Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. Nos.

September 24, 2012 154470-71

evidenced by a Trading Order8 and a Confirmation of Sale.9 However, instead of delivering the Treasury Bills, the PDB delivered the seven CB bills to the BOC, as evidenced by a PDB Security Delivery Receipt, bearing a "note: ** substitution in lieu of 0629-94" referring to the Treasury Bills.10 Nevertheless, the PDB retained possession of the Detached Assignments. It is basically the nature of this April 15 transaction that the PDB and the BOC cannot agree on. The transfer of the first set of seven CB bills i. CB bill nos. 45351-53 On April 20, 1994, according to the BOC, it "sold back"11 to the PDB three of the seven CB bills. In turn, the PDB transferred these three CB bills to Bancapital Development Corporation (Bancap). On April 25, 1994, the BOC bought the three CB bills from Bancap so, ultimately, the BOC reacquired these three CB bills,12 particularly described as follows: Serial No.: 2BB XM 045351 2BB XM 045352 2BB XM 045353 Quantity: Three (3) Denomination: Php 10 million Total Face Value: Php 30 million ii. CB bill nos. 45347-50 On April 20, 1994, the BOC sold the remaining four (4) CB bills to Capital One Equities Corporation13 which transferred them to All-Asia Capital and Trust Corporation (All Asia). On September 30, 1994, All Asia further transferred the four CB bills back to the RCBC.14 On November 16, 1994, the RCBC sold back to All Asia one of these 4 CB bills. When the BSP refused to release the amount of this CB bill on maturity, the BOC purchased from All Asia this lone CB bill,15 particularly described as follows:16 Serial No.: 2BB XM 045348 Quantity: One (1) Denomination: Php 10 million Total Face Value: Php 10 million As the registered owner of the remaining three CB bills, the RCBC sold them to IVI Capital and Insular Savings Bank. Again, when the BSP refused to release the amount of this CB bill on maturity, the RCBC paid back its transferees, reacquired these three CB bills and sold them to the BOC ultimately, the BOC acquired these three CB bills. All in all, the BOC acquired the first set of seven CB bills. II. Second set of CB bills On April 19, 1994, the RCBC, as registered owner, (i) sold two CB bills with a total face value of P 20 million to the PDB and (ii) delivered to the PDB the corresponding Detached Assignment.17 The two CB bills were particularly described as follows: Serial No.: BB XM 045373

BANK OF COMMERCE, Petitioner, vs. PLANTERS DEVELOPMENT BANK and BANGKO SENTRAL NG PILIPINAS, Respondent. x-----------------------x G.R. Nos. 154589-90 BANGKO SENTRAL NG PILIPINAS, Petitioner, vs. PLANTERS DEVELOPMENT BANK, Respondent.
DECISION BRION, J.: Before the Court are two consolidated petitions for review on certiorari under Rule 45,1 on pure questions of law, filed by the petitioners Bank of Commerce (BOC) and the Bangko Sentral ng Pilipinas (BSP). They assail the January 10, 2002 and July 23, 2002 Orders (assailed orders) of the Regional Trial Court (RTC) of Makati City, Branch 143, in Civil Case Nos. 94-3233 and 94-3254. These orders dismissed (i) the petition filed by the Planters Development Bank (PDB), (ii) the "counterclaim" filed by the BOC, and (iii) the counter-complaint/cross-claim for interpleader filed bythe BSP; and denied the BOCs and the BSPs motions for reconsideration. THE ANTECEDENTS The Central Bank bills I. First set of CB bills The Rizal Commercial Banking Corporation (RCBC) was the registered owner of seven Central Bank (CB) bills with a total face value of P 70 million, issued on January 2, 1994 and would mature on January 2, 1995.2 As evidenced by a "Detached Assignment" dated April 8, 1994,3 the RCBC sold these CB bills to the BOC.4 As evidenced by another "Detached Assignment"5 of even date, the BOC, in turn, sold these CB bills to the PDB.6 The BOC delivered the Detached Assignments to the PDB.7 On April 15, 1994 (April 15 transaction), the PDB, in turn, sold to the BOC Treasury Bills worth P 70 million, with maturity date of June 29, 1994, as

BB XM 045374 Issue date: January 3, 1994 Maturity date: January 2, 1995 Denomination: Php 10 million Total Face value: Php 20 million On even date, the PDB delivered to Bancap the two CB bills18 (April 19 transaction). In turn, Bancap sold the CB bills to Al-Amanah Islamic Investment Bank of the Philippines, which in turn sold it to the BOC.19 PDBs move against the transfer of the first and second sets of CB bills On June 30, 1994, upon learning of the transfers involving the CB bills, the PDB informed20 the Officer-in-Charge of the BSPs Government Securities Department,21 Lagrimas Nuqui, of the PDBs claim over these CB bills, based on the Detached Assignments in its possession. The PDB requested the BSP22 to record its claim in the BSPs books, explaining that its non-possession of the CB bills is "on account of imperfect negotiations thereof and/or subsequent setoff or transfer."23 Nuqui denied the request, invoking Section 8 of CB Circular No. 28 (Regulations Governing Open Market Operations, Stabilization of the Securities Market, Issue, Servicing and Redemption of the Public Debt)24 which requires the presentation of the bond before a registered bond may be transferred on the books of the BSP.25 In a July 25, 1994 letter, the PDB clarified to Nuqui that it was not "asking for the transfer of the CB Bills. rather it intends to put the BSP on formal notice that whoever is in possession of said bills is not a holder in due course," and, therefore the BSP should not make payment upon the presentation of the CB bills on maturity.26 Nuqui responded that the BSP was "not in a position at that point in time to determine who is and who is not the holder in due course since it is not privy to all acts and time involving the transfers or negotiation" of the CB bills. Nuqui added that the BSPs action shall be governed by CB Circular No. 28, as amended.27 On November 17, 1994, the PDB also asked BSP Deputy Governor Edgardo Zialcita that (i) a notation in the BSPs books be made against the transfer, exchange, or payment of the bonds and the payment of interest thereon; and (ii) the presenter of the bonds upon maturity be required to submit proof as a holder in due course (of the first set of CB bills). The PDB relied on Section 10 (d) 4 of CB Circular No. 28.28 This provision reads: (4) Assignments effected by fraud Where the assignment of a registered bond is secured by fraudulent representations, the Central Bank can grant no relief if the assignment has been honored without notice of fraud. Otherwise, the Central Bank, upon receipt of notice that the assignment is claimed to have been secured by fraudulent representations, or payment of the bond the payment of interest thereon, and when the bond is presented, will call upon the owner and the person presenting the bond to substantiate their respective claims.If it then appears that the person presenting the bond stands in the position of bonafide holder for value, the

Central Bank, after giving the owner an opportunity to assert his claim, will pass the bond for transfer, exchange or payments, as the case may be, without further question. In a December 29, 1994 letter, Nuqui again denied the request, reiterating the BSPs previous stand. In light of these BSP responses and the impending maturity of the CB bills, the PDB filed29 with the RTC two separate petitions for Mandamus, Prohibition and Injunction with prayer for Preliminary Injunction and Temporary Restraining Order, docketed as Civil Case No. 94-3233 (covering the first set of CB bills) and Civil Case 94-3254 (covering the second set of CB bills) against Nuqui, the BSP and the RCBC.30 The PDB essentially claims that in both the April 15 transaction (involving the first set of CB bills) and the April 19 transaction (involving the second set of CB bills), there was no intent on its part to transfer title of the CB bills, as shown by its non-issuance of a detached assignment in favor of the BOC and Bancap, respectively. The PDB particularly alleges that it merely "warehoused"31 the first set of CB bills with the BOC, as security collateral. On December 28, 1994, the RTC temporarily enjoined Nuqui and the BSP from paying the face value of the CB bills on maturity.32 On January 10, 1995, the PDB filed an Amended Petition, additionally impleading the BOC and All Asia.33 In a January 13, 1995 Order, the cases were consolidated.34 On January 17, 1995, the RTC granted the PDBs application for a writ of preliminary prohibitory injunction.35 In both petitions, the PDB identically prayed: WHEREFORE, it is respectfully prayed x x x that, after due notice and hearing, the Writs of Mandamus, Prohibition and Injunction, be issued; (i) commanding the BSP and Nuqui, or whoever may take her place (a) to record forthwith in the books of BSP the claim of x x x PDB on the [two sets of] CB Bills in accordance with Section 10 (d) (4) of revised C.B. Circular No. 28; and (b) also pursuant thereto, when the bills are presented on maturity date for payment, to call (i) x x x PDB, (ii) x x x RCBC x x x, (iii) x x x BOC x x x, and (iv) x x x ALL-ASIA x x x; or whoever will present the [first and second sets of] CB Bills for payment, to submit proof as to who stands as the holder in due course of said bills, and, thereafter, act accordingly; and (ii) ordering the BSP and Nuqui to pay jointly and severally to x x x PDB the following: (a) the sum of P 100,000.00, as and for exemplary damages; (b) the sum of at least P 500,000.00, or such amount as shall be proved at the trial, as and for attorneys fees; (c) the legal rate of interest from the filing of this Petition until full payment of the sums mentioned in this Petition; and

(d) the costs of suit.36 After the petitions were filed, the BOC acquired/reacquired all the nine CB bills the first and second sets of CB bills (collectively, subject CB bills). Defenses of the BSP and of the BOC37 The BOC filed its Answer, praying for the dismissal of the petition. It argued that the PDB has no cause of action against it since the PDB is no longer the owner of the CB bills. Contrary to the PDBs "warehousing theory,"38 the BOC asserted that the (i) April 15 transaction and the (ii) April 19 transaction covering both sets of CB bills - were valid contracts of sale, followed by a transfer of title (i) to the BOC (in the April 15 transaction) upon the PDBs delivery of the 1st set of CB bills in substitution of the Treasury Bills the PDB originally intended to sell, and (ii) to Bancap (in the April 19 transaction) upon the PDBs delivery of the 2nd set of CB bills to Bancap, likewise by way of substitution. The BOC adds that Section 10 (d) 4 of CB Circular No. 28 cannot apply to the PDBs case because (i) the PDB is not in possession of the CB bills and (ii) the BOC acquired these bills from the PDB, as to the 1st set of CB bills, and from Bancap, as to the 2nd set of CB bills, in good faith and for value. The BOC also asserted a compulsory counterclaim for damages and attorneys fees. On the other hand, the BSP countered that the PDB cannot invoke Section 10 (d) 4 of CB Circular No. 28 because this section applies only to an "owner" and a "person presenting the bond," of which the PDB is neither. The PDB has not presented to the BSP any assignment of the subject CB bills, duly recorded in the BSPs books, in its favor to clothe it with the status of an "owner."39 According to the BSP Section 10 d. (4) applies only to a registered bond which is assigned. And the issuance of CB Bills x x x are required to be recorded/registered in BSPs books. In this regard, Section 4 a. (1) of CB Circular 28 provides that registered bonds "may be transferred only by an assignment thereon duly executed by the registered owner or his duly authorized representative x x x and duly recorded on the books of the Central Bank." xxxx The alleged assignment of subject CB Bills in PDBs favor is not recorded/registered in BSPs books.40 (underscoring supplied) Consequently, when Nuqui and the BSP refused the PDBs request (to record its claim), they were merely performing their duties in accordance with CB Circular No. 28. Alternatively, the BSP asked that an interpleader suit be allowed between and among the claimants to the subject CB bills on the position that while it is able and willing to pay the subject CB bills face value, it is duty bound to ensure that payment is made to the

rightful owner. The BSP prayed that judgment be rendered: a. Ordering the dismissal of the PDBs petition for lack of merit; b. Determining which between/among [PDB] and the other claimants is/are lawfully entitled to the ownership of the subject CB bills and the proceeds thereof; c. x x x; d. Ordering PDB to pay BSP and Nuqui such actual/compensatory and exemplary damages as the RTC may deem warranted; and e. Ordering PDB to pay Nuqui moral damages and to pay the costs of the suit.41 Subsequent events The PDB agreed with the BSPs alternative response for an interpleader 4. PDB agrees that the various claimants should now interplead and substantiate their respective claims on the subject CB bills. However, the total face value of the subject CB bills should be deposited in escrow with a private bank to be disposed of only upon order of the RTC.42 Accordingly, on June 9, 199543 and August 4, 1995,44 the BOC and the PDB entered into two separate Escrow Agreements.45 The first agreement covered the first set of CB bills, while the second agreement covered the second set of CB bills. The parties agreed to jointly collect from the BSP the maturity proceeds of these CB bills and to deposit said amount in escrow, "pending final determination by Court judgment, or amicable settlement as to who shall be eventually entitled thereto."46 The BOC and the PDB filed a Joint Motion,47 submitting these Escrow Agreements for court approval. The RTC gave its approval to the parties Joint Motion.48 Accordingly, the BSP released the maturity proceeds of the CB bills by crediting the Demand Deposit Account of the PDB and of the BOC with 50% each of the maturity proceeds of the amount in escrow.49 In view of the BOCs acquisition of all the CB bills, All Asia50 moved to be dropped as a respondent (with the PDBs conformity51), which the RTC granted.52 The RCBC subsequently followed suit.53 In light of the developments, on May 4, 1998, the RTC required the parties to manifest their intention regarding the case and to inform the court of any amicable settlement; "otherwise, th[e] case shall be dismissed for lack of interest."54 Complying with the RTCs order, the BOC moved (i) that the case be set for pre-trial and (ii) for further proceeding to resolve the remaining issues between the BOC and the PDB, particularly on "who has a better right over the subject CB bills."55 The PDB joined the BOC in its motion.56 On September 28, 2000, the RTC granted the BSPs motion to interplead and, accordingly, required the

BOC to amend its Answer and for the conflicting claimants to comment thereon.57 In October 2000, the BOC filed its Amended Consolidated Answer with Compulsory Counterclaim, reiterating its earlier arguments asserting ownership over the subject CB bills.58 In the alternative, the BOC added that even assuming that there was no effective transfer of the nine CB bills ultimately to the BOC, the PDB remains obligated to deliver to the BOC, as buyer in the April 15 transaction and ultimate successor-in-interest of the buyer (Bancap) in the April 19 transaction, either the original subjects of the sales or the value thereof, plus whatever income that may have been earned during the pendency of the case.59 That BOC prayed: 1. To declare BOC as the rightful owner of the nine (9) CB bills and as the party entitled to the proceeds thereof as well as all income earned pursuant to the two (2) Escrow Agreements entered into by BOC and PDB. 2. In the alternative, ordering PDB to deliver the original subject of the sales transactions or the value thereof and whatever income earned by way of interest at prevailing rate. Without any opposition or objection from the PDB, on February 23, 2001, the RTC admitted60 the BOCs Amended Consolidated Answer with Compulsory Counterclaims. In May 2001, the PDB filed an Omnibus Motion,61 questioning the RTCs jurisdiction over the BOCs "additional counterclaims." The PDB argues that its petitions pray for the BSP (not the RTC) to determine who among the conflicting claimants to the CB bills stands in the position of the bona fide holder for value. The RTC cannot entertain the BOCs counterclaim, regardless of its nature, because it is the BSP which has jurisdiction to determine who is entitled to receive the proceeds of the CB bills. The BOC opposed62 the PDBs Omnibus Motion. The PDB filed its Reply.63 In a January 10, 2002 Order, the RTC dismissed the PDBs petition, the BOCs counterclaim and the BSPs counter-complaint/cross-claim for interpleader, holding that under CB Circular No. 28, it has no jurisdiction (i) over the BOCs "counterclaims" and (ii) to resolve the issue of ownership of the CB bills.64 With the denial of their separate motions for Reconsideration,65 the BOC and the BSP separately filed the present petitions for review on certiorari.66 THE BOCS and THE BSPS PETITIONS The BOC argues that the present cases do not fall within the limited provision of Section 10 (d) 4 of CB Circular No. 28, which contemplates only of three situations: first, where the fraudulent assignment is not coupled with a notice to the BSP, it can grant no relief; second, where the fraudulent assignment is coupled with a notice of fraud to the BSP, it will make a notation against the assignment and require the

owner and the holder to substantiate their claims; and third, where the case does not fall on either of the first two situations, the BSP will have to await action on the assignment pending settlement of the case, whether by agreement or by court order. The PDBs case cannot fall under the first two situations. With particular regard to the second situation, CB Circular No. 28 requires that the conflict must be between an "owner" and a "holder," for the BSP to exercise its limited jurisdiction to resolve conflicting claims; and the word "owner" here refers to the registered owner giving notice of the fraud to the BSP. The PDB, however, is not the registered owner nor is it in possession (holder) of the CB bills.67 Consequently, the PDBs case can only falls under the third situation which leaves the RTC, as a court of general jurisdiction, with the authority to resolve the issue of ownership of a registered bond (the CB bills) not falling in either of the first two situations. The BOC asserts that the policy consideration supportive of its interpretation of CB Circular No. 28 is to have a reliable system to protect the registered owner; should he file a notice with the BSP about a fraudulent assignment of certain CB bills, the BSP simply has to look at its books to determine who is the owner of the CB bills fraudulently assigned. Since it is only the registered owner who complied with the BSPs requirement of recording an assignment in the BSPs books, then "the protective mantle of administrative proceedings" should necessarily benefit him only, without extending the same benefit to those who chose to ignore the Circulars requirement, like the PDB.68 Assuming arguendo that the PDBs case falls under the second situation i.e., the BSP has jurisdiction to resolve the issue of ownership of the CB bills the more recent CB Circular No. 769-80 (Rules and Regulations Governing Central Bank Certificates of Indebtedness) already superseded CB Circular No. 28, and, in particular, effectively amended Section 10 (d) 4 of CB Circular No. 28. The pertinent provisions of CB Circular No. 769-80 read: Assignment Affected by Fraud. Any assignment for transfer of ownership of registered certificate obtained through fraudulent representation if honored by the Central Bank or any of its authorized service agencies shall not make the Central Bank or agency liable therefore unless it has previous formal notice of the fraud. The Central Bank, upon notice under oath that the assignment was secured through fraudulent means, shall immediately issue and circularize a "stop order" against the transfer, exchange, redemption of the Certificate including the payment of interest coupons. The Central Bank or service agency concerned shall continue to withhold action on the certificate until such time that the conflicting claims have been finally settled either by amicable settlement between the parties or by order of the Court. Unlike CB Circular No. 28, CB Circular No. 769-80 limited the BSPs authority to the mere issuance and circularization of a "stop order" against the transfer, exchange and redemption upon sworn notice of a

fraudulent assignment. Under this Circular, the BSP shall only continue to withhold action until the dispute is ended by an amicable settlement or by judicial determination. Given the more passive stance of the BSP the very agency tasked to enforce the circulars involved - under CB Circular No. 769-80, the RTCs dismissal of the BOCs counterclaims is palpably erroneous. Lastly, since Nuquis office (Government Securities Department) had already been abolished,69 it can no longer adjudicate the dispute under the second situation covered by CB Circular No. 28. The abolition of Nuquis office is not only consistent with the BSPs Charter but, more importantly, with CB Circular No. 769-80, which removed the BSPs adjudicative authority over fraudulent assignments. THE PDBS COMMENT The PDB claims that jurisdiction is determined by the allegations in the complaint/petition and not by the defenses set up in the answer.70 In filing the petition with the RTC, the PDB merely seeks to compel the BSP to determine, pursuant to CB Circular No. 28, the party legally entitled to the proceeds of the subject CB bills, which, as the PDB alleged, have been transferred through fraudulent representations an allegation which properly recognized the BSPs jurisdiction to resolve conflicting claims of ownership over the CB bills. The PDB adds that under the doctrine of primary jurisdiction, courts should refrain from determining a controversy involving a question whose resolution demands the exercise of sound administrative discretion. In the present case, the BSPs special knowledge and experience in resolving disputes on securities, whose assignment and trading are governed by the BSPs rules, should be upheld. The PDB counters that the BOCs tri-fold interpretation of Section 10 (d) 4 of CB Circular No. 28 sanctions split jurisdiction which is not favored;but even this tri-fold interpretation which, in the second situation, limits the meaning of the "owner" to the registered owner is flawed. Section 10 (d) 4 aims to protect not just the registered owner but anyone who has been deprived of his bond by fraudulent representation in order to deter fraud in the secondary trading of government securities. The PDB asserts that the existence of CB Circular No. 769-80 or the abolition of Nuquis office does not result in depriving the BSP of its jurisdiction: first, CB Circular No. 769-80 expressly provides that CB Circular No. 28 shall have suppletory application to CB Circular No. 769-80; and second, the BSP can always designate an office to resolve the PDBs claim over the CB bills. Lastly, the PDB argues that even assuming that the RTC has jurisdiction to resolve the issue of ownership of the CB bills, the RTC has not acquired jurisdiction over the BOCs so-called "compulsory" counterclaims (which in truth is merely "permissive") because of the BOCs failure to pay the appropriate docket fees. These counterclaims should, therefore, be dismissed and expunged from the record.

THE COURTS RULING We grant the petitions. At the outset, we note that the parties have not raised the validity of either CB Circular No. 28 or CB Circular No. 769-80 as an issue. What the parties largely contest is the applicable circular in case of an allegedly fraudulently assigned CB bill. The applicable circular, in turn, is determinative of the proper remedy available to the PDB and/or the BOC as claimants to the proceeds of the subject CB bills. Indisputably, at the time the PDB supposedly invoked the jurisdiction of the BSP in 1994 (by requesting for the annotation of its claim over the subject CB bills in the BSPs books), CB Circular No. 769-80 has long been in effect. Therefore, the parties respective interpretations of the provision of Section 10 (d) 4 of CB Circular No. 28 do not have any significance unless it is first established that that Circular governs the resolution of their conflicting claims of ownership. This conclusion is important, given the supposed repeal or modification of Section 10 (d) 4 of CB Circular No. 28 by the following provisions of CB Circular No. 769-80: ARTICLE XI SUPPLEMENTAL RULES Section 1. Central Bank Circular No. 28 The provisions of Central Bank Circular No. 28 shall have suppletory application to matters not specially covered by these Rules. ARTICLE XII EFFECTIVITY Effectivity The rules and regulations herein prescribed shall take effect upon approval by the Monetary Board, Central Bank of the Philippines, and all circulars, memoranda, or office orders inconsistent herewith are revoked or modified accordingly. (Emphases added) We agree with the PDB that in view of CB Circular No. 28s suppletory application, an attempt to harmonize the apparently conflicting provisions is a prerequisite before one may possibly conclude that an amendment or a repeal exists.71 Interestingly, however, even the PDB itself failed to submit an interpretation based on its own position of harmonization. The repealing clause of CB Circular No. 769-80 obviously did not expressly repeal CB Circular No. 28; in fact, it even provided for the suppletory application of CB Circular No. 28 on "matters not specially covered by" CB Circular No. 769-80. While no express repeal exists, the intent of CB Circular No. 769-80 to operate as an implied repeal,72 or at least to amend earlier CB circulars, is supported by its text "revoking" or "modif[ying" "all circulars" which are inconsistent with its terms. At the outset, we stress that none of the parties disputes that the subject CB bills fall within the category of a certificate or evidence of indebtedness

and that these were issued by the Central Bank, now the BSP. Thus, even without resorting to statutory construction aids, matters involving the subject CB bills should necessarily be governed by CB Circular No. 769-80. Even granting, however, that reliance on CB Circular No. 769-80 alone is not enough, we find that CB Circular No. 769-80 impliedly repeals CB Circular No. 28. An implied repeal transpires when a substantial conflict exists between the new and the prior laws. In the absence of an express repeal, a subsequent law cannot be construed as repealing a prior law unless an irreconcilable inconsistency and repugnancy exist in the terms of the new and the old laws.73 Repeal by implication is not favored, unless manifestly intended by the legislature, or unless it is convincingly and unambiguously demonstrated, that the laws or orders are clearly repugnant and patently inconsistent with one another so that they cannot coexist; the legislature is presumed to know the existing law and would express a repeal if one is intended.74 There are two instances of implied repeal. One takes place when the provisions in the two acts on the same subject matter are irreconcilably contradictory, in which case, the later act, to the extent of the conflict, constitutes an implied repeal of the earlier one. The other occurs when the later act covers the whole subject of the earlier one and is clearly intended as a substitute; thus, it will operate to repeal the earlier law.75 A general reading of the two circulars shows that the second instance of implied repeal is present in this case. CB Circular No. 28, entitled "Regulations Governing Open Market Operations, Stabilization of Securities Market, Issue, Servicing and Redemption of Public Debt," is a regulation governing the servicing and redemption of public debt, including the issue, inscription, registration, transfer, payment and replacement of bonds and securities representing the public debt.76 On the other hand, CB Circular No. 769-80, entitled "Rules and Regulations Governing Central Bank Certificate of Indebtedness," is the governing regulation on matters77 (i) involving certificate of indebtedness78 issued by the Central Bank itself and (ii) which are similarly covered by CB Circular No. 28. The CB Monetary Board issued CB Circular No. 28 to regulate the servicing and redemption of public debt, pursuant to Section 124 (now Section 119 of Republic Act R.A. No. 7653) of the old Central Bank law79 which provides that "the servicing and redemption of the public debt shall also be effected through the Bangko Sentral." However, even as R.A. No. 7653 continued to recognize this role by the BSP, the law required a phase-out of all fiscal agency functions by the BSP, including Section 119 of R.A. No. 7653. In other words, even if CB Circular No. 28 applies broadly to both government-issued bonds and securities and Central Bank-issued evidence of indebtedness, given the present state of law, CB Circular No. 28 and CB Circular No. 769-80 now operate on the same subject Central Bank-issued evidence of indebtedness. Under Section 1, Article XI

of CB Circular No. 769-80, the continued relevance and application of CB Circular No. 28 would depend on the need to supplement any deficiency or silence in CB Circular No. 769-80 on a particular matter. In the present case, both CB Circular No. 28 and CB Circular No. 769-80 provide the BSP with a course of action in case of an allegedly fraudulently assigned certificate of indebtedness. Under CB Circular No. 28, in case of fraudulent assignments, the BSP would have to "call upon the owner and the person presenting the bond to substantiate their respective claims" and, from there, determine who has a better right over the registered bond. On the other hand, under CB Circular No. 769-80, the BSP shall merely "issue and circularize a stop order against the transfer, exchange, redemption of the [registered] certificate" without any adjudicative function (which is the precise root of the present controversy). As the two circulars stand, the patent irreconcilability of these two provisions does not require elaboration. Section 5, Article V of CB Circular No. 769-80 inescapably repealed Section 10 (d) 4 of CB Circular No. 28. The issue of BSPs jurisdiction, lay hidden On that note, the Court could have written finis to the present controversy by simply sustaining the BSPs hands-off approach to the PDBs problem under CB Circular No. 769-80. However, the jurisdictional provision of CB Circular No. 769-80 itself, in relation to CB Circular No. 28, on the matter of fraudulent assignment, has given rise to a question of jurisdiction - the core question of law involved in these petitions - which the Court cannot just treat sub-silencio. Broadly speaking, jurisdiction is the legal power or authority to hear and determine a cause.80 In the exercise of judicial or quasi-judicial power, it refers to the authority of a court to hear and decide a case.81 In the context of these petitions, we hark back to the basic principles governing the question of jurisdiction over the subject matter. First, jurisdiction over the subject matter is determined only by the Constitution and by law.82 As a matter of substantive law, procedural rules alone can confer no jurisdiction to courts or administrative agencies.83 In fact, an administrative agency, acting in its quasi-judicial capacity, is a tribunal of limited jurisdiction and, as such, could wield only such powers that are specifically granted to it by the enabling statutes. In contrast, an RTC is a court of general jurisdiction, i.e., it has jurisdiction over cases whose subject matter does not fall within the exclusive original jurisdiction of any court, tribunal or body exercising judicial or quasi-judicial functions.84 Second, jurisdiction over the subject matter is determined not by the pleas set up by the defendant in his answer85 but by the allegations in the complaint,86 irrespective of whether the plaintiff is entitled to favorable judgment on the basis of his assertions.87 The reason is that the complaint is supposed to contain a concise statement of the

ultimate facts constituting the plaintiff's causes of action.88 Third, jurisdiction is determined by the law in force at the time of the filing of the complaint.89 Parenthetically, the Court observes that none of the parties ever raised the issue of whether the BSP can simply disown its jurisdiction, assuming it has, by the simple expedient of promulgating a new circular (specially applicable to a certificate of indebtedness issued by the BSP itself), inconsistent with an old circular, assertive of its limited jurisdiction over ownership issues arising from fraudulent assignments of a certificate of indebtedness. The PDB, in particular, relied solely and heavily on CB Circular No. 28. In light of the above principles pointing to jurisdiction as a matter of substantive law, the provisions of the law itself that gave CB Circular 769-80 its life and jurisdiction must be examined. The Philippine Central Bank On January 3, 1949, Congress created the Central Bank of the Philippines (Central Bank) as a corporate body with the primary objective of (i) maintaining the internal and external monetary stability in the Philippines; and (ii) preserving the international value and the convertibility of the peso.90 In line with these broad objectives, the Central Bank was empowered to issue rules and regulations "necessary for the effective discharge of the responsibilities and exercise of the powers assigned to the Monetary Board and to the Central Bank."91 Specifically, the Central Bank is authorized to organize (other) departments for the efficient conduct of its business and whose powers and duties "shall be determined by the Monetary Board, within the authority granted to the Board and the Central Bank"92 under its original charter. With the 1973 Constitution, the then Central Bank was constitutionally made as the countrys central monetary authority until such time that Congress93 shall have established a central bank. The 1987 Constitution continued to recognize this function of the then Central Bank until Congress, pursuant to the Constitution, created a new central monetary authority which later came to be known as the Bangko Sentral ng Pilipinas. Under the New Central Bank Act (R.A. No. 7653),94 the BSP is given the responsibility of providing policy directions in the areas of money, banking and credit; it is given, too, the primary objective of maintaining price stability, conducive to a balanced and sustainable growth of the economy, and of promoting and maintaining monetary stability and convertibility of the peso.95 The Constitution expressly grants the BSP, as the countrys central monetary authority, the power of supervision over the operation of banks, while leaving with Congress the authority to define the BSPs regulatory powers over the operations of finance companies and other institutions performing similar functions. Under R.A. No. 7653, the BSPs

powers and functions include (i) supervision over the operation of banks; (ii) regulation of operations of finance companies and non-bank financial institutions performing quasi banking functions; (iii) sole power and authority to issue currency within the Philippine territory; (iv) engaging in foreign exchange transactions; (v) making rediscounts, discounts, loans and advances to banking and other financial institutions to influence the volume of credit consistent with the objective of achieving price stability; (vi) engaging in open market operations; and (vii) acting as banker and financial advisor of the government.1wphi1 On the BSPs power of supervision over the operation of banks, Section 4 of R.A. No. 8791 (The General Banking Law of 2000) elaborates as follows: CHAPTER II AUTHORITY OF THE BANGKO SENTRAL SECTION 4. Supervisory Powers. The operations and activities of banks shall be subject to supervision of the Bangko Sentral. "Supervision" shall include the following: 4.1. The issuance of rules of conduct or the establishment of standards of operation for uniform application to all institutions or functions covered, taking into consideration the distinctive character of the operations of institutions and the substantive similarities of specific functions to which such rules, modes or standards are to be applied; 4.2. The conduct of examination to determine compliance with laws and regulations if the circumstances so warrant as determined by the Monetary Board; 4.3. Overseeing to ascertain regulations are complied with; that laws and

4.4. Regular investigation which shall not be oftener than once a year from the last date of examination to determine whether an institution is conducting its business on a safe or sound basis: Provided, That the deficiencies/irregularities found by or discovered by an audit shall be immediately addressed; 4.5. Inquiring into the solvency and liquidity of the institution (2-D); or 4.6. Enforcing prompt corrective action. (n) The Bangko Sentral shall also have supervision over the operations of and exercise regulatory powers over quasi-banks, trust entities and other financial institutions which under special laws are subject to Bangko Sentral supervision. (2-Ca) For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the borrowing of funds through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes as defined in Section 95 of Republic Act No. 7653 (hereafter the "New Central Bank Act") for purposes of relending or purchasing of receivables and other obligations. [emphasis ours]

While this provision empowers the BSP to oversee the operations and activities of banks to "ascertain that laws and regulations are complied with," the existence of the BSPs jurisdiction in the present dispute cannot rely on this provision. The fact remains that the BSP already made known to the PDB its unfavorable position on the latters claim of fraudulent assignment due to the latters own failure to comply96 with existing regulations: In this connection, Section 10 (b) 2 also requires that a "Detached assignment will be recognized or accepted only upon previous notice to the Central Bank x x x." In fact, in a memo dated September 23, 1991 xxx then CB Governor Jose L. Cuisia advised all banks (including PDB) xxx as follows: In view recurring incidents ostensibly disregarding certain provisions of CB circular No. 28 (as amended) covering assignments of registered bonds, all banks and all concerned are enjoined to observe strictly the pertinent provisions of said CB Circular as hereunder quoted: xxxx Under Section 10.b. (2) x x x Detached assignment will be recognized or accepted only upon previous notice to the Central Bank and its use is authorized only under the following circumstances: (a) x x x (b) x x x (c) assignments of treasury notes and certificates of indebtedness in registered form which are not provided at the back thereof with assignment form. (d) Assignment of securities which have changed ownership several times. (e) x x x Non-compliance herewith will constitute a basis for non-action or withholding of action on redemption/payment of interest coupons/transfer transactions or denominational exchange that may be directly affected thereby. [Boldfacing supplied] Again, the books of the BSP do not show that the supposed assignment of subject CB Bills was ever recorded in the BSPs books. [Boldfacing supplied] However, the PDB faults the BSP for not recording the assignment of the CB bills in the PDBs favor despite the fact that the PDB already requested the BSP to record its assignment in the BSPs books as early as June 30, 1994.97 The PDBs claim is not accurate. What the PDB requested the BSP on that date was not the recording of the assignment of the CB bills in its favor but the annotation of its claim over the CB bills at the time when (i) it was no longer in possession of the CB bills, having been transferred from one entity to another and (ii) all it has are the detached

assignments, which the PDB has not shown to be compliant with Section 10 (b) 2 above-quoted. Obviously, the PDB cannot insist that the BSP take cognizance of its plaint when the basis of the BSPs refusal under existing regulation, which the PDB is bound to observe, is the PDBs own failure to comply therewith. True, the BSP exercises supervisory powers (and regulatory powers) over banks (and quasi banks). The issue presented before the Court, however, does not concern the BSPs supervisory power over banks as this power is understood under the General Banking Law. In fact, there is nothing in the PDBs petition (even including the letters it sent to the BSP) that would support the BSPs jurisdiction outside of CB Circular No. 28, under its power of supervision, over conflicting claims to the proceeds of the CB bills. BSP has quasi-judicial powers over a class of cases which does not include the adjudication of ownership of the CB bills in question In United Coconut Planters Bank v. E. Ganzon, Inc.,98 the Court considered the BSP as an administrative agency,99 exercising quasi-judicial functions through its Monetary Board. It held: A quasi-judicial agency or body is an organ of government other than a court and other than a legislature, which affects the rights of private parties through either adjudication or rule-making. The very definition of an administrative agency includes its being vested with quasi-judicial powers. The ever increasing variety of powers and functions given to administrative agencies recognizes the need for the active intervention of administrative agencies in matters calling for technical knowledge and speed in countless controversies which cannot possibly be handled by regular courts. A "quasi-judicial function" is a term which applies to the action, discretion, etc., of public administrative officers or bodies, who are 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. Undoubtedly, the BSP Monetary Board is a quasijudicial agency exercising quasi-judicial powers or functions. As aptly observed by the Court of Appeals, the BSP Monetary Board is an independent central monetary authority and a body corporate with fiscal and administrative autonomy, mandated to provide policy directions in the areas of money, banking and credit. It has power to issue subpoena, to sue for contempt those refusing to obey the subpoena without justifiable reason, to administer oaths and compel presentation of books, records and others, needed in its examination, to impose fines and other sanctions and to issue cease and desist order. Section 37 of Republic Act No. 7653, in particular, explicitly provides that the BSP Monetary Board shall exercise its discretion in determining whether administrative sanctions should be imposed on banks and quasi-banks, which necessarily implies that the BSP Monetary Board must conduct some form of

investigation or hearing [citations omitted]

regarding

the

same.

The BSP is not simply a corporate entity but qualifies as an administrative agency created, pursuant to constitutional mandate,100 to carry out a particular governmental function.101 To be able to perform its role as central monetary authority, the Constitution granted it fiscal and administrative autonomy. In general, administrative agencies exercise powers and/or functions which may be characterized as administrative, investigatory, regulatory, quasilegislative, or quasi-judicial, or a mix of these five, as may be conferred by the Constitution or by statute.102 While the very nature of an administrative agency and the raison d'tre for its creation103 and proliferation dictate a grant of quasi-judicial power to it, the matters over which it may exercise this power must find sufficient anchorage on its enabling law, either by express provision or by necessary implication. Once found, the quasi-judicial power partakes of the nature of a limited and special jurisdiction, that is, to hear and determine a class of cases within its peculiar competence and expertise. In other words, the provisions of the enabling statute are the yardsticks by which the Court would measure the quantum of quasi-judicial powers an administrative agency may exercise, as defined in the enabling act of such agency.104 Scattered provisions in R.A. No. 7653 and R.A. No. 8791, inter alia, exist, conferring jurisdiction on the BSP on certain matters.105 For instance, under the situations contemplated under Section 36, par. 2106 (where a bank or quasi bank persists in carrying on its business in an unlawful or unsafe manner) and Section 37107 (where the bank or its officers willfully violate the banks charter or by-laws, or the rules and regulations issued by the Monetary Board) of R.A. No. 7653, the BSP may place an entity under receivership and/or liquidation or impose administrative sanctions upon the entity or its officers or directors. Among its several functions under R.A. No. 7653, the BSP is authorized to engage in open market operations and thereby "issue, place, buy and sell freely negotiable evidences of indebtedness of the Bangko Sentral" in the following manner. SEC. 90. Principles of Open Market Operations. The open market purchases and sales of securities by the Bangko Sentral shall be made exclusively in accordance with its primary objective of achieving price stability. xxxx SEC. 92. Issue and Negotiation of Bangko Sentral Obligations. In order to provide the Bangko Sentral with effective instruments for open market operations, the Bangko Sentral may, subject to such rules and regulations as the Monetary Board may prescribe and in accordance with the principles stated in Section 90 of this Act, issue, place, buy and sell freely negotiable evidences of indebtedness of the Bangko Sentral: Provided, That issuance of such

certificates of indebtedness shall be made only in cases of extraordinary movement in price levels. Said evidences of indebtedness may be issued directly against the international reserve of the Bangko Sentral or against the securities which it has acquired under the provisions of Section 91 of this Act, or may be issued without relation to specific types of assets of the Bangko Sentral. The Monetary Board shall determine the interest rates, maturities and other characteristics of said obligations of the Bangko Sentral, and may, if it deems it advisable, denominate the obligations in gold or foreign currencies. Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness of the Bangko Sentral to which this section refers may be acquired by the Bangko Sentral before their maturity, either through purchases in the open market or through redemptions at par and by lot if the Bangko Sentral has reserved the right to make such redemptions. The evidences of indebtedness acquired or redeemed by the Bangko Sentral shall not be included among its assets, and shall be immediately retired and cancelled.108 (italics supplied; emphases ours) The primary objective of the BSP is to maintain price stability.109 The BSP has a number of monetary policy instruments at its disposal to promote price stability. To increase or reduce liquidity in the financial system, the BSP uses open market operations, among others.110 Open market operation is a monetary tool where the BSP publicly buys or sells government securities111 from (or to) banks and financial institutions in order to expand or contract the supply of money. By controlling the money supply, the BSP is able to exert some influence on the prices of goods and services and achieve its inflation objectives.112 Once the issue and/or sale of a security is made, the BSP would necessarily make a determination, in accordance with its own rules, of the entity entitled to receive the proceeds of the security upon its maturity. This determination by the BSP is an exercise of its administrative powers113 under the law as an incident to its power to prescribe rules and regulations governing open market operations to achieve the "primary objective of achieving price stability."114 As a matter of necessity, too, the same rules and regulations facilitate transaction with the BSP by providing for an orderly manner of, among others, issuing, transferring, exchanging and paying securities representing public debt. Significantly, when competing claims of ownership over the proceeds of the securities it has issued are brought before it, the law has not given the BSP the quasi-judicial power to resolve these competing claims as part of its power to engage in open market operations. Nothing in the BSPs charter confers on the BSP the jurisdiction or authority to determine this kind of claims, arising out of a subsequent transfer or assignment of evidence of indebtedness a matter that appropriately falls within the competence of courts of general jurisdiction. That the statute withholds this power from the BSP is only consistent

with the fundamental reasons for the creation of a Philippine central bank, that is, to lay down stable monetary policy and exercise bank supervisory functions. Thus, the BSPs assumption of jurisdiction over competing claims cannot find even a stretchedout justification under its corporate powers "to do and perform any and all things that may be necessary or proper to carry out the purposes" of R.A. No. 7653. 115 To reiterate, open market operation is a monetary policy instrument that the BSP employs, among others, to regulate the supply of money in the economy to influence the timing, cost and availability of money and credit, as well as other financial factors, for the purpose of stabilizing the price level.116 What the law grants the BSP is a continuing role to shape and carry out the countrys monetary policy not the authority to adjudicate competing claims of ownership over the securities it has issued since this authority would not fall under the BSPs purposes under its charter. While R.A. No. 7653117 empowers the BSP to conduct administrative hearings and render judgment for or against an entity under its supervisory and regulatory powers and even authorizes the BSP Governor to "render decisions, or rulings x x x on matters regarding application or enforcement of laws pertaining to institutions supervised by the BSP and laws pertaining to quasibanks, as well as regulations, policies or instructions issued by the Monetary Board," it is precisely the text of the BSPs own regulation (whose validity is not here raised as an issue) that points to the BSPs limited role in case of an allegedly fraudulent assignment to simply (i) issuing and circularizing a "stop order" against the transfer, exchange, redemption of the certificate of indebtedness, including the payment of interest coupons, and (ii) withholding action on the certificate. A similar conclusion can be drawn from the BSPs administrative adjudicatory power in cases of "willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor."118 The noncompliance with the pertinent requirements under CB Circular No. 28, as amended, deprives a party from any right to demand payment from the BSP. In other words, the grant of quasi-judicial authority to the BSP cannot possibly extend to situations which do not call for the exercise by the BSP of its supervisory or regulatory functions over entities within its jurisdiction.119 The fact alone that the parties involved are banking institutions does not necessarily call for the exercise by the BSP of its quasi-judicial powers under the law.120 The doctrine of primary jurisdiction argues against BSPs purported authority to adjudicate ownership issues over the disputed CB bills

Given the preceding discussions, even the PDBs invocation of the doctrine of primary jurisdiction is misplaced. In the exercise of its plenary legislative power, Congress may create administrative agencies endowed with quasi-legislative and quasi-judicial powers. Necessarily, Congress likewise defines the limits of an agencys jurisdiction in the same manner as it defines the jurisdiction of courts.121 As a result, it may happen that either a court or an administrative agency has exclusive jurisdiction over a specific matter or both have concurrent jurisdiction on the same. It may happen, too, that courts and agencies may willingly relinquish adjudicatory power that is rightfully theirs in favor of the other. One of the instances when a court may properly defer to the adjudicatory authority of an agency is the applicability of the doctrine of primary jurisdiction.122 As early as 1954, the Court applied the doctrine of primary jurisdiction under the following terms: 6. In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative commissions and boards the power to resolve specialized disputes xxx ruled that Congress in requiring the Industrial Court's intervention in the resolution of labor-management controversies xxx meant such jurisdiction to be exclusive, although it did not so expressly state in the law. The Court held that under the "sense-making and expeditious doctrine of primary jurisdiction ... the courts cannot or will not determine a controversy involving a question which is within the jurisdiction of an administrative tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience, and services of the administrative tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the purposes of the regulatory statute administered."123 (emphasis ours) In Industrial Enterprises, Inc. v. Court of Appeals,124 the Court ruled that while an action for rescission of a contract between coal developers appears to be an action cognizable by regular courts, the trial court remains to be without jurisdiction to entertain the suit since the contract sought to be rescinded is "inextricably tied up with the right to develop coalbearing lands and the determination of whether or not the reversion of the coal operating contract over the subject coal blocks to [the plaintiff] would be in line with the countrys national program and objective on coal-development and over-all coalsupply-demand balance." It then applied the doctrine of primary jurisdiction In recent years, it has been the jurisprudential trend to apply the doctrine of primary jurisdiction in many cases involving matters that demand the special competence of administrative agencies. It may occur that the Court has jurisdiction to take cognizance of a particular case, which means that the matter involved is also judicial in character. However, if the case is such that its determination requires the

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expertise, specialized skills and knowledge of the proper administrative bodies because technical matters or intricate questions of facts are involved, then relief must first be obtained in an administrative proceeding before a remedy will be supplied by the courts even though the matter is within the proper jurisdiction of a court. This is the doctrine of primary jurisdiction. It applies "where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body." Clearly, the doctrine of primary jurisdiction finds application in this case since the question of what coal areas should be exploited and developed and which entity should be granted coal operating contracts over said areas involves a technical determination by the Bureau of Energy Development as the administrative agency in possession of the specialized expertise to act on the matter. The Trial Court does not have the competence to decide matters concerning activities relative to the exploration, exploitation, development and extraction of mineral resources like coal. These issues preclude an initial judicial determination. [emphases ours] The absence of any express or implied statutory power to adjudicate conflicting claims of ownership or entitlement to the proceeds of its certificates of indebtedness finds complement in the similar absence of any technical matter that would call for the BSPs special expertise or competence.125 In fact, what the PDBs petitions bear out is essentially the nature of the transaction it had with the subsequent transferees of the subject CB bills (BOC and Bancap) and not any matter more appropriate for special determination by the BSP or any administrative agency. In a similar vein, it is well-settled that the interpretation given to a rule or regulation by those charged with its execution is entitled to the greatest weight by the courts construing such rule or regulation.126 While there are exceptions127 to this rule, the PDB has not convinced us that a departure is warranted in this case. Given the non-applicability of the doctrine of primary jurisdiction, the BSPs own position, in light of Circular No. 769-80, deserves respect from the Court. Ordinarily, cases involving the application of doctrine of primary jurisdiction are initiated by an action invoking the jurisdiction of a court or administrative agency to resolve the substantive legal conflict between the parties. In this sense, the present case is quite unique since the courts jurisdiction was, originally, invoked to compel an administrative agency (the BSP) to resolve the legal conflict of ownership over the CB bills - instead of obtaining a judicial determination of the same dispute. The remedy of interpleader Based on the unique factual premise of the present case, the RTC acted correctly in initially assuming jurisdiction over the PDBs petition for mandamus,

prohibition and injunction.128 While the RTC agreed (albeit erroneously) with the PDBs view (that the BSP has jurisdiction), it, however, dismissed not only the BOCs/the BSPs counterclaims but the PDBs petition itself as well, on the ground that it lacks jurisdiction. This is plain error. Not only the parties themselves, but more so the courts, are bound by the rule on non-waiver of jurisdiction.129 believes that jurisdiction over the BOCs counterclaims and the BSPs counterclaim/crossclaim for interpleader calls for the application of the doctrine of primary jurisdiction, the allowance of the PDBs petition even becomes imperative because courts may raise the issue of primary jurisdiction sua sponte.130 Of the three possible options available to the RTC, the adoption of either of these two would lead the trial court into serious legal error: first, if it granted the PDBs petition, its decision would have to be set aside on appeal because the BSP has no jurisdiction as previously discussed; and second when it dismissed the PDBs petitions and the BOCs counterclaims on the ground that it lacks jurisdiction, the trial court seriously erred because precisely, the resolution of the conflicting claims over the CB bills falls within its general jurisdiction. Without emasculating its jurisdiction, the RTC could have properly dismissed the PDBs petition but on the ground that mandamus does not lie against the BSP; but even this correct alternative is no longer plausible since the BSP, as a respondent below, already properly brought before the RTC the remaining conflicting claims over the subject CB bills by way of a counterclaim/crossclaim for interpleader. Section 1, Rule 62 of the Rules of Court provides when an interpleader is proper: SECTION 1. When interpleader proper. Whenever conflicting claims upon the same subject matter are or may be made against a person who claims no interest whatever in the subject matter, or an interest which in whole or in part is not disputed by the claimants, he may bring an action against the conflicting claimants to compel them to interplead and litigate their several claims among themselves. The remedy of an action of interpleader131 is designed to protect a person against double vexation in respect of a single liability.7 It requires, as an indispensable requisite, that conflicting claims upon the same subject matter are or may be made against the stakeholder (the possessor of the subject matter) who claims no interest whatever in the subject matter or an interest which in whole or in part is not disputed by the claimants.132 Through this remedy, the stakeholder can join all competing claimants in a single proceeding to determine conflicting claims without exposing the stakeholder to the possibility of having to pay more than once on a single liability.133 When the court orders that the claimants litigate among themselves, in reality a new action arises,134

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where the claims of the interpleaders themselves are brought to the fore, the stakeholder as plaintiff is relegated merely to the role of initiating the suit. In short, the remedy of interpleader, when proper, merely provides an avenue for the conflicting claims on the same subject matter to be threshed out in an action. Section 2 of Rule 62 provides: SEC. 2. Order. Upon the filing of the complaint, the court shall issue an order requiring the conflicting claimants to interplead with one another. If the interests of justice so require, the court may direct in such order that the subject matter be paid or delivered to the court. This is precisely what the RTC did by granting the BSPs motion to interplead. The PDB itself "agreed that the various claimants should now interplead." Thus, the PDB and the BOC subsequently entered into two separate escrow agreements, covering the CB bills, and submitted them to the RTC for approval. In granting the BSPs motion, the RTC acted on the correct premise that it has jurisdiction to resolve the parties conflicting claims over the CB bills consistent with the rules and the parties conduct and accordingly required the BOC to amend its answer and for the PDB to comment thereon. Suddenly, however, the PDB made an about-face and questioned the jurisdiction of the RTC. Swayed by the PDBs argument, the RTC dismissed even the PDBs petition - which means that it did not actually compel the BSP to resolve the BOCs and the PDBs claims. Without the motion to interplead and the order granting it, the RTC could only dismiss the PDBs petition since it is the RTC which has jurisdiction to resolve the parties conflicting claims not the BSP. Given that the motion to interplead has been actually filed, the RTC could not have really granted the relief originally sought in the PDBs petition since the RTCs order granting the BSPs motion to interplead - to which the PDB in fact acquiesced into - effectively resulted in the dismissal of the PDBs petition. This is not altered by the fact that the PDB additionally prayed in its petition for damages, attorneys fees and costs of suit "against the public respondents" because the grant of the order to interplead effectively sustained the propriety of the BSPs resort to this procedural device. Interpleader 1. as a special civil action What is quite unique in this case is that the BSP did not initiate the interpleader suit through an original complaint but through its Answer. This circumstance becomes understandable if it is considered that insofar as the BSP is concerned, the PDB does not possess any right to have its claim recorded in the BSPs books; consequently, the PDB cannot properly be considered even as a potential claimant to the proceeds of the CB bills upon maturity. Thus, the interpleader was only an alternative position, made only in the BSPs Answer.135 The remedy of interpleader, as a special civil action, is primarily governed by the specific provisions in

Rule 62 of the Rules of Court and secondarily by the provisions applicable to ordinary civil actions.136 Indeed, Rule 62 does not expressly authorize the filing of a complaint-in-interpleader as part of, although separate and independent from, the answer. Similarly, Section 5, Rule 6, in relation to Section 1, Rule 9 of the Rules of Court137 does not include a complaint-in-interpleader as a claim,138 a form of defense,139 or as an objection that a defendant may be allowed to put up in his answer or in a motion to dismiss. This does not mean, however, that the BSPs "counter-complaint/cross-claim for interpleader" runs counter to general procedures. Apart from a pleading,140 the rules141 allow a party to seek an affirmative relief from the court through the procedural device of a motion. While captioned "Answer with counter complaint/cross-claim for interpleader," the RTC understood this as in the nature of a motion,142 seeking relief which essentially consists in an order for the conflicting claimants to litigate with each other so that "payment is made to the rightful or legitimate owner"143 of the subject CB bills. The rules define a "civil action" as "one by which a party sues another for the enforcement or protection of a right, or the prevention or redress of a wrong." Interpleader may be considered as a stakeholders remedy to prevent a wrong, that is, from making payment to one not entitled to it, thereby rendering itself vulnerable to lawsuit/s from those legally entitled to payment. Interpleader is a civil action made special by the existence of particular rules to govern the uniqueness of its application and operation. Under Section 2, Rule 6 of the Rules of Court, governing ordinary civil actions, a partys claim is asserted "in a complaint, counterclaim, cross-claim, third (fourth, etc.)-party complaint, or complaint-in-intervention." In an interpleader suit, however, a claim is not required to be contained in any of these pleadings but in the answer-(of the conflicting claimants)-ininterpleader. This claim is different from the counterclaim (or cross-claim, third party-complaint) which is separately allowed under Section 5, par. 2 of Rule 62. 2. the payment of docket fees covering BOCs counterclaim The PDB argues that, even assuming that the RTC has jurisdiction over the issue of ownership of the CB bills, the BOCs failure to pay the appropriate docket fees prevents the RTC from acquiring jurisdiction over the BOCs "counterclaims." We disagree with the PDB. To reiterate and recall, the order granting the "PDBs motion to interplead," already resulted in the dismissal of the PDBs petition. The same order required the BOC to amend its answer and for the conflicting claimants to comment, presumably to conform to the nature of an answer-in interpleader. Perhaps, by reason of the BOCs denomination of its claim as a "compulsory counterclaim" and the PDBs failure to fully appreciate the RTCs order granting the "BSPs motion for interpleader" (with the PDBs

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conformity), the PDB mistakenly treated the BOCs claim as a "permissive counterclaim" which necessitates the payment of docket fees. As the preceding discussions would show, however, the BOCs "claim" - i.e., its assertion of ownership over the CB bills is in reality just that, a "claim" against the stakeholder and not as a "counterclaim,"144 whether compulsory145 or permissive. It is only the BOCs alternative prayer (for the PDB to deliver to the BOC, as the buyer in the April 15 transaction and the ultimate successorin-interest of the buyer in the April 19 transaction, either the original subjects of the sales or the value thereof plus whatever income that may have been earned pendente lite) and its prayer for damages that are obviously compulsory counterclaims against the PDB and, therefore, does not require payment of docket fees.146 The PDB takes a contrary position through its insistence that a compulsory counterclaim should be one where the presence of third parties, of whom the court cannot acquire jurisdiction, is not required. It reasons out that since the RCBC and All Asia (the intervening holders of the CB bills) have already been dropped from the case, then the BOCs counterclaim must only be permissive in nature and the BOC should have paid the correct docket fees. We see no reason to belabor this claim. Even if we gloss over the PDBs own conformity to the dropping of these entities as parties, the BOC correctly argues that a remedy is provided under the Rules. Section 12, Rule 6 of the Rules of Court reads: SEC. 12. Bringing new parties. When the presence of parties other than those to the original action is required for the granting of complete relief in the determination of a counterclaim or cross-claim, the court shall order them to be brought in as defendants, if jurisdiction over them can be obtained. Even then, the strict characterization of the BOCs counterclaim is no longer material in disposing of the PDBs argument based on non-payment of docket fees. When an action is filed in court, the complaint must be accompanied by the payment of the requisite docket and filing fees by the party seeking affirmative relief from the court. It is the filing of the complaint or appropriate initiatory pleading, accompanied by the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the claim or the nature of the action.147 However, the non-payment of the docket fee at the time of filing does not automatically cause the dismissal of the case, so long as the fee is paid within the applicable prescriptive or reglementary period, especially when the claimant demonstrates a willingness to abide by the rules prescribing such payment.148 In the present case, considering the lack of a clear guideline on the payment of docket fee by the claimants in an interpleader suit, compounded by the unusual manner in which the interpleader suit was initiated and the circumstances surrounding it, we

surely cannot deduce from the BOCs mere failure to specify in its prayer the total amount of the CB bills it lays claim to (or the value of the subjects of the sales in the April 15 and April 19 transactions, in its alternative prayer) an intention to defraud the government that would warrant the dismissal of its claim.149 At any rate, regardless of the nature of the BOCs "counterclaims," for purposes of payment of filing fees, both the BOC and the PDB, properly as defendants-in-interpleader, must be assessed the payment of the correct docket fee arising from their respective claims. The seminal case of Sun Insurance Office, Ltd. v. Judge Asuncion150 provides us guidance in the payment of docket fees, to wit: 1. x x x Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period. 2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period. [underscoring ours] This must be the rule considering that Section 7, Rule 62 of which reads: SEC. 7. Docket and other lawful fees, costs and litigation expenses as liens. The docket and other lawful fees paid by the party who filed a complaint under this Rule, as well as the costs and litigation expenses, shall constitute a lien or charge upon the subject matter of the action, unless the court shall order otherwise. only pertain to the docket and lawful fees to be paid by the one who initiated the interpleader suit, and who, under the Rules, actually "claims no interest whatever in the subject matter." By constituting a lien on the subject matter of the action, Section 7 in effect only aims to actually compensate the complainant-in-interpleader, who happens to be the stakeholder unfortunate enough to get caught in a legal crossfire between two or more conflicting claimants, for the faultless trouble it found itself into. Since the defendants-in-interpleader are actually the ones who make a claim - only that it was extraordinarily done through the procedural device of interpleader - then to them devolves the duty to pay the docket fees prescribed under Rule 141 of the Rules of Court, as amended.151 The importance of paying the correct amount of docket fee cannot be overemphasized: The matter of payment of docket fees is not a mere triviality. These fees are necessary to defray court expenses in the handling of cases. Consequently, in order to avoid tremendous losses to the judiciary, and to the government as well, the payment of docket fees cannot be made dependent on the

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outcome of the case, except when the claimant is a pauper-litigant.152 WHEREFORE, premises considered the consolidated PETITIONS are GRANTED. The Planters Development Bank is hereby REQUIRED to file with the Regional Trial Court its comment or answer-in-interpleader to Bank of Commerces Amended Consolidated Answer with Compulsory Counterclaim, as previously ordered by the Regional Trial Court. The Regional Trial Court of Makati City, Branch 143, is hereby ORDERED to assess the docket fees due from Planters Development Bank and Bank of Commerce and order their payment, and to resolve with DELIBERATE DISPATCH the parties conflicting claims of ownership over the proceeds of the Central Bank bills. The Clerk of Court of the Regional Trial Court of Makati City, Branch 143, or his duly authorized representative is hereby ORDERED to assess and collect the appropriate amount of docket fees separately due the Bank of Commerce and Planters Development Bank as conflicting claimants in Bangko Sentral ng Pilipinas interpleader suit, in accordance with this decision. SO ORDERED.

Respondent Don Luis Dison Realty, Inc. and petitioners executed two Contracts of Lease3 whereby the former, as lessor, agreed to lease to the latter Units 22, 24, 32, 33, 34, 35, 36, 37 and 38 of the San Luis Building, located at 1006 M.Y. Orosa cor. T.M. Kalaw Streets, Ermita, Manila. Petitioners, in turn, agreed to pay monthly rentals, as follows: For Rooms 32/35: From March 1, 1991 P5,000.00/P10,000.00 to August 31, 1991

From September 1, 1991 to February 29, 1992 P5,500.00/P11,000.00 From March 1, 1992 to February 28, 1993 P6,050.00/P12,100.00 From March 1, 1993 to February 28, 1994 P6,655.00/P13,310.00 From March 1, 1994 to February 28, 1995 P7,320.50/P14,641.00 From March 1, 1995 to February 28, 1996 P8,052.55/P16,105.10 From March 1, 1996 to February 29, 1997 P8,857.81/P17,715.61 From March 1, 1997 to February 28, 1998 P9,743.59/P19,487.17

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 136409 2008 March 14,

From March 1, 1998 to February 28, 1999 P10,717.95/P21,435.89 From March 1, 1999 to February 28, 2000 P11,789.75/P23,579.484 For Rooms 22 and 24: Effective July 1, 1992 P10,000.00 with an increment of 10% every two years.5 For Rooms 33 and 34: Effective April 1, 1992 P5,000.00 with an increment of 10% every two years.6 For Rooms 36, 37 and 38: Effective when tenants vacate said premises P10,000.00 with an increment of 10% every two years.7 Petitioners were, likewise, required to pay for the cost of electric consumption, water bills and the use of telephone cables.8 The lease of Rooms 36, 37 and 38 did not materialize leaving only Rooms 22, 24, 32, 33, 34 and 35 as subjects of the lease contracts.9 While the contracts were in effect, petitioners dealt with Francis Pacheco (Pacheco), then General Manager of private respondent. Thereafter, Pacheco was replaced by Roswinda Bautista (Ms. Bautista).10 Petitioners religiously paid the monthly rentals until May 1992.11 After that, however, despite repeated

SUBHASH C. PASRICHA and JOSEPHINE A. PASRICHA, Petitioners, vs. DON LUIS DISON REALTY, INC., Respondent.
DECISION NACHURA, J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of the Decision1 of the Court of Appeals (CA) dated May 26, 1998 and its Resolution2 dated December 10, 1998 in CA-G.R. SP No. 37739 dismissing the petition filed by petitioners Josephine and Subhash Pasricha. The facts of the case, as culled from the records, are as follows:

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demands, petitioners continuously refused to pay the stipulated rent. Consequently, respondent was constrained to refer the matter to its lawyer who, in turn, made a final demand on petitioners for the payment of the accrued rentals amounting to P916,585.58.12 Because petitioners still refused to comply, a complaint for ejectment was filed by private respondent through its representative, Ms. Bautista, before the Metropolitan Trial Court (MeTC) of Manila.13 The case was raffled to Branch XIX and was docketed as Civil Case No. 143058-CV. Petitioners admitted their failure to pay the stipulated rent for the leased premises starting July until November 1992, but claimed that such refusal was justified because of the internal squabble in respondent company as to the person authorized to receive payment.14 To further justify their nonpayment of rent, petitioners alleged that they were prevented from using the units (rooms) subject matter of the lease contract, except Room 35. Petitioners eventually paid their monthly rent for December 1992 in the amount of P30,000.00, and claimed that respondent waived its right to collect the rents for the months of July to November 1992 since petitioners were prevented from using Rooms 22, 24, 32, 33, and 34.15 However, they again withheld payment of rents starting January 1993 because of respondents refusal to turn over Rooms 36, 37 and 38.16 To show good faith and willingness to pay the rents, petitioners alleged that they prepared the check vouchers for their monthly rentals from January 1993 to January 1994.17 Petitioners further averred in their Amended Answer18 that the complaint for ejectment was prematurely filed, as the controversy was not referred to the barangay for conciliation. For failure of the parties to reach an amicable settlement, the pre-trial conference was terminated. Thereafter, they submitted their respective position papers. On November 24, 1994, the MeTC rendered a Decision dismissing the complaint for ejectment.19 It considered petitioners non-payment of rentals as unjustified. The court held that mere willingness to pay the rent did not amount to payment of the obligation; petitioners should have deposited their payment in the name of respondent company. On the matter of possession of the subject premises, the court did not give credence to petitioners claim that private respondent failed to turn over possession of the premises. The court, however, dismissed the complaint because of Ms. Bautistas alleged lack of authority to sue on behalf of the corporation. Deciding the case on appeal, the Regional Trial Court (RTC) of Manila, Branch 1, in Civil Case No. 94-72515, reversed and set aside the MeTC Decision in this wise: WHEREFORE, the appealed decision is hereby reversed and set aside and another one is rendered ordering defendants-appellees and all persons claiming rights under them, as follows: (1) to vacate the leased premised (sic) and restore possession thereof to plaintiff-appellant;

(2) to pay plaintiff-appellant the sum of P967,915.80 representing the accrued rents in arrears as of November 1993, and the rents on the leased premises for the succeeding months in the amounts stated in paragraph 5 of the complaint until fully paid; and (3) to pay an additional sum equivalent to 25% of the rent accounts as and for attorneys fees plus the costs of this suit. SO ORDERED.20 The court adopted the MeTCs finding on petitioners unjustified refusal to pay the rent, which is a valid ground for ejectment. It, however, faulted the MeTC in dismissing the case on the ground of lack of capacity to sue. Instead, it upheld Ms. Bautistas authority to represent respondent notwithstanding the absence of a board resolution to that effect, since her authority was implied from her power as a general manager/treasurer of the company.21 Aggrieved, petitioners elevated the matter to the Court of Appeals in a petition for review on certiorari.22 On March 18, 1998, petitioners filed an Omnibus Motion23 to cite Ms. Bautista for contempt; to strike down the MeTC and RTC Decisions as legal nullities; and to conduct hearings and ocular inspections or delegate the reception of evidence. Without resolving the aforesaid motion, on May 26, 1998, the CA affirmed24 the RTC Decision but deleted the award of attorneys fees.25 Petitioners moved for the reconsideration of the aforesaid decision.26 Thereafter, they filed several motions asking the Honorable Justice Ruben T. Reyes to inhibit from further proceeding with the case allegedly because of his close association with Ms. Bautistas uncle-in-law.27 In a Resolution28 dated December 10, 1998, the CA denied the motions for lack of merit. The appellate court considered said motions as repetitive of their previous arguments, irrelevant and obviously dilatory.29 As to the motion for inhibition of the Honorable Justice Reyes, the same was denied, as the appellate court justice stressed that the decision and the resolution were not affected by extraneous matters.30 Lastly, the appellate court granted respondents motion for execution and directed the RTC to issue a new writ of execution of its decision, with the exception of the award of attorneys fees which the CA deleted.31 Petitioners now come before this Court in this petition for review on certiorari raising the following issues: I. Whether this ejectment suit should be dismissed and whether petitioners are entitled to damages for the unauthorized and malicious filing by Rosario (sic) Bautista of this ejectment case, it being clear that [Roswinda] whether as general manager or by virtue of her subsequent designation by the Board of

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Directors as the corporations attorney-in-fact had no legal capacity to institute the ejectment suit, independently of whether Director Pacanas Order setting aside the SEC revocation Order is a mere scrap of paper. II. Whether the RTCs and the Honorable Court of Appeals failure and refusal to resolve the most fundamental factual issues in the instant ejectment case render said decisions void on their face by reason of the complete abdication by the RTC and the Honorable Justice Ruben Reyes of their constitutional duty not only to clearly and distinctly state the facts and the law on which a decision is based but also to resolve the decisive factual issues in any given case. III. Whether the (1) failure and refusal of Honorable Justice Ruben Reyes to inhibit himself, despite his admission by reason of his silence of petitioners accusation that the said Justice enjoyed a $7,000.00 scholarship grant courtesy of the uncle-in-law of respondent "corporations" purported general manager and (2), worse, his act of ruling against the petitioners and in favor of the respondent "corporation" constitute an unconstitutional deprivation of petitioners property without due process of law.32 In addition to Ms. Bautistas lack of capacity to sue, petitioners insist that respondent company has no standing to sue as a juridical person in view of the suspension and eventual revocation of its certificate of registration.33 They likewise question the factual findings of the court on the bases of their ejectment from the subject premises. Specifically, they fault the appellate court for not finding that: 1) their nonpayment of rentals was justified; 2) they were deprived of possession of all the units subject of the lease contract except Room 35; and 3) respondent violated the terms of the contract by its continued refusal to turn over possession of Rooms 36, 37 and 38. Petitioners further prayed that a Temporary Restraining Order (TRO) be issued enjoining the CA from enforcing its Resolution directing the issuance of a Writ of Execution. Thus, in a Resolution34 dated January 18, 1999, this Court directed the parties to maintain the status quo effective immediately until further orders. The petition lacks merit. We uphold the capacity of respondent company to institute the ejectment case. Although the Securities and Exchange Commission (SEC) suspended and eventually revoked respondents certificate of registration on February 16, 1995, records show that it instituted the action for ejectment on December 15, 1993. Accordingly, when the case was commenced, its registration was not yet revoked.35 Besides, as correctly held by the appellate court, the SEC later set aside its earlier orders of suspension and revocation of respondents certificate, rendering the issue moot and academic.36

We likewise affirm Ms. Bautistas capacity to sue on behalf of the company despite lack of proof of authority to so represent it. A corporation has no powers except those expressly conferred on it by the Corporation Code and those that are implied from or are incidental to its existence. In turn, a corporation exercises said powers through its board of directors and/or its duly authorized officers and agents. Physical acts, like the signing of documents, can be performed only by natural persons duly authorized for the purpose by corporate by-laws or by a specific act of the board of directors.37 Thus, any person suing on behalf of the corporation should present proof of such authority. Although Ms. Bautista initially failed to show that she had the capacity to sign the verification and institute the ejectment case on behalf of the company, when confronted with such question, she immediately presented the Secretarys Certificate38 confirming her authority to represent the company. There is ample jurisprudence holding that subsequent and substantial compliance may call for the relaxation of the rules of procedure in the interest of justice.39 In Novelty Phils., Inc. v. Court of Appeals,40 the Court faulted the appellate court for dismissing a petition solely on petitioners failure to timely submit proof of authority to sue on behalf of the corporation. In Pfizer, Inc. v. Galan,41 we upheld the sufficiency of a petition verified by an employment specialist despite the total absence of a board resolution authorizing her to act for and on behalf of the corporation. Lastly, in China Banking Corporation v. Mondragon International Philippines, Inc,42 we relaxed the rules of procedure because the corporation ratified the managers status as an authorized signatory. In all of the above cases, we brushed aside technicalities in the interest of justice. This is not to say that we disregard the requirement of prior authority to act in the name of a corporation. The relaxation of the rules applies only to highly meritorious cases, and when there is substantial compliance. While it is true that rules of procedure are intended to promote rather than frustrate the ends of justice, and while the swift unclogging of court dockets is a laudable objective, we should not insist on strict adherence to the rules at the expense of substantial justice.43 Technical and procedural rules are intended to help secure, not suppress, the cause of justice; and a deviation from the rigid enforcement of the rules may be allowed to attain that prime objective, for, after all, the dispensation of justice is the core reason for the existence of courts.44 As to the denial of the motion to inhibit Justice Reyes, we find the same to be in order. First, the motion to inhibit came after the appellate court rendered the assailed decision, that is, after Justice Reyes had already rendered his opinion on the merits of the case. It is settled that a motion to inhibit shall be denied if filed after a member of the court had already given an opinion on the merits of the case, the rationale being that "a litigant cannot be permitted to speculate on the action of the court x x x (only to) raise an objection of this sort after the decision has been rendered."45 Second, it is settled that mere suspicion that a judge is partial to one of the parties is not enough; there should be evidence

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to substantiate the suspicion. Bias and prejudice cannot be presumed, especially when weighed against a judges sacred pledge under his oath of office to administer justice without regard for any person and to do right equally to the poor and the rich. There must be a showing of bias and prejudice stemming from an extrajudicial source, resulting in an opinion on the merits based on something other than what the judge learned from his participation in the case.46 We would like to reiterate, at this point, the policy of the Court not to tolerate acts of litigants who, for just about any conceivable reason, seek to disqualify a judge (or justice) for their own purpose, under a plea of bias, hostility, prejudice or prejudgment.47 We now come to the more substantive issue of whether or not the petitioners may be validly ejected from the leased premises. Unlawful detainer cases are summary in nature. In such cases, the elements to be proved and resolved are the fact of lease and the expiration or violation of its terms.48 Specifically, the essential requisites of unlawful detainer are: 1) the fact of lease by virtue of a contract, express or implied; 2) the expiration or termination of the possessors right to hold possession; 3) withholding by the lessee of possession of the land or building after the expiration or termination of the right to possess; 4) letter of demand upon lessee to pay the rental or comply with the terms of the lease and vacate the premises; and 5) the filing of the action within one year from the date of the last demand received by the defendant.49 It is undisputed that petitioners and respondent entered into two separate contracts of lease involving nine (9) rooms of the San Luis Building. Records, likewise, show that respondent repeatedly demanded that petitioners vacate the premises, but the latter refused to heed the demand; thus, they remained in possession of the premises. The only contentious issue is whether there was indeed a violation of the terms of the contract: on the part of petitioners, whether they failed to pay the stipulated rent without justifiable cause; while on the part of respondent, whether it prevented petitioners from occupying the leased premises except Room 35. This issue involves questions of fact, the resolution of which requires the evaluation of the evidence presented. The MeTC, the RTC and the CA all found that petitioners failed to perform their obligation to pay the stipulated rent. It is settled doctrine that in a civil case, the conclusions of fact of the trial court, especially when affirmed by the Court of Appeals, are final and conclusive, and cannot be reviewed on appeal by the Supreme Court.50 Albeit the rule admits of exceptions, not one of them obtains in this case.51 To settle this issue once and for all, we deem it proper to assess the array of factual findings supporting the courts conclusion. The evidence of petitioners non-payment of the stipulated rent is overwhelming. Petitioners, however, claim that such non-payment is justified by

the following: 1) the refusal of respondent to allow petitioners to use the leased properties, except room 35; 2) respondents refusal to turn over Rooms 36, 37 and 38; and 3) respondents refusal to accept payment tendered by petitioners. Petitioners justifications are belied by the evidence on record. As correctly held by the CA, petitioners communications to respondent prior to the filing of the complaint never mentioned their alleged inability to use the rooms.52 What they pointed out in their letters is that they did not know to whom payment should be made, whether to Ms. Bautista or to Pacheco.53 In their July 26 and October 30, 1993 letters, petitioners only questioned the method of computing their electric billings without, however, raising a complaint about their failure to use the rooms.54 Although petitioners stated in their December 30, 1993 letter that respondent failed to fulfill its part of the contract,55 nowhere did they specifically refer to their inability to use the leased rooms. Besides, at that time, they were already in default on their rentals for more than a year. If it were true that they were allowed to use only one of the nine (9) rooms subject of the contract of lease, and considering that the rooms were intended for a business purpose, we cannot understand why they did not specifically assert their right. If we believe petitioners contention that they had been prevented from using the rooms for more than a year before the complaint for ejectment was filed, they should have demanded specific performance from the lessor and commenced an action in court. With the execution of the contract, petitioners were already in a position to exercise their right to the use and enjoyment of the property according to the terms of the lease contract.56 As borne out by the records, the fact is that respondent turned over to petitioners the keys to the leased premises and petitioners, in fact, renovated the rooms. Thus, they were placed in possession of the premises and they had the right to the use and enjoyment of the same. They, likewise, had the right to resist any act of intrusion into their peaceful possession of the property, even as against the lessor itself. Yet, they did not lift a finger to protect their right if, indeed, there was a violation of the contract by the lessor. What was, instead, clearly established by the evidence was petitioners non-payment of rentals because ostensibly they did not know to whom payment should be made. However, this did not justify their failure to pay, because if such were the case, they were not without any remedy. They should have availed of the provisions of the Civil Code of the Philippines on the consignation of payment and of the Rules of Court on interpleader. Article 1256 of the Civil Code provides: Article 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due. Consignation alone shall produce the same effect in the following cases:

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xxxx (4) When two or more persons claim the same right to collect; x x x x. Consignation shall be made by depositing the things due at the disposal of a judicial authority, before whom the tender of payment shall be proved in a proper case, and the announcement of the consignation in other cases.57 In the instant case, consignation alone would have produced the effect of payment of the rentals. The rationale for consignation is to avoid the performance of an obligation becoming more onerous to the debtor by reason of causes not imputable to him.58 Petitioners claim that they made a written tender of payment and actually prepared vouchers for their monthly rentals. But that was insufficient to constitute a valid tender of payment. Even assuming that it was valid tender, still, it would not constitute payment for want of consignation of the amount. Well-settled is the rule that tender of payment must be accompanied by consignation in order that the effects of payment may be produced.59 Moreover, Section 1, Rule 62 of the Rules of Court provides: Section 1. When interpleader proper. Whenever conflicting claims upon the same subject matter are or may be made against a person who claims no interest whatever in the subject matter, or an interest which in whole or in part is not disputed by the claimants, he may bring an action against the conflicting claimants to compel them to interplead and litigate their several claims among themselves. Otherwise stated, an action for interpleader is proper when the lessee does not know to whom payment of rentals should be made due to conflicting claims on the property (or on the right to collect).60 The remedy is afforded not to protect a person against double liability but to protect him against double vexation in respect of one liability.61 Notably, instead of availing of the above remedies, petitioners opted to refrain from making payments. Neither can petitioners validly invoke the nondelivery of Rooms 36, 37 and 38 as a justification for non-payment of rentals. Although the two contracts embraced the lease of nine (9) rooms, the terms of the contracts - with their particular reference to specific rooms and the monthly rental for each easily raise the inference that the parties intended the lease of each room separate from that of the others.lavvphil There is nothing in the contract which would lead to the conclusion that the lease of one or more rooms was to be made dependent upon the lease of all the nine (9) rooms. Accordingly, the use of each room by the lessee gave rise to the corresponding obligation to pay the monthly rental for the same. Notably, respondent demanded

payment of rentals only for the rooms actually delivered to, and used by, petitioners. It may also be mentioned that the contract specifically provides that the lease of Rooms 36, 37 and 38 was to take effect only when the tenants thereof would vacate the premises. Absent a clear showing that the previous tenants had vacated the premises, respondent had no obligation to deliver possession of the subject rooms to petitioners. Thus, petitioners cannot use the non-delivery of Rooms 36, 37 and 38 as an excuse for their failure to pay the rentals due on the other rooms they occupied.1avvphil In light of the foregoing disquisition, respondent has every right to exercise his right to eject the erring lessees. The parties contracts of lease contain identical provisions, to wit: In case of default by the LESSEE in the payment of rental on the fifth (5th) day of each month, the amount owing shall as penalty bear interest at the rate of FOUR percent (4%) per month, to be paid, without prejudice to the right of the LESSOR to terminate his contract, enter the premises, and/or eject the LESSEE as hereinafter set forth;62 Moreover, Article 167363 of the Civil Code gives the lessor the right to judicially eject the lessees in case of non-payment of the monthly rentals. A contract of lease is a consensual, bilateral, onerous and commutative contract by which the owner temporarily grants the use of his property to another, who undertakes to pay the rent therefor.64 For failure to pay the rent, petitioners have no right to remain in the leased premises. WHEREFORE, premises considered, the petition is DENIED and the Status Quo Order dated January 18, 1999 is hereby LIFTED. The Decision of the Court of Appeals dated May 26, 1998 and its Resolution dated December 10, 1998 in CA-G.R. SP No. 37739 are AFFIRMED. SO ORDERED.

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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 202242 2012 July 17,

FRANCISCO I. CHAVEZ, Petitioner, vs. JUDICIAL AND BAR COUNCIL, SEN. FRANCIS JOSEPH G. ESCUDERO and REP. NIEL C. TUPAS, JR., Respondents.
DECISION MENDOZA, J.: The issue at hand has been in hibernation until the unexpected departure of Chief Justice Renato C. Corona on May 29, 2012, and the nomination of former Solicitor General Francisco I. Chavez (petitioner), as his potential successor, triggered the filing of this case. The issue has constantly been nagging legal minds, yet remained dormant for lack of constitutional challenge. As the matter is of extreme urgency considering the constitutional deadline in the process of selecting the nominees for the vacant seat of the Chief Justice, the Court cannot delay the resolution of the issue a day longer. Relegating it in the meantime to the back burner is not an option. Does the first paragraph of Section 8, Article VIII of the 1987 Constitution allow more than one (1) member of Congress to sit in the JBC? Is the practice

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of having two (2) representatives from each house of Congress with one (1) vote each sanctioned by the Constitution? These are the pivotal questions to be resolved in this original action for prohibition and injunction. Long before the naissance of the present Constitution, the annals of history bear witness to the fact that the exercise of appointing members of the Judiciary has always been the exclusive prerogative of the executive and legislative branches of the government. Like their progenitor of American origins, both the Malolos Constitution1 and the 1935 Constitution2 had vested the power to appoint the members of the Judiciary in the President, subject to confirmation by the Commission on Appointments. It was during these times that the country became witness to the deplorable practice of aspirants seeking confirmation of their appointment in the Judiciary to ingratiate themselves with the members of the legislative body.3 Then, with the fusion of executive and legislative power under the 1973 Constitution,4 the appointment of judges and justices was no longer subject to the scrutiny of another body. It was absolute, except that the appointees must have all the qualifications and none of the disqualifications. Prompted by the clamor to rid the process of appointments to the Judiciary from political pressure and partisan activities,5 the members of the Constitutional Commission saw the need to create a separate, competent and independent body to recommend nominees to the President. Thus, it conceived of a body representative of all the stakeholders in the judicial appointment process and called it the Judicial and Bar Council (JBC). Its composition, term and functions are provided under Section 8, Article VIII of the Constitution, viz: Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme Court composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a representative of the Congress as ex officio Members, a representative of the Integrated Bar, a professor of law, a retired Member of the Supreme Court, and a representative of the private sector. (2) The regular members of the Council shall be appointed by the President for a term of four years with the consent of the Commission on Appointments. Of the Members first appointed, the representative of the Integrated Bar shall serve for four years, the professor of law for three years, the retired Justice for two years, and the representative of the private sector for one year. (3) The Clerk of the Supreme Court shall be the Secretary ex officio of the Council and shall keep a record of its proceedings. (4) The regular Members of the Council shall receive such emoluments as may be determined by the Supreme Court. The Supreme Court shall provide in its annual budget the appropriations for the Council.

(5) The Council shall have the principal function of recommending appointees to the Judiciary. It may exercise such other functions and duties as the Supreme Court may assign to it. In compliance therewith, Congress, from the moment of the creation of the JBC, designated one representative to sit in the JBC to act as one of the ex officio members.6 Perhaps in order to give equal opportunity to both houses to sit in the exclusive body, the House of Representatives and the Senate would send alternate representatives to the JBC. In other words, Congress had only one (1) representative. In 1994, the composition of the JBC was substantially altered. Instead of having only seven (7) members, an eighth (8th) member was added to the JBC as two (2) representatives from Congress began sitting in the JBC - one from the House of Representatives and one from the Senate, with each having one-half (1/2) of a vote.7 Then, curiously, the JBC En Banc, in separate meetings held in 2000 and 2001, decided to allow the representatives from the Senate and the House of Representatives one full vote each.8 At present, Senator Francis Joseph G. Escudero and Congressman Niel C. Tupas, Jr. (respondents) simultaneously sit in the JBC as representatives of the legislature. It is this practice that petitioner has questioned in this petition,9 setting forth the following GROUNDS FOR ALLOWANCE OF THE PETITION I Article VIII, Section 8, Paragraph 1 is clear, definite and needs no interpretation in that the JBC shall have only one representative from Congress. II The framers of the Constitution clearly envisioned, contemplated and decided on a JBC composed of only seven (7) members. III Had the framers of the Constitution intended that the JBC composed of the one member from the Senate and one member from the House of Representatives, they could have easily said so as they did in the other provisions of the Constitution. IV The composition of the JBC providing for three exofficio members is purposely designed for a balanced representation of each of the three branches of the government. V One of the two (2) members of the JBC from Congress has no right (not even right) to sit in the said constitutional body and perform the duties and functions of a member thereof.

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VI The JBC cannot conduct valid proceedings as its composition is illegal and unconstitutional.10 On July 9, 2012, the JBC filed its Comment.11 It, however, abstained from recommending on how this constitutional issue should be disposed in gracious deference to the wisdom of the Court. Nonetheless, the JBC was more than generous enough to offer the insights of various personalities previously connected with it.12 Through the Office of the Solicitor General (OSG), respondents defended their position as members of the JBC in their Comment13 filed on July 12, 2012. According to them, the crux of the controversy is the phrase "a representative of Congress."14 Reverting to the basics, they cite Section 1, Article VI of the Constitution15 to determine the meaning of the term "Congress." It is their theory that the two houses, the Senate and the House of Representatives, are permanent and mandatory components of "Congress," such that the absence of either divests the term of its substantive meaning as expressed under the Constitution. In simplistic terms, the House of Representatives, without the Senate and viceversa, is not Congress.16 Bicameralism, as the system of choice by the Framers, requires that both houses exercise their respective powers in the performance of its mandated duty which is to legislate. Thus, when Section 8(1), Article VIII of the Constitution speaks of "a representative from Congress," it should mean one representative each from both Houses which comprise the entire Congress.17 Tracing the subject provisions history, the respondents claim that when the JBC was established, the Framers originally envisioned a unicameral legislative body, thereby allocating "a representative of the National Assembly" to the JBC. The phrase, however, was not modified to aptly jive with the change to bicameralism, the legislative system finally adopted by the Constitutional Commission on July 21, 1986. According to respondents, if the Commissioners were made aware of the consequence of having a bicameral legislature instead of a unicameral one, they would have made the corresponding adjustment in the representation of Congress in the JBC.18 The ambiguity having resulted from a plain case of inadvertence, the respondents urge the Court to look beyond the letter of the disputed provision because the literal adherence to its language would produce absurdity and incongruity to the bicameral nature of Congress.19 In other words, placing either of the respondents in the JBC will effectively deprive a house of Congress of its representation. In the same vein, the electorate represented by Members of Congress will lose their only opportunity to participate in the nomination process for the members of the Judiciary, effectively diminishing the republican nature of the government.20

The respondents further argue that the allowance of two (2) representatives of Congress to be members of the JBC does not render the latters purpose nugatory. While they admit that the purpose in creating the JBC was to insulate appointments to the Judiciary from political influence, they likewise cautioned the Court that this constitutional vision did not intend to entirely preclude political factor in said appointments. Therefore, no evil should be perceived in the current set-up of the JBC because two (2) members coming from Congress, whose membership to certain political parties is irrelevant, does not necessarily amplify political partisanship in the JBC. In fact, the presence of two (2) members from Congress will most likely provide balance as against the other six (6) members who are undeniably presidential appointees.21 The Issues In resolving the procedural and substantive issues arising from the petition, as well as the myriad of counter-arguments proffered by the respondents, the Court synthesized them into two: (1) Whether or not the conditions sine qua non for the exercise of the power of judicial review have been met in this case; and (2) Whether or not the current practice of the JBC to perform its functions with eight (8) members, two (2) of whom are members of Congress, runs counter to the letter and spirit of the 1987 Constitution. The Power of Judicial Review In its Comment, the JBC submits that petitioner is clothed with locus standi to file the petition, as a citizen and taxpayer, who has been nominated to the position of Chief Justice.22 For the respondents, however, petitioner has no "real interest" in questioning the constitutionality of the JBCs current composition.23 As outlined in jurisprudence, it is well-settled that for locus standi to lie, petitioner must exhibit that he has been denied, or is about to be denied, of a personal right or privilege to which he is entitled. Here, petitioner failed to manifest his acceptance of his recommendation to the position of Chief Justice, thereby divesting him of a substantial interest in the controversy. Without his name in the official list of applicants for the post, the respondents claim that there is no personal stake on the part of petitioner that would justify his outcry of unconstitutionality. Moreover, the mere allegation that this case is of transcendental importance does not excuse the waiver of the rule on locus standi, because, in the first place, the case lacks the requisites therefor. The respondents also question petitioners belated filing of the petition.24 Being aware that the current composition of the JBC has been in practice since 1994, petitioners silence for eighteen (18) years show that the constitutional issue being raised before the Court does not comply with the "earliest possible opportunity" requirement. Before addressing the above issues in seriatim, the Court deems it proper to first ascertain the nature of

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the petition. Pursuant to the rule that the nature of an action is determined by the allegations therein and the character of the relief sought, the Court views the petition as essentially an action for declaratory relief under Rule 63 of the 1997 Rules of Civil Procedure.25 The Constitution as the subject matter, and the validity and construction of Section 8 (1), Article VIII as the issue raised, the petition should properly be considered as that which would result in the adjudication of rights sans the execution process because the only relief to be granted is the very declaration of the rights under the document sought to be construed. It being so, the original jurisdiction over the petition lies with the appropriate Regional Trial Court (RTC). Notwithstanding the fact that only questions of law are raised in the petition, an action for declaratory relief is not among those within the original jurisdiction of this Court as provided in Section 5, Article VIII of the Constitution.26 At any rate, due to its serious implications, not only to government processes involved but also to the sanctity of the Constitution, the Court deems it more prudent to take cognizance of it. After all, the petition is also for prohibition under Rule 65 seeking to enjoin Congress from sending two (2) representatives with one (1) full vote each to the JBC. The Courts power of judicial review, like almost all other powers conferred by the Constitution, is subject to several limitations, namely: (1) there must be an actual case or controversy calling for the exercise of judicial power; (2) the person challenging the act must have "standing" to challenge; he must have a personal and substantial interest in the case, such that he has sustained or will sustain, direct injury as a result of its enforcement; (3) the question of constitutionality must be raised at the earliest possible opportunity; and (4) the issue of constitutionality must be the very lis mota of the case.27 Generally, a party will be allowed to litigate only when these conditions sine qua non are present, especially when the constitutionality of an act by a co-equal branch of government is put in issue. Anent locus standi, the question to be answered is this: does the party possess a personal stake in the outcome of the controversy as to assure that there is real, concrete and legal conflict of rights and duties from the issues presented before the Court? In David v. Macapagal-Arroyo,28 the Court summarized the rules on locus standi as culled from jurisprudence. There, it was held that taxpayers, voters, concerned citizens, and legislators may be accorded standing to sue, provided that the following requirements are met: (1) cases involve constitutional issues; (2) for taxpayers, there must be a claim of illegal disbursement of public funds or that the tax measure is unconstitutional; (3) for voters, there must be a showing of obvious interest in the validity of the election law in question; (4) for concerned citizens, there must be a showing that the issues raised are of transcendental importance which must be settled early; and (5) for legislators, there must be a claim that the official action complained of infringes upon their prerogatives as legislators.

In public suits, the plaintiff, representing the general public, asserts a "public right" in assailing an allegedly illegal official action. The plaintiff may be a person who is affected no differently from any other person, and can be suing as a "stranger," or as a "citizen" or "taxpayer." Thus, taxpayers have been allowed to sue where there is a claim that public funds are illegally disbursed or that public money is being deflected to any improper purpose, or that public funds are wasted through the enforcement of an invalid or unconstitutional law. Of greater import than the damage caused by the illegal expenditure of public funds is the mortal wound inflicted upon the fundamental law by the enforcement of an invalid statute.29 In this case, petitioner seeks judicial intervention as a taxpayer, a concerned citizen and a nominee to the position of Chief Justice of the Supreme Court. As a taxpayer, petitioner invokes his right to demand that the taxes he and the rest of the citizenry have been paying to the government are spent for lawful purposes. According to petitioner, "since the JBC derives financial support for its functions, operation and proceedings from taxes paid, petitioner possesses as taxpayer both right and legal standing to demand that the JBCs proceedings are not tainted with illegality and that its composition and actions do not violate the Constitution."30 Notably, petitioner takes pains in enumerating past actions that he had brought before the Court where his legal standing was sustained. Although this inventory is unnecessary to establish locus standi because obviously, not every case before the Court exhibits similar issues and facts, the Court recognizes the petitioners right to sue in this case. Clearly, petitioner has the legal standing to bring the present action because he has a personal stake in the outcome of this controversy. The Court disagrees with the respondents contention that petitioner lost his standing to sue because he is not an official nominee for the post of Chief Justice. While it is true that a "personal stake" on the case is imperative to have locus standi, this is not to say that only official nominees for the post of Chief Justice can come to the Court and question the JBC composition for being unconstitutional. The JBC likewise screens and nominates other members of the Judiciary. Albeit heavily publicized in this regard, the JBCs duty is not at all limited to the nominations for the highest magistrate in the land. A vast number of aspirants to judicial posts all over the country may be affected by the Courts ruling. More importantly, the legality of the very process of nominations to the positions in the Judiciary is the nucleus of the controversy. The Court considers this a constitutional issue that must be passed upon, lest a constitutional process be plagued by misgivings, doubts and worse, mistrust. Hence, a citizen has a right to bring this question to the Court, clothed with legal standing and at the same time, armed with issues of transcendental importance to society. The claim that the composition of the JBC is illegal and unconstitutional is an object of concern, not just for a nominee to a judicial post, but for all citizens who have the right to seek judicial intervention for rectification of legal blunders.

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With respect to the question of transcendental importance, it is not difficult to perceive from the opposing arguments of the parties that the determinants established in jurisprudence are attendant in this case: (1) the character of the funds or other assets involved in the case; (2) the presence of a clear case of disregard of a constitutional or statutory prohibition by the public respondent agency or instrumentality of the government; and (3) the lack of any other party with a more direct and specific interest in the questions being raised.31 The allegations of constitutional violations in this case are not empty attacks on the wisdom of the other branches of the government. The allegations are substantiated by facts and, therefore, deserve an evaluation from the Court. The Court need not elaborate on the legal and societal ramifications of the issues raised. It cannot be gainsaid that the JBC is a constitutional innovation crucial in the selection of the magistrates in our judicial system. The Composition of the JBC Central to the resolution of the foregoing petition is an understanding of the composition of the JBC as stated in the first paragraph of Section 8, Article VIII of the Constitution. It reads: Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme Court composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a representative of the Congress as ex officio Members, a representative of the Integrated Bar, a professor of law, a retired Member of the Supreme Court, and a representative of the private sector. From a simple reading of the above-quoted provision, it can readily be discerned that the provision is clear and unambiguous. The first paragraph calls for the creation of a JBC and places the same under the supervision of the Court. Then it goes to its composition where the regular members are enumerated: a representative of the Integrated Bar, a professor of law, a retired member of the Court and a representative from the private sector. On the second part lies the crux of the present controversy. It enumerates the ex officio or special members of the JBC composed of the Chief Justice, who shall be its Chairman, the Secretary of Justice and "a representative of Congress." As petitioner correctly posits, the use of the singular letter "a" preceding "representative of Congress" is unequivocal and leaves no room for any other construction. It is indicative of what the members of the Constitutional Commission had in mind, that is, Congress may designate only one (1) representative to the JBC. Had it been the intention that more than one (1) representative from the legislature would sit in the JBC, the Framers could have, in no uncertain terms, so provided. One of the primary and basic rules in statutory construction is that where the words of a statute are clear, plain, and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation.32 It is a well-settled

principle of constitutional construction that the language employed in the Constitution must be given their ordinary meaning except where technical terms are employed. As much as possible, the words of the Constitution should be understood in the sense they have in common use. What it says according to the text of the provision to be construed compels acceptance and negates the power of the courts to alter it, based on the postulate that the framers and the people mean what they say.33 Verba legis non est recedendum from the words of a statute there should be no departure.34 The raison d tre for the rule is essentially two-fold: First, because it is assumed that the words in which constitutional provisions are couched express the objective sought to be attained;35 and second, because the Constitution is not primarily a lawyers document but essentially that of the people, in whose consciousness it should ever be present as an important condition for the rule of law to prevail. 36 Moreover, under the maxim noscitur a sociis, where a particular word or phrase is ambiguous in itself or is equally susceptible of various meanings, its correct construction may be made clear and specific by considering the company of words in which it is founded or with which it is associated.37 This is because a word or phrase in a statute is always used in association with other words or phrases, and its meaning may, thus, be modified or restricted by the latter.38 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. A statute must be so construed as to harmonize and give effect to all its provisions whenever possible.39 In short, every meaning to be given to each word or phrase must be ascertained from the context of the body of the statute since a word or phrase in a statute is always used in association with other words or phrases and its meaning may be modified or restricted by the latter. Applying the foregoing principle to this case, it becomes apparent that the word "Congress" used in Article VIII, Section 8(1) of the Constitution is used in its generic sense. No particular allusion whatsoever is made on whether the Senate or the House of Representatives is being referred to, but that, in either case, only a singular representative may be allowed to sit in the JBC. The foregoing declaration is but sensible, since, as pointed out by an esteemed former member of the Court and consultant of the JBC in his memorandum,40 "from the enumeration of the membership of the JBC, it is patent that each category of members pertained to a single individual only."41 Indeed, the spirit and reason of the statute may be passed upon where a literal meaning would lead to absurdity, contradiction, injustice, or defeat the clear purpose of the lawmakers.42 Not any of these instances, however, is present in the case at bench. Considering that the language of the subject constitutional provision is plain and unambiguous, there is no need to resort extrinsic aids such as records of the Constitutional Commission.

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Nevertheless, even if the Court should proceed to look into the minds of the members of the Constitutional Commission, it is undeniable from the records thereof that it was intended that the JBC be composed of seven (7) members only. Thus: MR. RODRIGO: Let me go to another point then. On page 2, Section 5, there is a novel provision about the appointments of members of the Supreme Court and judges of the lower courts. At present it is the President who appoints them. If there is a Commission on Appointments, then it is the President with the confirmation of the Commission on Appointment. In this proposal, we would like to establish a new office, a sort of a board composed of seven members called the Judicial and Bar Council. And while the President will still appoint the member of the judiciary, he will be limited to the recommendees of this Council. xxx xxx xxx

without being effective at all because this Council will be under the influence of the President. Four out of seven are appointees of the President and they can be reappointed when their term ends. Therefore, they would be kowtow the President. A fifth member is the Minister of Justice, an alter ego of the President. Another member represents the Legislature. In all probability, the controlling part in the legislature belongs to the President and, therefore, this representative form the National Assembly is also under the influence of the President. And may I say, Mr. Presiding Officer, that event the Chief Justice of the Supreme Court is an appointee of the President. So it is futile he will be influence anyway by the President.44 [Emphases supplied] At this juncture, it is worthy to note that the sevenmember composition of the JBC serves a practical purpose, that is, to provide a solution should there be a stalemate in voting. This underlying reason leads the Court to conclude that a single vote may not be divided into half (1/2), between two representatives of Congress, or among any of the sitting members of the JBC for that matter. This unsanctioned practice can possibly cause disorder and eventually muddle the JBCs voting process, especially in the event a tie is reached. The aforesaid purpose would then be rendered illusory, defeating the precise mechanism which the Constitution itself created. While it would be unreasonable to expect that the Framers provide for every possible scenario, it is sensible to presume that they knew that an odd composition is the best means to break a voting deadlock. The respondents insist that owing to the bicameral nature of Congress, the word "Congress" in Section 8(1), Article VIII of the Constitution should be read as including both the Senate and the House of Representatives. They theorize that it was so worded because at the time the said provision was being drafted, the Framers initially intended a unicameral form of Congress. Then, when the Constitutional Commission eventually adopted a bicameral form of Congress, the Framers, through oversight, failed to amend Article VIII, Section 8 of the Constitution.45 On this score, the Court cites the insightful analysis of another member of the Court and JBC consultant, retired Justice Consuelo Ynares-Santiago.46 Thus: A perusal of the records of the Constitutional Commission reveals that the composition of the JBC reflects the Commissions desire "to have in the Council a representation for the major elements of the community." xxx The ex-officio members of the Council consist of representatives from the three main branches of government while the regular members are composed of various stakeholders in the judiciary. The unmistakeable tenor of Article VIII, Section 8(1) was to treat each ex-officio member as representing one co-equal branch of government. xxx Thus, the JBC was designed to have seven voting members with the three ex-officio members having equal say in the choice of judicial nominees. xxx xxx xxx

MR. RODRIGO. Of the seven members of the Judicial and Bar Council, the President appoints four of them who are regular members. xxx xxx xxx the

MR. CONCEPCION. The only purpose of Committee is to eliminate partisan politics.43 xxx xxx xxx

MR. RODRIGO. If my amendment is approved, then the provision will be exactly the same as the provision in the 1935 Constitution, Article VIII, Section 5. xxx xxx xxx

If we do not remove the proposed amendment on the creation of the Judicial and Bar Council, this will be a diminution of the appointing power of the highest magistrate of the land, of the President of the Philippines elected by all the Filipino people. The appointing power will be limited by a group of seven people who are not elected by the people but only appointed. Mr. Presiding Officer, if this Council is created, there will be no uniformity in our constitutional provisions on appointments. The members of the Judiciary will be segregated from the rest of the government. Even a municipal judge cannot be appointed by the President except upon recommendation or nomination of the three names by this Committee of seven people, commissioners of the Commission on Elections, the COA and the Commission on Civil Serviceeven ambassadors, generals of the Army will not come under this restriction. Why are we going to segregate the Judiciary from the rest of our government in the appointment of high-ranking officials? Another reason is that this Council will be ineffective. It will just besmirch the honor of our President

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No parallelism can be drawn between the representative of Congress in the JBC and the exercise by Congress of its legislative powers under Article VI and constituent powers under Article XVII of the Constitution. Congress, in relation to the executive and judicial branches of government, is constitutionally treated as another co-equal branch of in the matter of its representative in the JBC. On the other hand, the exercise of legislative and constituent powers requires the Senate and House of Representatives to coordinate and act as distinct bodies in furtherance of Congress role under our constitutional scheme. While the latter justifies and, in fact, necessitates the separateness of the two houses of Congress as they relate inter se, no such dichotomy need be made when Congress interacts with the other two co-equal branches of government. It is more in keeping with the co-equal nature of the three governmental branches to assign the same weight to considerations that any of its representatives may have regarding aspiring nominees to the judiciary. The representatives of the Senate and the House of Representatives act as such for one branch and should not have any more quantitative influence as the other branches in the exercise of prerogatives evenly bestowed upon the three. Sound reason and principle of equality among the three branches support this conclusion. [Emphases and underscoring supplied] More than the reasoning provided in the above discussed rules of constitutional construction, the Court finds the above thesis as the paramount justification of the Courts conclusion that "Congress," in the context of JBC representation, should be considered as one body. It is evident that the definition of "Congress" as a bicameral body refers to its primary function in government - to legislate.47 In the passage of laws, the Constitution is explicit in the distinction of the role of each house in the process. The same holds true in Congress non-legislative powers such as, inter alia, the power of appropriation,48 the declaration of an existence of a state of war,49 canvassing of electoral returns for the President and Vice-President,50 and impeachment.51 In the exercise of these powers, the Constitution employs precise language in laying down the roles which a particular house plays, regardless of whether the two houses consummate an official act by voting jointly or separately. An inter-play between the two houses is necessary in the realization of these powers causing a vivid dichotomy that the Court cannot simply discount. Verily, each house is constitutionally granted with powers and functions peculiar to its nature and with keen consideration to 1) its relationship with the other chamber; and 2) in consonance with the principle of checks and balances, to the other branches of government. This, however, cannot be said in the case of JBC representation because no liaison between the two houses exists in the workings of the JBC. No mechanism is required between the Senate and the House of Representatives in the screening and nomination of judicial officers. Hence, the term "Congress" must be taken to mean the entire legislative department. A fortiori, a pretext of

oversight cannot prevail over the more pragmatic scheme which the Constitution laid with firmness, that is, that the JBC has a seat for a single representative of Congress, as one of the co-equal branches of government. Doubtless, the Framers of our Constitution intended to create a JBC as an innovative solution in response to the public clamor in favor of eliminating politics in the appointment of members of the Judiciary.52 To ensure judicial independence, they adopted a holistic approach and hoped that, in creating a JBC, the private sector and the three branches of government would have an active role and equal voice in the selection of the members of the Judiciary. Therefore, to allow the Legislature to have more quantitative influence in the JBC by having more than one voice speak, whether with one full vote or onehalf (1/2) a vote each, would, as one former congressman and member of the JBC put it, "negate the principle of equality among the three branches of government which is enshrined in the Constitution."53 To quote one former Secretary of Justice: The present imbalance in voting power between the Legislative and the other sectors represented in the JBC must be corrected especially when considered vis--vis the avowed purpose for its creation, i.e., to insulate the appointments in the Judiciary against political influence. By allowing both houses of Congress to have a representative in the JBC and by giving each representative one (1) vote in the Council, Congress, as compared to the other members of the JBC, is accorded greater and unwarranted influence in the appointment of judges.54 [Emphasis supplied] It is clear, therefore, that the Constitution mandates that the JBC be composed of seven (7) members only. Thus, any inclusion of another member, whether with one whole vote or half (1/2) of it, goes against that mandate. Section 8(1), Article VIII of the Constitution, providing Congress with an equal voice with other members of the JBC in recommending appointees to the Judiciary is explicit. Any circumvention of the constitutional mandate should not be countenanced for the Constitution is the supreme law of the land. The Constitution is the basic and paramount law to which all other laws must conform and to which all persons, including the highest officials of the land, must defer. Constitutional doctrines must remain steadfast no matter what may be the tides of time. It cannot be simply made to sway and accommodate the call of situations and much more tailor itself to the whims and caprices of the government and the people who run it.55 Hence, any act of the government or of a public official or employee which is contrary to the Constitution is illegal, null and void. As to the effect of the Courts finding that the current composition of the JBC is unconstitutional, it bears mentioning that as a general rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is inoperative as if it has not

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been passed at all.56 This rule, however, is not absolute. In the interest of fair play under the doctrine of operative facts, actions previous to the declaration of unconstitutionality are legally recognized. They are not nullified. In Planters Products, Inc. v. Fertiphil Corporation,57 the Court explained: The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair play.1wphi1 It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The past cannot always be erased by a new judicial declaration. The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. Thus, it was applied to a criminal case when a declaration of unconstitutionality would put the accused in double jeopardy or would put in limbo the acts done by a municipality in reliance upon a law creating it. Considering the circumstances, the Court finds the exception applicable in this case and holds that notwithstanding its finding of unconstitutionality in the current composition of the JBC, all its prior official actions are nonetheless valid. At this point, the Court takes the initiative to clarify that it is not in a position to determine as to who should remain as the sole representative of Congress in the JBC. This is a matter beyond the province of the Court and is best left to the determination of Congress. Finally, while the Court finds wisdom in respondents' contention that both the Senate and the House of Representatives should be equally represented in the JBC, the Court is not in a position to stamp its imprimatur on such a construction at the risk of expanding the meaning of the Constitution as currently worded. Needless to state, the remedy lies in the amendment of this constitutional provision. The courts merely give effect to the lawgiver's intent. The solemn power and duty of the Court to interpret and apply the law does not include the power to correct, by reading into the law what is not written therein. WHEREFORE, the petition is GRANTED. The current numerical composition of the Judicial and Bar Council IS declared UNCONSTITUTIONAL. The Judicial and Bar Council is hereby enjoined to reconstitute itself so that only one ( 1) member of Congress will sit as a representative in its proceedings, in accordance with Section 8( 1 ), Article VIII of the 1987 Constitution. This disposition is immediately executory. SO ORDERED.

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classification of wheat Commissioner of Customs.

issued

by

petitioner

The antecedent facts are as follows: On 7 November 2003, petitioner Commissioner of Customs issued CMO 27-2003. Under the Memorandum, for tariff purposes, wheat was classified according to the following: (1) importer or consignee; (2) country of origin; and (3) port of discharge.5 The regulation provided an exclusive list of corporations, ports of discharge, commodity descriptions and countries of origin. Depending on these factors, wheat would be classified either as food grade or feed grade. The corresponding tariff for food grade wheat was 3%, for feed grade, 7%. CMO 27-2003 further provided for the proper procedure for protest or Valuation and Classification Review Committee (VCRC) cases. Under this procedure, the release of the articles that were the subject of protest required the importer to post a cash bond to cover the tariff differential.6 A month after the issuance of CMO 27-2003, on 19 December 2003, respondent filed a Petition for Declaratory Relief7 with the Regional Trial Court (RTC) of Las Pias City. It anticipated the implementation of the regulation on its imported and perishable Chinese milling wheat in transit from China.8 Respondent contended that CMO 27-2003 was issued without following the mandate of the Revised Administrative Code on public participation, prior notice, and publication or registration with the University of the Philippines Law Center. Respondent also alleged that the regulation summarily adjudged it to be a feed grade supplier without the benefit of prior assessment and examination; thus, despite having imported food grade wheat, it would be subjected to the 7% tariff upon the arrival of the shipment, forcing them to pay 133% more than was proper. Furthermore, respondent claimed that the equal protection clause of the Constitution was violated when the regulation treated non-flour millers differently from flour millers for no reason at all. Lastly, respondent asserted that the retroactive application of the regulation was confiscatory in nature. On 19 January 2004, the RTC issued a Temporary Restraining Order (TRO) effective for twenty (20) days from notice.9 Petitioners thereafter filed a Motion to Dismiss.10 They alleged that: (1) the RTC did not have jurisdiction over the subject matter of the case, because respondent was asking for a judicial determination of the classification of wheat; (2) an action for declaratory relief was improper; (3) CMO 27-2003 was an internal administrative rule and not legislative in nature; and (4) the claims of respondent were speculative and premature, because the Bureau of Customs (BOC) had yet to examine respondents products. They likewise opposed the application for a writ of preliminary

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 179579 2012 February 1,

COMMISSIONER OF CUSTOMS and the DISTRICT COLLECTOR OF THE PORT OF SUBIC, Petitioners, vs. HYPERMIX FEEDS CORPORATION, Respondent.
DECISION SERENO, J.: Before us is a Petition for Review under Rule 45,1 assailing the Decision2 and the Resolution3 of the Court of Appeals (CA), which nullified the Customs Memorandum Order (CMO) No. 27-20034 on the tariff

27

injunction on the ground that they had not inflicted any injury through the issuance of the regulation; and that the action would be contrary to the rule that administrative issuances are assumed valid until declared otherwise. On 28 February 2005, the parties agreed that the matters raised in the application for preliminary injunction and the Motion to Dismiss would just be resolved together in the main case. Thus, on 10 March 2005, the RTC rendered its Decision11 without having to resolve the application for preliminary injunction and the Motion to Dismiss. The trial court ruled in favor of respondent, to wit: WHEREFORE, in view of the foregoing, the Petition is GRANTED and the subject Customs Memorandum Order 27-2003 is declared INVALID and OF NO FORCE AND EFFECT. Respondents Commissioner of Customs, the District Collector of Subic or anyone acting in their behalf are to immediately cease and desist from enforcing the said Customs Memorandum Order 27-2003. SO ORDERED.12 The RTC held that it had jurisdiction over the subject matter, given that the issue raised by respondent concerned the quasi-legislative powers of petitioners. It likewise stated that a petition for declaratory relief was the proper remedy, and that respondent was the proper party to file it. The court considered that respondent was a regular importer, and that the latter would be subjected to the application of the regulation in future transactions. With regard to the validity of the regulation, the trial court found that petitioners had not followed the basic requirements of hearing and publication in the issuance of CMO 27-2003. It likewise held that petitioners had "substituted the quasi-judicial determination of the commodity by a quasilegislative predetermination."13 The lower court pointed out that a classification based on importers and ports of discharge were violative of the due process rights of respondent. Dissatisfied with the Decision of the lower court, petitioners appealed to the CA, raising the same allegations in defense of CMO 27-2003.14 The appellate court, however, dismissed the appeal. It held that, since the regulation affected substantial rights of petitioners and other importers, petitioners should have observed the requirements of notice, hearing and publication. Hence, this Petition. Petitioners raise the following consideration of this Court: issues for the

The Petition has no merit. We shall first discuss the propriety of an action for declaratory relief. Rule 63, Section 1 provides: Who may file petition. Any person interested under a deed, will, contract or other written instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties, thereunder. The requirements of an action for declaratory relief are as follows: (1) there must be a justiciable controversy; (2) the controversy must be between persons whose interests are adverse; (3) the party seeking declaratory relief must have a legal interest in the controversy; and (4) the issue involved must be ripe for judicial determination.15 We find that the Petition filed by respondent before the lower court meets these requirements. First, the subject of the controversy is the constitutionality of CMO 27-2003 issued by petitioner Commissioner of Customs. In Smart Communications v. NTC,16 we held: The determination of whether a specific rule or set of rules issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the regional trial courts. This is within the scope of judicial power, which includes the authority of the courts to determine in an appropriate action the validity of the acts of the political departments. 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. (Emphasis supplied) Meanwhile, in Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary,17 we said: xxx [A] legislative rule is in the nature of subordinate legislation, designed to implement a primary legislation by providing the details thereof. xxx In addition such rule must be published. On the other hand, interpretative rules are designed to provide guidelines to the law which the administrative agency is in charge of enforcing. Accordingly, in considering a legislative rule a court is free to make three inquiries: (i) whether the rule is

I. THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE WHICH IS NOT IN ACCORD WITH THE LAW AND PREVAILING JURISPRUDENCE. II. THE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT THE TRIAL COURT HAS JURISDICTION OVER THE CASE.

28

within the delegated authority of the administrative agency; (ii) whether it is reasonable; and (iii) whether it was issued pursuant to proper procedure. But the court is not free to substitute its judgment as to the desirability or wisdom of the rule for the legislative body, by its delegation of administrative judgment, has committed those questions to administrative judgments and not to judicial judgments. In the case of an interpretative rule, the inquiry is not into the validity but into the correctness or propriety of the rule. As a matter of power a court, when confronted with an interpretative rule, is free to (i) give the force of law to the rule; (ii) go to the opposite extreme and substitute its judgment; or (iii) give some intermediate degree of authoritative weight to the interpretative rule. (Emphasis supplied) Second, the controversy is between two parties that have adverse interests. Petitioners are summarily imposing a tariff rate that respondent is refusing to pay. Third, it is clear that respondent has a legal and substantive interest in the implementation of CMO 27-2003. Respondent has adequately shown that, as a regular importer of wheat, on 14 August 2003, it has actually made shipments of wheat from China to Subic. The shipment was set to arrive in December 2003. Upon its arrival, it would be subjected to the conditions of CMO 27-2003. The regulation calls for the imposition of different tariff rates, depending on the factors enumerated therein. Thus, respondent alleged that it would be made to pay the 7% tariff applied to feed grade wheat, instead of the 3% tariff on food grade wheat. In addition, respondent would have to go through the procedure under CMO 272003, which would undoubtedly toll its time and resources. The lower court correctly pointed out as follows: xxx As noted above, the fact that petitioner is precisely into the business of importing wheat, each and every importation will be subjected to constant disputes which will result into (sic) delays in the delivery, setting aside of funds as cash bond required in the CMO as well as the resulting expenses thereof. It is easy to see that business uncertainty will be a constant occurrence for petitioner. That the sums involved are not minimal is shown by the discussions during the hearings conducted as well as in the pleadings filed. It may be that the petitioner can later on get a refund but such has been foreclosed because the Collector of Customs and the Commissioner of Customs are bound by their own CMO. Petitioner cannot get its refund with the said agency. We believe and so find that Petitioner has presented such a stake in the outcome of this controversy as to vest it with standing to file this petition.18 (Emphasis supplied) Finally, the issue raised by respondent is ripe for judicial determination, because litigation is inevitable19 for the simple and uncontroverted reason that respondent is not included in the enumeration of flour millers classified as food grade wheat importers. Thus, as the trial court stated, it would have to file a protest case each time it imports food grade wheat and be subjected to the 7% tariff.

It is therefore clear that a petition for declaratory relief is the right remedy given the circumstances of the case. Considering that the questioned regulation would affect the substantive rights of respondent as explained above, it therefore follows that petitioners should have applied the pertinent provisions of Book VII, Chapter 2 of the Revised Administrative Code, to wit: Section 3. Filing. (1) Every agency shall file with the University of the Philippines Law Center three (3) certified copies of every rule adopted by it. Rules in force on the date of effectivity of this Code which are not filed within three (3) months from that date shall not thereafter be the bases of any sanction against any party of persons. xxx xxx xxx

Section 9. Public Participation. - (1) If not otherwise required by law, an agency shall, as far as practicable, publish or circulate notices of proposed rules and afford interested parties the opportunity to submit their views prior to the adoption of any rule. (2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been published in a newspaper of general circulation at least two (2) weeks before the first hearing thereon. (3) In case of opposition, the rules on contested cases shall be observed. When an administrative rule is merely interpretative in nature, its applicability needs nothing further than its bare issuance, for it gives no real consequence more than what the law itself has already prescribed. When, on the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law.20 Likewise, in Taada v. Tuvera,21 we held: The clear object of the above-quoted provision is to give the general public adequate notice of the various laws which are to regulate their actions and conduct as citizens. Without such notice and publication, there would be no basis for the application of the maxim "ignorantia legis non excusat." It would be the height of injustice to punish or otherwise burden a citizen for the transgression of a law of which he had no notice whatsoever, not even a constructive one. Perhaps at no time since the establishment of the Philippine Republic has the publication of laws taken so vital significance that at this time when the people have bestowed upon the President a power heretofore enjoyed solely by the legislature. While the people are kept abreast by the mass media of the debates and deliberations in the Batasan

29

Pambansa and for the diligent ones, ready access to the legislative records no such publicity accompanies the law-making process of the President. Thus, without publication, the people have no means of knowing what presidential decrees have actually been promulgated, much less a definite way of informing themselves of the specific contents and texts of such decrees. (Emphasis supplied) Because petitioners failed to follow the requirements enumerated by the Revised Administrative Code, the assailed regulation must be struck down. Going now to the content of CMO 27-3003, we likewise hold that it is unconstitutional for being violative of the equal protection clause of the Constitution. The equal protection clause means that no person or class of persons shall be deprived of the same protection of laws enjoyed by other persons or other classes in the same place in like circumstances. Thus, the guarantee of the equal protection of laws is not violated if there is a reasonable classification. For a classification to be reasonable, it must be shown that (1) it rests on substantial distinctions; (2) it is germane to the purpose of the law; (3) it is not limited to existing conditions only; and (4) it applies equally to all members of the same class.22 Unfortunately, CMO 27-2003 does not meet these requirements. We do not see how the quality of wheat is affected by who imports it, where it is discharged, or which country it came from. Thus, on the one hand, even if other millers excluded from CMO 27-2003 have imported food grade wheat, the product would still be declared as feed grade wheat, a classification subjecting them to 7% tariff. On the other hand, even if the importers listed under CMO 27-2003 have imported feed grade wheat, they would only be made to pay 3% tariff, thus depriving the state of the taxes due. The regulation, therefore, does not become disadvantageous to respondent only, but even to the state. It is also not clear how the regulation intends to "monitor more closely wheat importations and thus prevent their misclassification." A careful study of CMO 27-2003 shows that it not only fails to achieve this end, but results in the opposite. The application of the regulation forecloses the possibility that other corporations that are excluded from the list import food grade wheat; at the same time, it creates an assumption that those who meet the criteria do not import feed grade wheat. In the first case, importers are unnecessarily burdened to prove the classification of their wheat imports; while in the second, the state carries that burden. Petitioner Commissioner of Customs also went beyond his powers when the regulation limited the customs officers duties mandated by Section 1403 of the Tariff and Customs Law, as amended. The law provides: Section 1403. Duties of Customs Officer Tasked to Examine, Classify, and Appraise Imported Articles. The customs officer tasked to examine, classify, and

appraise imported articles shall determine whether the packages designated for examination and their contents are in accordance with the declaration in the entry, invoice and other pertinent documents and shall make return in such a manner as to indicate whether the articles have been truly and correctly declared in the entry as regard their quantity, measurement, weight, and tariff classification and not imported contrary to law. He shall submit samples to the laboratory for analysis when feasible to do so and when such analysis is necessary for the proper classification, appraisal, and/or admission into the Philippines of imported articles. Likewise, the customs officer shall determine the unit of quantity in which they are usually bought and sold, and appraise the imported articles in accordance with Section 201 of this Code. Failure on the part of the customs officer to comply with his duties shall subject him to the penalties prescribed under Section 3604 of this Code.1wphi1 The provision mandates that the customs officer must first assess and determine the classification of the imported article before tariff may be imposed. Unfortunately, CMO 23-2007 has already classified the article even before the customs officer had the chance to examine it. In effect, petitioner Commissioner of Customs diminished the powers granted by the Tariff and Customs Code with regard to wheat importation when it no longer required the customs officers prior examination and assessment of the proper classification of the wheat. It is well-settled that rules and regulations, which are the product of a delegated power to create new and additional legal provisions that have the effect of law, should be within the scope of the statutory authority granted by the legislature to the administrative agency. It is required that the regulation be germane to the objects and purposes of the law; and that it be not in contradiction to, but in conformity with, the standards prescribed by law.23 In summary, petitioners violated respondents right to due process in the issuance of CMO 27-2003 when they failed to observe the requirements under the Revised Administrative Code. Petitioners likewise violated respondents right to equal protection of laws when they provided for an unreasonable classification in the application of the regulation. Finally, petitioner Commissioner of Customs went beyond his powers of delegated authority when the regulation limited the powers of the customs officer to examine and assess imported articles. WHEREFORE, in view of the foregoing, the Petition is DENIED. SO ORDERED.

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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 196063 14, 2011 December

ORLANDO A. RAYOS, FE A. RAYOSDELA PAZ, represented by DR. ANTONIO A. RAYOS, and ENGR. MANUEL A. RAYOS, Petitioners, vs. THE CITY OF MANILA, Respondent.
RESOLUTION CARPIO, J.: The Case This petition, captioned as a petition for review on certiorari and declaratory relief,1 assails the Order of 6 January 20112 of the Regional Trial Court of Manila, Branch 49, denying reconsideration of the trial courts Order of 11 March 20103 which denied the motion to dismiss filed by petitioners Orlando A. Rayos, Fe A. Rayos Dela Paz, and Engr. Manuel A. Rayos.4 The Facts The present case originated from a complaint for eminent domain filed by respondent City of Manila against Remedios V. De Caronongan, Patria R. Serrano, Laureano M. Reyes, Paz B. Sison, Teofila B. Sison, Leticia R. Ventanilla, Rosalinda R. Barrozo (defendants), docketed as Civil Case No. 03108154. In its Complaint,5 the City of Manila alleged that it passed Ordinance No. 7949 authorizing the City Mayor to acquire "by expropriation, negotiation or by any other legal means" the parcel of land co-owned by defendants, which is covered by TCT No. 227512 and with an area of 1,182.20 square meters. The City of Manila offered to purchase the property at P1,000.00 per square meter. In their Answer,6 defendants conveyed their willingness to sell the property to the City of Manila, but at the price of P50,000.00 per square meter which they claimed was the fair market value of the land at the time.

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In the course of the proceedings, Laureano, one of the defendants, died on 1 December 2003 and was substituted by his son petitioner Manuel A. Rayos. Meanwhile, petitioner Orlando A. Rayos intervened while petitioner Fe A. Rayos Dela Paz was added as a defendant. On 7 December 2009, petitioners Orlando A. Rayos, Fe A. Rayos Dela Paz, and Engr. Manuel A. Rayos filed a Motion to Dismiss on the grounds that (1) Ordinance No. 7949 is unconstitutional and (2) the cases of Lagcao v. Labra7 and Jesus Is Lord Christian School Foundation, Inc. v. Municipality (now City) of Pasig, Metro Manila8 apply squarely to the present case. On 11 March 2010, the trial court denied the motion to dismiss. The trial court ruled that the motion to dismiss did not show any compelling reason to convince the court that the doctrine of stare decisis applies. Petitioners failed to demonstrate how or why the facts in this case are similar with the cited cases in order that the issue in this case be resolved in the same manner. The trial court disposed of the motion to dismiss in this wise: In view of the foregoing, and after intense evaluation of the records on hand, the Motion to Dismiss cannot be granted. In order to prevent further delay to the prejudice of all the proper parties in this case, continue with the trial for the determination of just compensation on July 7, 2010 at one oclock in the afternoon. SO ORDERED.9 On 6 January 2011, the trial court denied the motion for reconsideration. Petitioners filed with this Court the present petition reiterating the arguments in their motion to dismiss, namely, (1) Ordinance No. 7949 is unconstitutional, and (2) the cases of Lacgao v. Labra10 and Jesus Is Lord Christian School Foundation, Inc. v. Municipality (now City) of Pasig, Metro Manila11 apply squarely to this case. The Ruling of the Court We deny the petition. An order denying a motion to dismiss is interlocutory and not appealable.12 An order denying a motion to dismiss does not finally dispose of the case, and in effect, allows the case to proceed until the final adjudication thereof by the court. As such, it is merely interlocutory in nature and thus, not appealable.13 Section 1(c), Rule 41 of the Rules of Court provides: SECTION 1. Subject of appeal. - An appeal may be taken from a judgment or final order that completely disposes of the case, or of a particular matter therein when declared by these Rules to be appealable. No appeal may be taken from:

xxx (c) An interlocutory order; xxx In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate special civil action under Rule 65. Clearly, no appeal, under Rule 45 of the Rules of Court, may be taken from an interlocutory order. In case of denial of an interlocutory order, the immediate remedy available to the aggrieved party is to file a special civil action for certiorari under Rule 65 of the Rules of Court. In this case, since the trial courts order denying the motion to dismiss is not appealable, petitioners should have filed a petition for certiorari under Rule 65 to assail such order, and not a petition for review on certiorari under Rule 45 of the Rules of Court. For being a wrong remedy, the present petition deserves outright dismissal. Even if the Court treats the present petition as a petition for certiorari under Rule 65, which is the proper remedy to challenge the order denying the motion to dismiss, the same must be dismissed for violation of the principle of hierarchy of courts. This well-settled principle dictates that petitioners should file the petition for certiorari with the Court of Appeals, and not directly with this Court. Indeed, this Court, the Court of Appeals and the Regional Trial Courts exercise concurrent jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction.14 However, such concurrence in jurisdiction does not give petitioners unbridled freedom of choice of court forum.15 In Heirs of Bertuldo Hinog v. Melicor,16 citing People v. Cuaresma,17 the Court held: This Courts original jurisdiction to issue writs of certiorari is not exclusive. It is shared by this Court with Regional Trial Courts and with the Court of Appeals. This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the writs an absolute, unrestrained freedom of choice of the court to which application therefor will be directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and also serves as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level ("inferior") courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Courts 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 Courts time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent

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further over-crowding (Emphasis supplied.)

of

the

Courts

docket.

In short, to warrant a direct recourse to this Court, petitioners must show exceptional and compelling reasons therefor, clearly and specifically set out in the petition. This petitioners failed to do. Petitioners merely rehashed the arguments in their motion to dismiss, which consist mainly of unsubstantiated allegations. Petitioners invoke the cases of Lagcao v. Labra18 and Jesus Is Lord Christian School Foundation, Inc. v. Municipality (now City) of Pasig, Metro Manila19 in challenging the constitutionality of Ordinance No. 7949 without, however, showing clearly the applicability and similarity of those cases to the present controversy. Neither did petitioners explain why Ordinance No. 7949 is repugnant to the Constitution. Nor did petitioners specifically and sufficiently set forth any extraordinary and important reason to justify direct recourse to this Court.20 Likewise, assuming the present petition is one for declaratory relief,21 as can be gleaned from the caption of the petition, this Court has only appellate, not original, jurisdiction over such a petition. While this Court may treat a petition for declaratory relief as one for prohibition22 or mandamus, over which this Court exercises original jurisdiction,23 it must be stressed that this special treatment is undertaken only in cases with far reaching implications and transcendental issues that need to be resolved.24 In the present case, there is absolutely nothing which shows that it has far-reaching implications and involves transcendental questions deserving of this Courts treatment of the petition as one for prohibition or mandamus. WHEREFORE, we DENY the petition. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 193808 2012 June 26,

LUISK. LOKIN, JR. and TERESITA F. PLANAS, Petitioners, vs. COMMISSION ON ELECTIONS (COMELEC), CITIZENS BATTLE AGAINST CORRUPTION PARTY LIST represented by VIRGINIA S. JOSE SHERWIN N. TUGNA, and CINCHONA CRUZ-GONZALES, Respondents,
DECISION SERENO, J.: The present petition having been flied beyond the reglementary period, Rule 64 of the Rules of Court compels a dismissal on this basis alone. Despite petitioner's inexplicable disregard of basic concepts, this Court deems it appropriate to reiterate the specific procedure for the review of judgments made by the Commission on Elections (COMELEC) as laid down in Rule 64, and how it is differentiated from the more general remedy afforded by Rule 65. On 5 July 2010, the COMELEC First Division issued a Resolution1 expunging the Certificate of Nomination which included herein petitioners as representatives of the party-list group known as Citizens Battle Against Corruption (CIBAC). The COMELEC en banc affirmed the said Resolution, prompting Luis Lokin, Jr.

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and Teresita F. Planas to file the present Petition for Certiorari. Petitioners allege grave abuse of discretion on the part of the COMELEC in issuing both Resolutions, praying that they be recognized as the legitimate nominees of CIBAC party-list, and that petitioner Lokin, Jr. be proclaimed as the CIBAC party-list representative to the House of Representatives. Respondent CIBAC party-list is a multi-sectoral party registered2 under Republic Act No. (R.A.) 7941, otherwise known as the Party- List System Act. As stated in its constitution and bylaws, the platform of CIBAC is to fight graft and corruption and to promote ethical conduct in the countrys public service.3 Under the leadership of the National Council, its highest policymaking and governing body, the party participated in the 2001, 2004, and 2007 elections.4 On 20 November 2009, two different entities, both purporting to represent CIBAC, submitted to the COMELEC a "Manifestation of Intent to Participate in the Party-List System of Representation in the May 10, 2010 Elections." The first Manifestation5 was signed by a certain Pia B. Derla, who claimed to be the partys acting secretary-general. At 1:30 p.m. of the same day, another Manifestation6 was submitted by herein respondents Cinchona Cruz-Gonzales and Virginia Jose as the partys vice-president and secretary-general, respectively. On 15 January 2010, the COMELEC issued Resolution No. 87447giving due course to CIBACs Manifestation, "WITHOUT PREJUDICE TO the determination which of the two factions of the registered party-list/coalitions/sectoral organizations which filed two (2) manifestations of intent to participate is the official representative of said partylist/coalitions/sectoral organizations xxx."8 On 19 January 2010, respondents, led by President and Chairperson Emmanuel Joel J. Villanueva, submitted the Certificate of Nomination9 of CIBAC to the COMELEC Law Department. The nomination was certified by Villanueva and Virginia S. Jose. On 26 March 2010, Pia Derla submitted a second Certificate of Nomination,10 which included petitioners Luis Lokin, Jr. and Teresita Planas as party-list nominees. Derla affixed to the certification her signature as "acting secretary-general" of CIBAC. Claiming that the nomination of petitioners Lokin, Jr. and Planas was unauthorized, respondents filed with the COMELEC a "Petition to Expunge From The Records And/Or For Disqualification," seeking to nullify the Certificate filed by Derla. Respondents contended that Derla had misrepresented herself as "acting secretary-general," when she was not even a member of CIBAC; that the Certificate of Nomination and other documents she submitted were unauthorized by the party and therefore invalid; and that it was Villanueva who was duly authorized to file the Certificate of Nomination on its behalf.11 In the Resolution dated 5 July 2010, the COMELEC First Division granted the Petition, ordered the Certificate filed by Derla to be expunged from the records, and declared respondents faction as the true nominees of CIBAC.12 Upon Motion for Reconsideration separately filed by the adverse

parties, the COMELEC en banc affirmed the Divisions findings. In a per curiam Resolution dated 31 August 2010,13 the Commission reiterated that Pia Derla was unable to prove her authority to file the said Certificate, whereas respondents presented overwhelming evidence that Villanueva deputized CIBAC Secretary General Virginia Jose to submit the Certificate of Nomination pursuant to CIBACs Constitution and bylaws. Petitioners now seek recourse with this Court in accordance with Rules 64 and 65 of the Rules of Court, raising these issues: I) Whether the authority of Secretary General Virginia Jose to file the partys Certificate of Nomination is an intra-corporate matter, exclusively cognizable by special commercial courts, and over which the COMELEC has no jurisdiction; and II) Whether the COMELEC erred in granting the Petition for Disqualification and recognizing respondents as the properly authorized nominees of CIBAC party-list. As earlier stated, this Court denies the petition for being filed outside the requisite period. The review by this Court of judgments and final orders of the COMELEC is governed specifically by Rule 64 of the Rules of Court, which states: Sec. 1. Scope. This rule shall govern the review of judgments and final orders or resolutions of the Commission on Elections and the Commission on Audit. Sec. 2. Mode of review. A judgment or final order or resolution of the Commission on Elections and the Commission on Audit may be brought by the aggrieved party to the Supreme Court on certiorari under Rule 65, except as hereinafter provided. The exception referred to in Section 2 of this Rule refers precisely to the immediately succeeding provision, Section 3 thereof,14 which provides for the allowable period within which to file petitions for certiorari from judgments of both the COMELEC and the Commission on Audit. Thus, while Rule 64 refers to the same remedy of certiorari as the general rule in Rule 65, they cannot be equated, as they provide for different reglementary periods.15 Rule 65 provides for a period of 60 days from notice of judgment sought to be assailed in the Supreme Court, while Section 3 expressly provides for only 30 days, viz: SEC. 3. Time to file petition.The petition shall be filed within thirty (30) days from notice of the judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of denial. Petitioner received a copy of the first assailed Resolution on 12 July 2010. Upon the Motion for Reconsideration filed by petitioners on 15 July 2010, the COMELEC en banc issued the second assailed

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

Rule 64 in conjunction with Rule 65. Hence, there is no acceptable reason for their failure to comply with the proper procedure. But even if this Court were to apply liberality and take cognizance of the late Petition, the arguments therein are flawed. The COMELEC has jurisdiction over cases pertaining to party leadership and the nomination of party-list representatives. Petitioners contend that the COMELEC never should have taken cognizance of respondents Petition to Expunge and/or for Disqualification. They have reached this conclusion by characterizing the present matter as an intra-corporate dispute and, thus, cognizable only by special commercial courts, particularly the designated commercial court in this case, the Regional Trial Court in Pasig City.19 Pia Derla purportedly filed the Certificate of Nomination pursuant to the authority granted by the Board of Trustees of the "CIBAC Foundation, Inc.," the nonstock entity that is registered with the Securities and Exchange Commission (SEC).20 Thus, petitioners insist that the group that participated in the party-list system in the 2004 and 2007 elections was the SEC-registered entity, and not the National Council, which had allegedly become defunct since 2003. That was the year when CIBAC Foundation, Inc. was established and registered with the SEC.21 On the other hand, respondents counter that the foundation was established solely for the purpose of acting as CIBACs legal and financial arm, as provided by the partys Constitution and bylaws. It was never intended to substitute for, or oust CIBAC, the party-list itself.22 Even as petitioners insisted on the purely intracorporate nature of the conflict between "CIBAC Foundation" and the CIBAC Sectoral Party, they submitted their Certificate of Nomination and Manifestation of Intent to participate in the party-list elections. Precisely, petitioners were seeking the COMELECs approval of their eligibility to participate in the upcoming party-list elections. In effect, they invoke its authority under the Party-List System Act.23 Contrary to their stance that the present dispute stemmed from an intra-corporate matter, their submissions even recognize the COMELECs constitutional power to enforce and administer all laws relative to the conduct of an election, plebiscite, initiative, referendum, and recall.24 More specifically, as one of its constitutional functions, the COMELEC is also tasked to "register, after sufficient publication, political parties, organizations, or coalitions which, in addition to other requirements, must present their platform or program of government."25 In any case, the COMELECs jurisdiction to settle the struggle for leadership within the party is well established. This singular power to rule upon questions of party identity and leadership is exercised by the COMELEC as an incident to its enforcement powers. In Laban ng Demokratikong Pilipino v. Commission on Elections,26 the Court held: x x x. Corollary to the right of a political party "to identify the people who constitute the association

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

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

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and to select a standard bearer who best represents the partys ideologies and preference" is the right to exclude persons in its association and to not lend its name and prestige to those which it deems undeserving to represent its ideals. A certificate of candidacy makes known to the COMELEC that the person therein mentioned has been nominated by a duly authorized political group empowered to act and that it reflects accurately the sentiment of the nominating body. A candidates political party affiliation is also printed followed by his or her name in the certified list of candidates. A candidate misrepresenting himself or herself to be a partys candidate, therefore, not only misappropriates the partys name and prestige but foists a deception upon the electorate, who may unwittingly cast its ballot for him or her on the mistaken belief that he or she stands for the partys principles. To prevent this occurrence, the COMELEC has the power and the duty to step in and enforce the law not only to protect the party but, more importantly, the electorate, in line with the Commissions broad constitutional mandate to ensure orderly elections.27 (Emphasis supplied.) Similar to the present case, Laban delved into the issue of leadership for the purpose of determining which officer or member was the duly authorized representative tasked with filing the Certificate of Nomination, pursuant to its Constitution and bylaws, to wit: The only issue in this case, as defined by the COMELEC itself, is who as between the Party Chairman and the Secretary General has the authority to sign certificates of candidacy of the official candidates of the party. Indeed, the petitioners Manifestation and Petition before the COMELEC merely asked the Commission to recognize only those certificates of candidacy signed by petitioner Sen. Angara or his authorized representative, and no other.28 In the 2010 case Atienza v. Commission on Elections,29 it was expressly settled that the COMELEC possessed the authority to resolve intraparty disputes as a necessary tributary of its constitutionally mandated power to enforce election laws and register political parties. The Court therein cited Kalaw v. Commission on Elections and Palmares v. Commission on Elections, which uniformly upheld the COMELECs jurisdiction over intra-party disputes: The COMELECs jurisdiction over intra-party leadership disputes has already been settled by the Court. The Court ruled in Kalaw v. Commission on Elections that the COMELECs powers and functions under Section 2, Article IX-C of the Constitution, "include the ascertainment of the identity of the political party and its legitimate officers responsible for its acts." The Court also declared in another case that the COMELECs power to register political parties necessarily involved the determination of the persons who must act on its behalf. Thus, the COMELEC may resolve an intra-party leadership dispute, in a proper case brought before it, as an incident of its power to register political parties.30

Furthermore, matters regarding the nomination of party-list representatives, as well as their individual qualifications, are outlined in the Party-List System Law. Sections 8 and 9 thereof state: Sec. 8. Nomination of Party-List Representatives. Each registered party, organization or coalition shall submit to the COMELEC not later than forty-five (45) days before the election a list of names, not less than five (5), from which party-list representatives shall be chosen in case it obtains the required number of votes. A person may be nominated in one (1) list only. Only persons who have given their consent in writing may be named in the list. The list shall not include any candidate for any elective office or a person who has lost his bid for an elective office in the immediately preceding election. No change of names or alteration of the order of nominees shall be allowed after the same shall have been submitted to the COMELEC except in cases where the nominee dies, or withdraws in writing his nomination, becomes incapacitated in which case the name of the substitute nominee shall be placed last in the list. Incumbent sectoral representatives in the House of Representatives who are nominated in the party-list system shall not be considered resigned. Sec. 9. Qualifications of Party-List Nominees. No person shall be nominated as party-list representative unless he is a natural-born citizen of the Philippines, a registered voter, a resident of the Philippines for a period of not less than one (1)year immediately preceding the day of the election, able to read and write, a bona fide member of the party or organization which he seeks to represent for at least ninety (90) days preceding the day of the election, and is at least twenty-five (25) years of age on the day of the election. By virtue of the aforesaid mandate of the Party-List Law vesting the COMELEC with jurisdiction over the nomination of party-list representatives and prescribing the qualifications of each nominee, the COMELEC promulgated its "Rules on Disqualification Cases Against Nominees of Party-List Groups/ Organizations Participating in the 10 May 2010 Automated National and Local Elections."31 Adopting the same qualifications of party-list nominees listed above, Section 6 of these Rules also required that: The party-list group and the nominees must submit documentary evidence in consonance with the Constitution, R.A. 7941 and other laws to duly prove that the nominees truly belong to the marginalized and underrepresented sector/s, the sectoral party, organization, political party or coalition they seek to represent, which may include but not limited to the following: a. Track record of the party-list group/organization showing active participation of the nominee/s in the undertakings of the party-list group/organization for the advancement of the marginalized and underrepresented sector/s, the sectoral party, organization, political party or coalition they seek to represent;

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b. Proofs that the nominee/s truly adheres to the advocacies of the party-list group/organizations (prior declarations, speeches, written articles, and such other positive actions on the part of the nominee/s showing his/her adherence to the advocacies of the party-list group/organizations); c. Certification that the nominee/s is/are a bona fide member of the party-list group/ organization for at least ninety (90) days prior to the election; and d. In case of a party-list group/organization seeking representation of the marginalized and underrepresented sector/s, proof that the nominee/s is not only an advocate of the party-list/organization but is/are also a bona fide member/s of said marginalized and underrepresented sector. The Law Department shall require party-list group and nominees to submit the foregoing documentary evidence if not complied with prior to the effectivity of this resolution not later than three (3) days from the last day of filing of the list of nominees. Contrary to petitioners stance, no grave abuse of discretion is attributable to the COMELEC First Division and the COMELEC en banc.1wphi1 The tribunal correctly found that Pia Derlas alleged authority as "acting secretary-general" was an unsubstantiated allegation devoid of any supporting evidence. Petitioners did not submit any documentary evidence that Derla was a member of CIBAC, let alone the representative authorized by the party to submit its Certificate of Nomination.32 The COMELEC ruled: A careful perusal of the records readily shows that Pia B. Derla, who has signed and submitted, as the purported Acting Secretary General of CIBAC, the Certificates of Nomination of Respondents, has no authority to do so. Despite Respondents repeated claim that Ms. Derla is a member and officer of CIBAC, they have not presented any proof in support of the same. We are at a loss as to the manner by which Ms. Derla has assumed the post, and We see nothing but Respondents claims and writings/certifications by Ms. Derla herself that point to that alleged fact. Surely, We cannot rely on these submissions, as they are the very definition of selfserving declarations. On the other handWe cannot help but be convinced that it was Emmanuel Joel J. Villanueva, as the Party President and Chairman, who had been given the sole authority, at least for the 10 May 2010 Elections, to submit the list of nominees for the Party. The records would show that, in accordance with the Partys Constitution and by-laws, its National Council, the highest policymaking and governing body of the Party, met on 12 November 2009 and there being a quorum, then proceeded to elect its new set of officers, which included Mr. Villanueva as both Party President and Party Chairman, and Virginia S. Jose as Party Secretary General. During the same meeting, the Partys New Electoral Congress, which as per the CIBACs Constitution and By-Laws, was also composed of the National Council Members and had the task of choosing the nominees for the Party in

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

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Nomination filed on 19 January 2010 by Emmanuel Joel J. Villanueva, President and Chairman of Citizens Battle Against Corruption (CIBAC) Party List, are recognized as the legitimate nominees of the said party. SO ORDERED.

Promulgated: DECISION BRION, J.: Before the Court is the Petition for Certiorari1 filed by Tomas R. Osmea, former mayor of the City of Cebu, under Rule 64 of the Rules of Court. The petition seeks the reversal of the May 6, 2008 Decision2 and the June 8, 2009 Resolution3 of the respondent Commission on Audit (COA), which disallowed the damages, attorneys fees and litigation expenses awarded in favor of two construction companies in the collection cases filed against the City of Cebu, and made these charges the personal liability of Osmea for his failure to comply with the legal requirements for the disbursement of public funds. BACKGROUND FACTS The City of Cebu was to play host to the 1994 Palarong Pambansa (Palaro). In preparation for the games, the City engaged the services of WT Construction, Inc. (WTCI) and Dakay Construction and Development Company (DCDC) to construct and renovate the Cebu City Sports Complex. Osmea, then city mayor, was authorized by the Sangguniang Panlungsod (Sanggunian) of Cebu to represent the City and to execute the construction contracts. While the construction was being undertaken, Osmea issued a total of 20 Change/Extra Work Orders to WTCI, amounting to P35,418,142.42 (about 83% of the original contract price), and to DCDC, amounting to P15,744,525.24 (about 31% of the original contract price). These Change/Extra Work Orders were not covered by any Supplemental Agreement, nor was there a prior authorization from the Sanggunian. Nevertheless, the work proceeded on account of the "extreme urgency and need to have a suitable venue for the Palaro."4 The Palaro was successfully held at the Cebu City Sports Complex during the first six months of 1994. Thereafter, WTCI and DCDC demanded payment for the extra work they performed in the construction and renovation of the sports complex. A Sanggunian member, Councilor Augustus Young, sponsored a resolution authorizing Osmea to execute the supplemental agreements with WTCI and DCDC to cover the extra work performed, but the other Sanggunian members refused to pass the resolution. Thus, the extra work completed by WTCI and DCDC was not covered by the necessary appropriation to effect payment, prompting them to file two separate collection cases before the Regional Trial Court (RTC) of Cebu City (Civil Case Nos. CEB-170045 and CEB171556 ). The RTC found the claims meritorious, and ordered the City to pay for the extra work performed. The RTC likewise awarded damages, litigation expenses and attorneys fees in the amount of P2,514,255.40 to WTCI7 and P102,015.00 to DCDC.8 The decisions in favor of WTCI and DCDC were affirmed on appeal, subject to certain modifications as to the amounts due, and have become final. To satisfy the judgment debts, the Sanggunian finally passed the required appropriation ordinances.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 188818 2011 May 31,

TOMAS R. OSMEA, in his personal capacity and in his capacity as City Mayor of Cebu City, Petitioner, vs. THE COMMISSION ON AUDIT, Respondent.
Present: CORONA, C.J., CARPIO, CARPIO-MORALES, VELASCO, JR., NACHURA, LEONARDO-DE CASTRO, BRION, - versus - PERALTA, BERSAMIN, *DEL CASTILLO, ABAD, VILLARAMA, JR., PEREZ, MENDOZA, and SERENO, JJ.

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During post-audit, the City Auditor issued two notices disallowing the payment of litigation expenses, damages, and attorneys fees to WTCI and DCDC.9 The City Auditor held Osmea, the members of the Sanggunian, and the City Administrator liable for the P2,514,255.40 and P102,015.00 awarded to WTCI and DCDC, respectively, as damages, attorneys fees, and interest charges. These amounts, the City Auditor concluded, were unnecessary expenses for which the public officers should be held liable in their personal capacities pursuant to the law. Osmea and the members of the Sanggunian sought reconsideration of the disallowance with the COA Regional Office, which, through a 2nd Indorsement dated April 30, 2003,10 modified the City Auditors Decision by absolving the members of the sanggunian from any liability. It declared that the payment of the amounts awarded as damages and attorneys fees should solely be Osmeas liability, as it was him who ordered the change or extra work orders without the supplemental agreement required by law, or the prior authorization from the Sanggunian. The Sanggunian members cannot be held liable for refusing to enact the necessary ordinance appropriating funds for the judgment award because they are supposed to exercise their own judgment and discretion in the performance of their functions; they cannot be mere "rubber stamps" of the city mayor. The COA Regional Offices Decision was sustained by the COAs National Director for Legal and Adjudication (Local Sector) in a Decision dated January 16, 2004.11 Osmea filed an appeal against this Decision. On May 6, 2008, the COA issued the assailed Decision which affirmed the notices of disallowance.12 Osmea received a copy of the Decision on May 23, 2008. Eighteen days after or on June 10, 2008, Osmea filed a motion for reconsideration of the May 6, 2008 COA Decision. The COA denied Osmeas motion via a Resolution dated June 8, 2009.13 The Office of the Mayor of Cebu City received the June 8, 2009 Resolution of the COA on June 29, 2009. A day before, however, Osmea left for the United States of America for his check-up after his cancer surgery in April 2009 and returned to his office only on July 15, 2009. Thus, it was only on July 27, 2009 that Osmea filed the present petition for certiorari under Rule 64 to assail the COAs Decision of May 6, 2008 and Resolution of June 8, 2009. THE PETITION Rule 64 of the Rules of Court governs the procedure for the review of judgments and final orders or resolutions of the Commission on Elections and the COA. Section 3 of the same Rule provides for a 30day period, counted from the notice of the judgment or final order or resolution sought to be reviewed, to file the petition for certiorari. The Rule further states that the filing of a motion for reconsideration of the said judgment or final order or resolution interrupts the 30-day period.

Osmea filed his motion for reconsideration, of the COAs May 6, 2008 Decision, 18 days from his receipt thereof, leaving him with 12 days to file a Rule 64 petition against the COA ruling. He argues that the remaining period should be counted not from the receipt of the COAs June 8, 2009 Resolution by the Office of the Mayor of Cebu City on June 29, 2009, but from the time he officially reported back to his office on July 15, 2009, after his trip abroad. Since he is being made liable in his personal capacity, he reasons that the remaining period should be counted from his actual knowledge of the denial of his motion for reconsideration. Corollary, he needed time to hire a private counsel who would review his case and prepare the petition. Osmea pleads that his petition be given due course for the resolution of the important issues he raised. The damages and interest charges were awarded on account of the delay in the payment of the extra work done by WTCI and DCDC, which delay Osmea attributes to the refusal of the Sanggunian to appropriate the necessary amounts. Although Osmea acknowledges the legal necessity for a supplemental agreement for any extra work exceeding 25% of the original contract price, he justifies the immediate execution of the extra work he ordered (notwithstanding the lack of the supplemental agreement) on the basis of the extreme urgency to have the construction and repairs on the sports complex completed in time for the holding of the Palaro. He claims that the contractors themselves did not want to embarrass the City and, thus, proceeded to perform the extra work even without the supplemental agreement. Osmea also points out that the City was already adjudged liable for the principal sum due for the extra work orders and had already benefitted from the extra work orders by accepting and using the sports complex for the Palaro. For these reasons, he claims that all consequences of the liability imposed, including the payment of damages and interest charges, should also be shouldered by the City and not by him. THE COURTS RULING Relaxation of procedural rules to give effect to a partys right to appeal Section 3, Rule 64 of the Rules of Court states: SEC. 3. Time to file petition.The petition shall be filed within thirty (30) days from notice of the judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of denial. [Emphasis ours.] Several times in the past, we emphasized that procedural rules should be treated with utmost respect and due regard, since they are designed to

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facilitate the adjudication of cases to remedy the worsening problem of delay in the resolution of rival claims and in the administration of justice. From time to time, however, we have recognized exceptions to the Rules but only for the most compelling reasons where stubborn obedience to the Rules would defeat rather than serve the ends of justice. Every plea for a liberal construction of the Rules must at least be accompanied by an explanation of why the partylitigant failed to comply with the Rules and by a justification for the requested liberal construction.14 Where strong considerations of substantive justice are manifest in the petition, this Court may relax the strict application of the rules of procedure in the exercise of its legal jurisdiction.15 Osmea cites the mandatory medical check-ups he had to undergo in Houston, Texas after his cancer surgery in April 2009 as reason for the delay in filing his petition for certiorari. Due to his weakened state of health, he claims that he could not very well be expected to be bothered by the affairs of his office and had to focus only on his medical treatment. He could not require his office to attend to the case as he was being charged in his personal capacity. We find Osmeas reasons sufficient to justify a relaxation of the Rules. Although the service of the June 8, 2009 Resolution of the COA was validly made on June 29, 2009 through the notice sent to the Office of the Mayor of Cebu City,16 we consider July 15, 2009 the date he reported back to office as the effective date when he was actually notified of the resolution, and the reckoning date of the period to appeal. If we were to rule otherwise, we would be denying Osmea of his right to appeal the Decision of the COA, despite the merits of his case. Moreover, a certiorari petition filed under Rule 64 of the Rules of Court must be verified, and a verification requires the petitioner to state under oath before an authorized officer that he has read the petition and that the allegations therein are true and correct of his personal knowledge. Given that Osmea was out of the country to attend to his medical needs, he could not comply with the requirements to perfect his appeal of the Decision of the COA. While the Court has accepted verifications executed by a petitioners counsel who personally knows the truth of the facts alleged in the pleading, this was an alternative not available to Osmea, as he had yet to secure his own counsel. Osmea could not avail of the services of the City Attorney, as the latter is authorized to represent city officials only in their official capacity.17 The COA pins liability for the amount of damages paid to WTCI and DCDC on Osmea in his personal capacity, pursuant to Section 103 of Presidential Decree No. 1445 (PD 1445).18 Thus, the reckoning date to count the remaining 12 days to file his Rule 64 petition should be counted from July 15, 2009, the date Osmea had actual knowledge of the denial of his motion for reconsideration of the Decision of the COA and given the opportunity to competently file an appeal thereto before the Court. The present petition, filed on July 27, 2009, was filed within the reglementary period.

Personal liability for expenditures of government fund when made in violation of law The Courts decision to adopt a liberal application of the rules stems not only from humanitarian considerations discussed earlier, but also on our finding of merit in the petition. Section 103 of PD 1445 declares that "[e]xpenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor." Notably, the public officials personal liability arises only if the expenditure of government funds was made in violation of law. In this case, the damages were paid to WTCI and DCDC pursuant to final judgments rendered against the City for its unreasonable delay in paying its obligations. The COA, however, declared that the judgments, in the first place, would not be rendered against the City had it not been for the change and extra work orders that Osmea made which (a) it considered as unnecessary, (b) were without the Sanggunians approval, and (c) were not covered by a supplemental agreement. The term "unnecessary," when used in reference to expenditure of funds or uses of property, is relative. In Dr. Teresita L. Salva, etc. v. Guillermo N. Carague, etc., et al.,19 we ruled that "[c]ircumstances of time and place, behavioural and ecological factors, as well as political, social and economic conditions, would influence any such determination. x x x [T]ransactions under audit are to be judged on the basis of not only the standards of legality but also those of regularity, necessity, reasonableness and moderation." The 10-page letter of City Administrator Juan Saul F. Montecillo to the Sanggunian explained in detail the reasons for each change and extra work order; most of which were made to address security and safety concerns that may arise not only during the holding of the Palaro, but also in other events and activities that may later be held in the sports complex. Comparing this with the COAs general and unsubstantiated declarations that the expenses were "not essential"20 and not "dictated by the demands of good government,"21 we find that the expenses incurred for change and extra work orders were necessary and justified. The COA considers the change and extra work orders illegal, as these failed to comply with Section III, C1 of the Implementing Rules and Regulations of Presidential Decree No. 1594,22 which states that: 5. Change Orders or Extra Work Orders may be issued on a contract upon the approval of competent authorities provided that the cumulative amount of such Change Orders or Extra Work Orders does not exceed the limits of the former's authority to approve original contracts. 6. A separate Supplemental Agreement may be entered into for all Change Orders and Extra Work Orders if the aggregate amount exceeds 25% of the escalated original contract price. All change orders/extra work orders beyond 100% of the escalated original contract cost shall be subject to public bidding except where the works involved are

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

successful hosting of the Palaro, and not for any other "nefarious endeavour."29 WHEREFORE, in light of the foregoing, we hereby GRANT the petitioners Petition for Certiorari filed under Rule 64 of the Rules of Court. The respondents Decision of May 6, 2008 and Resolution of June 8, 2009 are SET ASIDE. SO ORDERED.

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DEANNA M. JANCE, HENRY G. DOBLE, REYNALDO D. LUZANA, MEDELYN P. TOQUILLO, SEVERINO A. ORLIDO, RHODERICK V. ALIPOON, JONATHAN CORDERO, DANILO B. BISCOCHO, BELLO C. LUCASAN, LUBERT V. TIVE, and the COMMISSION ON AUDIT, Respondents.
DECISION PERALTA, J.: Assailed in this petition for certiorari under Rule 64, in relation to Rule 65 of the Rules of Court, is Decision No. 2010-1461 dated December 30,2010 of the Commission on Audit (COA). The antecedent facts are as follows: Private respondents, namely: Encarnacion B. Tormon, Edgardo B. Alisaje, Lourdes M. Doble, Teresita Q. Lim, Edmundo R. Jornadal, Jimmy C. Villanueva , Deanna M. Jance, Henry G. Doble, Reynaldo D. Luzana, Medelyn P. Toquillo, Severino A. Orlido, Rhoderick V. Alipoon, Jonathan Cordero, Danilo B. Biscocho, Bello C. Lucasan, Lubert V. Tive, were former employees of Philippine Sugar Institute (PHILSUGIN) and the Sugar Quota Administration (SQA). On February 2, 1974, Presidential Decree (P.D.) No. 388 was issued creating the Philippine Sugar Commission (PHILSUCOM). Under the said decree, PHILSUGIN and SQA shall be abolished upon the organization of PHILSUCOM and all the former's assets, liabilities and records shall be transferred to the latter and the personnel of the abolished agencies who may not be retained shall be entitled to retirement/gratuity and incentive benefits. In September 1977, PHILSUGIN and SQA were abolished and private respondents were separated from the service; thus, they were paid their retirement/gratuity and incentive benefits. In the same year, private respondents were reinstated by PHILSUCOM subject to the condition that the former would refund in full the retirement/gratuity and incentive benefits they received from PHILSUGIN or SQA. PHILSUCOM Consultant, Eduardo F. Gamboa, wrote: We have received orders from the Main Office to require you to refund in full the unexpired portion of the money value of the retirement or lay-off gratuity you received as called for in Office Memorandum No. 4, series of 1977, dated December 5, 1977, in view of your reinstatement in the service. xxxx In connection herewith, you are therefore directed to make the necessary refund of the above-mentioned amount to our Local Accounting Department and to inform the Personnel Department, when refund is made. Failure on your part to make the necessary refund will constrain us to recommend corrective measures.2

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 195640 2012 December 4,

SUGAR REGULATORY ADMINISTRATION, represented by its Administrator, Petitioner, vs. ENCARNACION B. TORMON, EDGARDO B. ALISAJE, LOURDES M. DOBLE, TERESITA Q. LIM, EDMUNDO R. JORNADAL, JIMMY C. VILLANUEVA ,

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On May 28, 1986, Executive Order (E.O.) No. 18, series of 1986 was issued wherein the Sugar Regulatory Administration (petitioner SRA) replaced PHILSUCOM. PHILSUCOM's assets and records were all transferred to petitioner SRA which also retained some of the former's personnel which included the private respondents. On July 29, 2004, E.O. No. 339 was issued, otherwise known as Mandating the Rationalization of the Operations and Organization of the SRA, for the purpose of strengthening its vital services and refocusing its resources to priority programs and activities, and reducing its personnel with the payment of retirement gratuity and incentives for those who opted to retire from the service. Among those separated from the service were private respondents. Under the SRA Rationalization Program, petitioner computed its employees' incentives and terminal leave benefits based on their creditable years of service contained in their respective service records on file with petitioner and validated by the Government Service and Insurance System (GSIS). The computation was then submitted to the Department of Budget and Management (DBM) for approval and request of funds. The DBM approved the same and released the disbursement vouchers for processing of the incentive benefits. However, in the course of the implementation of its rationalization plan, petitioner found out that there was no showing that private respondents had refunded their gratuity benefits received from PHILSUGIN or SQA. Hence, petitioner considered private respondents' length of service as having been interrupted which commenced only at the time they were re-employed by PHILSUCOM in 1977. Petitioner then recomputed private respondents' retirement and incentive benefits and paid only the 75% equivalent of the originally computed benefits and withheld the remaining 25% in view of the latter's inability to prove the refund. Private respondents requested petitioner to compute their incentive benefits based on their length of service to include their years of service with PHILSUGIN or SQA taking into consideration their refund of gratuity benefits to PHILSUCOM at the time of their re-employment in 1977. On January 4, 2007, then petitioner's Administrator, James C. Ledesma, issued a memorandum3 declaring the services of its employees affected by the Rationalization Program, which included private respondents, terminated effective on January 15, 2007. Under Board Resolution No. 2007-0554 dated June 14, 2007, petitioner denied private respondents' requests for the latter's failure to submit proofs of refund of gratuity received from PHILSUGIN or SQA. On September 6, 2007, private respondents wrote a letter5 addressed to then Commission on Audit (COA) Chairman, Guillermo N. Carague, asking the COA to order petitioner to pay the balance representing the 25% of their retirement and incentive benefits withheld by petitioner. They claimed that they had already refunded the full amount of the incentive benefits through salary deductions and since petitioner could no longer find the PHILSUCOM payrolls reflecting those deductions, private

respondents submitted the affidavits of Messrs. Hilario T. Cordova6 and Nicolas L. Meneses Jr.,7 petitioner's Chief, Administrative Division, and Manager, Administrative and Finance Department, respectively, both executed in March 2007, attesting to the fact of refund. Petitioner filed its Answer8 thereto contending among others that since private respondents alleged payment, they were duty-bound to present evidence substantiating the said refund; that no records of payments existed to clearly establish their claim, thus, their resort to secondary evidence which were the sworn affidavits of petitioner's former officials were insufficient to prove the fact of the alleged payment. On October 14, 2009, the COA rendered Decision No. 2009 -100,9 with the following dispositive portion, to wit: WHEREFORE, foregoing premises considered, this Commission rules that the affidavits presented by claimants are insufficient proofs that they have refunded to PHILSUCOM the gratuity/incentive benefits they received from PHILSUGIN/SQA. Evidence other than the affidavits must be presented to substantially prove their claims. Also, all the benefits, gratuity, incentive and retirement they received upon their separation from PHILSUGIN or SQA must be accounted for and refunded to SRA before the requested incentive benefit is computed based on their length of government service reckoned from the time they were employed with PHILSUGIN or SQA.10 In so ruling, the COA found that since private respondents alleged payment, they had the burden of proving the same by clear and positive evidence; that the affidavits of Messrs. Cordova and Meneses, Jr. stating that private respondents had refunded to PHILSUCOM the benefits they received from PHILSUGIN/SQA were not the best evidence of such refunds; that an affidavit was made without notice to the adverse party or opportunity to cross examine; and that the contents of these affidavits were too general and did not state private respondents respective final payments. Private respondents filed their motion for reconsideration which was opposed by petitioner. On December 30, 2010, the COA rendered Decision No. 2010-146 granting private respondents' motion for reconsideration, the dispositive portion of which reads: WHEREFORE, premises considered, the instant Motion for Reconsideration is hereby GRANTED. Accordingly, COA Decision No. 2009-100 is hereby REVERSED and [SET] ASIDE. The SRA is directed to release to movants the amount representing the 25% balance of their incentive and terminal leave benefits.11 In its decision, the COA observed that private respondents had filed a separate but related complaint with the Civil Service Commission (CSC). It

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found that while their complaint with the CSC was denominated as illegal termination/backwages and entitlements, the main thrust of their complaint was to compel the payment of the 25% balance of their total incentives and terminal leave benefits withheld by petitioner, which was the same demand made in their letter to Chairman Carague whose decision is the subject of the motion for reconsideration, thus, forum shopping existed. The COA also noted that in their Supplement to Motion for Reconsideration/Manifestation filed on November 24, 2009, private respondents mentioned the ruling of the CSC12 in their favor and they now disputed the COAs jurisdiction to rule on their demand contending that it is the CSC which has jurisdiction over cases involving government reorganization; and that the CSC had issued a Resolution granting private respondents' motion for execution of the CSC resolution. Notwithstanding, however, the COA found that it did not lose jurisdiction over the present case and went on to decide the claim on the merits and disregarded the CSC Resolution. The COA ruled that the affidavits submitted were not secondary evidence within the context of Section 5, Rule 130 of the Rules of Court, hence, admissible in evidence, since technical rules of procedure and evidence are not strictly applied in administrative proceedings. The COA found in the records certain significant circumstances which, when taken together with the affidavits, established that indeed private respondents had refunded the incentives in question. Since private respondents had discharged their burden of proof, it was incumbent on petitioner to discharge the burden of evidence that respondents had not paid the said incentives; that it was the PHILSUCOM, then petitioner, being the successor of PHILSUGIN and SQA, that had been tasked with the official custody of all the records and books of their predecessors, as mandated under Section 10 of Presidential Decree No. 388; that if petitioner's Accounting Division cannot issue a certification because it has no records, it is never an excuse to shift the burden to the employees. Petitioner is now before us raising the following issues, to wit: 1. Whether or not respondent Commission erred and gravely abused its discretion when it gave credence to the affidavits of Mr. Hilario T. Cordova, then Chief, Administrative Division, SRA, and Mr. Nicolas L. Meneses, Jr., then Manager, Administrative and Finance Department plainly alleging that the gratuity/incentives have been refunded by the private respondents. 2. Whether or not public respondent Commission on Audit erred and gravely abused its discretion in making assumptions or suppositions out of certain circumstances which were not even alleged by private respondents and in arriving at a conclusion out of the same in favor of private respondents. 3. Whether or not public respondent Commission on Audit erred and gravely abused its discretion in finding substantial evidence that private respondents refunded the gratuity incentives in question.13

The issue for resolution is whether the COA committed grave abuse of discretion amounting to lack of jurisdiction in directing petitioner to pay the 25% balance of private respondents' incentive and terminal leave benefits withheld from the submitted computation of petitioner and duly funded by the DBM. We find no merit in the petition. Petitioner withheld 25% of private respondents' incentive and terminal leave benefits because of their failure to present evidence of refund of the amounts of retirement and incentive benefits earlier received from PHILSUGIN/SQA. On the other hand, private respondents claim that they had already refunded these benefits through salary deduction, therefore, they are entitled to the payment of the amounts withheld by petitioner. The burden of proof is on private respondents to prove such refund. One who pleads payment has the burden of proving it.14 Even where the creditor alleges non-payment, the general rule is that the onus rests on the debtor to prove payment, rather than on the creditor to prove non-payment.15 The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment.16 Well settled also is the rule that a receipt of payment is the best evidence of the fact of payment.17 In Monfort v. Aguinaldo,18 the receipts of payment, although not exclusive, were deemed to be the best evidence. Private respondents, however, could not present any receipt since they alleged that their payments were made through salary deductions and the payrolls which supposedly contained such deductions were in petitioner's possession which had not been produced. In order to prove their allegations of refund, private respondents submitted the affidavits of Messrs. Cordova and Meneses, Jr., which we successively quote in part, to wit: Mr. Cordova states: That I was the Administrative Officer II of the defunct Philippine Sugar Institute when it was abolished in 1977; that I hold the same position when the Philippine Sugar Commission took over the functions of PHILSUGIN from that year up to 1986; That I continued to be the head of Personnel Division when Sugar Regulatory Administration replaced PHILSUCOM in 1986 and retired as Division Chief II of the Administrative Division on July 31, 2003; That during my incumbency in said positions, I have personal knowledge of the paymen/refund of exPHILSUGIN employees separated from service but reinstated in PHILSUCOM by way of salary deduction through payroll; That Ms. Encarnacion Tormon, et al., upon return to service with PHILSUCOM, refunded the amount of the gratuities they received from PHILSUGIN in the months following/succeeding upon their appointment as reinstated employees of PHILSUCOM; That their status as reinstated employees are officially marked in their individual service records

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duly authenticated by myself as Chief of Personnel Division and validated by the Government Service Insurance System as proven by GSIS computation of their creditable years.19 On the other hand, Mr. Meneses Jr., states: That I was the Chief Internal Auditor of the defunct Philippine Sugar Institute when it was abolished in 1977; that I hold a key position in the Budget and Accounting Division when the Philippine Sugar Commission took over the functions of PHILSUGIN from that year up to 1986; That I later became Division Chief I of [the] Budget Division in the Sugar Regulatory Administration in 1988 and retired as Manager of the Administrative and Finance Department on July 31, 2003; That during my incumbency in said positions, I have personal knowledge of the payment/refund of exPHILSUGIN employees separated from service and reinstated in PHILSUCOM; That Ms. Encarnacion Tormon et al., upon return to service with PHILSUCOM, refunded the amount of the gratuities they received from PHILSUGIN; That their status as reinstated employees are officially marked in their individual service records duly authenticated by the Chief of Personnel Division and validated by GSIS.20 Messrs. Cordova, being petitioner's head of the Personnel Department, and Meneses, Jr., as petitioner's Chief of Budget Division, and later Manager of the Administrative and Finance Department, were in the best positions to attest to the fact of private respondents' refund through salary deductions of the amounts of retirement and incentive benefits previously received, especially since these officials were in those departments since PHILSUCOM took over in 1977 and later with petitioner until their retirement in 2003. There was nothing on record to show that Messrs. Cordova and Meneses, Jr. were actuated with any ill motive in the execution of their affidavits attesting to the fact of refund. The general rule is that administrative agencies are not bound by the technical rules of evidence. It can accept documents which cannot be admitted in a judicial proceeding where the Rules of Court are strictly observed. It can choose to give weight or disregard such evidence, depending on its trustworthiness.21 Here, we find no grave abuse of discretion committed by the COA when it admitted the affidavits of Messrs. Cordova and Meneses, Jr. and gave weight to them in the light of the other circumstances established by the records which will be shown later in the decision. Petitioner claims that the affiants attested on a matter which happened 30 years ago; thus, how could they recall that each of the 16 employees had actually refunded the gratuity/incentives way back in 1977; that each of the private respondents held different positions with salaries different from each other and the dates when they respectively re-

assumed service in the government differed from each other; that it may not even be entirely correct that all 16 respondents refunded the gratuity incentives in question by salary deduction. We are not persuaded. Significantly, Messrs. Cordova and Meneses, Jr. were petitioner's former officials who held key positions in the two divisions, namely, Personnel and Accounting Divisions, where private respondents were directed by then petitioner's Consultant Gamboa to make the necessary refunds for their retirement and incentive pay. Thus, if no refunds were made, these officials could have reported the same to Gamboa, who would have taken corrective measures as he threatened to do so if private respondents failed to make the necessary refunds. Notably, there is no showing that corrective measures had been taken. Moreover, as we said, while the COA admitted the affidavits, it did not rely solely on those affidavits to conclude that refunds were already made by private respondents. The matter of refund was proven by several circumstances which the COA found extant in the records of the case. We find apropos to quote the COA findings in this wise: First, movants were reemployed by PHILSUCOM with the condition that they must return the benefits they had already received. In his 16 March 1978 letter, Mr. Eduardo F. Gamboa, directed Ms. Tormon to refund the amount and to inform the Personnel Department when the refund was made. He warned Ms. Tormon to make the refund or they will be constrained to recommend corrective measures. The fact was that claimants were reinstated. That management did not take any corrective measures to compel the refund except perhaps, the enforced salary deduction which claimants said was the mode of refund undertaken is a point in favor of claimants. It would be unbelievable that in all these years, from 1977 to 2007, the SRA management, indubitably having the higher authority, just slept on its right to enforce the refund and did nothing about it. The natural and expected action that SRA ought to have taken was to enforce the refund through salary deduction, not through voluntary direct payment since the latter option does not carry with it the mandatory character of an automatic salary deduction. Second, a certain Mr. Henry Doble, one of the movants, was promoted from Emergency Employee, a temporary status, to senior machine cutting operator with permanent status. If Mr. Doble had not refunded his gratuity, it was more reasonable to suppose that SRA would not have promoted him. Third, COA Directors Rosemarie L. Lerio and Divina M. Alagon, CGS and SRA ATL22 Antonio M. Malit, to whom the case was coursed through for comments, did not mention, even in passing, of any audit finding in the Annual Audit Reports (AARS) regarding the unrefunded incentives received by claimants The silence of the AARs for 30 years would only lend credence that theses refunds were made. Fourth, under the SRA Rationalization program, the affected employees' incentive and terminal leave benefits were computed based on their creditable

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years of services as contained in their respective service records with the agency as validated by the GSIS. Accordingly, SRA computed movants' incentive and terminal leave benefits as of December 31, 2006 which was approved by the Department of Budget and Management (DBM) Secretary Rolando Andaya. This only showed that even the SRA was convinced that movants had no more financial accountability with the SRA at the time.1wphi1 Fifth, then SRA Administrator James C. Ledesma informed movants that not one of the records of the payments they claimed was available at the office; thus, the SRA could not be definite as to the actual payments made by them and the equivalent periods corresponding thereto, Also, Ms. Amelita A. Papasin, Accountant IV, Accounting Unit, SRA, Bacolod, stated that they could not find any record showing payments made as claimed by Ms. Tormon, et al., to refund the severance gratuities paid to them during their termination on September 30, 1977. Indeed, the SRA could not comply with the request of Mr. Antonio M. Malit, Audit Team leader (ATL), SRA, to produce copies of payroll or index of payments, or any accounting records covering the 32-year period which would have shown whether movants paid or did not pay the required refund. These payrolls and other records would have conclusively established the fact of payment or non-payment, But then all the SRA could say was there is no record of such payment. Absence of record is different from saying there was no payment.23 Factual findings of administrative bodies charged with their specific field of expertise, are afforded great weight by the courts, and in the absence of substantial showing that such findings were made from an erroneous estimation of the evidence presented, they are conclusive, and in the interest of stability of the governmental structure, should not be disturbed.24 Petitioner's claim that the COA made its own assumptions which were not even based on the allegations made by private respondents in any of their pleadings is devoid of merit. In their Reply to petitioner's Supplemental Comment/Opposition to private respondents' motion for reconsideration, private respondents had alleged some of these above- mentioned circumstances to support their claim that refunds had already been made. We also find that the records of the case support the abovequoted circumstances enumerated by the COA. Considering that private respondents had introduced evidence that they had refunded their retirement and incentive benefits through salary deduction, the burden of going forward with the evidence- as distinct from the general burden of proof- shifts to the petitioner, who is then under a duty of producing some evidence to show non-payment.25 However, the payroll to establish whether or not deductions had been made from the salary of private respondents were in petitioner's custody, but petitioner failed to present the same due to the considerable lapse of time. All told, we find no grave abuse of discretion amounting to lack or excess of jurisdiction committed

by the COA in rendering its assailed decision. There is grave abuse of discretion when there is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law and evidence but on caprice, whim and despotism,26 which is wanting in this case. WHEREFORE, the petition is DISMISSED. Decision No. 2010-146 dated December 30, 2010 of the Commission on Audit is hereby AFFIRMED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 176898 2012 December 3,

GEORGE S. H. SY, doing business under the name and style of OPM INTERNATIONAL CORPORATION, Petitioner, vs. AUTOBUS TRANSPORT SYSTEMS INC., Respondent.
DECISION DEL CASTILLO, J.: A writ of preliminary mandatory injunction will not be set aside unless it was issued with grave abused of discretion. This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the Decision2 dated September 21, 2006 and the Resolution3 dated March 6, 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 90926. Factual Antecedents

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Petitioner George S.H. Sy is doing business under the name and style of OPM International Corporation (OPM), which is engaged in the sale and installation of bus air conditioning units.4 Sometime in July 1996, petitioner entered into a verbal agreement with respondent Autobus Transport Systems, Inc.,5 a public utility bus company plying the northern Luzon routes from Manila.6 Under their agreement, respondent would purchase Konvecta air conditioning units from petitioner and petitioner would finance respondents acquisition of twenty-two (22) units of bus engine and chassis from Commercial Motors Corporation (CMC) and twenty-two (22) bus deluxe bodies to be built by Almazora Motors Corporation (AMC).7 The parties agreed that respondent would amortize the payments for the Konvecta air conditioning units and the bus units separately;8 that petitioner would settle respondents account with CMC starting on the fourteenth (14th) month from the time of the first delivery of the bus engines and chassis; and that respondent would pay petitioner the acquisition cost of the 22 units of bus engines and chassis in 36 monthly installments, starting on the fifteenth (15th) month from the time of the first delivery of the bus engines and chassis.9 As security, respondent would execute Chattel Mortgages over the buses in favor of CMC.10 Once petitioner has fully paid the amortizations to CMC, respondent would execute new Chattel Mortgages over the buses, this time, in favor of petitioner.11 In the meantime, respondent would deliver to petitioner titles to five properties in Caloocan City registered under the name of Gregorio Araneta III, the chairman of respondent, as security for petitioners advances to CMC.12 The 22 bus units were delivered to respondent by CMC in three batches: 10 in November 1996, five in March 1997 and seven in October 1997.13 After the delivery of the first batch, respondent delivered to petitioner Transfer Certificates of Title (TCT) Nos. 292199, 292200, 292201, 292202, and 292203.14 Petitioner, however, defaulted in paying the amortizations to CMC, forcing the latter to demand payment from respondent.15 Consequently, respondent was compelled to pay some of the obligations directly to CMC.16 On November 26, 1998, respondent, through counsel, issued a letter to petitioner demanding that he settle the obligations with CMC or return the five titles to respondent.17 On December 5, 1998, petitioner, in a letter, apologized for the delay and requested for an extension until January 31, 1999 to settle respondents obligations with CMC.18 On January 28, 1999, respondent, through counsel, again sent a letter to petitioner reminding him of his promise to settle the obligations by January 31, 1999.19 On the same date, petitioner, thru a letter, asked respondent for another extension of 10 days or until February 10, 1999.20

On March 12, 1999, due to the failure of petitioner to settle the obligations with CMC, respondent filed a complaint for Specific Performance21 against petitioner.22 The case was docketed as Civil Case No. 99-93127 and raffled to Branch 45 of the Regional Trial Court (RTC) of Manila. Respondent prayed that a decision be rendered: 1. Ordering [petitioner] to perform all his obligations under the verbal agreement by way of paying the balance of [respondents] loan to CMC; 2. Ordering [petitioner] to return to [respondent] the mortgaged five (5) Transfer Certificates of Title Nos. 292199, 292200, 292201, 292202 and 292203; 3. Ordering [petitioner] to pay [respondent] attorneys fees amounting to P50,000.00 plus P2,000.00 per hearing attended and pleadings submitted in Court.23 In his Answer,24 petitioner interposed the defense of lack of cause of action, contending that respondent has no right to institute the present action because the controversy is between petitioner and CMC.25 Petitioner also alleged that he failed to settle respondents obligations with CMC because respondent stopped paying its amortizations.26 Thus, petitioner prayed that respondent be ordered to pay the amount of P56,000,000.00, representing respondents alleged unpaid balance for the entire transaction.27 On the scheduled pre-trial, petitioner and his counsel failed to appear, prompting the RTC to declare petitioner in default.28 Upon petitioners motion,29 the RTC reconsidered the order of default.30 On the next scheduled pre-trial, petitioner and his counsel again failed to appear.31 Thus, petitioner was declared in default and respondent was allowed to present its evidence ex-parte.32 On May 16, 2000, the RTC rendered a Decision33 in favor of respondent, to wit: WHEREFORE, and as prayed for by [respondent], judgment is hereby rendered for the [respondent], as follows: 1) ordering the [petitioner] to perform all his obligations under the verbal agreement by way of paying the balance of [respondents] loan to CMC; 2) ordering [petitioner] to return to [respondent] the five (5) Transfer Certificates of Title Nos. 292199, 292200, 292201, 292202, and 29203; 3) ordering [petitioner] to pay [respondent] reasonable attorneys fees in the reduced amount of P20,000.00, plus the costs of suit. The counterclaim of the [petitioner] is dismissed for lack of bases and merit. SO ORDERED.34 Feeling aggrieved, petitioner filed a Petition for Relief from Judgment35 citing the death of his counsel as

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excusable negligence.36 Finding the petition meritorious, the RTC set aside its Decision and set the case for trial.37 On September 16, 2004, respondent filed a Motion to Order [Petitioner] to Return the Five (5) Transfer Certificates of Title to [Respondent].38 The RTC denied the motion in an Order39 dated December 9, 2004. On January 11, 2005, respondent filed a Motion for the Issuance of a Writ of Preliminary Mandatory Injunction,40 praying for the issuance of a Writ of Preliminary Mandatory Injunction commanding petitioner to return to respondent the five titles.41 Ruling of the Regional Trial Court On April 11, 2005, the RTC issued an Order42 granting respondents Motion. The RTC ordered petitioner to return the five titles to respondent since he failed to comply with the agreement he made with respondent, i.e. to finance respondents obligations with CMC.43 In granting the Motion, the RTC took into consideration respondents fear that petitioner might use these titles to obtain a loan from Metrobank given that petitioner already admitted that he turned over the possession of the five titles to the said bank.44 Thus: Wherefore, premises considered, and upon the posting by [respondent] of a bond in the amount of TWO MILLION (P2,000,000.00) PESOS to be approved by this Court, to answer all the damages and costs which the [petitioner] may suffer by reason of the injunction, if the Court will finally decide that the [respondent] was not entitled thereto, let a writ of preliminary mandatory injunction be issued commanding the [petitioner] to return to the [respondent] the five (5) Transfer Certificates of Title Nos. 292199, 292200, 292201, 292202 and 292203. SO ORDERED.45 Petitioner filed a Motion for Reconsideration with Motion to Post Counter bond46 but the RTC denied the same in its Order 47 dated July 26, 2005. This prompted petitioner to elevate the case to the CA via a Petition for Certiorari,48 imputing grave abuse of discretion on the part of the RTC in issuing the Writ of Preliminary Mandatory Injunction. Ruling of the Court of Appeals The CA, however, found no grave abuse of discretion on the part of the RTC.49 The CA agreed with the RTC that respondent delivered the five titles to petitioner as security for petitioners advances to CMC.50 Hence, the dispositive portion of the Decision51 dated September 21, 2006 reads: WHEREFORE, the petition is DENIED, the two (2) assailed Orders of the Regional Trial Court, Branch 45, dated 11 April 2005 and 26 July 2005, are hereby AFFIRMED. SO ORDERED.52

Petitioner moved for reconsideration53 but the CA denied his motion in a Resolution54 dated March 6, 2007. Issues Hence, this petition raising the following issues: I. WHETHER XXX THE HONORABLE [CA] COMMITTED A GRAVE AND SERIOUS ERROR WHEN IT FOUND THE ISSUANCE OF THE WRIT OF PRELIMINARY MANDATORY INJUNCTION TO BE IN ORDER, AND, CONSEQUENTLY, DECLARING THAT OPM NO LONGER HAD ANY REASON TO HOLD ON TO THE FIVE (5) TITLES. II. WHETHER XXX THE HONORABLE [CA] COMMITTED A GRAVE AND SERIOUS ERROR WHEN IT DID NOT FIND JUSTIFIABLE GROUNDS TO WARRANT THE WRITS DISSOLUTION BY OPMS OFFER TO POST A COUNTER BOND UNDER SECTION 6, RULE 58 OF THE 1997 RULES OF COURT. III. WHETHER THE FINDINGS OF FACT OF THE [CA] COMMITTED WITH GRAVE ABUSE OF DISCRETION MAY BE REVIEWED BY THE SUPREME COURT ON APPEAL BY CERTIORARI.55 Summed up, the issues boil down to whether the RTC committed grave abuse of discretion amounting to lack or in excess of jurisdiction in issuing a writ of preliminary mandatory injunction commanding petitioner to return to respondent TCT Nos. 292199, 292200, 292201, 292202, and 292203, and in denying petitioners offer to post a counter bond. Petitioners Arguments Petitioner claims that respondent is not entitled to a writ of preliminary mandatory injunction because it failed to show that it has a clear legal right56 and that it would suffer grave and irreparable damage if a writ were not issued.57 Petitioner alleges that respondent delivered the titles to him as security for respondents entire obligation to OPM in the total amount of more than P81 million, inclusive of interest.58 He insists that respondent still owes OPM the amount of P30 million, inclusive of interest.59 Considering that respondents obligation to OPM is not yet fully paid, respondent is not entitled to a writ of preliminary mandatory injunction.60 Petitioner likewise claims that the P2 million bond posted by respondent is insufficient to protect the interest of OPM in the event that judgment is rendered in its favor.61 Lastly, petitioner imputes grave abuse of discretion on the part of the CA in not allowing OPM to post a counter bond.62 Respondents Arguments Respondent, on the other hand, maintains that the RTC validly issued the writ of preliminary mandatory

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injunction.63 Respondent insists that it has a legal right to recover the five titles since petitioner defaulted in his obligation, exposing respondent to damages and financial burden.64 It claims that it had to pay interest and penalty charges to CMC because of petitioners delay in paying the amortizations.65 Respondent also contends that it was able to show the possibility of an "irreparable injury."66 Since the titles are in the possession of Metrobank, there is a possibility that petitioner would use these titles to obtain a loan with Metrobank.67 As to the bond and counter bond, respondent emphasizes that the fixing of the amount of bond and the granting of a motion for filing a counter bond are discretionary upon the trial court.68 Our Ruling Section 3, Rule 58 of the Rules of Court reads: SEC. 3. Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it is established: (a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; (b) That the commission, continuance or nonperformance of the act or acts complained of during the litigation would probably work injustice to the applicant; or (c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual. A preliminary injunction may be issued at any time before judgment or final order.69 It may be a prohibitory injunction, which requires a party to refrain from doing a particular act, or a mandatory injunction, which commands a party to perform a positive act to correct a wrong in the past.70 A writ of preliminary mandatory injunction, however, is more cautiously regarded because it commands the performance of an act.71 Accordingly, it must be issued only upon a clear showing that the following requisites are established: (1) the applicant has a clear and unmistakable right that must be protected; (2) there is a material and substantial invasion of such right; and (3) there is an urgent need for the writ to prevent irreparable injury to the applicant.72 In this case, the RTC, in granting respondents Motion for the Issuance of a Writ of Preliminary Mandatory Injunction, explained that: From the verified complaint filed in this case as well as the [respondents] verified Motion for the Issuance of a Writ of Preliminary Mandatory Injunction, it is clear that the five (5) land titles registered in the name of Gregorio Araneta III were delivered by the [respondent] to the [petitioner] to secure the latters

advances to CMC for the financing of the twenty two (22) bus chassis which [respondent] purchased from CMC. However, [petitioner] defaulted in his obligations to CMC which compelled the [respondent] to directly pay CMC some of the obligations of the [petitioner]. Since the condition for the delivery of the land titles which is the payment by the [petitioner] of the obligations of the [respondent] to CMC has not been complied with by the [petitioner], there is no further justification for the [petitioner] to hold on to the possession of the land titles. In this connection, extant in the records of this case are the two (2) letters of the [petitioner] to the lawyers of the [respondent] wherein he expressly admitted his failure to comply with his obligations to CMC on behalf of the [respondent] x x x. These letters were not denied by the [petitioner]; in fact, it was admitted by him in his Answer x x x. It must be noted that the land titles are in the name of Gregorio Araneta III who is not a party to the transaction between the [respondent] and the [petitioner] and that there is no document between the parties concerning the terms and conditions behind the possession of the said titles by the [petitioner]. There is no Deed of Mortgage over the properties covered by the said titles. The only document on record is the acknowledgement receipt dated March 18, 1997 signed by the [petitioner] x x x but other than the acknowledgment of the receipt of the titles, there is nothing else to show the terms and conditions under which [petitioner] is to possess the same. At best, therefore, the [petitioner] is merely a depository of the said titles. He cannot foreclose, dispose of, assign or otherwise deal with the same. Thus, the damages that he may suffer if the land titles are returned to the [respondent] is practically inexistent compared to the damages which [respondent] and the owners of the land titles have suffered due to the continuous possession of the [petitioner] of the said titles, as they cannot exercise their proprietary rights to the properties covered by the titles.[73 (Emphasis supplied) The CA affirmed the Order74 since it found no grave abuse of discretion amounting to lack or in excess of jurisdiction on the part of the RTC. It said: x x x we find the issuance of the writ to be in order. FIRST, there is no denying that the titles to the subject five (5) properties belonged to and were in fact registered under the name of Mr. Gregorio Ma. Araneta III of AUTOBUS. NEXT, as stated in AUTOBUS complaint and admitted in OPMs answer, the purpose in handing over the five (5) titles to OPM was to secure the advances to be made by the latter to CMC. Hence, when OPM failed to meet its obligations with CMC, AUTOBUS rights over the twenty-two (22) buses were materially and substantially compromised by a threatened foreclosure of the chattel mortgage. Again, this cannot be denied for a chattel mortgage was executed by AUTOBUS over the buses in favor of CMC which shall be transferred to OPM once CMC is paid by OPM, although claimed by OPM as additional collateral. AUTOBUS in its Comment and Memorandum asserts that it has paid all its obligations to CMC which is not denied by OPM.

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Consequently, OPM no longer had any reason to hold on to the five (5) titles for its failure to pay CMC. THIRDLY, the urgency of the situation necessitating the issuance of the mandatory writ was sufficiently established by AUTOBUS before the trial court, thus: [Respondent] has expressed fear that the [petitioner] (OPM) has turned over the possession of the said titles to Metrobank in order to obtain a loan from the bank or to secure an existing loan from the said bank. [Petitioner] has admitted that Metrobank has possession of the titles, but according to him, it is only for safekeeping. Considering this admission, this Court gives credence to the [respondents] fear. We x x x agree with the trial court for it is very unlikely that the purpose for handing over the titles to the bank was merely for safekeeping when the bank itself conducted inspections and appraisals on the subject five (5) properties of Mr. Araneta. As regards OPMs offer to post a counter bond, the same on its own does not however warrant the [writs] dissolution.75 Based on the foregoing disquisition, we find that the RTC had sufficient bases to issue the writ of preliminary mandatory injunction as all the requisites for the issuance of such writ were established. We agree with the RTC that respondent has a right to recover the five titles because petitioner failed to comply with his obligation to respondent. It bears stressing that respondent was compelled to directly pay CMC to avoid the foreclosure of the chattel mortgages, which respondent executed in favor of CMC. Considering that respondent has paid most, if not all, of its obligations to CMC, there is no reason for petitioner to hold on to the titles. Petitioners allegation that respondent delivered the five titles to him as security, not only for the refinancing of the 22 bus chassis from CMC, but for the entire obligation deserves scant consideration. In respondents demand letter76 dated November 26, 1998, respondents counsel reminded petitioner that "the sole purpose of the mortgage on the properties was to secure the refinancing of [respondents] buses with CMC."77 Thus, respondents counsel demanded petitioner to settle his obligations with CMC or return the titles to respondent. In his letter-reply78 dated December 5, 1998, petitioner did not deny that respondent delivered the titles to him solely as security for the refinancing of the buses. Instead, he admitted his failure to settle his obligations with CMC and asked that he be given additional time to settle the same.79 In respondents demand letter80 dated January 28, 1999, respondents counsel again reminded petitioner to settle the obligations with CMC or return the titles, which serves "as security for [petitioners] refinancing of buses."81 Again, in his letter82 dated January 28, 1999, petitioner did not refute the statement of respondents counsel. Once more, he admitted his failure and asked for a final extension.83 The communication between the parties clearly proves that the respondent delivered the five titles to petitioner solely as security for the

refinancing of the buses purchased by respondent from CMC.1wphi1 In addition, we need not belabor that the issuance of a writ of preliminary injunction is discretionary upon the trial court because "the assessment and evaluation of evidence towards that end involve findings of facts left to the said court for its conclusive determination."84 For this reason, the grant or the denial of a writ of preliminary injunction shall not be disturbed unless it was issued with grave abuse of discretion amounting to lack or in excess of jurisdiction.85 Grave abuse of discretion is defined as "capricious and whimsical exercise of judgment that is equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or despotic manner by reason of passion, prejudice or personal aversion amounting to an evasion of positive duty or to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of law."86 No grave abuse of discretion exists in this case. The contentions of petitioner regarding the fixing of the bond and the denial of his offer to post a counter bond likewise have no merit. As we have said, all these depend on the sound discretion of the trial court, which shall not be disturbed in the absence of grave abuse of discretion on the part of the trial court. Finally, as to whether respondent still owes OPM the amount of P30 million, we believe that this is a factual issue best left to the determination of the RTC where the main case is pending. WHEREFORE, the petition is hereby DENIED. The assailed Decision dated September 21, 2006 and the Resolution dated March 6, 2007 of the Court of Appeals in CA-G.R. SP. No. 90926 are hereby AFFIRMED. SO ORDERED.

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