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

RIZAL COMMERCIAL BANKING CORPORATION,


petitioner, vs. METRO CONTAINER CORPORATION,
respondent.

Angara Abello Concepcion Regala & Cruz for petitioner.

Noel Mingoa for Ley Construction & Development Corp.

Mondragon & Montoya Law Offices for private respondent.

SYNOPSIS

For failure of Ley Construction Corporation (LEYCON) to settle its


loan obligations, Rizal Commercial Banking Corporation (RCBC) instituted
an extrajudicial foreclosure proceeding against it. In a bidding, RCBC was
adjudged the highest bidder. LEYCON promptly filed an action for
Nullification of Extrajudicial Foreclosure Sale and Damages against RCBC
docketed as Civil Case No. 4037-V-93. Meanwhile, RCBC consolidated its
ownership over the property due to LEYCON's failure to redeem the
mortgaged property within the 12-month redemption period. By virtue
thereof, RCBC demanded rental payments from Metro Container
Corporation (METROCAN) which was leasing the mortgaged property from
LEYCON. On the other hand, on 26 May 1994, LEYCON filed an action for
Unlawful Detainer against METROCAN before the Metropolitan Trial Court
(MeTC), Branch 82 of Valenzuela, Metro Manila, docketed as Civil Case No.
6202. Consequently, METROCAN filed a complaint for Interpleader against
LEYCON and RCBC docketed as Civil Case No. 4398-V-94 before the
Regional Trial Court, Branch 75 of Valenzuela to compel them to interplead
and litigate their several claims among themselves and to determine which
among them shall rightfully receive the payment of monthly rentals on the
subject property. During the pre-trial conference of the interpleader case, the
trial court ordered the dismissal of the case insofar as METROCAN and
LEYCON were concerned in view of an amicable settlement they entered
into. On 31 October 1995, judgment was rendered in the Unlawful Detainer
case, which, among other things, ordered METROCAN to pay LEYCON
whatever rentals due on the subject premises. The said decision became final
and executory. By reason thereof, METROCAN and LEYCON separately
filed a motion to dismiss in the interpleader case. However, the said two
motions were dismissed for lack of merit. Thereafter, METROCAN sought
relief from the Court of Appeals via a petition for certiorari and prohibition.
Thus, the Court of Appeals granted the petition and ordered the dismissal of
the interpleader case. Hence, RCBC filed the instant petition.
The Court sustained the Court of Appeals. An action of
interpleader is afforded to protect a person not against double liability but
against double vexation in respect of one liability. It requires, as an
indispensable requisite, that "conflicting claims upon the same subject
matter are or may be made against the plaintiff-in-interpleader who claims
no interest whatever in the subject matter or an interest which in whole or in
part is not disputed by the claimants. The decision in Civil Case No. 6202
resolved the conflicting claims insofar as payment of rentals was concerned.
Petitioner then was correct in saying that it is not bound by the decision in
Civil Case No. 5202. It is not a party thereto. However, it could not compel
METROCAN to pursue Civil Case No. 4398-V-94. RCBC has other avenues
to prove its claim. It is not bereft of other legal remedies. In fact, the issue of
ownership can very well be threshed out in Civil Case No. 4037-V-93, the
case for Nullification of Extrajudicial Foreclosure Sale and Damages filed by
LEYCON against RCBC.
SYLLABUS

1. REMEDIAL LAW; SPECIAL CIVIL ACTION; UNLAWFUL DETAINER;


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

2. ID.; ID.; INTERPLEADER; PURPOSE. It should be remembered that an


action of interpleader is afforded to protect a person not against double liability
but against double vexation in respect of one liability. It requires, as an
indispensable requisite, that "conflicting claims upon the same subject matter are
or may be made against the plaintiff-in-interpleader who claims no interest
whatever in the subject matter or an interest which in whole or in part is not
disputed by the claimants."

3. ID; ID.; INTERPLEADER FOR PAYMENT OF RENTALS; CEASED TO EXIST


WHEN THE DECISION OF THE LOWER COURT IN AN UNLAWFUL
DETAINER CASE INVOLVING THE SAME PROPERTY BECOMES FINAL
AND EXECUTORY. When the decision in Civil Case No. 6202 became final
and executory, METROCAN has no other alternative left but to pay the rentals to
LEYCON. Precisely because there was already a judicial fiat to METROCAN,
there was no more reason to continue with Civil Case No. 4398-V-94. Thus,
METROCAN moved for the dismissal of the interpleader action not because it is
no longer interested but because there is no more need for it to pursue such
cause of action.

4. ID.; ID.; ID.; ID.; CLAIM OF OWNERSHIP BY ONE OF THE DEFENDANTS


IS NOT AFFECTED. Petitioner is correct in saying that it is not bound by the
decision in Civil Case No. 6202. It is not a party thereto. However, it could not
compel METROCAN to pursue Civil Case No. 4398-V-94. RCBC has other
avenues to prove its claim. It is not bereft of other legal remedies. In fact, the
issue of ownership can very well be threshed out in Civil Case No. 4037-V-93, the
case for Nullification of Extrajudicial Foreclosure Sale and Damages filed by
LEYCON against RCBC.

DECISION

KAPUNAN, J p:

Assailed in this petition for review on certiorari are the Decision, promulgated on
18 October 1996 and the Resolution, promulgated on 08 January 1997, of the
Court of Appeals in CA-G.R. SP No. 41294.

The facts of the case are as follows:

On 26 September 1990, Ley Construction Corporation (LEYCON) contracted a


loan from Rizal Commercial Banking Corporation (RCBC) in the amount of
Thirty Million Pesos (P30,000,000.00). The loan was secured by a real estate
mortgage over a property, located in Barrio Ugong, Valenzuela, Metro Manila
(now Valenzuela City) and covered by TCT No. V-17223. LEYCON failed to
settle its obligations prompting RCBC to institute an extrajudicial foreclosure
proceedings against it. After LEYCON's legal attempts to forestall the action of
RBCB failed, the foreclosure took place on 28 December 1992 with RCBC as the
highest bidder.

LEYCON promptly filed an action for Nullification of Extrajudicial Foreclosure


Sale and Damages against RCBC. The case, docketed as Civil Case No. 4037-V-
93, was raffled to the Regional Trial Court (RTC) of Valenzuela, Branch 172.
Meanwhile, RCBC consolidated its ownership over the property due to
LEYCON's failure to redeem it within the 12-month redemption period and TCT
No. V-332432 was issued if favor of the bank. By virtue thereof, RCBC demanded
rental payments from Metro Container Corporation (METROCAN) which was
leasing the property from LEYCON.

On 26 May 1994, LEYCON filed an action for Unlawful Detainer, docketed as


Civil Case No. 6202, against METROCAN before the Metropolitan Trial Court
(MeTC) of Valenzuela, Branch 82. CcTHaD

On 27 May 1994, METROCAN filed a complaint for Interpleader, docketed as


Civil Case No. 4398-V-94 before the Regional Trial Court of Valenzuela, Metro
Manila, Branch 75 against LEYCON and RCBC to compel them to interplead and
litigate their several claims among themselves and to determine which among
them shall rightfully receive the payment of monthly rentals on the subject
property. On 04 July 1995, during the pre-trial conference in Civil Case No. 4398-
V-94, the trial court ordered the dismissal of the case insofar as METROCAN and
LEYCON were concerned in view of an amicable settlement they entered by
virtue of which METROCAN paid back rentals to LEYCON.

On 31 October 1995, judgment was rendered in Civil Case No. 6202, which
among other things, ordered METROCAN to pay LEYCON whatever rentals due
on the subject premises. The MeTC decision became final and executory.

On 01 February 1996, METROCAN moved for the dismissal of Civil Case No.
4398-V-94 for having become moot and academic due to the amicable settlement
it entered with LEYCON on 04 July 1995 and the decision in Civil Case No. 6202
on 31 October 1995. LEYCON, likewise, moved for the dismissal of the case
citing the same grounds cited by METROCAN.

On 12 March 1996, the two motions were dismissed for lack of merit. The
motions for reconsideration filed by METROCAN and LEYCON were also
denied prompting METROCAN to seek relief from the Court of Appeals via a
petition for certiorari and prohibition with prayer for the issuance of a temporary
restraining order and a writ of preliminary injunction. LEYCON, as private
respondent, also sought for the nullification of the RTC orders.

In its Decision, promulgated on 18 October 1996, the Court of Appeals granted


the petition and set aside the 12 March 1996 and 24 June 1996 orders of the RTC.
The appellate court also ordered the dismissal of Civil Case No. 4398-V-94.
RCBC's motion for reconsideration was denied for lack of merit in the resolution
of 08 January 1997.
Hence, the present recourse.

RCBC alleged, that:

(1) THE DECISION OF THE METROPOLITAN TRIAL


COURT IN THE EJECTMENT CASE BETWEEN
METROCAN AND LEYCON DOES NOT AND
CANNOT RENDER THE INTERPLEADER
ACTION MOOT AND ACADEMIC.

(2) WHILE A PARTY WHO INITIATES AN


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

We sustain the Court of Appeals.

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

SECTION 1. Interpleader when proper. Whenever


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

In the case before us, it is undisputed that METROCAN filed the interpleader
action (Civil Case No. 4398-V-94) because it was unsure which between
LEYCON and RCBC was entitled to receive the payment of monthly rentals on
the subject property. LEYCON was claiming payment of the rentals as lessor of
the property while RCBC was making a demand by virtue of the consolidation of
the title of the property in its name.

It is also undisputed that LEYCON, as lessor of the subject property filed an


action for unlawful detainer (Civil Case No. 6202) against its lessee METROCAN.
The issue in Civil Case No. 6202 is limited to the question of physical or material
possession of the premises. 3 The issue of ownership is immaterial therein 4 and
the outcome of the case could not in any way affect conflicting claims of
ownership, in this case between RCBC and LEYCON. This was made clear when
the trial court, in denying RCBC's "Motion for Inclusion . . . as an Indispensable
Party" declared that "the final determination of the issue of physical possession
over the subject premises between the plaintiff and the defendant shall not in any
way affect RCBC's claims of ownership over the said premises, since RCBC is
neither a co-lessor or co-lessee of the same, hence he has no legal personality to
join the parties herein with respect to the issue of physical possession vis-a-vis the
contract of lease between the parties." 5 As aptly pointed by the MeTC, the issue
in Civil Case No. 6202 is limited to the defendant LEYCON's breach of the
provisions of the Contract of Lease Rentals. 6

Hence, the reason for the interpleader action ceased when the MeTC rendered
judgment in Civil Case No. 6202 whereby the court directed METROCAN to pay
LEYCON "whatever rentals due on the subject premises . . . ." While RCBC, not
being a party to Civil Case No. 6202, could not be bound by the judgment
therein, METROCAN is bound by the MeTC decision. When the decision in Civil
Case No. 6202 became final and executory, METROCAN has no other alternative
left but to pay the rentals to LEYCON. Precisely because there was already a
judicial fiat to METROCAN, there was no more reason to continue with Civil
Case No. 4398-V-94. Thus, METROCAN moved for the dismissal of the
interpleader action not because it is no longer interested but because there is no
more need for it to pursue such cause of action.

It should be remembered that an action of interpleader is afforded to protect a


person not against double liability but against double vexation in respect of one
liability. 7 It requires, as an indispensable requisite, that "conflicting claims upon
the same subject matter are or may be made against the plaintiff-in-interpleader
who claims no interest whatever in the subject matter or an interest which in
whole or in part is not disputed by the claimants." 8 The decision in Civil Case
No. 6202 resolved the conflicting claims insofar as payment of rentals was
concerned.

Petitioner is correct in saying that it is not bound by the decision in Civil Case
No. 6202. It is not a party thereto. However, it could not compel METROCAN to
pursue Civil Case No. 4398-V-94. RCBC has other avenues to prove its claim. Is
not bereft of other legal remedies. In fact, the issue of ownership can very well be
threshed out in Civil Case No. 4037-V-93, the case for Nullification of
Extrajudicial Foreclosure Sale and Damages filed by LEYCON against RCBC.
DcCEHI

WHEREFORE, the petition for review is DENIED and the Decision of the Court
of Appeals, promulgated on 18 October 1996, as well as its Resolution
promulgated on 08 January 1997, are AFFIRMED.

||| (Rizal Commercial Banking Corp. v. Metro Container Corp., G.R. No. 127913,
September 13, 2001)

SECOND DIVISION

[G.R. No. 120060. March 9, 2000.]

CEBU WOMAN'S CLUB, petitioner, vs. HON. LORETO D.


DE LA VICTORIA, in his capacity as Presiding Judge of
RTC, Br. 6, Cebu City, CAMSAC INTERNATIONAL, INC.
& PHANUEL SEORON, respondents.

Fernan Mercado & Cordero for petitioner.

Juan B. Astete, Jr. for CAMSAC International, Inc.

Rufino L. Remoreras, Jr., for Phanuel Seoron.

SYNOPSIS

Petitioner entered into a construction contract with private respondent CAMSAC


for the construction of a school building. The contract provided for a 10%
retention fee. The construction was, however, sub-contracted by respondent
Seoron. Upon its completion, Seoron filed a complaint for a sum of money
against petitioner and CAMSAC seeking to prevent petitioner from releasing the
10% retention fee to CAMSAC. Thereafter, petitioner received several demands
from several suppliers-creditors and from CAMSAC. A complaint for
interpleader was filed by petitioner with the same trial court where the two cases
between Seoron and petitioner, CAMSAC and its officer involving the same
issue is pending. The trial court dismissed the interpleader case and held that
petitioner's proper move would be to file an answer in order that all claims,
including that of the intervenors, may be tried and decided in one proceedings so
as to prevent multiplicity of suits. Petitioner moved for reconsideration, but it
was denied. It then filed this petition directly with this Court claiming that the
trial court acted with grave abuse of discretion when it motu proprio dismissed its
action for interpleader. CIaASH

A party may directly appeal to the Supreme Court from a decision of the trial
court only on pure questions of law. The resolution of the issue raised in the
interpleader case necessitated the factual determination and did not fall within
the ambit of direct appeal to the highest tribunal; that the special civil action of
certiorari is not available in instances of error of judgment which may be assailed
by appeal. It is not a substitute for appeal; and that the hierarchy of courts should
be observed in filing petitions for certiorari. The original jurisdiction of the Court
of Appeals over special civil actions of certiorari is concurrent with the Supreme
Court and the Regional Trial Court.

SYLLABUS

1. REMEDIAL LAW; ACTIONS; APPEAL BY CERTIORARI; DIRECT APPEAL


TO SUPREME COURT ALLOWED ONLY ON PURE QUESTIONS OF LAW.
Petitioner's direct resort to this Court is erroneous. Under the Rules of Court, a
party may directly appeal to the Supreme Court from a decision of the trial court
only on pure questions of law. The case at bench does not involve pure questions
of law as to entitle petitioner to seek immediate redress from this court. A
question of law arises when the doubt or difference arises as to what the law is
on a certain set of facts as distinguished from a question of fact which occurs
when the doubt or difference arises as to the truth or falsehood of the alleged
facts.

2. ID.; ID.; ID.; ID.; FACTUAL ISSUES RAISED IN CASE AT BAR NOT SUBJECT
THERETO. A scrutiny of the issues raised in this case shows that it includes
factual matters. The resolution of the interpleader case necessitates a
determination of whether the other pending cases relied upon by the trial court
in dismissing the former case involves the same matters covered by the latter
cases. There is a need to determine whether the pending civil cases arise out of
the same facts and circumstances as those involved in the interpleader case. As
such, petitioner's direct resort to this court must fail considering that this court is
not a trier of facts. Besides, in a petition for review on certiorari, the trial judge
should not even be made a party to the case as petitioner erroneously did.

3. ID.; SPECIAL CIVIL ACTION; CERTIORARI; CANNOT BE AVAILED OF TO


CORRECT ERRORS OF JUDGMENT. There is no question that grave abuse of
discretion or errors of jurisdiction may be corrected only by the special civil
action of certiorari. Such special remedy does not avail in instances of error of
judgment which can be corrected by appeal or by a petition for review. Since
petitioner availed of the remedy under Rule 45, recourse to Rule 65 cannot be
allowed either as an add-on or as a substitute for appeal.

4. ID.; ID.; ID.; ID.; FAILURE TO OBSERVE PROCEDURE FOR


INTERPLEADER, AN ERROR OF JUDGMENT. Petitioner's claim that the
trial court failed to observe the procedure for an interpleader action does not
constitute grave abuse of discretion for the extraordinary writ to issue. It is only
an error of judgment correctible by an ordinary appeal. The extraordinary writ
does not issue to correct errors of procedure or mistake in the findings and
conclusions of the judge.

5. ID.; ID.; ID.; PARTY SHOULD OBSERVE HIERARCHY OF COURTS IN


FILING PETITION AND SHOULD NOT SEEK IMMEDIATE RECOURSE TO
THIS COURT. On the assumption that this is a proper subject of a certiorari
case, petitioner should have observed the hierarchy of courts and not seek an
immediate recourse to the highest tribunal. The original jurisdiction of the Court
of Appeals over special civil actions for certiorari is concurrent with the Supreme
Court and the Regional Trial Court.

DECISION

BUENA, J p:

Petitioner seeks to set aside the Orders of the Regional Trial Court (RTC), dated
March 9, 1995 and April 11, 1995, in Civil Case No. CEB-17126, which dismissed
its complaint for interpleader and damages against private respondent CAMSAC
International Inc. (hereinafter referred to as "CAMSAC"), Arc Asia Philippines,
Inc., Triple A Marketing Development Corporation, Trinidad Patigayon, Signal
Trading Corporation and Malayan Insurance Co., Inc., due to the pendency of
two other cases. cdphil

The present controversy started with the construction of the Cebu School of
Midwifery Building owned by petitioner. In a bidding held on January 7, 1994,
the construction of the building was awarded by petitioner to respondent
CAMSAC represented by its President/General Manager, Architect Catalino M.
Salazar. The corresponding construction contract was executed between the
parties on January 26, 1994 with a stipulation on retention fee of ten (10%)
percent to be deducted by petitioner from all progress payments to the
contractor, herein respondent CAMSAC, which shall be released thirty (30)
calendar days after inspection and acceptance by petitioner of the project and the
submission of a sworn statement by respondent CAMSAC that all obligations,
including but not limited to salaries, materials used and taxes due in connection
with the construction have been duly paid. cdrep

On February 4, 1994, respondent CAMSAC entered into a "Sub-Contract


Agreement" with respondent Seoron to undertake the construction of the
subject building. After one year, respondent Seoron filed a complaint for "sum
of money with application for a writ of preliminary injunction" against petitioner
and respondent CAMSAC anchored on the "Sub-Contract Agreement" he
entered with the latter. Respondent Seoron sought to prevent petitioner from
paying or releasing any amount to respondent CAMSAC relative to the
construction of the subject building in the event that petitioner heeds CAMSAC's
request for the release of the retention fee.

In the meantime, petitioner allegedly received demand-letters from the


suppliers-creditors as well as from respondent CAMSAC for the release of the
10% retention fee, hence, on February 22, 1995, it filed before the trial court a
complaint for interpleader and damages against respondent CAMSAC, Arc Asia
Philippines, Inc., Triple A Marketing Development Corporation, Trinidad
Patigayon, Signal Trading Corporation and Malayan Insurance Co., Inc., in order
for them to interplead with one another to determine their respective rights and
claims on the retention fee.

On February 23, 1995, respondent CAMSAC filed an action for sum of money
and damages against petitioner 1 for failure of the latter to release the 10%
retention fee. On March 9, 1995, the trial court issued the first assailed Order
dismissing the complaint for interpleader to prevent multiplicity of suits, as there
are pending cases before the respondent court filed by respondent Seoron for
sum of money against petitioner and respondent CAMSAC which also involved
the ten (10%) retention fee. The trial court held:

"As herein before-stated, there is already a pending case by


Seoron against the herein plaintiff, Camsac International
Inc., and Catalino M. Salazar, as president of the Camsac and
in his personal capacity. Consequently, to give due course to
this present action would indeed result in a multiplicity of
suits. Plaintiff's proper move here would be to file an
answer, which it has not yet done up to this point in time
although it managed to file this complaint posthaste
assert a counterclaim and/or a cross claim, etc. in Civil Case
No. CEB-17079. The other defendants herein may intervene
therein if they so desire to protect their respective interest in
the same way that one of them, Arc Asia Phil. Inc., had
already filed its motion for intervention, dated March 6,
1995, in order that all their claims, may be tried and decided
in one proceeding. LLphil

WHEREFORE, the complaint for interpleader is hereby


denied due course, and the same should be, as it is hereby
ordered dismissed.

SO ORDERED." 2

Petitioner filed a motion for reconsideration which was denied in the second
assailed Order dated April 11, 1995. Hence, petitioner's immediate resort to this
Court by a petition for review on certiorari raising the following issues: 3

1. Respondent court acted with grave abuse of discretion, as


it had no jurisdiction, to exercise "due course"
authority and to motu proprio dismiss petitioner's
action for interpleader.

2. Respondent court erred when it correlated the "allegation


of fact" between the petitioner's complaint in Civil
Case No. CEB-17126 with that of the complaint in
Civil Case No. CEB-17079, and to thereafter issue
baseless and unwarranted conclusions patently
adverse to petitioner.

3. Although no hearing has as yet been conducted and in


what may amount to be a judgment on the
pleadings, respondent court's 9 March 1995 Order
is replete with "conclusions of fact and law" which,
if allowed to remain unchallenged, may amount to
a prejudgment of certain issues of fact and law that
are yet to be substantiated. LibLex

Petitioner's direct resort to this Court is erroneous. Under the Rules of Court, a
party may directly appeal to the Supreme Court from a decision of the trial court
only on pure questions of law. 4 The case at bench does not involve pure
questions of law as to entitle petitioner to seek immediate redress from this court.
A question of law arises when the doubt or difference arises as to what the law is
on a certain set of facts as distinguished from a question of fact which occurs
when the doubt or difference arises as to the truth or falsehood of the alleged
facts. 5

A scrutiny of the issues raised in this case shows that it includes factual matters.
The resolution of the interpleader case necessitates a determination of whether
the other pending cases relied upon by the trial court in dismissing the former
case involves the same matters covered by the latter cases. There is a need to
determine whether the pending civil cases arise out of the same facts and
circumstances as those involved in the interpleader case. As such, petitioner's
direct resort to this court must fail considering that this court is not a trier of
facts. 6 Besides, in a petition for review on certiorari, the trial judge should not
even be made a party to the case as petitioner erroneously did. 7

Petitioner's imputation of grave abuse of discretion to respondent court as


alleged in its petition is a vain attempt to justify its erroneous mode of
challenging the trial court's decision. There is no question that grave abuse of
discretion or errors of jurisdiction may be corrected only by the special civil
action of certiorari. 8 Such special remedy does not avail in instances of error of
judgment which can be corrected by appeal or by a petition for review. 9 Since
petitioner availed of the remedy under Rule 45, recourse to Rule 65 cannot be
allowed either as an add-on or as a substitute for appeal. 10

Verily, the alleged grave abuse of discretion and lack of jurisdiction raised in the
petition is misplaced. First, there is no question that the trial court has
jurisdiction over the interpleader case. Second, petitioner's claim that the trial
court failed to observe the procedure for an interpleader action does not
constitute grave abuse of discretion for the extraordinary writ to issue. It is only
an error of judgment correctible by an ordinary appeal. The extraordinary writ
does not issue to correct errors of procedure or mistake in the findings and
conclusions of the judge. 11 Finally, on the assumption that this is a proper
subject of a certiorari case, petitioner should have observed the hierarchy of
courts and not seek an immediate recourse to the highest tribunal. The original
jurisdiction of the Court of Appeals over special civil actions for certiorari is
concurrent with the Supreme Court and the Regional Trial Court. 12

ACCORDINGLY, the petition is denied for lack of merit.

||| (Cebu Woman's Club v. De La Victoria, G.R. No. 120060, March 09, 2000)

THIRD DIVISION

[G.R. No. 193494. March 12, 2014.]

LUI ENTERPRISES, INC., petitioner, vs. ZUELLIG


PHARMA CORPORATION and the PHILIPPINE BANK
OF COMMUNICATIONS, respondents.

DECISION

LEONEN, J p:

There should be no inexplicable delay in the filing of a motion to set aside order
of default. Even when a motion is filed within the required period, excusable
negligence must be properly alleged and proven.

This is a petition for review on certiorari of the Court of Appeals' decision 1 dated
May 24, 2010 and resolution 2 dated August 13, 2010 in CA-G.R. CV No. 88023.
The Court of Appeals affirmed in toto the Regional Trial Court of Makati's
decision 3 dated July 4, 2006.

The facts as established from the pleadings of the parties are as follows:

On March 9, 1995, Lui Enterprises, Inc. and Zuellig Pharma Corporation entered
into a 10-year contract of lease 4 over a parcel of land located in Barrio Tigatto,
Buhangin, Davao City. The parcel of land was covered by Transfer Certificate of
Title No. T-166476 and was registered under Eli L. Lui. 5

On January 10, 2003, Zuellig Pharma received a letter 6 from the Philippine Bank
of Communications. Claiming to be the new owner of the leased property, the
bank asked Zuellig Pharma to pay rent directly to it. Attached to the letter was a
copy of Transfer Certificate of Title No. 336962 under the name of the Philippine
Bank of Communications. 7 Transfer Certificate of Title No. 336962 was derived
from Transfer Certificate of Title No. T-166476. 8

Zuellig Pharma promptly informed Lui Enterprises of the Philippine Bank of


Communications' claim. On January 28, 2003, Lui Enterprises wrote to Zuellig
Pharma and insisted on its right to collect the leased property's rent. 9

Due to the conflicting claims of Lui Enterprises and the Philippine Bank of
Communications over the rental payments, Zuellig Pharma filed a complaint 10
for interpleader with the Regional Trial Court of Makati. In its complaint, Zuellig
Pharma alleged that it already consigned in court P604,024.35 as rental
payments. Zuellig Pharma prayed that it be allowed to consign in court its
succeeding monthly rental payments and that Lui Enterprises and the Philippine
Bank of Communications be ordered to litigate their conflicting claims. 11

The Philippine Bank of Communications filed its answer 12 to the complaint. On


the other hand, Lui Enterprises filed a motion to dismiss 13 on the ground that
Zuellig Pharma's alleged representative did not have authority to file the
complaint for interpleader on behalf of the corporation. Under the secretary's
certificate 14 dated May 6, 2003 attached to the complaint, Atty. Ana L.A. Peralta
was only authorized to "initiate and represent [Zuellig Pharma] in the civil
proceedings for consignation of rental payments to be filed against Lui
Enterprises, Inc. and/or [the Philippine Bank of Communications]." 15

According to Lui Enterprises, an earlier filed nullification of deed of dation in


payment case pending with the Regional Trial Court of Davao barred the filing
of the interpleader case. 16 Lui Enterprises filed this nullification case against the
Philippine Bank of Communications with respect to several properties it
dationed to the bank in payment of its obligations. The property leased by
Zuellig Pharma was among those allegedly dationed to the Philippine Bank of
Communications. 17 EHASaD

In the nullification of deed of dation in payment case, Lui Enterprises raised the
issue of which corporation had the better right over the rental payments. 18 Lui
Enterprises argued that the same issue was involved in the interpleader case. To
avoid possible conflicting decisions of the Davao trial court and the Makati trial
court on the same issue, Lui Enterprises argued that the subsequently filed
interpleader case be dismissed.

To support its argument, Lui Enterprises cited a writ of preliminary injunction 19


dated July 2, 2003 issued by the Regional Trial Court of Davao, ordering Lui
Enterprises and the Philippine Bank of Communications "[to maintain] status
quo" 20 with respect to the rent. By virtue of the writ of preliminary injunction,
Lui Enterprises argued that it should continue collecting the rental payments
from its lessees until the nullification of deed of dation in payment case was
resolved. The writ of preliminary injunction dated July 2, 2003 reads:

WHEREAS, on June 30, 2003, the Court issued an Order, a


portion of which is quoted:

WHEREFORE, PREMISES CONSIDERED, let a


Writ of Preliminary Injunction issue, restraining
and enjoining [the Philippine Bank of
Communications], its agents or [representative], the
Office of the Clerk of Court-Sheriff and all persons
acting on their behalf, from conducting auction sale
on the properties of [Lui Enterprises] in EJF-REM
Case No. 6272-03 scheduled on July 3, 2003 at 10:00
a.m. at the Hall of Justice, Ecoland, Davao City,
until the final termination of the case, upon plaintiff
[sic] filing of a bond in the amount of P1,000,000.00
to answer for damages that the enjoined parties
may sustain by reason of the injunction if the Court
should finally decide that applicant is not entitled
thereto.

WHEREAS, that plaintiff posted a bond of P1,000,000.00


duly approved by this Court.

IT IS HEREBY ORDERED by the undersigned Judge that,


until further orders, [the Philippine Bank of
Communications] and all [its] attorneys, representatives,
agents and any other persons assisting [the bank], are
directed to restrain from conducting auction sale on the
Properties of [Lui Enterprises] in EJF-REM Case No. 6272-03
scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice,
Ecoland, Davao City, until the final termination of the case.
21

Zuellig Pharma filed its opposition 22 to the motion to dismiss. It argued that the
motion to dismiss should be denied for having been filed late. Under Rule 16,
Section 1 of the 1997 Rules of Civil Procedure, a motion to dismiss should be filed
within the required time given to file an answer to the complaint, which is 15
days from service of summons on the defendant. 23 Summons was served on Lui
Enterprises on July 4, 2003. It had until July 19, 2003 to file a motion to dismiss,
but Lui Enterprises filed the motion only on July 23, 2003. 24

As to Lui Enterprises' claim that the interpleader case was filed without
authority, Zuellig Pharma argued that an action interpleader "is a necessary
consequence of the action for consignation." 25 Zuellig Pharma consigned its
rental payments because of "the clearly conflicting claims of [Lui Enterprises]
and [the Philippine Bank of Communications]." 26 Since Atty. Ana L.A. Peralta
was authorized to file a consignation case, this authority necessarily included an
authority to file the interpleader case.

Nevertheless, Zuellig Pharma filed in court the secretary's certificate dated


August 28, 2003, 27 which expressly stated that Atty. Ana L.A. Peralta was
authorized to file a consignation and interpleader case on behalf of Zuellig
Pharma. 28

With respect to the nullification of deed of dation in payment case, Zuellig


Pharma argued that its pendency did not bar the filing of the interpleader case. It
was not a party to the nullification case. 29

As to the writ of preliminary injunction issued by the Regional Trial Court of


Davao, Zuellig Pharma argued that the writ only pertained to properties owned
by Lui Enterprises. Under the writ of preliminary injunction, the Regional Trial
Court of Davao enjoined the July 3, 2003 auction sale of Lui Enterprises'
properties, the proceeds of which were supposed to satisfy its obligations to the
Philippine Bank of Communications. As early as April 21, 2001, however, the
Philippine Bank of Communications already owned the leased property as
evidenced by Transfer Certificate of Title No. 336962. Thus, the writ of
preliminary injunction did not apply to the leased property. 30

Considering that Lui Enterprises filed its motion to dismiss beyond the 15-day
period to file an answer, Zuellig Pharma moved that Lui Enterprises be declared
in default. 31

In its compliance 32 dated September 15, 2003, the Philippine Bank


of Communications "[joined Zuellig Pharma] in moving to declare [Lui
Enterprises] in default, and in [moving for] the denial of [Lui Enterprises']
motion to dismiss." 33
The Regional Trial Court of Makati found that Lui Enterprises failed to file its
motion to dismiss within the reglementary period. Thus, in its order 34 dated
October 6, 2003, the trial court denied Lui Enterprises' motion to dismiss and
declared it in default. 35

Lui Enterprises did not move for the reconsideration of the order dated October
6, 2003. Thus, the Makati trial court heard the interpleader case without Lui
Enterprises' participation. DTESIA

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

ORDER

Posed for Resolution is the Motion for Amendment of Order


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

xxx xxx xxx

As elsewhere stated, [the Philippine Bank of


Communications] did not oppose the instant motion up to
the present. In fact, during the hearing held on March 15,
2004, [the bank's] counsel manifested in open court that
except for the rentals due from [Zuellig Pharma] which are
the subject of a consignation suit before a Makati Court, the
other rental payments are continuously received by [Lui
Enterprises].

There being no objection from [the Philippine Bank of


Communications], and in order to protect the right of [Lui
Enterprises] respecting the subject of the action during the
pendency of this case, this Court, in the exercise of its
discretion hereby grants the motion.

Accordingly, consistent with the order of this Court dated


June 30, 2003, the parties are hereby directed to further
observe status quo with regard to the rental payments owing
or due from the lessees of the properties subject of the first
set of deeds of dacion and that the defendants are enjoined
from disposing of the properties located at Green Heights
Village, Davao City until the case is finally resolved.

With the order dated April 1, 2004 issued by the Regional Trial Court of Davao as
basis, Lui Enterprises argued that Zuellig Pharma must remit its rental payments
to it and prayed that the interpleader case be dismissed.

The Regional Trial Court of Makati only noted the manifestation with prayer
dated April 15, 2004. 39

It was only on October 21, 2004, or one year after the issuance of the order of
default, that Lui Enterprises filed a motion to set aside order of default 40 in the
Makati trial court on the ground of excusable negligence. Lui Enterprises argued
that its failure to file a motion to dismiss on time "was caused by the negligence
of [Lui Enterprises'] former counsel." 41 This negligence was allegedly excusable
because "[Lui Enterprises] was prejudiced and prevented from fairly presenting
[its] case." 42 TSAHIa

For its allegedly meritorious defense, Lui Enterprises argued that the earlier filed
nullification of deed of dation in payment case barred the filing of the
interpleader case. The two actions allegedly involved the same parties and the
same issue of which corporation had the better right over the rental payments.
To prevent "the possibility of two courts . . . rendering conflicting rulings [on the
same issue]," 43 Lui Enterprises argued that the subsequently filed interpleader
case be dismissed.

Zuellig Pharma filed its opposition 44 to the motion to set aside order of default.
It argued that a counsel's failure to file a timely answer was inexcusable
negligence which bound his client.

Further, Zuellig Pharma argued that the pending case for nullification of deed of
dation in payment "[did] not preclude [Zuellig Pharma] from seeking the relief
prayed for in the [interpleader case]." 45

While the motion to set aside order of default was still pending for resolution,
Lui Enterprises filed the manifestation and motion to dismiss 46 dated April 21,
2005 in the Makati trial court. It manifested that the Davao trial court issued
another order 47 dated April 18, 2005 in the nullification of deed of dation in
payment case. In this order, the Davao trial court directed the Philippine Bank of
Communications to inform Zuellig Pharma to pay rent to Lui Enterprises while
the Davao trial court's order dated April 1, 2004 was subsisting. The order dated
April 1, 2005 of the Davao trial court reads:

ORDER

Plaintiffs move for execution or implementation of the Order


dated September 14, 2004. In substance, [Lui Enterprises]
seek[s] to compel the remittance in their favor of the rentals
from [Zuellig Pharma], one of the lessees alluded to in the
September 14, 2004 Order whose rental payments "must be
remitted to and collected by [Lui Enterprises]." [The
Philippine Bank of Communications] did not submit any
opposition.

It appears from the records that sometime in February 2003,


after being threatened with a lawsuit coming from [the
Philippine Bank of Communications], [Zuellig Pharma]
stopped remitting its rentals to [Lui Enterprises] and instead,
has reportedly deposited the monthly rentals before a
Makati court for consignation. SEHDIC

As aptly raised by the plaintiffs, a possible impasse may


insist should the Makati Court's ruling be contrary to or in
conflict with the status quo order issued by this Court. To
preclude this spectacle, Zuellig Pharma should accordingly
be advised with the import of the Order dated September 14,
2004, the salient portion of which is quoted:

. . . prior to the institution of the instant case and by


agreement of the parties, plaintiffs were given as
they did exercise the right to collect, receive and
enjoy rental payments . . . .

Since the April 1, 2004 status quo order was a


necessary implement of the writ of preliminary
injunction issued on June 30, 2003, it follows that
plaintiff's right to collect and receive rental
payments which he enjoyed prior to the filing of
this case, must be respected and protected and
maintained until the case is resolved. As such, all
rentals due from the above-enumerated lessees
must be remitted to and collected by the Plaintiffs.

Status quo simply means the last actual peaceable


uncontested status that preceded the actual
controversy. (Searth Commodities Corp. v. Court of
Appeals, 207 SCRA 622).

As such, the [Philippine Bank of Communications] [is]


hereby directed to forthwith inform [Zuellig Pharma] of the
April 1, 2004 status quo order and the succeeding September
14, 2004 Order, and consequently, for the said lessee to remit
all rentals due from February 23, 2003 and onwards to [Lui
Enterprises] in the meanwhile that the status quo order is
subsisting.

In its manifestation and motion to dismiss, Lui Enterprises reiterated its prayer
for the dismissal of the interpleader case to prevent "the possibility of [the
Regional Trial Court, Branch 143, Makati City] and [the Regional Trial Court,
Branch 16, Davao City] rendering conflicting rulings [on the same issue of which
corporation has the better right to the rental payments]." 48

Without resolving the motion to set aside order of default, the Makati trial court
denied the manifestation with motion to dismiss dated April 21, 2005 on the
ground that Lui Enterprises already lost its standing in court. 49

Lui Enterprises did not file any motion for reconsideration of the denial of the
manifestation and motion to dismiss dated April 21, 2005.

In its decision 50 dated July 4, 2006, the Regional Trial Court of Makati ruled that
Lui Enterprises "[was] barred from any claim in respect of the [rental payments]"
51 since it was declared in default. Thus, according to the trial court, there was
no issue as to which corporation had the better right over the rental payments. 52
The trial court awarded the total consigned amount of P6,681,327.30 to the
Philippine Bank of Communications and ordered Lui Enterprises to pay Zuellig
Pharma P50,000.00 in attorney's fees. 53

Lui Enterprises appealed to the Court of Appeals. 54

The Court of Appeals found Lui Enterprises' appellant's brief insufficient. Under
Rule 44, Section 13 of the 1997 Rules of Civil Procedure, an appellant's brief must
contain a subject index, page references to the record, table of cases, textbooks
and statutes cited, and the statement of issues, among others. However, Lui
Enterprises' appellant's brief did not contain these requirements. 55

As to the denial of Lui Enterprises' motion to dismiss, the Court of Appeals


sustained the trial court. The Court of Appeals found that Lui Enterprises filed
its motion to dismiss four days late. 56

With respect to Lui Enterprises' motion to set aside order of default, the Court of
Appeals found that Lui Enterprises failed to show the excusable negligence that
prevented it from filing its motion to dismiss on time. On its allegedly
meritorious defense, the Court of Appeals ruled that the nullification of deed of
dation in payment case did not bar the filing of the interpleader case, with
Zuellig Pharma not being a party to the nullification case. 57

On the award of attorney's fees, the Court of Appeals sustained the trial court
since "Zuellig Pharma . . . was constrained to file the action for interpleader with
consignation in order to protect its interests . . . ." 58

Thus, in its decision 59 promulgated on May 24, 2010, the Court of Appeals
dismissed Lui Enterprises' appeal and affirmed in toto the Regional Trial Court of
Makati's decision.

Lui Enterprises filed a motion for reconsideration. 60

The Court of Appeals denied Lui Enterprises' motion for reconsideration in its
resolution promulgated on August 13, 2010. 61 Hence, this petition.

In this petition for review on certiorari, 62 Lui Enterprises argued that the Court
of Appeals applied "the rules of procedure strictly" 63 and dismissed its appeal
on technicalities. According to Lui Enterprises, the Court of Appeals should have
taken a liberal stance and allowed its appeal despite the lack of subject index,
page references to the record, table of cases, textbooks and statutes cited, and the
statement of issues in its appellant's brief. 64 IDcAHT

Lui Enterprises also claimed that the trial court should have set aside the order of
default since its failure to file a motion to dismiss on time was due to excusable
negligence. 65

For its allegedly meritorious defense, Lui Enterprises argued that the pending
nullification of deed of dation in payment case barred the filing of the
interpleader case. The nullification of deed of dation in payment case and the
interpleader case allegedly involved the same issue of which corporation had the
better right to the rent. To avoid conflicting rulings on the same issue, Lui
Enterprises argued that the subsequently filed interpleader case be dismissed. 66

No attorney's fees should have been awarded to Zuellig Pharma as argued by


Lui Enterprises. Zuellig Pharma filed the interpleader case despite its knowledge
of the nullification of deed of dation in payment case filed in the Davao trial
court where the same issue of which corporation had the better right over the
rental payments was being litigated. Thus, Zuellig Pharma filed the interpleader
case in bad faith for which it was not entitled to attorney's fees. 67

The Philippine Bank of Communications filed its comment 68 on the petition for
review on certiorari. It argued that Lui Enterprises failed to raise any error of law
and prayed that we affirm in toto the Court of Appeals' decision.
For Zuellig Pharma, it manifested that it was adopting the Philippine Bank of
Communications' arguments in its comment. 69

The issues for our resolution are:

I.Whether the Court of Appeals erred in dismissing Lui


Enterprises' appeal for lack of subject index, page
references to the record, table of cases, textbooks
and statutes cited, and the statement of issues in
Lui Enterprises' appellant's brief;

II.Whether the Regional Trial Court of Makati erred in


denying Lui Enterprises' motion to set aside order
of default;

III.Whether the annulment of deed of dation in payment


pending in the Regional Trial Court of Davao
barred the subsequent filing of the interpleader case
in the Regional Trial Court of Makati; and

IV.Whether Zuellig Pharma was entitled to attorney's fees.

Lui Enterprises' petition for review on certiorari is without merit. However, we


delete the award of attorney's fees.

I
Lui Enterprises did not comply with the rules on the contents of the
appellant's brief
Under Rule 50, Section 1, paragraph (f) of the 1997 Rules of Civil Procedure, the
Court of Appeals may, on its own motion or that of the appellee, dismiss an
appeal should the appellant's brief lack specific requirements under Rule 44,
Section 13, paragraphs (a), (c), (d), and (f):

Section 1.Grounds for dismissal of appeal. An appeal may be


dismissed by the Court of Appeals, on its own motion or on
that of the appellee, on the following grounds:

xxx xxx xxx

(f)Absence of specific assignment of errors in the appellant's


brief, or of page references to the record as required in
Section 13, paragraphs (a), (c), (d), and (f) of Rule 44.

These requirements are the subject index of the matter in brief, page references to
the record, and a table of cases alphabetically arranged and with textbooks and
statutes cited:
Section 13.Contents of the appellant's brief. The appellant's
brief shall contain, in the order herein indicated, the
following:

(a)A subject index of the matter in brief with a digest of the


arguments and page references, and a table of cases
alphabetically arranged, textbooks and statutes cited with
references to the pages where they are cited;

xxx xxx xxx

(c)Under the heading "Statement of the Case," a clear and


concise statement of the nature of the action, a summary of
the proceedings, the appealed rulings and orders of the
court, the nature of the controversy, with page references to
the record;

(d)Under the heading "Statement of Facts,'' a clear and


concise statement in a narrative form of the facts admitted
by both parties and of those in controversy, together with
the substance of the proof relating thereto in sufficient detail
to make it clearly intelligible, with page references to the
record; AIDTSE

xxx xxx xxx

(f)Under the heading "Argument," the appellant's arguments


on each assignment of error with page references to the
record. The authorities relied upon shall be cited by the page
of the report at which the case begins and the page of the
report on which the citation is found;

xxx xxx xxx

Lui Enterprises' appellant's brief lacked a subject index, page references to the
record, and table of cases, textbooks and statutes cited. Under Rule 50, Section 1
of the 1997 Rules of Civil Procedure, the Court of Appeals correctly dismissed
Lui Enterprises' appeal.

Except for cases provided in the Constitution, 70 appeal is a "purely statutory


right." 71 The right to appeal "must be exercised in the manner prescribed by
law" 72 and requires strict compliance with the Rules of Court on appeals. 73
Otherwise, the appeal shall be dismissed, and its dismissal shall not be a
deprivation of due process of law.

In Mendoza v. United Coconut Planters Bank, Inc., 74 this court sustained the Court
of Appeals' dismissal of Mendoza's appeal. Mendoza's appellant's brief lacked a
subject index, assignment of errors, and page references to the record. In De Liano
v. Court of Appeals, 75 this court also sustained the dismissal of De Liano's appeal.
De Liano's appellant's brief lacked a subject index, a table of cases and
authorities, and page references to the record.

There are exceptions to this rule. In Philippine Coconut Authority v. Corona


International, Inc., 76 the Philippine Coconut Authority's appellant's brief lacked a
clear and concise statement of the nature of the action, a summary of the
proceedings, the nature of the judgment, and page references to the record.
However, this court found that the Philippine Coconut Authority substantially
complied with the Rules. Its appellant's brief "apprise[d] [the Court of Appeals]
of the essential facts and nature of the case as well as the issues raised and the
laws necessary [to dispose of the case]." 77 This court "[deviated] from a rigid
enforcement of the rules" 78 and ordered the Court of Appeals to resolve the
Philippine Coconut Authority's appeal.

In Go v. Chaves, 79 Go's 17-page appellant's brief lacked a subject index.


However, Go subsequently filed a subject index. This court excused Go's
procedural lapse since the appellant's brief "[consisted] only of 17 pages which
[the Court of Appeals] may easily peruse to apprise it of [the case] and of the
relief sought." 80 This court ordered the Court of Appeals to resolve Go's appeal
"in the interest of justice." 81

In Philippine Coconut Authority and Go, the appellants substantially complied with
the rules on the contents of the appellant's brief. Thus, this court excused the
appellants' procedural lapses.

In this case, Lui Enterprises did not substantially comply with the rules on the
contents of the appellant's brief. It admitted that its appellant's brief lacked the
required subject index, page references to the record, and table of cases,
textbooks, and statutes cited. However, it did not even correct its admitted
"technical omissions" 82 by filing an amended appellant's brief with the required
contents. 83 Thus, this case does not allow a relaxation of the rules. The Court of
Appeals did not err in dismissing Lui Enterprises' appeal.

Rules on appeal "are designed for the proper and prompt disposition of cases
before the Court of Appeals." 84 With respect to the appellant's brief, its required
contents are designed "to minimize the [Court of Appeals'] labor in [examining]
the record upon which the appeal is heard and determined." 85

The subject index serves as the brief's table of contents. 86 Instead of "[thumbing]
through the [appellant's brief]" 87 every time the Court of Appeals Justice
encounters an argument or citation, the Justice deciding the case only has to refer
to the subject index for the argument or citation he or she needs. 88 This saves
the Court of Appeals time in reviewing the appealed case. Efficiency allows the
justices of the appellate court to substantially attend to this case as well as other
cases.

Page references to the record guarantee that the facts stated in the appellant's
brief are supported by the record. 89 A statement of fact without a page reference
to the record creates the presumption that it is unsupported by the record and,
thus, "may be stricken or disregarded altogether." 90

As for the table of cases, textbooks, and statutes cited, this is required so that the
Court of Appeals can easily verify the authorities cited "for accuracy and
aptness." 91

Lui Enterprises' appellant's brief lacked a subject index, page references to the
record, and a table of cases, textbooks, and statutes cited. These requirements
"were designed to assist the appellate court in the accomplishment of its tasks,
and, overall, to enhance the orderly administration of justice." 92 This court will
not disregard rules on appeal "in the guise of liberal construction." 93 For this
court to liberally construe the Rules, the party must substantially comply with
the Rules and correct its procedural lapses. 94 Lui Enterprises failed to remedy
these errors. cSIACD

All told, the Court of Appeals did not err in dismissing Lui Enterprises' appeal. It
failed to comply with Rule 44, Section 13, paragraphs (a), (c), (d), and (f) of the
1997 Rules of Civil Procedure on the required contents of the appellant's brief.

II
Lui Enterprises failed to show that its failure to answer the complaint
within the required period was due to excusable negligence
When a defendant is served with summons and a copy of the complaint, he or
she is required to answer within 15 days from the day he or she was served with
summons. 95 The defendant may also move to dismiss the complaint "[w]ithin
the time for but before filing the answer." 96

Fifteen days is sufficient time for a defendant to answer with good defenses
against the plaintiff's allegations in the complaint. Thus, a defendant who fails to
answer within 15 days from service of summons either presents no defenses
against the plaintiff's allegations in the complaint or was prevented from filing
his or her answer within the required period due to fraud, accident, mistake or
excusable negligence. 97

In either case, the court may declare the defendant in default on plaintiff's
motion and notice to defendant. 98 The court shall then try the case until
judgment without defendant's participation 99 and grant the plaintiff such relief
as his or her complaint may warrant. 100

A defendant declared in default loses his or her standing in court. 101 He or she
is "deprived of the right to take part in the trial and forfeits his [or her] rights as a
party litigant," 102 has no right "to present evidence [supporting his or her]
allegations," 103 and has no right to "control the proceedings [or] cross-examine
witnesses." 104 Moreover, he or she "has no right to expect that [the court] would
[act] upon [his or her pleadings]" 105 or that he or she "may [oppose] motions
filed against him [or her]." 106

However, the defendant declared in default "does not [waive] all of [his or her]
rights." 107 He or she still has the right to "receive notice of subsequent
proceedings." 108 Also, the plaintiff must still present evidence supporting his or
her allegations "despite the default of [the defendant]." 109

Default, therefore, is not meant to punish the defendant but to enforce the
prompt filing of the answer to the complaint. For a defendant without good
defenses, default saves him or her "the embarrassment of openly appearing to
defend the indefensible." 110 As this court explained in Gochangco v. The Court of
First Instance of Negros Occidental, Branch IV: 111

It does make sense for a defendant without defenses, and


who accepts the correctness of the specific relief prayed for
in the complaint, to forego the filing of the answer or any
sort of intervention in the action at all. For even if he did
intervene, the result would be the same: since he would be
unable to establish any good defense, having none in fact,
judgment would inevitably go against him. And this
would be an acceptable result, if not being in his power to
alter or prevent it, provided that the judgment did not go
beyond or differ from the specific relief stated in the
complaint. . . . . 112 (Emphasis in the original)

On the other hand, for a defendant with good defenses, "it would be unnatural
for him [or her] not to set . . . up [his or her defenses] properly and timely." 113
Thus, "it must be presumed that some insuperable cause prevented him [or her]
from [answering the complaint]." 114 In which case, his or her proper remedy
depends on when he or she discovered the default and whether the default
judgment was already rendered by the trial court.

After notice of the declaration of default but before the court renders the default
judgment, the defendant may file, under oath, a motion to set aside order of
default. The defendant must properly show that his or her failure to answer was
due to fraud, accident, 115 mistake 116 or excusable negligence. 117 The
defendant must also have a meritorious defense. Rule 9, Section 3, paragraph (b)
of the 1997 Rules of Civil Procedure provides:

Section 3.Default; declaration of. . . .

(b)Relief from order of default. A party declared in default


may at any time after notice thereof and before judgment file
a motion under oath to set aside the order of default upon
proper showing that his failure to answer was due to fraud,
accident, mistake or excusable negligence and that he has a
meritorious defense. In such case, the order of default may
be set aside on such terms and conditions as the judge may
impose in the interest of justice.

If the defendant discovers his or her default after judgment but prior to the
judgment becoming final and executory, he or she may file a motion for new trial
under Rule 37, Section 1, paragraph (a) of the 1997 Rules of Civil Procedure. 118
If he or she discovers his or her default after the judgment has become final and
executory, a petition for relief from judgment under Rule 38, Section 1 of the 1997
Rules of Civil Procedure may be filed. 119

Appeal is also available to the defendant declared in default. He or she may


appeal the judgment for being contrary to the evidence or to the law under Rule
41, Section 2 of the 1997 Rules of Civil Procedure. 120 He or she may do so even
if he or she did not file a petition to set aside order of default. 121

A petition for certiorari may also be filed if the trial court declared the defendant
in default with grave abuse of discretion. 122

The remedies of the motion to set aside order of default, motion for new trial,
and petition for relief from judgment are mutually exclusive, not alternative or
cumulative. This is to compel defendants to remedy their default at the earliest
possible opportunity. Depending on when the default was discovered and
whether a default judgment was already rendered, a defendant declared in
default may avail of only one of the three remedies.

Thus, if a defendant discovers his or her default before the trial court renders
judgment, he or she shall file a motion to set aside order of default. If this motion
to set aside order of default is denied, the defendant declared in default cannot
await the rendition of judgment, and he or she cannot file a motion for new trial
before the judgment becomes final and executory, or a petition for relief from
judgment after the judgment becomes final and executory.

Also, the remedies against default become narrower and narrower as the trial
nears judgment. The defendant enjoys the most liberality from this court with a
motion to set aside order of default, as he or she has no default judgment to
contend with, and he or she has the whole period before judgment to remedy his
or her default. TcDIaA

With a motion for new trial, the defendant must file the motion within the period
for taking an appeal 123 or within 15 days from notice of the default judgment.
Although a default judgment has already been rendered, the filing of the motion
for new trial tolls the reglementary period of appeal, and the default judgment
cannot be executed against the defendant.

A petition for relief from judgment is filed after the default judgment has become
final and executory. Thus, the filing of the petition for relief from judgment does
not stay the execution of the default judgment unless a writ of preliminary
injunction is issued pending the petition's resolution. 124

Upon the grant of a motion to set aside order of default, motion for new trial, or a
petition for relief from judgment, the defendant is given the chance to present his
or her evidence against that of plaintiff's. With an appeal, however, the
defendant has no right to present evidence on his or her behalf and can only
appeal the judgment for being contrary to plaintiff's evidence or the law.

Similar to an appeal, a petition for certiorari does not allow the defendant to
present evidence on his or her behalf. The defendant can only argue that the trial
court committed grave abuse of discretion in declaring him or her in default.

Thus, should a defendant prefer to present evidence on his or her behalf, he or


she must file either a motion to set aside order of default, motion for new trial, or
a petition for relief from judgment.

In this case, Lui Enterprises had discovered its default before the Regional Trial
Court of Makati rendered judgment. Thus, it timely filed a motion to set aside
order of default, raising the ground of excusable negligence.

Excusable negligence is "one which ordinary diligence and prudence could not
have guarded against." 125 The circumstances should be properly alleged and
proved. In this case, we find that Lui Enterprises' failure to answer within the
required period is inexcusable.

Lui Enterprises' counsel filed its motion to dismiss four days late. It did not
immediately take steps to remedy its default and took one year from discovery of
default to file a motion to set aside order of default. In its motion to set aside
order of default, Lui Enterprises only "conveniently blamed its . . . counsel [for
the late filing of the answer]" 126 without offering any excuse for the late filing.
This is not excusable negligence under Rule 9, Section 3, paragraph (b) 127 of the
1997 Rules of Civil Procedure. Thus, the Regional Trial Court of Makati did not
err in refusing to set aside the order of default.

Lui Enterprises argued that the Regional Trial Court of Makati should have been
liberal in setting aside its order of default. After it had been declared in default,
Lui Enterprises filed several manifestations informing the Makati trial court of
the earlier filed nullification of deed of dation in payment case which barred the
filing of the interpleader case. Lui Enterprises' president, Eli L. Lui, and counsel
even flew in from Davao to Makati to "formally [manifest that] a [similar] action
between [Lui Enterprises] and [the Philippine Bank of Communications]" 128
was already pending in the Regional Trial Court of Davao. However, the trial
court did not recognize Lui Enterprises' standing in court.

The general rule is that courts should proceed with deciding cases on the merits
and set aside orders of default as default judgments are "frowned upon." 129 As
much as possible, cases should be decided with both parties "given every chance
to fight their case fairly and in the open, without resort to technicality." 130

However, the basic requirements of Rule 9, Section 3, paragraph (b) of the 1997
Rules of Civil Procedure must first be complied with. 131 The defendant's motion
to set aside order of default must satisfy three conditions. First is the time
element. The defendant must challenge the default order before judgment.
Second, the defendant must have been prevented from filing his answer due to
fraud, accident, mistake or excusable negligence. Third, he must have a
meritorious defense. As this court held in SSS v. Hon. Chaves: 132

Procedural rules are not to be disregarded or dismissed


simply because their non-observance may have resulted in
prejudice to a party's substantive rights. Like all rules[,] they
are to be followed, except only when for the most persuasive
of reasons they may be relaxed to relieve a litigant of an
injustice not commensurate with the degree of his
thoughtlessness in not complying with the procedure
prescribed. . . . . 133

As discussed, Lui Enterprises never explained why its counsel failed to file the
motion to dismiss on time. It just argued that courts should be liberal in setting
aside orders of default. Even assuming that it had a meritorious defense and that
its representative and counsel had to fly in from Davao to Makati to personally
appear and manifest in court its meritorious defense, Lui Enterprises must first
show that its failure to answer was due to fraud, accident, mistake or excusable
negligence. This Lui Enterprises did not do.

Lui Enterprises argued that Zuellig Pharma filed the interpleader case to compel
Lui Enterprises and the Philippine Bank of Communications to litigate their
claims. Thus, "[d]eclaring the other claimant in default would ironically defeat
the very purpose of the suit." 134 The Regional Trial Court of Makati should not
have declared Lui Enterprises in default.
Under Rule 62, Section 1 of the 1997 Rules of Civil Procedure, a person may file a
special civil action for interpleader if conflicting claims are made against him or
her over a subject matter in which he or she has no interest. The action is brought
against the claimants to compel them to litigate their conflicting claims among
themselves. Rule 62, Section 1 of the 1997 Rules of Civil Procedure provides:

Section 1.When interpleader proper. Whenever conflicting


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

An interpleader complaint may be filed by a lessee against those who have


conflicting claims over the rent due for the property leased. 135 This remedy is
for the lessee to protect him or her from "double vexation in respect of one
liability." 136 He or she may file the interpleader case to extinguish his or her
obligation to pay rent, remove him or her from the adverse claimants' dispute,
and compel the parties with conflicting claims to litigate among themselves.
cDSAEI

In this case, Zuellig Pharma filed the interpleader case to extinguish its obligation
to pay rent. Its purpose in filing the interpleader case "was not defeated" 137
when the Makati trial court declared Lui Enterprises in default.

At any rate, an adverse claimant in an interpleader case may be declared in


default. Under Rule 62, Section 5 of the 1997 Rules of Civil Procedure, a claimant
who fails to answer within the required period may, on motion, be declared in
default. The consequence of the default is that the court may "render judgment
barring [the defaulted claimant] from any claim in respect to the subject matter."
138 The Rules would not have allowed claimants in interpleader cases to be
declared in default if it would "ironically defeat the very purpose of the suit." 139

The Regional Trial Court of Makati declared Lui Enterprises in default when it
failed to answer the complaint within the required period. Lui Enterprises filed a
motion to set aside order of default without an acceptable excuse why its counsel
failed to answer the complaint. It failed to prove the excusable negligence. Thus,
the Makati trial court did not err in refusing to set aside the order of default.

III
The nullification of deed in dation in payment case did not bar the filing of
the interpleader case. Litis pendentia is not present in this case.
Lui Enterprises allegedly filed for nullification of deed of dation in payment with
the Regional Trial Court of Davao. It sought to nullify the deed of dation in
payment through which the Philippine Bank of Communications acquired title
over the leased property. Lui Enterprises argued that this pending nullification
case barred the Regional Trial Court of Makati from hearing the interpleader
case. Since the interpleader case was filed subsequently to the nullification case,
the interpleader case should be dismissed.

Under Rule 16, Section 1, paragraph (e) of the 1997 Rules of Civil Procedure, a
motion to dismiss may be filed on the ground of litis pendentia:

Section 1.Grounds. Within the time for but before filing the
answer to the complaint or pleading asserting a claim, a
motion to dismiss may be made on any of the following
grounds:

xxx xxx xxx

(e)That there is another action pending between the


same parties for the same cause;

xxx xxx xxx

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

The requisites of litis pendentia are:

(1)Identity of parties or at least such as represent the same


interest in both actions;

(2)Identity of rights asserted and reliefs prayed for, the


reliefs being founded on the same facts; and

(3)The identity in the two cases should be such that the


judgment that may be rendered in one would,
regardless of which party is successful, amount to
res judicata in the other. 144

All of the requisites must be present. 145 Absent one requisite, there is no litis
pendentia. 146

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

Thus, the pending nullification case did not bar the filing of the interpleader case.

Lui Enterprises cited Progressive Development Corporation, Inc. v. Court of Appeals


147 as authority to set aside the subsequently filed interpleader case. In this cited
case, petitioner Progressive Development Corporation, Inc. entered into a lease
contract with Westin Seafood Market, Inc. The latter failed to pay rent. Thus,
Progressive Development Corporation, Inc. repossessed the leased premises,
inventoried the movable properties inside the leased premises, and scheduled
the public sale of the inventoried properties as they agreed upon in their lease
contract.

Westin Seafood Market, Inc. filed for forcible entry with damages against
Progressive Development Corporation, Inc. It subsequently filed an action for
damages against Progressive Development Corporation for its "forcible takeover
of the leased premises." 148

This court ordered the subsequently filed action for damages dismissed as the
pending forcible entry with damages case barred the subsequently filed damages
case.

Progressive Development Corporation, Inc. does not apply in this case. The action for
forcible entry with damages and the subsequent action for damages were filed by
the same plaintiff against the same defendant. There is identity of parties in both
cases.

In this case, the nullification of deed of dation in payment case was filed by Lui
Enterprises against the Philippine Bank of Communications. The interpleader
case was filed by Zuellig Pharma against Lui Enterprises and the Philippine Bank
of Communications. A different plaintiff filed the interpleader case against Lui
Enterprises and the Philippine Bank of Communications. Thus, there is no
identity of parties, and the first requisite of litis pendentia is absent.

As discussed, Lui Enterprises filed the nullification of deed of dation in payment


to recover ownership of the leased premises. Zuellig Pharma filed the
interpleader case to extinguish its obligation to pay rent. There is no identity of
reliefs prayed for, and the second requisite of litis pendentia is absent.

Since two requisites of litis pendentia are absent, the nullification of deed of dation
in payment case did not bar the filing of the interpleader case.
Lui Enterprises alleged that the Regional Trial Court of Davao issued a writ of
preliminary injunction against the Regional Trial Court of Makati. The Regional
Trial Court of Davao allegedly enjoined the Regional Trial Court of Makati from
taking cognizance of the interpleader case. Lui Enterprises argued that the
Regional Trial Court of Makati "should have respected the orders issued by the
Regional Trial Court of Davao." 149 Lui Enterprises cited Compania General de
Tabacos de Filipinas v. Court of Appeals 150 where this court allegedly held:

. . . [T]he issuance of the said writ by the RTC of Agoo, La


Union not only seeks to enjoin Branch 9 of the RTC of
Manila from proceeding with the foreclosure case but also
has the effect of pre-empting the latter's orders. . . . . 151

Compania General de Tabacos de Filipinas is not an authority for the claim that a
court can issue a writ of preliminary injunction against a co-equal court. The
cited sentence was taken out of context. In Compania General de Tabacos de
Filipinas, this court held that the Regional Trial Court of Agoo had no power to
issue a writ of preliminary injunction against the Regional Trial Court of Manila.
152 A court cannot enjoin the proceedings of a co-equal court.

Thus, when this court said that the Regional Trial Court of Agoo's writ of
preliminary injunction "not only seeks to enjoin . . . [the Regional Trial Court of
Manila] from proceeding with the foreclosure case but also has the effect of pre-
empting the latter's orders," 153 this court followed with "[t]his we cannot
countenance." 154

At any rate, the Regional Trial Court of Davao's order dated April 18, 2005 was
not a writ of preliminary injunction. It was a mere order directing the Philippine
Bank of Communications to inform Zuellig Pharma to pay rent to Lui Enterprises
while the status quo order between Lui Enterprises and the Philippine Bank of
Communications was subsisting. The Regional Trial Court of Davao did not
enjoin the proceedings before the Regional Trial Court of Makati. The order
dated April 18, 2005 provides:

As such, [the Philippine Bank of Communications] [is]


hereby directed to forthwith inform Zuellig Pharma Corp.,
of the April 1, 2004 status quo order and the succeeding
September 14, 2004 Order, and consequently, for the said
lessee to remit all rentals due from February 23, 2003 and
onwards to plaintiff Lui Enterprises, Inc., in the meanwhile
that the status quo order is subsisting. 155

Thus, the Regional Trial Court of Davao did not enjoin the Regional Trial Court
of Makati from hearing the interpleader case.
All told, the trial court did not err in proceeding with the interpleader case. The
nullification of deed of dation in payment case pending with the Regional Trial
Court of Davao did not bar the filing of the interpleader case with the Regional
Trial Court of Makati.

The Court of Appeals erred in awarding attorney's fees


In its ordinary sense, attorney's fees "represent the reasonable compensation [a
client pays his or her lawyer] [for legal service rendered]." 156 In its
extraordinary sense, attorney's fees "[are] awarded . . . as indemnity for damages
[the losing party pays the prevailing party]." 157

The award of attorney's fees is the exception rather than the rule. 158 It is not
awarded to the prevailing party "as a matter of course." 159 Under Article 2208 of
the Civil Code, attorney's fees cannot be recovered in the absence of stipulation,
except under specific circumstances:

(1)When exemplary damages are awarded;

(2)When the defendant's act or omission has compelled the


plaintiff to litigate with third persons or to incur
expenses to protect his interest; TIADCc

(3)In criminal cases of malicious prosecution against the


plaintiff;

(4)In case of a clearly unfounded civil action or proceeding


against the plaintiff;

(5)Where the defendant acted in gross and evident bad faith


in refusing to satisfy the plaintiff's plainly valid,
just and demandable claim;

(6)In actions for legal support;

(7)In actions for the recovery of wages of household helpers,


laborers and skilled workers;

(8)In actions for indemnity under workmen's compensation


and employer's liability laws;

(9)In a separate civil action to recover civil liability arising


from a crime;

(10)When at least double judicial costs are awarded;

(11)In any other case where the court deems it just and
equitable that attorney's fees and expenses of
litigation should be recovered. 160

Even if a party is "compelled to litigate with third persons or to incur expenses to


protect his [or her] rights," 161 attorney's fees will not be awarded if no bad faith
"could be reflected in a party's persistence in a case." 162

To award attorney's fees, the court must have "factual, legal, [and] equitable
justification." 163 The court must state the award's basis in its decision. 164 These
rules are based on the policy that "no premium should be placed on the right to
litigate." 165

In this case, the Court of Appeals awarded attorney's fees as "[Zuellig Pharma]
was compelled to litigate with third persons or to incur expenses to protect [its]
interest[s]." 166 This is not a compelling reason to award attorney's fees. That
Zuellig Pharma had to file an interpleader case to consign its rental payments did
not mean that Lui Enterprises was in bad faith in insisting that rental payments
be paid to it. Thus, the Court of Appeals erred in awarding attorney's fees to
Zuellig Pharma.

All told, the Court of Appeals' award of P50,000.00 as attorney's fees must be
deleted.

WHEREFORE, in view of the foregoing, the petition for review on certiorari is


DENIED. The Court of Appeals' decision and resolution in CA-G.R. CV No.
88023 are AFFIRMED with MODIFICATION. The award of P50,000.00
attorney's fees to Zuellig Pharma Corporation is DELETED.

SO ORDERED.

Velasco, Jr., Peralta, Abad and Mendoza, JJ., concur.

||| (Lui Enterprises, Inc. v. Zuellig Pharma Corp., G.R. No. 193494, March 12, 2014)

THIRD DIVISION

[G.R. No. 128568. April 9, 2003.]

SPOUSES REYNALDO ALCARAZ and ESMERALDA


ALCARAZ, petitioners, vs. PEDRO M. TANGGA-AN,
MENAS R. TANGGA-AN, VIRGINIA III YVETTE R.
TANGGA-AN, CECIL T. VILLAFLOR, HERMES R.
TANGGA-AN, VENUS R. TANGGA-AN, JUPITER R.
TANGGA-AN, YVONNE T. FRI, VIVIEN R. TANGGA-
AN and HON. JUDGE P. BURGOS and THE COURT OF
APPEALS, respondents.
Rolando P. Quimbo for petitioners.

Alfonso Dela Cerna for respondents.

SYNOPSIS

Respondents filed a complaint for unlawful detainer against petitioner spouses.


They alleged that the late Virginia Tangga-an (spouse of Pedro and mother of the
other respondents) leased a residential building to the petitioner spouses. The
land where the building was erected was still owned by the National Housing
Authority (NHA) at the time. After two years, the spouses failed to pay the rent.
Despite repeated demands to pay the rent and to vacate the premises, the
petitioner spouses refused. According to the spouses, however, the ownership of
the lot on which the house stood resulted in the cancellation of the contract of
lease between respondents and petitioner spouses. The transfer of title was
issued in the name of Virgilio (son of respondent Pedro and brothers of the other
respondents). Thereafter, they paid their rent to the new owner of the lot since
the respondents had no longer the right to collect the rentals. The Municipal Trial
Court ruled in favor of the respondents since the petitioner spouses failed to
prove that the subject lot belongs only to Virgilio. On appeal, the Regional Trial
Court affirmed the decision of the MTC. The Court of Appeals affirmed both
decisions of the MTC and the RTC. Hence, this petition for review.

According to the Court, the issue in the case at bar is whether the petitioner
spouses, as lessees, were excused from paying the rent because of the change in
the ownership of the land on which the rented house was built. The main
question, therefore is still the lawful possession of the subject premises by the
petitioner spouses. The petitioner spouses invoked the principle of accessory
follows the principal to which the petitioner spouses were deemed estopped.
Both parties knew that their contract pertained only to the lease of the house,
without including the land. After recognizing the validity of the contract for two
years, the petitioner spouses are deemed barred from alleging the automatic
cancellation of the contract on the ground that the respondents lost ownership of
the house after Virgilio acquired title over the lot. Extrajudicial recession of
contract is not possible without an express stipulation to that effect. Hence, for
violating the terms of the lease contract, that was, payment of the rent,
respondents can legally demand the ejectment of the petitioner spouses. The
Supreme Court affirmed the decision of the Court of Appeals.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; APPEALS; PETITION FOR REVIEW;


ONLY QUESTIONS OF LAW SHOULD BE RAISED BEFORE THE SUPREME
COURT. Pursuant to Section 1, Rule 45 of the 1997 Revised Rules of Civil
Procedure, a petition for review before this Court should only raise questions of
law. In the absence of showing that the case falls under one of the exceptions,
factual findings of the Court of Appeals are conclusive on the parties and not
reviewable by this Court. And they carry even more weight when the Court of
Appeals affirms the factual findings of the trial court. As such, this Court is not
duty-bound to analyze and weigh all over again the evidence already considered
in the proceedings below.

2. CIVIL LAW; CONTRACTS; EXTRAJUDICIAL RECISSION; EXPRESS


STIPULATION TO THAT EFFECT, REQUIRED. Due to the change in
ownership of the land, the petitioner spouses decided to unilaterally cancel the
contract because Virgilio supposedly became the new owner of the house after
acquiring title to the lot. They alleged that there was no reason anymore to
perform their obligations as lessees because the lessor had ceased to be the owner
of the house. But there is nothing in their lease contract that allows the parties to
extrajudicially rescind the same in case of violation of the terms thereof.
Extrajudicial rescission of a contract is not possible without an express
stipulation to that effect. What the petitioner spouses should have done was to
file a special civil action for interpleader for the claimants to litigate their claims
and to deposit the rentals in court. TADIHE

DECISION

CORONA, J p:

Before us is a petition for review of the decision 1 dated January 10, 1997 of the
Court of Appeals 2 affirming the decision 3 dated June 26, 1995 of the Regional
Trial Court (RTC) of Cebu City, Branch 17, which in turn upheld the decision 4
dated January 5, 1995 of the Municipal Trial Court (MTC) of Cebu City, Branch 2,
ordering the ejectment of the petitioner spouses from the house they were
renting from respondents. CIHTac

On October 4, 1994, respondents Pedro Tangga-an, Menas Tangga-an, Virginia III


Yvette Tangga-an, Cecil Villaflor, Hermes Tangga-an, Venus Tangga-an, Jupiter
Tangga-an, Yvonne Fri and Vivien Tangga-an filed a complaint for unlawful
detainer, with damages, docketed as Civil Case No. R-33928, against petitioner
spouses Reynaldo Alcaraz and Esmeralda Alcaraz.

The complaint alleged that the late Virginia Tangga-an (the spouse of respondent
Pedro Tangaa-an and mother of the rest of the respondents) leased a residential
building (house) located at Premier Street, Hipodromo, Cebu City to the
petitioner spouses. The lease contract was limited to the use and occupancy of
the said residential building and did not include the lot on which it was
constructed because the said lot was then owned by the National Housing
Authority (NHA). Under the contract, the petitioner spouses bound themselves
for five years to pay Virginia a monthly rental of P4,000 beginning November 22,
1991. However, since November 1993, they failed to pay rent. Thus, as of
October, 1994, they were in arrears in the amount of P48,000. Despite repeated
demands by respondents to pay the rentals in arrears and to surrender the
possession of the residential building, the petitioner spouses refused to vacate
the same. Respondents sought to repossess the property for their own use and
benefit.

On the other hand, the petitioner spouses alleged that, on July 23, 1993, the
ownership of the lot on which the house stood was transferred by the NHA to
Virgilio and Angelita D. Tangga-an. Virgilio Tangga-an is the son of the late
Virgilia Tangga-an and respondent Pedro Tangga-an, and the brother of the
other respondents. Transfer Certificate of Title No. 125657 was consequently
issued in the name of Virgilio Tangga-an. According to the petitioner spouses,
the subsequent change in ownership of the lot and the house resulted in the
cancellation of the contract of lease between respondents and petitioner spouses.
Thereafter, they paid the rent to the new owners of the lot (Virgilio and Angelita)
and not to respondents since the latter supposedly no longer had the legal right
to collect rentals.

On January 5, 1995, the MTC rendered a decision, the dispositive portion of


which read:

WHEREFORE, Judgment is entered by way of


preponderance of evidence in favor of plaintiffs and against
the defendants, Ordering the latter to vacate the premises
immediately, including all those who are occupying the
subject house in relation to them; They are also jointly
ordered to pay the sum of P48,000 representing rental
payment in arrears from November, 1993 up to October,
1994 and to update monthly payment of P4,000 thereafter
until their vacation therefrom; They are saddled to pay
attorney's fees in the sum of P5,000 and litigation costs in the
amount of P1,000.

SO ORDERED. 5

In ruling in favor of the respondents, the MTC held that the petitioner spouses
clearly violated the contract of lease due to non-payment of rent. They failed to
show that the subject house belonged to Virgilio alone. On the other hand, the
respondents proved that, after the death of Virginia, they registered said house
in the name of their trustees, co-respondents Hermes Tangga-an and his wife.
Furthermore, considering that Virgilio's claim of ownership over the lot was the
subject of a pending litigation for annulment of deed of sale and reconveyance of
property involving the Tangga-ans, the MTC ruled that it "cannot usurp to pass
judgment on the issues, as well as the conflicting claims of the parties therein." 6

On appeal, the RTC affirmed the decision of the MTC, and held that:

. . . [D]efendants failed to present any documentary evidence


modifying or amending the contract of lease (Annex "C",
complaint) to justify the transfer of payment of the monthly
rental to Virgilio Tanga-an who claims only as the registered
owner of the lot on which the leased house is located. It
appears that Virgilio Tanga-an does not possess any proof of
ownership of the rented house. Clearly, defendants had
violated the lease agreement executed between them and the
deceased lessor Virginia R. Tangga-an (sic) the predecessor
in interest of Hermes Tangga-an and his wife as shown in
the Tax Declaration of the said spouses (Annex "A",
complaint) whose name appears under the space for
previous owner by stopping payment of rental to the present
owner despite the existence of the contract of lease which
expires on November 22, 1996. The law on contracts
basically states:

"Obligations arising from contracts have the force


of law between the contracting parties and should
be complied with in good faith." (Article 1159, New
Civil Code of the Philippines).

xxx xxx xxx 7

In denying the petition for review and affirming the judgments of the courts a
quo, the Court of Appeals ruled that:

We also concur with the holding of both courts that as heirs


of Virginia Tangga-an, private respondents have the right to
institute the action for ejectment, in accordance with Article
487 of the Civil Code; and that the claim of petitioner that
Virgilio Tangga-an owns the lot where the leased residential
building stands and occupied by petitioners is still the
subject of a civil action for annulment of the sale of the lot
before the Regional Trial Court of Cebu. It does not follow as
a matter of course that whoever owns the lot owns the
building in question. Ownership of the lot cannot change the
nature and ownership of the building, which belongs to the
plaintiffs as heirs of the late Virginia Tangga-an through
Ernest Tangga-an and his wife. Respondent court correctly
reasoned out that ". . . defendants cannot hide over the cloak
of Virgilio Tangga-an, his claim of ownership over the lot as
far as the Court is concerned being irrelevant to this case . . .
." Most importantly, the action involving the question of
ownership of the lot is not a lawful ground to
suspend/abate the ejectment proceeding. The rationale of
the rule being that an ejectment suit involves only the issue
of material possession or possession de facto (San Pedro vs.
Court of Appeals, 235 SCRA 145, 150, and cases cited ). 8

Hence, this petition on the following assignments of error:

THE LEASE CONTRACT EXECUTED BY PETITIONERS


WITH VIRGINIA TANGGA-AN, PLAINTIFFS'
PREDECESSOR-IN-INTEREST, COVERED NOT ONLY
THE LAND, BUT ALSO THE IMPROVEMENT THEREON,
INCLUDING THE BUILDING.

II

VIRGILIO TANGGA-AN, AS ONE OF THE HEIRS OF


VIRGINIA, HAD THE SAME RIGHTS OVER THE
PROPERTY AS THOSE OF THE OTHER HEIRS, THE
PLAINTIFFS. HENCE, VIRGILIO MAY NOT BE
EXCLUDED UNILATERALLY BY THE OTHER HEIRS IN
HIS ENJOYMENT OF HIS HEREDITARY RIGHTS.

III

THE REGISTRATION OF THE LAND, INCLUDING THE


IMPROVEMENTS THEREON, IN THE NAME OF
VIRGILIO TANGGA-AN UNDER THE TORRENS SYSTEM
IS INDEFEASIBLE AND MAY NOT BE ATTACKED
COLLATERALLY IN THE PRESENT ILLEGAL DETAINER
CASE. 9

We rule in favor of the respondents.

Section 16 of the 1997 Revised Rules of Civil Procedure provides that:


SEC. 16. Resolving defense of ownership. When the
defendant raises the defense of ownership in his pleadings
and the question of possession cannot be resolved without
deciding the issue of ownership, the issue of ownership shall
be resolved only to determine the issue of possession.

The issue of ownership is precisely what the petitioner spouses raised to justify
their non-payment of rent and to resist eviction from the house they leased from
respondents. Being indispensable to the resolution of the issue of possession, we
herein render a provisional ruling on ownership.

Petitioner spouses seek a dismissal of the case for lack of jurisdiction claiming
that the only issue to be resolved is ownership over the house which is improper
in an ejectment case. We disagree. The issue in the case at bar is whether the
petitioner spouses, as lessees, were excused from paying the rent because of the
change in the ownership of the land on which the rented house was built. The
main question therefore is still the lawful possession of the subject premises by
the petitioner spouses. To resolve it, a discussion of the ownership issue is
necessary.

The petitioner spouses insist that the courts a quo erred in not finding that
Virgilio Tangga-an became the new owner not only of the lot but also of the
residential house. They claim that, before she died, Virginia, the original owner
of the subject house, waived and ceded her rights over the land in favor of
Virgilio. The said transfer allegedly included the subject house because, pursuant
to Article 440 of the Civil Code, "the ownership of the property gives the right of
accession to everything which is produced thereby, or which is incorporated or
attached thereto, either naturally or artificially." They also maintain that the
NHA executed a deed of sale of both the house and the lot in favor of Virgilio.
According to the petitioner spouses, the tax declaration over the house in the
name of respondent Hermes Tangga-an, as trustee of the other respondents, was
self-serving and had no probative value compared to the certificate of title over
the lot in the name of Virgilio Tangga-an.

We find no merit in petitioners' arguments.

Pursuant to Section 1, Rule 45 of the 1997 Revised Rules of Civil Procedure, a


petition for review before this Court should only raise questions of law. In the
absence of showing that the case falls under one of the exceptions, 10 factual
findings of the Court of Appeals are conclusive on the parties and not reviewable
by this Court. And they carry even more weight when the Court of Appeals
affirms the factual findings of the trial court. As such, this Court is not duty-
bound to analyze and weigh all over again the evidence already considered in
the proceedings below. 11
The courts a quo were unanimous in holding that the petitioner spouses failed to
substantiate their factual averment that Virgilio not only acquired the lot but also
the house. After examining the records, we found nothing to disprove the facts
determined by the lower courts. All the petitioner spouses presented was
Virgilio's uncertified xerox copy of the certificate of title over the lot. No
document was ever shown evidencing cession of the subject house in Virgilio's
favor. Virgilio's title could not be used to prove ownership over the house built
on said lot as it carried no reference at all to the house. A building by itself is a
real or immovable property distinct from the land on which it is constructed 12
and therefore can be a separate subject of contracts.

On the other hand, the respondents proved that, as compulsory heirs of Virginia,
they were the rightful owners of the subject house. They presented a tax
declaration in the name of their trustees, co-respondent Hermes Tangga-an and
his wife, which tax declaration sufficiently evidences their co-ownership and
acquisition of title following the death of the decedent Virginia. We have ruled
that:

Although tax declarations or realty tax payment of property


are not conclusive evidence of ownership, nevertheless, they
are good indicia of possession in the concept of owner for no
one in his right mind would be paying taxes for a property
that is not in his actual or at least constructive possession.
They constitute at least proof that the holder has a claim of
title over the property. The voluntary declaration of a piece
of property for taxation purposes manifests not only one's
sincere and honest desire to obtain title to the property and
announces his adverse claim against the State and all other
interested parties, but also the intention to contribute needed
revenues to the Government. Such an act strengthens one's
bona fide claim of acquisition of ownership. 13

One of the factual issues raised by the petitioner spouses concerns the alleged
waiver and cession of Virginia's rights over the house and lot to Virgilio. But the
petitioner spouses did not mention any consideration received by Virginia for
the waiver of the house, in effect making said waiver a donation thereof to
Virgilio. However, in order for a donation of real property like a house to be
valid, a public instrument duly signed by the donor and accepted by the donee
(which acceptance must be known to the donor while alive) must be executed. 14
Moreover, said donation must not impair the legitime of the forced heirs of the
donor in order for the same not to be inofficious. 15 In the case at bar, no such
public instrument was presented. Neither was it explained why said waiver did
not impair the rights of the other compulsory heirs of Virginia.
To support their argument that the house necessarily became Virgilio's property
as a result of the acquisition of the lot on which the same was built, the petitioner
spouses invoke the principle that the accessory follows the principal. Being an
accessory, the house is necessarily owned by the owner of the lot on which it is
built.

There is no need, however, to disturb and analyze the applicability of this well-
entrenched principle because the petitioner spouses are estopped from raising
the same. Both parties knew that their contract pertained only to the lease of the
house, without including the land. The contract states: "1. That the lessor is the
owner of a building of mixed materials situated at Premier St., Mabolo,
Hipodromo, Cebu City." 16 At the time of the perfection of the contract, the
petitioner spouses, as lessees, were aware that the NHA, and not Virginia, the
lessor, owned the land on which the rented house stood yet they signed the
same, obliged themselves to comply with the terms thereof for five years and
performed their obligations as lessees for two years. EHSAaD

Now they assume a completely different legal position. They claim that the lease
contract ceased to be effective because Virgilio's assumption of ownership of the
land stripped the respondents of ownership of the building. They argue that,
under Article 440 of the Civil Code, Virgilio's title over the lot necessarily
included the house on the said lot, thus automatically canceling the contract.

Section 2, Rule 131 of the Rules of Court provides as a conclusive presumption


that:

Sec. 2. Conclusive presumptions. The following are


instances of conclusive presumptions:

(a) Whenever a party has, by his own declaration,


act, or omission, intentionally and deliberately led
another to believe a particular thing true, and to act
upon such belief, he cannot, in any litigation arising
out of such declaration, act or omission, be
permitted to falsify it;

xxx xxx xxx


After recognizing the validity of the lease contract for two years, the
petitioner spouses are barred from alleging the automatic cancellation of the
contract on the ground that the respondents lost ownership of the house
after Virgilio acquired title over the lot.
We also note that the petitioner spouses rescinded the contract of lease without
judicial approval. Due to the change in ownership of the land, the petitioner
spouses decided to unilaterally cancel the contract because Virgilio supposedly
became the new owner of the house after acquiring title to the lot. They alleged
that there was no reason anymore to perform their obligations as lessees because
the lessor had ceased to be the owner of the house. But there is nothing in their
lease contract that allows the parties to extrajudicially rescind the same in case of
violation of the terms thereof. Extrajudicial rescission of a contract is not possible
without an express stipulation to that effect. 17 What the petitioner spouses
should have done was to file a special civil action for interpleader for the
claimants to litigate their claims and to deposit the rentals in court.

The petitioner spouses aver that their payments to Virgilio beginning November,
1993 were payments made in good faith to a person in possession of the credit, in
consonance with Article 1242 of the Civil Code. 18 This therefore released them
from their obligation. They claim that Virgilio collected the rentals in his capacity
as a co-owner. Being a son of Virginia, he was also entitled to the rent of the
subject house. We disagree. Virgilio collected the rentals not as a co-owner but as
the alleged sole owner of the subject house. The petitioner spouses themselves
admitted that Virgilio claimed sole ownership of the house and lot. It would be
incongruous for them to now assert payment in good faith to a person they
believed was collecting in behalf of his co-heirs after admitting that they paid
rent to Virgilio as the sole owner thereof.

Hence, for violating the terms of the lease contract, i.e., payment of rent,
respondents can legally demand the ejectment of the petitioner spouses.

WHEREFORE, the decision dated January 10, 1997 of the Court of Appeals is
hereby AFFIRMED. With costs against the petitioners. HEITAD

SO ORDERED.

||| (Spouses Alcaraz v. Tangga-an, G.R. No. 128568, April 09, 2003)

G.R. No. 136409. March 14, 2008.]

SUBHASH C. PASRICHA and JOSEPHINE A.


PASRICHA, petitioners, vs. DON LUIS DISON REALTY,
INC., respondent.

DECISION

NACHURA, J p:
This is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking the reversal of the Decision 1 of the Court of Appeals (CA) dated May 26,
1998 and its Resolution 2 dated December 10, 1998 in CA-G.R. SP No. 37739
dismissing the petition filed by petitioners Josephine and Subhash Pasricha.

The facts of the case, as culled from the records, are as follows:

Respondent Don Luis Dison Realty, Inc. and petitioners executed two Contracts
of Lease 3 whereby the former, as lessor, agreed to lease to the latter Units 22, 24,
32, 33, 34, 35, 36, 37 and 38 of the San Luis Building, located at 1006 M.Y. Orosa
cor. T.M. Kalaw Streets, Ermita, Manila. Petitioners, in turn, agreed to pay
monthly rentals, as follows:

For Rooms 32/35:

From March 1, 1991 to August 31, 1991


P5,000.00/P10,000.00

From September 1, 1991 to February 29, 1992


P5,500.00/P11,000.00

From March 1, 1992 to February 28, 1993


P6,050.00/P12,100.00

From March 1, 1993 to February 28, 1994


P6,655.00/P13,310.00

From March 1, 1994 to February 28, 1995


P7,320.50/P14,641.00

From March 1, 1995 to February 28, 1996


P8,052.55/P16,105.10

From March 1, 1996 to February 29, 1997


P8,857.81/P17,715.61

From March 1, 1997 to February 28, 1998


P9,743.59/P19,487.17

From March 1, 1998 to February 28, 1999


P10,717.95/P21,435.89

From March 1, 1999 to February 28, 2000


P11,789.75/P23,579.48 4

For Rooms 22 and 24:

Effective July 1, 1992 P10,000.00 with an increment of 10%


every two years. 5

For Rooms 33 and 34:

Effective April 1, 1992 P5,000.00 with an increment of 10%


every two years. 6

For Rooms 36, 37 and 38:

Effective when tenants vacate said premises P10,000.00


with an increment of 10% every two years. 7

Petitioners were, likewise, required to pay for the cost of electric


consumption, water bills and the use of telephone cables. 8
The lease of Rooms 36, 37 and 38 did not materialize leaving only Rooms 22, 24,
32, 33, 34 and 35 as subjects of the lease contracts. 9 While the contracts were in
effect, petitioners dealt with Francis Pacheco (Pacheco), then General Manager of
private respondent. Thereafter, Pacheco was replaced by Roswinda Bautista (Ms.
Bautista). 10 Petitioners religiously paid the monthly rentals until May 1992. 11
After that, however, despite repeated demands, petitioners continuously refused
to pay the stipulated rent. Consequently, respondent was constrained to refer the
matter to its lawyer who, in turn, made a final demand on petitioners for the
payment of the accrued rentals amounting to P916,585.58. 12 Because petitioners
still refused to comply, a complaint for ejectment was filed by private respondent
through its representative, Ms. Bautista, before the Metropolitan Trial Court
(MeTC) of Manila. 13 The case was raffled to Branch XIX and was docketed as
Civil Case No. 143058-CV.

Petitioners admitted their failure to pay the stipulated rent for the leased
premises starting July until November 1992, but claimed that such refusal was
justified because of the internal squabble in respondent company as to the person
authorized to receive payment. 14 To further justify their non-payment 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 respondent's 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 Answer 18 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. Bautista's 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 attorney's fees
plus the costs of this suit.

SO ORDERED. 20

The court adopted the MeTC's 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. Bautista's authority to represent respondent
notwithstanding the absence of a board resolution to that effect, since her
authority was implied from her power as a general manager/treasurer of
the company. 21
Aggrieved, petitioners elevated the matter to the Court of Appeals in a petition
for review on certiorari. 22 On March 18, 1998, petitioners filed an Omnibus
Motion 23 to cite Ms. Bautista for contempt; to strike down the MeTC and RTC
Decisions as legal nullities; and to conduct hearings and ocular inspections or
delegate the reception of evidence. Without resolving the aforesaid motion, on
May 26, 1998, the CA affirmed 24 the RTC Decision but deleted the award of
attorney's 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. Bautista's uncle-in-law. 27

In a Resolution 28 dated December 10, 1998, the CA denied the motions for lack
of merit. The appellate court considered said 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 respondent's motion
for execution and directed the RTC to issue a new writ of execution of its
decision, with the exception of the award of attorney's fees which the CA
deleted. 31

Petitioners now come before this Court in this petition for review on certiorari
raising the following issues:

I.

Whether this ejectment suit should be dismissed and


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

II.

Whether the RTC's 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 "corporation's" 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. Bautista's lack of capacity to sue, petitioners insist that


respondent company has no standing to sue as a juridical person in view of the
suspension and eventual revocation of its certificate of registration. 33 They
likewise question the factual findings of the court on the bases of their ejectment
from the subject premises. Specifically, they fault the appellate court for not
finding that: 1) their non-payment of rentals was justified; 2) they were deprived
of possession of all the units subject of the lease contract except Room 35; and 3)
respondent violated the terms of the contract by its continued refusal to turn
over possession of Rooms 36, 37 and 38. Petitioners further prayed that a
Temporary Restraining Order (TRO) be issued enjoining the CA from enforcing
its Resolution directing the issuance of a Writ of Execution. Thus, in a Resolution
34 dated January 18, 1999, this Court directed the parties to maintain the status
quo effective immediately until further orders.

The petition lacks merit.

We uphold the capacity of respondent company to institute the ejectment case.


Although the Securities and Exchange Commission (SEC) suspended and
eventually revoked respondent's 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 respondent's certificate,
rendering the issue moot and academic. 36

We likewise affirm Ms. Bautista's 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 Secretary's Certificate 38
confirming her authority to represent the company.

There is ample jurisprudence holding that subsequent and substantial


compliance may call for the relaxation of the rules of procedure in the interest of
justice. 39 In Novelty Phils., Inc. v. Court of Appeals, 40 the Court faulted the
appellate court for dismissing a petition solely on petitioner's 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 manager's 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 . . . (only to) raise an objection of this sort after the decision has
been rendered." 45 Second, it is settled that mere suspicion that a judge is partial
to one of the parties is not enough; there should be evidence to substantiate the
suspicion. Bias and prejudice cannot be presumed, especially when weighed
against a judge's 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 possessor's 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 court's 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) respondent's refusal to turn over Rooms 36, 37 and 38; and 3)
respondent's 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:

xxx xxx xxx

(4) When two or more persons claim the same right to


collect;

xxx xxx xxx.

Consignation shall be made by depositing the things due at the disposal of a


judicial authority, before whom the tender of payment shall be proved in a
proper case, and the announcement of the consignation in other cases. 57
In the instant case, consignation alone would have produced the effect of
payment of the rentals. The rationale for consignation is to avoid the
performance of an obligation becoming more onerous to the debtor by reason of
causes not imputable to him. 58 Petitioners claim that they made a written tender
of payment and actually prepared vouchers for their monthly rentals. But that
was insufficient to constitute a valid tender of payment. Even assuming that it
was valid tender, still, it would not constitute payment for want of consignation
of the amount. Well-settled is the rule that tender of payment must be
accompanied by consignation in order that the effects of payment may be
produced. 59

Moreover, Section 1, Rule 62 of the Rules of Court provides:

Section 1. When interpleader proper. Whenever conflicting


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

Otherwise stated, an action for interpleader is proper when the lessee does not
know to whom payment of rentals should be made due to conflicting claims on
the property (or on the right to collect). 60 The remedy is afforded not to protect
a person against double liability but to protect him against double vexation in
respect of one liability. 61
Notably, instead of availing of the above remedies, petitioners opted to refrain
from making payments.

Neither can petitioners validly invoke the non-delivery of Rooms 36, 37 and 38 as
a justification for non-payment of rentals. Although the two contracts embraced
the lease of nine (9) rooms, the terms of the contracts with their particular
reference to specific rooms and the monthly rental for each easily raise the
inference that the parties intended the lease of each room separate from that of
the others. There is nothing in the contract which would lead to the conclusion
that the lease of one or more rooms was to be made dependent upon the lease of
all the nine (9) rooms. Accordingly, the use of each room by the lessee gave rise
to the corresponding obligation to pay the monthly rental 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.

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 1673 63 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.
||| (Pasricha v. Don Luis Dison Realty, Inc., G.R. No. 136409, March 14, 2008)

THIRD DIVISION

[G.R. No. 181723. August 11, 2014.]

ELIZABETH DEL CARMEN, petitioner, vs. SPOUSES


RESTITUTO SABORDO and MIMA MAHILUM-
SABORDO, respondents.

DECISION

PERALTA, J p:

This treats of the petition for review on certiorari assailing the Decision 1 and
Resolution 2 of the Court of Appeals (CA), dated May 25, 2007 and January 24,
2008, respectively, in CA-G.R. CV No. 75013.

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

Sometime in 1961, the spouses Toribio and Eufrocina Suico (Suico spouses), along
with several business partners, entered into a business venture by establishing a
rice and corn mill at Mandaue City, Cebu. As part of their capital, they obtained
a loan from the Development Bank of the Philippines (DBP), and to secure the
said loan, four parcels of land owned by the Suico spouses, denominated as Lots
506, 512, 513 and 514, and another lot owned by their business partner, Juliana
Del Rosario, were mortgaged. Subsequently, the Suico spouses and their
business partners failed to pay their loan obligations forcing DBP to foreclose the
mortgage. After the Suico spouses and their partners failed to redeem the
foreclosed properties, DBP consolidated its ownership over the same.
Nonetheless, DBP later allowed the Suico spouses and Reginald and Beatriz
Flores (Flores spouses), as substitutes for Juliana Del Rosario, to repurchase the
subject lots by way of a conditional sale for the sum of P240,571.00. The Suico
and Flores spouses were able to pay the downpayment and the first monthly
amortization, but no monthly installments were made thereafter. Threatened
with the cancellation of the conditional sale, the Suico and Flores spouses sold
their rights over the said properties to herein respondents Restituto and Mima
Sabordo, subject to the condition that the latter shall pay the balance of the sale
price. On September 3, 1974, respondents and the Suico and Flores spouses
executed a supplemental agreement whereby they affirmed that what was
actually sold to respondents were Lots 512 and 513, while Lots 506 and 514 were
given to them as usufructuaries. DBP approved the sale of rights of the Suico and
Flores spouses in favor of herein respondents. Subsequently, respondents were
able to repurchase the foreclosed properties of the Suico and Flores spouses.
acHDTA

On September 13, 1976, respondent Restituto Sabordo (Restituto) filed with the
then Court of First Instance of Negros Occidental an original action for
declaratory relief with damages and prayer for a writ of preliminary injunction
raising the issue of whether or not the Suico spouses have the right to recover
from respondents Lots 506 and 514.

In its Decision dated December 17, 1986, the Regional Trial Court (RTC) of San
Carlos City, Negros Occidental, ruled in favor of the Suico spouses directing that
the latter have until August 31, 1987 within which to redeem or buy back from
respondents Lots 506 and 514.

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

xxx xxx xxx

For reasons given, judgment is hereby rendered modifying


the dispositive portion of [the] decision of the lower court to
read:

1) The defendants-appellees are granted up to


October 31, 1990 within which to exercise their
option to purchase from the plaintiff-appellant
Restituto Sabordo and Mima Mahilum Lot No. 506,
covered by Transfer Certificate of Title No. T-
102598 and Lot No. 514, covered by Transfer
Certificate of Title No. T-102599, both of Escalante
Cadastre, Negros Occidental by reimbursing or
paying to the plaintiff the sum of ONE HUNDRED
TWENTY-SEVEN THOUSAND FIVE HUNDRED
PESOS (P127,500.00); AISHcD

2) Within said period, the defendants-appellees


shall continue to have usufructuary rights on the
coconut trees on Lots Nos. 506 and 514, Escalante
Cadastre, Negros Occidental;
3) The Writ of Preliminary Injunction dated August
12, 1977 shall be effective until defendants-
appellees shall have exercised their option to
purchase within said period by paying or
reimbursing to the plaintiff-appellant the aforesaid
amount.

No pronouncement as to costs.

SO ORDERED. 4

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

In the meantime, Toribio Suico (Toribio) died leaving his widow, Eufrocina, and
several others, including herein petitioner, as legal heirs. Later, they discovered
that respondents mortgaged Lots 506 and 514 with Republic Planters Bank (RPB)
as security for a loan which, subsequently, became delinquent. AEcIaH

Thereafter, claiming that they are ready with the payment of P127,500.00, but
alleging that they cannot determine as to whom such payment shall be made,
petitioner and her co-heirs filed a Complaint 6 with the RTC of San Carlos City,
Negros Occidental seeking to compel herein respondents and RPB to interplead
and litigate between themselves their respective interests on the abovementioned
sum of money. The Complaint also prayed that respondents be directed to
substitute Lots 506 and 514 with other real estate properties as collateral for their
outstanding obligation with RPB and that the latter be ordered to accept the
substitute collateral and release the mortgage on Lots 506 and 514. Upon filing of
their complaint, the heirs of Toribio deposited the amount of P127,500.00 with
the RTC of San Carlos City, Branch 59.

Respondents filed their Answer 7 with Counterclaim praying for the dismissal of
the above Complaint on the grounds that (1) the action for interpleader was
improper since RPB is not laying any claim on the sum of P127,500.00; (2) that the
period within which the complainants are allowed to purchase Lots 506 and 514
had already expired; (3) that there was no valid consignation, and (4) that the
case is barred by litis pendencia or res judicata.

On the other hand, RPB filed a Motion to Dismiss the subject Complaint on the
ground that petitioner and her co-heirs had no valid cause of action and that they
have no primary legal right which is enforceable and binding against RPB.

On December 5, 2001, the RTC rendered judgment, dismissing the Complaint of


petitioner and her co-heirs for lack of merit. 8 Respondents' Counterclaim was
likewise dismissed.
Petitioner and her co-heirs filed an appeal with the CA contending that the
judicial deposit or consignation of the amount of P127,500.00 was valid and
binding and produced the effect of payment of the purchase price of the subject
lots. CcSTHI

In its assailed Decision, the CA denied the above appeal for lack of merit and
affirmed the disputed RTC Decision.

Petitioner and her co-heirs filed a Motion for Reconsideration, 9 but it was
likewise denied by the CA.

Hence, the present petition for review on certiorari with a lone Assignment of
Error, to wit:

THE COURT OF APPEALS ERRED IN AFFIRMING THE


DECISION OF THE LOWER COURT WHICH HELD
THAT THE JUDICIAL DEPOSIT OF P127,500.00 MADE
BY THE SUICOS WITH THE CLERK OF COURT OF THE
RTC, SAN CARLOS CITY, IN COMPLIANCE WITH THE
FINAL AND EXECUTORY DECISION OF THE COURT
OF APPEALS IN CA-G.R. CV-13785 WAS NOT VALID.
10

Petitioner's main contention is that the consignation which she and her co-heirs
made was a judicial deposit based on a final judgment and, as such, does not
require compliance with the requirements of Articles 1256 11 and 1257 12 of the
Civil Code.

The petition lacks merit.

At the outset, the Court quotes with approval the discussion of the CA regarding
the definition and nature of consignation, to wit: CDAHaE

. . . consignation [is] the act of depositing the thing due with


the court or judicial authorities whenever the creditor cannot
accept or refuses to accept payment, and it generally
requires a prior tender of payment. It should be
distinguished from tender of payment which is the
manifestation by the debtor to the creditor of his desire to
comply with his obligation, with the offer of immediate
performance. Tender is the antecedent of consignation, that
is, an act preparatory to the consignation, which is the
principal, and from which are derived the immediate
consequences which the debtor desires or seeks to obtain.
Tender of payment may be extrajudicial, while consignation
is necessarily judicial, and the priority of the first is the
attempt to make a private settlement before proceeding to
the solemnities of consignation. Tender and consignation,
where validly made, produces the effect of payment and
extinguishes the obligation. 13 ISDCHA

In the case of Arzaga v. Rumbaoa, 14 which was cited by petitioner in support of


his contention, this Court ruled that the deposit made with the court by the
plaintiff-appellee in the said case is considered a valid payment of the amount
adjudged, even without a prior tender of payment thereof to the defendants-
appellants, because the plaintiff-appellee, upon making such deposit, expressly
petitioned the court that the defendants-appellees be notified to receive the
tender of payment. This Court held that while "[t]he deposit, by itself alone, may
not have been sufficient, but with the express terms of the petition, there was full
and complete offer of payment made directly to defendants-appellants." 15 In the
instant case, however, petitioner and her co-heirs, upon making the deposit with
the RTC, did not ask the trial court that respondents be notified to receive the
amount that they have deposited. In fact, there was no tender of payment.
Instead, what petitioner and her co-heirs prayed for is that respondents and RPB
be directed to interplead with one another to determine their alleged respective
rights over the consigned amount; that respondents be likewise directed to
substitute the subject lots with other real properties as collateral for their loan
with RPB and that RPB be also directed to accept the substitute real properties as
collateral for the said loan. Nonetheless, the trial court correctly ruled that
interpleader is not the proper remedy because RPB did not make any claim
whatsoever over the amount consigned by petitioner and her co-heirs with the
court.

In the cases of Del Rosario v. Sandico 16 and Salvante v. Cruz, 17 likewise cited as
authority by petitioner, this Court held that, for a consignation or deposit with
the court of an amount due on a judgment to be considered as payment, there
must be prior tender to the judgment creditor who refuses to accept it. The same
principle was reiterated in the later case of Pabugais v. Sahijwani. 18 As stated
above, tender of payment involves a positive and unconditional act by the
obligor of offering legal tender currency as payment to the obligee for the
former's obligation and demanding that the latter accept the same. 19 In the
instant case, the Court finds no cogent reason to depart from the findings of the
CA and the RTC that petitioner and her co-heirs failed to make a prior valid
tender of payment to respondents. aDHCAE

It is settled that compliance with the requisites of a valid consignation is


mandatory. 20 Failure to comply strictly with any of the requisites will render
the consignation void. One of these requisites is a valid prior tender of payment.
21
Under Article 1256, the only instances where prior tender of payment is excused
are: (1) when the creditor is absent or unknown, or does not appear at the place
of payment; (2) when the creditor is incapacitated to receive the payment at the
time it is due; (3) when, without just cause, the creditor refuses to give a receipt;
(4) when two or more persons claim the same right to collect; and (5) when the
title of the obligation has been lost. None of these instances are present in the
instant case. Hence, the fact that the subject lots are in danger of being foreclosed
does not excuse petitioner and her co-heirs from tendering payment to
respondents, as directed by the court.

WHEREFORE, the instant petition is DENIED. The Decision of the Court of


Appeals, dated May 25, 2007, and its Resolution dated January 24, 2008, both in
CA-G.R. CV No. 75013, are AFFIRMED.

SO ORDERED.

||| (Del Carmen v. Spouses Sabordo, G.R. No. 181723, August 11, 2014)

G.R. No. 144101. September 16, 2005.]

ANTONIO P. TAMBUNTING, JR. and COMMERCIAL


HOUSE OF FINANCE, INC., petitioners, vs. SPOUSES
EMILIO SUMABAT and ESPERANZA BAELLO,
respondents.

Soo Gutierrez Leogardo & Lee for respondents.

SYLLABUS

1.REMEDIAL LAW; SPECIAL CIVIL ACTIONS; DECLARATORY RELIEF; A


COURT HAS NO MORE JURISDICTION OVER AN ACTION FOR
DECLARATORY RELIEF IF THE STATUTE, DEED, CONTRACT, ETC.,
SUBJECT THEREOF, HAS ALREADY BEEN INFRINGED OR TRANSGRESSED
BEFORE THE INSTITUTION OF THE ACTION. An action for declaratory
relief should be filed by a person interested under a deed, will, contract or other
written instrument, and whose rights are affected by a statute, executive order,
regulation or ordinance before breach or violation thereof. The purpose of the
action is to secure an authoritative statement of the rights and obligations of the
parties under a statute, deed, contract, etc. for their guidance in its enforcement
or compliance and not to settle issues arising from its alleged breach. It may be
entertained only before the breach or violation of the statute, deed, contract, etc.
to which it refers. Where the law or contract has already been contravened prior
to the filing of an action for declaratory relief, the court can no longer assume
jurisdiction over the action. In other words, a court has no more jurisdiction over
an action for declaratory relief if its subject, i.e., the statute, deed, contract, etc.,
has already been infringed or transgressed before the institution of the action.
Under such circumstances, inasmuch as a cause of action has already accrued in
favor of one or the other party, there is nothing more for the court to explain or
clarify short of a judgment or final order.

2.ID.; ID.; ID.; ID.; ABSENT JURISDICTION, THE TRIAL COURT'S DECISION
OVER THE ACTION FOR DECLARATORY RELIEF IS VOID AND WITHOUT
LEGAL EFFECT; CASE AT BAR. Here, an infraction of the mortgage terms
had already taken place before the filing of Civil Case No. C-7496. Thus, the CFI
lacked jurisdiction when it took cognizance of the case in 1979. And in the
absence of jurisdiction, its decision was void and without legal effect. As this
Court held in Arevalo v. Benedicto: Furthermore, the want of jurisdiction by a
court over the subject-matter renders its judgment void and a mere nullity, and
considering that a void judgment is in legal effect no judgment, by which no
rights are divested, from which no rights can be obtained, which neither binds
nor bars any one, and under which all acts performed and all claims flowing out
of are void, and considering further, that the decision, for want of jurisdiction of
the court, is not a decision in contemplation of law, and, hence, can never become
executory, it follows that such a void judgment cannot constitute a bar to another
case by reason of res judicata.

3.CIVIL LAW; PRESCRIPTION; AN ACTION TO ENFORCE A RIGHT ARISING


FROM A MORTGAGE SHOULD BE ENFORCED WITHIN TEN YEARS FROM
THE TIME THE RIGHT OF ACTION ACCRUES; CASE AT BAR. Article 1142
of the Civil Code is clear. A mortgage action prescribes after ten years. An action
to enforce a right arising from a mortgage should be enforced within ten years
from the time the right of action accrues. Otherwise, it will be barred by
prescription and the mortgage creditor will lose his rights under the mortgage.
Here, petitioners' right of action accrued in May 1977 when respondents
defaulted in their obligation to pay their loan amortizations. It was from that
time that the ten-year period to enforce the right under the mortgage started to
run. The period was interrupted when respondents filed Civil Case No. C-6329
sometime after May 1977 and the CFI restrained the intended foreclosure of the
property. However, the period commenced to run again on November 9, 1977
when the case was dismissed.

4.ID.; ID.; ID.; FILING OF AN ACTION FOR DECLARATORY RELIEF WILL


NOT INTERRUPT THE RUNNING OF THE TEN-YEAR PRESCRIPTIVE
PERIOD WHERE THE COURT LACKS JURISDICTION OVER THE ACTION.
The respondents' institution of Civil Case No. C-7496 in the CFI on March 16,
1979 did not interrupt the running of the ten-year prescriptive period because, as
discussed above, the court lacked jurisdiction over the action for declaratory
relief. All proceedings therein were without legal effect. Thus, petitioners could
have enforced their right under the mortgage, including its foreclosure, only
until November 7, 1987, the tenth year from the dismissal of Civil Case No. C-
6329. Thereafter, their right to do so was already barred by prescription. The
foreclosure held on February 8, 1995 was therefore some seven years too late. The
same thing can be said about the public auction held on March 27, 1995, the
consolidation of title in CHFI's favor and the issuance of TCT No. 310191 in its
name. They were all void and did not exist in the eyes of the law.

DECISION

CORONA, J p:

This petition for review on certiorari under Rule 45 of the Rules of Court assails
the February 11, 2000 decision of the Regional Trial Court (RTC) of Caloocan
City, Branch 120, in Civil Case No. C-16822.

This case involves a dispute over a parcel of land situated in Caloocan City
covered by TCT No. (87655) 18837. It was previously registered in the names of
respondents, spouses Emilio Sumabat and Esperanza Baello. On May 3, 1973,
respondents mortgaged it to petitioner Antonio Tambunting, Jr. to secure the
payment of a P7,727.95 loan. In August 1976, respondents were informed that
their indebtedness had ballooned to P15,000 for their failure to pay the monthly
amortizations. In May 1977, because respondents defaulted in their obligation,
petitioner Commercial House of Finance, Inc. (CHFI), as assignee of the
mortgage, initiated foreclosure proceedings on the mortgaged property but the
same did not push through. It was restrained by the then Court of First Instance
(CFI) of Caloocan City, Branch 33 (now RTC Branch 123) in Civil Case No. C-
6329, a complaint for injunction filed by respondents against petitioners.
However, the case was subsequently dismissed for failure of the parties to
appear at the hearing on November 9, 1977.

On March 16, 1979, respondents filed an action for declaratory relief with the CFI
of Caloocan City, Branch 33, seeking a declaration of the extent of their actual
indebtedness. It was docketed as Civil Case No. C-7496. Petitioners were
declared in default for failure to file an answer within the reglementary period.
They moved for the dismissal of the action on the ground that its subject, the
mortgage deed, had already been breached prior to the filing of the action. The
motion was denied for having been filed out of time and petitioners had already
been declared in default.

On January 8, 1981, the CFI rendered its decision. It fixed respondents' liability at
P15,743.83 and authorized them to consign the amount to the court for proper
disposition. In compliance with the decision, respondents consigned the required
amount on January 9, 1981.

In March 1995, respondents received a notice of sheriffs sale indicating that the
mortgage had been foreclosed by CHFI on February 8, 1995 and that an
extrajudicial sale of the property would be held on March 27, 1995.

On March 27, 1995, respondents instituted Civil Case No. C-16822, a petition for
preliminary injunction, damages and cancellation of annotation of encumbrance
with prayer for the issuance of a temporary restraining order, with the RTC of
Caloocan City, Branch 120. However, the public auction scheduled on that same
day proceeded and the property was sold to CHFI as the highest bidder.
Respondents failed to redeem the property during the redemption period.
Hence, title to the property was consolidated in favor of CHFI and a new
certificate of title (TCT No. 310191) was issued in its name. In view of these
developments, respondents amended their complaint to an action for
nullification of foreclosure, sheriff's sale and consolidation of title, reconveyance
and damages.

On February 11, 2000, the RTC issued the assailed decision. It ruled that the 1981
CFI decision in Civil Case No. C-7496 (fixing respondents' liability at P15,743.83
and authorizing consignation) had long attained finality. The mortgage was
extinguished when respondents paid their indebtedness by consigning the
amount in court. Moreover, the ten-year period within which petitioners should
have foreclosed the property was already barred by prescription. They abused
their right to foreclose the property and exercised it in bad faith. As a
consequence, the trial court nullified the foreclosure and extrajudicial sale of the
property, as well as the consolidation of title in CHFI's name in 1995. It then
ordered the register of deeds of Caloocan City to cancel TCT No. 310191 and to
reconvey the property to respondents. It also held petitioners liable for moral
damages, exemplary damages and attorney's fees.

Petitioners moved for a reconsideration of the trial court's decision but it was
denied. Hence, this petition. cICHTD

Petitioners claim that the trial court erred when it affirmed the validity of the
consignation. They insist that the CFI was barred from taking cognizance of the
action for declaratory relief since, petitioners being already in default in their
loan amortizations, there existed a violation of the mortgage deed even before
the institution of the action. Hence, the CFI could not have rendered a valid
judgment in Civil Case No. C-7496 and the consignation made pursuant to a void
judgment was likewise void. Respondents also fault the trial court for holding
that their right to foreclose the property had already prescribed.

True, the trial court erred when it ruled that the 1981 CFI decision in Civil Case
No. C-7496 was already final and executory.

An action for declaratory relief should be filed by a person interested under a


deed, will, contract or other written instrument, and whose rights are affected by
a statute, executive order, regulation or ordinance before breach or violation
thereof. 1 The purpose of the action is to secure an authoritative statement of the
rights and obligations of the parties under a statute, deed, contract, etc. for their
guidance in its enforcement or compliance and not to settle issues arising from its
alleged breach. 2 It may be entertained only before the breach or violation of the
statute, deed, contract, etc. to which it refers. 3 Where the law or contract has
already been contravened prior to the filing of an action for declaratory relief, the
court can no longer assume jurisdiction over the action. 4 In other words, a court
has no more jurisdiction over an action for declaratory relief if its subject, i.e., the
statute, deed, contract, etc., has already been infringed or transgressed before the
institution of the action. Under such circumstances, inasmuch as a cause of action
has already accrued in favor of one or the other party, there is nothing more for
the court to explain or clarify short of a judgment or final order.

Here, an infraction of the mortgage terms had already taken place before the
filing of Civil Case No. C-7496. Thus, the CFI lacked jurisdiction when it took
cognizance of the case in 1979. And in the absence of jurisdiction, its decision was
void and without legal effect. As this Court held in Arevalo v. Benedicto: 5

Furthermore, the want of jurisdiction by a court over the


subject-matter renders its judgment void and a mere nullity,
and considering that a void judgment is in legal effect no
judgment, by which no rights are divested, from which no
rights can be obtained, which neither binds nor bars any one,
and under which all acts performed and all claims flowing
out of are void, and considering further, that the decision,
for want of jurisdiction of the court, is not a decision in
contemplation of law, and, hence, can never become
executory, it follows that such a void judgment cannot
constitute a bar to another case by reason of res judicata.

Nonetheless, the petition must fail.

Article 1142 of the Civil Code is clear. A mortgage action prescribes after ten
years.

An action to enforce a right arising from a mortgage should be enforced within


ten years from the time the right of action accrues. 6 Otherwise, it will be barred
by prescription and the mortgage creditor will lose his rights under the
mortgage.

Here, petitioners' right of action accrued in May 1977 when respondents


defaulted in their obligation to pay their loan amortizations. It was from that
time that the ten-year period to enforce the right under the mortgage started to
run. The period was interrupted when respondents filed Civil Case No. C-6329
sometime after May 1977 and the CFI restrained the intended foreclosure of the
property. However, the period commenced to run again on November 9, 1977
when the case was dismissed.

The respondents' institution of Civil Case No. C-7496 in the CFI on March 16,
1979 did not interrupt the running of the ten-year prescriptive period because, as
discussed above, the court lacked jurisdiction over the action for declaratory
relief. All proceedings therein were without legal effect. Thus, petitioners could
have enforced their right under the mortgage, including its foreclosure, only
until November 7, 1987, the tenth year from the dismissal of Civil Case No. C-
6329. Thereafter, their right to do so was already barred by prescription.

The foreclosure held on February 8, 1995 was therefore some seven years too late.
The same thing can be said about the public auction held on March 27, 1995, the
consolidation of title in CHFI's favor and the issuance of TCT No. 310191 in its
name. They were all void and did not exist in the eyes of the law.

WHEREFORE, the petition is hereby DENIED.

||| (Tambunting, Jr. v. Spouses Sumabat, G.R. No. 144101, September 16, 2005)

G.R. No. 137538. September 3, 2001.]

OFFICE OF THE OMBUDSMAN, petitioner, vs. HON.


FRANCISCO B. IBAY, in his capacity as Presiding Judge
of the Regional Trial Court, Makati City, Branch 135,
UNION BANK OF THE PHILIPPINES, and LOURDES T.
MARQUEZ, in her capacity as Branch Manager of UBP
Julia Vargas Branch, respondents.

The Solicitor General for petitioner.

Fortun Narvasa & Salazar for private respondents.

SYNOPSIS
Petitioner, during its investigation on the alleged "scam" on the
Public Estates Authority-Amari Coastal Bay Development Corporation,
directed private respondent Lourdes Marquez, Branch Manager of Union
Bank of the Philippines, to produce bank account application forms,
signature cards, transactions history, bank statements, bank ledgers, debit
and credit memo, deposit and withdrawal slips, application for purchase of
manager's checks, used manager's checks, check microfilms and several
other documents for an in camera inspection relative to Accounts Nos. 001-
37270-5, 240-020718, 245-30317-3 and 245-30318-1. Private respondent, who
earlier refused to comply, was directed anew by petitioner, in an order, to
produce the requested documents and to show cause why she should not be
cited for contempt in case she fails to comply. Instead of complying, private
respondent filed a petition for declaratory relief before the Regional Trial
Court averring absence of legal obligation to divulge any information
relative to all deposits under Sections 2 and 3 of R.A. No. 1405 (Law on
Secrecy of Bank Deposits). Petitioner countered that under Section 15 (8) of
R.A. 6770 it has the power to examine and have access to bank accounts and
records. Meanwhile, private respondent filed with this Court a petition for
certiorari and prohibition assailing petitioner's order to institute indirect
contempt. Petitioner moved to dismiss the petition for declaratory relief on
ground of lack of jurisdiction, but the same was denied. Hence, the present
action.
The special civil action of declaratory relief falls under the exclusive
jurisdiction of the Regional Trial Courts. It is not among the actions within
the original jurisdiction of the Supreme Court even if only questions of law
are involved. For an action for declaratory relief to prosper, the following
requisites must concur: 1) there must be a justiciable controversy; 2) the
controversy must be between persons whose interests are adverse; 3) the
party seeking the relief has a legal interest in the controversy; and 4) the
issue is ripe for judicial determination. In the case at bar, the interests of the
parties are adverse considering the antagonistic assertion of the power of the
Ombudsman to examine bank deposits and refusal of private respondent to
allow petitioner to inspect in camera certain bank accounts and is ripe for
judicial determination as litigation is inevitable. Thus, the Regional Trial
Court may take cognizance of the petition.
In any event, the relief being sought had been squarely addressed
in Marquez vs. Desierto, wherein this Court ruled that before an in camera
inspection of bank accounts may be allowed, there must be a pending case
before a court of competent jurisdiction, with the account clearly identified
and the inspection limited to the subject matter of the pending case. Without
any pending litigation, any order for the opening of a bank account for
inspection is clearly premature and legally unjustified.
SYLLABUS

1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; DECLARATORY RELIEF;


FALLS WITHIN EXCLUSIVE JURISDICTION OF REGIONAL TRIAL COURTS.
The special civil action of declaratory relief falls under the exclusive
jurisdiction of the Regional Trial Courts. It is not among the actions within the
original jurisdiction of the Supreme Court even if only questions of law are
involved. Similarly, the Rules of Court is explicit that such action shall be
brought before the appropriate Regional Trial Court.

2. ID.; ID.; ID.; REQUISITES. The requisites of an action for declaratory relief
are: (1) there must be a justiciable controversy; (2) the controversy must be
between persons whose interests are adverse; (3) that the party seeking the relief
has a legal interest in the controversy; and (4) that the issue is ripe for judicial
determination.

3. ID.; ID.; ID.; ID.; CASE AT BAR. In this case, the controversy concerns the
extent of the power of petitioner to examine bank accounts under Section 15 (8)
of R.A. 6770 vis--vis the duty of banks under Republic Act 1405 not to divulge
any information relative to deposits of whatever nature. The interests of the
parties are adverse considering the antagonistic assertion of a legal right on one
hand, that is the power of Ombudsman to examine bank deposits, and on the
other, the denial thereof apparently by private respondent who refused to allow
petitioner to inspect in camera certain bank accounts. The party seeking relief,
private respondent herein, asserts a legal interest in the controversy. The issue
invoked is ripe for judicial determination as litigation is inevitable. Note that
petitioner has threatened private respondent with "indirect contempt" and
"obstruction" charges should the latter not comply with its order. Circumstances
considered, we hold that public respondent has jurisdiction to take cognizance of
the petition for declaratory relief. Nor can it be said that public respondent
gravely abused its discretion in doing so. We are thus constrained to dismiss the
instant petition for lack of merit.

4. ID.; ID.; ID.; IN CAMERA INSPECTION OF BANK ACCOUNT; REQUISITES.


In any event, the relief being sought by private respondent in her action for
declaratory relief before the RTC of Makati City has been squarely addressed by
our decision in Marquez vs. Desierto. In that case, we ruled that before an in camera
inspection of bank accounts may be allowed, there must be a pending case before
a court of competent jurisdiction. Further, the account must be clearly identified,
and the inspection limited to the subject matter of the pending case before the
court of competent jurisdiction. The bank personnel and the account holder must
be notified to be present during the inspection, and such inspection may cover
only the account identified in the pending case. In the present case, since there is
no pending litigation yet before a court of competent authority, but only an
investigation by the Ombudsman on the so-called "scam", any order for the
opening of the bank account for inspection is clearly premature and legally
unjustified.

RESOLUTION

QUISUMBING, J p:

This special civil action for certiorari seeks to annul the Orders of public
respondent dated August 19, 1998 and December 22, 1998, and to dismiss the
proceedings in Civil Case No. 98-1585.

The factual antecedents of this case are as follows:

Sometime in 1998, petitioner conducted an investigation on the alleged "scam" on


the Public Estates Authority-Amari Coastal Bay Development Corporation. The
case, entitled Fact-Finding and Intelligence Bureau vs. Amadeo Lagdameo, et al., was
docketed as OMB-0-97-0411. Initial result of the investigation revealed that the
alleged anomaly was committed through the issuance of checks which were
subsequently deposited in several financial institutions. On April 29, 1998,
petitioner issued an Order directing private respondent Lourdes Marquez,
branch manager of Union Bank of the Philippines branch at Julia Vargas Avenue,
Pasig City, to produce several bank documents for inspection relative to Account
Nos. 011-37270-5, 240-020718, 245-30317-3 and 245-30318-1, reportedly
maintained in the said branch. The documents referred to include bank account
application forms, signature cards, transactions history, bank statements, bank
ledgers, debit and credit memos, deposit and withdrawal slips, application for
purchase of manager's checks, used manager's checks and check microfilms. The
inspection would be done "in camera" wherein the bank records would be
examined without bringing the documents outside the bank premises. Its
purpose was to identify the specific bank records prior to the issuance of the
required information not in any manner needed in or relevant to the
investigation. 1

Private respondent failed to comply with petitioner's order. She explained that
the subject accounts pertain to International Corporate Bank (Interbank) which
merged with Union Bank in 1994. She added that despite diligent efforts, the
bank could not identify these accounts since the checks were issued in cash or
bearer forms. She informed petitioner that she had to first verify from the
Interbank records in its archives the whereabouts of said accounts. 2

Petitioner found private respondent's explanation unacceptable. Petitioner


reminded private respondent that her acts constitute disobedience or resistance
to a lawful order and is punishable as indirect contempt under Section 3 (b), Rule
71 of the Revised Rules of Court, in relation to Section 15 (9) of R.A. 6770
(Ombudsman Act of 1989). The same might also constitute willful obstruction of
the lawful exercise of the functions of the Ombudsman, which is punishable
under Section 36 of R.A. 6770. On June 16, 1998, petitioner issued an order to
private respondent to produce the requested bank documents for "in camera"
inspection. In the event of her failure to comply as directed, private respondent
was ordered to show cause why she should not be cited for contempt and why
she should not be charged for obstruction. 3

Instead of complying with the order of petitioner, private respondent filed a


petition for declaratory relief with an application for temporary restraining order
and/or preliminary injunction before the Regional Trial Court of Makati City,
Branch 135, presided by respondent Judge Francisco Ibay. The petition was
docketed as Civil Case No. 98-1585. In her petition, private respondent averred
that under Sections 2 and 3 of R.A. 1405 (Law on Secrecy of Bank Deposits), she
had the legal obligation not to divulge any information relative to all deposits of
whatever nature with banks in the Philippines. But petitioner's Order cited
Section 15(8) of R.A. 6770 stating that the Ombudsman had the power to examine
and have access to bank accounts and records. Private respondent, therefore,
sought a definite ruling and/or guidelines as regards her rights as well as
petitioner's power to inspect bank deposits under the cited provisions of law.
Meanwhile, private respondent filed with this Court a petition for certiorari and
prohibition, assailing petitioner's order to institute indirect contempt
proceedings against her. 4

Petitioner moved to dismiss the aforesaid petition for declaratory relief on the
ground that the RTC has no jurisdiction over the subject matter thereof. In an
order dated August 19, 1998, now being assailed, public respondent denied
petitioner's motion to dismiss. Petitioner then filed an ex-parte motion for extended
ruling. On December 22, 1998, public respondent issued an order declaring that it
has jurisdiction over the case since it is an action for declaratory relief under Rule
63 of the Rules of Court.

Seasonably, petitioner filed before this Court the instant petition assailing the
Orders dated August 19, 1998 and December 22, 1998 of public respondent on
the ground that public respondent assumed jurisdiction over the case and issued
orders with grave abuse of discretion and clear lack of jurisdiction. Petitioner
sought the nullification of the impugned orders, the immediate dismissal of Civil
Case No. 98-1585, and the prohibition of public respondent from exercising
jurisdiction on the investigation being conducted by petitioner in the alleged
PEA-AMARI land "scam".

The only question raised by petitioner for resolution public whether or not public
respondent acted without jurisdiction and discretion in entertaining the cited
petition for declaratory relief. DaAISH

Petitioner contends that the RTC of Makati City lacks jurisdiction over the
petition for declaratory relief. It asserts that respondent judge should have
dismissed the petition outright in view of Section 14 of R.A. 6770.

Section 14 of R.A. 6770 provides:

Restrictions. No writ of injunction shall be issued by any


court to delay an investigation being conducted by the
Ombudsman under this Act, unless there is a prima facie
evidence that the subject matter of the investigation is
outside the jurisdiction of the Office of the Ombudsman.

No court shall hear any appeal or application for remedy


against the decision or findings of the Ombudsman, except
the Supreme Court, on pure question of law.

Petitioner's invocation of the aforequoted statutory provision is misplaced. The


special civil action of declaratory relief falls under the exclusive jurisdiction of
the Regional Trial Courts. 5 It is not among the actions within the original
jurisdiction of the Supreme Court even if only questions of law are involved. 6
Similarly, the Rules of Court is explicit that such action shall be brought before
the appropriate Regional Trial Court. Section 1, Rule 63 of the Rules of Court
provides:

SECTION 1. Who may file petition. Any person interested


under a deed, will, contract or other written instrument,
whose rights are affected by a statute, executive order or
regulation, ordinance, or any other governmental regulation
may, before breach or violation thereof, bring an action in
the appropriate Regional Trial Court to determine any
question of construction or validity arising, and for a
declaration of his rights or duties, thereunder.

xxx xxx xxx


The requisites of an action for declaratory relief are: (1) there must be a justiciable
controversy; (2) the controversy must be between persons whose interests are
adverse; (3) that the party seeking the relief has a legal interest in the
controversy; and (4) that the issue is ripe for judicial determination. 7 In this case,
the controversy concerns the extent of the power of petitioner to examine bank
accounts under Section 15 (8) of R.A. 6770 vis-a-vis the duty of banks under
Republic Act 1405 not to divulge any information relative to deposits of
whatever nature. The interests of the parties are adverse considering the
antagonistic assertion of a legal right on one hand, that is the power of
Ombudsman to examine bank deposits, and on the other, the denial thereof
apparently by private respondent who refused to allow petitioner to inspect in
camera certain bank accounts. The party seeking relief, private respondent herein,
asserts a legal interest in the controversy. The issue invoked is ripe for judicial
determination as litigation is inevitable. Note that the petitioner has threatened
private respondent with "indirect contempt" and "obstruction" charges should
the latter not comply with its order.

Circumstances considered, we hold that public respondent has jurisdiction to


take cognizance of the petition for declaratory relief. Nor can it be said that
public respondent gravely abused its discretion in doing so. We are thus
constrained to dismiss the instant petition for lack of merit.

In any event, the relief being sought by private respondent in her action for
declaratory relief before the RTC of Makati City has been squarely addressed by
our decision in Marquez vs. Desierto 8 In that case, we ruled that before an in
camera inspection of bank accounts may be allowed, there must be a pending case
before a court of competent jurisdiction. Further, the account must be clearly
identified, and the inspection limited to the subject matter of the pending case
before the court of competent jurisdiction. The bank personnel and the account
holder must be notified to be present during the inspection, and such inspection
may cover only the account identified in the pending case. In the present case,
since there is no pending litigation yet before a court of competent authority, but
only an investigation by the Ombudsman on the so-called "scam", any order for
the opening of the bank account for inspection is clearly premature and legally
unjustified. HICSaD

WHEREFORE, the instant petition is DISMISSED.

||| (Office of the Ombudsman v. Ibay, G.R. No. 137538, September 03, 2001)

EN BANC

[G.R. No. 161400. September 2, 2005.]

ZENAIDA ORTEGA, represented by Her Attorney-in Fact


OCTAVIO ALVAREZ and/or ZEMVE ORTEGA
ALVAREZ, petitioners, vs. THE QUEZON CITY
GOVERNMENT, THE NATIONAL HOUSING
AUTHORITY & THE NATIONAL HOME MORTGAGE
CORP., respondents.

Jose V. Regalado, Jr. for petitioners.

Office of the City Attorney for Quezon City Government.

The Solicitor General for NHA and NHMC.

SYLLABUS

1.POLITICAL LAW; JUDICIAL DEPARTMENT; SUPREME COURT;


JURISDICTION; THERE MUST BE FIRST A FINAL JUDGMENT RENDERED
BY AN INFERIOR COURT BEFORE THIS COURT CAN ASSUME
JURISDICTION OVER A CASE. This Court can thus only review, revise,
reverse, modify on appeal or certiorari final judgments and orders of lower
courts in all cases in which the constitutionality or validity of, among other
things, an ordinance is in question. Foremost, therefore, is that there must be first
a final judgment rendered by an inferior court before this Court can assume
jurisdiction over a case of this nature.

2.ID.; ID.; ID.; ID.; IT DOES NOT CONDUCT ORIGINAL AND FULL TRIAL OF
A MAIN FACTUAL ISSUE. Verily, this Court does not conduct original and
full trial of a main factual issue like what petitioner is raising in the present
petition. It does not analyze or weigh evidence brought before it at the first
instance, otherwise, it would preempt the primary function of the lower court to
try the case on the merits, receive evidence, and decide the case definitively. Its
jurisdiction in cases which assail the validity of an ordinance is limited to
reviewing or revising final judgments or orders of lower courts and applying the
law based on their findings of facts brought before it.

3.ID.; ID.; ID.; ID.; JUDICIAL POLICY MUST REMAIN THAT THIS COURT
WILL NOT ENTERTAIN DIRECT RESORT TO IT. In another vein, if this
petition was to be considered as one for declaratory relief, as observed by the
OSG, it is not embraced within the original jurisdiction of this Court. . . . At all
events, even if this petition delves on questions of law, there is no statutory or
jurisprudential basis for according to this Court original and exclusive
jurisdiction over declaratory relief which advances only questions of law. Finally,
while a petition for declaratory relief may be treated as one for prohibition if it
has far reaching implications and raises questions that need to be resolved, there
is no allegation of facts by petitioner tending to show that she is entitled to such a
writ. The judicial policy must thus remain that this Court will not entertain direct
resort to it, except when the redress sought cannot be obtained in the proper
courts or when exceptional and compelling circumstances warrant availment of a
remedy within and calling for the exercise of this Court's primary jurisdiction.

DECISION

CARPIO MORALES, J p:

Petitioner Zenaida Ortega comes directly to this Court assailing the validity of
Quezon City Ordinance No. SP 1304, Series of 2003, and praying that the
following agencies, National Housing Authority (NHA), Housing and Land Use
Regulatory Board (HLURB), Department of Environment and Natural Resources
Bureau of Land Management, National Home Mortgage Financing
Corporation, and Home Insurance Guarantee Corporation, be restrained from
implementing the said ordinance.

Proposed Ordinance No. 2002-07 (PO 2002-07) was filed on January 10, 2002
before the City Council. PO 2002-07 sought to approve "the Subdivision Plan of
Samahang Kapitbahayan ng Barangay Vasra (Samahang Kapitbahayan), a Socialized
Housing Project (B.P. Blg. 220) with seventeen (17) lots (Community Mortgage
Program) containing [a total] area of Six Hundred Sixty Seven (667) square
meters, covered by Original Certificate of Title No. 735, owned by the City
Government of Quezon City (Vendor) located at a portion of [an] easement [in]
Barangay Vasra, Quezon City, Metro Manila, as applied for by the Samahang
Kapitbahayan ng Barangay Vasra (Vendee) subject to the conditions prescribed
under Quezon City Ordinance No. SP-56, S-93 and Batas Pambansa Blg. 220." 1

Proposed Resolution No. 2003-13 (PR 2003-13) was subsequently filed on January
20, 2002 to complement PO 2002-07. The proposed resolution sought to authorize
Quezon City Mayor Feliciano R. Belmonte to enter into a contract to sell a
portion of an easement located at Barangay Vasra, Quezon City with the
SAMAHANG KAPITBAHAYAN to be represented by its President, through the
Community Mortgage Program (CMP) of the National Home Mortgage Finance
Corporation (NHMFC). 2

On August 5, 2003, the Quezon City government enacted Ordinance No. SP-1304,
Series of 2003 (the ordinance), which is being challenged in the present petition, 3
reclassifying "as residential or converted from its original classification to
residential for distribution or for sale to its informal settlers" a "parcel of land
which may be considered an accretion/excess lot and previously conceived and
referred to in Proposed Ordinance No. 2002-07 and Proposed [Resolution] 2002-
13 as portion of [an] easement situated between Block 14, Psd-39577 of the
original subdivision plan and Culiat Creek, Barangay Vasra, Quezon City." 4

The provisions of the assailed ordinance read:

SECTION 1. A parcel of land which may be considered an


accretion/excess lot and previously conceived and referred
to in proposed ordinance no. PO 2002-07 and proposed
ordinance no. PO 2002-13 as portion of easement, situated
between Block 14. Psd-39577 of the original subdivision plan
and Culiat Creek, Barangay Vasra, Quezon City, is hereby
classified as residential or converted from its original
classification to residential for distribution or for sale to its
informal settlers.

SECTION 2. This Ordinance shall take effect immediately


upon its approval. 5

Petitioner, who claims to be the rightful owner of the land subject of the
ordinance, alleges that in enacting the ordinance, her various letter-protests to
the City Council against proposed Resolutions No. 2002-13, 2002-07 and 2002-239
6 were not heeded in the City Council, thus violating her constitutional rights to
due process and equal protection of the law. HAIDcE

Petitioner further claims that the lot referred to in the ordinance overlaps her
properties as their technical descriptions in Transfer Certificates of Title Nos. RT-
70472 (296026) and N-152137 issued in her name show; 7 and that assuming that
there exists accretion or easement of the Culiat Creek, she, being the owner of the
adjoining land, is the rightful owner thereof following Articles 457 8 and Article
620 9 of the Civil Code.

Petitioner likewise claims that the intended beneficiaries under the proposed
ordinance and resolution are not informal settlers as required under City
Ordinance No. SP-56, Series of 1993, 10 but lessees of her properties who had
been ordered ejected after she filed several unlawful detainer cases against them.
11

By Comment 12 filed on April 14, 2004, the Quezon City Government, through
the Office of the City Attorney, alleges that the present petition is premature and
raises questions of fact which entail reception of evidence; and that petitioner has
not yet established her right of ownership over the property referred to in the
ordinance, whereas its clear right thereover is evidenced by Original Certificate
of Title No. 735 issued in its name. 13

The NHA, by Comment 14 filed on May 17, 2004, prayed for the dismissal of the
petition, pointing out that the petition is actually one for declaratory relief under
Section 1, Rule 63 of the Rules of Court over which this Court has no original
jurisdiction.

The NHMFC, by Comment 15 filed on June 17, 2004, alleged that it is not a party
to any of the transactions with any of the parties in the present case. It
nevertheless adopted the comment of the Quezon City government that the
petition is premature and alleges facts which still need to be proven. 16

The petition must be dismissed.

Article VIII, Section 5 of the Constitution provides:

SECTION 5. The Supreme Court shall have the following


powers:

xxx xxx xxx

(2)Review, revise, reverse, modify, or affirm on appeal or


certiorari, as the law or the Rules of Court may provide,
final judgments and orders of lower courts in:

(a)All cases in which the constitutionality or


validity of any treaty, international or executive
agreement, law, presidential decree, proclamation,
order, instruction, ordinance, or regulation is in
question.

xxx xxx xxx (Emphasis and underscoring supplied).


This Court can thus only review, revise, reverse, modify on appeal or
certiorari final judgments and orders of lower courts in all cases in which the
constitutionality or validity of, among other things, an ordinance is in
question. Foremost, therefore, is that there must be first a final judgment
rendered by an inferior court 17 before this Court can assume jurisdiction
over a case of this nature.
Verily, this Court does not conduct original and full trial of a main factual issue
like what petitioner is raising in the present petition. 18 It does not analyze or
weigh evidence brought before it at the first instance, otherwise, it would
preempt the primary function of the lower court to try the case on the merits,
receive evidence, and decide the case definitively. 19 Its jurisdiction in cases
which assail the validity of an ordinance is limited to reviewing or revising final
judgments or orders of lower courts and applying the law based on their
findings of facts brought before it. 20

In another vein, if this petition was to be considered as one for declaratory relief,
as observed by the OSG, it is not embraced within the original jurisdiction of this
Court. 21 Rule 63 of the Rules of Court provides:
SECTION 1. Who may file petition. Any person interested
under a deed, will, contract or other written instrument, or
whose rights are affected by a statute, executive order or
regulation, ordinance, or any other government regulation
may, before breach or violation thereof, bring an action in
the appropriate Regional Trial Court to determine any
question of construction or validity arising from, and for a
declaration of his rights or duties, thereunder.

An action for the reformation of an instrument, or to quiet


title to real property or remove clouds therefrom, or to
consolidate ownership under Article 1607 of the Civil Code
may be brought under this Rule.

xxx xxx xxx

SEC. 4.Local government ordinances. In any action involving


the validity of a local government ordinance, the
corresponding prosecutor or attorney of the local
government unit involved shall be similarly notified and
entitled to be heard. (Emphasis and underscoring supplied)

Respecting petitioner's contention that since the ordinance violates national laws,
the present petition delves on questions of law over which this Court has original
jurisdiction, 22 the same fails. IATSHE

As reflected above, petitioner's assertion that the invalidity of the ordinance is


premised on her claim that she has a better right to the parcel of land referred to
in the ordinance is a factual issue.

At all events, even if this petition delves on questions of law, there is no statutory
or jurisprudential basis for according to this Court original and exclusive
jurisdiction over declaratory relief which advances only questions of law. 23

Finally, while a petition for declaratory relief may be treated as one for
prohibition if it has far reaching implications and raises questions that need to be
resolved, 24 there is no allegation of facts by petitioner tending to show that she
is entitled to such a writ. The judicial policy must thus remain that this Court will
not entertain direct resort to it, except when the redress sought cannot be
obtained in the proper courts or when exceptional and compelling circumstances
warrant availment of a remedy within and calling for the exercise of this Court's
primary jurisdiction. 25

WHEREFORE, the petition is hereby DISMISSED.

||| (Ortega v. Quezon City Gov't., G.R. No. 161400, September 02, 2005)
G.R. No. 126911. April 30, 2003.]

PHILIPPINE DEPOSIT INSURANCE CORPORATION,


petitioner, vs. THE HONORABLE COURT OF APPEALS
and JOSE ABAD, LEONOR ABAD, SABINA ABAD,
JOSEPHINE "JOSIE" BEATA ABAD-ORLINA, CECILIA
ABAD, PIO ABAD, DOMINIC ABAD, TEODORA ABAD,
respondents.

The Chief Legal Counsel for petitioner.

Dolores P. Abad and Leonora P. Abad for private respondents.

SYNOPSIS

Respondents filed claims with the Philippine Deposit Insurance Corporation


(PDIC) for the payment of the twenty insured golden time deposits (GTDs) at the
Manila Banking Corporation (MBC), Iloilo Branch. PDIC paid respondents the
value of three claims; however, it withheld the payment of the seventeen
remaining claims. Subsequently, PDIC filed a petition for declaratory relief
against respondents for a judicial declaration of the insurability of respondents'
GTDs. The trial court declared the GTDs of respondents to be deposit liabilities
of MBC, hence, are liabilities of PDIC as statutory insurer. The Court of Appeals
(CA) affirmed the decision of the trial court, except as to the award of legal
interest which it deleted. Hence, this petition.

In affirming the decision of the CA, the Supreme Court ruled that PDIC is liable
only for deposits received by a bank in the usual course of business. That no
actual money in bills and/or coins was handed by respondents to MBC does not
mean that the transactions on the new GTDs did not involve money and that
there was no consideration therefor, for the outstanding balance of respondents'
71 GTDs in MBC prior to May 26, 1987 was re-deposited by respondents under
28 new GTDs, eight of which were pre-terminated and withdrawn by respondent
Abad. MBC had cash on hand more than double the outstanding balance of
respondents' 71 GTDs at the start of the banking day on May 25, 1987. Since
respondent Abad was at MBC soon after it opened at 9:00 a.m. of that day,
petitioner should not presume that MBC had no cash to cover the new GTDs of
respondents and conclude that there was no consideration for said GTDs.
Petitioner having failed to overcome the presumption that the ordinary course of
business was followed, the Court found that the 28 new GTDs were deposited in
the usual course of business of MBC.
SYLLABUS

1. COMMERCIAL LAW; INSURANCE LAW; PHILIPPINE DEPOSIT


INSURANCE CORPORATION; LIABLE ONLY FOR DEPOSITS RECEIVED BY
A BANK IN THE USUAL COURSE OF BUSINESS; CASE AT BAR. Under its
charter, PDIC (hereafter petitioner) is liable only for deposits received by a bank
"in the usual course of business." . . . That no actual money in bills and/or coins
was handed by respondents to MBC does not mean that the transactions on the
new GTDs did not involve money and that there was no consideration therefor.
For the outstanding balance of respondents' 71 GTDs in MBC prior to May 26,
1987 in the amount of P1,115,889.15 as earlier mentioned was re-deposited by
respondents under 28 new GTDs. Admittedly, MBC had P2,841,711.90 cash on
hand more than double the outstanding balance of respondents' 71 GTDs at
the start of the banking day on May 25, 1987. Since respondent Jose Abad was at
MBC soon after it opened at 9:00 a.m. of that day, petitioner should not presume
that MBC had no cash to cover the new GTDs of respondents and conclude that
there was no consideration for said GTDs. Petitioner having failed to overcome
the presumption that the ordinary course of business was followed, this Court
finds that the 28 new GTDs were deposited "in the usual course of business" of
MBC. THCSEA

2. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; DECLARATORY RELIEF;


DOES NOT PROSCRIBE THE FILING OF COUNTERCLAIM BASED ON THE
SAME TRANSACTION, DEED OR CONTRACT SUBJECT OF THE
COMPLAINT. [A] petition for declaratory relief does not essentially entail an
executory process. There is nothing in its nature, however, that prohibits a
counterclaim from being set-up in the same action. "Now, there is nothing in the
nature of a special civil action for declaratory relief that proscribes the filing of a
counterclaim based on the same transaction, deed or contract subject of the
complaint. A special civil action is after all not essentially different from an
ordinary civil action, which is generally governed by Rules 1 to 56 of the Rules of
Court, except that the former deals with a special subject matter which makes
necessary some special regulation. But the identity between their fundamental
nature is such that the same rules governing ordinary civil suits may and do
apply to special civil actions if not inconsistent with or if they may serve to
supplement the provisions of the peculiar rules governing special civil actions."

DECISION

CARPIO MORALES, J p:
The present petition for review assails the decision of the Court of Appeals
affirming that of the Regional Trial Court of Iloilo City, Branch 30, finding
petitioner Philippine Deposit Insurance Corporation (PDIC) liable, as statutory
insurer, for the value of 20 Golden Time Deposits belonging to respondents Jose
Abad, Leonor Abad, Sabina Abad, Josephine "Josie" Beata Abad-Orlina, Cecilia
Abad, Pio Abad, Dominic Abad, and Teodora Abad at the Manila Banking
Corporation (MBC), Iloilo Branch. cDCEIA

Prior to May 22, 1997, respondents had, individually or jointly with each other,
71 certificates of time deposits denominated as "Golden Time Deposits" (GTD)
with an aggregate face value of P1,115,889.96. 1

On May 22, 1987, a Friday, the Monetary Board (MB) of the Central Bank of the
Philippines, now Bangko Sentral ng Pilipinas, issued Resolution 505 2
prohibiting MBC to do business in the Philippines, and placing its assets and
affairs under receivership. The Resolution, however, was not served on MBC
until Tuesday the following week, or on May 26, 1987, when the designated
Receiver took over. 3

On May 25, 1987, the next banking day following the issuance of the MB
Resolution, respondent Jose Abad was at the MBC at 9:00 a.m. for the purpose of
pre-terminating the 71 aforementioned GTDs and re-depositing the fund
represented thereby into 28 new GTDs in denominations of P40,000.00 or less
under the names of herein respondents individually or jointly with each other. 4
Of the 28 new GTDs, Jose Abad pre-terminated 8 and withdrew the value thereof
in the total amount of P320,000.00. 5

Respondents thereafter filed their claims with the PDIC for the payment of the
remaining 20 insured GTDs. 6

On February 11, 1988, PDIC paid respondents the value of 3 claims in the total
amount of P120,000.00. PDIC, however, withheld payment of the 17 remaining
claims after Washington Solidum, Deputy Receiver of MBC-Iloilo, submitted a
report to the PDIC 7 that there was massive conversion and substitution of trust
and deposit accounts on May 25, 1987 at MBC-Iloilo. 8 The pertinent portions of
the report stated:

xxx xxx xxx

On May 25, 1987 (Monday) or a day prior to the official


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

xxx xxx xxx

. . . The intention was to maximize the availment of PDIC


coverage limited to P40,000 by spreading out big accounts to
as many certificates under various nominees. . . . 9

xxx xxx xxx

Because of the report, PDIC entertained serious reservation in recognizing


respondents' GTDs as deposit liabilities of MBC-Iloilo. Thus, on August 30, 1991,
it filed a petition for declaratory relief against respondents with the Regional
Trial Court (RTC) of Iloilo City, for a judicial declaration determination of the
insurability of respondents' GTDs at MBC-Iloilo. 10

In their Answer filed on October 24, 1991 and Amended Answer 11 filed on
January 9, 1992, respondents set up a counterclaim against PDIC whereby they
asked for payment of their insured deposits. 12

In its Decision of February 22, 1994, 13 Branch 30 of the Iloilo RTC declared the
20 GTDs of respondents to be deposit liabilities of MBC, hence, are liabilities of
PDIC as statutory insurer. It accordingly disposed as follows:

WHEREFORE, premises considered, judgment is hereby


rendered:

1. Declaring the 28 GTDs of the Abads which were


issued by the TMBC-Iloilo on May 25, 1987 as
deposits or deposit liabilities of the bank as the
term is defined under Section 3 (f) of R.A. No. 3591,
as amended;

2. Declaring PDIC, being the statutory insurer of


bank deposits, liable to the Abads for the value of
the remaining 20 GTDs, the other 8 having been
paid already by TMBC Iloilo on May 25,1987;

3. Ordering PDIC to pay the Abads the value of


said 20 GTDs less the value of 3 GTDs it paid on
February 11, 1988, and the amounts it may have
paid the Abads pursuant to the Order of this Court
dated September 8, 1992;
4. Ordering PDIC to pay immediately the Abads
the balance of its admitted liability as contained in
the aforesaid Order of September 8, 1992, should
there be any, subject to liquidation when this case
shall have been finally decide; and

5. Ordering PDIC to pay legal interest on the


remaining insured deposits of the Abads from
February 11, 1988 until they are fully paid.

SO ORDERED.

On appeal, the Court of Appeals, by the assailed Decision of October 21, 1996, 14
affirmed the trial court's decision except as to the award of legal interest which it
deleted.

Hence, PDIC's present Petition for Review which sets forth this lone assignment
of error:

THE HONORABLE COURT OF APPEALS ERRED IN


AFFIRMING THE HOLDING OF THE TRIAL COURT
THAT THE AMOUNT REPRESENTED IN THE FACES OF
THE SO CALLED "GOLDEN TIME DEPOSITS" WERE
INSURED DEPOSITS EVEN AS THEY WERE MERE
DERIVATIVES OF RESPONDENTS' PREVIOUS ACCOUNT
BALANCES WHICH WERE PRE-
TERMINATED/TERMINATED AT THE TIME THE
MANILA BANKING CORPORATION WAS ALREADY IN
SERIOUS FINANCIAL DISTRESS.

In its supplement to the petition, PDIC adds the following assignment of error:

THE HONORABLE COURT OF APPEALS ERRED IN


AFFIRMING THE HOLDING OF THE TRIAL COURT
ORDERING PETITIONER TO PAY RESPONDENTS'
CLAIMS FOR PAYMENT OF INSURED DEPOSITS FOR
THE REASON THAT AN ACTION FOR DECLARATORY
RELIEF DOES NOT ESSENTIALLY ENTAIL AN
EXECUTORY PROCESS AS THE ONLY RELIEF THAT
SHOULD HAVE BEEN GRANTED BY THE TRIAL COURT
IS A DECLARATION OF THE RIGHTS AND DUTIES OF
PETITIONER UNDER R.A. 3591, AS AMENDED,
PARTICULARLY SECTION 3(F) THEREOF AS
CONSIDERED AGAINST THE SURROUNDING
CIRCUMSTANCES OF THE MATTER IN ISSUE SOUGHT
TO BE CONSTRUED WITHOUT PREJUDICE TO OTHER
MATTERS THAT NEED TO BE CONSIDERED BY
PETITIONER IN THE PROCESSING OF RESPONDENTS'
CLAIMS. TcHDIA

Under its charter, 15 PDIC (hereafter petitioner) is liable only for deposits
received by a bank "in the usual course of business." 16 Being of the firm
conviction that, as the reported May 25, 1987 bank transactions were so massive,
hence, irregular, petitioner essentially seeks a judicial declaration that such
transactions were not made "in the usual course of business" and, therefore, it
cannot be made liable for deposits subject thereof. 17

Petitioner points that as MBC was prohibited from doing further business by MB
Resolution 505 as of May 22, 1987, all transactions subsequent to such date were
not done "in the usual course of business."

Petitioner further posits that there was no consideration for the 20 GTDs subject
of respondents' claim. In support of this submission, it states that prior to March
25, 1987, when the 20 GTDs were made, MBC had been experiencing liquidity
problems, e.g., at the start of banking operations on March 25, 1987, it had only
P2,841,711.90 cash on hand and at the end of the day it was left with P27,805.81
consisting mostly of mutilated bills and coins. 18 Hence, even if respondents had
wanted to convert the face amounts of the GTDs to cash, MBC could not have
complied with it.

Petitioner theorizes that after MBC had exhausted its cash and could no longer
sustain further withdrawal transactions, it instead issued new GTDs as
"payment" for the pre-terminated GTDs of respondents to make sure that all the
newly-issued GTDs have face amounts which are within the statutory coverage
of deposit insurance. DHATcE

Petitioner concludes that since no cash was given by respondents and none was
received by MBC when the new GTDs were transacted, there was no
consideration therefor and, thus, they were not validly transacted "in the usual
course of business" and no liability for deposit insurance was created. 19

Petitioner's position does not persuade.

While the MB issued Resolution 505 on May 22, 1987, a copy thereof was served
on MBC only on May 26, 1987. MBC and its clients could be given the benefit of
the doubt that they were not aware that the MB resolution had been passed,
given the necessity of confidentiality of placing a banking institution under
receivership. 20

The evident implication of the law, therefore, is that the


appointment of a receiver may be made by the Monetary
Board without notice and hearing but its action is subject to
judicial inquiry to insure the protection of the banking
institution. Stated otherwise, due process does not
necessarily require a prior hearing; a hearing or an
opportunity to be heard may be subsequent to the closure.
One can just imagine the dire consequences of a prior hearing:
bank runs would be the order of the day, resulting in panic and
hysteria. In the process, fortunes may be wiped out, and
disillusionment will run the gamut of the entire banking
community. (Italics supplied). 21

Mere conjectures that MBC had actual knowledge of its impending closure do
not suffice. The MB resolution could not thus have nullified respondents'
transactions which occurred prior to May 26, 1987.

That no actual money in bills and/or coins was handed by respondents to MBC
does not mean that the transactions on the new GTDs did not involve money and
that there was no consideration therefor. For the outstanding balance of
respondents' 71 GTDs in MBC prior to May 26, 1987 22 in the amount of
P1,115,889.15 as earlier mentioned was re-deposited by respondents under 28 new
GTDs. Admittedly, MBC had P2,841,711.90 cash on hand more than double
the outstanding balance of respondent's 71 GTDs at the start of the banking
day on May 25, 1987. Since respondent Jose Abad was at MBC soon after it
opened at 9:00 a.m. of that day, petitioner should not presume that MBC had no
cash to cover the new GTDs of respondents and conclude that there was no
consideration for said GTDs.

Petitioner having failed to overcome the presumption that the ordinary course of
business was followed, 23 this Court finds that the 28 new GTDs were deposited
"in the usual course of business" of MBC.

In its second assignment of error, petitioner posits that the trial court erred in
ordering it to pay the balance of the deposit insurance to respondents,
maintaining that the instant petition stemmed from a petition for declaratory
relief which does not essentially entail an executory process, and the only relief
that should have been granted by the trial court is a declaration of the parties'
rights and duties. As such, petitioner continues, no order of payment may arise
from the case as this is beyond the office of declaratory relief proceedings. 24

Without doubt, a petition for declaratory relief does not essentially entail an
executory process. There is nothing in its nature, however, that prohibits a
counterclaim from being set-up in the same action. 25

Now, there is nothing in the nature of a special civil action


for declaratory relief that proscribes the filing of a
counterclaim based on the same transaction, deed or
contract subject of the complaint. A special civil action is
after all not essentially different from an ordinary civil
action, which is generally governed by Rules 1 to 56 of the
Rules of Court, except that the former deals with a special
subject matter which makes necessary some special
regulation. But the identity between their fundamental
nature is such that the same rules governing ordinary civil
suits may and do apply to special civil actions if not
inconsistent with or if they may serve to supplement the
provisions of the peculiar rules governing special civil
actions. 26

Petitioner additionally submits that the issue of determining the amount of


deposit insurance due respondents was never tried on the merits since the trial
dwelt only on the "determination of the viability or validity of the deposits" and
no evidence on record sustains the holding that the amount of deposit due
respondents had been finally determined. 27 This issue was not raised in the
court a quo, however, hence, it cannot be raised for the first time in the petition at
bar. 28

Finally, petitioner faults respondents for availing of the statutory limits of the
PDIC law, presupposing that, based on the conduct of respondent Jose Abad on
March 25, 1987, he and his co-respondents "somehow knew" of the impending
closure of MBC. Petitioner ascribes bad faith to respondent Jose Abad in
transacting the questioned deposits, and seeks to disqualify him from availing
the benefits under the law. 29

Good faith is presumed. This, petitioner failed to overcome since it offered mere
presumptions as evidence of bad faith.

WHEREFORE, the assailed decision of the Court of Appeals is hereby


AFFIRMED.

||| (Philippine Deposit Insurance Corp. v. Court of Appeals, G.R. No. 126911, April
30, 2003)

EN BANC

[G.R. No. 169466. May 9, 2007.]

DEPARTMENT OF BUDGET AND MANAGEMENT,


represented by SECRETARY ROMULO L. NERI,
PHILIPPINE NATIONAL POLICE, represented by
POLICE DIRECTOR GENERAL ARTURO L. LOMIBAO,
NATIONAL POLICE COMMISSION, represented by
CHAIRMAN ANGELO T. REYES, AND CIVIL SERVICE
COMMISSION, represented by CHAIRPERSON KARINA
C. DAVID, petitioners, vs. MANILA'S FINEST RETIREES
ASSOCIATION, INC., represented by P/COL.
FELICISIMO G. LAZARO (RET.), AND ALL THE OTHER
INP RETIREES, respondents.

DECISION

GARCIA, J p:

Assailed and sought to be set aside in this petition for review on certiorari under
Rule 45 of the Rules of Court are the following issuances of the Court of Appeals
(CA) in CA-G.R. CV No. 78203, to wit:

1. Decision 1 dated July 7, 2005 which affirmed in toto the


decision of the Regional Trial Court of Manila,
Branch 32, in Civil Case No. 02-103702, a suit for
declaratory relief, declaring the herein respondents
entitled to the same retirement benefits accorded
upon retirees of the Philippine National Police
(PNP) under Republic Act (R.A.) No. 6975, as
amended by R.A. No. 8551, and ordering the herein
petitioners to implement the proper adjustments on
respondents' retirement benefits; and

2. Resolution 2 dated August 24, 2005 which denied the


petitioners' motion for reconsideration.

The antecedent facts:

In 1975, Presidential Decree (P.D.) No. 765 was issued constituting the Integrated
National Police (INP) to be composed of the Philippine Constabulary (PC) as the
nucleus and the integrated police forces as components thereof. Complementing
P.D. No. 765 was P.D. No. 1184 3 dated August 26, 1977 (INP Law, hereinafter)
issued to professionalize the INP and promote career development therein.

On December 13, 1990, Republic Act (R.A.) No. 6975, entitled "AN ACT
ESTABLISHING THE PHILIPPINE NATIONAL POLICE UNDER A
REORGANIZED DEPARTMENT OF THE INTERIOR AND LOCAL
GOVERNMENT, AND FOR OTHER PURPOSES," hereinafter referred to as PNP
Law, was enacted. Under Section 23 of said law, the Philippine National Police
(PNP) would initially consist of the members of the INP, created under P.D. No.
765, as well as the officers and enlisted personnel of the PC. In part, Section 23
reads:

SEC. 23. Composition. Subject to the limitation provided


for in this Act, the Philippine National Police, hereinafter
referred to as the PNP, is hereby established, initially
consisting of the members of the police forces who were
integrated into the Integrated National Police (INP)
pursuant to Presidential Decree No. 765, and the officers and
enlisted personnel of the Philippine Constabulary (PC).
DaAISH

A little less than eight (8) years later, or on February 25, 1998, R.A. No. 6975 was
amended by R.A. No. 8551, otherwise known as the "PHILIPPINE NATIONAL
POLICE REFORM AND REORGANIZATION ACT OF 1998." Among other
things, the amendatory law reengineered the retirement scheme in the police
organization. Relevantly, PNP personnel, under the new law, stood to collect
more retirement benefits than what INP members of equivalent rank, who had
retired under the INP Law, received.

The INP retirees illustrated the resulting disparity in the retirement benefits
between them and the PNP retirees as follows: 4

Retirement Rank Monthly Pension Difference

INP PNP INP PNP

Corporal SPO3 P3,225.00 P11,310.00 P8,095.00

Captain P. Sr.
Insp. P5,248.00 P15,976.00 P10,628.00

Brig. Gen. P. Chief


Supt. P10,054.24 P18,088.00 P8,033.76

Hence, on June 3, 2002, in the Regional Trial Court (RTC) of Manila, all INP
retirees, spearheaded by the Manila's Finest Retirees Association, Inc., or the
MFRAI (hereinafter collectively referred to as the INP Retirees), filed a petition
for declaratory relief, 5 thereunder impleading, as respondents, the Department
of Budget and Management (DBM), the PNP, the National Police Commission
(NAPOLCOM), the Civil Service Commission (CSC) and the Government Service
Insurance System (GSIS). Docketed in the RTC as Civil Case No. 02-103702, which
was raffled to Branch 22 thereof, the petition alleged in gist that INP retirees
were equally situated as the PNP retirees but whose retirement benefits prior to
the enactment of R.A. No. 6975, as amended by R.A. No. 8551, were
unconscionably and arbitrarily excepted from the higher rates and adjusted
benefits accorded to the PNP retirees. Accordingly, in their petition, the
petitioning INP retirees pray that a

DECLARATORY JUDGMENT be rendered in their favor,


DECLARING with certainty that they, as INP-retirees, are
truly absorbed and equally considered as PNP-retirees and
thus, entitled to enjoy the SAME or IDENTICAL retirement
benefits being bestowed to PNP-retirees by virtue of said
PNP Law or Republic Act No. 6975, as amended by Republic Act
8551, with the corollary mandate for the respondents-
government agencies to effect the immediate adjustment on
their previously received disparate retirement benefits,
retroactive to its effectivity, and with due payment thereof.

The GSIS moved to dismiss the petition on grounds of lack of jurisdiction and
cause of action. On the other hand, the CSC, DBM, NAPOLCOM and PNP, in
their respective answers, asserted that the petitioners could not claim the more
generous retirement benefits under R.A. No. 6975 because at no time did they
become PNP members, having retired prior to the enactment of said law. DBM,
NAPOLCOM and PNP afterwards filed their respective pre-trial briefs.

The ensuing legal skirmish is not relevant to the disposition of the instant case.
The bottom line is that, on March 21, 2003, the RTC came out with its decision 6
holding that R.A. No. 6975, as amended, did not abolish the INP but merely
provided for the absorption of its police functions by the PNP, and accordingly
rendered judgment for the INP retirees, to wit:

WHEREFORE, this Court hereby renders JUDGMENT


DECLARING the INP Retirees entitled to the same or
identical retirement benefits and such other benefits being
granted, accorded and bestowed upon the PNP Retirees
under the PNP Law (RA No. 6975, as amended).

The respondents Government Departments and Agencies


shall IMMEDIATELY EFFECT and IMPLEMENT the proper
adjustments on the INP Retirees' retirement and such other
benefits, RETROACTIVE to its date of effectivity, and
RELEASE and PAY to the INP Retirees the due payments of
the amounts. cSaADC

SO ORDERED.
On April 2, 2003, the trial court issued what it denominated as Supplement to the
Decision whereunder it granted the GSIS' motion to dismiss and thus considered
the basic petition as withdrawn with respect to the latter.

From the adverse decision of the trial court, the remaining respondents, namely,
DBM, PNP, NAPOLCOM and CSC, interposed an appeal to the CA whereat
their appellate recourse was docketed as CA-G.R. CV No. 78203.

As stated at the threshold hereof, the CA, in its decision of July 7, 2005, 7
affirmed that of the trial court upholding the entitlement of the INP retirees to
the same or identical retirement benefits accorded upon PNP retirees under R.A.
No. 6975, as amended.

Their motion for reconsideration having been denied by the CA in its equally
assailed resolution of August 24, 2005, 8 herein petitioners are now with this
Court via the instant recourse on their singular submission that

THE COURT OF APPEALS COMMITTED A SERIOUS


ERROR IN LAW IN AFFIRMING THE DECISION OF
THE TRIAL COURT NOTWITHSTANDING THAT IT IS
CONTRARY TO LAW AND ESTABLISHED
JURISPRUDENCE.

We DENY.

In the main, it is petitioners' posture that R.A. No. 6975 clearly abolished the INP
and created in its stead a new police force, the PNP. Prescinding therefrom,
petitioners contend that since the PNP is an organization entirely different from
the INP, it follows that INP retirees never became PNP members. Ergo, they
cannot avail themselves of the retirement benefits accorded to PNP members
under R.A. No. 6975 and its amendatory law, R.A. No. 8551. HDIATS

A flashback at history is proper.

As may be recalled, R.A. No. 6975 was enacted into law on December 13, 1990, or
just about four (4) years after the 1986 Edsa Revolution toppled down the
dictatorship regime. Egged on by the current sentiment of the times generated by
the long period of martial rule during which the police force, the PC-INP, had a
military character, being then a major service of the Armed Forces of the
Philippines, and invariably moved by a fresh constitutional mandate for the
establishment of one police force which should be national in scope and, most
importantly, purely civilian in character, 9 Congress enacted R.A. No. 6975
establishing the PNP and placing it under the Department of Interior and Local
Government. To underscore the civilian character of the PNP, R.A. No. 6975
made it emphatically clear in its declaration of policy the following:
Section 2. Declaration of policy It is hereby declared to be
the policy of the State to promote peace and order, ensure
public safety and further strengthen local government
capability aimed towards the effective delivery of the basic
services to the citizenry through the establishment of a
highly efficient and competent police force that is national in
scope and civilian in character. . . . .

The police force shall be organized, trained and equipped


primarily for the performance of police functions. Its
national scope and civilian character shall be paramount.
No element of the police force shall be military nor shall
any position thereof be occupied by active members of the
[AFP]. (Emphasis and word in bracket supplied.)

Pursuant to Section 23, supra, of R.A. No. 6975, the PNP initially consisted of the
members of the police forces who were integrated into the INP by virtue of P.D.
No. 765, while Section 86 10 of the same law provides for the assumption by the
PNP of the police functions of the INP and its absorption by the former,
including its appropriations, funds, records, equipment, etc., as well as its
personnel. 11 And to govern the statute's implementation, Section 85 of the Act
spelled out the following absorption phases: DACcIH

Phase I Exercise of option by the uniformed members of


the [PC], the PC elements assigned with the Narcotics
Command, CIS, and the personnel of the technical services
of the AFP assigned with the PC to include the regular CIS
investigating agents and the operatives and agents of the
NAPOLCOM Inspection. Investigation and Intelligence
Branch, and the personnel of the absorbed National Action
Committee on Anti-Hijacking (NACAH) of the Department
of National Defense to be completed within six (6) months
from the date of the effectivity of this Act. At the end of this
phase, all personnel from the INP, PC, AFP Technical
Services, NACAH, and NAPOLCOM Inspection,
Investigation and Intelligence Branch shall have been
covered by official orders assigning them to the PNP, Fire
and Jail Forces by their respective units.

Phase II Approval of the table of organization and


equipment of all bureaus and offices created under this Act,
preparation and filling up of their staffing pattern, transfer
of assets to the [DILG] and organization of the Commission,
to be completed within twelve (12) months from the
effectivity date hereof. At the end of this phase, all personnel
to be absorbed by the [DILG] shall have been issued
appointment papers, and the organized Commission and the
PNP shall be fully operational. DASEac

The PC officers and enlisted personnel who have not opted


to join the PNP shall be reassigned to the Army, Navy or Air
Force, or shall be allowed to retire under existing AFP rules
and regulations. Any PC-INP officer or enlisted personnel
may, within the twelve-month period from the effectivity
of this Act, retire and be paid retirement benefits
corresponding to a position two (2) ranks higher than his
present grade, subject to the conditions that at the time he
applies for retirement, he has rendered at least twenty (20)
years of service and still has, at most, twenty-four (24)
months of service remaining before the compulsory
retirement age as provided by existing law for his office.

Phase III Adjustment of ranks and establishment of one (1)


lineal roster of officers and another for non-officers, and the
rationalization of compensation and retirement systems;
taking into consideration the existing compensation schemes
and retirement and separation benefit systems of the
different components of the PNP, to ensure that no member
of the PNP shall suffer any diminution in basic longevity
and incentive pays, allowances and retirement benefits due
them before the creations of the PNP, to be completed within
eighteen (18) months from the effectivity of this Act. . . . .

Upon the effectivity of this Act, the [DILG] Secretary shall


exercise administrative supervision as well as operational
control over the transferred, merged and/or absorbed AFP
and INP units. The incumbent Director General of the PC-
INP shall continue to act as Director General of the PNP
until . . . replaced . . . . (Emphasis and words in brackets
supplied.)

From the foregoing, it appears clear to us that the INP was never, as posited by
the petitioners, abolished or terminated out of existence by R.A. No. 6975. For
sure, nowhere in R.A. No. 6975 does the words "abolish" or "terminate" appear in
reference to the INP. Instead, what the law provides is for the "absorption,"
"transfer," and/or "merger" of the INP, as well as the other offices comprising the
PC-INP, with the PNP. To "abolish" is to do away with, to annul, abrogate or
destroy completely; 12 to "absorb" is to assimilate, incorporate or to take in. 13
"Merge" means to cause to combine or unite to become legally absorbed or
extinguished by merger 14 while "transfer" denotes movement from one position
to another. Clearly, "abolition" cannot be equated with "absorption."

True it is that Section 90 15 of R.A. No. 6975 speaks of the INP "[ceasing] to exist"
upon the effectivity of the law. It ought to be stressed, however, that such
cessation is but the logical consequence of the INP being absorbed by the PNP.

Far from being abolished then, the INP, at the most, was merely transformed to
become the PNP, minus of course its military character and complexion.

Even the petitioners' effort at disclosing the legislative intent behind the
enactment of R.A. No. 6975 cannot support their theory of abolition. Rather, the
Senate and House deliberations on the bill that eventually became R.A. No. 6975
reveal what has correctly been held by the CA in its assailed decision: that the
PNP was precisely created to erase the stigma spawned by the militarization of
the police force under the PC-INP structure. The rationale behind the passage of
R.A. No. 6975 was adequately articulated by no less than the sponsor 16 of the
corresponding House bill in his sponsorship speech, thus:

By removing the police force from under the control and


supervision of military officers, the bill seeks to restore and
underscore the civilian character of police work an otherwise
universal concept that was muddled up by the martial law years.

Indeed, were the legislative intent was for the INP's abolition such that nothing
would be left of it, the word "abolish" or what passes for it could have easily
found its way into the very text of the law itself, what with the abundant use of
the word during the legislative deliberations. But as can be gleaned from said
deliberations, the lawmakers' concern centered on the fact that if the entire PC-
INP corps join the PNP, then the PC-INP will necessarily be abolished, for who
then would be its members? Of more consequence, the lawmakers were one in
saying that there should never be two national police agencies at the same time.
cIHSTC

With the conclusion herein reached that the INP was not in fact abolished but
was merely transformed to become the PNP, members of the INP which include
the herein respondents are, therefore, not excluded from availing themselves of
the retirement benefits accorded to PNP retirees under Sections 74 17 and 75 18
of R.A. No. 6975, as amended by R.A. No. 8551. It may be that respondents were
no longer in the government service at the time of the enactment of R.A. No.
6975. This fact, however, without more, would not pose as an impediment to the
respondents' entitlement to the new retirement scheme set forth under the
aforecited sections. As correctly ratiocinated by the CA to which we are in full
accord:
For sure, R.A. No. 6975 was not a retroactive statute since it
did not impose a new obligation to pay the INP retirees the
difference between what they received when they retired
and what would now be due to them after R.A. No. 6975
was enacted. Even so, that did not render the RTC's
interpretation of R.A. No. 6975 any less valid. The
[respondents'] retirement prior to the passage of R.A. No.
6975 did not exclude them from the benefits provided by
R.A. No. 6975, as amended by R.A. No. 8551, since their
membership in the INP was an antecedent fact that
nonetheless allowed them to avail themselves of the benefits
of the subsequent laws. R.A. No. 6975 considered them as
PNP members, always referring to their membership and
service in the INP in providing for their retirement benefits.
19

Petitioners maintain, however, that NAPOLCOM Resolution No. 8, 20


particularly Section 11 21 thereof, bars the payment of any differential in
retirement pay to officers and non-officers who are already retired prior to the
effectivity of R.A. No. 6975. SAHIaD

The contention does not commend itself for concurrence.

Under the amendatory law (R.A. No. 8551), the application of rationalized
retirement benefits to PNP members who have meanwhile retired before its (R.A.
No. 8551) enactment was not prohibited. In fact, its Section 38 22 explicitly states
that the rationalized retirement benefits schedule and program "shall have
retroactive effect in favor of PNP members and officers retired or separated from the time
specified in the law." To us, the aforesaid provision should be made applicable to
INP members who had retired prior to the effectivity of R.A. No. 6975. For, as
afore-held, the INP was, in effect, merely absorbed by the PNP and not
abolished.

Indeed, to bar payment of retirement pay differential to INP members who were
already retired before R.A. No. 6975 became effective would even run counter to
the purpose of NAPOLCOM Resolution No. 8 itself, as expressed in its
preambulatory clause, which is to rationalize the retirement system of the PNP
taking into consideration existing retirement and benefit systems (including R.A.
No. 6975 and P.D. No. 1184) of the different components thereof "to ensure that no
member of the PNP shall suffer any diminution in the retirement benefits due them
before the creation of the PNP." 23

Most importantly, the perceived restriction could not plausibly preclude the
respondents from asserting their entitlement to retirement benefits adjusted to
the level when R.A. No. 6975 took effect. Such adjustment hews with the
constitutional warrant that "the State shall, from time to time, review to upgrade
the pensions and other benefits due to retirees of both the government and
private sectors," 24 and the implementing mandate under the Senior Citizen's
Law 25 that "to the extent practicable and feasible, retirement benefits . . . shall be
upgraded to be at par with the current scale enjoyed by those in actual service."
EcAISC

Certainly going for the respondents in their bid to enjoy the same retirement
benefits granted to PNP retirees, either under R.A. No. 6975 or R.A. No. 8551, is
Section 34 of the latter law which amended Section 75 of R.A. No. 6975 by adding
thereto the following proviso:

Section 75. Retirement benefits. . . . : Provided, finally, That


retirement pay of the officers/non-officers of the PNP shall be
subject to adjustments based on the prevailing scale of base pay of
police personnel in the active service.

Then, too, is the all familiar rule that:

Retirement laws should be liberally construed in favor of the


retiree because their intention is to provide for his
sustenance and hopefully, even comfort, when he no longer
has the stamina to continue earning his livelihood. The
liberal approach aims to achieve the humanitarian purposes
of the law in order that efficiency, security and well-being of
government employees may be enhanced. 26

The petitioners parlay the notion of prospective application of statutes, noting in


this regard that R.A. No. 6975, as amended, cannot be applied retroactively, there
being no provision to that effect.

We are not persuaded.

As correctly found by the appellate court, R.A. No. 6975 itself contextually
provides for its retroactive application to cover those who had retired prior to its
effectivity. In this regard, we invite attention to the three (3) phases of
implementation under Section 85 for the absorption and continuation in the
service of, among others, the INP members under the newly-established PNP.
IHEDAT

In a further bid to scuttle respondents' entitlement to the desired retirement


benefits, the petitioners fault the trial court for ordering the immediate
adjustments of the respondents' retirement benefits when the basic petition filed
before it was one for declaratory relief. To the petitioners, such petition does not
essentially entail an executory process, the only relief proper under that setting
being a declaration of the parties' rights and duties.

Petitioners' above posture is valid to a point. However, the execution of


judgments in a petition for declaratory relief is not necessarily indefensible. In
Philippine Deposit Insurance Corporation[PDIC] v. Court of Appeals, 27 wherein the
Court affirmed the order for the petitioners therein to pay the balance of the
deposit insurance to the therein respondents, we categorically ruled:

Now, there is nothing in the nature of a special civil action


for declaratory relief that proscribes the filing of a
counterclaim based on the same transaction, deed or
contract subject of the complaint. A special civil action is
after all not essentially different from an ordinary civil
action, which is generally governed by Rules 1 to 56 of the
Rules of Court, except that the former deals with a special
subject matter which makes necessary some special
regulation. But the identity between their fundamental
nature is such that the same rules governing ordinary civil
suits may and do apply to special civil actions if not
inconsistent with or if they may serve to supplement the
provisions of the peculiar rules governing special civil
actions. 28 IHEaAc

Similarly, in Matalin Coconut Co., Inc. v. Municipal Council of Malabang, Lanao del
Sur: 29 the Court upheld the lower court's order for a party to refund the
amounts paid by the adverse party under the municipal ordinance therein
questioned, stating:

. . . Under Sec. 6 of Rule 64, the action for declaratory relief


may be converted into an ordinary action and the parties
allowed to file such pleadings as may be necessary or
proper, if before the final termination of the case "a breach or
violation of an . . . ordinance, should take place." In the
present case, no breach or violation of the ordinance
occurred. The petitioner decided to pay "under protest" the
fees imposed by the ordinance. Such payment did not affect
the case; the declaratory relief action was still proper
because the applicability of the ordinance to future
transactions still remained to be resolved, although the
matter could also be threshed out in an ordinary suit for the
recovery of taxes paid . . . In its petition for declaratory relief,
petitioner-appellee alleged that by reason of the enforcement
of the municipal ordinance by respondents it was forced to
pay under protest the fees imposed pursuant to the said
ordinance, and accordingly, one of the reliefs prayed for by
the petitioner was that the respondents be ordered to refund
all the amounts it paid to respondent Municipal Treasurer
during the pendency of the case. The inclusion of said
allegation and prayer in the petition was not objected to by
the respondents in their answer. During the trial, evidence of
the payments made by the petitioner was introduced.
Respondents were thus fully aware of the petitioner's claim
for refund and of what would happen if the ordinance were
to be declared invalid by the court.

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

At bottom then, the trial court's judgment forestalled multiplicity of suits which,
needless to stress, would only entail a long and arduous process. Considering
their obvious advanced years, the respondents can hardly afford another
protracted proceedings. It is thus for this Court to already write finis to this case.

WHEREFORE, the instant petition is DENIED and the assailed decision and
resolution of the CA, respectively dated July 7, 2005 and August 24, 2005, are
AFFIRMED.

||| (Department of Budget and Management v. Manila's Finest Retirees Association,


Inc., G.R. No. 169466, May 09, 2007)

EN BANC

[G.R. No. 141386. November 29, 2001.]

THE COMMISSION ON AUDIT OF THE PROVINCE OF


CEBU, Represented by Provincial Auditor ROY L. URSAL,
petitioner, vs. PROVINCE OF CEBU, Represented by
Governor PABLO P. GARCIA, respondent.

The Solicitor General for petitioner.


Cebu Provincial Legal Office for respondent.

SYNOPSIS

The Commission on Audit (COA) of the Province of Cebu issued Notices of


Suspension to the Province of Cebu, saying that disbursements for the salaries of
teachers appointed by the province for the extension classes and scholarship
grants of the province are not chargeable to the provincial Special Education
Fund (SEF). Consequently, the Province of Cebu filed a petition for declaratory
relief with the trial court. The court a quo rendered its decision declaring the
questioned expenses as authorized expenditures of the SEF. Hence, the instant
petition filed by COA.

The Special Education Fund was created by virtue of Republic Act No. 5447.
What was expressly repealed by the Local Government Code was only Section 3
of R.A. No. 5447. The provisions allocating funds for the salaries of teachers
under Section 1 of R.A. No. 5447, which are not inconsistent with Sections 272
and 100 (c) of the Local Government Code, remain in force and effect. Even
under the doctrine of necessary implication, the allocation of the SEF for the
establishment and maintenance of extension classes logically implies the hiring
of teachers who should, as a matter of course, be compensated for their services.

With respect, however, to college scholarship grants, a reading of the pertinent


laws of the Local Government Code revealed that said grants are not among the
projects for which the proceeds of the SEF may be appropriated. In the same
vein, however noble the intention of the province in extending said scholarship
to deserving students, this Court cannot apply the doctrine of necessary
implication inasmuch as the grant of scholarship is neither necessary nor
indispensable to the operation and maintenance of public schools. Instead, such
scholarship grants may be charged to the General Funds of the province.

SYLLABUS

1. POLITICAL LAW; STATUTORY CONSTRUCTION; INTENT OF


LEGISLATURE IS THE CONTROLLING FACTOR IN THE INTERPRETATION
OF A STATUTE. It is a basic precept in statutory construction that the intent
of the legislature is the controlling factor in the interpretation of a statute.

2. ID.; ADMINISTRATIVE LAW; Republic Act No. 5447; CREATED SPECIAL


EDUCATION FUND. The Special Education Fund was created by virtue of
R.A. No. 5447, which is an act creating a special education fund to be constituted
from the proceeds of an additional real property tax and a certain portion of the
taxes on Virginia-type cigarettes and duties on imported leaf tobacco, defining
the activities to be financed, creating school boards for the purpose, and
appropriating funds therefrom, which took effect on January 1, 1969. Pursuant
thereto, P.D. No. 464, also known as the Real Property Tax Code of the
Philippines, imposed an annual tax of 1% on real property which shall accrue to
the SEF.

3. ID.; ID.; ID.; ONLY SECTION 3 THEREOF WAS REPEALED BY THE LOCAL
GOVERNMENT CODE; PROVISIONS ALLOCATING FUNDS FOR THE
SALARIES OF TEACHERS REMAIN IN FORCE AND EFFECT. Evidently,
what was expressly repealed by the Local Government Code was only Section 3,
of R.A. No. 5447, which deals with the "Allocation of taxes on Virginia type
cigarettes and duties on imported leaf tobacco." The legislature is presumed to
know the existing laws, such that whenever it intends to repeal a particular or
specific provision of law, it does so expressly. The failure to add a specific
repealing clause particularly mentioning the statute to be repealed indicates that
the intent was not to repeal any existing law on the matter, unless an
irreconcilable inconsistency and repugnancy exists in the terms of the new and
the old laws. Hence, the provisions allocating funds for the salaries of teachers
under Section 1, of R.A. No. 5447, which are not inconsistent with Sections 272
and 100 (c) of the Local Government Code, remain in force and effect.

4. ID.; ID.; ID.; ESTABLISHMENT AND MAINTENANCE OF EXTENSION


CLASSES LOGICALLY IMPLIES THE HIRING OF TEACHERS WHO SHOULD
BE COMPENSATED FOR THEIR SERVICES. Even under the doctrine of
necessary implication, the allocation of the SEF for the establishment and
maintenance of extension classes logically implies the hiring of teachers who
should, as a matter of course be compensated for their services. Every statute is
understood, by implication, to contain all such provisions as may be necessary to
effectuate its object and purpose, or to make effective rights, powers, privileges
or jurisdiction which it grants, including all such collateral and subsidiary
consequences as may be fairly and logically inferred from its terms. Ex necessitate
legis. Verily, the services and the corresponding compensation of these teachers
are necessary and indispensable to the establishment and maintenance of
extension classes. Indeed, the operation and maintenance of public schools is
lodged principally with the DECS. This is the reason why only salaries of public
school teachers appointed in connection with the establishment and maintenance
of extension classes, inter alia, pertain to the supplementary budget of the local
school boards. Thus, it should be made clear that not every kind of personnel-
related benefits of public school teachers may be charged to the SEF. The SEF
may be expended only for the salaries and personnel-related benefits of teachers
appointed by the local school boards in connection with the establishment and
maintenance of extension classes. Extension classes as referred to mean
additional classes needed to accommodate all children of school age desiring to
enter in public schools to acquire basic education.
5. ID.; ID.; LOCAL GOVERNMENT CODE; OMITTED SCHOLARSHIP TO
POOR BUT DESERVING STUDENTS; SCHOLARSHIP GRANTS MAY BE
CHARGED TO THE GENERAL FUNDS OF THE PROVINCE. With respect,
however, to college scholarship grants, a reading of the pertinent laws of the
Local Government Code reveals that said grants are not among the projects for
which the proceeds of the SEF may be appropriated. It should be noted that
Sections 100 (c) and 272 of the Local Government Code substantially reproduced
Section 1 of R.A. No. 5447. But, unlike payment of salaries of teachers which falls
within the ambit of "establishment and maintenance of extension classes" and
"operation and maintenance of public schools," the "granting of government
scholarship to poor but deserving students" was omitted in Sections 100 (c) and
272 of the Local Government Code. Casus omissus pro omisso habendus est. A
person, object, or thing omitted from an enumeration in a statute must be held to
have been omitted intentionally. It is not for this Court to supply such grant of
scholarship where the legislature has omitted it. In the same vein, however noble
the intention of the province in extending said scholarship to deserving students,
we cannot apply the doctrine of necessary implication inasmuch as the grant of
scholarship is neither necessary nor indispensable to the operation and
maintenance of public schools. Instead, such scholarship grants may be charged
to the General Funds of the province.

6. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; DECLARATORY RELIEF;


PROPERLY APPLIED SINCE THE APPLICABILITY OF THE STATUTE IN
QUESTION REMAINS TO BE RESOLVED IN FUTURE TRANSACTIONS. As
held in Shell Company of the Philippines, Ltd. v. Municipality of Sipocot, any breach
of the statute subject of the controversy will not affect the case; the action for
declaratory relief will prosper because the applicability of the statute in question
to future transactions still remains to be resolved. Absent a definite ruling in the
instant case for declaratory relief, doubts as to the disposition of the SEF will
persist. Hence, the trial court did not err in giving due course to the petition for
declaratory relief filed by the province of Cebu. ASaTHc

DECISION

YNARES-SANTIAGO, J p:

May the salaries and personnel-related benefits of public school teachers


appointed by local chief executives in connection with the establishment and
maintenance of extension classes; as well as the expenses for college scholarship
grants, be charged to the Special Education Fund (SEF) of the local government
unit concerned?
The instant petition for review, which raises a pure question of law, seeks to
annul and set aside the decision 1 of the Regional Trial Court of Cebu, Branch 20,
in a petition for declaratory relief, docketed as Civil Case No. CEB-24422.

The provincial governor of the province of Cebu, as chairman of the local school
board, under Section 98 of the Local Government Code, appointed classroom
teachers who have no items in the DECS plantilla to handle extension classes that
would accommodate students in the public schools.

In the audit of accounts conducted by the Commission on Audit (COA) of the


Province of Cebu, for the period January to June 1998, it appeared that the
salaries and personnel-related benefits of the teachers appointed by the province
for the extension classes were charged against the provincial SEF. Likewise
charged to the SEF were the college scholarship grants of the province.
Consequently, the COA issued Notices of Suspension to the province of Cebu, 2
saying that disbursements for the salaries of teachers and scholarship grants are
not chargeable to the provincial SEF.

Faced with the Notices of Suspension issued by the COA, the province of Cebu,
represented by its governor, filed a petition for declaratory relief with the trial
court.

On December 13, 1999, the court a quo rendered a decision declaring the
questioned expenses as authorized expenditures of the SEF. The dispositive
portion thereof reads:

WHEREFORE, in view of all the foregoing premises


considered, judgment is hereby rendered giving due course
to this instant petition for declaratory relief declaring and
confirming that petitioner is vested with the authority to
disburse the proceeds from the Special Educational Fund
[SEF] for the payment of salaries, allowances or honoraria
for teachers and non-teaching personnel in the public
schools in the Province of Cebu and its component cities,
and, municipalities, as well as the expenses for scholarship
grants of petitioners specially to poor but deserving students
therein.

Declaring, further, respondents audit findings on pages 36


and 37 in the Annual Audit Report on the Province of Cebu
for the year ending December 31, 1999 as null and void. 3

Hence, the instant petition by the Commission on Audit.


The Special Education Fund was created by virtue of R.A. No. 5447, which is An
act creating a special education fund to be constituted from the proceeds of an
additional real property tax and a certain portion of the taxes on Virginia-type
cigarettes and duties on imported leaf tobacco, defining the activities to be
financed, creating school boards for the purpose, and appropriating funds
therefrom, which took effect on January 1, 1969. Pursuant thereto, P.D. No. 464,
also known as the Real Property Tax Code of the Philippines, imposed an annual
tax of 1% on real property which shall accrue to the SEF. 4

Under R.A. No. 5447, the SEF may be expended exclusively for the following
activities of the DECS

(a) the organization and operation of such number of


extension classes as may be needed to
accommodate all children of school age desiring
to enter Grade I, including the creation of
positions of classroom teachers, head teachers
and principals for such extension classes . . . ;

(b) the programming of the construction and repair


of elementary school buildings, acquisition
of sites, and the construction and repair of
workshops and similar buildings and
accessories thereof to house laboratory,
technical and similar equipment and
apparatus needed by public schools
offering practical arts, home economics
and vocational courses, giving priority to
elementary schools on the basis of the
actual needs and total requirements of the
country . . . ;

(c) the payment and adjustment of salaries of public


school teachers under and by virtue of
Republic Act Numbered Five Thousand One
Hundred Sixty-Eight and all the benefits in
favor of public school teachers provided under
Republic Act Numbered Four Thousand Six
Hundred Seventy;

(d) preparation, printing and/or purchase of


textbooks, teacher's guides, forms and
pamphlets . . . ;

(e) the purchase and/or improvement, repair and


refurbishing of machinery, laboratory,
technical and similar equipment and
apparatus, including spare parts needed
by the Bureau of Vocational Education
and secondary schools offering courses;

(f) the establishment of printing plant to be used


exclusively for the printing needs of the
Department of Education and the
improvement of regional printing plants
in the vocational schools;

(g) the purchase of teaching materials such as work


books, atlases, flip charts, science and
mathematics teaching aids, and simple
laboratory devices for elementary and
secondary classes;

(h) the implementation of the existing program for


citizenship development in barrio high
schools, folk schools and adult education
classes;

(i) the undertaking of education research, including


that of the Board of National Education;

(j) the granting of government scholarships to poor but


deserving students under Republic Act
Numbered Four Thousand Ninety; and

(k) the promotion of physical education, such as


athletic meets. (Italics supplied)

With the effectivity of the Local Government Code of 1991, petitioner contends
that R.A. No. 5447 was repealed, leaving Sections 235, 272 and 100 (c) of the Code
to govern the disposition of the SEF, to wit:

SEC. 235. Additional Levy on Real Property for the Special


Education Fund (SEF). A province or city or a municipality
within the Metropolitan Manila Area, may levy and collect
an annual tax of one percent (1%) on the assessed value of
real property which shall be in addition to the basic real
property tax. The proceeds thereof shall exclusively accrue
to the Special Education Fund (SEF).

SEC. 272. Application of Proceeds of the Additional One Percent


SEF Tax. The proceeds from the additional one percent
(1%) tax on real property accruing to the SEF shall be
automatically released to the local school boards: Provided,
That, in case of provinces, the proceeds shall be divided
equally between the provincial and municipal school boards:
Provided, however, That the proceeds shall be allocated for the
operation and maintenance of public schools, construction and
repair of school buildings, facilities and equipment, educational
research, purchase of books and periodicals, and sports
development as determined and approved by the local school board.
(Italics supplied) aHSTID

SEC. 100. Meeting and Quorum; Budget

xxx xxx xxx

(c) The annual school board budget shall give


priority to the following:

(1) Construction, repair, and maintenance


of school buildings and other
facilities of public elementary and
secondary schools;

(2) Establishment and maintenance of


extension classes where necessary;
and

(3) Sports activities at the division, district,


municipal, and barangay levels.
(Italics supplied)

Invoking the legal maxim "expressio unius est exclusio alterius," petitioner alleges
that since salaries, personnel-related benefits and scholarship grants are not
among those authorized as lawful expenditures of the SEF under the Local
Government Code, they should be deemed excluded therefrom.

Moreover, petitioner claims that since what is allowed for local school boards to
determine under Section 99 5 of the Local Government Code is only the "annual
supplementary budgetary needs for the operation and maintenance of public
schools," as well as the "supplementary local cost to meet such needs," the budget
of the local school boards for the establishment and maintenance of extension
classes should be construed to refer only to the upkeep and maintenance of
public school building, facilities and similar expenses other than personnel-
related benefits. This is because, petitioner argued, the maintenance and
operation of public schools pertain principally to the DECS.
The contentions are without merit. It is a basic precept in statutory construction
that the intent of the legislature is the controlling factor in the interpretation of a
statute. 6 In this connection, the following portions of the deliberations of the
Senate on the second reading of the Local Government Code on July 30, 1990 are
significant:

Senator Guingona.

Mr. President.

The President.

Senator Guingona is recognized.

Senator Guingona.

Just for clarification, Mr. President. In this transfer, will it


include everything eventually lock, stock and
barrel, including curriculum?

Senator Pimentel.

Mr. President, our stand in the Committee is to respect the


decision of the National Government in terms of
curriculum.

Senator Guingona.

But, supposing the Local Education Board wishes to adopt a


certain curriculum for that particular region?

Senator Pimentel.

Mr. President, pursuant to the wording of the proposed


transfer of this elementary school system to local
government units, what are specifically covered
here are merely the construction, repair, and
maintenance of elementary school buildings and
other structures connected with public elementary
school education, payment of salaries, emoluments,
allowances et cetera, procurement of books, other
teaching materials and equipment needed for the
proper implementation of the program. There is
nothing here that will indicate that the local
government will have any right to alter the
curriculum. (Italics supplied)
Senator Guingona.

Thank you, Mr. President.

Similarly instructive are the foregoing deliberations in the House of


Representatives on August 16, 1990:

INTERPELLATION OF MS. RAYMUNDO

(Continuation)

Continuing her interpellation, Ms. Raymundo then adverted


to subsection 4 of Section 101 [now Section 100, paragraph
(c)] and asked if the budget is limited only to the three
priority areas mentioned. She also asked what is meant by
the phrase "maintenance of extension classes."

In response, Mr. De Pedro clarified that the provision is not


limited to the three activities, to which may be added other
sets of priorities at the proper time. As to extension classes, he
pointed out that the school boards may provide out of its own
funds, for additional teachers or other requirements if the national
government cannot provide funding therefor. Upon Ms.
Raymundo's query, Mr. de Pedro further explained that
support for teacher tools could fall under the priorities cited
and is covered by certain circulars.

Undoubtedly, the aforecited exchange of views clearly demonstrates that the


legislature intended the SEF to answer for the compensation of teachers handling
extension classes. STECDc

Furthermore, the pertinent portion of the repealing clause of the Local


Government Code, provides:

SEC. 534. Repealing Clause. . . .

(c) The provisions of . . . Sections 3, a (3) and b (2) of


Republic Act No. 5447, regarding the Special Education
Fund . . . are hereby repealed and rendered of no force and
effect.

Evidently, what was expressly repealed by the Local Government Code was only
Section 3, of R.A. No. 5447, which deals with the "Allocation of taxes on Virginia
type cigarettes and duties on imported leaf tobacco." The legislature is presumed
to know the existing laws, such that whenever it intends to repeal a particular or
specific provision of law, it does so expressly. The failure to add a specific
repealing clause particularly mentioning the statute to be repealed indicates that
the intent was not to repeal any existing law on the matter, unless an
irreconcilable inconsistency and repugnancy exists in the terms of the new and
the old laws. 7 Hence, the provisions allocating funds for the salaries of teachers
under Section 1, of R.A. No. 5447, which are not inconsistent with Sections 272
and 100 (c) of the Local Government Code, remain in force and effect. TSIEAD

Even under the doctrine of necessary implication, the allocation of the SEF for the
establishment and maintenance of extension classes logically implies the hiring
of teachers who should, as a matter of course be compensated for their services.
Every statute is understood, by implication, to contain all such provisions as may
be necessary to effectuate its object and purpose, or to make effective rights,
powers, privileges or jurisdiction which it grants, including all such collateral
and subsidiary consequences as may be fairly and logically inferred from its
terms. Ex necessitate legis. 8 Verily, the services and the corresponding
compensation of these teachers are necessary and indispensable to the
establishment and maintenance of extension classes.

Indeed, the operation and maintenance of public schools is lodged principally


with the DECS. This is the reason why only salaries of public school teachers
appointed in connection with the establishment and maintenance of extension
classes, inter alia, pertain to the supplementary budget of the local school boards.
Thus, it should be made clear that not every kind of personnel-related benefits of
public school teachers may be charged to the SEF. The SEF may be expended
only for the salaries and personnel-related benefits of teachers appointed by the
local school boards in connection with the establishment and maintenance of
extension classes. Extension classes as referred to mean additional classes needed
to accommodate all children of school age desiring to enter in public schools to
acquire basic education. 9

With respect, however, to college scholarship grants, a reading of the pertinent


laws of the Local Government Code reveals that said grants are not among the
projects for which the proceeds of the SEF may be appropriated. It should be
noted that Sections 100 (c) and 272 of the Local Government Code substantially
reproduced Section 1, of R.A. No. 5447. But, unlike payment of salaries of
teachers which falls within the ambit of "establishment and maintenance of
extension classes" and "operation and maintenance of public schools," the
"granting of government scholarship to poor but deserving students" was
omitted in Sections 100 (c) and 272 of the Local Government Code. Casus omissus
pro omisso habendus est. A person, object, or thing omitted from an enumeration in
a statute must be held to have been omitted intentionally. It is not for this Court
to supply such grant of scholarship where the legislature has omitted it. 10

In the same vein, however noble the intention of the province in extending said
scholarship to deserving students, we cannot apply the doctrine of necessary
implication inasmuch as the grant of scholarship is neither necessary nor
indispensable to the operation and maintenance of public schools. Instead, such
scholarship grants may be charged to the General Funds of the province.

Pursuant to Section 1, Rule 63 11 of the 1997 Rules of Civil Procedure, a petition


for declaratory relief may be filed before there is a breach or violation. The
Solicitor General claims that the Notices of Suspension issued by the COA to the
respondent province amounted to a breach or violation, and therefore, the
petition for declaratory relief should have been denied by the trial court.

We are not convinced. As held in Shell Company of the Philippines, Ltd. v.


Municipality of Sipocot, 12 any breach of the statute subject of the controversy will
not affect the case; the action for declaratory relief will prosper because the
applicability of the statute in question to future transactions still remains to be
resolved. Absent a definite ruling in the instant case for declaratory relief, doubts
as to the disposition of the SEF will persist. Hence, the trial court did not err in
giving due course to the petition for declaratory relief filed by the province of
Cebu.

WHEREFORE, in view of all the foregoing, the Decision of the Regional Trial
Court of Cebu City, Branch 20, in Civil Case No. CEB-24422, is AFFIRMED with
MODIFICATION. The salaries and personnel-related benefits of the teachers
appointed by the provincial school board of Cebu in connection with the
establishment and maintenance of extension classes, are declared chargeable
against the Special Education Fund of the province. However, the expenses
incurred by the provincial government for the college scholarship grants should
not be charged against the Special Education Fund, but against the General
Funds of the province of Cebu.

SO ORDERED.

||| (COA of the Province of Cebu v. Province of Cebu, G.R. No. 141386, November 29,
2001)

EN BANC

[G.R. No. 160031. December 18, 2008.]

SOCIAL JUSTICE SOCIETY (SJS), petitioner, vs. HON.


JOSE D. LINA, in his capacity as Secretary of the
Department of Interior and Local Government (DILG),
Lipa City Mayor HON. VILMA SANTOS-RECTO,
Pampanga Provincial Governor HON. LITO LAPID, and
Paraaque City Mayor HON. JOEY MARQUEZ,
respondents.

DECISION

NACHURA, J p:

Assailed in this Rule 45 petition are the June 30, 2003 1 and the September 12,
2003 2 Orders of the Regional Trial Court (RTC) of Manila, Branch 14 in Civil
Case No. 02-104585. TICaEc

Filed with the trial court on September 12, 2002, by petitioner Social Justice
Society, a registered political party, was a petition for declaratory relief against
the then Secretary of the Department of Interior and Local Government (DILG),
respondent Jose D. Lina, 3 praying for the proper construction of Section 90 of
Republic Act (R.A.) No. 7160, which provides that:

SEC. 90. Practice of Profession.

(a) All governors, city and municipal mayors are prohibited


from practicing their profession or engaging in any
occupation other than the exercise of their functions as local
chief executives.

(b) Sanggunian members may practice their professions,


engage in any occupation, or teach in schools except during
session hours: Provided, That sanggunian members who are
members of the Bar shall not:

(1) Appear as counsel before any court in any civil


case wherein a local government unit or any office,
agency, or instrumentality of the government is the
adverse party;

(2) Appear as counsel in any criminal case wherein


an officer or employee of the national or local
government is accused of an offense committed in
relation to his office;

(3) Collect any fee for their appearance in


administrative proceedings involving the local
government unit of which he is an official; and

(4) Use property and personnel of the Government


except when the sanggunian member concerned is
defending the interest of the Government.

(c) Doctors of medicine may practice their profession even


during official hours of work only on occasions of
emergency: Provided, That the officials concerned do not
derive monetary compensation therefrom. [Underscoring
supplied.]

Based on the said provision, specifically paragraph (a) thereof, petitioner posited
that actors who were elected as governors, city and municipal mayors were
disallowed by law to appear in movies and television programs as one of the
characters therein, for this would give them undue advantage over their political
opponents, and would considerably reduce the time that they must devote to
their constituents. 4 THIASE

To strengthen its point, petitioner later amended its petition to implead as


additional respondents then Lipa City Mayor Vilma Santos, then Pampanga
Provincial Governor Lito Lapid, and then Paraaque City Mayor Joey Marquez.
5

Summing up the arguments of the other respondents in their respective


pleadings, the DILG, through the Office of the Solicitor General (OSG), moved
for the dismissal of the petition on the grounds that: (1) petitioner has no legal
standing to file the petition, because it is not a "person whose rights are affected"
by the statute; (2) it is not the real party-in-interest; (3) there is no judicial
controversy; (4) there is no need for construction of the subject provision; (5)
there is already a breach of the statute as alleged in the petition itself; and (6)
declaratory relief is not the proper remedy. 6

In the assailed June 30, 2003 Order, 7 the trial court, sustaining the arguments of
the DILG, dismissed the petition for declaratory relief. It further denied, in the
September 12, 2003 Order, 8 petitioner's motion for reconsideration.

Dissatisfied, petitioner filed the instant petition for review on certiorari before this
Court on the following grounds:

I.

THE REGIONAL TRIAL COURT SERIOUSLY ERRED IN


DISMISSING PETITIONER'S PETITION FOR
DECLARATORY RELIEF ON PURELY TECHNICAL
GROUNDS.

II.
THE REGIONAL TRIAL COURT SERIOUSLY ERRED IN
NOT RESOLVING THE ISSUE RAISED IN THE PETITION
FOR DECLARATORY RELIEF. 9

Petitioner contends that it, a registered political party composed of citizens,


established to relentlessly pursue social justice in the Philippines, and allowed to
field candidates in the elections, has the legal interest and the right to be
informed and enlightened, on whether or not their public officials, who are paid
out of public funds, can, during their tenure, lawfully appear as heroes or villains
in movies, or comedians in television shows, and flaunt their disdain for legal
and ethical standards. The determination further of a party's legal standing in
actions for declaratory relief involving laws should not be as rigid as when such
action involves a deed, will or contract. 10 cDCHaS

It also argues that a party's legal standing is a procedural technicality which may
be set aside where the issues raised are of paramount public interest. In the
instant case, the importance of the issue can never be minimized or discounted.
The appearance of incumbent city or municipal mayors and provincial
governors, who are actors, in movies and television programs enhances their
income but reduces considerably the time that they should devote to their
constituents. This is in violation of Section 90 of R.A. No. 7160 and Section 7 of
R.A. No. 6713 or the Code of Conduct and Ethical Standards for Public Officials
and Employees. Their appearance further gives them undue advantage in future
elections over their opponents who are not actors. 11

The Court agrees with petitioner's contentions on locus standi considering the
liberal attitude it has taken in recent decisions.

However, following rules of procedure, we find as proper the trial court's


dismissal of the petition for declaratory relief in Civil Case No. 02-104585.
Readily discernable is that the same is an inappropriate remedy to enforce
compliance with Section 90 of R.A. 7160, and to prevent local chief executives
Santos-Recto, Lapid and Marquez from taking roles in movies and television
shows. The Court, thus, grants the OSG's move to dismiss the case.

Indeed, an action for declaratory relief should be filed by a person interested


under a deed, a will, a contract or other written instrument, and whose rights are
affected by a statute, an executive order, a regulation or an ordinance. The
purpose of the remedy is to interpret or to determine the validity of the written
instrument and to seek a judicial declaration of the parties' rights or duties
thereunder. 14 For the action to prosper, it must be shown that (1) there is a
justiciable controversy; (2) the controversy is between persons whose interests
are adverse; (3) the party seeking the relief has a legal interest in the controversy;
and (4) the issue is ripe for judicial determination. 15 Suffice it to state that, in the
petition filed with the trial court, petitioner failed to allege the ultimate facts
which satisfy these requisites. Not only that, as admitted by the petitioner, the
provision the interpretation of which is being sought has already been breached
by the respondents. Declaratory relief cannot thus be availed of. 16

WHEREFORE, premises considered, the petition is DENIED. No pronouncement


as to costs. EaHDcS

SO ORDERED.

||| (Social Justice Society v. Lina, G.R. No. 160031, December 18, 2008)

EN BANC

[G.R. No. 101783. January 23, 2002.]

MANILA ELECTRIC COMPANY, petitioner, vs.


PHILIPPINE CONSUMERS FOUNDATION, INC.,
EDGARDO S. ISIP, HON. JUDGE MANUEL M.
CALANOG, JR., and HON. JUDGE TIRSO D' C.
VELASCO, respondents.

Quiazon Makalintal Barot Torres Ibarra & Sison for petitioner.

The Solicitor General for public respondent.

Eduardo A. Claudio II & Associates, Tomas C. Llamas for private respondents.

Pascua & Zuniga for respondent PCFI.

SYNOPSIS

On February 5, 1982, the Philippine Consumers Foundation, Inc.


(PCFI) filed with the Board of Energy (BOE) a "Petition for Specific
Performance, Damages and Violation of P.D. 551" against Manila Electric
Company (MERALCO) docketed as BOE Case No. 82-198. PCFI sought,
among others, for the immediate refund by Meralco to its customers, all
savings it realized under P.D. No. 551, by reason of the reduction of its
franchise tax from 5% to 2%. On November 25, 1982, the BOE dismissed
PCFI's petition by declaring that Meralco was indeed authorized by the BOE
to retain the disputed savings under P.D. No. 551. Relative thereto, the PCFI
filed a petition for certiorari with this Court docketed as G.R. No. 63018 but
was dismissed for lack of merit. Four years thereafter, PCFI and a certain
Edgardo S. Isip filed with the Regional Trial Court (RTC), Branch 76,
Quezon City, a petition for declaratory relief docketed as Civil Case No. Q-
89-3659. Once again, they insisted that pursuant to Section 4 of P.D. 551, the
savings belong to the ultimate consumers. In its answer, Meralco prayed for
the dismissal of the petition on the ground of res judicata. Subsequently, the
RTC rendered the assailed decision declaring null and void the resolution of
this Court in G.R. No. 63018 and held that the disputed savings belong to the
consumers. Hence, the instant petition.
In granting the petition, the Court ruled that respondent RTC's
decision granting PCFI and Isip's petition for declaratory relief was in direct
derogation of the principle of res judicata. Twice, it had been settled that
Meralco is duly authorized to retain the savings it realized under P.D. No.
551 as long as its rate of return falls below the 12% allowable rate. The
pronouncement of the BOE in BOE Case No. 82-198 finding such fact to be
"beyond question" was clear and not susceptible of equivocation. This
pronouncement was sustained by this Court in G.R. No. 63018. In finding no
grave abuse of discretion on the part of the BOE, this Court saw the wisdom
of its assailed decision.
Moreover, a lower court cannot reverse or set aside decisions or
orders of a superior court, especially of the Supreme Court, for to do so will
negate the principle of hierarchy of courts and nullify the essence of review.
A final judgment, albeit erroneous, is binding on the whole world. Thus, it is
the duty of the lower court to obey the decisions of this Court and render
obeisance to its status as the apex of the hierarchy of courts. There is only
one Supreme Court from whose decisions all other courts should take their
bearings. SICaDA
SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; EFFECT OF JUDGMENT; RES


JUDICATA; ELUCIDATED. Res judicata means a matter adjudged, a thing
judicially acted upon or decided; a thing or matter settled by judgment. In res
judicata, the judgment in the first action is considered conclusive as to every
matter offered and received therein, as to any other admissible matter which
might have been offered for that purpose, and all other matters that could have
been adjudged therein. For a claim of res judicata to prosper, the following
requisites must concur: 1) there must be a final judgment or order; 2) the court
rendering it must have jurisdiction over the subject matter and the parties; 3) it
must be a judgment or order on the merits; and 4) there must be, between the
two cases identity of parties, subject matter and causes of action.

2. ID.; ID.; ID.; ID.; THERE MUST BE A FINAL JUDGMENT; PRESENT IN CASE
AT BAR. It is beyond question that this Court's Resolution dated October 22,
1985 in G.R. No. 63018, sustaining the BOE's Decision dated November 25, 1982
in BOE Case No. 82-198 which dismissed PCFI's petition, attained finality on
December 4, 1985. As a matter of fact, this Court had long ago issued an Entry of
Judgment stating that the said Resolution "became final and executory and is . . .
recorded in the Book of Entries of Judgments." Prior thereto, or on March 10,
1980, the BOE's Order in BOE Case No. 79-672 became final when the oppositors
therein did not appeal.

3. ID.; ID.; ID.; ID.; COURT WHICH RENDERED THE FINAL JUDGMENT HAS
JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES; CASE AT
BAR. There is no question that the BOE has jurisdiction over the subject
matter and the parties therein. Under P.D. No. 1206, The BOE is the agency
authorized to "regulate and fix the power rates to be charged by electric
companies." As such, it has jurisdiction over Meralco, an electric company, and
over the savings it realized under P.D. No. 551. It bears stressing that P.D. No.
551 was passed precisely to enable the grantees of electric franchises to reduce
their rates within the reach of consumers. Clearly, the matter on how the
disputed savings should be disposed of in order to realize a reduction of rates is
within the competence of the BOE. aHSTID

4. ID.; ID.; ID.; ID.; JUDGMENT OR ORDER WAS ON THE MERITS. The
BOE's Decision in BOE Case No. 82-198 is a judgment on the merits. A judgment
is on the merits when it determines the rights and liabilities of the parties based
on the disclosed facts, irrespective of formal, technical or dilatory objections.
After according both parties the opportunities to be heard, the BOE disposed of
the controversy by resolving the rights of the parties under P.D. No. 551. In its
Decision, the BOE declared in clear and unequivocal manner that Meralco "has
been duly authorized to retain the savings realized under the provisions of P.D.
No. 551" and that private respondent PCFI's argument to the contrary is
"untenable." The BOE's Decision was upheld by this Court in G.R. No. 63018.

5. ID.; ID.; ID.; ID.; DOES NOT REQUIRE ABSOLUTE BUT ONLY
SUBSTANTIAL IDENTITY OF PARTIES. There is identity of parties between
the two cases. BOE Case No. 82-198 was a contest between private respondent
PCFI, as petitioner, and Meralco, as respondent. Civil Case No. Q-89-3659
involves the same contenders, except that respondent Edgardo Isip joined PCFI
as a plaintiff. But his inclusion as such plaintiff is inconsequential. A party by
bringing forward, in a second case, additional parties cannot escape the effects of
the principle of res judicata when the facts remain the same. Res judicata is not
defeated by a minor difference of parties, as it does not require absolute but only
substantial identity of parties.

6. ID.; ID.; ID.; ID.; IDENTITY OF SUBJECT MATTERS; PRESENT IN CASE AT


BAR. The subject matters of BOE Case No. 82-198 and Civil Case No. Q-89-
3659 are likewise identical since both refer to the savings realized by Meralco
from the reduction of the franchise tax under P.D. No. 551. The subject matter of
an action refers to the thing, wrongful act, contract or property which is directly
involved in the action, concerning which the wrong has been done and with
respect to which the controversy has arisen. In both cases, the controversy is how
the disputed savings shall be disposed of whether they shall be retained by
Meralco or be passed on the consumers.

7. ID.; ID.; ID.; ID.; IDENTITY OF CAUSES OF ACTION; PARTIES WERE


LITIGATING FOR THE SAME THING AND THE SAME CONTENTIONS.
With respect to identity of causes of action, this requisite is likewise present. In
both cases, the act alleged to be in violation of the legal right of private
respondents is Meralco's retention of the savings it realized under P.D. No. 551.
While it is true that BOE Case No. 82-198 is one for specific performance, while
Civil Case No. Q-89-3659 is for declaratory relief in the ultimate both are
directed towards only one relief, i.e., the refund of the disputed savings to the
consumers. To seek a court's declaration on who should benefit from the
disputed savings (whether Meralco or the consumers) will result in the
relitigation of an issue fairly and fully adjudicated in BOE Case No. 82-198.
Clearly, the test of identity of causes of action lies not in the form of an action. The
difference of actions in the aforesaid cases is of no moment. The doctrine of res
judicata still applies considering that the parties were litigating for the same thing
and more importantly, the same contentions. As can be gleaned from the records,
private respondents' arguments in Civil Case No. Q-89-3659 bear extreme
resemblance with those raised in BOE Case No. 82-198.

8. POLITICAL LAW; ADMINISTRATIVE LAW; Presidential Decree No. 551;


MERALCO IS DULY AUTHORIZED TO RETAIN THE SAVINGS IT REALIZED
THEREUNDER AS LONG AS ITS RATE OF RETURN FALLS BELOW THE 12%
ALLOWABLE RATE. Respondent RTC's Decision granting PCFI and Isip's
petition for declaratory relief is in direct derogation of the principle of res
judicata. Twice, it has been settled that Meralco is duly authorized to retain the
savings it realized under P.D. No. 551 as long as its rate of return falls below the
12% allowable rate. The pronouncement of the BOE in BOE Case No. 82-198
finding such fact to be "beyond question" is clear and not susceptible of
equivocation. This pronouncement was sustained by this Court in G.R. No.
63018. In finding no grave abuse of discretion on the part of the BOE, this Court
saw the wisdom of its assailed Decision. Thus, this Court held: "[I]n dismissing
the petition for specific performance, the BOE authorized Meralco, in lieu of
increasing its rates to get a more reasonable return on investments while at the
same time refunding to consumers the benefit of P.D. No. 551, to instead defer
the passing on of benefits but without the planned increases. Instead of giving
back money to consumers and then taking back the same in terms of increased
rates, Meralco was allowed by the BOE to follow the more simplified and
rational procedure."

9. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; DECLARATORY RELIEF; NOT


APPLICABLE AFTER A LAW HAS BEEN ALLEGEDLY VIOLATED; CASE AT
BAR. [L]et it not be overlooked that the purpose of an action for declaratory
relief is to secure an authoritative statement of the rights and obligations of the
parties under a statute, deed, contract, etc. for their guidance in the enforcement
thereof, or compliance therewith, and not to settle issues arising from an alleged
breach thereof. It may be entertained only before the breach or violation of the
statute, deed, contract, etc., to which it refers. The petition gives a practical
remedy in ending controversies which have not reached the stage where other
relief is immediately available. It supplies the need for a form of action that will
set controversies at rest before they lead to repudiation of obligations, invasion of
rights, and the commission of wrongs. Here, private respondents brought the
petition for declaratory relief long after the alleged violation of P.D. No. 551.
DaHSIT

10. ID.; CIVIL PROCEDURE; JURISDICTION; PRINCIPLE OF HIERARCHY OF


COURTS; LOWER COURT CANNOT REVERSE OR SET ASIDE DECISION OR
ORDERS OF A SUPERIOR COURT. A lower court cannot reverse or set aside
decisions or orders of a superior court, especially of this Court, for to do so will
negate the principle of hierarchy of courts and nullify the essence of review. A
final judgment, albeit erroneous, is binding on the whole world. Thus, it is the
duty of the lower courts to obey the Decisions of this Court and render obeisance
to its status as the apex of the hierarchy of courts. "A becoming modesty of
inferior courts demands conscious realization of the position that they occupy in
the interrelation and operation of the integrated judicial system of the nation."
"There is only one Supreme Court from whose decisions all other courts should
take their bearings," as eloquently declared by Justice J.B.L. Reyes.

11. ID.; ID.; JUDGMENT; JUDICIAL ERROR SHOULD BE CORRECTED


THROUGH APPEALS, NOT THROUGH REPEATED SUITS ON THE SAME
CLAIM. Respondent RTC, and for this matter, all lower courts, ought to be
reminded that a final and executory decision or order can no longer be disturbed
or reopened no matter how erroneous it may be. Although judicial
determinations are not infallible, judicial error should be corrected through
appeals, not through repeated suits on the same claim. In setting aside the
Resolution and Entry of Judgment of this Court in G.R. No. 63018, respondent
court grossly violated basic rules of civil procedure. ScEaAD

DECISION
SANDOVAL-GUTIERREZ, J p:

Interest republicae ut sit finis litium 1 it is to the interest of the public that there
should be an end to litigation by the same parties and their privies over a subject
fully and fairly adjudicated. From this overwhelming concern springs the
doctrine of res judicata an obvious rule of reason according stability to
judgments. acCITS

Challenged in this petition for review on certiorari are the a) Decision in Civil
Case No. Q-89-3659 dated January 16, 1991 of the Regional Trial Court, Branch
76, Quezon City; 2 and b) its Order dated September 10, 1991 3 denying the
motion for reconsideration of the said Decision.

The pertinent facts are:

On September 11, 1974, former President Ferdinand E. Marcos, with the objective
of enabling the grantees of electric franchises to reduce their rates "within the
reach of consumers," 4 promulgated Presidential Decree No. 551 5 providing for
the reduction from 5% to 2% of the franchise tax paid by electric companies, thus:

"SECTION 1. Any provision of law or local ordinance to the


contrary notwithstanding, the franchise tax payable by all
grantees of franchises to generate, distribute and sell electric
current for light, heat and power shall be two (2%) of their
gross receipts received from the sale of electric current and
from transactions incident to the generation, distribution
and sale of electric current."

On February 5, 1982, the Philippine Consumers Foundation, Inc., (PCFI) filed


with the Board of Energy (BOE) a "Petition for Specific Performance, Damages
and Violation of P.D. No. 551" 6 against the Manila Electric Company (Meralco),
docketed as BOE Case No. 82-198. PCFI sought for the immediate refund by
Meralco to its customers of all the savings it realized under P.D. No. 551, through
the reduction of its franchise tax from 5% to 2%, with interest at the legal rate;
and for the payment of damages and a fine in the amount of P50,000.00 for
violating P.D. 551. It moored its petition on Section 4 of P.D. No. 551 which
provides:

"Sec. 4. All the savings realized by electric franchise holders


from the reduction of the franchise tax under Section 1 and
tariff reductions and tax credits under Sections 2 and 3, shall
be passed on to the ultimate consumer. The Secretary of Finance
shall promulgate rules and regulations and devise a
reporting systems to carry out the provisions of this Decree."
In its answer to the petition, Meralco alleged that it was duly authorized by the
BOE in its Order dated March 10, 1980 in BOE Case No. 79-692 to retain the
disputed savings; and that the said Order had long become final.

On November 25, 1982, the BOE issued its Decision dismissing PCFI's petition,
declaring that Meralco was indeed authorized by the BOE, in BOE Case No. 79-
692, to retain the disputed savings under P.D. 551, thus:

"It is at once evident from the foregoing controlling facts and


circumstances, particularly the Order of this Board dated March
10, 1980, as confirmed by the reply-letter dated March 3, 1981,
that Meralco has been duly authorized to retain the savings
realized under the provisions of P.D. 551. The authority granted
in the said Order and letter is so clear and unequivocal as to
leave any room for contradictory interpretation. This Board,
therefore, holds as untenable petitioner's claim that
respondent Meralco was never authorized under the said
Order and letter to hold on to the savings realized under the
said decree.

"The Board likewise finds to be devoid of merit petitioner's


contention that pursuant to Opinion No. 140, Series of 1979,
of the Minister of Justice, it is absolutely mandatory on the
part of respondent Meralco to pass on to its customers the
savings under consideration. It must be pointed out that the
Order of March 10, 1980 was issued by this Board on the
basis of the recommendation contained in the Memorandum
dated November 30, 1979 of the Minister of Finance, which
was approved by the President of the Philippines in his
directive to this Board dated December 11, 1979 issued thru
Presidential Executive Assistant Jacobo Clave. This Board
believes and so holds that the approval by the President of
the Philippines of the aforesaid Finance Ministry's
recommendation had the effects of (a) reversing or
modifying the aforementioned Opinion of the Minister of
Justice; and (b) confirming the promulgation by the Ministry
of Finance, conformably with the specific authority granted
it under P.D. No. 551, of an additional rule or regulation for
the implementation of the said decree for the guidance of
this Board. In issuing the Order of March 10, 1980, therefore,
the Board has done no more than follow and be guided by
the said additional rule or regulation.

"It is noteworthy to mention also that the registered oppositors in


BOE Case No. 79-692 (formerly BPW Case No. 72-2146), where
the respondent herein originally filed its motion requesting for
authority to defer the passing on to its customers of the franchise
tax reduction benefits under P.D. No. 551, have done nothing to
seek relief from or to appeal to the appropriate forum, the said
Order of March 10, 1980. As a consequence, the disposition
contained therein have long become final.

xxx xxx xxx


"That Meralco has been authorized to retain the savings resulting
from the reduction of the franchise tax under P.D. No. 551 is,
therefore beyond question." 7 (Italics supplied)

PCFI filed a motion for reconsideration but was denied by the BOE. Hence, PCFI
filed a Petition for Certiorari with this Court, docketed as G.R. No. 63018. In a
Resolution dated October 22, 1985, this Court dismissed the petition for lack of
merit, holding that:

"We see no grave abuse of discretion warranting the setting aside


of the BOE order.

"P.D. No. 551 ordered the Minister of Finance to issue


implementing rules and regulations. The Minister
authorized all grantees of electric franchises, not Meralco
alone, whose rates of return on their rate bases were below
the legal allowable level to either ask for increased rates or to
defer the passing on of benefits under the decree to
consumers until just and reasonable returns could be had.
Lengthy investigations, audits, hearings, and determinations
over practically an eight year period preceded the
questioned decision. The petitioners failed both below and
in this petition to successfully refute the facts ascertained in
the audits and examinations. The BOE approved option
formed the basis of subsequent determinations of Meralco
rates and the adopted formula became the basis of
computations. When this petition was filed on January 27, 1983,
the November 25, 1982 ruling was already final and executory.
Moreover, the March 10, 1980 judgment rendered in BOE Case
No. 79-692, where Meralco had filed a motion for authority to
defer passing on to customers the savings from the reduction of
franchise taxes, was not appealed or questioned by the petitioners.
Instead, they filed BOE Case No. 82-198 on February 5, 1982 or
almost two years later, raising the same issues against the same
parties. BOE's questioned decision in Case No. 82-198 used the
facts in BOE Case No. 79-692 for its conclusions. Not only had the
March 10, 1980 decision confirmed the findings of the Minister of
Finance on Meralco's accounts and finances but in filing the
second case, the petitioners were asking for a readjudication of the
same issues in another challenge to these same findings. . . . ." 8
(Italics supplied)

Four years thereafter, PCFI and a certain Edgardo S. Isip, private respondents
herein, filed with respondent Regional Trial Court, Branch 76, Quezon City, a
petition for declaratory relief, docketed as Civil Case No. Q-89-3659. Private
respondents prayed for a ruling on who should be entitled to the savings
realized by Meralco under P.D. No. 551. Once again, they insisted that pursuant
to Section 4 of P.D. No. 551, the savings belong to the ultimate consumers.

Meralco, in its answer, prayed for the dismissal of the petition on the ground of
res judicata, citing this Court's Resolution in G.R. No. 63018 which affirmed the
BOE's Decision in BOE Case No. 82-198.

On January 16, 1991, respondent RTC rendered the assailed Decision declaring
null and void the Resolution of this Court in G.R. No. 63018 and on the basis of
the Dissenting Opinion of the late Justice Claudio Teehankee, held that the
disputed savings belong to the consumers, thus:

"Respondent Meralco's theory is devoid of merit. As correctly


stated in the dissenting opinion of the late Chief Justice Claudio
Teehankee in the October 22, 1985 resolution of the Supreme
Court in SC G.R. No. 63018, the decision of the Board of Energy is
ultra vires, hence, null and void. . . . .

"It is a well-settled rule in statutory construction that when


the law is clear, it leaves no room for interpretation. The
memorandum issued by the Minister of Finance which was
made the basis of the decision of the Board of Energy has no
legal effect because Sec. 4 of P.D. No. 551 is clear and
unequivocal.

xxx xxx xxx


"Since the law is clear, what is left to be done by the
administrative body or agency concerned is to enforce the
law. There is no room for an administrative interpretation of
the law. In the instant case, the Board interpreted PD 551
and chose not only to enforce it but to amend and modify
the law on the basis of a Memorandum and the authority
issued by the Minister of Finance to all grantees of electric-
franchises, not Meralco alone, whose rates of return on their
rate basis were below the legal allowable level, to either ask
for an increased rates or to defer the passing on of benefits
under the decree to consumers, until just and reasonable
return could be had. This is beyond the authority granted by
PD 551 to the Minister of Finance. PD 551 merely ordered
the Minister of Finance to issue implementing rules and
regulations. He cannot amend or modify the clear mandate
of the law. The act therefore of the Minister of Finance was ultra
vires, hence, null and void. Considering that said act became the
basis of the Board of Energy's decision, it follows that said decision
is likewise null and void and the Supreme Court resolution
affirming said decision is also null and void having proceeded from
a void judgment, hence, cannot be considered as valid judgment
that will be a bar to the present action." 9 (Italics supplied)

Meralco moved for a reconsideration of the above Decision but was denied by
respondent court in its Order of September 10, 1991.

Hence, Meralco's petition for review on certiorari anchored on the following


grounds:

"I

RESPONDENT JUDGES ERRED IN HOLDING THAT


CIVIL CASE NO. 89-3659 IS NOT BARRED BY PRIOR
JUDGMENT.

II

RESPONDENT JUDGES ERRED IN DECLARING NULL


AND VOID A RESOLUTION OF THIS HONORABLE
SUPREME COURT.

III

RESPONDENT JUDGES ERRED IN HOLDING THAT THE


REMEDY OF DECLARATORY RELIEF WAS STILL
AVAILABLE TO PRIVATE RESPONDENTS.

IV

RESPONDENT JUDGES ERRED IN NOT DISMISSING THE


PETITION FOR DECLARATORY RELIEF." 10

Meralco contends that Civil Case No. Q-89-3659 is already barred by prior
judgments, referring to a) this Court's Resolution in G.R. No. 63018 sustaining the
BOE's Decision in BOE Case No. 82-198; and b) the Order dated March 10, 1980 of
the same Board in BOE Case No. 79-692, both holding that Meralco is authorized
to retain its savings realized under P.D. 551. Meralco likewise argues that
respondent RTC cannot annul the Resolution of this Court in G.R. No. 63018
considering that trial courts cannot set aside decisions of a superior court. And
lastly, Meralco maintains that private respondents can no longer avail of the
remedy of an action for declaratory relief in view of the rule that such action
should be filed before a violation of the statute occurred. 11

In their comment, 12 private respondents argue that this Court's Resolution in


G.R. No. 63018 cannot be a bar to Civil Case No. Q-89-3659 for declaratory relief
considering that it did not delve on the essential issue raised in the latter case,
i.e., who is entitled to the savings. Further, they claim that public interest would
be defeated by the application of res judicata.

The petition is meritorious.

The issue whether or not Meralco is duly authorized to retain the savings
resulting from the reduction of the franchise tax under P.D. No. 551 as long as its
rate of return falls below the 12% allowable rate recognized in this jurisdiction
has long been settled. Thus, the relitigation of the same issue in Civil Case No. Q-
89-3659 cannot be sanctioned under the principle of res judicata.

Res judicata means a matter adjudged, a thing judicially acted upon or decided; a
thing or matter settled by judgment. 13 In res judicata, the judgment in the first
action is considered conclusive as to every matter offered and received therein,
as to any other admissible matter which might have been offered for that
purpose, and all other matters that could have been adjudged therein. 14 For a
claim of res judicata to prosper, the following requisites must concur: 1) there
must be a final judgment or order; 2) the court rendering it must have
jurisdiction over the subject matter and the parties; 3) it must be a judgment or
order on the merits; and 4) there must be, between the two cases identity of
parties, subject matter and causes of action. 15

All the above requisites are extant in the records and thus, beyond dispute.

Re: FIRST REQUISITE there must be a final judgment:

It is beyond question that this Court's Resolution dated October 22, 1985 in G.R.
No. 63018, sustaining the BOE's Decision dated November 25, 1982 in BOE Case
No. 82-198 which dismissed PCFI's petition, attained finality on December 4,
1985. As a matter of fact, this Court had long ago issued an Entry of Judgment
stating that the said Resolution "became final and executory and is . . . recorded
in the Book of Entries of Judgments." Prior thereto, or on March 10, 1980, the
BOE's Order in BOE Case No. 79-672 became final when the oppositors therein
did not appeal.

Re: SECOND REQUISITE the court which rendered the final judgment must have
jurisdiction over the subject matter and the parties:

There is no question that the BOE has jurisdiction over the subject matter and the
parties herein. Under P.D. No. 1206, 16 The BOE is the agency authorized to
"regulate and fix the power rates to be charged by electric companies.'' 17 As
such, it has jurisdiction over Meralco, an electric company, and over the savings
it realized under P.D. No. 551. It bears stressing that P.D. No. 551 was passed
precisely to enable the grantees of electric franchises to reduce their rates within
the reach of consumers. Clearly, the matter on how the disputed savings should
be disposed of in order to realize a reduction of rates is within the competence of
the BOE.

Re: THIRD REQUISITE it must be a judgment or order on the merits:

The BOE's Decision in BOE Case No. 82-198 is a judgment on the merits. A
judgment is on the merits when it determines the rights and liabilities of the
parties based on the disclosed facts, irrespective of formal, technical or dilatory
objections. After according both parties the opportunities to be heard, the BOE
disposed of the controversy by resolving the rights of the parties under P.D. No.
551. In its Decision, the BOE declared in clear and unequivocal manner that
Meralco "has been duly authorized to retain the savings realized under the
provisions of P.D. No. 551" and that private respondent PCFI's argument to the
contrary is "untenable." The BOE's Decision was upheld by this Court in G.R. No.
63018.

Re: FOURTH REQUISITE there must be between the two cases identity of parties,
subject matter and causes of action:

There is identity of parties between the two cases. BOE Case No. 82-198 was a
contest between private respondent PCFI, as petitioner, and Meralco, as
respondent. Civil Case No. Q-89-3659 involves the same contenders, except that
respondent Edgardo Isip joined PCFI as a plaintiff. But his inclusion as such
plaintiff is inconsequential. A party by bringing forward, in a second case,
additional parties cannot escape the effects of the principle of res judicata when
the facts remain the same. Res judicata is not defeated by a minor difference of
parties, as it does not require absolute but only substantial identity of parties. 18

The subject matters of BOE Case No. 82-198 and Civil Case No. Q-89-3659 are
likewise identical since both refer to the savings realized by Meralco from the
reduction of the franchise tax under P.D. No. 551. The subject matter of an action
refers to the thing, wrongful act, contract or property which is directly involved
in the action, concerning which the wrong has been done and with respect to
which the controversy has arisen. 19 In both cases, the controversy is how the
disputed savings shall be disposed of whether they shall be retained by
Meralco or be passed on to the consumers.

With respect to identity of causes of action, this requisite is likewise present. In


both cases, the act alleged to be in violation of the legal right of private
respondents is Meralco's retention of the savings it realized under P.D. No. 551.
While it is true that BOE Case No. 82-198 is one for specific performance, while
Civil Case No. Q-89-3659 is for declaratory relief in the ultimate both are
directed towards only one relief, i.e., the refund of the disputed savings to the
consumers. To seek a court's declaration on who should benefit from the
disputed savings (whether Meralco or the consumers) will result in the
relitigation of an issue fairly and fully adjudicated in BOE Case No. 82-198.

Clearly, the test of identity of causes of action lies not in the form of an action. The
difference of actions in the aforesaid cases is of no moment. The doctrine of res
judicata still applies considering that the parties were litigating for the same thing
and more importantly, the same contentions. 20 As can be gleaned from the
records, private respondents' arguments in Civil Case No. Q-89-3659 bear
extreme resemblance with those raised in BOE Case No. 82-198.

Respondent RTC's Decision granting PCFI and Isip's petition for declaratory
relief is in direct derogation of the principle of res judicata. Twice, it has been
settled that Meralco is duly authorized to retain the savings it realized under
P.D. No. 551 as long as its rate of return falls below the 12% allowable rate. The
pronouncement of the BOE in BOE Case No. 82-198 finding such fact to be
"beyond question" is clear and not susceptible of equivocation. This
pronouncement was sustained by this Court in G.R. No. 63018. In finding no
grave abuse of discretion on the part of the BOE, this Court saw the wisdom of
its assailed Decision. Thus, this Court held: "[I]n dismissing the petition for
specific performance, the BOE authorized Meralco, in lieu of increasing its rates
to get a more reasonable return on investments while at the same time refunding
to consumers the benefit of P.D. No. 551, to instead defer the passing on of
benefits but without the planned increases. Instead of giving back money to
consumers and then taking back the same in terms of increased rates, Meralco
was allowed by the BOE to follow the more simplified and rational procedure."
21

Private respondents now argue that G.R. No. 63018 merely decreed the
postponement of the passing of Meralco's savings to the consumers until it could
increase its rate charges. On this point, this Court categorically ruled:
" . . . . And finally, as stated by the Solicitor General, if only to put
the issue to final rest, BOE's decision authorizing Meralco to
retain the savings resulting from the reduction of franchise tax as
long as its rate of return falls below the 12% allowable rate is
supported by P.D. No. 551, the rules and administrative orders of
the Ministry of Finance which had been duly authorized by the
decree itself and by directives of the President to carry out the
provisions of the decree, and most of all by equitable economic
considerations without which the decree would lose its purpose and
viability." 22

Corollarily, let it not be overlooked that the purpose of an action for declaratory
relief is to secure an authoritative statement of the rights and obligations of the
parties under a statute, deed, contract, etc. for their guidance in the enforcement
thereof, or compliance therewith, and not to settle issues arising from an alleged
breach thereof. It may be entertained only before the breach or violation of the
statute, deed, contract, etc., to which it refers. 23 The petition gives a practical
remedy in ending controversies which have not reached the stage where other
relief is immediately available. It supplies the need for a form of action that will
set controversies at rest before they lead to repudiation of obligations, invasion of
rights, and the commission of wrongs. 24 Here, private respondents brought the
petition for declaratory relief long after the alleged violation of P.D. No. 551.

Lastly, we are dismayed by respondent RTC's adherence to the Dissenting


Opinion, instead of the Majority Opinion, of the members of this Court in G.R.
No. 63018, as well as its temerity to declare a Resolution of this Court "null and
void" and "cannot be considered as valid judgment that will be a bar to the present
action."

A lower court cannot reverse or set aside decisions or orders of a superior court,
especially of this Court, for to do so will negate the principle of hierarchy of
courts and nullify the essence of review. A final judgment, albeit erroneous, is
binding on the whole world. Thus, it is the duty of the lower courts to obey the
Decisions of this Court and render obeisance to its status as the apex of the
hierarchy of courts. "A becoming modesty of inferior courts demands conscious
realization of the position that they occupy in the interrelation and operation of
the integrated judicial system of the nation." 25 "There is only one Supreme
Court from whose decisions all other courts should take their bearings," as
eloquently declared by Justice J. B. L. Reyes. 26

Respondent RTC, and for this matter, all lower courts, ought to be reminded that
a final and executory decision or order can no longer be disturbed or reopened
no matter how erroneous it may be. Although judicial determinations are not
infallible, judicial error should be corrected through appeals, not through
repeated suits on the same claim. 27 In setting aside the Resolution and Entry of
Judgment of this Court in G.R. No. 63018, respondent court grossly violated basic
rules of civil procedure.

In fine, we stress that the rights of Meralco under P.D. No. 551, as determined by
the BOE and sustained by this Court, have acquired the character of res judicata
and can no longer be challenged.

WHEREFORE, the petition is hereby GRANTED. The assailed RTC Decision


dated January 16, 1991 and Order dated September 10, 1991 in Civil Case No. Q-
89-3659 are REVERSED and SET ASIDE.

SO ORDERED.

||| (Manila Electric Co. v. Philippine Consumers Foundation, Inc., G.R. No. 101783,
January 23, 2002)

G.R. No. 150806. January 28, 2008.]

EUFEMIA ALMEDA and ROMEL ALMEDA, petitioners, vs.


BATHALA MARKETING INDUSTRIES, INC., respondent.

DECISION

NACHURA, J p:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, of
the Decision 1 of the Court of Appeals (CA), dated September 3, 2001, in CA-G.R.
CV No. 67784, and its Resolution 2 dated November 19, 2001. The assailed
Decision affirmed with modification the Decision 3 of the Regional Trial Court
(RTC), Makati City, Branch 136, dated May 9, 2000 in Civil Case No. 98-411.

Sometime in May 1997, respondent Bathala Marketing Industries, Inc., as lessee,


represented by its president Ramon H. Garcia, renewed its Contract of Lease 4
with Ponciano L. Almeda (Ponciano), as lessor, husband of petitioner Eufemia
and father of petitioner Romel Almeda. Under the said contract, Ponciano agreed
to lease a portion of the Almeda Compound, located at 2208 Pasong Tamo Street,
Makati City, consisting of 7,348.25 square meters, for a monthly rental of
P1,107,348.69, for a term of four (4) years from May 1, 1997 unless sooner
terminated as provided in the contract. 5 The contract of lease contained the
following pertinent provisions which gave rise to the instant case:

SIXTH It is expressly understood by the parties hereto


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

SEVENTH In case an extraordinary inflation or


devaluation of Philippine Currency should supervene, the
value of Philippine peso at the time of the establishment of
the obligation shall be the basis of payment; 6

During the effectivity of the contract, Ponciano died. Thereafter, respondent dealt
with petitioners. In a letter 7 dated December 29, 1997, petitioners advised
respondent that the former shall assess and collect Value Added Tax (VAT) on its
monthly rentals. In response, respondent contended that VAT may not be
imposed as the rentals fixed in the contract of lease were supposed to include the
VAT therein, considering that their contract was executed on May 1, 1997 when
the VAT law had long been in effect. 8

On January 26, 1998, respondent received another letter from petitioners


informing the former that its monthly rental should be increased by 73%
pursuant to condition No. 7 of the contract and Article 1250 of the Civil Code.
Respondent opposed petitioners' demand and insisted that there was no
extraordinary inflation to warrant the application of Article 1250 in light of the
pronouncement of this Court in various cases. 9

Respondent refused to pay the VAT and adjusted rentals as demanded by


petitioners but continued to pay the stipulated amount set forth in their contract.

On February 18, 1998, respondent instituted an action for declaratory relief for
purposes of determining the correct interpretation of condition Nos. 6 and 7 of
the lease contract to prevent damage and prejudice. 10 The case was docketed as
Civil Case No. 98-411 before the RTC of Makati.

On March 10, 1998, petitioners in turn filed an action for ejectment, rescission
and damages against respondent for failure of the latter to vacate the premises
after the demand made by the former. 11 Before respondent could file an answer,
petitioners filed a Notice of Dismissal. 12 They subsequently refiled the
complaint before the Metropolitan Trial Court of Makati; the case was raffled to
Branch 139 and was docketed as Civil Case No. 53596.

Petitioners later moved for the dismissal of the declaratory relief case for being
an improper remedy considering that respondent was already in breach of the
obligation and that the case would not end the litigation and settle the rights of
the parties. The trial court, however, was not persuaded, and consequently,
denied the motion.

After trial on the merits, on May 9, 2000, the RTC ruled in favor of respondent
and against petitioners. The pertinent portion of the decision reads:

WHEREFORE, premises considered, this Court renders


judgment on the case as follows:

1) declaring that plaintiff is not liable for the payment of


Value-Added Tax (VAT) of 10% of the rent for [the] use of
the leased premises;

2) declaring that plaintiff is not liable for the payment of any


rental adjustment, there being no [extraordinary] inflation or
devaluation, as provided in the Seventh Condition of the
lease contract, to justify the same;

3) holding defendants liable to plaintiff for the total amount


of P1,119,102.19, said amount representing payments
erroneously made by plaintiff as VAT charges and rental
adjustment for the months of January, February and March,
1999; and

4) holding defendants liable to plaintiff for the amount of


P1,107,348.69, said amount representing the balance of
plaintiff's rental deposit still with defendants.

SO ORDERED. 13

The trial court denied petitioners their right to pass on to respondent the burden
of paying the VAT since it was not a new tax that would call for the application
of the sixth clause of the contract. The court, likewise, denied their right to collect
the demanded increase in rental, there being no extraordinary inflation or
devaluation as provided for in the seventh clause of the contract. Because of the
payment made by respondent of the rental adjustment demanded by petitioners,
the court ordered the restitution by the latter to the former of the amounts paid,
notwithstanding the well-established rule that in an action for declaratory relief,
other than a declaration of rights and obligations, affirmative reliefs are not
sought by or awarded to the parties.
Petitioners elevated the aforesaid case to the Court of Appeals which affirmed
with modification the RTC decision. The fallo reads:

WHEREFORE, premises considered, the present appeal is


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

No pronouncement as to costs.

SO ORDERED. 14

The appellate court agreed with the conclusions of law and the application of the
decisional rules on the matter made by the RTC. However, it found that the trial
court exceeded its jurisdiction in granting affirmative relief to the respondent,
particularly the restitution of its excess payment.

Petitioners now come before this Court raising the following issues:

I.

WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL


CODE IS APPLICABLE TO THE CASE AT BAR.

II.

WHETHER OR NOT THE DOCTRINE ENUNCIATED IN


FILIPINO PIPE AND FOUNDRY CORP. VS. NAWASA
CASE, 161 SCRA 32 AND COMPANION CASES ARE (sic)
APPLICABLE IN THE CASE AT BAR.

III.

WHETHER OR NOT IN NOT APPLYING THE DOCTRINE


IN THE CASE OF DEL ROSARIO VS. THE SHELL
COMPANY OF THE PHILIPPINES, 164 SCRA 562, THE
HONORABLE COURT OF APPEALS SERIOUSLY ERRED
ON A QUESTION OF LAW.

IV.

WHETHER OR NOT THE FINDING OF THE HONORABLE


COURT OF APPEALS THAT RESPONDENT IS NOT
LIABLE TO PAY THE 10% VALUE ADDED TAX IS IN
ACCORDANCE WITH THE MANDATE OF RA 7716.
V.

WHETHER OR NOT DECLARATORY RELIEF IS PROPER


SINCE PLAINTIFF-APPELLEE WAS IN BREACH WHEN
THE PETITION FOR DECLARATORY RELIEF WAS FILED
BEFORE THE TRIAL COURT.

In fine, the issues for our resolution are as follows: 1) whether the action for
declaratory relief is proper; 2) whether respondent is liable to pay 10% VAT
pursuant to Republic Act (RA) 7716; and 3) whether the amount of rentals due
the petitioners should be adjusted by reason of extraordinary inflation or
devaluation.

Declaratory relief is defined as an action by any person interested in a deed, will,


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

Decisional law enumerates the requisites of an action for declaratory relief, as


follows: 1) the subject matter of the controversy must be a deed, will, contract or
other written instrument, statute, executive order or regulation, or ordinance; 2)
the terms of said documents and the validity thereof are doubtful and require
judicial construction; 3) there must have been no breach of the documents in
question; 4) there must be an actual justiciable controversy or the "ripening
seeds" of one between persons whose interests are adverse; 5) the issue must be
ripe for judicial determination; and 6) adequate relief is not available through
other means or other forms of action or proceeding. 16

It is beyond cavil that the foregoing requisites are present in the instant case,
except that petitioners insist that respondent was already in breach of the
contract when the petition was filed.

We do not agree.

After petitioners demanded payment of adjusted rentals and in the months that
followed, respondent complied with the terms and conditions set forth in their
contract of lease by paying the rentals stipulated therein. Respondent religiously
fulfilled its obligations to petitioners even during the pendency of the present
suit. There is no showing that respondent committed an act constituting a breach
of the subject contract of lease. Thus, respondent is not barred from instituting
before the trial court the petition for declaratory relief.
Petitioners claim that the instant petition is not proper because a separate action
for rescission, ejectment and damages had been commenced before another
court; thus, the construction of the subject contractual provisions should be
ventilated in the same forum.

We are not convinced.

It is true that in Panganiban v. Pilipinas Shell Petroleum Corporation 17 we held that


the petition for declaratory relief should be dismissed in view of the pendency of
a separate action for unlawful detainer. However, we cannot apply the same
ruling to the instant case. In Panganiban, the unlawful detainer case had already
been resolved by the trial court before the dismissal of the declaratory relief case;
and it was petitioner in that case who insisted that the action for declaratory
relief be preferred over the action for unlawful detainer. Conversely, in the case
at bench, the trial court had not yet resolved the rescission/ejectment case during
the pendency of the declaratory relief petition. In fact, the trial court, where the
rescission case was on appeal, itself initiated the suspension of the proceedings
pending the resolution of the action for declaratory relief.

We are not unmindful of the doctrine enunciated in Teodoro, Jr. v. Mirasol 18


where the declaratory relief action was dismissed because the issue therein could
be threshed out in the unlawful detainer suit. Yet, again, in that case, there was
already a breach of contract at the time of the filing of the declaratory relief
petition. This dissimilar factual milieu proscribes the Court from applying
Teodoro to the instant case.

Given all these attendant circumstances, the Court is disposed to entertain the
instant declaratory relief action instead of dismissing it, notwithstanding the
pendency of the ejectment/rescission case before the trial court. The resolution of
the present petition would write finis to the parties' dispute, as it would settle
once and for all the question of the proper interpretation of the two contractual
stipulations subject of this controversy.

Now, on the substantive law issues.

Petitioners repeatedly made a demand on respondent for the payment of VAT


and for rental adjustment allegedly brought about by extraordinary inflation or
devaluation. Both the trial court and the appellate court found no merit in
petitioners' claim. We see no reason to depart from such findings.

As to the liability of respondent for the payment of VAT, we cite with approval
the ratiocination of the appellate court, viz.:

Clearly, the person primarily liable for the payment of VAT


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

In short, petitioners are estopped from shifting to respondent the burden of


paying the VAT.
Petitioners' reliance on the sixth condition of the contract is, likewise, unavailing.
This provision clearly states that respondent can only be held liable for new taxes
imposed after the effectivity of the contract of lease, that is, after May 1997, and
only if they pertain to the lot and the building where the leased premises are
located. Considering that RA 7716 took effect in 1994, the VAT cannot be
considered as a "new tax" in May 1997, as to fall within the coverage of the sixth
stipulation.

Neither can petitioners legitimately demand rental adjustment because of


extraordinary inflation or devaluation.

Petitioners contend that Article 1250 of the Civil Code does not apply to this case
because the contract stipulation speaks of extraordinary inflation or devaluation
while the Code speaks of extraordinary inflation or deflation. They insist that the
doctrine pronounced in Del Rosario v. The Shell Company, Phils. Limited 20 should
apply.
Essential to contract construction is the ascertainment of the intention of the
contracting parties, and such determination must take into account the
contemporaneous and subsequent acts of the parties. This intention, once
ascertained, is deemed an integral part of the contract. 21

While, indeed, condition No. 7 of the contract speaks of "extraordinary inflation


or devaluation" as compared to Article 1250's "extraordinary inflation or
deflation," we find that when the parties used the term "devaluation," they really
did not intend to depart from Article 1250 of the Civil Code. Condition No. 7 of
the contract should, thus, be read in harmony with the Civil Code provision.

That this is the intention of the parties is evident from petitioners' letter 22 dated
January 26, 1998, where, in demanding rental adjustment ostensibly based on
condition No. 7, petitioners made explicit reference to Article 1250 of the Civil
Code, even quoting the law verbatim. Thus, the application of Del Rosario is not
warranted. Rather, jurisprudential rules on the application of Article 1250 should
be considered.

Article 1250 of the Civil Code states:

In case an extraordinary inflation or deflation of the currency


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

Inflation has been defined as the sharp increase of money or credit, or both,
without a corresponding increase in business transaction. There is inflation when
there is an increase in the volume of money and credit relative to available
goods, resulting in a substantial and continuing rise in the general price level. 23
In a number of cases, this Court had provided a discourse on what constitutes
extraordinary inflation, thus:

[E]xtraordinary inflation exists when there is a decrease or


increase in the purchasing power of the Philippine currency
which is unusual or beyond the common fluctuation in the
value of said currency, and such increase or decrease could
not have been reasonably foreseen or was manifestly beyond
the contemplation of the parties at the time of the
establishment of the obligation. 24

The factual circumstances obtaining in the present case do not make out a case of
extraordinary inflation or devaluation as would justify the application of Article
1250 of the Civil Code. We would like to stress that the erosion of the value of the
Philippine peso in the past three or four decades, starting in the mid-sixties, is
characteristic of most currencies. And while the Court may take judicial notice of
the decline in the purchasing power of the Philippine currency in that span of
time, such downward trend of the peso cannot be considered as the
extraordinary phenomenon contemplated by Article 1250 of the Civil Code.
Furthermore, absent an official pronouncement or declaration by competent
authorities of the existence of extraordinary inflation during a given period, the
effects of extraordinary inflation are not to be applied. 25

WHEREFORE, premises considered, the petition is DENIED. The Decision of the


Court of Appeals in CA-G.R. CV No. 67784, dated September 3, 2001, and its
Resolution dated November 19, 2001, are AFFIRMED.

SO ORDERED.

||| (Almeda v. Bathala Marketing Industries, Inc., G.R. No. 150806, January 28, 2008)

THIRD DIVISION

[G.R. No. 193494. March 12, 2014.]

LUI ENTERPRISES, INC., petitioner, vs. ZUELLIG


PHARMA CORPORATION and the PHILIPPINE BANK
OF COMMUNICATIONS, respondents.

DECISION

LEONEN, J p:

There should be no inexplicable delay in the filing of a motion to set aside order
of default. Even when a motion is filed within the required period, excusable
negligence must be properly alleged and proven.

This is a petition for review on certiorari of the Court of Appeals' decision 1 dated
May 24, 2010 and resolution 2 dated August 13, 2010 in CA-G.R. CV No. 88023.
The Court of Appeals affirmed in toto the Regional Trial Court of Makati's
decision 3 dated July 4, 2006.

The facts as established from the pleadings of the parties are as follows:

On March 9, 1995, Lui Enterprises, Inc. and Zuellig Pharma Corporation entered
into a 10-year contract of lease 4 over a parcel of land located in Barrio Tigatto,
Buhangin, Davao City. The parcel of land was covered by Transfer Certificate of
Title No. T-166476 and was registered under Eli L. Lui. 5

On January 10, 2003, Zuellig Pharma received a letter 6 from the Philippine Bank
of Communications. Claiming to be the new owner of the leased property, the
bank asked Zuellig Pharma to pay rent directly to it. Attached to the letter was a
copy of Transfer Certificate of Title No. 336962 under the name of the Philippine
Bank of Communications. 7 Transfer Certificate of Title No. 336962 was derived
from Transfer Certificate of Title No. T-166476. 8

Zuellig Pharma promptly informed Lui Enterprises of the Philippine Bank of


Communications' claim. On January 28, 2003, Lui Enterprises wrote to Zuellig
Pharma and insisted on its right to collect the leased property's rent. 9

Due to the conflicting claims of Lui Enterprises and the Philippine Bank of
Communications over the rental payments, Zuellig Pharma filed a complaint 10
for interpleader with the Regional Trial Court of Makati. In its complaint, Zuellig
Pharma alleged that it already consigned in court P604,024.35 as rental
payments. Zuellig Pharma prayed that it be allowed to consign in court its
succeeding monthly rental payments and that Lui Enterprises and the Philippine
Bank of Communications be ordered to litigate their conflicting claims. 11

The Philippine Bank of Communications filed its answer 12 to the complaint. On


the other hand, Lui Enterprises filed a motion to dismiss 13 on the ground that
Zuellig Pharma's alleged representative did not have authority to file the
complaint for interpleader on behalf of the corporation. Under the secretary's
certificate 14 dated May 6, 2003 attached to the complaint, Atty. Ana L.A. Peralta
was only authorized to "initiate and represent [Zuellig Pharma] in the civil
proceedings for consignation of rental payments to be filed against Lui
Enterprises, Inc. and/or [the Philippine Bank of Communications]." 15

According to Lui Enterprises, an earlier filed nullification of deed of dation in


payment case pending with the Regional Trial Court of Davao barred the filing
of the interpleader case. 16 Lui Enterprises filed this nullification case against the
Philippine Bank of Communications with respect to several properties it
dationed to the bank in payment of its obligations. The property leased by
Zuellig Pharma was among those allegedly dationed to the Philippine Bank of
Communications. 17 EHASaD

In the nullification of deed of dation in payment case, Lui Enterprises raised the
issue of which corporation had the better right over the rental payments. 18 Lui
Enterprises argued that the same issue was involved in the interpleader case. To
avoid possible conflicting decisions of the Davao trial court and the Makati trial
court on the same issue, Lui Enterprises argued that the subsequently filed
interpleader case be dismissed.
To support its argument, Lui Enterprises cited a writ of preliminary injunction 19
dated July 2, 2003 issued by the Regional Trial Court of Davao, ordering Lui
Enterprises and the Philippine Bank of Communications "[to maintain] status
quo" 20 with respect to the rent. By virtue of the writ of preliminary injunction,
Lui Enterprises argued that it should continue collecting the rental payments
from its lessees until the nullification of deed of dation in payment case was
resolved. The writ of preliminary injunction dated July 2, 2003 reads:

WHEREAS, on June 30, 2003, the Court issued an Order, a


portion of which is quoted:

WHEREFORE, PREMISES CONSIDERED, let a


Writ of Preliminary Injunction issue, restraining
and enjoining [the Philippine Bank of
Communications], its agents or [representative], the
Office of the Clerk of Court-Sheriff and all persons
acting on their behalf, from conducting auction sale
on the properties of [Lui Enterprises] in EJF-REM
Case No. 6272-03 scheduled on July 3, 2003 at 10:00
a.m. at the Hall of Justice, Ecoland, Davao City,
until the final termination of the case, upon plaintiff
[sic] filing of a bond in the amount of P1,000,000.00
to answer for damages that the enjoined parties
may sustain by reason of the injunction if the Court
should finally decide that applicant is not entitled
thereto.

WHEREAS, that plaintiff posted a bond of P1,000,000.00


duly approved by this Court.

IT IS HEREBY ORDERED by the undersigned Judge that,


until further orders, [the Philippine Bank of
Communications] and all [its] attorneys, representatives,
agents and any other persons assisting [the bank], are
directed to restrain from conducting auction sale on the
Properties of [Lui Enterprises] in EJF-REM Case No. 6272-03
scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice,
Ecoland, Davao City, until the final termination of the case.
21

Zuellig Pharma filed its opposition 22 to the motion to dismiss. It argued that the
motion to dismiss should be denied for having been filed late. Under Rule 16,
Section 1 of the 1997 Rules of Civil Procedure, a motion to dismiss should be filed
within the required time given to file an answer to the complaint, which is 15
days from service of summons on the defendant. 23 Summons was served on Lui
Enterprises on July 4, 2003. It had until July 19, 2003 to file a motion to dismiss,
but Lui Enterprises filed the motion only on July 23, 2003. 24

As to Lui Enterprises' claim that the interpleader case was filed without
authority, Zuellig Pharma argued that an action interpleader "is a necessary
consequence of the action for consignation." 25 Zuellig Pharma consigned its
rental payments because of "the clearly conflicting claims of [Lui Enterprises]
and [the Philippine Bank of Communications]." 26 Since Atty. Ana L.A. Peralta
was authorized to file a consignation case, this authority necessarily included an
authority to file the interpleader case.

Nevertheless, Zuellig Pharma filed in court the secretary's certificate dated


August 28, 2003, 27 which expressly stated that Atty. Ana L.A. Peralta was
authorized to file a consignation and interpleader case on behalf of Zuellig
Pharma. 28

With respect to the nullification of deed of dation in payment case, Zuellig


Pharma argued that its pendency did not bar the filing of the interpleader case. It
was not a party to the nullification case. 29

As to the writ of preliminary injunction issued by the Regional Trial Court of


Davao, Zuellig Pharma argued that the writ only pertained to properties owned
by Lui Enterprises. Under the writ of preliminary injunction, the Regional Trial
Court of Davao enjoined the July 3, 2003 auction sale of Lui Enterprises'
properties, the proceeds of which were supposed to satisfy its obligations to the
Philippine Bank of Communications. As early as April 21, 2001, however, the
Philippine Bank of Communications already owned the leased property as
evidenced by Transfer Certificate of Title No. 336962. Thus, the writ of
preliminary injunction did not apply to the leased property. 30

Considering that Lui Enterprises filed its motion to dismiss beyond the 15-day
period to file an answer, Zuellig Pharma moved that Lui Enterprises be declared
in default. 31

In its compliance 32 dated September 15, 2003, the Philippine Bank


of Communications "[joined Zuellig Pharma] in moving to declare [Lui
Enterprises] in default, and in [moving for] the denial of [Lui Enterprises']
motion to dismiss." 33
The Regional Trial Court of Makati found that Lui Enterprises failed to file its
motion to dismiss within the reglementary period. Thus, in its order 34 dated
October 6, 2003, the trial court denied Lui Enterprises' motion to dismiss and
declared it in default. 35

Lui Enterprises did not move for the reconsideration of the order dated October
6, 2003. Thus, the Makati trial court heard the interpleader case without Lui
Enterprises' participation. DTESIA

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

ORDER

Posed for Resolution is the Motion for Amendment of Order


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

xxx xxx xxx

As elsewhere stated, [the Philippine Bank of


Communications] did not oppose the instant motion up to
the present. In fact, during the hearing held on March 15,
2004, [the bank's] counsel manifested in open court that
except for the rentals due from [Zuellig Pharma] which are
the subject of a consignation suit before a Makati Court, the
other rental payments are continuously received by [Lui
Enterprises].

There being no objection from [the Philippine Bank of


Communications], and in order to protect the right of [Lui
Enterprises] respecting the subject of the action during the
pendency of this case, this Court, in the exercise of its
discretion hereby grants the motion.

Accordingly, consistent with the order of this Court dated


June 30, 2003, the parties are hereby directed to further
observe status quo with regard to the rental payments owing
or due from the lessees of the properties subject of the first
set of deeds of dacion and that the defendants are enjoined
from disposing of the properties located at Green Heights
Village, Davao City until the case is finally resolved.

With the order dated April 1, 2004 issued by the Regional Trial Court of Davao as
basis, Lui Enterprises argued that Zuellig Pharma must remit its rental payments
to it and prayed that the interpleader case be dismissed.
The Regional Trial Court of Makati only noted the manifestation with prayer
dated April 15, 2004. 39

It was only on October 21, 2004, or one year after the issuance of the order of
default, that Lui Enterprises filed a motion to set aside order of default 40 in the
Makati trial court on the ground of excusable negligence. Lui Enterprises argued
that its failure to file a motion to dismiss on time "was caused by the negligence
of [Lui Enterprises'] former counsel." 41 This negligence was allegedly excusable
because "[Lui Enterprises] was prejudiced and prevented from fairly presenting
[its] case." 42 TSAHIa

For its allegedly meritorious defense, Lui Enterprises argued that the earlier filed
nullification of deed of dation in payment case barred the filing of the
interpleader case. The two actions allegedly involved the same parties and the
same issue of which corporation had the better right over the rental payments.
To prevent "the possibility of two courts . . . rendering conflicting rulings [on the
same issue]," 43 Lui Enterprises argued that the subsequently filed interpleader
case be dismissed.

Zuellig Pharma filed its opposition 44 to the motion to set aside order of default.
It argued that a counsel's failure to file a timely answer was inexcusable
negligence which bound his client.

Further, Zuellig Pharma argued that the pending case for nullification of deed of
dation in payment "[did] not preclude [Zuellig Pharma] from seeking the relief
prayed for in the [interpleader case]." 45

While the motion to set aside order of default was still pending for resolution,
Lui Enterprises filed the manifestation and motion to dismiss 46 dated April 21,
2005 in the Makati trial court. It manifested that the Davao trial court issued
another order 47 dated April 18, 2005 in the nullification of deed of dation in
payment case. In this order, the Davao trial court directed the Philippine Bank of
Communications to inform Zuellig Pharma to pay rent to Lui Enterprises while
the Davao trial court's order dated April 1, 2004 was subsisting. The order dated
April 1, 2005 of the Davao trial court reads:

ORDER

Plaintiffs move for execution or implementation of the Order


dated September 14, 2004. In substance, [Lui Enterprises]
seek[s] to compel the remittance in their favor of the rentals
from [Zuellig Pharma], one of the lessees alluded to in the
September 14, 2004 Order whose rental payments "must be
remitted to and collected by [Lui Enterprises]." [The
Philippine Bank of Communications] did not submit any
opposition.

It appears from the records that sometime in February 2003,


after being threatened with a lawsuit coming from [the
Philippine Bank of Communications], [Zuellig Pharma]
stopped remitting its rentals to [Lui Enterprises] and instead,
has reportedly deposited the monthly rentals before a
Makati court for consignation. SEHDIC

As aptly raised by the plaintiffs, a possible impasse may


insist should the Makati Court's ruling be contrary to or in
conflict with the status quo order issued by this Court. To
preclude this spectacle, Zuellig Pharma should accordingly
be advised with the import of the Order dated September 14,
2004, the salient portion of which is quoted:

. . . prior to the institution of the instant case and by


agreement of the parties, plaintiffs were given as
they did exercise the right to collect, receive and
enjoy rental payments . . . .

Since the April 1, 2004 status quo order was a


necessary implement of the writ of preliminary
injunction issued on June 30, 2003, it follows that
plaintiff's right to collect and receive rental
payments which he enjoyed prior to the filing of
this case, must be respected and protected and
maintained until the case is resolved. As such, all
rentals due from the above-enumerated lessees
must be remitted to and collected by the Plaintiffs.

Status quo simply means the last actual peaceable


uncontested status that preceded the actual
controversy. (Searth Commodities Corp. v. Court of
Appeals, 207 SCRA 622).

As such, the [Philippine Bank of Communications] [is]


hereby directed to forthwith inform [Zuellig Pharma] of the
April 1, 2004 status quo order and the succeeding September
14, 2004 Order, and consequently, for the said lessee to remit
all rentals due from February 23, 2003 and onwards to [Lui
Enterprises] in the meanwhile that the status quo order is
subsisting.

In its manifestation and motion to dismiss, Lui Enterprises reiterated its prayer
for the dismissal of the interpleader case to prevent "the possibility of [the
Regional Trial Court, Branch 143, Makati City] and [the Regional Trial Court,
Branch 16, Davao City] rendering conflicting rulings [on the same issue of which
corporation has the better right to the rental payments]." 48

Without resolving the motion to set aside order of default, the Makati trial court
denied the manifestation with motion to dismiss dated April 21, 2005 on the
ground that Lui Enterprises already lost its standing in court. 49

Lui Enterprises did not file any motion for reconsideration of the denial of the
manifestation and motion to dismiss dated April 21, 2005.

In its decision 50 dated July 4, 2006, the Regional Trial Court of Makati ruled that
Lui Enterprises "[was] barred from any claim in respect of the [rental payments]"
51 since it was declared in default. Thus, according to the trial court, there was
no issue as to which corporation had the better right over the rental payments. 52
The trial court awarded the total consigned amount of P6,681,327.30 to the
Philippine Bank of Communications and ordered Lui Enterprises to pay Zuellig
Pharma P50,000.00 in attorney's fees. 53

Lui Enterprises appealed to the Court of Appeals. 54

The Court of Appeals found Lui Enterprises' appellant's brief insufficient. Under
Rule 44, Section 13 of the 1997 Rules of Civil Procedure, an appellant's brief must
contain a subject index, page references to the record, table of cases, textbooks
and statutes cited, and the statement of issues, among others. However, Lui
Enterprises' appellant's brief did not contain these requirements. 55

As to the denial of Lui Enterprises' motion to dismiss, the Court of Appeals


sustained the trial court. The Court of Appeals found that Lui Enterprises filed
its motion to dismiss four days late. 56

With respect to Lui Enterprises' motion to set aside order of default, the Court of
Appeals found that Lui Enterprises failed to show the excusable negligence that
prevented it from filing its motion to dismiss on time. On its allegedly
meritorious defense, the Court of Appeals ruled that the nullification of deed of
dation in payment case did not bar the filing of the interpleader case, with
Zuellig Pharma not being a party to the nullification case. 57

On the award of attorney's fees, the Court of Appeals sustained the trial court
since "Zuellig Pharma . . . was constrained to file the action for interpleader with
consignation in order to protect its interests . . . ." 58

Thus, in its decision 59 promulgated on May 24, 2010, the Court of Appeals
dismissed Lui Enterprises' appeal and affirmed in toto the Regional Trial Court of
Makati's decision.
Lui Enterprises filed a motion for reconsideration. 60

The Court of Appeals denied Lui Enterprises' motion for reconsideration in its
resolution promulgated on August 13, 2010. 61 Hence, this petition.

In this petition for review on certiorari, 62 Lui Enterprises argued that the Court
of Appeals applied "the rules of procedure strictly" 63 and dismissed its appeal
on technicalities. According to Lui Enterprises, the Court of Appeals should have
taken a liberal stance and allowed its appeal despite the lack of subject index,
page references to the record, table of cases, textbooks and statutes cited, and the
statement of issues in its appellant's brief. 64 IDcAHT

Lui Enterprises also claimed that the trial court should have set aside the order of
default since its failure to file a motion to dismiss on time was due to excusable
negligence. 65

For its allegedly meritorious defense, Lui Enterprises argued that the pending
nullification of deed of dation in payment case barred the filing of the
interpleader case. The nullification of deed of dation in payment case and the
interpleader case allegedly involved the same issue of which corporation had the
better right to the rent. To avoid conflicting rulings on the same issue, Lui
Enterprises argued that the subsequently filed interpleader case be dismissed. 66

No attorney's fees should have been awarded to Zuellig Pharma as argued by


Lui Enterprises. Zuellig Pharma filed the interpleader case despite its knowledge
of the nullification of deed of dation in payment case filed in the Davao trial
court where the same issue of which corporation had the better right over the
rental payments was being litigated. Thus, Zuellig Pharma filed the interpleader
case in bad faith for which it was not entitled to attorney's fees. 67

The Philippine Bank of Communications filed its comment 68 on the petition for
review on certiorari. It argued that Lui Enterprises failed to raise any error of law
and prayed that we affirm in toto the Court of Appeals' decision.

For Zuellig Pharma, it manifested that it was adopting the Philippine Bank of
Communications' arguments in its comment. 69

The issues for our resolution are:

I.Whether the Court of Appeals erred in dismissing Lui


Enterprises' appeal for lack of subject index, page
references to the record, table of cases, textbooks
and statutes cited, and the statement of issues in
Lui Enterprises' appellant's brief;

II.Whether the Regional Trial Court of Makati erred in


denying Lui Enterprises' motion to set aside order
of default;

III.Whether the annulment of deed of dation in payment


pending in the Regional Trial Court of Davao
barred the subsequent filing of the interpleader case
in the Regional Trial Court of Makati; and

IV.Whether Zuellig Pharma was entitled to attorney's fees.

Lui Enterprises' petition for review on certiorari is without merit. However, we


delete the award of attorney's fees.

I
Lui Enterprises did not comply with the rules on the contents of the
appellant's brief
Under Rule 50, Section 1, paragraph (f) of the 1997 Rules of Civil Procedure, the
Court of Appeals may, on its own motion or that of the appellee, dismiss an
appeal should the appellant's brief lack specific requirements under Rule 44,
Section 13, paragraphs (a), (c), (d), and (f):

Section 1.Grounds for dismissal of appeal. An appeal may be


dismissed by the Court of Appeals, on its own motion or on
that of the appellee, on the following grounds:

xxx xxx xxx

(f)Absence of specific assignment of errors in the appellant's


brief, or of page references to the record as required in
Section 13, paragraphs (a), (c), (d), and (f) of Rule 44.

These requirements are the subject index of the matter in brief, page references to
the record, and a table of cases alphabetically arranged and with textbooks and
statutes cited:

Section 13.Contents of the appellant's brief. The appellant's


brief shall contain, in the order herein indicated, the
following:

(a)A subject index of the matter in brief with a digest of the


arguments and page references, and a table of cases
alphabetically arranged, textbooks and statutes cited with
references to the pages where they are cited;

xxx xxx xxx


(c)Under the heading "Statement of the Case," a clear and
concise statement of the nature of the action, a summary of
the proceedings, the appealed rulings and orders of the
court, the nature of the controversy, with page references to
the record;

(d)Under the heading "Statement of Facts,'' a clear and


concise statement in a narrative form of the facts admitted
by both parties and of those in controversy, together with
the substance of the proof relating thereto in sufficient detail
to make it clearly intelligible, with page references to the
record; AIDTSE

xxx xxx xxx

(f)Under the heading "Argument," the appellant's arguments


on each assignment of error with page references to the
record. The authorities relied upon shall be cited by the page
of the report at which the case begins and the page of the
report on which the citation is found;

xxx xxx xxx

Lui Enterprises' appellant's brief lacked a subject index, page references to the
record, and table of cases, textbooks and statutes cited. Under Rule 50, Section 1
of the 1997 Rules of Civil Procedure, the Court of Appeals correctly dismissed
Lui Enterprises' appeal.

Except for cases provided in the Constitution, 70 appeal is a "purely statutory


right." 71 The right to appeal "must be exercised in the manner prescribed by
law" 72 and requires strict compliance with the Rules of Court on appeals. 73
Otherwise, the appeal shall be dismissed, and its dismissal shall not be a
deprivation of due process of law.

In Mendoza v. United Coconut Planters Bank, Inc., 74 this court sustained the Court
of Appeals' dismissal of Mendoza's appeal. Mendoza's appellant's brief lacked a
subject index, assignment of errors, and page references to the record. In De Liano
v. Court of Appeals, 75 this court also sustained the dismissal of De Liano's appeal.
De Liano's appellant's brief lacked a subject index, a table of cases and
authorities, and page references to the record.

There are exceptions to this rule. In Philippine Coconut Authority v. Corona


International, Inc., 76 the Philippine Coconut Authority's appellant's brief lacked a
clear and concise statement of the nature of the action, a summary of the
proceedings, the nature of the judgment, and page references to the record.
However, this court found that the Philippine Coconut Authority substantially
complied with the Rules. Its appellant's brief "apprise[d] [the Court of Appeals]
of the essential facts and nature of the case as well as the issues raised and the
laws necessary [to dispose of the case]." 77 This court "[deviated] from a rigid
enforcement of the rules" 78 and ordered the Court of Appeals to resolve the
Philippine Coconut Authority's appeal.

In Go v. Chaves, 79 Go's 17-page appellant's brief lacked a subject index.


However, Go subsequently filed a subject index. This court excused Go's
procedural lapse since the appellant's brief "[consisted] only of 17 pages which
[the Court of Appeals] may easily peruse to apprise it of [the case] and of the
relief sought." 80 This court ordered the Court of Appeals to resolve Go's appeal
"in the interest of justice." 81

In Philippine Coconut Authority and Go, the appellants substantially complied with
the rules on the contents of the appellant's brief. Thus, this court excused the
appellants' procedural lapses.

In this case, Lui Enterprises did not substantially comply with the rules on the
contents of the appellant's brief. It admitted that its appellant's brief lacked the
required subject index, page references to the record, and table of cases,
textbooks, and statutes cited. However, it did not even correct its admitted
"technical omissions" 82 by filing an amended appellant's brief with the required
contents. 83 Thus, this case does not allow a relaxation of the rules. The Court of
Appeals did not err in dismissing Lui Enterprises' appeal.

Rules on appeal "are designed for the proper and prompt disposition of cases
before the Court of Appeals." 84 With respect to the appellant's brief, its required
contents are designed "to minimize the [Court of Appeals'] labor in [examining]
the record upon which the appeal is heard and determined." 85

The subject index serves as the brief's table of contents. 86 Instead of "[thumbing]
through the [appellant's brief]" 87 every time the Court of Appeals Justice
encounters an argument or citation, the Justice deciding the case only has to refer
to the subject index for the argument or citation he or she needs. 88 This saves
the Court of Appeals time in reviewing the appealed case. Efficiency allows the
justices of the appellate court to substantially attend to this case as well as other
cases.

Page references to the record guarantee that the facts stated in the appellant's
brief are supported by the record. 89 A statement of fact without a page reference
to the record creates the presumption that it is unsupported by the record and,
thus, "may be stricken or disregarded altogether." 90

As for the table of cases, textbooks, and statutes cited, this is required so that the
Court of Appeals can easily verify the authorities cited "for accuracy and
aptness." 91

Lui Enterprises' appellant's brief lacked a subject index, page references to the
record, and a table of cases, textbooks, and statutes cited. These requirements
"were designed to assist the appellate court in the accomplishment of its tasks,
and, overall, to enhance the orderly administration of justice." 92 This court will
not disregard rules on appeal "in the guise of liberal construction." 93 For this
court to liberally construe the Rules, the party must substantially comply with
the Rules and correct its procedural lapses. 94 Lui Enterprises failed to remedy
these errors. cSIACD

All told, the Court of Appeals did not err in dismissing Lui Enterprises' appeal. It
failed to comply with Rule 44, Section 13, paragraphs (a), (c), (d), and (f) of the
1997 Rules of Civil Procedure on the required contents of the appellant's brief.

II
Lui Enterprises failed to show that its failure to answer the complaint
within the required period was due to excusable negligence
When a defendant is served with summons and a copy of the complaint, he or
she is required to answer within 15 days from the day he or she was served with
summons. 95 The defendant may also move to dismiss the complaint "[w]ithin
the time for but before filing the answer." 96

Fifteen days is sufficient time for a defendant to answer with good defenses
against the plaintiff's allegations in the complaint. Thus, a defendant who fails to
answer within 15 days from service of summons either presents no defenses
against the plaintiff's allegations in the complaint or was prevented from filing
his or her answer within the required period due to fraud, accident, mistake or
excusable negligence. 97

In either case, the court may declare the defendant in default on plaintiff's
motion and notice to defendant. 98 The court shall then try the case until
judgment without defendant's participation 99 and grant the plaintiff such relief
as his or her complaint may warrant. 100

A defendant declared in default loses his or her standing in court. 101 He or she
is "deprived of the right to take part in the trial and forfeits his [or her] rights as a
party litigant," 102 has no right "to present evidence [supporting his or her]
allegations," 103 and has no right to "control the proceedings [or] cross-examine
witnesses." 104 Moreover, he or she "has no right to expect that [the court] would
[act] upon [his or her pleadings]" 105 or that he or she "may [oppose] motions
filed against him [or her]." 106

However, the defendant declared in default "does not [waive] all of [his or her]
rights." 107 He or she still has the right to "receive notice of subsequent
proceedings." 108 Also, the plaintiff must still present evidence supporting his or
her allegations "despite the default of [the defendant]." 109

Default, therefore, is not meant to punish the defendant but to enforce the
prompt filing of the answer to the complaint. For a defendant without good
defenses, default saves him or her "the embarrassment of openly appearing to
defend the indefensible." 110 As this court explained in Gochangco v. The Court of
First Instance of Negros Occidental, Branch IV: 111

It does make sense for a defendant without defenses, and


who accepts the correctness of the specific relief prayed for
in the complaint, to forego the filing of the answer or any
sort of intervention in the action at all. For even if he did
intervene, the result would be the same: since he would be
unable to establish any good defense, having none in fact,
judgment would inevitably go against him. And this
would be an acceptable result, if not being in his power to
alter or prevent it, provided that the judgment did not go
beyond or differ from the specific relief stated in the
complaint. . . . . 112 (Emphasis in the original)

On the other hand, for a defendant with good defenses, "it would be unnatural
for him [or her] not to set . . . up [his or her defenses] properly and timely." 113
Thus, "it must be presumed that some insuperable cause prevented him [or her]
from [answering the complaint]." 114 In which case, his or her proper remedy
depends on when he or she discovered the default and whether the default
judgment was already rendered by the trial court.

After notice of the declaration of default but before the court renders the default
judgment, the defendant may file, under oath, a motion to set aside order of
default. The defendant must properly show that his or her failure to answer was
due to fraud, accident, 115 mistake 116 or excusable negligence. 117 The
defendant must also have a meritorious defense. Rule 9, Section 3, paragraph (b)
of the 1997 Rules of Civil Procedure provides:

Section 3.Default; declaration of. . . .

(b)Relief from order of default. A party declared in default


may at any time after notice thereof and before judgment file
a motion under oath to set aside the order of default upon
proper showing that his failure to answer was due to fraud,
accident, mistake or excusable negligence and that he has a
meritorious defense. In such case, the order of default may
be set aside on such terms and conditions as the judge may
impose in the interest of justice.

If the defendant discovers his or her default after judgment but prior to the
judgment becoming final and executory, he or she may file a motion for new trial
under Rule 37, Section 1, paragraph (a) of the 1997 Rules of Civil Procedure. 118
If he or she discovers his or her default after the judgment has become final and
executory, a petition for relief from judgment under Rule 38, Section 1 of the 1997
Rules of Civil Procedure may be filed. 119

Appeal is also available to the defendant declared in default. He or she may


appeal the judgment for being contrary to the evidence or to the law under Rule
41, Section 2 of the 1997 Rules of Civil Procedure. 120 He or she may do so even
if he or she did not file a petition to set aside order of default. 121

A petition for certiorari may also be filed if the trial court declared the defendant
in default with grave abuse of discretion. 122

The remedies of the motion to set aside order of default, motion for new trial,
and petition for relief from judgment are mutually exclusive, not alternative or
cumulative. This is to compel defendants to remedy their default at the earliest
possible opportunity. Depending on when the default was discovered and
whether a default judgment was already rendered, a defendant declared in
default may avail of only one of the three remedies.

Thus, if a defendant discovers his or her default before the trial court renders
judgment, he or she shall file a motion to set aside order of default. If this motion
to set aside order of default is denied, the defendant declared in default cannot
await the rendition of judgment, and he or she cannot file a motion for new trial
before the judgment becomes final and executory, or a petition for relief from
judgment after the judgment becomes final and executory.

Also, the remedies against default become narrower and narrower as the trial
nears judgment. The defendant enjoys the most liberality from this court with a
motion to set aside order of default, as he or she has no default judgment to
contend with, and he or she has the whole period before judgment to remedy his
or her default. TcDIaA

With a motion for new trial, the defendant must file the motion within the period
for taking an appeal 123 or within 15 days from notice of the default judgment.
Although a default judgment has already been rendered, the filing of the motion
for new trial tolls the reglementary period of appeal, and the default judgment
cannot be executed against the defendant.

A petition for relief from judgment is filed after the default judgment has become
final and executory. Thus, the filing of the petition for relief from judgment does
not stay the execution of the default judgment unless a writ of preliminary
injunction is issued pending the petition's resolution. 124

Upon the grant of a motion to set aside order of default, motion for new trial, or a
petition for relief from judgment, the defendant is given the chance to present his
or her evidence against that of plaintiff's. With an appeal, however, the
defendant has no right to present evidence on his or her behalf and can only
appeal the judgment for being contrary to plaintiff's evidence or the law.

Similar to an appeal, a petition for certiorari does not allow the defendant to
present evidence on his or her behalf. The defendant can only argue that the trial
court committed grave abuse of discretion in declaring him or her in default.

Thus, should a defendant prefer to present evidence on his or her behalf, he or


she must file either a motion to set aside order of default, motion for new trial, or
a petition for relief from judgment.

In this case, Lui Enterprises had discovered its default before the Regional Trial
Court of Makati rendered judgment. Thus, it timely filed a motion to set aside
order of default, raising the ground of excusable negligence.

Excusable negligence is "one which ordinary diligence and prudence could not
have guarded against." 125 The circumstances should be properly alleged and
proved. In this case, we find that Lui Enterprises' failure to answer within the
required period is inexcusable.

Lui Enterprises' counsel filed its motion to dismiss four days late. It did not
immediately take steps to remedy its default and took one year from discovery of
default to file a motion to set aside order of default. In its motion to set aside
order of default, Lui Enterprises only "conveniently blamed its . . . counsel [for
the late filing of the answer]" 126 without offering any excuse for the late filing.
This is not excusable negligence under Rule 9, Section 3, paragraph (b) 127 of the
1997 Rules of Civil Procedure. Thus, the Regional Trial Court of Makati did not
err in refusing to set aside the order of default.

Lui Enterprises argued that the Regional Trial Court of Makati should have been
liberal in setting aside its order of default. After it had been declared in default,
Lui Enterprises filed several manifestations informing the Makati trial court of
the earlier filed nullification of deed of dation in payment case which barred the
filing of the interpleader case. Lui Enterprises' president, Eli L. Lui, and counsel
even flew in from Davao to Makati to "formally [manifest that] a [similar] action
between [Lui Enterprises] and [the Philippine Bank of Communications]" 128
was already pending in the Regional Trial Court of Davao. However, the trial
court did not recognize Lui Enterprises' standing in court.

The general rule is that courts should proceed with deciding cases on the merits
and set aside orders of default as default judgments are "frowned upon." 129 As
much as possible, cases should be decided with both parties "given every chance
to fight their case fairly and in the open, without resort to technicality." 130

However, the basic requirements of Rule 9, Section 3, paragraph (b) of the 1997
Rules of Civil Procedure must first be complied with. 131 The defendant's motion
to set aside order of default must satisfy three conditions. First is the time
element. The defendant must challenge the default order before judgment.
Second, the defendant must have been prevented from filing his answer due to
fraud, accident, mistake or excusable negligence. Third, he must have a
meritorious defense. As this court held in SSS v. Hon. Chaves: 132

Procedural rules are not to be disregarded or dismissed


simply because their non-observance may have resulted in
prejudice to a party's substantive rights. Like all rules[,] they
are to be followed, except only when for the most persuasive
of reasons they may be relaxed to relieve a litigant of an
injustice not commensurate with the degree of his
thoughtlessness in not complying with the procedure
prescribed. . . . . 133

As discussed, Lui Enterprises never explained why its counsel failed to file the
motion to dismiss on time. It just argued that courts should be liberal in setting
aside orders of default. Even assuming that it had a meritorious defense and that
its representative and counsel had to fly in from Davao to Makati to personally
appear and manifest in court its meritorious defense, Lui Enterprises must first
show that its failure to answer was due to fraud, accident, mistake or excusable
negligence. This Lui Enterprises did not do.

Lui Enterprises argued that Zuellig Pharma filed the interpleader case to compel
Lui Enterprises and the Philippine Bank of Communications to litigate their
claims. Thus, "[d]eclaring the other claimant in default would ironically defeat
the very purpose of the suit." 134 The Regional Trial Court of Makati should not
have declared Lui Enterprises in default.

Under Rule 62, Section 1 of the 1997 Rules of Civil Procedure, a person may file a
special civil action for interpleader if conflicting claims are made against him or
her over a subject matter in which he or she has no interest. The action is brought
against the claimants to compel them to litigate their conflicting claims among
themselves. Rule 62, Section 1 of the 1997 Rules of Civil Procedure provides:

Section 1.When interpleader proper. Whenever conflicting


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

An interpleader complaint may be filed by a lessee against those who have


conflicting claims over the rent due for the property leased. 135 This remedy is
for the lessee to protect him or her from "double vexation in respect of one
liability." 136 He or she may file the interpleader case to extinguish his or her
obligation to pay rent, remove him or her from the adverse claimants' dispute,
and compel the parties with conflicting claims to litigate among themselves.
cDSAEI

In this case, Zuellig Pharma filed the interpleader case to extinguish its obligation
to pay rent. Its purpose in filing the interpleader case "was not defeated" 137
when the Makati trial court declared Lui Enterprises in default.

At any rate, an adverse claimant in an interpleader case may be declared in


default. Under Rule 62, Section 5 of the 1997 Rules of Civil Procedure, a claimant
who fails to answer within the required period may, on motion, be declared in
default. The consequence of the default is that the court may "render judgment
barring [the defaulted claimant] from any claim in respect to the subject matter."
138 The Rules would not have allowed claimants in interpleader cases to be
declared in default if it would "ironically defeat the very purpose of the suit." 139

The Regional Trial Court of Makati declared Lui Enterprises in default when it
failed to answer the complaint within the required period. Lui Enterprises filed a
motion to set aside order of default without an acceptable excuse why its counsel
failed to answer the complaint. It failed to prove the excusable negligence. Thus,
the Makati trial court did not err in refusing to set aside the order of default.

III
The nullification of deed in dation in payment case did not bar the filing of
the interpleader case. Litis pendentia is not present in this case.
Lui Enterprises allegedly filed for nullification of deed of dation in payment with
the Regional Trial Court of Davao. It sought to nullify the deed of dation in
payment through which the Philippine Bank of Communications acquired title
over the leased property. Lui Enterprises argued that this pending nullification
case barred the Regional Trial Court of Makati from hearing the interpleader
case. Since the interpleader case was filed subsequently to the nullification case,
the interpleader case should be dismissed.

Under Rule 16, Section 1, paragraph (e) of the 1997 Rules of Civil Procedure, a
motion to dismiss may be filed on the ground of litis pendentia:

Section 1.Grounds. Within the time for but before filing the
answer to the complaint or pleading asserting a claim, a
motion to dismiss may be made on any of the following
grounds:

xxx xxx xxx

(e)That there is another action pending between the


same parties for the same cause;

xxx xxx xxx

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

The requisites of litis pendentia are:

(1)Identity of parties or at least such as represent the same


interest in both actions;

(2)Identity of rights asserted and reliefs prayed for, the


reliefs being founded on the same facts; and

(3)The identity in the two cases should be such that the


judgment that may be rendered in one would,
regardless of which party is successful, amount to
res judicata in the other. 144

All of the requisites must be present. 145 Absent one requisite, there is no litis
pendentia. 146

In this case, there is no litis pendentia since there is no identity of parties in the
nullification of deed of dation in payment case and the interpleader case. Zuellig
Pharma is not a party to the nullification case filed in the Davao trial court.

There is also no identity of rights asserted and reliefs prayed for. Lui Enterprises
filed the first case to nullify the deed of dation in payment it executed in favor of
the Philippine Bank of Communications. Zuellig Pharma subsequently filed the
interpleader case to consign in court the rental payments and extinguish its
obligation as lessee. The interpleader case was necessary and was not instituted
to harass either Lui Enterprises or the Philippine Bank of Communications.

Thus, the pending nullification case did not bar the filing of the interpleader case.

Lui Enterprises cited Progressive Development Corporation, Inc. v. Court of Appeals


147 as authority to set aside the subsequently filed interpleader case. In this cited
case, petitioner Progressive Development Corporation, Inc. entered into a lease
contract with Westin Seafood Market, Inc. The latter failed to pay rent. Thus,
Progressive Development Corporation, Inc. repossessed the leased premises,
inventoried the movable properties inside the leased premises, and scheduled
the public sale of the inventoried properties as they agreed upon in their lease
contract.

Westin Seafood Market, Inc. filed for forcible entry with damages against
Progressive Development Corporation, Inc. It subsequently filed an action for
damages against Progressive Development Corporation for its "forcible takeover
of the leased premises." 148

This court ordered the subsequently filed action for damages dismissed as the
pending forcible entry with damages case barred the subsequently filed damages
case.

Progressive Development Corporation, Inc. does not apply in this case. The action for
forcible entry with damages and the subsequent action for damages were filed by
the same plaintiff against the same defendant. There is identity of parties in both
cases.

In this case, the nullification of deed of dation in payment case was filed by Lui
Enterprises against the Philippine Bank of Communications. The interpleader
case was filed by Zuellig Pharma against Lui Enterprises and the Philippine Bank
of Communications. A different plaintiff filed the interpleader case against Lui
Enterprises and the Philippine Bank of Communications. Thus, there is no
identity of parties, and the first requisite of litis pendentia is absent.

As discussed, Lui Enterprises filed the nullification of deed of dation in payment


to recover ownership of the leased premises. Zuellig Pharma filed the
interpleader case to extinguish its obligation to pay rent. There is no identity of
reliefs prayed for, and the second requisite of litis pendentia is absent.

Since two requisites of litis pendentia are absent, the nullification of deed of dation
in payment case did not bar the filing of the interpleader case.

Lui Enterprises alleged that the Regional Trial Court of Davao issued a writ of
preliminary injunction against the Regional Trial Court of Makati. The Regional
Trial Court of Davao allegedly enjoined the Regional Trial Court of Makati from
taking cognizance of the interpleader case. Lui Enterprises argued that the
Regional Trial Court of Makati "should have respected the orders issued by the
Regional Trial Court of Davao." 149 Lui Enterprises cited Compania General de
Tabacos de Filipinas v. Court of Appeals 150 where this court allegedly held:

. . . [T]he issuance of the said writ by the RTC of Agoo, La


Union not only seeks to enjoin Branch 9 of the RTC of
Manila from proceeding with the foreclosure case but also
has the effect of pre-empting the latter's orders. . . . . 151

Compania General de Tabacos de Filipinas is not an authority for the claim that a
court can issue a writ of preliminary injunction against a co-equal court. The
cited sentence was taken out of context. In Compania General de Tabacos de
Filipinas, this court held that the Regional Trial Court of Agoo had no power to
issue a writ of preliminary injunction against the Regional Trial Court of Manila.
152 A court cannot enjoin the proceedings of a co-equal court.

Thus, when this court said that the Regional Trial Court of Agoo's writ of
preliminary injunction "not only seeks to enjoin . . . [the Regional Trial Court of
Manila] from proceeding with the foreclosure case but also has the effect of pre-
empting the latter's orders," 153 this court followed with "[t]his we cannot
countenance." 154

At any rate, the Regional Trial Court of Davao's order dated April 18, 2005 was
not a writ of preliminary injunction. It was a mere order directing the Philippine
Bank of Communications to inform Zuellig Pharma to pay rent to Lui Enterprises
while the status quo order between Lui Enterprises and the Philippine Bank of
Communications was subsisting. The Regional Trial Court of Davao did not
enjoin the proceedings before the Regional Trial Court of Makati. The order
dated April 18, 2005 provides:

As such, [the Philippine Bank of Communications] [is]


hereby directed to forthwith inform Zuellig Pharma Corp.,
of the April 1, 2004 status quo order and the succeeding
September 14, 2004 Order, and consequently, for the said
lessee to remit all rentals due from February 23, 2003 and
onwards to plaintiff Lui Enterprises, Inc., in the meanwhile
that the status quo order is subsisting. 155

Thus, the Regional Trial Court of Davao did not enjoin the Regional Trial Court
of Makati from hearing the interpleader case.

All told, the trial court did not err in proceeding with the interpleader case. The
nullification of deed of dation in payment case pending with the Regional Trial
Court of Davao did not bar the filing of the interpleader case with the Regional
Trial Court of Makati.

The Court of Appeals erred in awarding attorney's fees


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

(1)When exemplary damages are awarded;

(2)When the defendant's act or omission has compelled the


plaintiff to litigate with third persons or to incur
expenses to protect his interest; TIADCc

(3)In criminal cases of malicious prosecution against the


plaintiff;

(4)In case of a clearly unfounded civil action or proceeding


against the plaintiff;

(5)Where the defendant acted in gross and evident bad faith


in refusing to satisfy the plaintiff's plainly valid,
just and demandable claim;

(6)In actions for legal support;

(7)In actions for the recovery of wages of household helpers,


laborers and skilled workers;

(8)In actions for indemnity under workmen's compensation


and employer's liability laws;

(9)In a separate civil action to recover civil liability arising


from a crime;

(10)When at least double judicial costs are awarded;

(11)In any other case where the court deems it just and
equitable that attorney's fees and expenses of
litigation should be recovered. 160

Even if a party is "compelled to litigate with third persons or to incur expenses to


protect his [or her] rights," 161 attorney's fees will not be awarded if no bad faith
"could be reflected in a party's persistence in a case." 162

To award attorney's fees, the court must have "factual, legal, [and] equitable
justification." 163 The court must state the award's basis in its decision. 164 These
rules are based on the policy that "no premium should be placed on the right to
litigate." 165

In this case, the Court of Appeals awarded attorney's fees as "[Zuellig Pharma]
was compelled to litigate with third persons or to incur expenses to protect [its]
interest[s]." 166 This is not a compelling reason to award attorney's fees. That
Zuellig Pharma had to file an interpleader case to consign its rental payments did
not mean that Lui Enterprises was in bad faith in insisting that rental payments
be paid to it. Thus, the Court of Appeals erred in awarding attorney's fees to
Zuellig Pharma.

All told, the Court of Appeals' award of P50,000.00 as attorney's fees must be
deleted.

WHEREFORE, in view of the foregoing, the petition for review on certiorari is


DENIED. The Court of Appeals' decision and resolution in CA-G.R. CV No.
88023 are AFFIRMED with MODIFICATION. The award of P50,000.00
attorney's fees to Zuellig Pharma Corporation is DELETED.

SO ORDERED.

Velasco, Jr., Peralta, Abad and Mendoza, JJ., concur

||| (Lui Enterprises, Inc. v. Zuellig Pharma Corp., G.R. No. 193494, March 12, 2014)

EN BANC

[UDK-14858. April 2, 2013.]

ERNESTO D. BALITE, petitioner, vs. COMMISSION ON


ELECTIONS, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court en banc issued a Resolution dated APRIL 2, 2013,
which reads as follows:

"UDK-14858 (Ernesto D. Balite vs. Commission on Elections). In accordance with


Rule 64 and other related provisions of the 1997 Rules of Civil Procedure, as
amended, governing review of judgments and final orders or resolutions of the
Commission on Elections, only petitions which are accompanied by or which
comply strictly with the requirements specified therein shall be entertained. On
the basis thereof, the Court Resolved to DISMISS the instant petition for
certiorari for non-compliance therewith, particularly for
(a)failure to completely state the material dates to show that
the petition was filed on time pursuant to Section 5,
Rule 64 in relation to Section 3 (2nd par.), Rule 46;

(b)non-submission of proof of service (e.g., a written


admission of the party served/an affidavit of the
party serving/registry receipts) of the petition on
the Commission on Elections as required by Section
5, Rule 64 and Section 13, Rule 13;

(c)failure to pay docket and other fees in violation of Section


5 (4th par.), Rule 64 and Section 3, Rule 46 in
relation to Section 2, Rule 56; and

(d)insufficiency of the petition in form as it lacks verification


and certification against forum-shopping as
required by Section 5, Rule 64 in relation to Sections
4 and 5, Rule 7.

In any event, the petition would still be dismissed for failure to sufficiently show
that any grave abuse of discretion was committed by the Commission on
Elections in rendering the challenged resolution which, on the contrary, appears
to be in accord with the facts and applicable law and jurisprudence." Perlas-
Bernabe, J., on official leave. (adv30)

||| (Balite v. COMELEC, UDK-14858, April 02, 2013)

EN BANC

[G.R. No. 205296. February 19, 2013.]

ARNOLD ADRANEDA AND DR. PRISCILLA AMPUAN,


petitioners, vs. COMMISSION ON ELECTIONS AND
ATING GURO, respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court en banc issued a Resolution dated FEBRUARY 19,
2013, which reads as follows:

"G.R. No. 205296 (Arnold Adraneda and Dr. Priscilla Ampuan vs. Commission on
Elections and Ating Guro). In accordance with Rule 64 and other related
provisions of the 1997 Rules of Civil Procedure, as amended, governing review
of judgments and final orders or resolutions of the Commission on Elections,
only petitions which are accompanied by or which comply strictly with the
requirements specified therein shall be entertained. On the basis thereof, the
Court Resolved to DISMISS the instant petition for certiorari for non-compliance
therewith, particularly for

(a) failure to accompany the petition with a clearly legible


duplicate original or certified true copy of the
assailed resolution in violation of Section 5, Rule 64;
and

(b) failure to state material dates showing when notice of


resolution subject of the petition was received,
when a motion for reconsideration, if any, was
filed, and when notice of the denial thereof was
received, to show that the petition was filed on time
pursuant to Section 5, Rule 64 in relation to Section
3 (2nd par.), Rule 46." (adv2) TDcAaH

Very
||| (Adraneda v. COMELEC, G.R. No. 205296, February 19, 2013)

EN BANC

[G.R. No. 200704. March 20, 2012.]

IAM ALASTAIRE PAINAGAN PALGAN, petitioner, vs.


COMMISSION ON ELECTIONS AND KRISTINE JEANE
BUDIONGAN, respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court en banc issued a Resolution dated MARCH 20, 2012,
which reads as follows:
"G.R. No. 200704 (Iam Alastaire Painagan Palgan vs. Commission on Elections and
Kristine Jeane Budiongan). The Court Resolved to:

(a)GRANT the Motion dated February 24, 2012 filed by


counsel for petitioner for an extension of thirty (30)
days from February 24, 2012, or until March 25,
2012, within which to file a petition for certiorari
under Rules 64 and 65 of the Rules of Court (not a
petition for review on certiorari); and

(b)REQUIRE the petitioner to COMPLY with the following


procedural requirements within five (5) days from
notice hereof:

(i)requirement to state material dates showing


when notice of judgment, final order or
resolution subject of the petition was
received, when a motion for
reconsideration, if any, was filed, and
when notice of the denial thereof was
received, to show that the motion for
extension was filed on time pursuant to
Section 5 (3rd par.), Rule 64 in relation to
Section 3 (2nd par.), Rule 46, Rules of
Court;

(ii)requirement to pay deposit for sheriff's fee and


legal research fee pursuant to Sections 4
and 5 (4th par.), Rule 64, Rules of Court;
and

(iii)requirement to file pleadings and motions in


eighteen (18) legible copies pursuant to
Section 5 (1st par.), Rule 64 and Section 2,
Rule 56, Rules of Court." Del Castillo, J., on
leave. (adv61) aITECA

Very
||| (Palgan v. COMELEC, G.R. No. 200704, March 20, 2012)

EN BANC

[G.R. No. 205736. March 5, 2013.]


ALLIANCE FOR REFORM TOWARDS EFFECTIVE
MANAGEMENT AND SUSTAINABLE DEVELOPMENT,
INC. [ARMD], petitioner, vs. COMMISSION ON
ELECTIONS, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court en banc issued a Resolution dated MARCH 5, 2013,
which reads as follows:

"G.R. No. 205736 (Alliance for Reform Towards Effective Management and Sustainable
Development, Inc. [ARMD] vs. Commission on Elections). In accordance with
Rule 64 and other related provisions of the 1997 Rules of Civil Procedure, as
amended, governing review of judgments and final orders or resolutions of the
Commission on Elections, only petitions which are accompanied by or which
comply strictly with the requirements specified therein shall be entertained. On
the basis thereof, the Court Resolved to DISMISS the instant petition for
certiorari for non-compliance therewith, particularly for

(a)failure to accompany the petition with a clearly legible


duplicate original or certified true copy of the
assailed judgment in violation of Section 5, Rule 64;
and

(b)insufficiency of the petition in form as the verification is


defective because of lack of proof of authority to
sign the same for and in behalf of the petitioner."
(adv90) SDEITC

||| (Alliance for Reform Towards Effective Management and Sustainable Development,
Inc. v. COMELEC, G.R. No. 205736, March 05, 2013)

EN BANC

[G.R. No. 209593. November 19, 2013.]

CASIMIRO A. YNARES III, petitioner, vs. COMMISSION


ON ELECTIONS AND DANILO O. LEYBLE, respondents.
NOTICE

Sirs/Mesdames :

Please take notice that the Court en banc issued a Resolution dated NOVEMBER 19,
2013, which reads as follows:

"G.R. No. 209593 (Casimiro A. Ynares III vs. Commission on Elections and Danilo O.
Leyble). In accordance with Rule 64 and other related provisions of the 1997
Rules of Civil Procedure, as amended, as well as circulars, directives or orders of
the Supreme Court, governing review of judgments and final orders or
resolutions of the Commission on Elections, only petitions which are
accompanied by or which comply strictly with the requirements specified therein
shall be entertained. On the basis thereof, the Court Resolved to DISMISS the
instant petition for certiorari for non-compliance therewith, particularly for

(a)failure to state all the material dates to show that the


petition was filed on time pursuant to Section 5,
Rule 64 in relation to Section 3 (2nd par.), Rule 46,
1997 Rules of Civil Procedure, as amended;

(b)insufficient or defective verification and certification on


non-forum shopping, as the affiant thereof was not
personally known to the notary public or identified
by the notary public through competent evidence of
identity as required by the 2004 Rules on Notarial
Practice; and

(c)failure to attach a verified declaration that the pleading


and annexes submitted electronically are complete
and true copies of the printed document and
annexes filed with the Supreme Court, as required
in the Guidelines on Submission and Processing of
Soft Copies of Supreme Court-bound Papers
Pursuant to the Efficient Use of Paper Rule. cDAISC

In any event, the petition would still be dismissed for being the wrong remedy
and for failure to sufficiently show that any grave abuse of discretion was
committed by the Commission on Elections in rendering the challenged orders
which, on the contrary, appear to be in accord with the facts and applicable law
and jurisprudence.

The Court Resolved to NOTE the Manifestation dated October 29, 2013 filed by
counsel for petitioner, stating that he was constrained to file the petition by
registered mail on October 25, 2013." (adv66)

||| (CASIMIRO A. YNARES III, petitioner, vs. COMMISSION ON ELECTIONS


AND DANILO O. LEYBLE, respondents., G.R. No. 209593, November 19, 2013)

EN BANC

[G.R. No. 184915. June 30, 2009.]

NILO T. PATES, petitioner, vs. COMMISSION ON


ELECTIONS and EMELITA B. ALMIRANTE, respondents.

RESOLUTION

BRION, J p:

Our Resolution of November 11, 2008 dismissed the petition in caption pursuant
to Section 3, Rule 64 of the Rules of Court which provides:

SEC. 3. Time to file petition. The petition shall be filed


within thirty (30) days from notice of the judgment or final
order or resolution sought to be reviewed. The filing of a
motion for new trial or reconsideration of said judgment or
final order or resolution, if allowed under the procedural
rules of the Commission concerned, shall interrupt the
period herein fixed. If the motion is denied, the aggrieved
party may file the petition within the remaining period, but
which shall not be less than five (5) days in any event,
reckoned from notice of denial.

taking into account the following material antecedents:


a. February 1, 2008 The COMELEC First Division issued
its Resolution (assailed in the petition);

b. February 4, 2008 The counsel for petitioner Nilo T.


Pates (petitioner) received a copy of the February 1,
2008 Resolution; TAEcSC

c. February 8, 2008 The petitioner filed his motion for


reconsideration (MR) of the February 1, 2008
Resolution (4 days from receipt of the February 1,
2008 Resolution)

d. September 18, 2008 The COMELEC en banc issued a


Resolution denying the petitioner's MR (also
assailed in the petition).

e. September 22, 2008 The petitioner received the


COMELEC en banc Resolution of September 18,
2008 AaITCH

Under this chronology, the last day for the filing of a petition for certiorari, i.e., 30
days from notice of the final COMELEC Resolution, fell on a Saturday (October
18, 2008), as the petitioner only had the remaining period of 26 days to file his
petition, after using up 4 days in preparing and filing his Motion for
Reconsideration. Effectively, the last day for filing was October 20, 2008 the
following Monday or the first working day after October 18, 2008. The petitioner
filed his petition with us on October 22, 2008 or two days late; hence, our
Resolution of dismissal of November 11, 2008.

The Motion for Reconsideration


The petitioner asks us in his "Urgent Motion for Reconsideration with Reiteration
for the Issuance of a Temporary Restraining Order" to reverse the dismissal of his
petition, arguing that the petition was seasonably filed under the fresh period rule
enunciated by the Supreme Court in a number of cases decided beginning the year 2005.
The "fresh period" refers to the original period provided under the Rules of
Court counted from notice of the ruling on the motion for reconsideration by the
tribunal below, without deducting the period for the preparation and filing of the
motion for reconsideration. SIDTCa

He claims that, historically, the fresh period rule was the prevailing rule in filing
petitions for certiorari. This Court, he continues, changed this rule when it
promulgated the 1997 Rules of Civil Procedure and Circular No. 39-98, which
both provided for the filing of petitions within the remainder of the original
period, the "remainder" being the original period less the days used up in
preparing and filing a motion for reconsideration. He then points out that on
September 1, 2000 or only three years after, this Court promulgated A.M. No. 00-
02-03-SC bringing back the fresh period rule. According to the petitioner, the
reason for the change, which we supposedly articulated in Narzoles v. National
Labor Relations Commission, 1 was the tremendous confusion generated by
Circular No. 39-98.

The fresh period rule, the petitioner further asserts, was subsequently applied by
this Court in the following cases:
(1) Neypes v. Court of Appeals 2 which thenceforth applied the
fresh eriod rule to ordinary appeals of decisions of
the Regional Trial Court to the Court of Appeals;
SDAcaT

(2) Spouses de los Santos v. Vda. de Mangubat 3 reiterating


Neypes;

(3) Active Realty and Development Corporation v. Fernandez 4


which, followingNeypes, applied the fresh period
rule to ordinary appeals from the decisions of the
Municipal Trial Court to the Regional Trial Court;
and

(4) Romero v. Court of Appeals 5 which emphasized that A.M.


No. 00-02-03-SC is a curative statute that may be
applied retroactively.

A reading of the ruling in these cases, the petitioner argues, shows that this
Court has consistently held that the order or resolution denying the motion for
reconsideration or new trial is considered as the final order finally disposing of
the case, and the date of its receipt by a party is the correct reckoning point for
counting the period for appellate review. CADSHI

The Respondent's Comment


We asked the respondents to comment on the petitioner's motion for
reconsideration. The Office of the Solicitor General (OSG), citing Section 5, Rule
65 of the Rules of Court and its related cases, asked via a "Manifestation and
Motion" that it be excused from filing a separate comment. We granted the OSG's
manifestation and motion.

For her part, respondent Emelita B. Almirante (respondent Almirante) filed a


comment stating that: (1) we are absolutely correct in concluding that the petition
was filed out of time; and (2) the petitioner's reliance on Section 4, Rule 65 of the
Rules of Court (as amended by A.M. No. 00-02-03-SC) is totally misplaced, as
Rule 64, not Rule 65, is the vehicle for review of judgments and final orders or
resolutions of the COMELEC. Respondent Almirante points out that Rule 64 and
Rule 65 are different; Rule 65 provides for a 60-day period for filing petitions for
certiorari, while Rule 64 provides for 30 days.

OUR RULING
We do not find the motion for reconsideration meritorious.

A. As a Matter of Law
Section 7, Article IX-A of the Constitution provides that unless otherwise
provided by the Constitution or by law, any decision, order, or ruling of each
Commission may be brought to the Court on certiorari by the aggrieved party
within 30 days from receipt of a copy thereof. For this reason, the Rules of Court
provide for a separate rule (Rule 64) specifically applicable only to decisions of
the COMELEC and the Commission on Audit. This Rule expressly refers to the
application of Rule 65 in the filing of a petition for certiorari, subject to the
exception clause "except as hereinafter provided". 6 SaIACT

Even a superficial reading of the motion for reconsideration shows that the
petitioner has not challenged our conclusion that his petition was filed outside
the period required by Section 3, Rule 64; he merely insists that the fresh period
rule applicable to a petition for certiorari under Rule 65 should likewise apply to
petitions for certiorari of COMELEC rulings filed under Rule 64.

Rule 64, however, cannot simply be equated to Rule 65 even if it expressly refers
to the latter rule. They exist as separate rules for substantive reasons as discussed
below. Procedurally, the most patent difference between the two i.e., the
exception that Section 2, Rule 64 refers to is Section 3 which provides for a
special period for the filing of petitions for certiorari from decisions or rulings of
the COMELEC en banc. The period is 30 days from notice of the decision or
ruling (instead of the 60 days that Rule 65 provides), with the intervening period
used for the filing of any motion for reconsideration deductible from the
originally-granted 30 days (instead of the fresh period of 60 days that Rule 65
provides). HICATc

Thus, as a matter of law, our ruling of November 11, 2008 to dismiss the petition
for late filing cannot but be correct. This ruling is not without its precedent; we
have previously ordered a similar dismissal in the earlier case of Domingo v.
Commission on Elections. 7 The Court, too, has countless times in the past stressed
that the Rules of Court must be followed. Thus, we had this to say in Fortich v.
Corona: 8

Procedural rules, we must stress, should be treated with


utmost respect and due regard since they are designed to
facilitate the adjudication of cases to remedy the worsening
problem of delay in the resolution of rival claims and in the
administration of justice. The requirement is in pursuance to
the bill of rights inscribed in the Constitution which
guarantees that "all persons shall have a right to the speedy
disposition of their before all judicial, quasi-judicial and
administrative bodies," the adjudicatory bodies and the
parties to a case are thus enjoined to abide strictly by the
rules. While it is true that a litigation is not a game of
technicalities, it is equally true that every case must be prosecuted
in accordance with the prescribed procedure to ensure an orderly
and speedy administration of justice. There have been some
instances wherein this Court allowed a relaxation in the
application of the rules, but this flexibility was "never
intended to forge a bastion for erring litigants to violate
the rules with impunity." A liberal interpretation and
application of the rules of procedure can be resorted to
only in proper cases and under justifiable causes and
circumstances. (Emphasis supplied) ISCDEA

As emphasized above, exceptional circumstances or compelling reasons may


have existed in the past when we either suspended the operation of the Rules or
exempted a particular case from their application. 9 But, these instances were
the exceptions rather than the rule, and we invariably took this course of action
only upon a meritorious plea for the liberal construction of the Rules of Court
based on attendant exceptional circumstances. These uncommon exceptions
allowed us to maintain the stability of our rulings, while allowing for the
unusual cases when the dictates of justice demand a correspondingly different
treatment.

Under this unique nature of the exceptions, a party asking for the suspension of
the Rules of Court comes to us with the heavy burden of proving that he
deserves to be accorded exceptional treatment. Every plea for a liberal
construction of the Rules must at least be accompanied by an explanation of why
the party-litigant failed to comply with the rules and by a justification for the
requested liberal construction. 10

Significantly, the petitioner presented no exceptional circumstance or any


compelling reason to warrant the non-application of Section 3, Rule 64 to his
petition. He failed to explain why his filing was late. Other than his appeal to
history, uniformity, and convenience, he did not explain why we should adopt and
apply the fresh period rule to an election case. EHSADc

To us, the petitioner's omissions are fatal, as his motion does not provide us any
reason specific to his case why we should act as he advocates.

B. As a Matter of Policy

In harking back to the history of the fresh period rule, what the petitioner
apparently wants for reasons of uniformity and convenience is the
simultaneous amendment of Section 3, Rule 64 and the application of his
proposed new rule to his case. To state the obvious, any amendment of this
provision is an exercise in the power of this Court to promulgate rules on
practice and procedure as provided by Section 5 (5), Article VIII of the
Constitution. Our rulemaking, as every lawyer should know, is different from
our adjudicatory function. Rulemaking is an act of legislation, directly assigned
to us by the Constitution, that requires the formulation of policies rather than the
determination of the legal rights and obligations of litigants before us. As a rule,
rulemaking requires that we consult with our own constituencies, not necessarily
with the parties directly affected in their individual cases, in order to ensure that
the rule and the policy that it enunciates are the most reasonable that we can
promulgate under the circumstances, taking into account the interests of
everyone not the least of which are the constitutional parameters and
guidelines for our actions. We point these out as our adjudicatory powers should
not be confused with our rulemaking prerogative.

We acknowledge that the avoidance of confusion through the use of uniform


standards is not without its merits. We are not unmindful, too, that no less than
the Constitution requires that "motions for reconsideration of [division] decisions
shall be decided by the Commission en banc." 11 Thus, the ruling of the
Commission en banc on reconsideration is effectively a new ruling rendered
separately and independently from that made by a division. SEcITC

Counterbalanced against these reasons, however, are other considerations no less


weighty, the most significant of which is the importance the Constitution and
this Court, in obedience to the Constitution, accord to elections and the prompt
determination of their results. Section 3, Article IX-C of the Constitution
expressly requires that the COMELEC's 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 Court's treatment of the periods for the filing of the
different modes of review, he misses out on the reason why the period under
Section 3, Rule 64 has been retained. The reason, as made clear above, is
constitutionally-based and is no less than the importance our Constitution
accords to the prompt determination of election results. This reason far
outweighs convenience and uniformity. We significantly note that the present
petition itself, through its plea for the grant of a restraining order, recognizes the need for
haste in deciding election cases.

C. Our Liberal Approach

Largely for the same reason and as discussed below, we are not inclined to
suspend the rules to come to the rescue of a litigant whose counsel has blundered
by reading the wrong applicable provision. The Rules of Court are with us for
the prompt and orderly administration of justice; litigants cannot, after resorting
to a wrong remedy, simply cry for the liberal construction of these rules. 12 Our
ruling in Lapid v. Laurea 13 succinctly emphasized this point when we said:
cIECaS

Members of the bar are reminded that their first duty is to


comply with the rules of procedure, rather than seek
exceptions as loopholes. Technical rules of procedure are not
designed to frustrate the ends of justice. These are provided
to effect the prompt, proper and orderly disposition of cases
and, thus, effectively prevent the clogging of court dockets.
Utter disregard of these rules cannot justly be rationalized
by harking on the policy of liberal construction. [Emphasis
supplied.]

We add that even for this Court, liberality does not signify an unbridled exercise
of discretion. It has its limits; to serve its purpose and to preserve its true worth,
it must be exercised only in the most appropriate cases. 14

WHEREFORE, premises considered, we DENY the motion for reconsideration


for lack of merit. Our Resolution of November 11, 2008 is hereby declared
FINAL. Let entry of judgment be made in due course. EcTIDA

SO ORDERED.

||| (Pates v. COMELEC, G.R. No. 184915, June 30, 2009)

EN BANC

[G.R. No. 193808. June 26, 2012.]

LUIS K. 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 p:

The present petition having been filed beyond the reglementary period, Rule 64
of the Rules of Court compels a dismissal on this basis alone. Despite petitioner's
inexplicable disregard of basic concepts, this Court deems it appropriate to
reiterate the specific procedure for the review of judgments made by the
Commission on Elections (COMELEC) as laid down in Rule 64, and how it is
differentiated from the more general remedy afforded by Rule 65.

On 5 July 2010, the COMELEC First Division issued a Resolution 1 expunging


the Certificate of Nomination which included herein petitioners as
representatives of the party-list group known as Citizens' Battle Against
Corruption (CIBAC). The COMELEC en banc affirmed the said Resolution,
prompting Luis Lokin, Jr. and Teresita F. Planas to file the present Petition for
Certiorari. Petitioners allege grave abuse of discretion on the part of the
COMELEC in issuing both Resolutions, praying that they be recognized as the
legitimate nominees of CIBAC party-list, and that petitioner Lokin, Jr. be
proclaimed as the CIBAC party-list representative to the House of
Representatives. SHcDAI

Respondent CIBAC party-list is a multi-sectoral party registered 2 under


Republic Act No. (R.A.) 7941, otherwise known as the Party-List System Act. As
stated in its constitution and bylaws, the platform of CIBAC is to fight graft and
corruption and to promote ethical conduct in the country's 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
Manifestation 5 was signed by a certain Pia B. Derla, who claimed to be the
party's acting secretary-general. At 1:30 p.m. of the same day, another
Manifestation 6 was submitted by herein respondents Cinchona Cruz-Gonzales
and Virginia Jose as the party's vice-president and secretary-general,
respectively.

On 15 January 2010, the COMELEC issued Resolution No. 8744 7 giving due
course to CIBAC's Manifestation, "WITHOUT PREJUDICE . . . TO the
determination which of the two factions of the registered party-
list/coalitions/sectoral organizations which filed two (2) manifestations of
intent to participate is the official representative of said party-
list/coalitions/sectoral organizations . . . ." 8

On 19 January 2010, respondents, led by President and Chairperson Emmanuel


Joel J. Villanueva, submitted the Certificate of Nomination 9 of CIBAC to the
COMELEC Law Department. The nomination was certified by Villanueva and
Virginia S. Jose. On 26 March 2010, Pia Derla submitted a second Certificate of
Nomination, 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 nullity 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 Division's 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 CIBAC's
Constitution and bylaws. SHacCD

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 party's Certificate of Nomination is an intra-
corporate matter, exclusively cognizable by special commercial courts, and over
which the COMELEC has no jurisdiction; and II) Whether the COMELEC erred
in granting the Petition for Disqualification and recognizing respondents as the
properly authorized nominees of CIBAC party-list.

As earlier stated, this Court denies the petition for being filed outside the
requisite period. The review by this Court of judgments and final orders of the
COMELEC is governed specifically by Rule 64 of the Rules of Court, which
states:

Sec. 1.Scope. This rule shall govern the review of


judgments and final orders or resolutions of the Commission
on Elections and the Commission on Audit.

Sec. 2.Mode of review. A judgment or final order or


resolution of the Commission on Elections and the
Commission on Audit may be brought by the aggrieved
party to the Supreme Court on certiorari under Rule 65,
except as hereinafter provided.

The exception referred to in Section 2 of this Rule refers precisely to the


immediately succeeding provision, Section 3 thereof, 14 which provides for the
allowable period within which to file petitions for certiorari from judgments of
both the COMELEC and the Commission on Audit. Thus, while Rule 64 refers to
the same remedy of certiorari as the general rule in Rule 65, they cannot be
equated, as they provide for different reglementary periods. 15 Rule 65 provides
for a period of 60 days from notice of judgment sought to be assailed in the
Supreme Court, while Section 3 expressly provides for only 30 days, viz.:

SEC. 3.Time to file petition. The petition shall be filed


within thirty (30) days from notice of the judgment or final
order or resolution sought to be reviewed. The filing of a
motion for new trial or reconsideration of said judgment or
final order or resolution, if allowed under the procedural
rules of the Commission concerned, shall interrupt the
period herein fixed. If the motion is denied, the aggrieved
party may file the petition within the remaining period,
but which shall not be less than five (5) days in any event,
reckoned from notice of denial.

Petitioner received a copy of the first assailed Resolution on 12 July 2010. Upon
the Motion for Reconsideration filed by petitioners on 15 July 2010, the
COMELEC en banc issued the second assailed Resolution on 31 August 2010. This
per curiam Resolution was received by petitioners on 1 September 2010. 16 Thus,
pursuant to Section 3 above, deducting the three days it took petitioners to file
the Motion for Reconsideration, they had a remaining period of 27 days or until
28 September 2010 within which to file the Petition for Certiorari with this Court.
AECcTS

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:

. . . . While it is true that a litigation is not a game of


technicalities, it is equally true that every case must be
prosecuted in accordance with the prescribed procedure to
ensure an orderly and speedy administration of justice.
There have been some instances wherein this Court allowed
a relaxation in the application of the rules, but this flexibility
was "never intended to forge a bastion for erring litigants to
violate the rules with impunity."

xxx xxx xxx

Under this unique nature of the exceptions, a party asking


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

xxx xxx xxx

. . . . Section 3, Article IX-C of the Constitution expressly


requires that the COMELEC's 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 Court's 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 . . . . (Emphasis
supplied, footnotes omitted.)

In this case, petitioners do not even attempt to explain why the Petition was filed
out of time. Clearly, they are aware of the applicable period for filing, as they
themselves invoke the remedy under Rule 64 in conjunction with Rule 65. Hence,
there is no acceptable reason for their failure to comply with the proper
procedure. But even if this Court were to apply liberality and take cognizance of
the late Petition, the arguments therein are flawed. The COMELEC has
jurisdiction over cases pertaining to party leadership and the nomination of
party-list representatives.
Petitioners contend that the COMELEC never should have taken cognizance of
respondents' Petition to Expunge and/or for Disqualification. They have reached
this conclusion by characterizing the present matter as an intra-corporate dispute
and, thus, cognizable only by special commercial courts, particularly the
designated commercial court in this case, the Regional Trial Court in Pasig City.
19 Pia Derla purportedly filed the Certificate of Nomination pursuant to the
authority granted by the Board of Trustees of the "CIBAC Foundation, Inc.,'' the
non-stock entity that is registered with the Securities and Exchange Commission
(SEC). 20

Thus, petitioners insist that the group that participated in the party-list system in
the 2004 and 2007 elections was the SEC-registered entity, and not the National
Council, which had allegedly become defunct since 2003. That was the year
when CIBAC Foundation, Inc. was established and registered with the SEC. 21
On the other hand, respondents counter that the foundation was established
solely for the purpose of acting as CIBAC's legal and financial arm, as provided
by the party's Constitution and bylaws. It was never intended to substitute for, or
oust CIBAC, the party-list itself. 22 ACTIcS

Even as petitioners insisted on the purely intra-corporate nature of the conflict


between "CIBAC Foundation" and the CIBAC Sectoral Party, they submitted
their Certificate of Nomination and Manifestation of Intent to participate in the
party-list elections. Precisely, petitioners were seeking the COMELEC's 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 COMELEC's 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 COMELEC's 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:

. . . . Corollary to the right of a political party "to identify the


people who constitute the association and to select a
standard bearer who best represents the party's 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
candidate's 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
party's candidate, therefore, not only misappropriates the
party's 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
party's 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 Commission's
broad constitutional mandate to ensure orderly elections.
27 (Emphasis supplied.) THCASc

Similar to the present case, Laban delved into the issue of leadership for the
purpose of determining which officer or member was the duly authorized
representative tasked with filing the Certificate of Nomination, pursuant to its
Constitution and bylaws, to wit:

The only issue in this case, as defined by the COMELEC


itself, is who as between the Party Chairman and the
Secretary General has the authority to sign certificates of
candidacy of the official candidates of the party. Indeed, the
petitioners' Manifestation and Petition before the COMELEC
merely asked the Commission to recognize only those
certificates of candidacy signed by petitioner Sen. Angara or
his authorized representative, and no other. 28

In the 2010 case Atienza v. Commission on Elections, 29 it was expressly settled that
the COMELEC possessed the authority to resolve intra-party disputes as a
necessary tributary of its constitutionally mandated power to enforce election
laws and register political parties. The Court therein cited Kalaw v. Commission on
Elections and Palmares v. Commission on Elections, which uniformity upheld the
COMELEC's jurisdiction over intra-party disputes:

The COMELEC's jurisdiction over intra-party leadership


disputes has already been settled by the Court. The Court
ruled in Kalaw v. Commission on Elections that the
COMELEC's 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 COMELEC's 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.

See. 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: cSaCDT

a.Track record of the party-list group/organization showing


active participation of the nominee/s in the undertakings of
the party-list group/organization for the advancement of the
marginalized and underrepresented sector/s, the sectoral
party, organization, political party or coalition they seek to
represent;

b.Proofs that the nominee/s truly adheres to the advocacies


of the party-list group/organizations (prior declarations,
speeches, written articles, and such other positive actions on
the part of the nominee/s showing his/her adherence to the
advocacies of the party-list group/organizations);

c.Certification that the nominee/s is/are a bona fide member


of the party-list group/organization for at least ninety (90)
days prior to the election; and

d.In case of a party-list group/organization seeking


representation of the marginalized and underrepresented
sector/s, proof that the nominee/s is not only an advocate of
the 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. The tribunal correctly
found that Pia Derla's 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 self-serving declarations.

On the other hand . . . We 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 Party's 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 Party's New Electoral
Congress, which as per the CIBAC's 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 so-called 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 party's 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; acCITS

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 CIBAC's Secretary


General Virginia S. Jose providing the official list of
officers of CIBAC. 37

WHEREFORE, finding no grave abuse of discretion on the part of the


COMELEC in issuing the assailed Resolutions, the instant Petition is
DISMISSED. This Court AFFIRMS the judgment of the COMELEC expunging
from its records the Certificate of Nomination filed on 26 March 2010 by Pia B.
Derla. The nominees, as listed in the Certificate of Nomination filed on 19
January 2010 by Emmanuel Joel J. Villanueva, President and Chairman of
Citizens' Battle Against Corruption (CIBAC) Party List, are recognized as the
legitimate nominees of the said party.

SO ORDERED.

||| (Lokin, Jr. v. COMELEC, G.R. No. 193808, June 26, 2012)

EN BANC

[G.R. No. 188818. May 31, 2011.]

TOMAS R. OSMEA, in his personal capacity and in his


capacity as City Mayor of Cebu City, petitioner, vs. THE
COMMISSION ON AUDIT, respondent.

DECISION

BRION, J p:

Before the Court is the Petition for Certiorari 1 filed by Tomas R. Osmea, former
mayor of the City of Cebu, under Rule 64 of the Rules of Court. The petition
seeks the reversal of the May 6, 2008 Decision 2 and the June 8, 2009 Resolution 3
of the respondent Commission on Audit (COA), which disallowed the damages,
attorney's 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. HDacIT

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-17004 5 and CEB-17155). 6 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
attorney's fees in the amount of P2,514,255.40 to WTCI 7 and P102,015.00 to
DCDC. 8 The decisions in favor of WTCI and DCDC were affirmed on appeal,
subject to certain modifications as to the amounts due, and have become final. To
satisfy the judgment debts, the Sanggunian finally passed the required
appropriation ordinances.

During post-audit, the City Auditor issued two notices disallowing the payment
of litigation expenses, damages, and attorney's 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, attorney's 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 Auditor's Decision by absolving the
members of the sanggunian from any liability. It declared that the payment of the
amounts awarded as damages and attorney's fees should solely be Osmea's
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 Office's Decision was sustained by the COA's 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 Osmea's 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 COA's Decision
of May 6, 2008 and Resolution of June 8, 2009. cSCTID

THE PETITION
Rule 64 of the Rules of Court governs the procedure for the review of judgments
and final orders or resolutions of the Commission on Elections and the COA.
Section 3 of the same Rule provides for a 30-day period, counted from the notice
of the judgment or final order or resolution sought to be reviewed, to file the
petition for certiorari. The Rule further states that the filing of a motion for
reconsideration of the said judgment or final order or resolution interrupts the
30-day period.

Osmea filed his motion for reconsideration, of the COA's 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 COA's 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 COURT'S RULING


Relaxation of procedural rules to
give effect to a party's right to appeal
Section 3, Rule 64 of the Rules of Court states:

SEC. 3.Time to file petition. The petition shall be filed


within thirty (30) days from notice of the judgment or final
order or resolution sought to be reviewed. The filing of a
motion for new trial or reconsideration of said judgment or
final order or resolution, if allowed under the procedural
rules of the Commission concerned, shall interrupt the
period herein fixed. If the motion is denied, the aggrieved
party may file the petition within the remaining period, but
which shall not be less than five (5) days in any event,
reckoned from notice of denial. [Emphasis ours.]

Several times in the past, we emphasized that procedural rules should be treated
with utmost respect and due regard, since they are designed to facilitate the
adjudication of cases to remedy the worsening problem of delay in the resolution
of rival claims and in the administration of justice. From time to time, however,
we have recognized exceptions to the Rules but only for the most compelling reasons
where stubborn obedience to the Rules would defeat rather than serve the ends
of justice. Every plea for a liberal construction of the Rules must at least be
accompanied by an explanation of why the party-litigant failed to comply with
the Rules and by a justification for the requested liberal construction. 14 Where
strong considerations of substantive justice are manifest in the petition, this
Court may relax the strict application of the rules of procedure in the exercise of
its legal jurisdiction. 15
Osmea cites the mandatory medical check-ups he had to undergo in Houston,
Texas after his cancer surgery in April 2009 as reason for the delay in filing his
petition for certiorari. Due to his weakened state of health, he claims that he could
not very well be expected to be bothered by the affairs of his office and had to
focus only on his medical treatment. He could not require his office to attend to
the case as he was being charged in his personal capacity. DSEaHT

We find Osmea's 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 petitioner's 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 Court's 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 official's 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 Sanggunian's 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. . . . [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 COA's 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. HECaTD

6.A separate Supplemental Agreement may be entered into


for all Change Orders and Extra Work Orders if
the aggregate amount exceeds 25% of the
escalated original contract price. All change
orders/extra work orders beyond 100% of the
escalated original contract cost shall be subject to
public bidding except where the works involved
are inseparable from the original scope of the
project in which case negotiation with the
incumbent contractor may be allowed, subject to
approval by the appropriate authorities. [Emphases
ours.]

Reviewing the facts of the case, we find that the prevailing circumstances at
the time the change and extra work orders were executed and completed
indicate that the City of Cebu tacitly approved these orders, rendering a
supplemental agreement or authorization from the Sanggunian unnecessary.
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 Sanggunian's ratification of all the change and extra work orders
issued by Osmea. In National Power Corporation (NPC) v. Hon. Rose Marie Alonzo-
Legasto, etc., et al., 26 the Court considered the compromise agreement between
the NPC and the construction company as a ratification of the extra work
performed, without prior approval from the NPC's 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 City's successful hosting of the Palaro, and not for any other "nefarious
endeavour." 29

WHEREFORE, in light of the foregoing, we hereby GRANT the petitioner's


Petition for Certiorari filed under Rule 64 of the Rules of Court. The respondent's
Decision of May 6, 2008 and Resolution of June 8, 2009 are SET ASIDE. ScEaAD

SO ORDERED.

||| (Osmea v. COA, G.R. No. 188818, May 31, 2011)

EN BANC

[G.R. No. 168296. January 31, 2007.]

FELOMINO V. VILLAGRACIA, petitioner, vs.


COMMISSION ON ELECTIONS and RENATO V. DE LA
PUNTA, respondents.

DECISION

PUNO, C.J p:

At bar is a Petition for Certiorari under Rule 64 of the Rules of Court with Urgent
Prayer for Issuance of Temporary Restraining Order. Petitioner was proclaimed
as winning candidate for the position of Punong Barangay in Barangay
Caawigan, Talisay, Camarines Norte, in the July 15, 2002 barangay elections by a
margin of six (6) votes.

Private respondent filed an election protest with the Municipal Trial Court of
Talisay, Camarines Norte, under Election Case No. 001-2002. After the revision of
ballots, the trial court invalidated thirty-four (34) of the ballots for being marked.
All 34 marked ballots were deducted from the votes of petitioner.

On December 3, 2003, the trial court adjudged private respondent as the true
winner and nullified the proclamation of petitioner, viz.:

WHEREFORE, the Court finds the Protestant Renato dela


Punta as the duly elected Punong Barangay of Caawigan,
Talisay, Camarines Norte with the total valid vote[s] of 187
or a winning margin of 26 votes.

The earlier proclamation made by the Barangay Board of


Canvassers of Precinct No. 15-A and 15-A-2 and 15-A-1 of
Barangay Caawigan, Talisay, Camarines Norte is declared
null and void. 1

Petitioner appealed the decision with the First Division of the Commission on
Elections (COMELEC) raising for the first time on appeal the issue that the trial
court lacked jurisdiction over the election protest for failure of private
respondent to pay the correct filing fees. HIEASa

The First Division, through its Resolution 2 dated September 9, 2004, set aside the
decision of the trial court and dismissed the election protest of private
respondent for lack of jurisdiction, viz.:

The payment credited to the general fund which could be


considered as filing fee is incomplete considering that
Section 6 of Rule 37 of the [COMELEC] Rules on Procedure
requires that it should be One Hundred (P100.00) Pesos.
Hence, the trial court could not have acquired jurisdiction
over the [private respondent's] case. 3

Private respondent moved for reconsideration. In an Order 4 dated October 7,


2004, the First Division elevated the motion for reconsideration to the COMELEC
En Banc.

On June 1, 2005, the COMELEC En Banc promulgated its questioned Resolution


granting the motion for reconsideration and reinstating the decision of the trial
court. It issued a writ of execution 5 on July 22, 2005 ordering petitioner to vacate
his post as Punong Barangay of Barangay Caawigan, Talisay, Camarines Norte,
in favor of private respondent.

Hence, this petition raising the following issues:

WHETHER THE COMMISSION ON ELECTIONS


(COMELEC, FOR SHORT) GRAVELY ABUSED ITS
DISCRETION AMOUNTING TO LACK OF JURISDICTION
IN NOT APPLYING THE SOLLER DOCTRINE IN THE
INSTANT CASE[.]

II

WHETHER THE COMELEC ERRED IN CONCLUDING


THAT THE USE OF THE WORDS "JOKER", "QUEEN",
"ALAS", AND "KAMATIS", IN MORE THAN ONE BALLOT
WOULD CONSTITUTE MARKED BALLOTS. 6

Petitioner contends that had public respondent followed the doctrine in Soller v.
COMELEC, 7 it would have sustained the ruling of the First Division that the
trial court lacked jurisdiction to hear the election protest due to private
respondent's failure to pay the correct filing fees.

We disagree. The Soller case is not on all fours with the case at bar. In Soller,
petitioner therein filed with the trial court a motion to dismiss private
respondent's protest on the ground of, among others, lack of jurisdiction. In the
case at bar, petitioner actively participated in the proceedings and voluntarily
submitted to the jurisdiction of the trial court. It was only after the trial court
issued its decision adverse to petitioner that he raised the issue of jurisdiction for
the first time on appeal with the COMELEC's First Division. 8

While it is true that a court acquires jurisdiction over a case upon complete
payment of the prescribed filing fee, the rule admits of exceptions, as when a
party never raised the issue of jurisdiction in the trial court. As we stated in
Tijam v. Sibonghanoy, et al., viz.: 9

. . . [I]t is too late for the loser to question the jurisdiction or


power of the court. . . . [I]t is not right for a party who has
affirmed and invoked the jurisdiction of a court in a
particular matter to secure an affirmative relief, to
afterwards deny that same jurisdiction to escape a penalty.
HAcaCS

It was therefore error on the part of the COMELEC's First Division to


indiscriminately apply Soller to the case at bar. As correctly pointed out by
public respondent in its questioned Resolution, viz.:

. . . . Villagracia never assailed the proceedings of the trial


court for lack of jurisdiction during the proceedings therein.
Instead, he filed an Answer to the Protest on 2 August 2002
and then actively participated during the hearings and
revision of ballots and subsequently filed his Formal Offer of
Exhibits. The issue on the filing fees was never raised until
the Decision adverse to his interest was promulgated by the
trial court and only on [a]ppeal to the COMELEC.
Necessarily, we apply the case of Alday vs. FGU Insurance
Corporation where the Supreme Court instructed that
"although the lack of jurisdiction of a court may be raised at
any stage of the action, a party may be estopped from raising
such questions if he has actively taken part in the very
proceedings which he questions, belatedly objecting to the
court's jurisdiction in the event that the judgment or order
subsequently rendered is adverse to him." Villagracia is
therefore estopped from questioning the jurisdiction of the
trial court only on [a]ppeal. 10

As to the second issue, petitioner contends that in order to invalidate a ballot for
being marked, it must appear that the voter has placed the mark to identify the
ballot. 11 Petitioner argues that the appearance of the words "Joker," "Alas,"
"Queen" and "Kamatis" in more than one ballot cannot identify the ballot of a
voter so as to violate the secrecy of votes. Thus, the votes should be counted in
his favor. 12

There are 34 marked ballots in the case at bar. Fourteen (14) ballots are marked
with the word "Joker"; six (6) ballots with the word "Alas"; seven (7) ballots with
the word "Queen"; and, seven (7) ballots with the word "Kamatis." These ballots
were all deducted by the trial court from the votes of petitioner. While each of
these words appears in more than one ballot and may not identify a particular
voter, it is not necessary that the marks in a ballot should be able to specifically
identify a particular voter. 13 We have ruled that the distinction should always
be between marks that were apparently carelessly or innocently made, which do
not invalidate the ballot, and marks purposely placed thereon by the voter with a
view to possible future identification, which invalidates it. The marks which shall
be considered sufficient to invalidate the ballot are those which the voter himself
deliberately placed on his ballot for the purpose of identifying it thereafter. 14

In the case at bar, the marks indicate no other intention than to identify the
ballots. The observation of public respondent on the appearance of the marks on
the questioned ballots is apropos, viz.:

. . . . We take notice of the fact that these marks were all


written in the number 7 slot of the list of Kagawad for
Sangguniang Barangay. We further take notice that all these
marks appear only in ballots wherein the Punong Barangay
voted thereon is Jun Villagracia, the proclaimed winning
candidate and herein [petitioner]. It is therefore indubitable
that these ballots are indeed marked ballots. 15

Finally, the present action is one of certiorari under Rule 64 of the Rules of Court
where questions of fact cannot be raised. The familiar rule is that findings of fact
of the [COMELEC] supported by substantial evidence shall be final and non-
reviewable. 16 There is no reason to depart from this rule.

IN VIEW WHEREOF, the petition is DISMISSED. The prayer for a Temporary


Restraining Order is DENIED for being moot. The questioned Resolution of the
COMELEC En Banc dated June 1, 2005 in EAC No. 1-2004 is AFFIRMED.

Costs against petitioner.

||| (Villagracia v. COMELEC, G.R. No. 168296, January 31, 2007)

THIRD DIVISION

[G.R. No. 135507. November 29, 2005.]

PHILIPPINE RABBIT BUS LINES, INC., petitioner, vs.


NELSON GOIMCO, SR., SPOUSES ISABELO and
REMEGIA LADIA, respondents.

Ponce Enrile Cayetano Reyes & Manalastas for petitioner.

Reynaldo D. Hernandez, Romeo Sadarnas and Ruben Platon for


respondents.

SYLLABUS

1.REMEDIAL LAW; SPECIAL CIVIL ACTIONS; PETITION FOR CERTIORARI


UNDER RULE 65; CORRECTS ONLY ERRORS OF JURISDICTION OR GRAVE
ABUSE OF DISCRETION, AMOUNTING TO LACK OR EXCESS OF
JURISDICTION; CASE AT BAR. What petitioner should have filed is a
petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, not a petition for certiorari under Rule 65 of the same
Rules. We have consistently held that certiorari is not a substitute for a lost
appeal. The extraordinary writ of certiorari issues only for the correction of
errors of jurisdiction or grave abuse of discretion amounting to lack or excess of
jurisdiction. Grave abuse of discretion is such capricious and whimsical exercise
of judgment which is equivalent to an excess or lack of jurisdiction, meaning that
the abuse of discretion must be so patent and so gross as to amount to an evasion
of a positive duty or a virtual refusal to perform a duty enjoined by law, or to act
at all in contemplation of law, as where the power is exercised in an arbitrary
and despotic manner by reason of passion or hostility.

2.ID.; APPEAL; RIGHT TO APPEAL IS A PROCEDURAL REMEDY WHICH


MAY BE EXERCISED ONLY IN THE MANNER PRESCRIBED BY LAW. The
right to appeal is not a natural right or a part of due process. It is merely a
procedural remedy of statutory origin and may be exercised only in the manner
prescribed by the provisions of law authorizing its exercise. Hence, its
requirements must be strictly complied with.

3.LEGAL AND JUDICIAL ETHICS; ATTORNEYS; ADMINISTRATIVE


COMPLAINT AGAINST AN ATTORNEY; INEXCUSABLE NEGLIGENCE;
FAILURE TO FILE BRIEF FOR CLIENT, A CASE OF. We note that petitioner's
previous counsel is a large law firm with several lawyers in its roster. Yet it took
said counsel four (4) months, from the expiration of the reglementary period,
within which to file the appellant's brief. It is settled that failure to file brief for a
client constitutes inexcusable negligence.

4.ID.; ID.; ID.; ID.; MISTAKES, NEGLIGENCE AND OMISSIONS OF COUNSEL


ARE BINDING UPON HIS CLIENT; CASE AT BAR. It is settled that the
mistakes, negligence, and omissions of counsel are binding upon his client. So
should it be in the instant cases. On petitioner's insistence that it was denied due
process, suffice it to say that there is no denial of due process where the adverse
ruling was attributable to its counsel's negligence.

RESOLUTION

SANDOVAL-GUTIERREZ, J p:

Before us is a petition for certiorari seeking to set aside the Resolutions 1 of the
Court of Appeals dated February 3, 1998 in CA-G.R. CV No. 56176 dismissing
the appeal filed by the Philippine Rabbit Bus Liner, Inc., herein petitioner, for its
failure to file the required appellant's brief within the reglementary period.

Petitioner is a corporation organized and existing under the Philippine laws and
is engaged in business as a common carrier.

On October 17, 1983, petitioner's bus No. 309 collided with a ten-wheeler truck in
Dolores, Mabalacat, Pampanga. As a result, several passengers were injured.
Nelson Goimco, Sr., herein respondent and one of the passengers, filed with the
Regional Trial Court (RTC), Branch 65, Tarlac City, a complaint for breach of
contract of carriage against petitioner, docketed as Civil Case No. 6977. Spouses
Isabelo and Remegia Ladia (also impleaded herein as respondents), parents of
Isabelo Ladia, Jr. who died, likewise instituted a similar complaint with the same
court, docketed as Civil Case No. 7054. The two cases were consolidated and
jointly heard by the trial court.

After trial, the RTC rendered a Joint Decision, the dispositive portion of which
reads:

"WHEREFORE, judgment is rendered in favor of the


plaintiffs and against the defendant as follows:

(1)Defendant is ordered to pay to plaintiff Nelson


Goimco, Sr., the amount of P248,157.38 as
and by way of actual damages; the
amount of P100,000.00 as and by way of
moral damages; the amount of P100,000.00
as and by way of exemplary damages; and
the amount of P50,000.00 as and by way of
attorney's fees;

(2)Defendant is ordered to pay to the heirs of


Isabelo Ladia, Jr., the amount of P50,000.00
for the death of Isabelo Ladia, Jr., the
amount of P75,000.00 as and by way of
actual damages, and amount of P15,000.00
as and by way of attorney's fees.

(3)Third-party defendant First Integrated Bonding


and Insurance Company is ordered to pay
to the defendant the amount of P50,000.00
by way of reimbursement of liabilities
incurred by the defendant as a result of
the accident.

SO ORDERED." 2

Both parties filed their respective motions for reconsideration of the Decision.
Petitioner sought to be exonerated from all civil liabilities, while respondents
asked for an award corresponding to the loss of income of respondent Nelson
Goimco and the late Isabelo Ladia, Jr.

In an Order dated September 7, 1995, the trial court denied petitioner's motion
but granted those of respondents Goimco and spouses Ladia, thus:

"WHEREFORE, the decision of this court is hereby amended


awarding the amount of P679,629,60 to Nelson Goimco and
P100,980.00 to the heirs of Isabelo Ladia, Jr., for loss of
income.

SO ORDERED." 3

Petitioner then, through the law office of Escudero, Marasigan, Sta. Ana & E.H.
Villareal, interposed an appeal to the Court of Appeals.

On October 2, 1997, petitioner received a copy of the Order of the Appellate


Court directing it to file its appellant's brief within fifteen (15) days or until
October 17, 1997. However, despite notice, petitioner did not file the required
appellant's brief. Hence, on February 3, 1998, the Court of Appeals dismissed
petitioner's appeal pursuant to Section 1 (3), Rule 50 of the 1997 Rules of Civil
Procedure, as amended. ECcTaS

Petitioner filed a motion for reconsideration alleging that "the expiration of the
reglementary period fell during more or less at the time that the office log book
(of its counsel), containing the schedules of hearings and deadlines for pleadings,
motions and other documents, inadvertently got lost." 4 Hence, its failure to file
the appellant's brief was due to "its (counsel's) mistake or excusable negligence."

On July 29, 1998, the Court of Appeals denied petitioner's motion for
reconsideration, holding that its "counsel could have, with ordinary prudence,
updated the schedule of hearings and deadlines for the filing of pleadings, briefs
and other court papers within a lesser period of 4 months." 5

Hence, the instant petition for certiorari.

This petition lacks merit.

What petitioner should have filed is a petition for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure, as amended, not a petition for certiorari
under Rule 65 of the same Rules. We have consistently held that certiorari is not a
substitute for a lost appeal. 6

The extraordinary writ of certiorari issues only for the correction of errors of
jurisdiction or grave abuse of discretion amounting to lack or excess of
jurisdiction. 7 Grave abuse of discretion is such capricious and whimsical
exercise of judgment which is equivalent to an excess or lack of jurisdiction,
meaning that the abuse of discretion must be so patent and so gross as to amount
to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by
law, or to act at all in contemplation of law, as where the power is exercised in an
arbitrary and despotic manner by reason of passion or hostility. 8

We find that in dismissing petitioner's appeal, the Court of Appeals did not
gravely abuse its discretion.
Moreover, the right to appeal is not a natural right or a part of due process. It is
merely a procedural remedy of statutory origin and may be exercised only in the
manner prescribed by the provisions of law authorizing its exercise. 9 Hence, its
requirements must be strictly complied with. 10 Section 7, Rule 44 of the same
Rules provides:

"SEC. 7.Appellant's brief. It shall be the duty of the


appellant to file with the court within forty-five (45) days
from receipt of the notice of the clerk that all evidence, oral
and documentary, are attached to record, seven (7) copies of
his legibly typewritten, mimeographed or printed brief, with
proof of service of two (2) copies thereof upon the appellee."

Section 1 (e), Rule 50 likewise states:

"SEC. 1.Grounds for dismissal of appeal. An appeal may be


dismissed by the Court of Appeals, on its own motion or on
that of the appellee, on the following grounds:

xxx xxx xxx

(e)Failure of the appellant to serve and file the required


number of copies of his brief or memorandum within the
time prescribed by these Rules;"

In Casim v. Floredeliza, 11 we stressed that the above Rules are designed for the
proper and prompt disposition of cases before the Appellate Court, for they
provide for a system under which litigants may be heard in the correct form and
manner at the prescribed time in an orderly confrontation before a court whose
authority is unquestioned.

We note that petitioner's previous counsel is a large law firm with several
lawyers in its roster. Yet it took said counsel four (4) months, from the
expiration of the reglementary period, within which to file the appellant's brief.
It is settled that failure to file brief for a client constitutes inexcusable negligence.
12 Petitioner's flimsy excuse that it's counsel's logbook containing the schedules
for the filing of pleadings and hearings was lost is, to say the least, most
unpersuasive. Said counsel should have examined consistently the records of its
cases to find out what appropriate actions have to be taken thereon. The notice to
file the appellant's brief was in the records of the instant cases all along. Had
counsel been efficient in the handling of its cases, the required appellant's brief
could have been filed on time. Its failure to do so is an inexcusable negligence.

It is settled that the mistakes, negligence, and omissions of counsel are binding
upon his client. 13 So should it be in the instant cases.
On petitioner's insistence that it was denied due process, suffice it to say that
there is no denial of due process where the adverse ruling was attributable to its
counsel's negligence. 14

WHEREFORE, the petition is DISMISSED. Costs against petitioner.

SO ORDERED.

||| (Philippine Rabbit Bus Lines Inc. v. Goimco Sr., G.R. No. 135507, November 29,
2005)

SECOND DIVISION

[G.R. No. 153762. August 12, 2005.]

SUSAN HONORIDEZ, JOSEFINA H. LOPEZ and


CONSTANTINA H. SANCHEZ, petitioners, vs. MAKILITO
B. MAHINAY, JOCELYN "JOY" B. SORENSEN and
husband name unknown, ARTHUR CABIGON, and
FELIMON SUAREZ, respondents.

Pedro A. Rosito for petitioners.

Jesus Isidoro C. Atoc for F. Suarez.

Makilito Mahinay and Mario Mayol for respondents.

SYLLABUS

1.REMEDIAL LAW; CIVIL PROCEDURE; APPEALS; PETITION FOR REVIEW;


PROPER REMEDY TO QUESTION FINAL ORDERS OR JUDGMENTS AND
NOT INTERLOCUTORY ORDERS. Petitioners clearly erred in their choice of
remedy. The instant petition, as described by petitioners' counsel, "is a petition
for review on appeal by certiorari." A petition for review under Rule 45 is the
proper remedy to question final orders or judgments and not interlocutory
orders. It is limited only to questions of law. The 22 March 2002 Order of the RTC
does not constitute a final order or judgment, but is an interlocutory order, for it
did not rule on nor dismiss Civil Case No. CEB-23653. In denying petitioners'
three (3) motions, the RTC merely resolved incidental matters and did not touch
on the merits of the case nor put an end to the proceedings.

2.ID.; ID.; ID.; ID.; WILL FAIL WHERE PARTIES DID NOT RAISE
SUBSTANTIAL QUESTION OF LAW; SUPREME COURT IS NOT THE PROPER
VENUE TO CONSIDER A FACTUAL ISSUE AS IT IS NOT A TRIER OF FACTS.
Likewise, even if we treat this matter as a proper petition for certiorari under
Rule 45, the petition must still fail. Petitioners raise no substantial question of
law. Petitioners want the Court to reverse the Order of the RTC on the sole
ground that the transaction between them and Suarez was one of real estate
mortgage, and that they were able to redeem the subject lot. In other words,
petitioners would have the Court reopen Civil Case No. CEB-16335, and make a
re-evaluation of the facts pertaining to the true nature of petitioners' transaction
with Suarez, a question which has long been ruled upon by the RTC by its
holding that it is a sale and not a mortgage. Moreover, petitioners would like the
Court to accept their claim that a redemption of the subject property had been
made, a matter which should have been brought before the trial court which
heard Civil Case No. CEB-16335. It is not the function of this Court to re-examine
the evidence submitted by the parties or analyze or weigh the evidence all over
again. This Court is definitely not the proper venue to consider a factual issue as
it is not a trier of facts.

3.ID.; SPECIAL CIVIL ACTIONS; PETITION FOR CERTIORARI; PROPER


REMEDY TO QUESTION AN ALLEGEDLY IMPROVIDENT ORDER OR
DECISION; PETITION WILL NOT PROSPER ABSENT IMPUTATION OF
COMMISSION OF GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION ON THE PART OF THE LOWER COURT.
Moreover, it is well-settled that a petition for certiorari under Rule 65, not Rule
45, is the proper remedy to question an allegedly improvident order or decision,
such as the one in the instant case. However, even if petitioners filed a petition
under Rule 65, the same will not prosper, since the same should have been filed
with the Court of Appeals, following the doctrine of hierarchy of courts, which
serves as a general determinant of the proper forum for the availment of the
extraordinary remedy of certiorari. Considering that a special civil action of
certiorari under Rule 65 is within the concurrent original jurisdiction of the
Supreme Court and the Court of Appeals, the petition should have been initially
filed in the Court of Appeals in strict observance of the doctrine on the hierarchy
of courts. Moreover, the petition does not impute the commission of a grave
abuse of discretion amounting to lack or excess of jurisdiction to the lower court,
which is the essential centerpiece of a Rule 65 petition.

4.ID.; CIVIL PROCEDURE; TRIAL; CONSOLIDATION; ONLY PENDING


ACTIONS INVOLVING A COMMON QUESTION OF LAW OR FACT MAY BE
CONSOLIDATED. Petitioners attempt to revive the issues in Civil Case No.
CEB-16335 by moving for the consolidation of the same with Civil Case No. CEB-
23653. Under Section 1, Rule 31 of the Rules of Court, only pending actions
involving a common question of law or fact may be consolidated. Obviously,
petitioners cannot make out a case for consolidation in this case since Civil Case
No. CEB-16335, the case which petitioners seek to consolidate with the case a
quo, has long become final and executory; as such it cannot be re-litigated in the
instant proceedings without virtually impeaching the correctness of the decision
in the other case. Public policy abhors such eventuality.

5.ID.; JUDGMENTS; FINAL AND EXECUTORY; DOCTRINE OF FINALITY OF


JUDGMENT; ONCE A JUDGMENT HAS ATTAINED FINALITY IT BECOMES
IMMUTABLE AND UNALTERABLE. Litigation must end and terminate
sometime and somewhere, and it is essential to an effective administration of
justice that once a judgment has become final the issue or cause involved therein
should be laid to rest. This doctrine of finality of judgment is grounded on
fundamental considerations of public policy and sound practice. In fact, nothing
is more settled in law than that once a judgment attains finality it thereby
becomes immutable and unalterable. It may no longer be modified in any
respect, even if the modification is meant to correct what is perceived to be an
erroneous conclusion of fact or law, and regardless of whether the modification
is attempted to be made by the court rendering it or by the highest court of the
land. The decision in Civil Case No. CEB-16335 has long become final and
executory. This Court finds no reason to disturb the same.

DECISION

TINGA, J p:

This petition for review under Rule 45 filed by Susan Honoridez, Josefina H.
Lopez and Constantina H. Sanchez assails the 22 March 2002 Order of the
Regional Trial Court (RTC), 7th Judicial Region, Branch 58, Cebu City in Civil
Case No. CEB-23653 which denied petitioners' three (3) motions. 1

On 14 April 1992, petitioners filed a Complaint 2 with the RTC of Cebu City for
declaration of nullity of a mortgage deed and for damages, with an application
for a temporary restraining order and/or injunction to prevent the foreclosure
sale of the subject parcel of land. Petitioners alleged that on 27 October 1994, they
mortgaged said parcel of land to Jocelyn "Joy" Sorensen (Sorensen), and that the
mortgage deed imposed an exorbitant, unconscionable interest of five percent
(5%) per month or sixty percent (60%) per annum. 3 Thereafter, petitioners filed
an Amended Complaint, 4 alleging that the same parcel of land was earlier
mortgaged to Felimon Suarez (Suarez) on 9 November 1993, but they were
required to execute a deed of sale instead. They claimed that when the secured
obligation had matured, Sorensen offered to help redeem the property and did
pay the sum for such purpose, as well as the taxes involved. It was after such
payment that petitioners executed the mortgage in favor of Sorensen. CTHDcE

During the course of the proceedings, Atty. Makilito Mahinay (Mahinay) filed a
Motion to Intervene, 5 claiming that in an earlier case, Civil Case No. CEB-11086,
he and petitioners entered into a compromise agreement wherein he was given
the preferential right to buy the lot in issue in the event that petitioners decide to
dispose of it. Later on, he discovered that petitioners executed a deed of sale over
the same lot in favor of Suarez, thereby prompting him to file an action for
specific performance against petitioners and Suarez. The subsequent action,
docketed as Civil Case No. CEB-16335, was decided in Mahinay's favor, with the
RTC finding that the contract between Suarez and petitioners was a sale and not
an equitable mortgage, ruling that Mahinay is entitled to redeem the lot from
Suarez, and ordering Suarez to execute a deed of conveyance and to transfer the
lot to Mahinay for the same consideration as in the deed of sale between Suarez
and petitioners. This decision was affirmed by the Court of Appeals and became
final and executory on 8 February 2001. 6

Petitioners and Sorensen opposed the motion for intervention, claiming that
Suarez could not have sold the lot to Mahinay because Suarez had not purchased
it and become its owner in the first place. Thereafter, Mahinay filed a motion for
judgment on the pleadings, alleging that the answers failed to tender an issue. 7

Petitioners then filed three motions, to wit: (1) Motion to Defer Motion for Judgment
on the Pleadings, (2) Motion for Consolidation, and (3) Motion for Leave to File Third
Party Complaint and Admit Third Party Complaint. 8 In the first motion, they
claimed that they were able to redeem the lot from Suarez long before the
decision in Civil Case No. CEB-16335 had come out, thus rendering the
aforementioned decision moot and academic. According to petitioners, such
redemption is a supervening event which rendered the decision unenforceable.
In the second motion, they argued that the determination of whether such
redemption is a supervening event is a common issue in the case a quo and in
Civil Case No. CEB-16335. In the third motion, petitioners claimed that there is a
necessity to implead Suarez in order to preserve and protect their ownership
over the lot. 9

In the assailed 22 March 2002 Order, 10 the RTC found that the parties are bound
by the finality of the decision in Civil Case No. CEB-16335, and that their posture
that their transaction with Suarez is not a sale but a mortgage is an attempt to
reopen an issue which has already been decided with finality. Anent the claim
that the redemption of the lot in issue is a supervening event which rendered the
decision moot and academic, the RTC held that it should have been raised in
Civil Case No. CEB-16335 to precipitate the presentation of evidence on the
matter, especially since the redemption allegedly occurred while the case was
still pending. Based on these findings, the RTC denied the three motions. The
dispositive portion of the Order reads:

Based on the foregoing findings, the Court finds no valid


ground to grant the Motion for Judgment on the Pleadings,
Motion to Defer Action on the Motion for Judgment on the
Pleadings, Motion for Consolidation and Motion for Leave
to File Third Party Complaint, etc, as they are hereby denied.

SO ORDERED. 11

Petitioners filed a Motion for Reconsideration 12 but the same was denied by the
RTC for lack of merit.

Petitioners went straight to this Court, through a petition under Rule 45 of the
Rules of Court, presenting the following assignment of errors, to wit:

I.The trial court erred in not allowing petitioners to file the


third-party complaint against Felimon Suarez.

II.The trial court erred in not consolidating Civil Case No.


CEB-23653 [with Civil Case No. CEB 16335].

III.The trial court erred in not granting petitioners' motion


for reconsideration. 13

The Order insofar as it denied Mahinay's motion for judgment on the pleadings is
not challenged in this petition.

Petitioners maintain that the deed of sale between them and Suarez was a real
estate mortgage founded on a loan, 14 and that assuming arguendo that they sold
the lot to Suarez, ownership over the lot was eventually restored to them
nevertheless since they were able to redeem the same in 1994. 15 They thus claim
that the redemption of the lot was a fait accompli and that the RTC decision in
Civil Case No. CEB-16335 has become functus oficio. 16 As Suarez has never
become the owner of the lot, he is not entitled to withdraw the amount deposited
by Mahinay in accordance with the decision in Civil Case No. CEB-16335. 17

In his Comment, Mahinay capitalizes on the holding of the trial court. He claims
that petitioners' third-party complaint does not relate in any way to the subject
matter in the complaint-in-intervention, and that petitioners merely want the
reversal of the decision in Civil Case No. CEB-16335. In addition, he argues that
the case a quo cannot be consolidated with Civil Case No. CEB-16335 since the
latter case has long been terminated. 18

For his part, Suarez admits that he executed a deed of conveyance in favor of
Mahinay and had moved for the release of the cash bond posted by the latter.
However, he abandoned the motion for release of the money when petitioners
made him "recall" 19 that they have already redeemed the property from him
and that he had already returned to them the Original Owner's Certificate of
Title covering the property. He likewise admits that he received money from
Sorensen for the redemption of the subject lot. 20

Sorensen, on the other hand, claims that the instant petition in essence seeks to
annul the decision in Civil Case No. CEB-16335, a decision which had already
been affirmed by the Court of Appeals and for which an entry of judgment had
already been issued. She adds that although she has claims against Suarez, it is
doubtful whether it is still procedurally feasible to reopen Civil Case No. CEB-
16335 considering that there is an entry of judgment. 21

In their consolidated reply, petitioners assert that with Suarez's admission that
they redeemed the subject lot, it follows that he had no more legal right over the
said property when the decision in Civil Case No. CEB-16335 was rendered.
Thus, said decision has no legal leg to stand on. 22 They insist that there is a
common issue between the case a quo and in Civil Case No. CEB-16335, that is,
whether the subject lot was repurchased by petitioners from Suarez. 23

The petition must be denied.

Petitioners clearly erred in their choice of remedy. The instant petition, as


described by petitioners' counsel, "is a petition for review on appeal by certiorari."
24 A petition for review under Rule 45 is the proper remedy to question final
orders or judgments and not interlocutory orders. It is limited only to questions
of law. 25 The 22 March 2002 Order of the RTC does not constitute a final order or
judgment, but is an interlocutory order, for it did not rule on nor dismiss Civil
Case No. CEB-23653. In denying petitioners' three (3) motions, the RTC merely
resolved incidental matters and did not touch on the merits of the case nor put an
end to the proceedings. 26

Moreover, it is well-settled that a petition for certiorari under Rule 65, not Rule 45,
is the proper remedy to question an allegedly improvident order or decision,
such as the one in the instant case. 27

However, even if petitioners filed a petition under Rule 65, the same will not
prosper, since the same should have been filed with the Court of Appeals,
following the doctrine of hierarchy of courts, which serves as a general
determinant of the proper forum for the availment of the extraordinary remedy
of certiorari. Considering that a special civil action of certiorari under Rule 65 is
within the concurrent original jurisdiction of the Supreme Court and the Court of
Appeals, the petition should have been initially filed in the Court of Appeals in
strict observance of the doctrine on the hierarchy of courts. 28 Moreover, the
petition does not impute the commission of a grave abuse of discretion
amounting to lack or excess of jurisdiction to the lower court, which is the
essential centerpiece of a Rule 65 petition. EACTSH

Likewise, even if we treat this matter as a proper petition for certiorari under Rule
45, the petition must still fail. Petitioners raise no substantial question of law.
Petitioners want the Court to reverse the Order of the RTC on the sole ground
that the transaction between them and Suarez was one of real estate mortgage,
and that they were able to redeem the subject lot. In other words, petitioners
would have the Court reopen Civil Case No. CEB-16335, and make a re-
evaluation of the facts pertaining to the true nature of petitioners' transaction
with Suarez, a question which has long been ruled upon by the RTC by its
holding that it is a sale and not a mortgage. Moreover, petitioners would like the
Court to accept their claim that a redemption of the subject property had been
made, a matter which should have been brought before the trial court which
heard Civil Case No. CEB-16335.

It is not the function of this Court to re-examine the evidence submitted by the
parties or analyze or weigh the evidence all over again. This Court is definitely
not the proper venue to consider a factual issue as it is not a trier of facts. 29

Petitioners attempt to revive the issues in Civil Case No. CEB-16335 by moving
for the consolidation of the same with Civil Case No. CEB-23653. Under Section
1, Rule 31 of the Rules of Court, only pending actions involving a common
question of law or fact may be consolidated. Obviously, petitioners cannot make
out a case for consolidation in this case since Civil Case No. CEB-16335, the case
which petitioners seek to consolidate with the case a quo, has long become final
and executory; as such it cannot be re-litigated in the instant proceedings without
virtually impeaching the correctness of the decision in the other case. Public
policy abhors such eventuality. HASDcC

Litigation must end and terminate sometime and somewhere, and it is essential
to an effective administration of justice that once a judgment has become final the
issue or cause involved therein should be laid to rest. 30 This doctrine of finality
of judgment is grounded on fundamental considerations of public policy and
sound practice. 31 In fact, nothing is more settled in law than that once a
judgment attains finality it thereby becomes immutable and unalterable. It may
no longer be modified in any respect, even if the modification is meant to correct
what is perceived to be an erroneous conclusion of fact or law, and regardless of
whether the modification is attempted to be made by the court rendering it or by
the highest court of the land. 32 The decision in Civil Case No. CEB-16335 has
long become final and executory. This Court finds no reason to disturb the same.

WHEREFORE, premises considered, the instant petition is hereby DENIED for


lack of merit. Costs against petitioners.

SO ORDERED.

||| (Honoridez v. Mahinay, G.R. No. 153762, August 12, 2005)

SECOND DIVISION

[G.R. No. 140102. February 9, 2006.]

UNION INDUSTRIES, INC., petitioner, vs. GASPAR


VALES and PRUDENCIO CERDENIA, 1 respondents.

SYLLABUS

1.REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; FAILURE TO


ATTACH PERTINENT PLEADINGS AND DOCUMENTS IS A VIOLATION OF
THE RULES WHICH ARE REQUIRED TO BE FOLLOWED EXCEPT ONLY FOR
THE MOST PERSUASIVE REASONS; RATIONALE. Petitioner's failure to
attach copies of pertinent pleadings and documents was a violation of Rule 65,
Section 1, paragraph 2 of the Rules of Court. It is true that a litigation is not a
game of technicalities and that the rules of procedure should not be strictly
enforced at the cost of substantial justice. However, it does not mean that the
Rules of Court may be ignored at will and at random to the prejudice of the
orderly presentation and assessment of the issues and their just resolution. It
must be emphasized that procedural rules should not be belittled or dismissed
simply because their non-observance may have resulted in prejudice to a party's
substantial rights. Like all rules, they are required to be followed except only for
the most persuasive of reasons.

2.ID.; EVIDENCE; FACTUAL FINDINGS OF THE LABOR ARBITER WHEN


AFFIRMED BY THE NATIONAL LABOR RELATIONS COMMISSION (NLRC)
AND THE COURT OF APPEALS ARE BINDING UPON THE SUPREME
COURT; JUSTIFIED. As a rule, factual findings of the labor arbiter, when
affirmed by the NLRC and the Court of Appeals, are binding on this Court. It is
not our function to analyze or weigh all over again the evidence already
considered in the proceedings below. Our jurisdiction in a petition for review
under Rule 45 of the Rules of Court is limited to reviewing only errors of law.
RESOLUTION

CORONA, J p:

In this petition for review under Rule 45 of the Rules of Court, petitioner would
have us annul and set aside the May 21, 1999 decision 2 of the Court of Appeals
finding no grave abuse of discretion on the part of the National Labor Relations
Commission 3 (NLRC) in holding petitioner liable to pay respondents, Gaspar
Vales and Prudencio Cerdenia, separation benefits in the amounts of P27,885 and
P21,450, respectively.

The facts are not disputed.

Respondents Vales and Cerdenia were agency workers of Gotamco & Sons, Inc.
They were assigned to work for petitioner Union Industries, Inc. as carpenters
since 1983 and 1986, respectively.

In 1995, grievance meetings were held for the regularization of several


contractual employees, including respondents. This resulted in a compromise
agreement, 4 the pertinent portion of which read:

1.)On the remaining issues, the parties agreed on the


following:

xxx xxx xxx

(b)The following years of service of the remaining 8


complainants under Gotamco shall be tacked in
into their length of service as regular employees of
UII for purposes only of retirement or separation
pay, to wit:

xxx xxx xxx


2.GASPAR VALES- 6 years

3.PRUDENCIO CERDENIA- 5 years


2.)The complainants agree that this agreement embodies all
their claims and that they waive any other claims against UII
which [they] could have made or have made during the
negotiations, but which are not embodied in this agreement.
HDTcEI

3.)The parties agree to sign the formal memorandum of


agreement at a later date to be agreed upon by them." 5

In 1995, respondents joined petitioner's mainstream of regular employees. They


underwent medical examination and were both diagnosed to be positive for
pulmonary tuberculosis (PTB). They were, however, allowed to continue
working for another year subject to medical re-examination. If still found
suffering from PTB, they were to take a leave to recuperate before reporting back
to work.

On June 14, 1996, respondents were again found positive for PTB. They were
required to go on sick leave. Instead, respondents filed a complaint for illegal
dismissal against petitioner before the arbitration branch of the NLRC.

The labor arbiter 6 dismissed the complaint for illegal dismissal but ordered the
payment of separation benefits based on the following:

After a thorough analysis of the evidence adduced to the


records of the case at bench, this Arbitration Branch finds
that complainants 7 were not illegally dismissed from
employment much less dismissed at all. They were both
[merely asked] to go on sick leave for further medical
treatment of pulmonary tuberculosis (PTB).

xxx xxx xxx

Considering that complainants [were] suffering from


controlled PTB minimal since the [latter] part of 1995 and
their continued employment would be prejudicial to their
health and that of their co-workers and despite medication
and treatment for over a year, their medical condition
showed that they are still suffering from PTB minimal, the
relief of separation pay of 1/2 month salary for every year of
credited and actual service is in order. . . .

The basis in the computation of their separation benefits


should be reckoned from the date that they were first
hired/assigned at Union Industries, Inc. by Gotamco & Sons,
Inc. and not from the agreement forged between labor and
management as a result of the grievance hearing for the
regularization of the affected service contractual workers
(including complainants herein). This is based on the
principle of equity since the record of employment is
reckoned not from the date of his appointment as such, but
from the very first time that he worked with the respondent
establishment.
xxx xxx xxx

WHEREFORE, judgment is hereby rendered ordering


Respondent, Union Industries, Inc. 8 to pay complainants,
Gaspar Vales and Prudencio Cerdenia separation benefits in
the amounts of P27,885.00 and P21,450.00 respectively.
DHACES

The complaint for illegal dismissal and other monetary


claims are hereby disallowed for lack of merit. 9

On appeal, the NLRC affirmed the decision of the labor arbiter, reasoning that,
because of respondents' regularization, the number of years they actually
worked for petitioner should be considered in the computation of separation
benefits. Petitioner's motion for reconsideration was denied.

On June 9, 1998, petitioner filed a petition for certiorari with this Court. It was,
however, referred to the Court of Appeals in line with our ruling in St. Martin
Funeral Homes v. NLRC, et al. 10

On May 21, 1999, the Court of Appeals dismissed the petition on two grounds:
(1) petitioner failed to attach pertinent documents and pleadings and (2) there
was no grave abuse of discretion on the part of the NLRC. According to the
Court of Appeals, the decision of the labor arbiter, which the NLRC affirmed,
was in consonance with the principle that labor laws constitute social legislation
under which doubts are resolved in favor of labor. 11 The motion for
reconsideration was denied. Hence, this recourse.

The petition lacks merit.

The Court of Appeals was correct in dismissing the petition for certiorari.
Petitioner's failure to attach copies of pertinent pleadings and documents was a
violation of Rule 65, Section 1, paragraph 2 of the Rules of Court.

It is true that a litigation is not a game of technicalities and


that the rules of procedure should not be strictly enforced at
the cost of substantial justice. However, it does not mean
that the Rules of Court may be ignored at will and at
random to the prejudice of the orderly presentation and
assessment of the issues and their just resolution. It must be
emphasized that procedural rules should not be belittled or
dismissed simply because their non-observance may have
resulted in prejudice to a party's substantial rights. Like all
rules, they are required to be followed except only for the
most persuasive of reasons. 12
Petitioner furthermore wants us to set aside the award of separation benefits to
respondents Vales and Cerdenia in the amounts of P27,885 and P21,450,
respectively a factual finding of the labor arbiter which was affirmed by the
NLRC and upheld by the Court of Appeals.

We deny the prayer. As a rule, factual findings of the labor arbiter, when
affirmed by the NLRC and the Court of Appeals, are binding on this Court. It is
not our function to analyze or weigh all over again the evidence already
considered in the proceedings below. 13 Our jurisdiction in a petition for review
under Rule 45 of the Rules of Court is limited to reviewing only errors of law. 14

WHEREFORE, there being no reversible error on the part of the Court of Appeals
in rendering its May 21, 1999 decision, the instant petition is hereby DENIED.
ESHAIC

Costs against petitioner.

SO ORDERED.

||| (Union Industries, Inc. v. Vales, G.R. No. 140102, February 09, 2006)

FIRST DIVISION

[G.R. Nos. 162814-17. August 25, 2005.]

JOSE F. MANACOP, HARISH C. RAMNANI, CHANDRU


P. PESSUMAL and MAUREEN M. RAMNANI, petitioners,
vs. EQUITABLE PCIBANK, LAVINE LOUNGEWEAR
MANUFACTURING INC., PHILIPPINE FIRE AND
MARINE INSURANCE CORPORATION and FIRST
LEPANTO-TAISHO INSURANCE CORPORATION,
respondents.

Arturo S. Santos for petitioners.

R.A. Quiroz Law Offices for First Lepanto-Taisho Insurance


Corporation.

Picazo Buyco Tan Fider & Santos for Rizal Surety and Insurance
Company.

M.A. Aguinaldo & Associates and Fondevilla Jasarino Young Rondario &
Librojo Law Offices for Lavine Loungewear Manufacturing, Inc.

Villaraza & Angangco Law Offices for Equitable PCI Bank.


SYLLABUS

1.REMEDIAL LAW; CIVIL PROCEDURE; SIMULTANEOUS FILING OF A


PETITION FOR CERTIORARI UNDER RULE 65 AND AN ORDINARY APPEAL
UNDER RULE 45 OF THE REVISED RULES OF CIVIL PROCEDURE CANNOT
BE ALLOWED; RATIONALE. Simultaneous filing of a petition for certiorari
under Rule 65 and an ordinary appeal under Rule 41 of the Revised Rules of
Civil Procedure cannot be allowed since one remedy would necessarily cancel
out the other. The existence and availability of the right of appeal proscribes
resort to certiorari because one of the requirements for availment of the latter is
precisely that there should be no appeal. It is elementary that for certiorari to
prosper, it is not enough that the trial court committed grave abuse of discretion
amounting to lack or excess of jurisdiction; the requirement that there is no
appeal, nor any plain, speedy and adequate remedy in the ordinary course of law
must likewise be satisfied. It is well-settled that the remedy to obtain reversal or
modification of the judgment on the merits is appeal. This is true even if the
error, or one of the errors, ascribed to the trial court rendering the judgment is its
lack of jurisdiction over the subject matter, or the exercise of power in excess
thereof, or grave abuse of discretion in the findings of fact or of law set out in the
decision. Thus, while it may be true that a final order or judgment was rendered
under circumstances that would otherwise justify resort to a special civil action
under Rule 65, the latter would nonetheless be unavailing if there is an appeal or
any other plain, speedy and adequate remedy in the ordinary course of law.

2.ID.; ID.; WHEN RESORT TO SPECIAL CIVIL ACTION FOR CERTIORARI


WAS JUSTIFIED EVEN AS THE REGLEMENTARY PERIOD FOR THE PROPER
REMEDY OF APPEAL HAD ALREADY LAPSED; NOT APPLICABLE IN CASE
AT BAR. Equitable Bank's reliance on Estate of Salud Jimenez v. Philippine
Export Processing Zone is misplaced. In that case, resort by the respondent to a
special civil action was justified, even as the reglementary period for the proper
remedy of appeal had already lapsed, because the assailed order of the trial court
set aside an expropriation order that had long become final and executory. The
Court declared therein that the trial court clearly acted beyond its jurisdiction for
it cannot modify a final and executory order. The questioned order of the trial
court in that case was a patent nullity. In contrast, Equitable Bank has not shown
any valid or extraordinary circumstance that would justify immediate resort to
certiorari. It simply alleged grave abuse of discretion on the part of the trial judge
as purportedly shown by a pattern of questionable rulings in favor of petitioners.
However, these rulings may not be corrected by certiorari no matter how
irregular or erroneous they might be. If the court has jurisdiction over the subject
matter and of the person, its rulings upon all questions involved are within its
jurisdiction and may be corrected only by an appeal from the final decision.

3.ID.; ID.; FORUM-SHOPPING; PRESENT UPON INSTITUTION OF TWO OR


MORE ACTIONS OR PROCEEDINGS GROUNDED ON THE SAME CAUSE OF
ACTION ON THE SUPPOSITION THAT ONE OR THE OTHER WOULD
MAKE A FAVORABLE DISPOSITION; PRESENT IN CASE AT BAR. Another
compelling reason for dismissing CA-G.R. Nos. 70292 and 70298 is that Equitable
Bank and Lavine actually engaged in forum-shopping. As pointed out by
petitioners, there is indeed parallelism between the instant case and Chemphil
Export & Import Corp. v. CA. In Chemphil, PCIBank filed a special civil action
for certiorari against final orders of the trial court, even as its co-parties likewise
brought an ordinary appeal from the same final orders. Although PCIBank did
not join its co-parties in the latter's appeal and instead separately filed its own
petition under Rule 65, the Court nonetheless found PCIBank's acts as
constituting forum-shopping: We view with skepticism PCIB's contention that it
did not join the consortium because it 'honestly believed that certiorari was the
more efficacious and speedy relief available under the circumstances.' Rule 65 of
the Revised Rules of Court is not difficult to understand. Certiorari is available
only if there is no appeal or other plain, speedy and adequate remedy in the
ordinary course of law. Hence, in instituting a separate petition for certiorari,
PCIB has deliberately resorted to forum-shopping. . . . It alarms us to realize that
we have to constantly repeat our warning against forum-shopping. We cannot
over-emphasize its ill-effects, one of which is aptly demonstrated in the case at
bench where we are confronted with two divisions of the Court of Appeals
issuing contradictory decisions . . . Forum-shopping or the act of a party against
whom an adverse judgment has been rendered in one forum, of seeking another
(and possibly favorable) opinion in another forum (other than by appeal or the
special civil action of certiorari), or the institution of two (2) or more actions or
proceedings grounded on the same cause on the supposition that one or the
other court would make a favorable disposition has been characterized as an act
of malpractice that is prohibited and condemned as trifling with the Courts and
abusing their processes. It constitutes improper conduct which tends to degrade
the administration of justice. It has also been aptly described as deplorable
because it adds to the congestion of the already heavily burdened dockets of the
courts. Thus, if we allow the instant petitions of Equitable Bank and Lavine to
prosper, this Court would be confronted with the spectacle of two (2) appellate
court decisions (one on the special civil actions brought by Equitable Bank and
Lavine, and another on the ordinary appeals taken by Rizal Surety, Equitable
Bank and the other respondents) dealing with the same subject matter, issues,
and parties. Needless to say, this is exactly the pernicious effect that the rules
against forum-shopping seek to avoid.

4.ID.; ID.; CERTIORARI; WHEN CONSIDERED AS PROPER REMEDY


AGAINST AN ORDER GRANTING EXECUTION PENDING APPEAL.
Certiorari lies against an order granting execution pending appeal where the
same is not founded upon good reasons. The fact that the losing party had also
appealed from the judgment does not bar the certiorari proceedings, as the
appeal could not be an adequate remedy from such premature execution.
Additionally, there is no forum-shopping where in one petition a party questions
the order granting the motion for execution pending appeal and at the same time
questions the decision on the merits in a regular appeal before the appellate
court. After all, the merits of the main case are not to be determined in a petition
questioning execution pending appeal and vice versa.

5.ID.; ID.; EXECUTION PENDING APPEAL; WHEN ALLOWED. The general


rule is that only judgments which have become final and executory may be
executed. However, discretionary execution of appealed judgments may be
allowed under Section 2 (a) of Rule 39 of the Revised Rules of Civil Procedure
upon concurrence of the following requisites: (a) there must be a motion by the
prevailing party with notice to the adverse party; (b) there must be a good reason
for execution pending appeal; and (c) the good reason must be stated in a special
order. The yardstick remains the presence or the absence of good reasons
consisting of exceptional circumstances of such urgency as to outweigh the injury
or damage that the losing party may suffer, should the appealed judgment be
reversed later. Since the execution of a judgment pending appeal is an exception
to the general rule, the existence of good reasons is essential.

6.ID.; ID.; ID.; NOT PROPER IN CASE AT BAR. The fact that the insurance
companies admit their liabilities is not a compelling or superior circumstance
that would warrant execution pending appeal. On the contrary, admission of
their liabilities and willingness to deliver the proceeds to the proper party
militate against execution pending appeal since there is little or no danger that
the judgment will become illusory. There is likewise no merit in petitioners'
contention that the appeals are merely dilatory because, while the insurance
companies admitted their liabilities, the matter of how much is owing from each
of them and who is entitled to the same remain unsettled. It should be noted that
respondent insurance companies are questioning the amounts awarded by the
trial court for being over and above the amount ascertained by the Office of the
Insurance Commission. There are also three parties claiming the insurance
proceeds, namely: petitioners, Equitable Bank, and Lavine as represented by the
group of Chandru. Besides, that the appeal is merely dilatory is not a good
reason for granting execution pending appeal. As held in BF Corporation v. Edsa
Shangri-la Hotel: . . . it is not for the trial judge to determine the merit of a
decision he rendered as this is the role of the appellate court. Hence, it is not
within competence of the trial court, in resolving a motion for execution pending
appeal, to rule that the appeal is patently dilatory and rely on the same as basis
for finding good reasons to grant the motion. Only an appellate court can
appreciate the dilatory intent of an appeal as an additional good reason in
upholding an order for execution pending appeal. . .

DECISION

YNARES-SANTIAGO, J p:

Respondent Lavine Loungewear Manufacturing, Inc. ("Lavine") insured its


buildings and supplies against fire with Philippine Fire and Marine Insurance
Corporation ("PhilFire"), Rizal Surety and Insurance Company ("Rizal Surety"),
Tabacalera Insurance Company ("TICO"), First Lepanto-Taisho Insurance
Corporation ("First Lepanto"), Equitable Insurance Corporation ("Equitable
Insurance"), and Reliance Insurance Corporation ("Reliance Insurance"). Except
for Policy No. 13798 issued by First Lepanto, all the policies provide that:

Loss, if any, under this policy is payable to Equitable


Banking Corporation-Greenhills Branch, as their interest
may appear subject to the terms, conditions, clauses and
warranties under this policy. (Underscoring supplied)

On August 1, 1998, a fire gutted Lavine's buildings and their contents thus claims
were made against the policies. As found by the Office of the Insurance
Commission, the insurance proceeds payable to Lavine is P112,245,324.34. 1

Lavine was then represented by Harish C. Ramnani ("Harish") but his authority
was withdrawn on March 17, 2000 by the Board of Directors due to his alleged
failure to account for the insurance proceeds. Chandru C. Ramnani ("Chandru")
was appointed in his stead and was designated, together with Atty. Mario A.
Aguinaldo, as Lavine's representatives in negotiating with the insurance
companies.

Prior to the release of the proceeds, the insurance companies required Lavine to
sign a Sworn Statement in Proof of Loss and Subrogation Agreement 2 whereby the
former would be absolved from their liabilities upon payment of the proceeds to
Equitable Bank. Only Harish signed the document while the rest of Lavine's
directors refused to sign.

Notwithstanding Chandru's request that payments be made first to Lavine who


shall thereafter pay Equitable Bank as the latter's interest may appear, certain
insurance companies released the proceeds directly to Equitable Bank thus
Chandru filed, in behalf of Lavine, a Petition for the Issuance of a Writ of
Preliminary Injunction with Prayer for a Temporary Restraining Order 3 before
the Regional Trial Court (RTC) of Pasig City, against PhilFire, Rizal Surety,
TICO, First Lepanto and Equitable Bank. The case was docketed as Civil Case
No. 68287 and raffled to Branch 71 presided by Judge Celso D. Lavia. SIcEHD

Harish, Jose F. Manacop, Chandru P. Pessumal, Maureen M. Ramnani and


Salvador Cortez, moved to intervene 4 claiming they were Lavine's incumbent
directors and that Harish was Lavine's authorized representative. 5 They
disclaimed Chandru's designation as president of Lavine as well as his and Atty.
Aguinaldo's authority to file the action. They also denied having refused to sign
the Sworn Statement in Proof of Loss and Subrogation Agreement. 6

On February 14, 2001, the trial court granted the motion for intervention 7 and
thereafter denied Lavine's motion for reconsideration. 8

In their respective Answer with Compulsory Counterclaim, Rizal Surety stated


its willingness to pay the insurance proceeds but only to the rightful claimant, 9
while Equitable Bank alleged it had sufficiently established the amount of its
claim and as beneficiary of the insurance policies, it was entitled to collect the
proceeds. 10

The intervenors in their Amended Answer-in-Intervention 11 with cross-claim


against the insurance companies alleged that as of August 1, 1998, Lavine's
obligations to Equitable Bank amounted to P71,000,000.00 and since Equitable
Insurance and Reliance Insurance have already paid the bank more than this
amount, respondent insurance companies should be ordered to immediately
deliver to Lavine the remaining insurance proceeds through the intervenors and
to pay interests thereon from the time of submission of proof of loss.

In its Answer 12 dated May 22, 2001 to Lavine's complaint and the intervenors'
cross-claim, First Lepanto alleged that its share in the combined proceeds was
P16,145,760.11, of which P6,000,000.00 had already been paid to Equitable Bank.
It withheld payment of the balance since it could not determine to whom it
should be made. It further alleged that the intervenors had no personality to
intervene and prayed for the outright dismissal of their cross-claim against the
insurance companies.

This was refuted by the intervenors who alleged that since Lavine and
petitioners were already litigating, it was too late for First Lepanto to file an
action for interpleader. They stressed that the latter must now deliver the balance
of the insurance proceeds to either Equitable Bank or Lavine, through the
intervenors. 13

On June 18, 2001, PhilFire filed its Answer 14 admitting liability in the amount of
P12,916,608.09, of which P4,288,329.52 had been paid to Equitable Bank but
withheld paying the balance until the rightful claimant has been determined.
TICO did not file an answer to Lavine's complaint and was declared in default.
15

After pre-trial, the intervenors filed a Second Amended Answer-in-Intervention


16 alleging that Lavine's liabilities to Equitable Bank were extinguished since it
received proceeds exceeding the amount of Lavine's obligations. Thus, the real
estate mortgages given as security therefor be released and the excess amount
returned to Lavine. ESCTIA

Equitable Bank denied that Lavine's obligations were fully paid, and averred that
the loans were secured not only by the insurance policies and the real estate
mortgages but also by several surety agreements executed by Harish and
Maureen Ramnani. The bank prayed that: (a) the insurance companies be
ordered to deliver to it the proceeds of the policies and/or for Lavine to be
directed to pay the outstanding loans; (b) the spouses Harish and Maureen
Ramnani be held solidarily liable for the payment of the outstanding obligations
of Lavine; and (c) the mortgaged properties be foreclosed in case of failure of
Lavine, the insurers and sureties to fully satisfy the loan obligations. 17

In a Reply, 18 the intervenors denied that Lavine acquired further loans from the
bank for the years 1998 and 1999. The promissory notes allegedly pertaining to
these loans were obtained prior to 1998 and the surety agreements signed by
Harish and Maureen Ramnani were consolidated in a Surety Agreement dated
January 27, 1997 19 and that the loan covered by PN No. TL-GH-97-0292 had
been fully paid.

In the meantime, Equitable Bank and First Lepanto manifested in open court that
another pre-trial should be conducted on the intervenors' cross-claim under the
Second Amended Answer-in-Intervention but the trial court denied the same
and proceeded with the hearing of the case. 20

On April 2, 2002, the trial court rendered a decision, the dispositive part of which
reads:

WHEREFORE, judgment is hereby rendered:

1.DISMISSING the Complaint dated January 22, 2001, for


lack of merit, with costs against Chandru C. Ramnani.

2.ORDERING the defendant Bank to refund to plaintiff


through the Intervenors the amount of P65,819,936.05
representing the overpayment as actual or compensatory
damages, with legal rate of interest at six (6%) per cent per
annum from the date of this decision until full payment.

3.ORDERING:
a.Defendant Philippine Fire and Marine Insurance
Corporation to pay plaintiff through Intervenors
the total amount of P15,111,670.48 representing
unpaid insurance proceeds as actual or
compensatory damages, with twenty-nine (29%)
per cent interest per annum from October 1, 1998
until full payment.

b.Defendant Rizal Surety and Insurance Company


to pay plaintiff through Intervenors the amount of
P17,100,000.00 representing unpaid insurance
proceeds as actual or compensatory damages, with
twenty-nine (29%) per cent interest per annum
from October 1, 1998 until full payment.

c.Defendant First Lepanto-Taisho Insurance


Corporation to pay plaintiff through Intervenors
the total amount of P18,250,000.00 representing
unpaid insurance proceeds as actual or
compensatory damages, with twenty-nine (29%)
per cent interest per annum from October 1, 1998
until full payment.

d.Defendant Tabacalera Insurance Company to pay


plaintiff through Intervenors the amount of
P25,690,000.00 representing unpaid insurance
proceeds as actual or compensatory damages, with
twenty-nine (29%) per cent interest per annum
from October 1, 1998 until full payment. DTAHSI

4.ORDERING all defendants to pay, jointly and severally,


plaintiff through Intervenors the amount equivalent to ten
(10%) per cent of the actual damages due and demandable as
and by way of attorney's fees.

5.CANCELLING the loan mortgage annotations and


RETURNING to plaintiff through Intervenors TCT No.
23906, CCT Nos. PT-17871, PT-17872 and PT-17873.

6.Costs of suit.

Counterclaims filed by plaintiff against intervenors and


cross-claims filed by all defendants against intervenors and
counterclaims are hereby DISMISSED for lack of merit.

SO ORDERED. 21
On April 3, 2002, the intervenors filed a Motion for Execution Pending Appeal 22
on the following grounds: (a) TICO was on the brink of insolvency; (b) Lavine
was in imminent danger of extinction; and (c) any appeal from the trial court's
judgment would be merely dilatory.

Meanwhile, Rizal Surety, First Lepanto, Equitable Bank and Lavine separately
filed a Notice of Appeal. 23 PhilFire likewise filed a Notice of Appeal, 24 a
Motion for Reconsideration (Ad Cautelam), 25 and a Motion to Dismiss. 26
PhilFire's Motion for Reconsideration and Motion to Dismiss were denied by the
trial court on May 14, 2002. 27

Without filing a motion for reconsideration from the decision of the trial court
and even before the latter could rule on the motion for execution pending appeal,
Equitable Bank filed on April 24, 2002 a Petition for Certiorari, Prohibition and
Mandamus (with Prayer for Temporary Restraining Order and Preliminary
Injunction) 28 before the Court of Appeals docketed as CA-G.R. SP No. 70298.
Lavine also filed a Petition for Certiorari with Prayer for Temporary Restraining
Order (TRO) and Writ of Preliminary Injunction 29 docketed as CA-G.R. SP No.
70292, after it withdrew its Notice of Appeal. Both claimed that appeal was not a
plain, speedy and adequate remedy under the circumstances.

Judge Lavia granted intervenors' motion for execution pending appeal 30 and
issued a writ of execution on May 20, 2002 31 which was implemented the
following day. Personal properties of PhilFire and First Lepanto were seized; the
latter's bank deposits garnished while real properties belonging to Equitable
Bank were levied upon. The writ was not enforced against Rizal Surety because
its corporate name and operations were transferred to QBE Insurance (Phils.)
Incorporation ("QBE Insurance"). 32

First Lepanto assailed the trial court's order granting execution pending appeal
and the writ of execution in a Petition for Certiorari 33 before the Court of
Appeals docketed as CA-G.R. SP No. 70844. It allegedly did not file a motion for
reconsideration of the trial court's order due to extreme urgency, as the ongoing
execution of the appealed judgment was threatening to paralyze its operations.
Before long, PhilFire also filed a Petition for Certiorari With Prayer for Temporary
Restraining Order and Writ of Preliminary Injunction docketed as CA-G.R. SP
No. 70799, against the same order and writ of execution. 34

Rizal Surety, for its part, did not file a petition under Rule 65 of the Revised
Rules of Civil Procedure but maintained its ordinary appeal from the April 2,
2002 decision of the trial court. However, acting on the report that Rizal Surety
was now re-organized as QBE Insurance (Phils.) Inc., Judge Lavia issued an
Order dated May 27, 2002 directing the implementation of the Writ of Execution
against QBE Insurance. 35

Subsequently, the certiorari petitions were consolidated before the Tenth Division
of the Court of Appeals, which thereupon granted Lavine's prayer for the
issuance of a writ of preliminary injunction upon posting a P50M bond. 36

In view of the issuance of the writ of execution by the trial court, Equitable Bank
filed an Amended and/or Supplemental Petition for Certiorari, Prohibition and
Mandamus 37 in CA-G.R. SP No. 70298 on June 11, 2002, assailing the trial court's
order granting execution pending appeal as well as the issuance of the writ of
execution. In due course, the Court of Appeals promulgated a consolidated
decision, the dispositive part of which reads:

WHEREFORE, premises considered, judgment is hereby


rendered:

(1)SETTING ASIDE the decision dated April 2, 2001;

(2)declaring NULL and VOID the Special Order dated May


17, 2002 and the Writ of Execution dated May 20, 2002;

(3)remanding the case to the lower court for the conduct of


pre-trial conference on the Second Amended Answer-in-
Intervention and the subsequent pleadings filed in relation
thereto; and

(4)in the event that the lower court decides that Lavine is the
one entitled to the proceeds of the insurance policies,
payment thereof should be withheld, subject to the outcome
of the decision on the issue on the rightful members of the
Board of Directors of Lavine which is pending before the
intra-corporate court. DTCSHA

SO ORDERED. 38

On March 17, 2004, the appellate court issued a resolution amending its earlier
decision as follows:

WHEREFORE, premises considered, this Court hereby


resolves to:

1.CORRECT paragraph 1 of the dispositive portion of the


Consolidated Decision dated May 29, 2003 to reflect the
correct date of the questioned decision of the court a quo
which is April 2, 2002 and not April 2, 2001;

2.CLARIFY paragraph 3 of the Consolidated Decision in the


sense that the case is remanded to the lower court to enable
to (sic) the parties to amend their respective pleadings and
issues, as may be necessary and conduct pre-trial anew and
other proceedings to the exclusion of the intervenors in view
of the ruling that the latter should not have been allowed to
intervene in the case;

3.a) LIFT the order of levy and garnishment on the real and
personal properties and bank deposits of Equitable PCIBank;
b) LIFT the garnishment on the bank accounts of Philippine
Fire and Marine Insurance Corporation which were made
pursuant to the Special Order dated May 17, 2002 and the
Writ of Execution dated May 20, 2002 which were declared
null and void in this Court's Consolidated Decision; and

5.DENY Equitable PCIBank's motion to disqualify


respondent Judge Celso Lavia from hearing the case upon
its remand to the lower court. IEHTaA

SO ORDERED. 39

Upon proper motion, the Court of Appeals also subsequently ordered the lifting
of the order of levy and notice of garnishment on the real properties and bank
deposits of First Lepanto in a resolution dated April 20, 2004.

Equitable Bank then filed a petition for review before this Court docketed as G.R.
Nos. 162842-45 assailing the appellate court's resolution insofar as it denied the
bank's motion to disqualify Judge Lavia. However, the Third Division of this
Court denied the petition 40 and its subsequent motion for reconsideration. 41

On the other hand, the intervenors now petitioners took this recourse
under Rule 45 alleging that:

I.THE COURT OF APPEALS ERRED IN GIVING DUE


COURSE TO THE PETITION FOR CERTIORARI
OF EQUITABLE PCIBANK IN CA-G.R. SP NO.
70298 AND THE PETITION FOR CERTIORARI OF
LAVINE IN CA-G.R. SP NO. 70292
NOTWITHSTANDING THAT THE ORDINARY
MODE OF APPEAL UNDER SECTION 2, RULE 41
OF THE REVISED RULES OF COURT HAD
ALREADY BEEN AVAILED OF BY THEM.

II.THE COURT OF APPEALS COMMITTED AN ERROR IN


VOIDING THE DECISION OF THE TRIAL COURT
DATED APRIL 2, 2002 FOR LACK OF PRE-TRIAL
ON THE PETITIONERS AMENDED ANSWER-IN-
INTERVENTION NOTWITHSTANDING THAT A
PRE-TRIAL WAS ALREADY CONCLUDED AND
THE PARTIES HAVE ALREADY ADDUCED
THEIR RESPECTIVE EVIDENCES IN THE TRIAL.

III.THE COURT OF APPEALS GRAVELY ERRED IN


HOLDING THAT PETITIONERS WHO ARE THE
RIGHTFUL MEMBERS OF THE BOARD OF
DIRECTORS CANNOT INTERVENE TO
PROSECUTE THE ACTION FILED BY LAVINE
THROUGH A MINORITY STOCKHOLDER WHO
HAS NO AUTHORITY THEREFOR.

IV.THE COURT OF APPEALS ERRED IN SETTING ASIDE


THE DECISION OF THE TRIAL COURT AND
FRUSTRATE THE FINDINGS THAT EQUITABLE
PCIBANK IS NOT ENTITLED TO CLAIM THE
INSURANCE PROCEEDS SINCE THE LOAN OF
LAVINE TO IT HAD ALREADY BEEN FULLY
PAID AS IN FACT THERE WAS AN
OVERPAYMENT WHICH MUST BE RETURNED
TO LAVINE.

V.THE COURT OF APPEALS COMMITTED AN ERROR IN


VOIDING THE WRIT OF EXECUTION PENDING
APPEAL NOTWITHSTANDING THAT THE
JUDGMENT LIABILITY IS ADMITTED BUT ITS
SATISFACTION IS WITHHELD BY VIRTUE OF
THE FLIMSY APPEAL. 42

The petition is partly meritorious.

On the first assigned error, we agree that the Court of Appeals should have
dismissed CA-G.R. SP Nos. 70292 and 70298. A perusal of these petitions show
that Equitable Bank and Lavine inappropriately filed the petitions for certiorari
when appeal was clearly a plain, speedy and adequate remedy from the decision
of the trial court. In fact, both filed their respective notices of appeal from the
trial court's decision, although Lavine later withdrew its notice of appeal. They
therefore cannot be allowed to question the same decision on the merits and also
invoke the extraordinary remedy of certiorari.

Simultaneous filing of a petition for certiorari under Rule 65 and an ordinary


appeal under Rule 41 of the Revised Rules of Civil Procedure cannot be allowed
since one remedy would necessarily cancel out the other. The existence and
availability of the right of appeal proscribes resort to certiorari because one of the
requirements for availment of the latter is precisely that there should be no
appeal. 43 It is elementary that for certiorari to prosper, it is not enough that the
trial court committed grave abuse of discretion amounting to lack or excess of
jurisdiction; the requirement that there is no appeal, nor any plain, speedy and
adequate remedy in the ordinary course of law must likewise be satisfied. 44

In the instant case, Equitable Bank and Lavine assailed the trial court's decision
through certiorari by alleging that Judge Lavia was biased. According to
Equitable Bank, Judge Lavia's partiality was evident in his refusal to issue and
serve summons on Jethmal Inc. and in conducting pre-trial on petitioners' Second
Amended Answer-in-Intervention. On the other hand, Lavine alleged that Judge
Lavia disregarded mandatory provisions of the Rules of Court when he allowed
petitioners to intervene; that he also resolved the issue of corporate
representation between the two groups of directors of Lavine when he had no
jurisdiction over the subject matter.

Clearly, the foregoing allegations are proper under Rule 41. It should be pointed
out that when Equitable Bank and Lavine filed their respective petitions before
the Court of Appeals on April 24, 2002, the trial court had already rendered on
April 2, 2002 a judgment on the merits. Both had notice of said final judgment as
they even filed notices of appeal with the trial court. This only goes to show that
Equitable Bank and Lavine unwittingly recognized ordinary appeal as the proper
remedy in seeking reversal of the assailed decision.

It is well-settled that the remedy to obtain reversal or modification of the


judgment on the merits is appeal. This is true even if the error, or one of the
errors, ascribed to the trial court rendering the judgment is its lack of jurisdiction
over the subject matter, or the exercise of power in excess thereof, or grave abuse
of discretion in the findings of fact or of law set out in the decision. 45 Thus,
while it may be true that a final order or judgment was rendered under
circumstances that would otherwise justify resort to a special civil action under
Rule 65, the latter would nonetheless be unavailing if there is an appeal or any
other plain, speedy and adequate remedy in the ordinary course of law.

Equitable Bank, however, posits that in certain exceptional cases, certiorari may
be allowed even with the availability of an appeal, such as where valid and
compelling considerations would warrant the same or where rigid application of
the rules would result in a manifest failure or miscarriage of justice, as in this
case.

Equitable Bank's reliance on Estate of Salud Jimenez v. Philippine Export Processing


Zone 46 is misplaced. In that case, resort by the respondent to a special civil
action was justified, even as the reglementary period for the proper remedy of
appeal had already lapsed, because the assailed order of the trial court set aside
an expropriation order that had long become final and executory. The Court
declared therein that the trial court clearly acted beyond its jurisdiction for it
cannot modify a final and executory order. The questioned order of the trial
court in that case was a patent nullity. DAEcIS

In contrast, Equitable Bank has not shown any valid or extraordinary


circumstance that would justify immediate resort to certiorari. It simply alleged
grave abuse of discretion on the part of the trial judge as purportedly shown by a
pattern of questionable rulings in favor of petitioners. However, these rulings
may not be corrected by certiorari no matter how irregular or erroneous they
might be. If the court has jurisdiction over the subject matter and of the person,
its rulings upon all questions involved are within its jurisdiction and may be
corrected only by an appeal from the final decision. 47

Another compelling reason for dismissing CA-G.R. Nos. 70292 and 70298 is that
Equitable Bank and Lavine actually engaged in forum-shopping. As pointed out
by petitioners, there is indeed parallelism between the instant case and Chemphil
Export & Import Corp. v. CA. 48

In Chemphil, PCIBank filed a special civil action for certiorari against final orders
of the trial court, even as its co-parties likewise brought an ordinary appeal from
the same final orders. Although PCIBank did not join its co-parties in the latter's
appeal and instead separately filed its own petition under Rule 65, the Court
nonetheless found PCIBank's acts as constituting forum-shopping:

We view with skepticism PCIB's contention that it did not


join the consortium because it 'honestly believed that
certiorari was the more efficacious and speedy relief available
under the circumstances.' Rule 65 of the Revised Rules of
Court is not difficult to understand. Certiorari is available
only if there is no appeal or other plain, speedy and
adequate remedy in the ordinary course of law. Hence, in
instituting a separate petition for certiorari, PCIB has
deliberately resorted to forum-shopping.

xxx xxx xxx

It alarms us to realize that we have to constantly repeat our


warning against forum-shopping. We cannot over-
emphasize its ill-effects, one of which is aptly demonstrated
in the case at bench where we are confronted with two
divisions of the Court of Appeals issuing contradictory
decisions . . .
Forum-shopping or the act of a party against whom an
adverse judgment has been rendered in one forum, of
seeking another (and possibly favorable) opinion in another
forum (other than by appeal or the special civil action of
certiorari), or the institution of two (2) or more actions or
proceedings grounded on the same cause on the supposition
that one or the other court would make a favorable
disposition has been characterized as an act of malpractice
that is prohibited and condemned as trifling with the Courts
and abusing their processes. It constitutes improper conduct
which tends to degrade the administration of justice. It has
also been aptly described as deplorable because it adds to
the congestion of the already heavily burdened dockets of
the courts. (Underscoring supplied) 49

Thus, if we allow the instant petitions of Equitable Bank and Lavine to prosper,
this Court would be confronted with the spectacle of two (2) appellate court
decisions (one on the special civil actions brought by Equitable Bank and Lavine,
and another on the ordinary appeals taken by Rizal Surety, Equitable Bank and
the other respondents) dealing with the same subject matter, issues, and parties.
Needless to say, this is exactly the pernicious effect that the rules against forum-
shopping seek to avoid. Consequently, the certiorari petitions of Equitable Bank
and Lavine must be struck down for being anathema to the orderly
administration of justice. cDAEIH

In view of the preceding discussion, we find it no longer necessary to discuss


petitioners' second to fourth assigned errors. The propriety of the intervention,
the lack of pre-trial and the extent of Equitable Bank's interests in the insurance
proceeds, among others, are issues that must properly be resolved in the
ordinary appeals. Except for Lavine which apparently withdrew its notice of
appeal, all the other respondents appealed the decision of the trial court under
Rule 41. These appeals must consequently be allowed to proceed.

Anent petitioners' fifth assigned error, we find that the Court of Appeals did not
err in giving due course and in granting the petitions in CA-G.R. SP Nos. 70799
and 70844. These certiorari petitions initiated by PhilFire and First Lepanto were
directed against the trial court's orders granting execution pending appeal and
the concomitant issuance of a writ of execution. The proper recourse to be taken
from these orders is a special civil action for certiorari under Rule 65, pursuant to
Section 1, Rule 41 of the Revised Rules of Civil Procedure. 50

Certiorari lies against an order granting execution pending appeal where the
same is not founded upon good reasons. The fact that the losing party had also
appealed from the judgment does not bar the certiorari proceedings, as the appeal
could not be an adequate remedy from such premature execution. Additionally,
there is no forum-shopping where in one petition a party questions the order
granting the motion for execution pending appeal and at the same time questions
the decision on the merits in a regular appeal before the appellate court. After all,
the merits of the main case are not to be determined in a petition questioning
execution pending appeal and vice versa. 51

The general rule is that only judgments which have become final and executory
may be executed. 52 However, discretionary execution of appealed judgments
may be allowed under Section 2 (a) of Rule 39 of the Revised Rules of Civil
Procedure upon concurrence of the following requisites: (a) there must be a
motion by the prevailing party with notice to the adverse party; (b) there must be
a good reason for execution pending appeal; and (c) the good reason must be
stated in a special order. 53 The yardstick remains the presence or the absence of
good reasons consisting of exceptional circumstances of such urgency as to
outweigh the injury or damage that the losing party may suffer, should the
appealed judgment be reversed later. 54 Since the execution of a judgment
pending appeal is an exception to the general rule, the existence of good reasons
is essential. 55

In the case at bar, petitioners insist that execution pending appeal is justified
because respondent insurance companies admitted their liabilities under the
insurance contracts and thus have no reason to withhold payment.

We are not persuaded. The fact that the insurance companies admit their
liabilities is not a compelling or superior circumstance that would warrant
execution pending appeal. On the contrary, admission of their liabilities and
willingness to deliver the proceeds to the proper party militate against execution
pending appeal since there is little or no danger that the judgment will become
illusory.

There is likewise no merit in petitioners' contention that the appeals are merely
dilatory because, while the insurance companies admitted their liabilities, the
matter of how much is owing from each of them and who is entitled to the same
remain unsettled. It should be noted that respondent insurance companies are
questioning the amounts awarded by the trial court for being over and above the
amount ascertained by the Office of the Insurance Commission. There are also
three parties claiming the insurance proceeds, namely: petitioners, Equitable
Bank, and Lavine as represented by the group of Chandru.

Besides, that the appeal is merely dilatory is not a good reason for granting
execution pending appeal. As held in BF Corporation v. Edsa Shangri-la Hotel: 56

. . . it is not for the trial judge to determine the merit of a


decision he rendered as this is the role of the appellate court.
Hence, it is not within competence of the trial court, in
resolving a motion for execution pending appeal, to rule that
the appeal is patently dilatory and rely on the same as basis
for finding good reasons to grant the motion. Only an
appellate court can appreciate the dilatory intent of an
appeal as an additional good reason in upholding an order
for execution pending appeal. . . 57

Lastly, petitioners assert that Lavine's financial distress is sufficient reason to


order execution pending appeal. Citing Borja v. Court of Appeals, 58 they claim
that execution pending appeal may be granted if the prevailing party is already
of advanced age and in danger of extinction. ADTCaI

Borja is not applicable to the case at bar because its factual milieu is different. In
Borja, the prevailing party was a natural person who, at 76 years of age, "may no
longer enjoy the fruit of the judgment before he finally passes away." 59 Lavine,
on the other hand, is a juridical entity whose existence cannot be likened to a
natural person. Its precarious financial condition is not by itself a compelling
circumstance warranting immediate execution and does not outweigh the long
standing general policy of enforcing only final and executory judgments. 60

WHEREFORE, the petition is PARTIALLY GRANTED. CA-G.R. SP Nos. 70292


and 70298 are DISMISSED. The assailed decision of the Court of Appeals dated
May 29, 2003 is AFFIRMED insofar as it declared null and void the Special Order
dated May 17, 2002 and the Writ of Execution dated May 20, 2002 of the Regional
Trial Court-Pasig City, Branch 71, in Civil Case No. 68287.

SO ORDERED.

||| (Manacop v. Equitable PCIBank, G.R. Nos. 162814-17, August 25, 2005)

THIRD DIVISION

[G.R. No. 159296. February 10, 2006.]

ALLGEMEINE-BAU-CHEMIE PHILS., INC., petitioner, vs.


METROPOLITAN BANK & TRUST CO., HONORABLE
N. C. PERELLO, Presiding Judge of the REGIONAL
TRIAL COURT-MUNTINLUPA, BRANCH 276 and
SHERIFF FELIX FALCOTELLO, respondents.

The Law Firm of Chan Robles & Associates for petitioner.


Santiago Corpuz & Ejercito Law Offices for private respondent.

SYLLABUS

1.REMEDIAL LAW; PROVISIONAL REMEDIES; PRELIMINARY INJUNCTION;


DEFINED; APPLICATION IN CASE AT BAR. It is axiomatic that what
determines the nature of an action and hence, the jurisdiction of a court, are the
allegations of the complaint and the character of the relief sought. Petitioner's
only prayer in CA-G.R. No. 71217 is "for the preservation of the status quo, that is,
petitioner, having in possession over the subject properties for several years,
shall retain such possession until the controversy [Civil Case No. 00-196] before
the said trial court [Branch 276, RTC of Muntinlupa City] has been finally
resolved and respondents be prevented from taking over such possession."
Clearly, what petitioner filed with the appellate court was an original action for
preliminary injunction which is a provisional and extra-ordinary remedy
calculated to preserve or maintain the status quo of things and is availed of to
prevent actual or threatened acts, until the merits of the case can be heard.

2.ID.; ID.; ID.; JURISDICTION OF THE COURT OF APPEALS, EXPLAINED.


An original action for injunction is outside the jurisdiction of the Court of
Appeals, however. Under B.P. 129, the appellate court has original jurisdiction
only over actions for annulment of judgments of the RTCs and has original
jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus and
quo warranto, and auxiliary writs or processes whether or not they are in aid of its
appellate jurisdiction. The appellate court's jurisdiction to grant a writ of
preliminary injunction is limited to actions or proceedings pending before it, as
Section 2 of Rule 58 of the Rules clearly provides: SECTION 2. Who may grant
preliminary injunction. A preliminary injunction may be granted by the court
where the action or proceeding is pending. . . . or in a petition for certiorari,
prohibition or mandamus under Section 7 of Rule 65, thus: SECTION 7.
Expediting proceedings; injunctive relief. The court in which the petition is filed
may issue orders expediting the proceedings, and it may also grant a temporary
restraining order or a writ of preliminary injunction for the preservation of the
rights of the parties pending such proceedings. The petition shall not interrupt
the course of the principal case unless a temporary restraining order or a writ of
preliminary injunction has been issued against the public respondent from
further proceeding in the case.

DECISION
CARPIO MORALES, J p:

The appellate court's denial of petitioner Allgemeine-Bau-Chemie Phils., Inc.'s


petition to enjoin the implementation of a writ of possession issued by Branch
276, Regional Trial Court (RTC) of Muntinlupa City in favor of private
respondent Metropolitan Bank and Trust Co. (Metrobank) is the subject of the
present petition for review.

Under a loan agreement 1 dated November 19, 1996, Asian Appraisal Holdings,
Inc. (AAHI) obtained a loan amounting to P442,500,000 from Solidbank
Corporation (Solidbank) for the construction of Asian Star Building, a 20 storey
commercial condominium built on lots covered by TCT Nos. 205967 and 205969
2 located at the Filinvest Corporate City, Alabang, Muntinlupa City.

As security for the loan, AAHI executed a security agreement 3 or real estate
mortgage dated November 19, 1996 over its property consisting of the lots
covered by TCT Nos. 205967 and 205969 and the condominium built thereon
including all units, parking slots, common areas and other improvements,
machineries and equipment. The real estate mortgage was registered with the
Register of Deeds on November 19, 1996 and duly annotated on the individual
Condominium Certificates of Title (CTC) on even date.

On November 17, 1999, AAHI entered into a contract to sell 4 with petitioner for
the purchase of Units 1004 and 1005 covered by CTC No. 54666 5 and CTC No.
54667 6 , respectively, and the right to the exclusive use of parking slots P515,
P516, P517, and P514 covered by CTC No. 54986, 7 CTC No. 54987, 8 CTC No.
54988, 9 CTC No. 54985 10 (the subject properties), respectively, for a total
purchase price of P23,571,280.

On December 22, 1999, the parties executed an addendum 11 to the contract to


sell whereby AAHI assigned to petitioner the right to the exclusive use of
parking slot P504 covered by CTC No. 54975 for a consideration of P600,000,
which petitioner paid on even date. TEDHaA

By separate letters 12 dated March 23, 2000, AAHI and Solidbank informed
petitioner of the real estate mortgage forged by them and was advised to remit
its monthly amortizations for the units and parking slots it purchased to
Solidbank. Petitioner was also requested to inform Solidbank of the total
installments it had paid for these units and parking slots and the balance still due
thereon. 13

Petitioner which occupied the condominium units as its place of business had, by
October 2001, fully settled its obligation to AAHI in the total amount of
P26,588,409.30. 14
On October 21, 2000, as AAHI defaulted on its loan obligation, Metropolitan
Bank and Trust Company (Metrobank), to which the banking operations of
Solidbank were integrated, filed before the Muntinlupa RTC a Petition for Extra-
Judicial Foreclosure of the Real Estate Mortgage. 15

AAHI not long after filed on October 30, 2000 also before the Muntinlupa RTC a
complaint 16 against Solidbank, for Specific Performance with Preliminary
Injunction to enjoin the foreclosure of the real estate mortgage, docketed as Civil
Case No. 00-196, and raffled to Branch 256 of the RTC.

On October 31, 2000, the mortgaged properties were sold at public auction to the
highest bidder, Metrobank, to which a Certificate of Sale was issued. 17 The
Certificate of Sale was registered with the Register of Deeds of Muntinlupa City
and annotated on the individual CTCs on April 4, 2001. 18

On January 24, 2002, Metrobank filed an Ex-Parte petition for the Issuance of a
Writ of Possession 19 of the properties subject of the foreclosed mortgage. The
petition was docketed as LRC Case No. 02-007 and raffled to Branch 276, RTC of
Muntinlupa. The petition was granted and a writ of possession was issued on
April 9, 2002. 20

Also on April 9, 2002, petitioner filed before Branch 256 of the RTC in Civil Case
No. 00-196 (AAHI's complaint against Solidbank for Specific Performance with
Preliminary Injunction) a motion for intervention, 21 to which it attached a
complaint-in-intervention 22 with prayer for the annulment of the extra-judicial
foreclosure sale, delivery of title, and damages and for the issuance of a
temporary restraining order and/or writ of preliminary injunction enjoining
Metrobank to consolidate its title and to take possession of its properties.

The court Sheriff on April 15, 2002 issued a notice to vacate 23 which was served
on May 16, 2002 upon all building occupants who were advised to make the
necessary arrangements with Metrobank regarding their occupancy. 24

In the meantime, the Motion for Reconsideration of the April 9, 2002 Order of
Branch 276 filed by AAHI was denied by Order 25 dated May 13, 2002,
prompting it to file before the appellate court a petition for a writ of preliminary
injunction.

Petitioner filed on June 18, 2002 a separate petition for the issuance of a
temporary restraining order and a writ of preliminary injunction with the
appellate court, 26 docketed as CA-G.R. SP No. 71217, also to enjoin the
implementation of the writ of possession issued by Branch 276 of the Muntinlupa
RTC. In its petition, petitioner alleged that its complaint-in-intervention in Civil
Case No. 00-196 pending in Branch 256 is its principal action but as the said court
could not enjoin Branch 276 from implementing the writ of possession, both
courts being of equal jurisdiction, it had no choice but to file the petition with the
appellate court. 27

On August 22, 2002, the Tenth Division of the Court of Appeals granted
petitioners prayer for, and issued a temporary restraining order 28 in CA-G.R.
SP No. 71217. By Decision 29 of January 22, 2003, the Seventh Division of the
Court of Appeals denied, however, petitioners prayer for the issuance of a writ
of preliminary injunction for failure to establish a clear and unmistakable right to
the subject properties. 30

The motion for reconsideration of the above-said Resolution of January 22, 2003
having been denied by the appellate court by Resolution 31 dated July 23, 2003,
petitioner now comes before this Court on a petition for review, alleging that the
appellate court committed grave and palpable error in denying its prayer for a
writ of preliminary injunction in flagrant violation of laws and jurisprudence. 32

The petition fails. SDEHCc

It is axiomatic that what determines the nature of an action and hence, the
jurisdiction of a court, are the allegations of the complaint and the character of
the relief sought. 33 Petitioner's only prayer in CA-G.R. No. 71217 is "for the
preservation of the status quo, that is, petitioner, having in possession over the
subject properties for several years, shall retain such possession until the
controversy [Civil Case No. 00-196] before the said trial court [Branch 276, RTC
of Muntinlupa City] has been finally resolved and respondents be prevented
from taking over such possession." 34

Clearly, what petitioner filed with the appellate court was an original action for
preliminary injunction which is a provisional and extra-ordinary remedy
calculated to preserve or maintain the status quo of things and is availed of to
prevent actual or threatened acts, until the merits of the case can be heard.

An original action for injunction is outside the jurisdiction of the Court of


Appeals, however. Under B.P. 129, the appellate court has original jurisdiction
only over actions for annulment of judgments of the RTCs and has original
jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus and
quo warranto, and auxiliary writs or processes whether or not they are in aid of its
appellate jurisdiction. 35

The appellate court's jurisdiction to grant a writ of preliminary injunction is


limited to actions or proceedings pending before it, as Section 2 of Rule 58 of the
Rules clearly provides:

SECTION 2.Who may grant preliminary injunction. A


preliminary injunction may be granted by the court where
the action or proceeding is pending. . . . (Emphasis
supplied),

or in a petition for certiorari, prohibition or mandamus under Section 7 of Rule


65, thus:
SECTION 7.Expediting proceedings; injunctive relief. The
court in which the petition is filed may issue orders
expediting the proceedings, and it may also grant a
temporary restraining order or a writ of preliminary
injunction for the preservation of the rights of the parties
pending such proceedings. The petition shall not interrupt
the course of the principal case unless a temporary
restraining order or a writ of preliminary injunction has
been issued against the public respondent from further
proceeding in the case. (Emphasis supplied)

In the case at bar, petitioner's complaint-in-intervention in Civil Case No. 00-196


was pending before Branch 256 of the Muntinlupa RTC, not with the appellate
court. Petitioner's petition before the appellate court does not show, nay allege,
that in issuing the writ of possession, the Muntinlupa RTC acted without or in
excess of its jurisdiction or with grave abuse of discretion for it to be treated as
either one for certiorari 36 or prohibition. 37

Thus, for want of jurisdiction, the petition before the appellate court should have
been dismissed outright. aTADcH

At all events, it is well-settled that an order granting or denying a preliminary


injunction is not appealable. 38

WHEREFORE, the petition is, in light of the foregoing discussions, DENIED.

Costs against petitioner.

||| (Allgemeine-Bau-Chemie Phils., Inc. v. Metropolitan Bank & Trust Co., G.R. No.
159296, February 10, 2006)

THIRD DIVISION

[G.R. No. 148361. November 29, 2005.]

RAFAEL BAUTISTA and LIGAYA ROSEL, petitioners, vs.


MAYA-MAYA COTTAGES, INC., respondent.
Abello Concepcion Regala & Cruz for petitioners.

Romulo Mabanta Buenaventura Sayoc & Delos Angeles and Roxas De los
Reyes Laurel & Rosario Law Offices for respondent.

SYLLABUS

REMEDIAL LAW; 1997 RULES OF CIVIL PROCEDURE; SEC. 2 RULE 10


THEREOF; WHEN AN AMENDMENT OF PLEADING, AS A MATTER OF
RIGHT, MAY BE MADE; CASE AT BAR. [The above provision] Section 2,
Rule 10 of the 1997 Rules of Civil Procedure clearly shows that before the filing of
any responsive pleading, a party has the absolute right to amend his pleading,
regardless of whether a new cause of action or change in theory is introduced. It
is settled that a motion to dismiss is not the responsive pleading contemplated by
the Rule. Records show that petitioners had not yet filed a responsive pleading to
the original complaint in Civil Case No. 371. What they filed was a motion to
dismiss. It follows that respondent, as a plaintiff, may file an amended complaint
even after the original complaint was ordered dismissed, provided that the order
of dismissal is not yet final, as in this case. Verily, the Court of Appeals correctly
held that in issuing the assailed Order admitting the amended complaint, the
trial court did not gravely abuse its discretion. Hence, neither certiorari nor
prohibition would lie.

RESOLUTION

SANDOVAL GUTIERREZ, J p:

For our resolution is the instant petition for review on certiorari assailing the
Decision 1 and Resolution of the Court of Appeals, dated November 24, 2000 and
May 30, 2001, respectively, in CA-G.R. SP No. 43574.

The facts are:

Spouses Rafael and Ligaya Bautista, petitioners herein, are the registered owners
of a 3,856-square meter lot located at Natipuan, Nasugbu, Batangas, as evidenced
by Original Certificate of Title (OCT) No. P-1436 issued in their names on
January 15, 1989 by the Register of Deeds, same province.

On May 13, 1996, Maya-Maya Cottages, Inc. (MMCI), respondent, filed with the
Regional Trial Court (RTC) of Nasugbu, Batangas a complaint for cancellation of
petitioners' title and damages, with application for a preliminary injunction,
docketed as Civil Case No. 371. Respondent alleged inter alia that "without any
color of right and through dubious means," petitioners were able to obtain OCT
No. P-1436 in their names.

On May 29, 1996, petitioners filed a motion to dismiss the complaint on the
ground that it does not state a cause of action. They averred that respondent is a
private corporation, hence, disqualified under the Constitution 2 from acquiring
public alienable lands except by lease. Respondent cannot thus be considered a
real party in interest.

In its Order dated August 30, 1996, the trial court granted the motion to dismiss,
holding that since the property is an alienable public land, respondent is not
qualified to acquire it except by lease. Thus, it has no cause of action.

Respondent then filed a motion for reconsideration with motion for leave to file
an amended complaint for quieting of title. Respondent alleged that the technical
description in petitioners' title does not cover the disputed lot.

Thereupon, petitioners filed their opposition, contending that the amended


complaint does not also state a cause of action and if admitted, respondent's
theory of the case is substantially modified.

On November 18, 1996, the trial court issued an Order denying petitioners'
motion to dismiss, thus, reversing its Order of August 30, 1996 dismissing the
complaint in Civil Case No. 371. SIcEHC

Petitioners then filed with the Court of Appeals a special civil action for certiorari
and prohibition, docketed as CA-G.R. SP No. 43574. They alleged that the
amended complaint does not cure the defect in the original complaint which
does not state a cause of action. Clearly, in admitting respondent's amended
complaint, the trial court committed grave abuse of discretion amounting to lack
or excess of jurisdiction.

On November 24, 2000, the Court of Appeals rendered a Decision dismissing the
petition for certiorari and prohibition.

Petitioners filed a motion for reconsideration but was denied by the Appellate
Court in its Resolution of May 30, 2001.

Hence, the instant petitioner for review on certiorari.

The sole issue for our resolution is whether the Court of Appeals erred in
holding that the trial court did not commit grave abuse of discretion amounting
to lack or excess of jurisdiction in admitting respondent's amended complaint.
Section 2, Rule 10 of the 1997 Rules of Civil Procedure, as amended, provides:

"SEC. 2.Amendments as a matter of right. A party may


amend his pleading once as a matter of right at any time
before a responsive pleading is served or, in the case of a
reply, at any time within ten (10) days after it is served."

The above provision clearly shows that before the filing of any responsive
pleading, a party has the absolute right to amend his pleading, regardless of
whether a new cause of action or change in theory is introduced. It is settled that
a motion to dismiss is not the responsive pleading contemplated by the Rule. 3
Records show that petitioners had not yet filed a responsive pleading to the
original complaint in Civil Case No. 371. What they filed was a motion to
dismiss. It follows that respondent, as a plaintiff, may file an amended complaint
even after the original complaint was ordered dismissed, provided that the order
of dismissal is not yet final, 4 as in this case.

Verily, the Court of Appeals correctly held that in issuing the assailed Order
admitting the amended complaint, the trial court did not gravely abuse its
discretion. Hence, neither certiorari nor prohibition would lie.

As to petitioners' contention that respondent corporation is barred from


acquiring the subject lot, suffice it to say that this is a matter of defense which can
only be properly determined during the full-blown trial of the instant case.

WHEREFORE, the petition is DENIED. The challenged Decision and Resolution


of the Court of Appeals in CA-G.R. SP No. 43574 are AFFIRMED IN TOTO. Costs
against petitioners.

SO ORDERED.

||| (Bautista v. Maya-Maya Cottages Inc., G.R. No. 148361, November 29, 2005)

FIRST DIVISION

[G.R. No. 156142. March 23, 2011.]

SPOUSES ALVIN GUERRERO AND MERCURY M.


GUERRERO, petitioners, vs. HON. LORNA NAVARRO
DOMINGO, IN HER CAPACITY AS PRESIDING JUDGE,
BRANCH 201, REGIONAL TRIAL COURT, LAS PIAS
CITY & PILAR DEVELOPMENT CORPORATION,
respondents.
DECISION

LEONARDO-DE CASTRO, J p:

This is a Petition for Review on Certiorari assailing the Order 1 of the Regional
Trial Court (RTC), Branch 201 of Las Pias City dated November 18, 2002 in Civil
Case No. SCA-02-0007. Said Order denied the Petition for Prohibition against the
proceedings in Civil Case No. 6293, an unlawful detainer case, which was filed in
the Metropolitan Trial Court (MeTC) of Las Pias City.

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

On June 2, 1997, private respondent Pilar Development Corporation (PDC) and


petitioners spouses Alvin and Mercury Guerrero (spouses Guerrero) entered into
a Contract to Sell 2 whereby PDC agreed to sell to the spouses Guerrero the
property covered by Transfer Certificate of Title (TCT) No. T-51529 and the
house standing thereon. The total consideration for the sale is P2,374,000.00 with
a downpayment of P594,000.00 and a balance of P1,780,000.00 payable in 120
months commencing on May 30, 1997.

On February 5, 2002, PDC filed a Complaint 3 for Unlawful Detainer against the
spouses Guerrero. The Complaint alleged that the spouses Guerrero made no
further payment beyond June 1, 2000 despite repeated demands, prompting PDC
to cancel the Contract to Sell on November 19, 2001 by sending a Notice of
Cancellation to the spouses Guerrero dated November 23, 2001. The Complaint
was docketed as Civil Case No. 6293 filed with the MeTC of Las Pias City. The
spouses Guerrero responded with a pleading captioned Answer with
Reservation 4 alleging that it is impermissible to blend "causes of action such as
'cancellation, extinguishment or rescission of contract' (which are beyond
pecuniary estimation) and 'ejectment (unlawful detainer).'"

On April 10, 2002, the spouses Guerrero filed a Petition for Prohibition 5 with the
RTC of Las Pias City praying that the Complaint in Civil Case No. 6293 be
quashed, 6 and raising the following lone issue: DcHSEa

AN ACTION WITH TWO (2) JOINED CONTROVERSIES,


ONE BEYOND PECUNIARY ESTIMATION SUCH AS
"EXTINGUISHMENT OF CONTRACT" (COGNIZABLE BY
THE RTC), AND THE OTHER, FOR EJECTMENT
(UNLAWFUL DETAINER), IS BEYOND THE
ADJUDICATORY POWERS OF AN INFERIOR COURT. 7

The Petition was docketed as Civil Case No. SCA-02-0007 and was raffled to
the RTC-Branch 201, then presided by Judge Lorna Navarro Domingo.
In the meantime, proceedings in Civil Case No. 6293 continued. Except for the
Answer they had earlier filed, the spouses Guerrero did not participate in the
proceedings of Civil Case No. 6293 until the MeTC rendered its Decision 8 on
September 30, 2002. Ruling in favor of PDC, the MeTC brushed aside the spouses
Guerrero's insistence that it had no jurisdiction by holding that the allegations in
the complaint and the reliefs prayed for therein indicate that the suit is indeed an
unlawful detainer case cognizable by it. 9

On November 4, 2002, the spouses Guerrero appealed the MeTC Decision in


Civil Case No. 6293 to the RTC of Las Pias City. The appeal was docketed as
Civil Case No. LP-02-0292 and was raffled to Branch 197 then presided by Judge
Manuel N. Duque.

On November 18, 2002, the RTC-Branch 201 issued the herein assailed Order in
Civil Case No. SCA-02-0007, denying the Petition for Prohibition for lack of
merit.

Hence, this Petition wherein the spouses, Guerrero reiterated their argument
before the RTC-Branch 201 that the joinder of an action beyond pecuniary
estimation such as "extinguishment of contract" with an action for unlawful
detainer is beyond the adjudicatory powers of the MeTC. The spouses Guerrero
claim that the cancellation of the contract to sell is a matter prejudicial to the
action for unlawful detainer. 10

Meanwhile, on June 20, 2003, the RTC-Branch 197 dismissed the appeal of the
spouses Guerrero in Civil Case No. LP-02-0292 on account of their failure to file
their Memorandum of Appeal and for failure to comply with another Court
Order dated December 16, 2002. 11 On August 28, 2003, the RTC-Branch 197,
noting that there was no appeal or Motion for Reconsideration filed assailing the
June 20, 2003 Decision, ordered the return of the records of the case to the MeTC.
12

Prohibition does not lie to restrain an act that is already a fait accompli
In denying the Petition for Prohibition of the spouses Guerrero, the RTC-Branch
201 held that the remedy was inappropriate, applying the rule that Prohibition
does not lie to restrain an act that is already a fait accompli:

A perusal of the complaint filed before the Metropolitan


Trial Court, Las Pias under Civil Case No. 6293 alleged that
the Contract to Sell was cancelled on November 19, 2001,
from then on Petitioner's right to occupy the property
ceased, and that Defendants/Petitioners refused to
surrender and vacate the house and lot. The prayer is for the
Defendants to vacate the premises to the Plaintiff and pay
rentals. TASCEc

xxx xxx xxx

"The function of the Writ of Prohibition is to prevent the


doing of some act which is about to be done. It is not
intended to provide a remedy for acts already
accomplished["] (Cabanero vs. Torres, 61 Phil. 522 [1935];
Agustin, et al. vs. De la Fuente, 84 Phil. 525 [1949]; Navarro vs.
Lardizabal, G.R. No. L-25361, September 28, 1968, 25 SCRA
370; Heirs of Eugenia V. Roxas, Inc. vs. Intermediate Appellate
Court, G.R. No. 67195, May 29, 1989, 173 SCRA 581).

In this case the Contract to Sell has already been cancelled


before the filing of the complaint for Unlawful Detainer,
hence the Prohibition will no longer lie.

The rest of the allegations are within the jurisdiction of the


Metropolitan Trial Court as the case filed is for Unlawful
Detainer. 13

Indeed, prohibition is a preventive remedy seeking a judgment ordering the


defendant to desist from continuing with the commission of an act perceived to
be illegal. 14 However, we disagree with the pronouncement of the RTC-Branch
201 that the act sought to be prevented in the filing of the Petition for Prohibition
is the cancellation of the contract to sell. Petitions for Prohibition may be filed
only against tribunals, corporations, boards, officers or persons exercising
judicial, quasi-judicial or ministerial functions. 15 Though couched in imprecise
terms, the Petition for Prohibition in the case at bar apparently seeks to prevent
the MeTC from hearing and disposing Civil Case No. 6293:

PRAYER

WHEREFORE, considering the nature of this petition, that is,


Civil Case No. 6293 being under the operation of the
Summary Rules of Procedure, petitioners very fervently
pray, that:

1.Upon the filing of this petition, it be given


preferential disposition or hearing at the
earliest time possible be conducted for
purposes of issuance of preliminary writ
of prohibition;

2.Thereafter, the COMPLAINT (Annex "B" hereof),


be QUASHED as it contains two (2)
combined but severable cases, one
cognizable before this Honorable Court,
and the other, before the public
respondent.

For other reliefs just and equitable. 16

Nevertheless, the same result occurs: Civil Case No. 6293 had already been
disposed by the MeTC, as there was no preliminary injunction issued against
said proceeding. The appeal of the spouses Guerrero in Civil Case No. 6293 had
likewise been denied by the RTC-Branch 197 in a Decision dated June 20, 2003.
The records of the case were returned to the MeTC in view of petitioners' failure
to file a Motion for Reconsideration or an appeal of the same. 17 Since the act
sought to be enjoined in the Petition for Prohibition had already been
accomplished, the same should be dismissed. AHEDaI

To avail of the extraordinary writ of prohibition, petitioners


should have no appeal, nor any plain, speedy and adequate remedy in
the ordinary course of law
Ever since the Petition for Prohibition was filed with the RTC-Branch 201, PDC
opposed its propriety on the ground that the spouses Guerrero had an available
remedy against the allegedly improper exercise of jurisdiction by the MeTC a
Motion to Dismiss. 18

Certainly, the spouses Guerrero could have filed a Motion to Dismiss to prevent
the exercise of jurisdiction by the MeTC if the same had been warranted. Section
13, Rule 70 of the 1997 Rules of Civil Procedure clearly provides that Motions to
Dismiss on the ground of lack of jurisdiction over the subject matter are
exceptions to the pleadings that are prohibited in forcible entry and unlawful
detainer cases:

Sec. 13.Prohibited pleadings and motions. The following


petitions, motions, or pleadings shall not be allowed:

1.Motion to dismiss the complaint except on the


ground of lack of jurisdiction over the subject
matter, or failure to comply with section 12.

Further, under Section 6, Rule 16 19 of the same Rules, any ground for dismissal
may, in lieu of a Motion to Dismiss, be raised in the Answer as an affirmative
defense. This was, in fact, what petitioners did in the present case.

Before resorting to the remedy of prohibition, there should be "no appeal or any
other plain, speedy, and adequate remedy in the ordinary course of law." 20 We
are convinced that in the case at bar, a Motion to Dismiss or an Answer is a plain,
speedy, and adequate remedy in opposing the jurisdiction of the MeTC. Being in
possession of the subject property, the step of filing a Motion to Dismiss or an
Answer instead of resorting to an extraordinary writ under Rule 65 would have
even favored the spouses Guerrero, as there is no threat of dispossession until
the MeTC renders its judgment on the action.

The spouses Guerrero could have, and in fact actually did, present their
allegations in the Petition for Prohibition as defenses in Civil Case No. 6293. As
stated above, however, the spouses Guerrero did not participate in the
proceedings of Civil Case No. 6293 with the exception of filing an Answer with
Reservation. The appeal thereof, Civil Case No. LP-02-0292 in the RTC-Branch
197, was likewise dismissed on account of the spouses Guerrero's failure to file
their Memorandum of Appeal and failure to comply with another Court Order.
Just as certiorari cannot be made a substitute for an appeal where the latter
remedy is available but was lost through the fault or negligence of petitioner, 21
prohibition should not lie when petitioner could have resorted to other remedies
that are now lost due to its own neglect. The irresponsible act of ignoring the
proceedings and orders in Civil Case No. 6293 and in the appeal thereof deserve
no affirmation from this Court.

The spouses Guerrero's insistence that there was a violation of Presidential


Decree No. 975 or an invalid rescission of the contract by PDC could have been
asserted in a separate civil action. The latter would not constitute forum
shopping since the only issue in ejectment suits is physical possession, and any
finding thereon on ownership is only for the purpose of determining right to
possession. 22

WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The


Decision of the Regional Trial Court, Branch 201 of Las Pias City in Civil Case
No. SCA-02-0007 is AFFIRMED.

Costs against petitioners Alvin and Mercury Guerrero.

SO

||| (Spouses Guerrero v. Domingo, G.R. No. 156142, March 23, 2011)

THIRD DIVISION

[G.R. No. 191424. August 7, 2013.]

ALFEO D. VIVAS, on his behalf and on behalf of the


Shareholders of EUROCREDIT COMMUNITY BANK,
petitioner, vs. THE MONETARY BOARD OF THE
BANGKO SENTRAL NG PILIPINAS and the PHILIPPINE
DEPOSIT INSURANCE CORPORATION, respondents.

DECISION

MENDOZA, J p:

This is a petition for prohibition with prayer for the issuance of a status quo ante
order or writ of preliminary injunction ordering the respondents to desist from
closing EuroCredit Community Bank, Incorporated (ECBI) and from pursuing
the receivership thereof. The petition likewise prays that the management and
operation of ECBI be restored to its Board of Directors (BOD) and its officers.

The Facts
The Rural Bank of Faire, Incorporated (RBFI) was a duly registered rural banking
institution with principal office in Centro Sur, Sto. Nio, Cagayan. Record shows
that the corporate life of RBFI expired on May 31, 2005. 1 Notwithstanding,
petitioner Alfeo D. Vivas (Vivas) and his principals acquired the controlling
interest in RBFI sometime in January 2006. At the initiative of Vivas and the new
management team, an internal audit was conducted on RBFI and results thereof
highlighted the dismal operation of the rural bank. In view of those findings,
certain measures calculated to revitalize the bank were allegedly introduced. 2
On December 8, 2006, the Bangko Sentral ng Pilipinas (BSP) issued the Certificate
of Authority extending the corporate life of RBFI for another fifty (50) years. The
BSP also approved the change of its corporate name to EuroCredit Community
Bank, Incorporated, as well as the increase in the number of the members of its
BOD, from five (5) to eleven (11). 3 SaIACT

Pursuant to Section 28 of Republic Act (R.A.) No. 7653, otherwise known as The
New Central Bank Act, the Integrated Supervision Department II (ISD II) of the
BSP conducted a general examination on ECBI with the cut-off date of December
31, 2007. Shortly after the completion of the general examination, an exit
conference was held on March 27, 2008 at the BSP during which the BSP officials
and examiners apprised Vivas, the Chairman and President of ECBI, as well as
the other bank officers and members of its BOD, of the advance findings noted
during the said examination. The ECBI submitted its comments on BSP's
consolidated findings and risk asset classification through a letter, dated April 8,
2008. 4

Sometime in April 2008, the examiners from the Department of Loans and Credit
of the BSP arrived at the ECBI and cancelled the rediscounting line of the bank.
Vivas appealed the cancellation to BSP. 5 Thereafter, the Monetary Board (MB)
issued Resolution No. 1255, dated September 25, 2008, placing ECBI under
Prompt Corrective Action (PCA) framework because of the following serious
findings and supervisory concerns noted during the general examination: 1]
negative capital of P14.674 million and capital adequacy ratio of negative 18.42%;
2] CAMEL (Capital Asset Management Earnings Liquidity) composite rating of
"2" with a Management component rating of "1"; and 3] serious supervisory
concerns particularly on activities deemed unsafe or unsound. 6 Vivas claimed
that the BSP took the above courses of action due to the joint influence exerted by
a certain hostile shareholder and a former BSP examiner. 7

Through its letter, dated September 30, 2008, the BSP furnished ECBI with a copy
of the Report of Examination (ROE) as of December 31, 2007. In addition, the BSP
directed the bank's BOD and senior management to: 1] infuse fresh capital of
P22.643 million; 2] book the amount of P28.563 million representing unbooked
valuation reserves on classified loans and other risks assets on or before October
31, 2008; and 3] take appropriate action necessary to address the
violations/exceptions noted in the examination. 8 cAEaSC

Vivas moved for a reconsideration of Resolution No. 1255 on the grounds of non-
observance of due process and arbitrariness. The ISD II, on several instances, had
invited the BOD of ECBI to discuss matters pertaining to the placement of the
bank under PCA framework and other supervisory concerns before making the
appropriate recommendations to the MB. The proposed meeting, however, did
not materialize due to postponements sought by Vivas. 9

In its letter, dated February 20, 2009, the BSP directed ECBI to explain why it
transferred the majority shares of RBFI without securing the prior approval of
the MB in apparent violation of Subsection X126.2 of the Manual of Regulation
for Banks (MORB). 10 Still in another letter, 11 dated March 31, 2009, the ISD II
required ECBI to explain why it did not obtain the prior approval of the BSP
anent the establishment and operation of the bank's sub-offices.

Also, the scheduled March 31, 2009 general examination of the books, records
and general condition of ECBI with the cut-off date of December 31, 2008, did not
push through. According to Vivas, ECBI asked for the deferment of the
examination pending resolution of its appeal before the MB. Vivas believed that
he was being treated unfairly because the letter of authority to examine allegedly
contained a clause which pertained to the Anti-Money Laundering Law and the
Bank Secrecy Act. 12

The MB, on the other hand, posited that ECBI unjustly refused to allow the BSP
examiners from examining and inspecting its books and records, in violation of
Sections 25 and 34 of R.A. No. 7653. In its letter, 13 dated May 8, 2009, the BSP
informed ECBI that it was already due for another annual examination and that
the pendency of its appeal before the MB would not prevent the BSP from
conducting another one as mandated by Section 28 of R.A. No. 7653. DTEScI

In view of ECBI's refusal to comply with the required examination, the MB


issued Resolution No. 726, 14 dated May 14, 2009, imposing monetary
penalty/fine on ECBI, and referred the matter to the Office of the Special
Investigation (OSI) for the filing of appropriate legal action. The BSP also wrote a
letter, 15 dated May 26, 2009, advising ECBI to comply with MB Resolution No.
771, which essentially required the bank to follow its directives. On May 28, 2009,
the ISD II reiterated its demand upon the ECBI BOD to allow the BSP examiners
to conduct a general examination on June 3, 2009. 16

In its June 2, 2009 Letter-Reply, 17 ECBI asked for another deferment of the
examination due to the pendency of certain unresolved issues subject of its
appeal before the MB, and because Vivas was then out of the country. The ISD II
denied ECBI's request and ordered the general examination to proceed as
previously scheduled. 18

Thereafter, the MB issued Resolution No. 823, 19 dated June 4, 2009, approving
the issuance of a cease and desist order against ECBI, which enjoined it from
pursuing certain acts and transactions that were considered unsafe or unsound
banking practices, and from doing such other acts or transactions constituting
fraud or might result in the dissipation of its assets. TCHcAE

On June 10, 2009, the OSI filed with the Department of Justice (DOJ) a complaint
for Estafa Through Falsification of Commercial Documents against certain
officials and employees of ECBI. Meanwhile, the MB issued Resolution No. 1164,
20 dated August 13, 2009, denying the appeal of ECBI from Resolution No. 1255
which placed it under PCA framework. On November 18, 2009, the general
examination of the books and records of ECBI with the cut-off date of September
30, 2009, was commenced and ended in December 2009. Later, the BSP officials
and examiners met with the representatives of ECBI, including Vivas, and
discussed their findings. 21 On December 7, 2009, the ISD II reminded ECBI of
the non-submission of its financial audit reports for the years 2007 and 2008 with
a warning that failure to submit those reports and the written explanation for
such omission shall result in the imposition of a monetary penalty. 22 In a letter,
dated February 1, 2010, the ISD II informed ECBI of MB Resolution No. 1548
which denied its request for reconsideration of Resolution No. 726.

On March 4, 2010, the MB issued Resolution No. 276 23 placing ECBI under
receivership in accordance with the recommendation of the ISD II which reads:

On the basis of the examination findings as of 30 September


2009 as reported by the Integrated Supervision Department
(ISD) II, in its memorandum dated 17 February 2010, which
findings showed that the Eurocredit Community Bank, Inc.
a Rural Bank (Eurocredit Bank) (a) is unable to pay its
liabilities as they become due in the ordinary course of
business; (b) has insufficient realizable assets to meet
liabilities; (c) cannot continue in business without involving
probable losses to its depositors and creditors; and (d) has
willfully violated a cease and desist order of the Monetary
Board for acts or transactions which are considered unsafe
and unsound banking practices and other acts or
transactions constituting fraud or dissipation of the assets of
the institution, and considering the failure of the Board of
Directors/management of Eurocredit Bank to restore the
bank's financial health and viability despite considerable
time given to address the bank's financial problems, and that
the bank had been accorded due process, the Board, in
accordance with Section 30 of Republic Act No. 7653 (The
New Central Bank Act), approved the recommendation of
ISD II as follows: cSDHEC

1.To prohibit the Eurocredit Bank from doing


business in the Philippines and to place its
assets and affairs under receivership; and

2.To designate the Philippine Deposit Insurance


Corporation as Receiver of the bank.

Assailing MB Resolution No. 276, Vivas filed this petition for prohibition before
this Court, ascribing grave abuse of discretion to the MB for prohibiting ECBI
from continuing its banking business and for placing it under receivership. The
petitioner presents the following

ARGUMENTS:
(a)It is grave abuse of discretion amounting to loss of
jurisdiction to apply the general law embodied in
Section 30 of the New Central Bank Act as
opposed to the specific law embodied in Sections
11 and 14 of the Rural Banks Act of 1992.

(b)Even if it assumed that Section 30 of the New Central


Bank Act is applicable, it is still the gravest abuse
of discretion amounting to lack or excess of
jurisdiction to execute the law with manifest
arbitrariness, abuse of discretion, and bad faith,
violation of constitutional rights and to further
execute a mandate well in excess of its parameters.
IcTEAD

(c)The power delegated in favor of the Bangko Sentral ng


Pilipinas to place rural banks under receiverships
is unconstitutional for being a diminution or
invasion of the powers of the Supreme Court, in
violation of Section 2, Article VIII of the
Philippine Constitution. 24

Vivas submits that the respondents committed grave abuse of discretion when
they erroneously applied Section 30 of R.A. No. 7653, instead of Sections 11 and
14 of the Rural Bank Act of 1992 or R.A. No. 7353. He argues that despite the
deficiencies, inadequacies and oversights in the conduct of the affairs of ECBI, it
has not committed any financial fraud and, hence, its placement under
receivership was unwarranted and improper. He posits that, instead, the BSP
should have taken over the management of ECBI and extended loans to the
financially distrained bank pursuant to Sections 11 and 14 of R.A. No. 7353
because the BSP's power is limited only to supervision and management take-
over of banks.

He contends that the implementation of the questioned resolution was tainted


with arbitrariness and bad faith, stressing that ECBI was placed under
receivership without due and prior hearing in violation of his and the bank's
right to due process. He adds that respondent PDIC actually closed ECBI even in
the absence of any directive to this effect. Lastly, Vivas assails the
constitutionality of Section 30 of R.A. No. 7653 claiming that said provision
vested upon the BSP the unbridled power to close and place under receivership a
hapless rural bank instead of aiding its financial needs. He is of the view that
such power goes way beyond its constitutional limitation and has transformed
the BSP to a sovereign in its own "kingdom of banks." 25 ISCHET

The Court's Ruling


The petition must fail.

Vivas Availed of the Wrong Remedy


To begin with, Vivas availed of the wrong remedy. The MB issued Resolution
No. 276, dated March 4, 2010, in the exercise of its power under R.A. No. 7653.
Under Section 30 thereof, any act of the MB placing a bank under
conservatorship, receivership or liquidation may not be restrained or set aside
except on a petition for certiorari. Pertinent portions of R.A. 7653 read:

Section 30.

xxx xxx xxx.


The actions of the Monetary Board taken under this section
or under Section 29 of this Act shall be final and executory,
and may not be restrained or set aside by the court except on
petition for certiorari on the ground that the action taken
was in excess of jurisdiction or with such grave abuse of
discretion as to amount to lack or excess of jurisdiction. The
petition for certiorari may only be filed by the stockholders of
record representing the majority of the capital stock within
ten (10) days from receipt by the board of directors of the
institution of the order directing receivership, liquidation or
conservatorship.

xxx xxx xxx. [Emphases supplied]

Prohibition is already unavailing


Granting that a petition for prohibition is allowed, it is already an ineffective
remedy under the circumstances obtaining. Prohibition or a "writ of prohibition"
is that process by which a superior court prevents inferior courts, tribunals,
officers, or persons from usurping or exercising a jurisdiction with which they
have not been vested by law, and confines them to the exercise of those powers
legally conferred. Its office is to restrain subordinate courts, tribunals or persons
from exercising jurisdiction over matters not within its cognizance or exceeding
its jurisdiction in matters of which it has cognizance. 26 In our jurisdiction, the
rule on prohibition is enshrined in Section 2, Rule 65 of the Rules on Civil
Procedure, to wit: TIAEac

Sec. 2.Petition for prohibition. When the proceedings of


any tribunal, corporation, board, officer or person,
whether exercising judicial, quasi-judicial or ministerial
functions, are without or in excess of its or his jurisdiction,
or with grave abuse of discretion amounting to lack or
excess of jurisdiction, and there is no appeal or any other
plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with
certainty and praying that the judgment be rendered
commanding the respondent to desist from further
proceedings in the action or matter specified therein, or
otherwise granting such incidental reliefs as the law and
justice require.

xxx xxx xxx.

Indeed, prohibition is a preventive remedy seeking that a judgment be rendered


which would direct the defendant to desist from continuing with the commission
of an act perceived to be illegal. 27 As a rule, the proper function of a writ of
prohibition is to prevent the doing of an act which is about to be done. It is not
intended to provide a remedy for acts already accomplished. 28

Though couched in imprecise terms, this petition for prohibition apparently


seeks to prevent the acts of closing of ECBI and placing it under receivership.
Resolution No. 276, however, had already been issued by the MB and the closure
of ECBI and its placement under receivership by the PDIC were already
accomplished. Apparently, the remedy of prohibition is no longer appropriate.
Settled is the rule that prohibition does not lie to restrain an act that is already a
fait accompli. 29 caADIC

The Petition Should Have Been Filed in the CA


Even if treated as a petition for certiorari, the petition should have been filed
with the CA. Section 4 of Rule 65 reads:

Section 4.When and where petition filed. The petition shall


be filed not later than sixty (60) days from notice of the
judgment, order or resolution. In case a motion for
reconsideration or new trial is timely filed, whether such
motion is required or not, the sixty (60) day period shall be
counted from notice of the denial of said motion.

The petition shall be filed in the Supreme Court or, if it


relates to the acts or omissions of a lower court or of a
corporation, board, officer or person, in the Regional Trial
Court exercising jurisdiction over the territorial area as
defined by the Supreme Court. It may also be filed in the
Court of Appeals whether or not the same is in aid of its
appellate jurisdiction, or in the Sandiganbayan if it is in aid
of its appellate jurisdiction. If it involves the acts or
omissions of a quasi-judicial agency, unless otherwise
provided by law or these Rules, the petition shall be filed in
and cognizable only by the Court of Appeals. [Emphases
supplied]

That the MB is a quasi-judicial agency was already settled and reiterated in the
case of Bank of Commerce v. Planters Development Bank and Bangko Sentral Ng
Pilipinas. 30 SIcEHC

Doctrine of Hierarchy of Courts


Even in the absence of such provision, the petition is also dismissible because it
simply ignored the doctrine of hierarchy of courts. True, the Court, the CA and
the RTC have original concurrent jurisdiction to issue writs of certiorari,
prohibition and mandamus. The concurrence of jurisdiction, however, does not
grant the party seeking any of the extraordinary writs the absolute freedom to
file a petition in any court of his choice. The petitioner has not advanced any
special or important reason which would allow a direct resort to this Court.
Under the Rules of Court, a party may directly appeal to this Court only on pure
questions of law. 31 In the case at bench, there are certainly factual issues as Vivas
is questioning the findings of the investigating team.

Strict observance of the policy of judicial hierarchy demands that where the
issuance of the extraordinary writs is also within the competence of the CA or the
RTC, the special action for the obtainment of such writ must be presented to
either court. As a rule, the Court will not entertain direct resort to it unless the
redress desired cannot be obtained in the appropriate lower courts; or where
exceptional and compelling circumstances, such as cases of national interest and
with serious implications, justify the availment of the extraordinary remedy of
writ of certiorari, prohibition, or mandamus calling for the exercise of its primary
jurisdiction. 32 The judicial policy must be observed to prevent an imposition on
the precious time and attention of the Court.

The MB Committed No Grave Abuse of Discretion


In any event, no grave abuse of discretion can be attributed to the MB for the
issuance of the assailed Resolution No. 276. DcAEIS

Vivas insists that the circumstances of the case warrant the application of Section
11 of R.A. No. 7353, which provides:

Sec. 11.The power to supervise the operation of any rural


bank by the Monetary Board as herein indicated shall consist
in placing limits to the maximum credit allowed to any
individual borrower; in prescribing the interest rate, in
determining the loan period and loan procedures, in
indicating the manner in which technical assistance shall be
extended to rural banks, in imposing a uniform accounting
system and manner of keeping the accounts and records of
rural banks; in instituting periodic surveys of loan and
lending procedures, audits, test-check of cash and other
transactions of the rural banks; in conducting training
courses for personnel of rural banks; and, in general, in
supervising the business operations of the rural banks.

The Central Bank shall have the power to enforce the laws,
orders, instructions, rules and regulations promulgated by
the Monetary Board, applicable to rural banks; to require
rural banks, their directors, officers and agents to conduct
and manage the affairs of the rural banks in a lawful and
orderly manner; and, upon proof that the rural bank or its
Board of Directors, or officers are conducting and managing
the affairs of the bank in a manner contrary to laws, orders,
instructions, rules and regulations promulgated by the
Monetary Board or in a manner substantially prejudicial to
the interest of the Government, depositors or creditors, to
take over the management of such bank when specifically
authorized to do so by the Monetary Board after due hearing
process until a new board of directors and officers are
elected and qualified without prejudice to the prosecution of
the persons responsible for such violations under the
provisions of Sections 32, 33 and 34 of Republic Act No. 265,
as amended. aEDCAH

xxx xxx xxx.

The thrust of Vivas' argument is that ECBI did not commit any financial fraud
and, hence, its placement under receivership was unwarranted and improper. He
asserts that, instead, the BSP should have taken over the management of ECBI
and extended loans to the financially distrained bank pursuant to Sections 11 and
14 of R.A. No. 7353 because the BSP's power is limited only to supervision and
management take-over of banks, and not receivership. acIHDA

Vivas argues that implementation of the questioned resolution was tainted with
arbitrariness and bad faith, stressing that ECBI was placed under receivership
without due and prior hearing, invoking Section 11 of R.A. No. 7353 which states
that the BSP may take over the management of a rural bank after due hearing. 33
He adds that because R.A. No. 7353 is a special law, the same should prevail over
R.A. No. 7653 which is a general law.

The Court has taken this into account, but it appears from all over the records
that ECBI was given every opportunity to be heard and improve on its financial
standing. The records disclose that BSP officials and examiners met with the
representatives of ECBI, including Vivas, and discussed their findings. 34 There
were also reminders that ECBI submit its financial audit reports for the years
2007 and 2008 with a warning that failure to submit them and a written
explanation of such omission shall result in the imposition of a monetary
penalty. 35 More importantly, ECBI was heard on its motion for reconsideration.
For failure of ECBI to comply, the MB came out with Resolution No. 1548
denying its request for reconsideration of Resolution No. 726. Having been heard
on its motion for reconsideration, ECBI cannot claim that it was deprived of its
right under the Rural Bank Act.
Close Now, Hear Later
At any rate, if circumstances warrant it, the MB may forbid a bank from doing
business and place it under receivership without prior notice and hearing. Section
30 of R.A. No. 7653 provides, viz.:

Sec. 30.Proceedings in Receivership and Liquidation.


Whenever, upon report of the head of the supervising or
examining department, the Monetary Board finds that a
bank or quasi-bank:

(a)is unable to pay its liabilities as they become due in the


ordinary course of business: Provided, That this
shall not include inability to pay caused by
extraordinary demands induced by financial panic
in the banking community; ETAICc

(b)has insufficient realizable assets, as determined by the


Bangko Sentral, to meet its liabilities; or

(c)cannot continue in business without involving probable


losses to its depositors or creditors; or

(d)has wilfully violated a cease and desist order under


Section 37 that has become final, involving acts or
transactions which amount to fraud or a dissipation
of the assets of the institution; in which cases, the
Monetary Board may summarily and without need
for prior hearing forbid the institution from doing
business in the Philippines and designate the
Philippine Deposit Insurance Corporation as
receiver of the banking institution. [Emphases
supplied.]

xxx xxx xxx.


Accordingly, there is no conflict which would call for the application of the
doctrine that a special law should prevail over a general law. It must be
emphasized that R.A. No. 7653 is a later law and under said act, the power of the
MB over banks, including rural banks, was increased and expanded. The Court,
in several cases, upheld the power of the MB to take over banks without need for
prior hearing. It is not necessary inasmuch as the law entrusts to the MB the
appreciation and determination of whether any or all of the statutory grounds
for the closure and receivership of the erring bank are present. The MB, under
R.A. No. 7653, has been invested with more power of closure and placement of a
bank under receivership for insolvency or illiquidity, or because the bank's
continuance in business would probably result in the loss to depositors or
creditors. In the case of Bangko Sentral Ng Pilipinas Monetary Board v. Hon.
Antonio-Valenzuela, 36 the Court reiterated the doctrine of "close now, hear later,"
stating that it was justified as a measure for the protection of the public interest.
Thus: DAcSIC

The "close now, hear later" doctrine has already been


justified as a measure for the protection of the public
interest. Swift action is called for on the part of the BSP when
it finds that a bank is in dire straits. Unless adequate and
determined efforts are taken by the government against
distressed and mismanaged banks, public faith in the
banking system is certain to deteriorate to the prejudice of
the national economy itself, not to mention the losses
suffered by the bank depositors, creditors, and stockholders,
who all deserve the protection of the government. 37
[Emphasis supplied]

In Rural Bank of Buhi, Inc. v. Court of Appeals, 38 the Court also wrote that

. . . due process does not necessarily require a prior


hearing; a hearing or an opportunity to be heard may be
subsequent to the closure. One can just imagine the dire
consequences of a prior hearing: bank runs would be the
order of the day, resulting in panic and hysteria. In the
process, fortunes may be wiped out and disillusionment will
run the gamut of the entire banking community. 39

The doctrine is founded on practical and legal considerations to obviate


unwarranted dissipation of the bank's assets and as a valid exercise of police
power to protect the depositors, creditors, stockholders, and the general public.
40 Swift, adequate and determined actions must be taken against financially
distressed and mismanaged banks by government agencies lest the public faith
in the banking system deteriorate to the prejudice of the national economy.
CcAITa

Accordingly, the MB can immediately implement its resolution prohibiting a


banking institution to do business in the Philippines and, thereafter, appoint the
PDIC as receiver. The procedure for the involuntary closure of a bank is
summary and expeditious in nature. Such action of the MB shall be final and
executory, but may be later subjected to a judicial scrutiny via a petition for
certiorari to be filed by the stockholders of record of the bank representing a
majority of the capital stock. Obviously, this procedure is designed to protect the
interest of all concerned, that is, the depositors, creditors and stockholders, the
bank itself and the general public. The protection afforded public interest
warrants the exercise of a summary closure.

In the case at bench, the ISD II submitted its memorandum, dated February 17,
2010, containing the findings noted during the general examination conducted
on ECBI with the cut-off date of September 30, 2009. The memorandum
underscored the inability of ECBI to pay its liabilities as they would fall due in
the usual course of its business, its liabilities being in excess of the assets held.
Also, it was noted that ECBI's continued banking operation would most
probably result in the incurrence of additional losses to the prejudice of its
depositors and creditors. On top of these, it was found that ECBI had willfully
violated the cease-and-desist order of the MB issued in its June 24, 2009
Resolution, and had disregarded the BSP rules and directives. For said reasons,
the MB was forced to issue the assailed Resolution No. 276 placing ECBI under
receivership. In addition, the MB stressed that it accorded ECBI ample time and
opportunity to address its monetary problem and to restore and improve its
financial health and viability but it failed to do so. AEcTaS

In light of the circumstances obtaining in this case, the application of the


corrective measures enunciated in Section 30 of R.A. No. 7653 was proper and
justified. Management take-over under Section 11 of R.A. No. 7353 was no longer
feasible considering the financial quagmire that engulfed ECBI showing serious
conditions of insolvency and illiquidity. Besides, placing ECBI under
receivership would effectively put a stop to the further draining of its assets.

No Undue Delegation of Legislative Power


Lastly, the petitioner challenges the constitutionality of Section 30 of R.A. No.
7653, as the legislature granted the MB a broad and unrestrained power to close
and place a financially troubled bank under receivership. He claims that the said
provision was an undue delegation of legislative power. The contention deserves
scant consideration. DITEAc

Preliminarily, Vivas' attempt to assail the constitutionality of Section 30 of R.A.


No. 7653 constitutes collateral attack on the said provision of law. Nothing is
more settled than the rule that the constitutionality of a statute cannot be
collaterally attacked as constitutionality issues must be pleaded directly and not
collaterally. 41 A collateral attack on a presumably valid law is not permissible.
Unless a law or rule is annulled in a direct proceeding, the legal presumption of
its validity stands. 42

Be that as it may, there is no violation of the non-delegation of legislative power.


The rationale for the constitutional proscription is that "legislative discretion as
to the substantive contents of the law cannot be delegated. What can be
delegated is the discretion to determine how the law may be enforced, not what
the law shall be. The ascertainment of the latter subject is a prerogative of the
legislature. This prerogative cannot be abdicated or surrendered by the
legislature to the delegate." 43

"There are two accepted tests to determine whether or not there is a valid
delegation of legislative power, viz., the completeness test and the sufficient
standard test. Under the first test, the law must be complete in all its terms and
conditions when it leaves the legislature such that when it reaches the delegate
the only thing he will have to do is enforce it. Under the sufficient standard test,
there must be adequate guidelines or stations in the law to map out the
boundaries of the delegate's authority and prevent the delegation from running
riot. Both tests are intended to prevent a total transference of legislative authority
to the delegate, who is not allowed to step into the shoes of the legislature and
exercise a power essentially legislative." 44 CcAHEI

In this case, under the two tests, there was no undue delegation of legislative
authority in the issuance of R.A. No. 7653. To address the growing concerns in
the banking industry, the legislature has sufficiently empowered the MB to
effectively monitor and supervise banks and financial institutions and, if
circumstances warrant, to forbid them to do business, to take over their
management or to place them under receivership. The legislature has clearly
spelled out the reasonable parameters of the power entrusted to the MB and
assigned to it only the manner of enforcing said power. In other words, the MB
was given a wide discretion and latitude only as to how the law should be
implemented in order to attain its objective of protecting the interest of the
public, the banking industry and the economy.

WHEREFORE, the petition for prohibition is DENIED.

||| (Vivas v. Monetary Board of the BSP, G.R. No. 191424, August 07, 2013)

SECOND DIVISION

[G.R. No. 202556. September 12, 2012.]

DANILO A. LIHAYLIHAY, petitioner, vs. BUREAU OF


INTERNAL REVENUE, REPRESENTED BY
COMMISSIONER KIM S. JACINTO-HENARES, ET AL.,
respondent.

NOTICE
Sirs/Mesdames :

Please take notice that the Court, Second Division, issued a Resolution dated 12
September 2012 which reads as follows:

G.R. No. 202556 (Danilo A. Lihaylihay v. Bureau of Internal Revenue,


represented by Commissioner Kim S. Jacinto-Henares, et al.).

After a judicious perusal of the records, the Court resolves to DISMISS the
instant petition for failure to sufficiently show, based on the recital of facts
therein, that mandamus lies in this case to compel respondent Bureau of Internal
Revenue (BIR) to collect the alleged delinquent taxes of Fortune Tobacco
Corporation (FTC) or to deliver to petitioner Danilo Lihaylihay his informer's
reward.

Mandamus is a remedy available to compel the performance of ministerial duties.


1 However, the assessment and imposition of tax liabilities is within BIR's
discretionary power, which cannot be ordered by mandamus. 2 Records show that
the BIR found no legal justification to warrant the filing and collection of taxes
against FTC. Thus, in the absence of arbitrariness, which petitioner failed to
establish in this case, the BIR's exercise of its discretionary power is not subject to
the contrary judgment. 3 Consequently, there being no delinquent taxes assessed,
no collection can be made nor any informer's reward became due 4 in favor of
petitioner. (Carpio, J., no part due to prior inhibition in related cases; Mendoza, J.,
designated Acting Member per Raffle dated September 10, 2012.)

SO ORDERED.

||| (Lihaylihay v. BIR, G.R. No. 202556, September 12, 2012)

THIRD DIVISION

[G.R. No. 176831. January 15, 2010.]

UY KIAO ENG, petitioner, vs. NIXON LEE, respondent.

DECISION

NACHURA, J p:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court, assailing the August 23, 2006 Amended Decision 1 of the Court of
Appeals (CA) in CA-G.R. SP No. 91725 and the February 23, 2007 Resolution, 2
denying the motion for reconsideration thereof.

The relevant facts and proceedings follow.

Alleging that his father passed away on June 22, 1992 in Manila and left a
holographic will, which is now in the custody of petitioner Uy Kiao Eng, his
mother, respondent Nixon Lee filed, on May 28, 2001, a petition for mandamus
with damages, docketed as Civil Case No. 01100939, before the Regional Trial
Court (RTC) of Manila, to compel petitioner to produce the will so that probate
proceedings for the allowance thereof could be instituted. Allegedly, respondent
had already requested his mother to settle and liquidate the patriarch's estate
and to deliver to the legal heirs their respective inheritance, but petitioner
refused to do so without any justifiable reason. 3

In her answer with counterclaim, petitioner traversed the allegations in the


complaint and posited that the same be dismissed for failure to state a cause of
action, for lack of cause of action, and for non-compliance with a condition
precedent for the filing thereof. Petitioner denied that she was in custody of the
original holographic will and that she knew of its whereabouts. She, moreover,
asserted that photocopies of the will were given to respondent and to his
siblings. As a matter of fact, respondent was able to introduce, as an exhibit, a
copy of the will in Civil Case No. 224-V-00 before the RTC of Valenzuela City.
Petitioner further contended that respondent should have first exerted earnest
efforts to amicably settle the controversy with her before he filed the suit. 4
DcHSEa

The RTC heard the case. After the presentation and formal offer of respondent's
evidence, petitioner demurred, contending that her son failed to prove that she
had in her custody the original holographic will. Importantly, she asserted that
the pieces of documentary evidence presented, aside from being hearsay, were
all immaterial and irrelevant to the issue involved in the petition they did not
prove or disprove that she unlawfully neglected the performance of an act which
the law specifically enjoined as a duty resulting from an office, trust or station,
for the court to issue the writ of mandamus. 5

The RTC, at first, denied the demurrer to evidence. 6 In its February 4, 2005
Order, 7 however, it granted the same on petitioner's motion for reconsideration.
Respondent's motion for reconsideration of this latter order was denied on
September 20, 2005. 8 Hence, the petition was dismissed.

Aggrieved, respondent sought review from the appellate court. On April 26,
2006, the CA initially denied the appeal for lack of merit. It ruled that the writ of
mandamus would issue only in instances when no other remedy would be
available and sufficient to afford redress. Under Rule 76, in an action for the
settlement of the estate of his deceased father, respondent could ask for the
presentation or production and for the approval or probate of the holographic
will. The CA further ruled that respondent, in the proceedings before the trial
court, failed to present sufficient evidence to prove that his mother had in her
custody the original copy of the will. 9

Respondent moved for reconsideration. The appellate court, in the assailed


August 23, 2006 Amended Decision, 10 granted the motion, set aside its earlier
ruling, issued the writ, and ordered the production of the will and the payment
of attorney's fees. It ruled this time that respondent was able to show by
testimonial evidence that his mother had in her possession the holographic will.

Dissatisfied with this turn of events, petitioner filed a motion for reconsideration.
The appellate court denied this motion in the further assailed February 23, 2007
Resolution. 11

Left with no other recourse, petitioner brought the matter before this Court,
contending in the main that the petition for mandamus is not the proper remedy
and that the testimonial evidence used by the appellate court as basis for its
ruling is inadmissible. 12

The Court cannot sustain the CA's issuance of the writ.

The first paragraph of Section 3 of Rule 65 of the Rules of Court pertinently


provides that SAEHaC

SEC. 3. Petition for mandamus. When any tribunal,


corporation, board, officer or person unlawfully neglects the
performance of an act which the law specifically enjoins as a duty
resulting from an office, trust, or station, or unlawfully excludes
another from the use and enjoyment of a right or office to which
such other is entitled, and there is no other plain, speedy and
adequate remedy in the ordinary course of law, the person
aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that
judgment be rendered commanding the respondent,
immediately or at some other time to be specified by the
court, to do the act required to be done to protect the rights
of the petitioner, and to pay the damages sustained by the
petitioner by reason of the wrongful acts of the respondent.
13

Mandamus is a command issuing from a court of law of competent jurisdiction, in


the name of the state or the sovereign, directed to some inferior court, tribunal, or
board, or to some corporation or person requiring the performance of a
particular duty therein specified, which duty results from the official station of
the party to whom the writ is directed or from operation of law. 14 This
definition recognizes the public character of the remedy, and clearly excludes the
idea that it may be resorted to for the purpose of enforcing the performance of
duties in which the public has no interest. 15 The writ is a proper recourse for
citizens who seek to enforce a public right and to compel the performance of a
public duty, most especially when the public right involved is mandated by the
Constitution. 16 As the quoted provision instructs, mandamus will lie if the
tribunal, corporation, board, officer, or person unlawfully neglects the
performance of an act which the law enjoins as a duty resulting from an office,
trust or station. 17

The writ of mandamus, however, will not issue to compel an official to do


anything which is not his duty to do or which it is his duty not to do, or to give
to the applicant anything to which he is not entitled by law. 18 Nor will
mandamus issue to enforce a right which is in substantial dispute or as to which a
substantial doubt exists, although objection raising a mere technical question will
be disregarded if the right is clear and the case is meritorious. 19 As a rule,
mandamus will not lie in the absence of any of the following grounds: [a] that the
court, officer, board, or person against whom the action is taken unlawfully
neglected the performance of an act which the law specifically enjoins as a duty
resulting from office, trust, or station; or [b] that such court, officer, board, or
person has unlawfully excluded petitioner/relator from the use and enjoyment
of a right or office to which he is entitled. 20 On the part of the relator, it is
essential to the issuance of a writ of mandamus that he should have a clear legal
right to the thing demanded and it must be the imperative duty of respondent to
perform the act required. 21

Recognized further in this jurisdiction is the principle that mandamus cannot be


used to enforce contractual obligations. 22 Generally, mandamus will not lie to
enforce purely private contract rights, and will not lie against an individual
unless some obligation in the nature of a public or quasi-public duty is imposed.
23 The writ is not appropriate to enforce a private right against an individual. 24
The writ of mandamus lies to enforce the execution of an act, when, otherwise,
justice would be obstructed; and, regularly, issues only in cases relating to the
public and to the government; hence, it is called a prerogative writ. 25 To
preserve its prerogative character, mandamus is not used for the redress of private
wrongs, but only in matters relating to the public. 26 TEIHDa

Moreover, an important principle followed in the issuance of the writ is that


there should be no plain, speedy and adequate remedy in the ordinary course of
law other than the remedy of mandamus being invoked. 27 In other
words,mandamus can be issued only in cases where the usual modes of procedure
and forms of remedy are powerless to afford relief. 28 Although classified as a
legal remedy, mandamus is equitable in its nature and its issuance is generally
controlled by equitable principles. 29 Indeed, the grant of the writ of mandamus
lies in the sound discretion of the court.

In the instant case, the Court, without unnecessarily ascertaining whether the
obligation involved here the production of the original holographic will is
in the nature of a public or a private duty, rules that the remedy of mandamus
cannot be availed of by respondent Lee because there lies another plain, speedy
and adequate remedy in the ordinary course of law. Let it be noted that
respondent has a photocopy of the will and that he seeks the production of the
original for purposes of probate. The Rules of Court, however, does not prevent
him from instituting probate proceedings for the allowance of the will whether
the same is in his possession or not. Rule 76, Section 1 relevantly provides:

Section 1. Who may petition for the allowance of will. Any


executor, devisee, or legatee named in a will, or any other
person interested in the estate, may, at any time, after the
death of the testator, petition the court having jurisdiction to
have the will allowed, whether the same be in his possession
or not, or is lost or destroyed.

An adequate remedy is further provided by Rule 75, Sections 2 to 5, for the


production of the original holographic will. Thus
SEC. 2. Custodian of will to deliver. The person who has
custody of a will shall, within twenty (20) days after he
knows of the death of the testator, deliver the will to the
court having jurisdiction, or to the executor named in the
will.

SEC. 3. Executor to present will and accept or refuse trust. A


person named as executor in a will shall within twenty (20)
days after he knows of the death of the testator, or within
twenty (20) days after he knows that he is named executor if
he obtained such knowledge after the death of the testator,
present such will to the court having jurisdiction, unless the
will has reached the court in any other manner, and shall,
within such period, signify to the court in writing his
acceptance of the trust or his refusal to accept it. ADcHES

SEC. 4. Custodian and executor subject to fine for neglect. A


person who neglects any of the duties required in the two
last preceding sections without excuse satisfactory to the
court shall be fined not exceeding two thousand pesos.
SEC. 5. Person retaining will may be committed. A person
having custody of a will after the death of the testator who
neglects without reasonable cause to deliver the same, when
ordered so to do, to the court having jurisdiction, may be
committed to prison and there kept until he delivers the will.
30

There being a plain, speedy and adequate remedy in the ordinary course of law
for the production of the subject will, the remedy of mandamus cannot be availed
of. Suffice it to state that respondent Lee lacks a cause of action in his petition.
Thus, the Court grants the demurrer.

WHEREFORE, premises considered, the petition for review on certiorari is


GRANTED. The August 23, 2006 Amended Decision and the February 23, 2007
Resolution of the Court of Appeals in CA-G.R. SP No. 91725 are REVERSED and
SET ASIDE. Civil Case No. 01100939 before the Regional Trial Court of Manila is
DISMISSED.

SO ORDERED.

||| (Uy Kiao Eng v. Lee, G.R. No. 176831, January 15, 2010)

EN BANC

[G.R. No. 206323. April 11, 2013.]

LOUIS "BAROK" C. BIRAOGO, ON HIS BEHALF AND


ON BEHALF OF OTHER CITIZENS OF THE REPUBLIC
OF THE PHILIPPINES SIMILARLY SITUATED, petitioner,
vs. HON. ALBERTO F. DEL ROSARIO, SECRETARY OF
FOREIGN AFFAIRS, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court en banc issued a Resolution dated APRIL 11, 2013,
which reads as follows:

"G.R. No. 206323 (Louis "Barok" C. Biraogo, on his behalf and on behalf of
other citizens of the Republic of the Philippines similarly situated, petitioner, v.
Hon. Alberto F. Del Rosario, Secretary of Foreign Affairs, respondent.)

RESOLUTION
This is a petition for Mandamus under Rule 65 of the Rules of Court, seeking to
compel herein respondent Alberto F. Del Rosario, as Secretary of Foreign Affairs,
to press the Philippine claim to North Borneo (Sabah) before the International
Court of Justice (ICJ) or such other fora authorized under international law.

We dismiss the petition for lack of merit.

1.Section 3, Rule 65 of the Rules of Court provides:

Sec. 3.When any tribunal, corporation, board, officer or


person unlawfully neglects the performance of an act which
the law specifically enjoins as a duty resulting from an office,
trust, or station . . . and there is no other plain, speedy and
adequate remedy in the ordinary course of law, the person
aggrieved may file a verified petition in the proper court,
alleging the facts with certainty and praying that judgment
be rendered commanding the respondent, immediately or at
some other time to be specified by the court, to do the act
required to be done to protect the rights of the petitioner,
and to pay the damages sustained by the petitioner by
reason of the wrongful acts of the respondent.

Mandamus is a command issuing from a court of law of competent jurisdiction in


the name of the state or the sovereign, directed to some inferior court, tribunal, or
board, or to some corporation or person requiring the performance of a
particular duty therein specified, which duty results from the official station of
the party to whom the writ is directed or from operation of law. The writ of
mandamus, however, will not issue to compel an official to do anything which is
not his duty to do or which it is his duty not to do. Nor will mandamus issue to
enforce a right which is in substantial dispute. 1 aDECHI

Before mandamus is issued, the following requisites should be satisfied: (1)


petitioner must show a clear legal right to the act demanded; (2) respondent
must have the duty to perform the act because the same is mandated by law; (3)
respondent unlawfully neglects the performance of the duty enjoined by law; (4)
the act to be performed is ministerial, not discretionary; and (5) there is no other
plain, speedy, and adequate remedy in the ordinary course of law. These
requisites applied, mandamus will not lie in the case at bar.

First, petitioner has not shown a clear legal right to the act demanded. Second,
the act which petitioner seeks to be performed by the Secretary of Foreign Affairs
is clearly not merely ministerial. What is here involved is a discretionary act on
the part of the Executive Department, which act involves the delicate balance of
national and international concerns. Third, there is no showing that there is no
other remedy in the course of law.

2.The submission to the ICJ of the Philippine claim over Sabah involves the
conduct of our foreign relations. This is primarily an executive prerogative, and
the courts may not inquire into the wisdom or lack of it in the exercise thereof.
This is a principle laid down by the courts since time immemorial. 2

WHEREFORE, premises considered, the Court Resolves to DISMISS the present


petition for lack of merit." (adv115)

||| (Biraogo v. Del Rosario, G.R. No. 206323, April 11, 2013)

THIRD DIVISION

[G.R. No. 146531. March 18, 2005.]

DOMINGO R. MANALO, petitioner, vs. PAIC SAVINGS


BANK and THERESE V. VARGAS, respondents.

DECISION

SANDOVAL-GUTIERREZ, J p:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, assailing the Decision 1 dated December 21, 2000 of
the Court of Appeals in CA-G.R. SP No. 60966, "Domingo R. Manalo vs. PAIC
Savings Bank, represented by the Liquidator/Receiver, PDIC, and Therese Villanueva
Vargas."

The factual antecedents as borne by the records are:

On July 19, 1983, S. Villanueva Enterprises, Inc., represented by its president,


Therese Villanueva Vargas, impleaded as a respondent, obtained a P3,000,000.00
loan from PAIC Savings and Mortgage Bank, also a respondent. As security for
the loan, respondents mortgaged two (2) lots situated in Pasay City covered by
Transfer Certificate of Title (TCT) No. 6076 of the Registry of Deeds, same city.
However, respondent Vargas failed to pay the loan. Consequently, the mortgage
was foreclosed and the lots were sold at public auction to respondent bank, being
the highest bidder.

On December 4, 1984, a Certificate of Sale 2 was issued to respondent bank and


eventually registered with the Registry of Deeds of Pasay City.

On October 14, 1991 or seven years later, respondent Vargas filed with the
Regional Trial Court (RTC), Branch 116, Pasay City, a complaint for annulment
of mortgage and extrajudicial foreclosure against respondent bank, docketed as
Civil Case No. R-8477. In due course, the RTC rendered a Decision dated July 22,
1993 dismissing the complaint for lack of merit. On appeal, the Court of Appeals,
in a Decision dated October 28, 1996, affirmed the RTC Decision, sustaining the
legality of the mortgage and the foreclosure proceedings. The Decision of the
Appellate Court then became final and executory.

Meantime or on June 22, 1992, respondent bank filed with the RTC, Branch 112,
Pasay City, a petition for issuance of a writ of possession, docketed as Civil Case
No. 9011-P. After hearing, or on April 2, 1998, the court granted the petition and
issued a writ of possession.

Earlier or on December 23, 1992, respondent Vargas sold to Armando Angsico


the lots for P18,000,500.00. Then on August 24, 1994, respondent Vargas leased to
Domingo R. Manalo, petitioner, a portion of the same lots consisting of 450
square meters for a period of ten (10) years with a monthly rental of P22,500.00.
Later, or on June 29, 1997, Angsico assigned and transferred to petitioner all his
rights to the property as shown by a Deed of Assignment and Transfer of Rights.
TcHDIA

On May 7, 1998, petitioner filed with the RTC, Branch 231, Pasay City, a
complaint for specific performance and damages, docketed as Civil Case No. 98-
0868. Impleaded as defendants are respondent bank, its liquidator and/or
receiver PDIC, and respondent Vargas. In his complaint, petitioner alleged that
he has legal interest in the subject lots, having initially leased a portion of the
same from respondent Vargas and then purchased the whole area from Angsico.
He prayed that the trial court issue a writ of mandamus compelling respondent
bank (1) to allow him to redeem and/or repurchase the subject lots for
P18,000,000.00; and (2) to release to him TCT No. 6076.

Instead of filing an answer, respondent bank filed a motion to dismiss the


complaint on the following grounds: (1) the trial court has no jurisdiction over
the subject property; and (2) the complaint fails to state a sufficient cause of
action. Respondent bank averred that petitioner has no legal interest in the
subject lots since as early as December 4, 1985, the title thereto was consolidated
in its name when respondent Vargas, petitioner's predecessor-in-interest, failed
to exercise her right of redemption.

On September 29, 1998, the RTC issued an Order denying respondent bank's
motion to dismiss the complaint. Thus, respondent bank, on October 7, 1998,
filed its answer alleging as affirmative defenses that the complaint failed to state
a cause of action and that the trial court has no jurisdiction over the case.

On September 4, 2000, the RTC rendered a Decision dismissing the complaint for
"lack of an enforceable cause of action," thus:

"WHEREFORE, in the light of the aforementioned reasons,


for lack of an enforceable cause of action, the case is hereby
DISMISSED with costs against the plaintiff.

SO ORDERED."

On appeal, the Court of Appeals rendered the assailed Decision dated December
21, 2000 affirming the RTC Decision and holding that petitioner's complaint
failed to state a cause of action, thus:

"To begin with, the present petition for Mandamus on appeal


should have been outrightly dismissed considering that such
extraordinary remedy under Rule 65 is not available under
the facts obtaining. Mandamus is a writ issued in order to
compel the performance, when refused, of a ministerial
duty, this being its main objective. It does not lie to require
anyone to fulfill a contractual obligation or to compel a
course of conduct, nor to control or review the exercise of
discretion. Petitioner must show a clear legal right to the
thing demanded with the corresponding imperative duty of
the respondent to perform the act required. It never issues in
doubtful cases. The writ will not issue to compel anything to
which the petitioner is not entitled by law. Mandamus does
not confer power nor impose duties. It simply commands to
exercise a power already possessed and to perform a duty
already imposed (Tangonan vs. Pano, 137 SCRA 245 [1985];
University of San Agustin vs. Court of Appeals, 230 SCRA 761
[1994]).

"At bar, we cannot see any legal justification to compel PAIC


Bank to accept the proposed P18,000,000.00 redemption money
and to release the subject title. This is not the idea of a ministerial
duty under the law.

"Essentially, the case at hand could be one for specific


performance, as what the court a quo said in the first
paragraph of the challenged decision.

xxx xxx xxx

"In the case at bar, what succinctly appears on records is the


indubitable fact that appellant has no cause of action against
PAIC Bank. It may be true that earlier the motion to dismiss
of PAIC Bank on this point was denied by the court a quo.
Yet, such resolution did not preclude the trial court to later
on declare, after trial, that indeed there was no cause of
action, especially so when the defense of lack of cause of
action is averred in the answer as one of the affirmative
defenses. ADcHES

"Under the Rules of Court, a cause of action is defined as an


act of omission of one party in violation of the legal right of
the other which causes the latter injury (Rebodillo vs. Court of
Appeals, 170 SCRA 800 [1989]). It is composed of: (1) the
plaintiff's primary right and defendant's corresponding
primary duty, whatever may be the subject to which they
relate to his person, character, property or contract; and (2)
the delict or wrongful act or omission of the defendant, by
which the primary right and duty have been violated. The
cause of action is determined not by the prayer of the
complaint but by the facts alleged (Nicanor de Guzman, Jr. vs.
Court of Appeals, 192 SCRA 507 [1990]).

"Here, the absence of cause of action of the appellant becomes more


apparent when we consider the following:

(a) Logic and common sense dictate that one can only sell
what he owns and the buyer acquires only what the
seller can offer. On June 29, 1997, when Angsico sold
the lot to Manalo, Angsico was not the owner of the
subject property simply because at the time he (Angsico)
purchased the same property from Vargas and/or S.
Villanueva on December 23, 1992, said sellers were no
longer the lawful owners of the property. As correctly
pointed out by the appellees, after the expiration of the
one (1) year redemption period and no redemption was
made on December 5, 1985, PAIC Bank ipso facto
became the legal owner in fee simple of the subject lot
and its improvements, being the highest bidder in the
auction sale and the vendee in the Sheriff's Certificate of
Sale duly registered a year before and which entitles it to
the issuance of a new certificate of title in his name
(People's Financing Corp. vs. Court of Appeals, 192
SCRA 34 [1990]; Sumerariz vs. Development Bank of
the Philippines, 21 SCRA 1374 [1967]).

xxx xxx xxx

"One last word, after failing to avail of the right of


redemption, the mortgaged property became an acquired
asset of the mortgagee PAIC Bank. Like any ordinary
property owner, PAIC Bank has the right to enjoy all the
attributes of ownership, among others, to sell the property
for whatever price it may deem reasonable and in favor of
whomsoever it chooses to sell it. This prerogative to enter
into lawful contract constitutes one of the liberties of the
people of the State. If that right be struck down or arbitrarily
interfered with, there is a substantial inferment of the liberty
of the people under the Constitution. To enter into a contract
freely and without restraint is one of the liberties guaranteed
to the citizens of the country and should not be lightly
interfered with. On that very same reason, courts cannot
force party litigants to enter into a contract, without
violating the fundamental law.

"IN VIEW OF THE FOREGOING, this appeal is ordered


DISMISSED.

SO ORDERED."

Thus, the instant petition for review on certiorari. Basically, petitioner ascribes to
the Court of Appeals the following error:

"IN HOLDING THAT THE PETITIONER FAILED TO


ESTABLISH A CAUSE OF ACTION AND THAT
MANDAMUS IS NOT THE CORRECT REMEDY."

In its comment, respondent bank contends that both the courts below did not err
in dismissing petitioner's action because mandamus does not lie to enforce
contractual obligations.

We hold that mandamus is not the proper recourse to enforce petitioner's alleged
right of redemption. To begin with, mandamus applies as a remedy only where
petitioner's right is founded clearly in law and not when it is doubtful. 3 In varying
language, the principle echoed and reechoed is that legal rights may be enforced
by mandamus only if those rights are well-defined, clear and certain. 4
On December 4, 1985 or when respondent Vargas failed to exercise her right of
redemption within the one (1) year redemption period, respondent bank ipso facto
became the absolute owner of the lots. Surprisingly, however, on December 23, 1992,
she sold the property for P18,000,500.00 to Angsico, who eventually transferred
his rights to petitioner. Not only that, on August 24, 1994, respondent Vargas still
leased to petitioner a portion of the subject lots.

Verily, when respondent bank became the owner of the lots on December 4, 1985,
respondent Vargas could no longer legally transfer, cede and convey the
property to petitioner. EIcTAD

Moreover, mandamus cannot be availed of as a remedy to enforce the


performance of contractual obligations. In Commission on Elections vs. Quijano-
Padilla, 5 we held:

"No rule of law is better settled than that mandamus does not lie to
enforce the performance of contractual obligations. As early as
1924, Justice Street, in Quiogue vs. Romualdez, already set
forth the justification of this rule, thus:

'Upon the facts above stated we are of the opinion


that the writ of mandamus is not the appropriate, or
even an admissible remedy. It is manifest that
whatever rights the petitioner may have, upon the
facts stated, are derived from her contract with the
city; and no rule of law is better settled than that
mandamus never lies to enforce the performance of
private contracts. . . . The petitioner's remedy, if any
she has, is by an original action in the Court of First
Instance to compel the city to pay the agreed price
or to pay damages for the breach of contract.'

xxx xxx xxx


'It was not intended to aid a plaintiff in the enforcement
of a mere contract right, or to take the place of the other
remedies provided by law for the adjudication of disputed
claims. Looking at the case from the standpoint of
appellant, it involves nothing more than an
ordinary breach of contract. If, as contended, the
appellant had a valid contract with the school
board, it also had an adequate remedy at law to
recover damages for its breach; and to permit the
writ of mandamus to be used for the purpose of enforcing
a mere contract right would be a wide departure from the
settled practice in respect to the character of cases in
which relief by mandamus may be obtained.

xxx xxx xxx."


WHEREFORE, the petition is DENIED. The assailed Decision dated December
21, 2000 of the Court of Appeals in CA-G.R. SP No. 60966 is hereby AFFIRMED.

||| (Manalo v. PAIC Savings Bank, G.R. No. 146531, March 18, 2005)

THIRD DIVISION

[G.R. No. 168053. September 21, 2011.]

REBECCA T. ARQUERO, petitioner, vs. COURT OF


APPEALS (Former Thirteenth Division); EDILBERTO C.
DE JESUS, in his capacity as Secretary of the Department
of Education; DR. PARALUMAN GIRON, Director,
Regional Office IV-MIMAROPA, Department of
Education; DR. EDUARDO LOPEZ, Schools Division
Superintendent, Puerto Princesa City; and NORMA
BRILLANTES, respondents.

DECISION

PERALTA, J p:

This is a petition for review on certiorari under Rule 45 of the Rules of Court filed
by petitioner Rebecca T. Arquero against public respondents Edilberto C. De
Jesus (De Jesus), in his capacity as Secretary of Education, Dr. Paraluman Giron
(Dr. Giron), Department of Education (DepEd) Director, Regional Office IV-
MIMAROPA, Dr. Eduardo Lopez (Lopez), Schools Division Superintendent,
Puerto Princesa City, and private respondent Norma Brillantes. Petitioner assails
the Court of Appeals (CA) Decision 1 dated December 15, 2004 and Resolution 2
dated May 3, 2005 in CA-G.R. SP No. 85899. The assailed decision reversed and
set aside the Judgment by Default 3 of the Regional Trial Court (RTC), Branch 95,
Puerto Princesa City, while the assailed resolution denied petitioner's motion for
reconsideration.

The facts of the case are as follows:


On October 13, 1989, Congress approved Republic Act (RA) No. 6765, or "An Act
Integrating Certain High Schools in the City of Puerto Princesa and in the Province of
Palawan with the Palawan National School and Appropriating Funds Therefor." Under
the law, the following schools were converted into national schools and
integrated with the Palawan National School (PNS) in the City of Puerto
Princesa, Province of Palawan, as branches thereof: (1) Puerto Princesa School of
Philippine Craftsmen; (2) San Jose Barangay High School; (3) Inagawan Barangay
High School; (4) Puerto Princesa Rural High School; all in the City of Puerto
Princesa and (5) Plaridel Barangay High School in the Municipality of Aborlan;
(6) Narra Barangay High School in the Municipality of Narra; (7) Quezon
Municipal High School in the Municipality of Quezon; (8) Pulot Barangay High
School in the Municipality of Brooke's Point; (9) Bataraza Barangay High School
in the Municipality Bataraza; and (10) Balabac Barangay High School in the
Municipality of Balabac; all in the Province of Palawan. 4

Section 2 of the law provides that the PNS shall, in addition to general secondary
education program, offer post-secondary technical-vocational and other relevant
courses to carry out its objectives. The PNS shall thus be considered the "mother
unit" and the integrated schools should benefit from a centralized curriculum
planning to eliminate duplication of functions and efforts relative to human
resource development for the province. 5 The law also provides that the Palawan
Integrated National Schools (PINS) shall be headed by a Vocational School
Superintendent (VSS) who shall be chosen and appointed by the Secretary of the
Department of Education, Culture, and Sports (now the DepEd). 6 Except for
Puerto Princesa School of Philippine Craftsmen, which shall be headed by the
Home Industries Training Supervisor, the PNS and each of its units or branches
shall be headed either by a Principal or Secondary School Head Teacher to be
chosen in accordance with the DepEd Rules and Regulations. 7 aIHCSA

However, no VSS was appointed. Instead, then DECS Region IV Office


designated then PNS Principal Eugenio J. dela Cuesta in a concurrent capacity as
Officer-in-Charge (OIC) of the PINS. After the retirement of Dela Cuesta,
petitioner took over as Secondary School Principal of the PNS. 8 On March 18,
1993, then DECS-Region IV Director IV Desideria Rex (Director Rex) designated
petitioner as OIC of the PINS. 9

On December 1, 1994, Director Rex's successor, Pedro B. Trinidad placed all


satellite schools of the PINS under the direct supervision of the Schools Division
Superintendent for Palawan effective January 1, 1995. 10 This directive was later
approved by the DepEd in September 1996. Petitioner was instructed to turn
over the administration and supervision of the PINS branches or units. 11 In
another memorandum, Schools Division Superintendent Portia Gesilva was
designated as OIC of the PINS. These events prompted different parties to
institute various actions restraining the enforcement of the DepEd orders.
Pursuant to RA 8204, separate City Schools Division Offices were established for
the City of Puerto Princesa and the Province of Palawan. 12

On March 14, 2000, Regional Director Belen H. Magsino issued an Order


addressed to the Schools Division Superintendent of Palawan and Puerto
Princesa City, and petitioner stating that the PINS satellite schools shall be under
the supervision of the division schools superintendents concerned, while
petitioner should concentrate on the supervision and administration of the PNS.
13 Again, this prompted the filing of various court actions.

On May 14, 2002, then DECS Undersecretary Jaime D. Jacob issued an Order 14
addressed to Dr. Giron, OIC, DepEd Regional Office No. 4, stating that there
being no more legal impediment to the integration, he ordered that the
secondary schools integrated with the PNS be under the direct administrative
management and supervision of the schools division superintendents of the
divisions of Palawan and Puerto Princesa City, as the case may be, according to
their geographical and political boundaries. Consequently, Dr. Giron instructed
the secondary schools' principals concerned of the assumption of jurisdiction by
the superintendent of the schools division offices of the city and province, and
that their fiscal and financial transaction as turned over will be effected on July 1,
2002. However, then DepEd Undersecretary Ramon C. Bacani (Bacani) ordered
that the status quo be maintained and that no turn over of schools be made. 15 In
the meantime, petitioner remained as the OIC of the PINS.

On September 19, 2002, Dr. Giron withdrew the designation of petitioner as OIC
of the PINS, enjoining her from submitting to the Regional Office all
appointments and personnel movement involving the PNS and the satellite
schools. On November 7, 2002, petitioner appealed to the Civil Service
Commission assailing the withdrawal of her designation as OIC of the PINS. 16

On March 28, 2003, then DepEd Secretary Edilberto C. De Jesus designated


Assistant Schools Division Superintendent Norma B. Brillantes (hereafter
referred to as private respondent) in concurrent capacity as OIC of the PINS
entitled to representation and transportation allowance, except the salary of the
position. 17 Petitioner filed a Motion for Reconsideration and/or Clarification 18
before the Office of the DepEd Secretary as to the designation of private
respondent. aDcHIS

On September 18, 2003, Dr. Giron filed a formal charge 19 against petitioner who
continued to defy the orders issued by the Regional Office relative to the exercise
of her functions as OIC of the PINS despite the designation of private respondent
as such. The administrative complaint charged petitioner with grave misconduct,
gross insubordination and conduct prejudicial to the best interest of the service.
Petitioner was also preventively suspended for ninety (90) days. 20
On October 2, 2003, petitioner filed the Petition for Quo Warranto with Prayer for
Issuance of Temporary Restraining Order and/or Injunctive Writ 21 before the
RTC of Palawan 22 against public and private respondents. The case was
docketed as Civil Case No. 3854. Petitioner argued that the designation of private
respondent deprived her of her right to exercise her function and perform her
duties in violation of her right to security of tenure. Considering that petitioner
was appointed in a permanent capacity, she insisted that private respondent's
designation as OIC of the PNS is null and void there being no vacancy to the
position. Petitioner thus prayed that the RTC issue an order granting the writ of
quo warranto enjoining private respondent from assuming the position of OIC of
the PNS, declaring the questioned designation null and void and without
operative effect, and declaring petitioner to be entitled to the office of the
principal of the PNS. 23

On October 6, 2003, the Executive Judge issued a 72-Hour TRO 24 enjoining and
restraining private respondent from assuming the position of OIC and
performing the functions of the Office of the Principal of the PNS; and
restraining public respondents from giving due course or recognizing the
assailed designation of private respondent. The RTC later issued the writ of
preliminary injunction. 25

Respondents failed to file their Answer. Hence, on motion 26 of petitioner, the


Court declared respondents in default in an Order 27 dated December 15, 2003.
In the same order, petitioner was allowed to present her evidence ex parte.

On June 14, 2004, the RTC rendered a Judgment by Default, 28 the dispositive
portion of which reads:

WHEREFORE, premises considered and by preponderance


of evidence, judgment is hereby rendered:

1. Declaring petitioner Rebecca T. Arquero as the


lawful Principal and Head of the Palawan
Integrated National High School who is
lawfully entitled to manage the operation
and finances of the school subject to
existing laws;

2. Declaring the formal charge against petitioner,


the preventive suspension, the
investigating committee, the proceedings
therein and any orders, rulings, judgments
and decisions that would arise therefrom
as null, void and of no effect;
3. Ordering respondent Norma Brillantes, or any
person acting in her behalf, to cease and
desist from assuming and exercising the
functions of the Office of the Principal of
Palawan Integrated National High School,
and respondents Edilberto C. De Jesus,
Paraluman R. Giron and Eduardo V.
Lopez, or any person acting in their behalf,
from giving due course or recognizing the
same; and HCaIDS

4. Making the writ of preliminary injunction issued


in this case permanent.

IT IS SO ORDERED. 29

The RTC held that considering that the integrated school failed to offer post-
secondary technical-vocational courses, the VSS position became functus officio.
The PNS, therefore, remains to be a general secondary school under the
jurisdiction of the DepEd. 30 Consequently, supervision of the integrated school
was automatically vested with the principal of the PNS without the necessity of
appointment or designation. As to the administrative case filed against
petitioner, the RTC opined that the formal charge and preventive suspension are
illegal for lack of due process. 31

On appeal, the CA reversed and set aside the RTC decision, the dispositive
portion of which reads:

WHEREFORE, premises considered, the present appeal is


hereby GRANTED. The appealed decision of the court a quo
in Civil Case No. 3854 is hereby REVERSED and SET ASIDE.
A new judgment is hereby entered DISMISSING the petition
for quo warranto filed by appellee Rebecca T. Arquero.

No pronouncement as to costs.

SO ORDERED. 32

Applying the rules on statutory construction, the appellate court emphasized the
need to harmonize the laws. The CA held that the PINS and its satellite schools
remain under the complete administrative jurisdiction of the DepEd and not
transferred to the Technical Education and Skills Development Authority
(TESDA). It also explained that by providing for a distinct position of VSS with a
higher qualification, specifically chosen and appointed by the DepEd Secretary
that is separate from the school head of the PNS offering general secondary
education program, RA 6765 intended that the functions of a VSS and School
Principal of PNS be discharged by two separate persons. 33 The CA added that if
we follow the RTC conclusion, petitioner would assume the responsibilities and
exercise the functions of a division schools superintendent without appointment
and compliance with the qualifications required by law. 34 The appellate court
likewise held that petitioner failed to establish her clear legal right to the position
of OIC of the PINS as she was not appointed but merely designated to the
position in addition to her functions as incumbent school principal of the PNS. 35
Clearly, there was no violation of her right to due process and security of tenure
when private respondent replaced her. As to the validity of filing the
administrative charge against her and the subsequent imposition of preventive
suspension, the CA refused to rule on the matter due to the pendency of the
administrative case which is within the jurisdiction of the DepEd.

Hence, this petition raising the following issues: cIHCST

A. THE COURT OF APPEALS' DECISION DATED THE


15TH DECEMBER 2004, AND THE RESOLUTION
OF 3RD MAY 2005, HAVE DECIDED A
QUESTION OF SUBSTANCE, NOT
THERETOFORE DETERMINED BY THE
SUPREME COURT, OR THE APPELLATE COURT
HAS DECIDED IT IN A WAY PROBABLY NOT IN
ACCORD WITH LAW OR WITH THE
APPLICABLE DECISIONS OF THE HIGHEST
COURT; OR THE RESPONDENT COURT OF
APPEALS HAS SO FAR DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR AN EXERCISE
OF THE POWER OF SUPERVISION.

B. THE CHALLENGED DECISION WAS RENDERED ON


THE BASIS OF MERE UNSUBSTANTIATED
"ARGUMENTATIONS" OF THE INDIVIDUAL
RESPONDENTS.

NO IOTA OF EVIDENCE, TESTIMONIAL OR


DOCUMENTARY, WERE PRESENTED AND
OFFERED FOR A SPECIFIC PURPOSE BY THE
RESPONDENTS (WHO WERE DECLARED IN
DEFAULT).

THEREFORE, THE CONCLUSION OF THE IMPUGNED


DECISION IS NOT SUPPORTED BY RECORDED
EVIDENCE. 36
The petition is without merit.

Petitioner insists that respondents could not have appealed the RTC decision
having been declared in default. She explains that the only issue that could have
been raised is a purely legal question, therefore, the appeal should have been
filed with the Court and not with the CA.

In Martinez v. Republic, 37 the Court has clearly discussed the remedies of a party
declared in default in light of the 1964 and 1997 Rules of Court and a number of
jurisprudence applying and interpreting said rules. Citing Lina v. Court of
Appeals, 38 the Court enumerated the above-mentioned remedies, to wit:

a) The defendant in default may, at any time after discovery


thereof and before judgment, file a motion, under
oath, to set aside the order of default on the ground
that his failure to answer was due to fraud,
accident, mistake or excusable neglect, and that he
has meritorious defenses; (Sec. 3, Rule 18)

b) If the judgment has already been rendered when the


defendant discovered the default, but before the
same has become final and executory, he may file a
motion for new trial under Section 1 (a) of Rule 37;

c) If the defendant discovered the default after the judgment


has become final and executory, he may file a
petition for relief under Section 2 of Rule 38; and

d) He may also appeal from the judgment rendered against


him as contrary to the evidence or to the law, even
if no petition to set aside the order of default has
been presented by him. (Sec. 2, Rule 41) 39
cDEHIC

The Court explained in Martinez that the fourth remedy, that of appeal, is
anchored on Section 2, Rule 41 of the 1964 Rules. Even after the deletion of that
provision under the 1997 Rules, the Court did not hesitate to expressly rely on
the Lina doctrine, including the pronouncement that a defaulted defendant may
appeal from the judgment rendered against him. Moreover, in Rural Bank of Sta.
Catalina v. Land Bank of the Philippines, 40 the Court provided a comprehensive
restatement of the remedies of the defending party declared in default:

It bears stressing that a defending party declared in default


loses his standing in court and his right to adduce evidence
and to present his defense. He, however, has the right to
appeal from the judgment by default and assail said
judgment on the ground, inter alia, that the amount of the
judgment is excessive or is different in kind from that
prayed for, or that the plaintiff failed to prove the material
allegations of his complaint, or that the decision is contrary
to law. Such party declared in default is proscribed from
seeking a modification or reversal of the assailed decision on
the basis of the evidence submitted by him in the Court of
Appeals, for if it were otherwise, he would thereby be
allowed to regain his right to adduce evidence, a right which
he lost in the trial court when he was declared in default,
and which he failed to have vacated. In this case, the
petitioner sought the modification of the decision of the trial
court based on the evidence submitted by it only in the
Court of Appeals. 41

Undoubtedly, a defendant declared in default retains the right to appeal


from the judgment by default on the ground that the plaintiff failed to prove
the material allegations of the complaint, or that the decision is contrary to
law, even without need of the prior filing of a motion to set aside the order
of default except that he does not regain his right to adduce evidence. 42 The
appellate court, in turn, can review the assailed decision and is not
precluded from reversing the same based solely on the evidence submitted
by the plaintiff.
The next question to be resolved is whether petitioner has the right to the
contested public office and to oust private respondent from its enjoyment. We
answer in the negative.

A quo warranto proceeding is the proper legal remedy to determine the right or
title to the contested public office and to oust the holder from its enjoyment. 43 It
is brought against the person who is alleged to have usurped, intruded into, or
unlawfully held or exercised the public office. 44 It may be brought by the
Republic of the Philippines or by the person claiming to be entitled to such office.
45

In quo warranto, the petitioner who files the action in his name must prove that he
is entitled to the subject public office. In other words, the private person suing
must show a clear right to the contested position. 46 Otherwise, the person who
holds the same has a right to undisturbed possession and the action for quo
warranto may be dismissed. 47 It is not even necessary to pass upon the right of
the defendant who, by virtue of his appointment, continues in the undisturbed
possession of his office. 48 IECcAT

On the basis of the evidence presented solely by petitioner and without


considering the arguments and attachments made by respondents to rebut
petitioner's claims, we find that petitioner failed to prove that she is entitled to
the contested position.

It is undisputed that petitioner was appointed as the principal of the PNS. In


addition, she was designated as the OIC of the PINS. Said designation was,
however, withdrawn. Private respondent was, thereafter, designated as the new
OIC. This prompted petitioner to file the quo warranto petition before the court a
quo.

The contested position was created by RA 6765. Section 3 of the law provides:

Section 3. The school shall be headed by a Vocational School


Superintendent. He shall be chosen and appointed by the
Secretary of Education, Culture and Sports [now Secretary of
Education].

Moreover, Section 4 thereof states:


Section 4. The Home Industries Training Supervisor of the
Puerto Princesa School of Philippine Craftsmen shall
continue to serve as such. The main school and each of its
units or branches shall be headed either by a Principal or
Secondary School Head Teacher to be chosen in accordance
with the rules and regulations of the Department of
Education, Culture and Sports [now the Department of
Education].

As aptly observed by the CA, the law created two positions the VSS and the
principal or secondary school head teacher of each of the units or branches of the
integrated school. The legislators clearly intended that the integrated schools
shall be headed by a superintendent. Admittedly, petitioner did not possess the
qualifications to hold the position and she was merely designated by the DepEd
as the OIC of the PINS. At that time, she held in a concurrent capacity, the
permanent position of principal of the PNS. Having been appointed as OIC
without the necessary qualifications, petitioner held the position only in a
temporary capacity. The purpose of an acting or temporary appointment is to
prevent a hiatus in the discharge of official functions by authorizing a person to
discharge those functions pending the selection of a permanent or another
appointee. An acting appointee accepts the position on the condition that he shall
surrender the office once he is called to do so by the appointing authority.
Therefore, his term of office is not fixed, but endures at the pleasure of the
appointing authority. 49 The essence of an acting appointment is its
temporariness and its consequent revocability at any time by the appointing
authority. 50

Thus, under RA 6765, petitioner can only insist on her security of tenure as
principal of the PNS but not as OIC of the integrated school. Upon the
withdrawal of her designation, her right to the contested position ceased to exist.

Petitioner also bases her right to the contested position on the enactment of RA
7796, or "An Act Creating the Technical Education and Skills Development Authority,
Providing for its Powers, Structure and for Other Purposes," and RA 9155, or "An Act
Instituting a Framework of Governance for Basic Education, Establishing Authority and
Accountability, Renaming the Department of Education Culture and Sports as the
Department of Education, and for Other Purposes." She contends that under RA
7796, the position of VSS could no longer be filled up by the DepEd having been
absorbed by TESDA. As such, the right to manage the operation and finances of
the integrated schools is automatically vested with petitioner being the principal
of the PNS without further appointment or designation.

Again, we do not agree. HDICSa

As found by the RTC and affirmed by the CA, the PINS failed to implement its
technical-vocational education program. Consequently, the PNS and the other
satellite schools never came under the jurisdiction of the Bureau of Technical and
Vocational Education of the DepEd nor the technical-vocational education in
DepEd's regional offices. Thus, except for the Puerto Princesa School of
Philippine Craftsmen, which is now within the jurisdiction of the TESDA, the
PNS and the other units remained under the complete administrative jurisdiction
of the DepEd. Although the technical-vocational education program was not
implemented, it does not alter the law's intent that the main school, which is the
PNS and the other units integrated with it, shall be headed either by a principal
or secondary school head teacher; while the PINS or the integrated school shall
be headed by another. We cannot subscribe to petitioner's insistence that the
principal automatically heads the PINS without appointment or designation. As
clearly explained by the CA, "by providing for a distinct position with a higher
qualification (that of a superintendent), specifically chosen and appointed by the
DepEd Secretary, separate from the school head of the PNS offering general
secondary education program, the law clearly intended the functions of a VSS
and school principal of the PNS to be discharged and performed by two different
individuals." 51

Neither can petitioner rely on the enactment of RA 9155. The law, in fact,
weakens petitioner's claim. RA 9155 provides the framework for the governance
of basic education. It also emphasizes the principle of shared governance which
recognizes that every unit (which includes the national, regional, division, school
district, and school levels) in the education bureaucracy has a particular role, task
and responsibility. The school shall be headed by a [principal] or school head; a
school district by a schools district supervisor; a division by a schools division
superintendent; a region by a director; and the national level by the Secretary of
Education. It must be recalled that the integration under RA 6765 involved
certain high schools in different municipalities of the Province of Palawan and
the City of Puerto Princesa. We also note that RA 6765 intended that the
integrated school shall be headed by a superintendent. Nowhere in the above
laws can we find justification for petitioner's insistence that she, and not private
respondent, has a better right to hold the contested position.

Clearly, petitioner failed to establish her right to the contested position.


Therefore, the dismissal of her quo warranto petition is in order. It must be
emphasized, however, that this declaration only involves the position of
petitioner as OIC of the PINS. It does not in any way affect her position as
principal of the PNS which she holds in a permanent capacity.

WHEREFORE, premises considered, the petition is DENIED for lack of merit.


The Court of Appeals Decision dated December 15, 2004 and Resolution dated
May 3, 2005 in CA-G.R. SP No. 85899, are AFFIRMED.

SO ORDERED. STcEaI

Velasco, Jr., Abad, Mendoza and Perlas-Bernabe, JJ., concur.

||| (Arquero v. Court of Appeals, G.R. No. 168053, September 21, 2011)

SECOND DIVISION

[G.R. No. 184980. March 30, 2011.]

DANILO MORO, petitioner, vs. GENEROSO REYES DEL


CASTILLO, JR., respondent.

DECISION

ABAD, J p:

This case is about the right of the petitioner in an action for quo warranto to be
reinstated meantime that he has appealed from the Ombudsman's decision
dismissing him from the service for, among other grounds, misconduct in office.
cEAHSC

The Facts and the Case


On December 7, 2005 the Ombudsman charged respondent Generoso Reyes del
Castillo, Jr. (Del Castillo), then Chief Accountant of the General Headquarters
(GHQ) Accounting Center of the Armed Forces of the Philippines (AFP), with
dishonesty, grave misconduct and conduct prejudicial to the best interest of the
service in OMB-P-A-06-0031-A. The Ombudsman alleged that Del Castillo made
false statements in his Statement of Assets and Liabilities from 1996 to 2004 and
that he acquired properties manifestly out of proportion to his reported salary.

On April 1, 2006 the GHQ reassigned Del Castillo to the Philippine Air Force
(PAF) Accounting Center by virtue of GHQ AFP Special Order 91 (SO 91). 1
Through the same order, petitioner Danilo Moro (Moro), then Chief Accountant
of the Philippine Navy, took over the position of Chief Accountant of the GHQ
Accounting Center.

Meantime, on August 30, 2006 the Ombudsman placed Del Castillo under
preventive suspension for six months and eventually ordered his dismissal from
the service on February 5, 2007. 2 The penalty imposed on him included
cancellation of eligibility, forfeiture of retirement benefits, and perpetual
disqualification from reemployment in the government. Del Castillo filed a
motion for reconsideration, which is pending to this date.

Following the lapse of his six-month suspension or on March 12, 2007 Del
Castillo attempted to reassume his former post of GHQ Chief Accountant. But,
he was unable to do so since Moro declined to yield the position. Consequently,
on April 4, 2007 Del Castillo filed a petition for quo warranto 3 against Moro with
the Regional Trial Court 4 (RTC) of Paraaque City in Civil Case 07-0111.

Del Castillo claimed that Moro was merely detailed as GHQ Chief Accountant
when the Ombudsman placed Del Castillo under preventive suspension. Since
the latter's period of suspension already lapsed, he was entitled to resume his
former post and Moro was but a usurper. 5

For his part, Moro pointed out in his Answer 6 that his appointment under SO 91
as GHQ Chief Accountant was a permanent appointment. Indeed, the GHQ had
already reassigned Del Castillo to the PAF Accounting Center even before the
Ombudsman placed him under preventive suspension. Del Castillo was,
therefore, not automatically entitled to return to his former GHQ post despite the
lapse of his suspension.

During the pendency of the quo warranto case before the RTC, Del Castillo
refused to report at the PAF Accounting Center despite a memorandum from the
AFP Acting Deputy Chief of Staff for Personnel that carried the note and
approval of the AFP Chief of Staff. 7 Del Castillo insisted that he could not be
placed under the PAF since he was the GHQ Chief Accountant. 8 cAISTC

On October 10, 2007 the RTC dismissed Del Castillo's petition, 9 holding that
Moro held the position of GHQ Chief Accountant pursuant to orders of the AFP
Chief of Staff. Moreover, the RTC found Del Castillo's reassignment to the PAF
Accounting Center valid. Under the Civil Service Commission (CSC) Rules, a
reassignment may be made for a maximum of one year. Since Del Castillo's
preventive suspension kept him away for only six months, he had to return to
the PAF to complete his maximum detail at that posting. Besides, said the trial
court, the Ombudsman's February 5, 2007 Order, which directed Del Castillo's
dismissal from the service for grave misconduct, among others, rendered the
petition moot and academic. The RTC denied Del Castillo's motion for
reconsideration.

Instead of appealing from the order of dismissal of his action, Del Castillo filed a
petition for certiorari with the Court of Appeals (CA) in CA-G.R. SP 103470. On
October 13, 2008 the CA reversed the RTC Decision. 10 Notwithstanding the
procedural error, the CA gave due course to the petition on grounds of
substantial justice and fair play. It held that Del Castillo's reassignment exceeded
the maximum of one year allowed by law and that SO 91 was void since it did
not indicate a definite duration for such reassignment. Further, the CA held as
non-executory the Ombudsman's dismissal of Del Castillo in view of his appeal
from that dismissal. With the denial of his motion for reconsideration, Moro filed
this petition via Rule 45 of the Rules of Court.

The Issue Presented


The key issue in this case is whether or not respondent Del Castillo is entitled to
be restored to the position of Chief Accountant of the GHQ Accounting Center
that he once held.

The Court's Ruling


An action for quo warranto under Rule 66 of the Rules of Court may be filed
against one who usurps, intrudes into, or unlawfully holds or exercises a public
office. 11 It may be brought by the Republic of the Philippines or by the person
claiming to be entitled to such office. 12 In this case, it was Del Castillo who filed
the action, claiming that he was entitled as a matter of right to reassume the
position of GHQ Chief Accountant after his preventive suspension ended on
March 11, 2007. He argues that, assuming his reassignment to the PAF
Accounting Center was valid, the same could not exceed one year. Since his
detail at the PAF took effect under SO 91 on April 1, 2006, it could last not later
than March 31, 2007. By then, Moro should have allowed him to return to his
previous posting as GHQ Chief Accountant.

But, as Moro points out, he had been authorized under SO 91 to serve as GHQ
Chief Accountant. Del Castillo, on the other hand, had been ordered dismissed
from the service by the Ombudsman in OMB-P-A-06-0031-A. Consequently, he
cannot reassume the contested position.

Del Castillo of course insists, citing Lapid v. Court of Appeals, 13 that only
decisions of the Ombudsman that impose the penalties of public censure,
reprimand, or suspension of not more than a month or a fine of one month salary
are final, executory, and unappealable. Consequently, when the penalty is
dismissal as in his case, he can avail himself of the remedy of appeal and the
execution of the decision against him would, in the meantime, be held in
abeyance.

But, the Lapid case has already been superseded by In the Matter to Declare in
Contempt of Court Hon. Simeon A. Datumanong, Secretary of DPWH. 14 The Court
held in Datumanong that Section 7, Rule III of Administrative Order 7, as
amended by Administrative Order 17, 15 clearly provides that an appeal shall
not stop a decision of the Ombudsman from being executory. The Court later
reiterated this ruling in Office of the Ombudsman v. Court of Appeals. 16 AaDSTH

In quo warranto, the petitioner who files the action in his name must prove that he
is entitled to the subject public office. Otherwise, the person who holds the same
has a right to undisturbed possession and the action for quo warranto may be
dismissed. 17

Here, Del Castillo brought the action for quo warranto in his name on April 4,
2007, months after the Ombudsman ordered his dismissal from service on
February 5, 2007. As explained above, that dismissal order was immediately
executory even pending appeal. Consequently, he has no right to pursue the
action for quo warranto or reassume the position of Chief Accountant of the GHQ
Accounting Center.

WHEREFORE, the Court GRANTS the petition, REVERSES and SETS ASIDE
the decision dated October 13, 2008 of the Court of Appeals in CA-G.R. SP
103470, and REINSTATES the October 10, 2007 decision of the Regional Trial
Court in Civil Case 07-0111, which dismissed the complaint for quo warranto.

||| (Moro v. Del Castillo, Jr., G.R. No. 184980, March 30, 2011)

EN BANC

[G.R. Nos. 192147 & 192149. August 23, 2011.]

RENALD F. VILANDO, petitioner, vs. HOUSE OF


REPRESENTATIVES ELECTORAL TRIBUNAL,
JOCELYN SY LIMKAICHONG AND HON. SPEAKER
PROSPERO NOGRALES, respondents.
DECISION

MENDOZA, J p:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court
assailing the March 24, 2010 Decision 1 of the House of Representatives Electoral
Tribunal (HRET) dismissing the petitions for quo warranto and declaring private
respondent Jocelyn Sy Limkaichong (Limkaichong) not disqualified as Member of
the House of Representatives representing the First District of Negros Oriental
and its Resolution 2 dated May 17, 2010, denying the motion for reconsideration.

In the May 14, 2007 elections, Limkaichong filed her certificate of candidacy for
the position of Representative of the First District of Negros Oriental. She won
over the other contender, Olivia Paras.

On May 25, 2007, she was proclaimed as Representative by the Provincial Board
of Canvassers on the basis of Comelec Resolution No. 8062 3 issued on May 18,
2007.

On July 23, 2007, she assumed office as Member of the House of Representatives.

Meanwhile, petitions involving either the disqualification or the proclamation of


Limkaichong were filed before the Commission on Elections (COMELEC) which
reached the Court. EDIaSH

The petitions, which questioned her citizenship, were filed against Limkaichong
by her detractors: Louis Biraogo (G.R. No. 179120); 4 Olivia Paras (G.R. Nos.
179132-33); 5 and Renald F. Vilando (G.R. Nos. 179240-41). 6 These three (3)
petitions were consolidated with the petition for certiorari filed by Limkaichong
(G.R. Nos. 178831-32) assailing the Joint Resolution issued by the COMELEC
which resolved the disqualification cases against her.

On April 1, 2009, the Court granted the aforesaid petition of Limkaichong,


reversed the Joint Resolution of the Comelec, dismissed the three (3) other
petitions, and directed the petitioners to seek relief before the HRET by way of a
petition for Quo Warranto.

On April 21, 2009 and May 27, 2009, petitioner Renald F. Vilando (Vilando), as
taxpayer; and Jacinto Paras, as registered voter of the congressional district
concerned, filed separate petitions for Quo Warranto against Limkaichong before
the HRET. These petitions were consolidated by the HRET as they both
challenged the eligibility of one and the same respondent. Petitioners asserted
that Limkaichong was a Chinese citizen and ineligible for the office she was
elected and proclaimed. They alleged that she was born to a father (Julio Sy),
whose naturalization had not attained finality, and to a mother who acquired the
Chinese citizenship of Julio Sy from the time of her marriage to the latter. Also,
they invoked the jurisdiction of the HRET for a determination of Limkaichong's
citizenship, which necessarily included an inquiry into the validity of the
naturalization certificate of Julio Sy.

For her defense, Limkaichong maintained that she is a natural-born Filipino


citizen. She averred that the acquisition of Philippine citizenship by her father
was regular and in order and had already attained the status of res judicata.
Further, she claimed that the validity of such citizenship could not be assailed
through a collateral attack. DcTSHa

On March 24, 2010, the HRET dismissed both petitions and declared
Limkaichong not disqualified as Member of the House of Representatives.
Pertinent portions of the HRET decision reads:

By and large, petitioners failed to satisfy the quantum of


proof to sustain their theory that respondent is not a natural-
born Filipino citizen and therefore not qualified as
Representative of the First District, Negros Oriental. This
being so, their petitions must fail.

WHEREFORE, the Tribunal DISMISSES the instant petition


for lack of merit and declares that respondent Jocelyn Sy
Limkaichong is not disqualified as Member of the House of
Representatives representing the First District, Negros
Oriental.

As soon as the Decision becomes final and executory, notice


of copies thereof shall be sent to the President of the
Philippines, the House of Representatives through the
Speaker, the Commission on Audit through the Chairman,
pursuant to Rule 96 of the 2004 Rules of the House of
Representatives Electoral Tribunal. Let a copy of this
Decision be furnished the Chairman, Commission on
Elections, for his information and appropriate action.

SO ORDERED. 7

The petitioners sought reconsideration of the aforesaid decision, but it was


denied by the HRET in its Resolution dated May 17, 2010. IDTcHa

Hence, this petition for certiorari filed by Vilando anchored on the following:

GROUNDS:
THE ONE-SIDED RESOLUTION OF THE SUBJECT
PETITION FOR QUO WARRANTO AND THE UTTER
FAILURE OF THE HRET TO DISQUALIFY
LIMKAICHONG AS MEMBER OF THE HOUSE OF
REPRESENTATIVES DESPITE MANIFEST EVIDENCE
THAT SHE IS NOT A NATURAL-BORN FILIPINO
CITIZEN IS WHIMSICAL, CAPRICIOUS AND
ARBITRARY BECAUSE:

1. THE PETITION FOR QUO WARRANTO DOES NOT


OPERATE AS A COLLATERAL ATTACK ON
THE CITIZENSHIP OF LIMKAICHONG'S
FATHER FOR THE REASON THAT HER
FATHER'S CERTIFICATE OF
NATURALIZATION IS OF NO FORCE AND
EFFECT FROM THE VERY BEGINNING,
HENCE, THERE IS ACTUALLY NOTHING
BEING ATTACKED OR ASSAILED BY THE
SAME.

2. LIMKAICHONG CANNOT DERIVE PHILIPPINE


CITIZENSHIP FROM HER MOTHER GIVEN
THAT AT THE TIME OF HER BIRTH, HER
MOTHER IS NOT ALREADY A FILIPINO
CITIZEN AS A RESULT OF HER MARRIAGE
TO HER FATHER AS PROVIDED FOR UNDER
SECTION 1 (7) OF COMMONWEALTH ACT
NO. 63 IN RELATION TO ARTICLE 2 (1)
CHAPTER II OF THE CHINESE REVISED
NATIONALITY LAW OF FEBRUARY 5, 1959.

3. HAVING THE PLENARY, ABSOLUTE AND


EXCLUSIVE JURISDICTION TO DETERMINE,
AMONG OTHERS, THE QUALIFICATIONS OF
MEMBERS OF THE HOUSE OF
REPRESENTATIVES, THE HRET CAN LOOK
INTO THE ELIGIBILITY OF LIMKAICHONG
EVEN IF, AS AN INCIDENT THERETO, IT
WOULD MEAN LOOKING INTO THE
VALIDITY OF THE CERTIFICATE OF
NATURALIZATION. 8

It should be noted that Limkaichong's term of office as Representative of the First


District of Negros Oriental from June 30, 2007 to June 30, 2010 already expired.
As such, the issue questioning her eligibility to hold office has been rendered
moot and academic by the expiration of her term. Whatever judgment is reached,
the same can no longer have any practical legal effect or, in the nature of things,
can no longer be enforced. 9 Thus, the petition may be dismissed for being moot
and academic. aCASEH

Moreover, there was the conduct of the 2010 elections, a supervening event, in a
sense, has also rendered this case moot and academic. A moot and academic case
is one that ceases to present a justiciable controversy by virtue of supervening
events, so that a declaration thereon would be of no practical value. As a rule,
courts decline jurisdiction over such case, or dismiss it on ground of mootness.
10

Citizenship, being a continuing requirement for Members of the House of


Representatives, however, may be questioned at anytime. 11 For this reason, the
Court deems it appropriate to resolve the petition on the merits. This position
finds support in the rule that courts will decide a question, otherwise moot and
academic, if it is "capable of repetition, yet evading review." 12 The question on
Limkaichong's citizenship is likely to recur if she would run again, as she did
run, for public office, hence, capable of repetition.

In any case, the Court is of the view that the HRET committed no grave abuse of
discretion in finding that Limkaichong is not disqualified to sit as Member of the
House of Representatives.

Vilando's argument, that the quo warranto petition does not operate as a collateral
attack on the citizenship of Limkaichong's father as the certificate of
naturalization is null and void from the beginning, is devoid of merit.

In this petition, Vilando seeks to disqualify Limkaichong on the ground that she
is a Chinese citizen. To prove his point, he makes reference to the alleged nullity
of the grant of naturalization of Limkaichong's father which, however, is not
allowed as it would constitute a collateral attack on the citizenship of the father.
In our jurisdiction, an attack on a person's citizenship may only be done through
a direct action for its nullity. 13

The proper proceeding to assail the citizenship of Limkaichong's father should be


in accordance with Section 18 of Commonwealth Act No. 473. As held in
Limkaichong v. Comelec, 14 thus:

As early as the case of Queto v. Catolico, 15 where the Court


of First Instance judge motu propio and not in the proper
denaturalization proceedings called to court various
grantees of certificates of naturalization (who had already
taken their oaths of allegiance) and cancelled their
certificates of naturalization due to procedural infirmities,
the Court held that:

. . . It may be true that, as alleged by said


respondents, that the proceedings for naturalization
were tainted with certain infirmities, fatal or
otherwise, but that is beside the point in this case.
The jurisdiction of the court to inquire into and rule
upon such infirmities must be properly invoked in
accordance with the procedure laid down by law.
Such procedure is the cancellation of the
naturalization certificate. [Section 1(5),
COMMONWEALTH ACT NO. 63], in the manner
fixed in Section 18 of Commonwealth Act No. 473,
hereinbefore quoted, namely, "upon motion made
in the proper proceedings by the Solicitor General
or his representatives, or by the proper provincial
fiscal." In other words, the initiative must come
from these officers, presumably after previous
investigation in each particular case. DHSCEc

Clearly, under law and jurisprudence, it is the State, through


its representatives designated by statute, that may question
the illegally or invalidly procured certificate of
naturalization in the appropriate denaturalization
proceedings. It is plainly not a matter that may be raised by
private persons in an election case involving the naturalized
citizen's descendant.

Vilando asserts that as an incident in determining the eligibility of Limkaichong,


the HRET, having the plenary, absolute and exclusive jurisdiction to determine
her qualifications, can pass upon the efficacy of the certificate of naturalization.

True, the HRET has jurisdiction over quo warranto petitions, specifically over
cases challenging ineligibility on the ground of lack of citizenship. No less than
the 1987 Constitution vests the HRET the authority to be the sole judge of all
contests relating to the election, returns and qualifications of its Members. This
constitutional power is likewise echoed in the 2004 Rules of the HRET. Rule 14
thereof restates this duty, thus:

Rule 14. Jurisdiction. The Tribunal is the sole judge of all


contests relating to the election, returns, and qualifications of
the Members of the House of Representatives. ICHAaT

Time and again, this Court has acknowledged this sole and exclusive jurisdiction
of the HRET. 16 The power granted to HRET by the Constitution is intended to
be as complete and unimpaired as if it had remained originally in the legislature.
17 Such power is regarded as full, clear and complete and excludes the exercise
of any authority on the part of this Court that would in any wise restrict it or
curtail it or even affect the same. 18

Such power of the HRET, no matter how complete and exclusive, does not carry
with it the authority to delve into the legality of the judgment of naturalization in
the pursuit of disqualifying Limkaichong. To rule otherwise would operate as a
collateral attack on the citizenship of the father which, as already stated, is not
permissible. The HRET properly resolved the issue with the following
ratiocination:

. . . We note that Jocelyn C. Limkaichong, not the father


Julio Ong Sy, is the respondent in the present case. The
Tribunal may not dwell on deliberating on the validity of
naturalization of the father if only to pursue the end of
declaring the daughter as disqualified to hold office.

Unfortunately, much as the Tribunal wants to resolve said


issue, it cannot do so because its jurisdiction is limited to the
qualification of the proclaimed respondent Limkaichong,
being a sitting Member of the Congress.

Evidently, there is no basis to oblige the Tribunal to reopen


the naturalization proceedings for a determination of the
citizenship of the ascendant of respondent. A petition for quo
warranto is not a means to achieve that purpose. To rule on
this issue in this quo warranto proceeding will not only be a
clear grave abuse of discretion amounting to a lack or excess
of jurisdiction, but also a blatant violation of due process on
the part of the persons who will be affected or who are not
parties in this case. 19

Thus, the Office of the Solicitor General (OSG) wrote that "a collateral attack
against a judgment is generally not allowed, unless the judgment is void upon its
face or its nullity is apparent by virtue of its own recitals." 20 Under the present
situation, there is no evidence to show that the judgment is void on its face:

As to the Order of the CFI, Negros Oriental dated July 9,


1957 and September 21, 1959 that were offered in evidence,
far from proving an invalid oath of allegiance and certificate
of naturalization, being public records, they do in fact
constitute legitimate source of authority for the conferment
of status of the father of respondent as naturalized Filipino.
Absent any contrary declaration by a competent court, the
Tribunal presumes the validity of the CFI Orders of July 9,
1957 and September 21, 1959, and the resulting
documentations of Julio Sy's acquisition of Filipino
citizenship by naturalization as valid and of legal effect. The
oath of allegiance and certificate of naturalization are
themselves proofs of the actual conferment of naturalization.
21

The HRET, therefore, correctly relied on the presumption of validity of the July 9,
1957 and September 21, 1959 Orders of the Court of First Instance (CFI) Negros
Oriental, which granted the petition and declared Julio Sy a naturalized Filipino
absent any evidence to the contrary. THacES

Records disclose that Limkaichong was born in Dumaguete City on November 9,


1959. The governing law is the citizenship provision of the 1935 Constitution, the
pertinent portion thereof, reads:

Article IV

Section 1. The following are citizens of the Philippines:

xxx xxx xxx

(3) Those whose fathers are citizens of the Philippines.

(4) Those whose mothers are citizens of the Philippines and,


upon reaching the age of majority, elect Philippine
citizenship.

xxx xxx xxx

Indubitably, with Limkaichong's father having been conferred the status as a


naturalized Filipino, it follows that she is a Filipino citizen born to a Filipino
father.

Even on the assumption that the naturalization proceedings and the subsequent
issuance of certificate of naturalization were invalid, Limkaichong can still be
considered a natural-born Filipino citizen having been born to a Filipino mother
and having impliedly elected Filipino citizenship when she reached majority age.
The HRET is, thus, correct in declaring that Limkaichong is a natural-born
Filipino citizen:

Respondent Limkaichong falls under the category of those


persons whose fathers are citizens of the Philippines. (Section
1(3), Article IV, 1935 Constitution) It matters not whether the
father acquired citizenship by birth or by naturalization.
Therefore, following the line of transmission through the
father under the 1935 Constitution, the respondent has
satisfactorily complied with the requirement for candidacy
and for holding office, as she is a natural-born Filipino
citizen.

Likewise, the citizenship of respondent Limkaichong finds


support in paragraph 4, Section 1, Article IV of the 1935
Constitution.

Having failed to prove that Anesia Sy lost her Philippine


citizenship, respondent can be considered a natural born
citizen of the Philippines, having been born to a mother who
was a natural-born Filipina at the time of marriage, and
because respondent was able to elect citizenship informally
when she reached majority age. Respondent participated in
the barangay elections as a young voter in 1976,
accomplished voter's affidavit as of 1984, and ran as a
candidate and was elected as Mayor of La Libertad, Negros
Oriental in 2004. These are positive acts of election of
Philippine citizenship. The case of In re: Florencio Mallare,
elucidates how election of citizenship is manifested in
actions indubitably showing a definite choice. We note that
respondent had informally elected citizenship after January
17, 1973 during which time the 1973 Constitution considered
as citizens of the Philippines all those who elect citizenship
in accordance with the 1935 Constitution. The 1987
Constitution provisions, i.e., Section 1(3), Article [IV] and
Section 2, Article [IV] were enacted to correct the anomalous
situation where one born of a Filipino father and an alien
mother was automatically accorded the status of a natural-
born citizen, while one born of a Filipino mother and an
alien father would still have to elect Philippine citizenship
yet if so elected, was not conferred natural-born status. It
was the intention of the framers of the 1987 Constitution to
treat equally those born before the 1973 Constitution and
who elected Philippine citizenship upon reaching the age of
majority either before or after the effectivity of the 1973
Constitution. Thus, those who would elect Philippine
citizenship under par. 3, Section 1, Article [IV] of the 1987
Constitution are now, under Section 2, Article [IV] thereof
also natural-born Filipinos. The following are the pertinent
provisions of the 1987 Constitution: ADCEaH

Article IV
Section 1. The following are citizens of the
Philippines:

(1) Those who are citizens of the


Philippines at the time of the adoption of
this Constitution;

(2) Those whose fathers or mothers are


citizens of the Philippines;

(3) Those born before January 17, 1973, of


Filipino mothers, who elect Philippine
citizenship upon reaching the age of
majority; and

(4) Those who are naturalized in


accordance with law.

Section 2. Natural-born citizens are those who are


citizens of the Philippines from birth without
having to perform any act to acquire or perfect their
Philippine citizenship. Those who elect Philippine
citizenship in accordance with paragraph (3),
Section 1 hereof shall be deemed natural-born
citizens. 22

Vilando's assertion that Limkaichong cannot derive Philippine citizenship from


her mother because the latter became a Chinese citizen when she married Julio
Sy, as provided for under Section 1 (7) of COMMONWEALTH ACT NO. 63 in
relation to Article 2 (1) Chapter II of the Chinese Revised Nationality Law of
February 5, 1959, must likewise fail.

As aptly pointed out by the HRET, Vilando was not able to offer in evidence a
duly certified true copy of the alleged Chinese Revised Law of Nationality to
prove that Limkaichong's mother indeed lost her Philippine citizenship. Verily,
Vilando failed to establish his case through competent and admissible evidence
to warrant a reversal of the HRET ruling. cAHDES

Also, an application for an alien certificate of registration (ACR) is not an


indubitable proof of forfeiture of Philippine citizenship. It is well to quote the
ruling of the HRET on this matter, to wit:

An alien certificate of registration is issued to an individual


who declares that he is not a Filipino citizen. It is obtained
only when applied for. It is in a form prescribed by the
agency and contains a declaration by the applicant of his or
her personal information, a photograph, and physical details
that identify the applicant. It bears no indication of basis for
foreign citizenship, nor proof of change to foreign
citizenship. It certifies that a person named therein has
applied for registration and fingerprinting and that such
person was issued a certificate of registration under the
Alien Registration Act of 1950 or other special law. It is only
evidence of registration.

Unlike birth certificates registered pursuant to Act 3753 (The


Civil Register Law), and much less like other public records
referred to under Section 23, Rule 132, an alien certificate of
registration is not a public document that would be prima
facie evidence of the truth of facts contained therein. On its
face, it only certifies that the applicant had submitted
himself or herself to registration. Therefore, there is no
presumption of alienage of the declarant. This is especially
so where the declarant has in fact been a natural-born
Filipino all along and never lost his or her status as such. 23

Thus, obtaining an ACR by Limkaichong's mother was not tantamount to a


repudiation of her original citizenship. Neither did it result in an acquisition of
alien citizenship. In a string of decisions, this Court has consistently held that an
application for, and the holding of, an alien certificate of registration is not an act
constituting renunciation of Philippine citizenship. 24 For renunciation to
effectively result in the loss of citizenship, the same must be express. 25 Such
express renunciation is lacking in this case. aIEDAC

Accordingly, Limkaichong's mother, being a Filipino citizen, can transmit her


citizenship to her daughter.

Well-settled is the principle that the judgments of the HRET are beyond judicial
interference. The only instance where this Court may intervene in the exercise of
its so-called extraordinary jurisdiction is upon a determination that the decision
or resolution of the HRET was rendered without or in excess of its jurisdiction, or
with grave abuse of discretion or upon a clear showing of such arbitrary and
improvident use of its power to constitute a denial of due process of law, or upon
a demonstration of a very clear unmitigated error, manifestly constituting such
grave abuse of discretion that there has to be a remedy for such abuse. 26 In this
case, there is no showing of any such arbitrariness or improvidence. The HRET
acted well within the sphere of its power when it dismissed the quo warranto
petition.

In fine, this Court finds sufficient basis to sustain the ruling of the HRET which
resolved the issue of citizenship in favor of Limkaichong.
WHEREFORE, the petition is DENIED. Accordingly, the Court affirms the
March 24, 2010 Decision of the HRET declaring that Limkaichong is not
disqualified as Member of the House of Representatives representing the First
District, Negros Oriental. TEacSA

SO ORDERED.

||| (Vilando v. HRET, G.R. Nos. 192147 & 192149, August 23, 2011)

EN BANC

[G.R. No. 191560. March 29, 2011.]

HON. LUIS MARIO M. GENERAL, Commissioner,


National Police Commission, petitioner, vs. HON.
ALEJANDRO S. URRO, in his capacity as the new
appointee vice herein petitioner HON. LUIS MARIO M.
GENERAL, National Police Commission, respondent.

HON. LUIS MARIO M. GENERAL, Commissioner,


National Police Commission, petitioner, vs. President
GLORIA MACAPAGAL-ARROYO, thru Executive
Secretary LEANDRO MENDOZA, in Her capacity as the
appointing power, HON. RONALDO V. PUNO, in His
capacity as Secretary of the Department of Interior and
Local Government and as Ex-Officio Chairman of the
National Police Commission and HON. EDUARDO U.
ESCUETA, ALEJANDRO S. URRO, and HON.
CONSTANCIA P. DE GUZMAN as the midnight
appointees, respondents.

DECISION

BRION, J p:

Before the Court are the Consolidated Petitions for Quo Warranto, 1 and Certiorari
and/or Prohibition 2 with urgent prayer for the issuance of a temporary
restraining order (TRO) and/or preliminary injunction filed by Atty. Luis Mario
General (petitioner). The petitioner seeks to declare unconstitutional the
appointments of Alejandro S. Urro, Constancia P. de Guzman and Eduardo U.
Escueta (collectively, the respondents) as Commissioners of the National Police
Commission (NAPOLCOM), and to prohibit then Executive Secretary Leandro
Mendoza and Department of Interior and Local Government (DILG) Secretary
Ronaldo V. Puno from enforcing the respondents' oath of office. Particularly, the
petitioner asks that respondent Urro be ousted as NAPOLCOM Commissioner
and he be allowed to continue in office.

THE ANTECEDENTS
On September 20, 2004, then President Gloria Macapagal-Arroyo (PGMA)
appointed Imelda C. Roces (Roces) as acting Commissioner of the NAPOLCOM,
representing the civilian sector. 3 On January 25, 2006, PGMA reappointed Roces
as acting NAPOLCOM Commissioner. 4 When Roces died in September 2007,
PGMA appointed the petitioner on July 21, 2008 5 as acting NAPOLCOM
Commissioner in place of Roces. On the same date, PGMA appointed Eduardo
U. Escueta (Escueta) as acting NAPOLCOM Commissioner and designated him as
NAPOLCOM Vice Chairman. 6

Later, PGMA appointed Alejandro S. Urro (Urro) in place of the petitioner,


Constancia P. de Guzman in place of Celia Leones, and Escueta as permanent
NAPOLCOM Commissioners. Urro's appointment paper is dated March 5, 2010;
while the appointment papers of De Guzman and Escueta are both dated
March 8, 2010. 7 On March 9, 2010, Escueta took his oath of office before Makati
Regional Trial Court Judge Alberico Umali. 8

In a letter dated March 19, 2010, DILG Head Executive Assistant/Chief-of-Staff


Pascual V. Veron Cruz, Jr. issued separate congratulatory letters to the
respondents. The letter uniformly reads.

You have just been appointed COMMISSIONER . . .


National Police Commission. . . . Attached is your
appointment paper duly signed by Her Excellency, President
Macapagal Arroyo. 9

After being furnished a copy of the congratulatory letters on March 22, 2010, 10
the petitioner filed the present petition questioning the validity of the
respondents' appointments mainly on the ground that it violates the
constitutional prohibition against midnight appointments. 11

On March 25, 2010 and April 27, 2010, respondents Urro and de Guzman took
their oath of office as NAPOLCOM Commissioners before DILG Secretary Puno
and Sandiganbayan Associate Justice Jose R. Hernandez, respectively. 12 DTEcSa

On July 30, 2010, the newly elected President of the Republic of the Philippines,
His Excellency Benigno S. Aquino III, issued Executive Order No. 2 (E.O. No. 2)
"Recalling, Withdrawing, and Revoking Appointments Issued by the Previous
Administration in Violation of the Constitutional Ban on Midnight
Appointments." The salient portions of E.O. No. 2 read:

SECTION 1. Midnight Appointments Defined. The following


appointments made by the former President and other
appointing authorities in departments, agencies, offices, and
instrumentalities, including government-owned or
controlled corporations, shall be considered as midnight
appointments:

(a) Those made on or after March 11, 2010, including all


appointments bearing dates prior to March 11, 2010 where
the appointee has accepted, or taken his oath, or assumed
public office on or after March 11, 2010, except temporary
appointments in the executive positions when continued
vacancies will prejudice public service or endanger public
safety as may be determined by the appointing authority.

(b) Those made prior to March 11, 2010, but to take effect
after said date or appointments to office that would be
vacant only after March 11, 2010.

(c) Appointments and promotions made during the period


of 45 days prior to the May 10, 2010 elections in violation of
Section 261 of the Omnibus Election Code.

SECTION 2. Recall, Withdraw, and Revocation of Midnight


Appointments. Midnight appointments, as defined under
Section 1, are hereby recalled, withdrawn, and revoked.
The positions covered or otherwise affected are hereby
declared vacant. (Emphasis supplied.)

THE PETITION
The petitioner claims that Roces was supposed to serve a full term of six years
counted from the date of her appointment in October (should be September)
2004. 13 Since she failed to finish her six-year term, then the petitioner is entitled
to serve this unexpired portion or until October (should be September) 2010. 14
The petitioner invokes Republic Act (R.A.) No. 6975 15 (otherwise known as the
Department of the Interior and Local Government Act of 1990) which requires that
vacancies in the NAPOLCOM "shall be filled up for the unexpired term only." 16
Because of the mandatory word "shall," the petitioner concludes that the
appointment issued to him was really a "regular" appointment, notwithstanding
what appears in his appointment paper. As a regular appointee, the petitioner argues
that he cannot be removed from office except for cause.
The petitioner alternatively submits that even if his appointment were
temporary, a temporary appointment does not give the President the license to
abuse a public official simply because he lacks security of tenure. 17 He asserts
that the validity of his termination from office depends on the validity of the
appointment of the person intended to replace him. He explains that until a
presidential appointment is "officially released," there is no "appointment" to
speak of. Since the appointment paper of respondent Urro, while bearing a date
prior to the effectivity of the constitutional ban on appointments, 18 was
officially released (per the congratulatory letter dated March 19, 2010 issued to
Urro) when the appointment ban was already in effect, then the petitioner's
appointment, though temporary in nature, should remain effective as no new
and valid appointment was effectively made.

The petitioner assails the validity of the appointments of respondents De


Guzman and Escueta, claiming that they were also made in violation of the
constitutional ban on appointments. HDIaST

THE COMMENTS OF THE RESPONDENTS and THE OFFICE OF THE


SOLICITOR GENERAL (OSG)
Prefatorily, the respondents characterize Escueta's inclusion in the present
petition as an error since his appointment, acceptance and assumption of office
all took place before the constitutional ban on appointments started. Thus, there
is no "case or controversy" as to Escueta.

The respondents posit that the petitioner is not a real party-in-interest to file a
petition for quo warranto since he was merely appointed in an acting capacity and
could be validly removed from office at anytime.

The respondents likewise counter that what the ban on midnight appointments
under Section 15, Article VII of the Constitution prohibits is only the making of an
appointment by the President sixty (60) days before the next presidential
elections and until his term expires; it does not prohibit the acceptance by the
appointee of his appointment within the same prohibited period. 19 The
respondents claim that "appointment" which is a presidential act, must be
distinguished from the "acceptance" or "rejection" of the appointment, which is
the act of the appointee. Section 15, Article VII of the Constitution is directed
only against the President and his act of appointment, and is not concerned with
the act/s of the appointee. Since the respondents were appointed (per the date
appearing in their appointment papers) before the constitutional ban took effect,
then their appointments are valid.

The respondents assert that their appointments cannot be considered as


midnight appointments under the Dominador R. Aytona v. Andres V. Castillo, et al.
20 ruling, as restated in In Re: Appointments dated March 30, 1998 of Hon. Mateo A.
Valenzuela, et al. 21 and Arturo M. de Castro v. Judicial and Bar Council, et al., 22
since the petitioner failed to substantiate his claim that their appointments were
made only "for the purpose of influencing the Presidential elections," or for
"partisan reasons." 23

The respondents pray for the issuance of a TRO to stop the implementation of
E.O. No. 2, and for the consolidation of this case with the pending cases of
Tamondong v. Executive Secretary 24 and De Castro v. Office of the President 25
which similarly assail the validity of E.O. No. 2.

On the other hand, while the OSG considers the respondents' appointments
within the scope of "midnight appointments" as defined by E.O. No. 2, the OSG
nonetheless submits that the petitioner is not entitled to the remedy of quo
warranto in view of the nature of his appointment. The OSG claims that since an
appointment in an acting capacity cannot exceed one year, the petitioner's
appointment ipso facto expired on July 21, 2009. 26

PETITIONER'S REPLY
The petitioner argues in reply that he is the legally subsisting commissioner until
another qualified commissioner is validly appointed by the new President to
replace him. 27

The petitioner likewise claims that the respondents appeared to have skirted the
element of issuance of an appointment in considering whether an appointment is
made. The petitioner asserts that to constitute an appointment, the President's act
of affixing his signature must be coupled with the physical issuance of the
appointment to the appointee i.e., the appointment paper is officially issued in
favor of the appointee through the President's proper Cabinet Secretary. The
making of an appointment is different from its issuance since prior to the official
issuance of an appointment, the appointing authority enjoys the prerogative to
change his mind. In the present case, the respondents' appointment papers were
officially issued and communicated to them only on March 19, 2010, well within
the period of the constitutional ban, as shown by the congratulatory letters
individually issued to them.

Given this premise, the petitioner claims that he correctly impleaded Escueta in
this case since his appointment also violates the Constitution. The petitioner adds
that Escueta was appointed on July 21, 2008, although then as acting
NAPOLCOM Commissioner. By permanently appointing him as NAPOLCOM
Commissioner, he stands to be in office for more than six years, in violation of
R.A. No. 6975. 28 cETDIA

The petitioner argues that even granting that the President can extend
appointments in an acting capacity to NAPOLCOM Commissioners, it may not
be done by "successive appointments" in the same capacity without violating
R.A. No. 6975, as amended, which provides a fixed and staggered term of office
for NAPOLCOM Commissioners. 29

THE COURT'S RULING


We dismiss the petition for lack of merit.

When questions of constitutional significance are raised, the Court can exercise
its power of judicial review only if the following requisites are present: (1) the
existence of an actual and appropriate case; (2) the existence of personal and
substantial interest on the part of the party raising the constitutional question; (3)
recourse to judicial review is made at the earliest opportunity; and (4) the
constitutional question is the lis mota of the case. 30

Both parties dwelt lengthily on the issue of constitutionality of the respondents'


appointments in light of E.O. No. 2 and the subsequent filing before the Court of
several petitions questioning this Executive Order. The parties, however, appear
to have overlooked the basic principle in constitutional adjudication that enjoins
the Court from passing upon a constitutional question, although properly
presented, if the case can be disposed of on some other ground. 31 In
constitutional law terms, this means that we ought to refrain from resolving any
constitutional issue "unless the constitutional question is the lis mota of the case."

Lis mota literally means "the cause of the suit or action." This last requisite of
judicial review is simply an offshoot of the presumption of validity accorded the
executive and legislative acts of our co-equal branches of the government.
Ultimately, it is rooted in the principle of separation of powers. Given the
presumed validity of an executive act, the petitioner who claims otherwise has
the burden of showing first that the case cannot be resolved unless the
constitutional question he raised is determined by the Court. 32

In the present case, the constitutionality of the respondents' appointments is not


the lis mota of the case. From the submitted pleadings, what is decisive is the
determination of whether the petitioner has a cause of action to institute and
maintain this present petition a quo warranto against respondent Urro. If the
petitioner fails to establish his cause of action for quo warranto, a discussion of the
constitutionality of the appointments of the respondents is rendered completely
unnecessary. The inclusion of the grounds for certiorari and/or prohibition does
not alter the essential character of the petitioner's action since he does not even
allege that he has a personal and substantial interest in raising the constitutional
issue insofar as the other respondents are concerned.

The resolution of whether a cause of action exists, in turn, hinges on the nature of
the petitioner's appointment. We frame the issues under the following questions:

1. What is the nature of the petitioner's appointment as


acting NAPOLCOM Commissioner?

2. Does the petitioner have the clear right to be reinstated to


his former position and to oust respondent Urro as
NAPOLCOM Commissioner?

I. Nature of petitioner's appointment


a. A staggered term of office is not inconsistent with an
acting appointment
The petitioner asserts that contrary to what appears in his appointment paper,
the appointment extended to him was really a regular appointment; thus, he
cannot be removed from office except for cause. The petitioner argues that the
appointment of an acting NAPOLCOM Commissioner or, at the very least, the
"successive appointments" of NAPOLCOM Commissioners in an acting capacity
contravenes the safeguards that the law R.A. No. 6975 33 intends through
the staggered term of office of NAPOLCOM Commissioners. TSIDEa

Notably, the petitioner does not expressly claim that he was issued a permanent
appointment; rather, he claims that his appointment is actually a regular
appointment since R.A. No. 6975 does not allegedly allow an appointment of a
NAPOLCOM Commissioner in an acting capacity.

At the outset, the petitioner's use of terms needs some clarification.


Appointments may be classified into two: first, as to its nature; and second, as to
the manner in which it is made. 34

Under the first classification, appointments can either be permanent or


temporary (acting). A basic distinction is that a permanent appointee can only be
removed from office for cause; whereas a temporary appointee can be removed
even without hearing or cause. 35 Under the second classification, an
appointment can either be regular or ad interim. A regular appointment is one
made while Congress is in session, while an ad interim appointment is one issued
during the recess of Congress. In strict terms, presidential appointments that
require no confirmation from the Commission on Appointments 36 cannot be
properly characterized as either a regular or an ad interim appointment.

In this light, what the petitioner may have meant is a permanent (as contrasted to
a temporary or acting) appointment to the office of a NAPOLCOM
Commissioner, at least for the duration of the unexpired portion of his
predecessor (Roces).

Generally, the power to appoint vested in the President includes the power to
make temporary appointments, unless he is otherwise specifically prohibited
by the Constitution or by the law, or where an acting appointment is
repugnant to the nature of the office involved. 37 The President's power to issue
an acting appointment is particularly authorized by the Administrative Code of
1987 (Executive Order No. 292).

CHAPTER 5

POWER OF APPOINTMENT

Section 16. Power of Appointment. The President shall


exercise the power to appoint such officials as provided for
in the Constitution and laws.

Section 17. Power to Issue Temporary Designation.

(1) The President may temporarily designate an officer


already in the government service or any other
competent person to perform the functions of an
office in the executive branch, appointment to
which is vested in him by law, when: (a) the officer
regularly appointed to the office is unable to
perform his duties by reason of illness, absence or
any other cause; or (b) there exists a vacancy;

(2) . . .

(3) In no case shall a temporary designation exceed one (1)


year.

The purpose of an acting or temporary appointment is to prevent a hiatus in the


discharge of official functions by authorizing a person to discharge those
functions pending the selection of a permanent or another appointee. An acting
appointee accepts the position on the condition that he shall surrender the office
once he is called to do so by the appointing authority. Therefore, his term of
office is not fixed but endures at the pleasure of the appointing authority. His
separation from the service does not import removal but merely the expiration of
his term a mode of termination of official relations that falls outside the
coverage of the constitutional provision on security of tenure 38 since no removal
from office is involved.

The power to appoint is essentially executive in nature 39 and the limitations on


or qualifications in the exercise of this power are strictly construed. 40 In the
present case, the petitioner posits that the law itself, R.A. No. 6975, prohibits the
appointment of a NAPOLCOM Commissioner in an acting capacity by
staggering his term of office. R.A. No. 6975, on the term of office, states: DCESaI

Section 16. Term of Office. The four (4) regular and full-
time Commissioners shall be appointed by the President
upon the recommendation of the Secretary. Of the first four
(4) commissioners to be appointed, two (2) commissioners
shall serve for six (6) years and the two (2) other
commissioners for four (4) years. All subsequent
appointments shall be for a period of six (6) years each,
without reappointment or extension.

Generally, the purpose for staggering the term of office is to minimize the
appointing authority's opportunity to appoint a majority of the members of a
collegial body. It also intended to ensure the continuity of the body and its
policies. 41 A staggered term of office, however, is not a statutory prohibition,
direct or indirect, against the issuance of acting or temporary appointment. It
does not negate the authority to issue acting or temporary appointments that the
Administrative Code grants.

Ramon P. Binamira v. Peter D. Garrucho, Jr., 42 involving the Philippine Tourism


Authority (PTA), is an example of how this Court has recognized the validity of
temporary appointments in vacancies in offices whose holders are appointed on
staggered basis. Under Presidential Decree (P.D.) No. 189, 43 (the charter of the
PTA, as amended by P.D. No. 564 44 and P.D. No. 1400), 45 the members of the
PTA's governing body are all presidential appointees whose terms of office are
also staggered. 46 This, notwithstanding, the Court sustained the temporary
character of the appointment extended by the President in favor of the PTA
General Manager, even if the law 47 also fixes his term of office at six years
unless sooner removed for cause.

Interestingly, even a staggered term of office does not ensure that at no instance
will the appointing authority appoint all the members of a body whose members
are appointed on staggered basis.

The post-war predecessor of the NAPOLCOM was the Police Commission


created under R.A. No. 4864. 48 Pursuant to the 1987 Constitutional provision
mandating the creation of one national civilian police force, 49 Congress enacted
R.A. No. 6975 and created the NAPOLCOM to exercise, inter alia, "administrative
control over the Philippine National Police." Later, Congress enacted R.A. No.
8551 which substantially retained the organizational structure, powers and
functions of the NAPOLCOM. 50 Under these laws, the President has appointed
the members of the Commission whose terms of office are staggered.

Under Section 16 of R.A. No. 6975, the NAPOLCOM Commissioners are all given
a fixed term of six years (except the two of the first appointees who hold office
only for four years). By staggering their terms of office however, the four regular
commissioners would not vacate their offices at the same time since a vacancy
will occur every two years.
Under the NAPOLCOM set up, the law does not appear to have been designed
to attain the purpose of preventing the same President from appointing all the
NAPOLCOM Commissioners by staggering their terms of office. R.A. No. 6975
took effect on January 1, 1991. In the usual course, the term of office of the first
two regular commissioners would have expired in 1997, while the term of the
other two commissioners would have expired in 1995. Since the term of the
President elected in the first national elections under the 1987 Constitution
expired on June 30, 1998, then, theoretically, the sitting President for the 1992-
1998 term could appoint all the succeeding four regular NAPOLCOM
Commissioners. The next President, on the other hand, whose term ended in
2004, would have appointed the next succeeding Commissioners in 2001 and
2003.

It is noteworthy, too, that while the Court nullified the attempt of Congress to
consider the terms of office of the then NAPOLCOM Commissioners as
automatically expired on the ground that there was no bona fide reorganization of
the NAPOLCOM, 51 a provision on the staggering of terms of office is evidently
absent in R.A. No. 8551 the amendatory law to R.A. No. 6975. Section 7 of R.A.
No. 8551 reads:

Section 7. Section 16 of Republic Act No. 6975 is hereby


amended to read as follows:

"SEC. 16. Term of Office. The four (4) regular and full-time
Commissioners shall be appointed by the President for a
term of six (6) years without re-appointment or extension."

Thus, as the law now stands, the petitioner's claim that the appointment of an
acting NAPOLCOM Commissioner is not allowed based on the staggering of
terms of office does not even have any statutory basis.

Given the wide latitude of the President's appointing authority (and the strict
construction against any limitation on or qualification of this power), the
prohibition on the President from issuing an acting appointment must either be
specific, or there must be a clear repugnancy between the nature of the office and
the temporary appointment. No such limitation on the President's appointing
power appears to be clearly deducible from the text of R.A. No. 6975 in the
manner we ruled in Nacionalista Party v. Bautista. 52 In that case, we nullified the
acting appointment issued by the President to fill the office of a Commissioner of
the Commission on Elections (COMELEC) on the ground that it would undermine
the independence of the COMELEC. We ruled that given the specific nature of the
functions performed by COMELEC Commissioners, only a permanent
appointment to the office of a COMELEC Commissioner can be made.

Under the Constitution, the State is mandated to establish and maintain a police
force to be administered and controlled by a national police commission.
Pursuant to this constitutional mandate, the Congress enacted R.A. No. 6975,
creating the NAPOLCOM with the following powers and functions: 53 aDcETC

Section 14. Powers and Functions of the Commission. The


Commission shall exercise the following powers and
functions:

(a) Exercise administrative control and operational


supervision over the Philippine National Police which shall
mean the power to:

xxx xxx xxx

b) Advise the President on all matters involving police


functions and administration;

c) Render to the President and to the Congress an annual


report on its activities and accomplishments during the
thirty (30) days after the end of the calendar year, which
shall include an appraisal of the conditions obtaining in the
organization and administration of police agencies in the
municipalities, cities and provinces throughout the country,
and recommendations for appropriate remedial legislation;

d) Recommend to the President, through the Secretary,


within sixty (60) days before the commencement of each
calendar year, a crime prevention program; and

e) Perform such other functions necessary to carry out the


provisions of this Act and as the President may direct.
[Emphasis added.]

We find nothing in this enumeration of functions of the members of the


NAPOLCOM that would be subverted or defeated by the President's
appointment of an acting NAPOLCOM Commissioner pending the selection and
qualification of a permanent appointee. Viewed as an institution, a survey of
pertinent laws and executive issuances 54 will show that the NAPOLCOM has
always remained as an office under or within the Executive Department. 55
Clearly, there is nothing repugnant between the petitioner's acting appointment,
on one hand, and the nature of the functions of the NAPOLCOM Commissioners
or of the NAPOLCOM as an institution, on the other.

b. R.A. No. 6975 does not prohibit the appointment of an acting


NAPOLCOM Commissioner in filling up vacancies in
the NAPOLCOM
The petitioner next cites Section 18 of R.A. No. 6975 to support his claim that the
appointment of a NAPOLCOM Commissioner to fill a vacancy due to the
permanent incapacity of a regular Commissioner can only be permanent and not
temporary:

Section 18. Removal from Office. The members of the


Commission may be removed from office for cause. All
vacancies in the Commission, except through expiration of
term, shall be filled up for the unexpired term only:
Provided, That any person who shall be appointed in this
case shall be eligible for regular appointment for another full
term.

Nothing in the cited provision supports the petitioner's conclusion. By using the
word "only" in Section 18 of R.A. No. 6975, the law's obvious intent is only to
prevent the new appointee from serving beyond the term of office of the original
appointee. It does not prohibit the new appointee from serving less than the
unexpired portion of the term as in the case of a temporary appointment.

While the Court previously inquired into the true nature of a supposed acting
appointment for the purpose of determining whether the appointing power is
abusing the principle of temporary appointment, 56 the petitioner has not pointed
to any circumstance/s which would warrant a second look into and the
invalidation of the temporary nature of his appointment. 57

Even the petitioner's citation of Justice Puno's 58 dissenting opinion in Teodoro B.


Pangilinan v. Guillermo T. Maglaya, etc. 59 is inapt. Like the petitioner, Pangilinan
was merely appointed in an acting capacity and unarguably enjoyed no security
of tenure. He was relieved from the service after exposing certain anomalies
involving his superiors. Upon hearing his plea for reinstatement, the Court
unanimously observed that Pangilinan's relief was a punitive response from his
superiors. The point of disagreement, however, is whether Pangilinan's lack of
security of tenure deprives him of the right to seek reinstatement. Considering
that the law (Administrative Code of 1987) allows temporary appointments only
for a period not exceeding twelve (12) months, the majority considered
Pangilinan to be without any judicial remedy since at the time of his separation,
he no longer had any right to the office. Justice Puno dissented, arguing that
Pangilinan's superiors' abuse of his temporary appointment furnishes the basis
for the relief he seeks. EcDSHT

In the present case, the petitioner does not even allege that his separation from
the office amounted to an abuse of his temporary appointment that would entitle
him to the incidental benefit of reinstatement. 60 As we did in Pangilinan, 61 we
point out that the petitioner's appointment as Acting Commissioner was time-
limited. His appointment ipso facto expired on July 21, 2009 when it was not
renewed either in an acting or a permanent capacity. With an expired
appointment, he technically now occupies no position on which to anchor his quo
warranto petition.

c. The petitioner is estopped from claiming that he


was permanently appointed
The petitioner's appointment paper is dated July 21, 2008. From that time until he
was apprised on March 22, 2010 of the appointment of respondent Urro, the
petitioner faithfully discharged the functions of his office without expressing any
misgivings on the character of his appointment. However, when called to
relinquish his office in favor of respondent Urro, the petitioner was quick on his
feet to refute what appeared in his appointment papers.

Under these facts, the additional circumstance of estoppel clearly militates


against the petitioner. A person who accepts an appointment in an acting
capacity, extended and received without any protest or reservation, and who acts
by virtue of that appointment for a considerable time, cannot later on be heard to
say that the appointment was really a permanent one so that he could not be
removed except for cause. 62

II. An acting appointee has no cause of action for quo warranto against
the new appointee
The Rules of Court requires that an ordinary civil action must be based on a cause
of action, 63 which is defined as an act or omission of one party in violation of
the legal right of the other which causes the latter injury. While a quo warranto is
a special civil action, the existence of a cause of action is not any less required
since both special and ordinary civil actions are governed by the rules on
ordinary civil actions subject only to the rules prescribed specifically for a
particular special civil action. 64

Quo warranto is a remedy to try disputes with respect to the title to a public
office. Generally, quo warranto proceedings are commenced by the Government
as the proper party-plaintiff. However, under Section 5, Rule 66 of the Rules of
Court, an individual may commence such action if he claims to be entitled to the
public office allegedly usurped by another. We stress that the person instituting
the quo warranto proceedings in his own behalf must show that he is entitled to
the office in dispute; otherwise, the action may be dismissed at any stage. 65
Emphatically, Section 6, Rule 66 of the same Rules requires the petitioner to state
in the petition his right to the public office and the respondent's unlawful
possession of the disputed position.

As early as 1905, 66 the Court already held that for a petition for quo warranto to
be successful, the suing private individual must show a clear right to the
contested office. 67 His failure to establish this right warrants the dismissal of the
suit for lack of cause of action; it is not even necessary to pass upon the right of
the defendant who, by virtue of his appointment, continues in the undisturbed
possession of his office. 68

Since the petitioner merely holds an acting appointment (and an expired one at
that), he clearly does not have a cause of action to maintain the present petition.
69 The essence of an acting appointment is its temporariness and its consequent
revocability at any time by the appointing authority. 70 The petitioner in a quo
warranto proceeding who seeks reinstatement to an office, on the ground of
usurpation or illegal deprivation, must prove his clear right 71 to the office for
his suit to succeed; otherwise, his petition must fail.

From this perspective, the petitioner must first clearly establish his own right to
the disputed office as a condition precedent to the consideration of the
unconstitutionality of the respondents' appointments. The petitioner's failure in
this regard renders a ruling on the constitutional issues raised completely
unnecessary. Neither do we need to pass upon the validity of the respondents'
appointment. These latter issues can be determined more appropriately in a
proper case. IEHSDA

WHEREFORE, the petition is DISMISSED.

||| (General v. Urro, G.R. No. 191560, March 29, 2011)

THIRD DIVISION

[G.R. No. 168053. September 21, 2011.]

REBECCA T. ARQUERO, petitioner, vs. COURT OF


APPEALS (Former Thirteenth Division); EDILBERTO C.
DE JESUS, in his capacity as Secretary of the Department
of Education; DR. PARALUMAN GIRON, Director,
Regional Office IV-MIMAROPA, Department of
Education; DR. EDUARDO LOPEZ, Schools Division
Superintendent, Puerto Princesa City; and NORMA
BRILLANTES, respondents.

DECISION

PERALTA, J p:
This is a petition for review on certiorari under Rule 45 of the Rules of Court filed
by petitioner Rebecca T. Arquero against public respondents Edilberto C. De
Jesus (De Jesus), in his capacity as Secretary of Education, Dr. Paraluman Giron
(Dr. Giron), Department of Education (DepEd) Director, Regional Office IV-
MIMAROPA, Dr. Eduardo Lopez (Lopez), Schools Division Superintendent,
Puerto Princesa City, and private respondent Norma Brillantes. Petitioner assails
the Court of Appeals (CA) Decision 1 dated December 15, 2004 and Resolution 2
dated May 3, 2005 in CA-G.R. SP No. 85899. The assailed decision reversed and
set aside the Judgment by Default 3 of the Regional Trial Court (RTC), Branch 95,
Puerto Princesa City, while the assailed resolution denied petitioner's motion for
reconsideration.

The facts of the case are as follows:

On October 13, 1989, Congress approved Republic Act (RA) No. 6765, or "An Act
Integrating Certain High Schools in the City of Puerto Princesa and in the Province of
Palawan with the Palawan National School and Appropriating Funds Therefor." Under
the law, the following schools were converted into national schools and
integrated with the Palawan National School (PNS) in the City of Puerto
Princesa, Province of Palawan, as branches thereof: (1) Puerto Princesa School of
Philippine Craftsmen; (2) San Jose Barangay High School; (3) Inagawan Barangay
High School; (4) Puerto Princesa Rural High School; all in the City of Puerto
Princesa and (5) Plaridel Barangay High School in the Municipality of Aborlan;
(6) Narra Barangay High School in the Municipality of Narra; (7) Quezon
Municipal High School in the Municipality of Quezon; (8) Pulot Barangay High
School in the Municipality of Brooke's Point; (9) Bataraza Barangay High School
in the Municipality Bataraza; and (10) Balabac Barangay High School in the
Municipality of Balabac; all in the Province of Palawan. 4

Section 2 of the law provides that the PNS shall, in addition to general secondary
education program, offer post-secondary technical-vocational and other relevant
courses to carry out its objectives. The PNS shall thus be considered the "mother
unit" and the integrated schools should benefit from a centralized curriculum
planning to eliminate duplication of functions and efforts relative to human
resource development for the province. 5 The law also provides that the Palawan
Integrated National Schools (PINS) shall be headed by a Vocational School
Superintendent (VSS) who shall be chosen and appointed by the Secretary of the
Department of Education, Culture, and Sports (now the DepEd). 6 Except for
Puerto Princesa School of Philippine Craftsmen, which shall be headed by the
Home Industries Training Supervisor, the PNS and each of its units or branches
shall be headed either by a Principal or Secondary School Head Teacher to be
chosen in accordance with the DepEd Rules and Regulations. 7 aIHCSA

However, no VSS was appointed. Instead, then DECS Region IV Office


designated then PNS Principal Eugenio J. dela Cuesta in a concurrent capacity as
Officer-in-Charge (OIC) of the PINS. After the retirement of Dela Cuesta,
petitioner took over as Secondary School Principal of the PNS. 8 On March 18,
1993, then DECS-Region IV Director IV Desideria Rex (Director Rex) designated
petitioner as OIC of the PINS. 9

On December 1, 1994, Director Rex's successor, Pedro B. Trinidad placed all


satellite schools of the PINS under the direct supervision of the Schools Division
Superintendent for Palawan effective January 1, 1995. 10 This directive was later
approved by the DepEd in September 1996. Petitioner was instructed to turn
over the administration and supervision of the PINS branches or units. 11 In
another memorandum, Schools Division Superintendent Portia Gesilva was
designated as OIC of the PINS. These events prompted different parties to
institute various actions restraining the enforcement of the DepEd orders.

Pursuant to RA 8204, separate City Schools Division Offices were established for
the City of Puerto Princesa and the Province of Palawan. 12

On March 14, 2000, Regional Director Belen H. Magsino issued an Order


addressed to the Schools Division Superintendent of Palawan and Puerto
Princesa City, and petitioner stating that the PINS satellite schools shall be under
the supervision of the division schools superintendents concerned, while
petitioner should concentrate on the supervision and administration of the PNS.
13 Again, this prompted the filing of various court actions.

On May 14, 2002, then DECS Undersecretary Jaime D. Jacob issued an Order 14
addressed to Dr. Giron, OIC, DepEd Regional Office No. 4, stating that there
being no more legal impediment to the integration, he ordered that the
secondary schools integrated with the PNS be under the direct administrative
management and supervision of the schools division superintendents of the
divisions of Palawan and Puerto Princesa City, as the case may be, according to
their geographical and political boundaries. Consequently, Dr. Giron instructed
the secondary schools' principals concerned of the assumption of jurisdiction by
the superintendent of the schools division offices of the city and province, and
that their fiscal and financial transaction as turned over will be effected on July 1,
2002. However, then DepEd Undersecretary Ramon C. Bacani (Bacani) ordered
that the status quo be maintained and that no turn over of schools be made. 15 In
the meantime, petitioner remained as the OIC of the PINS.

On September 19, 2002, Dr. Giron withdrew the designation of petitioner as OIC
of the PINS, enjoining her from submitting to the Regional Office all
appointments and personnel movement involving the PNS and the satellite
schools. On November 7, 2002, petitioner appealed to the Civil Service
Commission assailing the withdrawal of her designation as OIC of the PINS. 16
On March 28, 2003, then DepEd Secretary Edilberto C. De Jesus designated
Assistant Schools Division Superintendent Norma B. Brillantes (hereafter
referred to as private respondent) in concurrent capacity as OIC of the PINS
entitled to representation and transportation allowance, except the salary of the
position. 17 Petitioner filed a Motion for Reconsideration and/or Clarification 18
before the Office of the DepEd Secretary as to the designation of private
respondent. aDcHIS

On September 18, 2003, Dr. Giron filed a formal charge 19 against petitioner who
continued to defy the orders issued by the Regional Office relative to the exercise
of her functions as OIC of the PINS despite the designation of private respondent
as such. The administrative complaint charged petitioner with grave misconduct,
gross insubordination and conduct prejudicial to the best interest of the service.
Petitioner was also preventively suspended for ninety (90) days. 20

On October 2, 2003, petitioner filed the Petition for Quo Warranto with Prayer for
Issuance of Temporary Restraining Order and/or Injunctive Writ 21 before the
RTC of Palawan 22 against public and private respondents. The case was
docketed as Civil Case No. 3854. Petitioner argued that the designation of private
respondent deprived her of her right to exercise her function and perform her
duties in violation of her right to security of tenure. Considering that petitioner
was appointed in a permanent capacity, she insisted that private respondent's
designation as OIC of the PNS is null and void there being no vacancy to the
position. Petitioner thus prayed that the RTC issue an order granting the writ of
quo warranto enjoining private respondent from assuming the position of OIC of
the PNS, declaring the questioned designation null and void and without
operative effect, and declaring petitioner to be entitled to the office of the
principal of the PNS. 23

On October 6, 2003, the Executive Judge issued a 72-Hour TRO 24 enjoining and
restraining private respondent from assuming the position of OIC and
performing the functions of the Office of the Principal of the PNS; and
restraining public respondents from giving due course or recognizing the
assailed designation of private respondent. The RTC later issued the writ of
preliminary injunction. 25

Respondents failed to file their Answer. Hence, on motion 26 of petitioner, the


Court declared respondents in default in an Order 27 dated December 15, 2003.
In the same order, petitioner was allowed to present her evidence ex parte.

On June 14, 2004, the RTC rendered a Judgment by Default, 28 the dispositive
portion of which reads:

WHEREFORE, premises considered and by preponderance


of evidence, judgment is hereby rendered:
1. Declaring petitioner Rebecca T. Arquero as the
lawful Principal and Head of the Palawan
Integrated National High School who is
lawfully entitled to manage the operation
and finances of the school subject to
existing laws;

2. Declaring the formal charge against petitioner,


the preventive suspension, the
investigating committee, the proceedings
therein and any orders, rulings, judgments
and decisions that would arise therefrom
as null, void and of no effect;

3. Ordering respondent Norma Brillantes, or any


person acting in her behalf, to cease and
desist from assuming and exercising the
functions of the Office of the Principal of
Palawan Integrated National High School,
and respondents Edilberto C. De Jesus,
Paraluman R. Giron and Eduardo V.
Lopez, or any person acting in their behalf,
from giving due course or recognizing the
same; and HCaIDS

4. Making the writ of preliminary injunction issued


in this case permanent.

IT IS SO ORDERED. 29

The RTC held that considering that the integrated school failed to offer post-
secondary technical-vocational courses, the VSS position became functus officio.
The PNS, therefore, remains to be a general secondary school under the
jurisdiction of the DepEd. 30 Consequently, supervision of the integrated school
was automatically vested with the principal of the PNS without the necessity of
appointment or designation. As to the administrative case filed against
petitioner, the RTC opined that the formal charge and preventive suspension are
illegal for lack of due process. 31

On appeal, the CA reversed and set aside the RTC decision, the dispositive
portion of which reads:

WHEREFORE, premises considered, the present appeal is


hereby GRANTED. The appealed decision of the court a quo
in Civil Case No. 3854 is hereby REVERSED and SET ASIDE.
A new judgment is hereby entered DISMISSING the petition
for quo warranto filed by appellee Rebecca T. Arquero.

No pronouncement as to costs.

SO ORDERED. 32

Applying the rules on statutory construction, the appellate court emphasized the
need to harmonize the laws. The CA held that the PINS and its satellite schools
remain under the complete administrative jurisdiction of the DepEd and not
transferred to the Technical Education and Skills Development Authority
(TESDA). It also explained that by providing for a distinct position of VSS with a
higher qualification, specifically chosen and appointed by the DepEd Secretary
that is separate from the school head of the PNS offering general secondary
education program, RA 6765 intended that the functions of a VSS and School
Principal of PNS be discharged by two separate persons. 33 The CA added that if
we follow the RTC conclusion, petitioner would assume the responsibilities and
exercise the functions of a division schools superintendent without appointment
and compliance with the qualifications required by law. 34 The appellate court
likewise held that petitioner failed to establish her clear legal right to the position
of OIC of the PINS as she was not appointed but merely designated to the
position in addition to her functions as incumbent school principal of the PNS. 35
Clearly, there was no violation of her right to due process and security of tenure
when private respondent replaced her