt its judgments to the special
circumstances of a case because of a resulting legal inflexibility when the
law is applied to a given situation. The purpose of the exercise of equity
jurisdiction, among others, is to prevent unjust enrichment and to ensure
restitution.43
The RTC orders which allowed the withdrawal of the deposited funds for the
use and occupation of the subject units were issued pursuant to the RTC’s
equity jurisdiction, as the CA held in the petition docketed as CA-G.R. SP
No. 81277.
The RTC’s equity jurisdiction is separate and distinct from its appellate
jurisdiction on the ejectment case. The RTC could not have issued its orders
in the exercise of its appellate jurisdiction since there was nothing more to
execute on the dismissed ejectment case. As the RTC orders explained, the
dismissal of the ejectment case effectively and completely blotted out and
cancelled the complaint. Hence, the RTC orders were clearly issued in the
exercise of the RTC’s equity jurisdiction, not on the basis of its appellate
jurisdiction.
This Court takes judicial notice44 that the validity of the RTC Orders has
been upheld in a separate petition before this Court, under G.R. SP No.
171429 entitled Antonio Dela Cruz v. Regulus Development, Inc.
The levy of real property was ordered by the RTC in the exercise of its
equity jurisdiction.
The levy of the respondent’s property was made pursuant to the RTC orders
issued in the exercise of its equity jurisdiction, independent of the ejectment
case originally filed with the MTC.
An examination of the RTC order dated June 30, 2008, directing the levy of
the respondent’s real property shows that it was based on the RTC order
dated July 25, 2003. The levy of the respondent’s property was issued to
satisfy the amounts due under the lease contracts, and not as a result of the
decision in the ejectment case.
The CA erred when it concluded that the RTC exercised its appellate
jurisdiction in the ejectment case when it directed the levy of the
respondent’s property.
Furthermore, the order to levy on the respondent’s real property was SO ORDERED.
consistent with the first writ of execution issued by the RTC on December
18, 2003, to implement the RTC orders. The writ of execution states that:

xxx In case of [sic] sufficient personal property of the defendant cannot be

found whereof to satisfy the amount of the said judgment, you are directed
to levy [on] the real property of said defendant and to sell the same or so
much thereof in the manner provided by law for the satisfaction of the
said judgment and to make return of your proceedings together with this
Writ within sixty (60) days from receipt hereof. (emphasis supplied)

The subsequent order of the RTC to levy on the respondent’s property was
merely a reiteration and an enforcement of the original writ of execution
issued.1âwphi1

Since the order of levy is clearly rooted on the RTC Orders, the only question
that needs to be resolved is which court has jurisdiction to order the
execution of the RTC orders.

The RTC, as the court of origin, has jurisdiction to order the levy of the
respondent's real property.

Execution shall be applied for in the court of origin, in accordance with

Section 1,45 Rule 39 of the Rules of Court.

The court of origin with respect to the assailed RTC orders is the court which
issued these orders. The RTC is the court with jurisdiction to order the
execution of the issued RTC orders.

Hence, the petitioner correctly moved for the issuance of the writ of
execution and levy of the respondent's real property before the RTC as the
court of origin.

WHEREFORE, we hereby GRANT the petition for review on certiorari.

The decision dated November 23, 2010, and the resolution dated August 10,
2011, of the Court of Appeals in CA-G.R. SP No. 105290 are
hereby REVERSED and SET ASIDE. The orders dated June 30, 2008, and
August 26, 2008, of Branch 108 of the Regional Trial Court of Pasay City,
are hereby REINSTATED. Costs against respondent Antonio dela Cruz.