G HOLDINGS, INC.
, Petitioner, - versus - NATIONAL
MINES AND
ALLIED WORKERS UNION Local 103 (NAMAWU);
SHERIFFS RICHARD H. APROSTA and ALBERTO
MUNOZ, all acting Sheriffs; DEPARTMENT OF
LABOR AND EMPLOYMENT, Region VI, Bacolod
District Office, Bacolod City, Respondents.
G.R. No. 160236
NACHURA, J.:
Before this Court is a petition for review on
certiorari under Rule 45 of the Rules of Court
assailing the October 14, 2003 Decision[1] of the
Court of Appeals (CA) in CA-G.R. SP No. 75322.
The Facts
The petitioner, G Holdings, Inc. (GHI), is a
domestic corporation primarily engaged in the
business of owning and holding shares of stock of
different companies.[2] It was registered with the
Securities and Exchange Commission on August 3,
1992. Private respondent, National Mines and
Allied Workers Union Local 103 (NAMAWU), was
the exclusive bargaining agent of the rank and file
employees of Maricalum Mining Corporation
(MMC),[3] an entity operating a copper mine and
mill complex at Sipalay, Negros Occidental.[4]
MMC was incorporated by the Development Bank
of the Philippines (DBP) and the Philippine
National Bank (PNB) on October 19, 1984, on
account of their foreclosure of Marinduque Mining
and Industrial Corporations assets. MMC started its
commercial operations in August 1985. Later, DBP
and PNB transferred it to the National
Government for disposition or privatization
because it had become a non-performing asset.[5]
On October 2, 1992, pursuant to a Purchase and
Sale Agreement[6] executed between GHI and
Asset Privatization Trust (APT), the former bought
ninety percent (90%) of MMCs shares and financial
claims.[7] These financial claims were converted
into three Promissory Notes[8] issued by MMC in
favor of GHI totaling P500M and secured by
mortgages over MMCs properties. The notes,
which were similarly worded except for their
amounts, read as follows:
PROMISSORY NOTE
AMOUNT - Php114,715,360.00 [Php186,550,560.00
in the second note, and Php248,734,080.00 in the
third note.]
MAKATI, METRO MANILA, PHILIPPINES, October 2,
1992
For Value Received, MARICALUM MINING
CORPORATION (MMC) with postal address at 4th
Floor, Manila Memorial Park Bldg., 2283 Pasong
Tamo Extension, Makati, Metro Manila,
Philippines, hereby promises to pay G HOLDINGS,
INC., at its office at Phimco Compound, F. Manalo
Street, Punta, Sta. Ana, Manila, the amount of
PESOS ONE HUNDRED FOURTEEN MILLION, SEVEN
HUNDRED FIFTEEN THOUSAND AND THREE
HUNDRED SIXTY (Php114,715,360.00) [PESOS ONE
HUNDRED EIGHTY SIX MILLION FIVE HUNDRED
FIFTY THOUSAND FIFE HUNDRED AND SIXTY
(Php186,550,560.00) in the second note, and
PESOS TWO HUNDRED FORTY EIGHT MILLION,
SEVEN HUNDRED THIRTY FOUR THOUSAND AND
EIGHTY (Php248,734,080.00) in the third note],
PHILIPPINE CURRENCY, on or before October 2,
2002. Interest shall accrue on the amount of this
Note at a rate per annum equal to the interest of
90-day Treasury Bills prevailing on the Friday
preceding the maturity date of every calendar
quarter.
As collateral security, MMC hereby establishes
and constitutes in favor of G HOLDINGS, INC., its
successors and/or assigns:
1. A mortgage over certain parcels of
land, more particularly listed and described in the
Sheriffs Certificate of Sale dated September 7,
1984 issued by the Ex-Officio Provincial Sheriff of
Negros Occidental, Rolando V. Ramirez, with
office at Bacolod City following the auction sale
conducted pursuant to the provisions of Act 3135,
a copy of which certificate of sale is hereto
attached as Annex A and made an integral part
hereof;
2. A chattel mortgage over assets and
personal properties more particularly listed and
described in the Sheriffs Certificate of Sale dated
September 7, 1984 issued by the Ex-Officio
Provincial Sheriff of Negros Occidental, Rolando V.
Ramirez, with office at Bacolod City following the
auction conducted pursuant to the provisions of
Act 1508, a copy of which Certificate of Sale is
hereto attached as Annex B and made an integral
part hereof.
3. Mortgages over assets listed in APT
Specific Catalogue GC-031 for MMC, a copy of
which Catalogue is hereby made an integral part
hereof by way of reference, as well as assets
presently in use by MMC but which are not listed
or included in paragraphs 1 and 2 above and shall
include all assets that may hereinafter be
acquired by MMC.
MARICALUM MINING CORPORATION (Maker)
x x x x[9]
Upon the signing of the Purchase and Sale
Agreement and upon the full satisfaction of the
stipulated down payment, GHI immediately took
physical possession of the mine site and its
facilities, and took full control of the management
and operation of MMC.[10]
Almost four years thereafter, or on August 23,
1996, a labor dispute (refusal to bargain
collectively and unfair labor practice) arose
between MMC and NAMAWU, with the latter
eventually filing with the National Conciliation
and Mediation Board of Bacolod City a notice of
strike.[11] Then Labor Secretary, now Associate
Justice of this Court, Leonardo A. Quisumbing,
later assumed jurisdiction over the dispute and
ruled in favor of NAMAWU. In his July 30, 1997
Order in OS-AJ-10-96-014 (Quisumbing Order),
Secretary Quisumbing declared that the lay-off (of
workers) implemented on May 7, 1996 and
October 7, 1996 was illegal and that MMC
committed unfair labor practice. He then ordered
the reinstatement of the laid-off workers, with
payment of full backwages and benefits, and
directed the execution of a new collective
bargaining agreement (CBA) incorporating the
terms and conditions of the previous CBA
providing for an annual increase in the workers
daily wage.[12] In two separate cases─G.R. Nos.
133519 and 138996─filed with this Court, we
sustained the validity of the Quisumbing Order,
which became final and executory on January 26,
2000.[13]
On May 11, 2001, then Acting Department of Labor
and Employment (DOLE) Secretary, now also an
Associate Justice of this Court, Arturo D. Brion, on
motion of NAMAWU, directed the issuance of a
partial writ of execution (Brion Writ), and ordered
the DOLE sheriffs to proceed to the MMC premises
for the execution of the same.[14] Much later, in
2006, this Court, in G.R. Nos. 157696-97, entitled
Maricalum Mining Corporation v. Brion and
NAMAWU,[15] affirmed the propriety of the
issuance of the Brion Writ.
The Brion Writ was not fully satisfied because
MMCs resident manager resisted its
enforcement.[16] On motion of NAMAWU, then
DOLE Secretary Patricia A. Sto. Tomas ordered the
issuance of the July 18, 2002 Alias Writ of
Execution and Break-Open Order (Sto. Tomas
Writ).[17] On October 11, 2002, the respondent
acting sheriffs, the members of the union, and
several armed men implemented the Sto. Tomas
Writ, and levied on the properties of MMC located
at its compound in Sipalay, Negros Occidental.[18]
On October 14, 2002, GHI filed with the Regional
Trial Court (RTC) of Kabankalan City, Negros
Occidental, Special Civil Action (SCA) No. 1127 for
Contempt with Prayer for the Issuance of a
Temporary Restraining Order (TRO) and Writ of
Preliminary Injunction and to Nullify the Sheriffs
Levy on Properties.[19] GHI contended that the
levied properties were the subject of a Deed of
Real Estate and Chattel Mortgage, dated
September 5, 1996[20] executed by MMC in favor
of GHI to secure the aforesaid P550M promissory
notes; that this deed was registered on February
24, 2000;[21] and that the mortgaged properties
were already extrajudicially foreclosed in July
2001 and sold to GHI as the highest bidder on
December 3, 2001, as evidenced by the Certificate
of Sale dated December 4, 2001.[22]
The trial court issued ex parte a TRO effective for
72 hours, and set the hearing on the application
for a writ of injunction.[23] On October 17, 2002,
the trial court ordered the issuance of a Writ of
Injunction (issued on October 18, 2002)[24]
enjoining the DOLE sheriffs from further enforcing
the Sto. Tomas Writ and from conducting any
public sale of the levied-on properties, subject to
GHIs posting of a P5M bond.[25]
Resolving, among others, NAMAWUs separate
motions for the reconsideration of the injunction
order and for the dismissal of the case, the RTC
issued its December 4, 2002 Omnibus Order,[26]
the dispositive portion of which reads:
WHEREFORE, premises considered, respondent
NAMAWU Local 103s Motion for Reconsideration
dated October 23, 2002 for the reconsideration of
the Order of this Court directing the issuance of
Writ of Injunction prayed for by petitioner and the
Order dated October 18, 2002 approving
petitioners Injunction Bond in the amount of
P5,000,000.00 is hereby DENIED.
Respondents Motion to Dismiss as embodied in its
Opposition to Extension of Temporary Restraining
Order and Issuance of Writ of Preliminary
Injunction with Motion to Dismiss and Suspend
Period to File Answer dated October 15, 2002 is
likewise DENIED.
Petitioners Urgent Motion for the return of the
levied firearms is GRANTED. Pursuant thereto,
respondent sheriffs are ordered to return the
levied firearms and handguns to the petitioner
provided the latter puts [up] a bond in the amount
of P332,200.00.
Respondents lawyer, Atty. Jose Lapak, is strictly
warned not to resort again to disrespectful and
contemptuous language in his pleadings,
otherwise, the same shall be dealt with
accordingly.
SO ORDERED.[27]
Aggrieved, NAMAWU filed with the CA a petition
for certiorari under Rule 65, assailing the October
17, 18 and December 4, 2002 orders of the
RTC.[28]
After due proceedings, on October 14, 2003, the
appellate court rendered a Decision setting aside
the RTC issuances and directing the immediate
execution of the Sto. Tomas Writ. The CA ruled,
among others, that the circumstances surrounding
the execution of the September 5, 1996 Deed of
Real Estate and Chattel Mortgage yielded the
conclusion that the deed was sham, fictitious and
fraudulent; that it was executed two weeks after
the labor dispute arose in 1996, but surprisingly, it
was registered only on February 24, 2000,
immediately after the Court affirmed with finality
the Quisumbing Order. The CA also found that the
certificates of title to MMCs real properties did
not contain any annotation of a mortgage lien,
and, suspiciously, GHI did not intervene in the
long drawn-out labor proceedings to protect its
right as a mortgagee of virtually all the properties
of MMC.[29]
The CA further ruled that the subsequent
foreclosure of the mortgage was irregular,
effected precisely to prevent the satisfaction of
the judgment against MMC. It noted that the
foreclosure proceedings were initiated in July
2001, shortly after the issuance of the Brion Writ;
and, more importantly, the basis for the
extrajudicial foreclosure was not the failure of
MMC to pay the mortgage debt, but its failure to
satisfy any money judgment against it rendered by
a court or tribunal of competent jurisdiction, in
favor of any person, firm or entity, without any
legal ground or reason.[30] Further, the CA
pierced the veil of corporate fiction of the two
corporations.[31] The dispositive portion of the
appellate courts decision reads:
WHEREFORE, in view of the foregoing
considerations, the petition is GRANTED. The
October 17, 2002 and the December 4, 2002 Order
of the RTC, Branch 61 of Kabankalan City, Negros
Occidental are hereby ANNULLED and SET ASIDE
for having been issued in excess or without
authority. The Writ of Preliminary Injunction
issued by the said court is lifted, and the DOLE
Sheriff is directed to immediately enforce the
Writ of Execution issued by the Department of
Labor and Employment in the case In re: Labor
Dispute in Maricalum Mining Corporation docketed
as OS-AJ-10-96-01 (NCMB-RB6-08-96).[32]
The Issues
Dissatisfied, GHI elevated the case to this Court
via the instant petition for review on certiorari,
raising the following issues:
I - WHETHER OR NOT GHI IS A PARTY TO THE
LABOR DISPUTE BETWEEN NAMAWU AND MMC.

II= WHETHER OR NOT, ASSUMING ARGUENDO THAT
THE PERTINENT DECISION OR ORDER IN THE SAID
LABOR DISPUTE BETWEEN MMC AND NAMAWU MAY
BE ENFORCED AGAINST GHI, THERE IS ALREADY A
FINAL DEETERMINATION BY THE SUPREME COURT
OF THE RIGHTS OF THE PARTIES IN SAID LABOR
DISPUTE CONSIDERING THE PENDENCY OF G.R.
NOS. 157696-97
III- WHETHER OR NOT GHI IS THE ABSOLUTE
OWNER OF THE PROPERTIES UNLAWFULLY
GARNISHED BY RESPONDENTS SHERIFFS.
IV - WHETHER OR NOT THE HONORABLE HENRY D.
ARLES CORRECTLY ISSUED A WRIT OF INJUNCTION
AGAINST THE UNLAWFUL EXECUTIOIN ON GHIS
PROPERTIES.
V- WHETHER OR NOT THE VALIDITY OF THE DEED
OF REAL AND CHATTEL MORTGAGE OVER THE
SUBJECT PROPERTIES BETWEEN MMC AND GHI MAY
BE COLLATERALLY ATTACKED.
VI - WHETHER OR NOT, ASSUMING ARGUENDO
THAT THE VALIDITY OF THE SAID REAL AND
CHATTEL MORTGAGE MAY BE COLLATERALLY
ATTACKED, THE SAID MORTGAGE IS SHAM,
FICTITIOUS AND FRAUDULENT.
VII - WHETHER OR NOT GHI IS A DISTINCT AND
SEPARATE CORPORATE ENTITY FROM MMC.
VIII - WHETHER OR NOT GHI CAN BE PREVENTED
THROUGH THE ISSUANCE OF A RESTRAINING
ORDER OR INJUNCTION FROM TAKING POSSESSION
OR BE DISPOSSESSED OF ASSETS PURCHASED BY IT
FROM APT.[33]
Stripped of non-essentials, the core issue is
whether, given the factual circumstances
obtaining, the RTC properly issued the writ of
injunction to prevent the enforcement of the Sto.
Tomas Writ. The resolution of this principal issue,
however, will necessitate a ruling on the following
key and interrelated questions:
1. Whether the mortgage of the MMCs
properties to GHI was a sham;
2. Whether there was an effective levy by the
DOLE upon the MMCs real and personal properties;
and
3. Whether it was proper for the CA to pierce
the veil of corporate fiction between MMC and
GHI.
Our Ruling
Before we delve into an extended discussion of
the foregoing issues, it is essential to take judicial
cognizance of cases intimately linked to the
present controversy which had earlier been
elevated to and decided by this Court.
Judicial Notice.
Judicial notice must be taken by this Court of its
Decision in Maricalum Mining Corporation v. Hon.
Arturo D. Brion and NAMAWU,[34] in which we
upheld the right of herein private respondent,
NAMAWU, to its labor claims. Upon the same
principle of judicial notice, we acknowledge our
Decision in Republic of the Philippines, through its
trustee, the Asset Privatization Trust v. G
Holdings, Inc.,[35] in which GHI was recognized as
the rightful purchaser of the shares of stocks of
MMC, and thus, entitled to the delivery of the
company notes accompanying the said purchase.
These company notes, consisting of three (3)
Promissory Notes, were part of the documents
executed in 1992 in the privatization sale of MMC
by the Asset Privatization Trust (APT) to GHI. Each
of these notes uniformly contains stipulations
establishing and constituting in favor of GHI
mortgages over MMCs real and personal
properties. The stipulations were subsequently
formalized in a separate document denominated
Deed of Real Estate and Chattel Mortgage on
September 5, 1996. Thereafter, the Deed was
registered on February 4, 2000.[36]
We find both decisions critically relevant to the
instant dispute. In fact, they should have guided
the courts below in the disposition of the
controversy at their respective levels. To repeat,
these decisions respectively confirm the right of
NAMAWU to its labor claims[37] and affirm the
right of GHI to its financial and mortgage claims
over the real and personal properties of MMC, as
will be explained below. The assailed CA decision
apparently failed to consider the impact of these
two decisions on the case at bar. Thus, we find it
timely to reiterate that: courts have also taken
judicial notice of previous cases to determine
whether or not the case pending is a moot one or
whether or not a previous ruling is applicable to
the case under consideration.[38]
However, the CA correctly assessed that the
authority of the lower court to issue the
challenged writ of injunction depends on the
validity of the third partys (GHIs) claim of
ownership over the property subject of the writ of
execution issued by the labor department.
Accordingly, the main inquiry addressed by the CA
decision was whether GHI could be treated as a
third party or a stranger to the labor dispute,
whose properties were beyond the reach of the
Writ of Execution dated December 18, 2001.[39]
In this light, all the more does it become
imperative to take judicial notice of the two cases
aforesaid, as they provide the necessary
perspective to determine whether GHI is such a
party with a valid ownership claim over the
properties subject of the writ of execution. In
Juaban v. Espina,[40] we held that in some
instances, courts have also taken judicial notice of
proceedings in other cases that are closely
connected to the matter in controversy. These
cases may be so closely interwoven, or so clearly
interdependent, as to invoke a rule of judicial
notice. The two cases that we have taken judicial
notice of are of such character, and our review of
the instant case cannot stray from the findings
and conclusions therein.
Having recognized these crucial Court rulings,
situating the facts in proper perspective, we now
proceed to resolve the questions identified above.
The mortgage was not a sham.
Republic etc., v. G Holdings, Inc. acknowledged
the existence of the Purchase and Sale Agreement
between the APT and the GHI, and recounts the
facts attendant to that transaction, as follows:
The series of negotiations between the petitioner
Republic of the Philippines, through the APT as its
trustee, and G Holdings culminated in the
execution of a purchase and sale agreement on
October 2, 1992. Under the agreement, the
Republic undertook to sell and deliver 90% of the
entire issued and outstanding shares of MMC, as
well as its company notes, to G Holdings in
consideration of the purchase price of
P673,161,280. It also provided for a down
payment of P98,704,000 with the balance divided
into four tranches payable in installment over a
period of ten years.[41]
The company notes mentioned therein were
actually the very same three (3) Promissory Notes
amounting to P550M, issued by MMC in favor of
GHI. As already adverted to above, these notes
uniformly contained stipulations establishing and
constituting mortgages over MMCs real and
personal properties.
It may be remembered that APT acquired the MMC
from the PNB and the DBP. Then, in compliance
with its mandate to privatize government assets,
APT sold the aforesaid MMC shares and notes to
GHI. To repeat, this Court has recognized this
Purchase and Sale Agreement in Republic, etc., v.
G Holdings, Inc.
The participation of the Government, through
APT, in this transaction is significant. Because the
Government had actively negotiated and,
eventually, executed the agreement, then the
transaction is imbued with an aura of official
authority, giving rise to the presumption of
regularity in its execution. This presumption
would cover all related transactional acts and
documents needed to consummate the
privatization sale, inclusive of the Promissory
Notes. It is obvious, then, that the Government,
through APT, consented to the establishment and
constitution of the mortgages on the assets of
MMC in favor of GHI, as provided in the notes.
Accordingly, the notes (and the stipulations
therein) enjoy the benefit of the same
presumption of regularity accorded to government
actions. Given the Government consent thereto,
and clothed with the presumption of regularity,
the mortgages cannot be characterized as sham,
fictitious or fraudulent.
Indeed, as mentioned above, the three (3)
Promissory Notes, executed on October 2, 1992,
established and constituted in favor of GHI the
following mortgages:
 1. A mortgage over certain parcels of land, more
particularly listed and described in the Sheriffs
Certificate of Sale dated September 7, 1984 issued
by the Ex-Officio Provincial Sheriff of Negros
Occidental, Rolando V. Ramirez, with office at
Bacolod City following the auction sale conducted
pursuant to the provisions of Act 3135, a copy of
which certificate of sale is hereto attached as
Annex A and made an integral part hereof;
2. A chattel mortgage over assets and
personal properties more particularly listed and
described in the Sheriffs Certificate of Sale dated
September 7, 1984 issued by the Ex-Officio
Provincial Sheriff of Negros Occidental, Rolando V.
Ramirez, with office at Bacolod City following the
auction conducted pursuant to the provision of Act
1508, a copy of which Certificate of Sale is hereto
attached as Annex B and made an integral part
hereof.
3. Mortgages over assets listed in APT Specific
catalogue GC-031 for MMC, a copy of which
Catalogue is hereby made an integral part hereof
by way of reference, as well as assets presently in
use by MMC but which are not listed or included in
paragraphs 1 and 2 above and shall include all
assets that may hereinafter be acquired by
MMC.[42]
It is difficult to conceive that these mortgages,
already existing in 1992, almost four (4) years
before NAMAWU filed its notice of strike, were a
fictitious arrangement intended to defraud
NAMAWU. After all, they were agreed upon long
before the seeds of the labor dispute germinated.
While it is true that the Deed of Real Estate and
Chattel Mortgage was executed only on September
5, 1996, it is beyond cavil that this formal
document of mortgage was merely a derivative of
the original mortgage stipulations contained in the
Promissory Notes of October 2, 1992. The
execution of this Deed in 1996 does not detract
from, but instead reinforces, the manifest
intention of the parties to establish and constitute
the mortgages on MMCs real and personal
properties.
Apparently, the move to execute a formal
document denominated as the Deed of Real Estate
and Chattel Mortgage came about after the
decision of the RTC of Manila in Civil Case No. 95-
76132 became final in mid-1996. This conclusion
surfaces when we consider the genesis of Civil
Case No. 95-76132 and subsequent incidents
thereto, as narrated in Republic, etc. v. G
Holdings, Inc., viz:
Subsequently, a disagreement on the matter of
when installment payments should commence
arose between the parties. The Republic claimed
that it should be on the seventh month from the
signing of the agreement while G Holdings insisted
that it should begin seven months after the
fulfillment of the closing conditions.
Unable to settle the issue, G Holdings filed a
complaint for specific performance and damages
with the Regional Trial Court of Manila, Branch 49,
against the Republic to compel it to close the sale
in accordance with the purchase and sale
agreement. The complaint was docketed as Civil
Case No. 95-76132.
During the pre-trial, the respective counsels of
the parties manifested that the issue involved in
the case was one of law and submitted the case
for decision. On June 11, 1996, the trial court
rendered its decision. It ruled in favor of G
Holdings and held:
In line with the foregoing, this Court having been
convinced that the Purchase and Sale Agreement
is indeed subject to the final closing conditions
prescribed by Stipulation No. 5.02 and
conformably to Rule 39, Section 10 of the Rules of
Court, accordingly orders that the Asset
Privatization Trust execute the corresponding
Document of Transfer of the subject shares and
financial notes and cause the actual delivery of
subject shares and notes to G Holdings, Inc.,
within a period of thirty (30) days from receipt of
this Decision, and after G Holdings Inc., shall have
paid in full the entire balance, at its present value
of P241,702,122.86, computed pursuant to the
prepayment provisions of the Agreement. Plaintiff
shall pay the balance simultaneously with the
delivery of the Deed of Transfer and actual
delivery of the shares and notes.
SO ORDERED.
The Solicitor General filed a notice of appeal on
behalf of the Republic on June 28, 1996. Contrary
to the rules of procedure, however, the notice of
appeal was filed with the Court of Appeals (CA),
not with the trial court which rendered the
judgment appealed from.
No other judicial remedy was resorted to until
July 2, 1999 when the Republic, through the APT,
filed a petition for annulment of judgment with
the CA. It claimed that the decision should be
annulled on the ground of abuse of discretion
amounting to lack of jurisdiction on the part of
the trial court. x x x
Finding that the grounds necessary for the
annulment of judgment were inexistent, the
appellate court dismissed the petition. x x x x[43]
With the RTC decision having become final owing
to the failure of the Republic to perfect an
appeal, it may have become necessary to execute
the Deed of Real Estate and Chattel Mortgage on
September 5, 1996, in order to enforce the trial
courts decision of June 11, 1996. This appears to
be the most plausible explanation for the
execution of the Deed of Real Estate and Chattel
Mortgage only in September 1996. Even as the
parties had already validly constituted the
mortgages in 1992, as explicitly provided in the
Promissory Notes, a specific deed of mortgage in a
separate document may have been deemed
necessary for registration purposes. Obviously,
this explanation is more logical and more sensible
than the strained conjecture that the mortgage
was executed on September 5, 1996 only for the
purpose of defrauding NAMAWU.
It is undeniable that the Deed of Real Estate and
Chattel Mortgage was formally documented two
weeks after NAMAWU filed its notice of strike
against MMC on August 23, 1996. However, this
fact alone cannot give rise to an adverse inference
for two reasons. First, as discussed above, the
mortgages had already been established and
constituted as early as October 2, 1992 in the
Promissory Notes, showing the clear intent of the
parties to impose a lien upon MMCs properties.
Second, the mere filing of a notice of strike by
NAMAWU did not, as yet, vest in NAMAWU any
definitive right that could be prejudiced by the
execution of the mortgage deed.
The fact that MMCs obligation to GHI is not
reflected in the formers financial statements─a
circumstance made capital of by NAMAWU in order
to cast doubt on the validity of the mortgage
deed─is of no moment. By itself, it does not
provide a sufficient basis to invalidate this public
document. To say otherwise, and to invalidate the
mortgage deed on this pretext, would furnish MMC
a convenient excuse to absolve itself of its
mortgage obligations by adopting the simple
strategy of not including the obligations in its
financial statements. It would ignore our ruling in
Republic, etc. v. G Holdings, Inc., which obliged
APT to deliver the MMC shares and financial notes
to GHI. Besides, the failure of the mortgagor to
record in its financial statements its loan
obligations is surely not an essential element for
the validity of mortgage agreements, nor will it
independently affect the right of the mortgagee
to foreclose.
Contrary to the CA decision, Tanongon v.
Samson[44] is not on all fours with the instant
case. There are material differences between the
two cases. At issue in Tanongon was a third-party
claim arising from a Deed of Absolute Sale
executed between Olizon and Tanongon on July
29, 1997, after the NLRC decision became final
and executory on April 29, 1997. In the case at
bar, what is involved is a loan with mortgage
agreement executed on October 2, 1992, well
ahead of the unions notice of strike on August 23,
1996. No presumption of regularity inheres in the
deed of sale in Tanongon, while the participation
of APT in this case clothes the transaction in 1992
with such a presumption that has not been
successfully rebutted. In Tanongon, the conduct
of a full-blown trial led to the finding─duly
supported by evidence─that the voluntary sale of
the assets of the judgment debtor was made in
bad faith. Here, no trial was held, owing to the
motion to dismiss filed by NAMAWU, and the CA
failed to consider the factual findings made by
this Court in Republic, etc. v. G Holdings, Inc.
Furthermore, in Tanongon, the claimant did not
exercise his option to file a separate action in
court, thus allowing the NLRC Sheriff to levy on
execution and to determine the rights of third-
party claimants.[45] In this case, a separate
action was filed in the regular courts by GHI, the
third-party claimant. Finally, the questioned
transaction in Tanongon was a plain, voluntary
transfer in the form of a sale executed by the
judgment debtor in favor of a dubious third-party,
resulting in the inability of the judgment creditor
to satisfy the judgment. On the other hand, this
case involves an involuntary transfer (foreclosure
of mortgage) arising from a loan obligation that
well-existed long before the commencement of
the labor claims of the private respondent.
Three other circumstances have been put forward
by the CA to support its conclusion that the
mortgage contract is a sham. First, the CA
considered it highly suspect that the Deed of Real
Estate and Chattel Mortgage was registered only
on February 4, 2000, three years after its
execution, and almost one month after the
Supreme Court rendered its decision in the labor
dispute.[46] Equally suspicious, as far as the CA is
concerned, is the fact that the mortgages were
foreclosed on July 31, 2001, after the DOLE had
already issued a Partial Writ of Execution on May
9, 2001.[47] To the appellate court, the timing of
the registration of the mortgage deed was too
coincidental, while the date of the foreclosure
signified that it was effected precisely to prevent
the satisfaction of the judgment awards.[48]
Furthermore, the CA found that the mortgage
deed itself was executed without any
consideration, because at the time of its
execution, all the assets of MMC had already been
transferred to GHI.[49]
These circumstances provided the CA with
sufficient justification to apply Article 1387 of the
Civil Code on presumed fraudulent transactions,
and to declare that the mortgage deed was void
for being simulated and fictitious.[50]
We do not agree. We find this Courts ruling in MR
Holdings, Ltd. v. Sheriff Bajar[51] pertinent and
instructive:
Article 1387 of the Civil Code of the Philippines
provides:
Art. 1387. All contracts by virtue of which the
debtor alienates property by gratuitous title are
presumed to have been entered into in fraud of
creditors, when the donor did not reserve
sufficient property to pay all debts contracted
before the donation.
Alienations by onerous title are also presumed
fraudulent when made by persons against whom
some judgment has been rendered in any instance
or some writ of attachment has been issued. The
decision or attachment need not refer to the
property alienated, and need not have been
obtained by the party seeking rescission.
In addition to these presumptions, the design to
defraud creditors may be proved in any other
manner recognized by law and of evidence.
This article presumes the existence of fraud made
by a debtor. Thus, in the absence of satisfactory
evidence to the contrary, an alienation of a
property will be held fraudulent if it is made after
a judgment has been rendered against the debtor
making the alienation. This presumption of fraud
is not conclusive and may be rebutted by
satisfactory and convincing evidence. All that is
necessary is to establish affirmatively that the
conveyance is made in good faith and for a
sufficient and valuable consideration.
The Assignment Agreement and the Deed of
Assignment were executed for valuable
considerations. Patent from the Assignment
Agreement is the fact that petitioner assumed the
payment of US$18,453,450.12 to ADB in
satisfaction of Marcoppers remaining debt as of
March 20, 1997. Solidbank cannot deny this fact
considering that a substantial portion of the said
payment, in the sum of US$13,886,791.06, was
remitted in favor of the Bank of Nova Scotia, its
major stockholder.
The facts of the case so far show that the
assignment contracts were executed in good faith.
The execution of the Assignment Agreement on
March 20, 1997 and the Deed of Assignment on
December 8,1997 is not the alpha of this case.
While the execution of these assignment contracts
almost coincided with the rendition on May 7,
1997 of the Partial Judgment in Civil Case No. 96-
80083 by the Manila RTC, however, there was no
intention on the part of petitioner to defeat
Solidbanks claim. It bears reiterating that as early
as November 4, 1992, Placer Dome had already
bound itself under a Support and Standby Credit
Agreement to provide Marcopper with cash flow
support for the payment to ADB of its obligations.
When Marcopper ceased operations on account of
disastrous mine tailings spill into the Boac River
and ADB pressed for payment of the loan, Placer
Dome agreed to have its subsidiary, herein
petitioner, pay ADB the amount of
US$18,453,450.12.
Thereupon, ADB and Marcopper executed,
respectively, in favor of petitioner an Assignment
Agreement and a Deed of Assignment. Obviously,
the assignment contracts were connected with
transactions that happened long before the
rendition in 1997 of the Partial Judgment in Civil
Case No. 96-80083 by the Manila RTC. Those
contracts cannot be viewed in isolation. If we may
add, it is highly inconceivable that ADB, a
reputable international financial organization, will
connive with Marcopper to feign or simulate a
contract in 1992 just to defraud Solidbank for its
claim four years thereafter. And it is equally
incredible for petitioner to be paying the huge
sum of US$18,453,450.12 to ADB only for the
purpose of defrauding Solidbank of the sum of
P52,970,756.89.
It is said that the test as to whether or not a
conveyance is fraudulent is ― does it prejudice
the rights of creditors? We cannot see how
Solidbanks right was prejudiced by the assignment
contracts considering that substantially all of
Marcoppers properties were already covered by
the registered Deed of Real Estate and Chattel
Mortgage executed by Marcopper in favor of ADB
as early as November 11, 1992. As such, Solidbank
cannot assert a better right than ADB, the latter
being a preferred creditor. It is basic that
mortgaged properties answer primarily for the
mortgaged credit, not for the judgment credit of
the mortgagors unsecured creditor. Considering
that petitioner assumed Marcoppers debt to ADB,
it follows that Solidbanks right as judgment
creditor over the subject properties must give way
to that of the former.[52]
From this ruling in MR Holdings, we can draw
parallel conclusions. The execution of the
subsequent Deed of Real Estate and Chattel
Mortgage on September 5, 1996 was simply the
formal documentation of what had already been
agreed in the seminal transaction (the Purchase
and Sale Agreement) between APT and GHI. It
should not be viewed in isolation, apart from the
original agreement of October 2, 1992. And it
cannot be denied that this original agreement was
supported by an adequate consideration. The APT
was even ordered by the court to deliver the
shares and financial notes of MMC in exchange for
the payments that GHI had made.
It was also about this time, in 1996, that NAMAWU
filed a notice of strike to protest non-payment of
its rightful labor claims.[53] But, as already
mentioned, the outcome of that labor dispute was
yet unascertainable at that time, and NAMAWU
could only have hoped for, or speculated about, a
favorable ruling. To paraphrase MR Holdings, we
cannot see how NAMAWUs right was prejudiced by
the Deed of Real Estate and Chattel Mortgage, or
by its delayed registration, when substantially all
of the properties of MMC were already mortgaged
to GHI as early as October 2, 1992. Given this
reality, the Court of Appeals had no basis to
conclude that this Deed of Real Estate and Chattel
Mortgage, by reason of its late registration, was a
simulated or fictitious contract.
The importance of registration and its binding
effect is stated in Section 51 of the Property
Registration Decree or Presidential Decree (P.D.)
No. 1529,[54] which reads:
SECTION 51. Conveyance and other dealings by
registered owner.An owner of registered land may
convey, mortgage, lease, charge or otherwise deal
with the same in accordance with existing laws.
He may use such forms, deeds, mortgages, leases
or other voluntary instrument as are sufficient in
law. But no deed, mortgage, lease or other
voluntary instrument, except a will purporting to
convey or effect registered land, shall take effect
as a conveyance or bind the land, but shall
operate only as a contract between the parties
and as evidence of authority to the Registry of
Deeds to make registration.
The act of registration shall be the operative act
to convey or affect the land insofar as third
persons are concerned, and in all cases under this
Decree, the registration shall be made in the
Office of the Register of Deeds for the province or
the city where the land lies.[55]
Under the Torrens system, registration is the
operative act which gives validity to the transfer
or creates a lien upon the land. Further,
entrenched in our jurisdiction is the doctrine that
registration in a public registry creates
constructive notice to the whole world.[56] Thus,
Section 51 of Act No. 496, as amended by Section
52 of P.D. No. 1529, provides:
SECTION 52. Constructive notice upon
registration.Every conveyance, mortgage, lease,
lien, attachment, order, judgment, instrument or
entry affecting registered land shall, if registered,
filed or entered in the Office of the Register of
Deeds for the province or city where the land to
which it relates lies, be constructive notice to all
persons from the time of such registering, filing or
entering.
But, there is nothing in Act No. 496, as amended
by P.D. No. 1529, that imposes a period within
which to register annotations of conveyance,
mortgage, lease, lien, attachment, order,
judgment, instrument or entry affecting
registered land. If liens were not so registered,
then it shall operate only as a contract between
the parties and as evidence of authority to the
Registry of Deeds to make registration. If
registered, it shall be the operative act to convey
or affect the land insofar as third persons are
concerned. The mere lapse of time from the
execution of the mortgage document to the
moment of its registration does not affect the
rights of a mortgagee.
Neither will the circumstance of GHIs foreclosure
of MMCs properties on July 31, 2001, or after the
DOLE had already issued a Partial Writ of
Execution on May 9, 2001 against MMC, support
the conclusion of the CA that GHIs act of
foreclosing on MMCs properties was effected to
prevent satisfaction of the judgment award. GHIs
mortgage rights, constituted in 1992, antedated
the Partial Writ of Execution by nearly ten (10)
years. GHIs resort to foreclosure was a legitimate
enforcement of a right to liquidate a bona fide
debt. It was a reasonable option open to a
mortgagee which, not being a party to the labor
dispute between NAMAWU and MMC, stood to
suffer a loss if it did not avail itself of the remedy
of foreclosure.
The well-settled rule is that a mortgage lien is
inseparable from the property mortgaged.[57]
While it is true that GHIs foreclosure of MMCs
mortgaged properties may have had the effect to
prevent satisfaction of the judgment award
against the specific mortgaged property that first
answers for a mortgage obligation ahead of any
subsequent creditors, that same foreclosure does
not necessarily translate to having been effected
to prevent satisfaction of the judgment award
against MMC.
Likewise, we note the narration of subsequent
facts contained in the Comment of the Office of
the Solicitor General. Therein, it is alleged that
after the Partial Writ of Execution was issued on
May 9, 2001, a motion for reconsideration was
filed by MMC; that the denial of the motion was
appealed to the CA; that when the appeal was
dismissed by the CA on January 24, 2002, it
eventually became the subject of a review
petition before this Court, docketed as G.R. No.
157696; and that G.R. No. 157696 was decided by
this Court only on February 9, 2006.
This chronology of subsequent events shows that
February 9, 2006 would have been the earliest
date for the unimpeded enforcement of the
Partial Writ of Execution, as it was only then that
this Court resolved the issue. This happened four
and a half years after July 31, 2001, the date
when GHI foreclosed on the mortgaged properties.
Thus, it is not accurate to say that the foreclosure
made on July 31, 2001 was effected [only] to
prevent satisfaction of the judgment award.
We also observe the error in the CAs finding that
the 1996 Deed of Real Estate and Chattel
Mortgage was not supported by any consideration
since at the time the deed was executed, all the
real and personal property of MMC had already
been transferred in the hands of G Holdings.[58] It
should be remembered that the Purchase and Sale
Agreement between GHI and APT involved large
amounts (P550M) and even spawned a subsequent
court action (Civil Case No. 95-76132, RTC of
Manila). Yet, nowhere in the Agreement or in the
RTC decision is there any mention of real and
personal properties of MMC being included in the
sale to GHI in 1992. These properties simply
served as mortgaged collateral for the 1992
Promissory Notes.[59] The Purchase and Sale
Agreement and the Promissory Notes themselves
are the best evidence that there was ample
consideration for the mortgage.
Thus, we must reject the conclusion of the CA
that the Deed of Real Estate and Chattel Mortgage
executed in 1996 was a simulated transaction.
On the issue of whether therehad been an
effective levy upon the properties of GHI.
The well-settled principle is that the rights of a
mortgage creditor over the mortgaged properties
are superior to those of a subsequent attaching
creditor. In Cabral v. Evangelista,[60] this Court
declared that:
Defendants-appellants purchase of the mortgaged
chattels at the public sheriff's sale and the
delivery of the chattels to them with a certificate
of sale did not give them a superior right to the
chattels as against plaintiffs-mortgagees. Rule 39,
Section 22 of the old Rules of Court (now Rule 39,
Section 25 of the Revised Rules), cited by
appellants precisely provides that the sale conveys
to the purchaser all the right which the debtor
had in such property on the day the execution or
attachment was levied. It has long been settled by
this Court that The right of those who so acquire
said properties should not and can not be superior
to that of the creditor who has in his favor an
instrument of mortgage executed with the
formalities of the law, in good faith, and without
the least indication of fraud. This is all the more
true in the present case, because, when the
plaintiff purchased the automobile in question on
August 22, 1933, he knew, or at least, it is
presumed that he knew, by the mere fact that the
instrument of mortgage, Exhibit 2, was registered
in the office of the register of deeds of Manila,
that said automobile was subject to a mortgage
lien. In purchasing it, with full knowledge that
such circumstances existed, it should be presumed
that he did so, very much willing to respect the
lien existing thereon, since he should not have
expected that with the purchase, he would
acquire a better right than that which the vendor
then had. In another case between two
mortgagees, we held that As between the first
and second mortgagees, therefore, the second
mortgagee has at most only the right to redeem,
and even when the second mortgagee goes
through the formality of an extrajudicial
foreclosure, the purchaser acquires no more than
the right of redemption from the first mortgagee.
The superiority of the mortgagee's lien over that
of a subsequent judgment creditor is now
expressly provided in Rule 39, Section 16 of the
Revised Rules of Court, which states with regard
to the effect of levy on execution as to third
persons that The levy on execution shall create a
lien in favor of the judgment creditor over the
right, title and interest of the judgment debtor in
such property at the time of the levy, subject to
liens or encumbrances then existing.
Even in the matter of possession, mortgagees over
chattel have superior, preferential and paramount
rights thereto, and the mortgagor has mere rights
of redemption.[61]
Similar rules apply to cases of mortgaged real
properties that are registered. Since the
properties were already mortgaged to GHI, the
only interest remaining in the mortgagor was its
right to redeem said properties from the
mortgage. The right of redemption was the only
leviable or attachable property right of the
mortgagor in the mortgaged real properties. We
have held that
The main issue in this case is the nature of the
lien of a judgment creditor, like the petitioner,
who has levied an attachment on the judgment
debtor's (CMI) real properties which had been
mortgaged to a consortium of banks and were
subsequently sold to a third party, Top Rate.x x x
x
The sheriff's levy on CMI's properties, under the
writ of attachment obtained by the petitioner,
was actually a levy on the interest only of the
judgment debtor CMI on those properties. Since
the properties were already mortgaged to the
consortium of banks, the only interest remaining
in the mortgagor CMI was its right to redeem said
properties from the mortgage. The right of
redemption was the only leviable or attachable
property right of CMI in the mortgaged real
properties. The sheriff could not have attached
the properties themselves, for they had already
been conveyed to the consortium of banks by
mortgage (defined as a conditional sale), so his
levy must be understood to have attached only
the mortgagor's remaining interest in the
mortgaged property the right to redeem it from
the mortgage.[62]x x x x
There appears in the record a factual
contradiction relating to whether the foreclosure
by GHI on July 13, 2001[63] over some of the
contested properties came ahead of the levy
thereon, or the reverse. NAMAWU claims that the
levy on two trucks was effected on June 22,
2001,[64] which GHI disputes as a misstatement
because the levy was attempted on July 18, 2002,
and not 2001[65] What is undisputed though is
that the mortgage of GHI was registered on
February 4, 2000,[66] well ahead of any levy by
NAMAWU. Prior registration of a lien creates a
preference, as the act of registration is the
operative act that conveys and affects the
land,[67] even against subsequent judgment
creditors, such as respondent herein. Its
registration of the mortgage was not intended to
defraud NAMAWU of its judgment claims, since
even the courts were already judicially aware of
its existence since 1992. Thus, at that moment in
time, with the registration of the mortgage,
either NAMAWU had no properties of MMC to
attach because the same had been previously
foreclosed by GHI as mortgagee thereof; or by
virtue of the DOLEs levy to enforce NAMAWUs
claims, the latters rights are subject to the notice
of the foreclosure on the subject properties by a
prior mortgagees right. GHIs mortgage right had
already been registered by then, and it is basic
that mortgaged properties answer primarily for
the mortgaged credit, not for the judgment credit
of the mortgagors unsecured creditor.[68]
On the issue of piercing the veil of corporate
fiction.
The CA found that:
Ordinarily, the interlocking of directors and
officers in two different corporations is not a
conclusive indication that the corporations are
one and the same for purposes of applying the
doctrine of piercing the veil of corporate fiction.
However, when the legal fiction of the separate
corporate personality is abused, such as when the
same is used for fraudulent or wrongful ends, the
courts have not hesitated to pierce the corporate
veil (Francisco vs. Mejia, 362 SCRA 738). In the
case at bar, the Deed of Real Estate and Chattel
Mortgage was entered into between MMC and G
Holdings for the purpose of evading the
satisfaction of the legitimate claims of the
petitioner against MMC. The notion of separate
personality is clearly being utilized by the two
corporations to perpetuate the violation of a
positive legal duty arising from a final judgment
to the prejudice of the petitioners right.[69]
Settled jurisprudence[70] has it that
(A) corporation, upon coming into existence, is
invested by law with a personality separate and
distinct from those persons composing it as well as
from any other legal entity to which it may be
related. By this attribute, a stockholder may not,
generally, be made to answer for acts or liabilities
of the said corporation, and vice versa. This
separate and distinct personality is, however,
merely a fiction created by law for convenience
and to promote the ends of justice. For this
reason, it may not be used or invoked for ends
subversive to the policy and purpose behind its
creation or which could not have been intended
by law to which it owes its being. This is
particularly true when the fiction is used to
defeat public convenience, justify wrong, protect
fraud, defend crime, confuse legitimate legal or
judicial issues, perpetrate deception or otherwise
circumvent the law. This is likewise true where
the corporate entity is being used as an alter ego,
adjunct, or business conduit for the sole benefit
of the stockholders or of another corporate entity.
In all these cases, the notion of corporate entity
will be pierced or disregarded with reference to
the particular transaction involved.
Given this jurisprudential principle and the factual
circumstances obtaining in this case, we now ask:
Was the CA correct in piercing the veil of
corporate identity of GHI and MMC?
In our disquisition above, we have shown that the
CAs finding that there was a simulated mortgage
between GHI and MMC to justify a wrong or
protect a fraud has struggled vainly to find a
foothold when confronted with the ruling of this
Court in Republic v. G Holdings, Inc.
The negotiations between the GHI and the
Government--through APT, dating back to 1992--
culminating in the Purchase and Sale Agreement,
cannot be depicted as a contrived transaction. In
fact, in the said Republic, etc., v. G Holdings,
Inc., this Court adjudged that GHI was entitled to
its rightful claims─ not just to the shares of MMC
itself, or just to the financial notes that already
contained the mortgage clauses over MMCs
disputed assets, but also to the delivery of those
instruments. Certainly, we cannot impute to this
Courts findings on the case any badge of fraud.
Thus, we reject the CAs conclusion that it was
right to pierce the veil of corporate fiction,
because the foregoing circumstances belie such an
inference. Furthermore, we cannot ascribe to the
Government, or the APT in particular, any undue
motive to participate in a transaction designed to
perpetrate fraud. Accordingly, we consider the CA
interpretation unwarranted.
We also cannot agree that the presumption of
fraud in Article 1387 of the Civil Code relative to
property conveyances, when there was already a
judgment rendered or a writ of attachment
issued, authorizes piercing the veil of corporate
identity in this case. We find that Article 1387
finds less application to an involuntary alienation
such as the foreclosure of mortgage made before
any final judgment of a court. We thus hold that
when the alienation is involuntary, and the
foreclosure is not fraudulent because the
mortgage deed has been previously executed in
accordance with formalities of law, and the
foreclosure is resorted to in order to liquidate a
bona fide debt, it is not the alienation by onerous
title contemplated in Article 1387 of the Civil
Code wherein fraud is presumed.
Since the factual antecedents of this case do not
warrant a finding that the mortgage and loan
agreements between MMC and GHI were
simulated, then their separate personalities must
be recognized. To pierce the veil of corporate
fiction would require that their personalities as
creditor and debtor be conjoined, resulting in a
merger of the personalities of the creditor (GHI)
and the debtor (MMC) in one person, such that the
debt of one to the other is thereby extinguished.
But the debt embodied in the 1992 Financial Notes
has been established, and even made subject of
court litigation (Civil Case No. 95-76132, RTC
Manila). This can only mean that GHI and MMC
have separate corporate personalities.
Neither was MMC used merely as an alter ego,
adjunct, or business conduit for the sole benefit
of GHI, to justify piercing the formers veil of
corporate fiction so that the latter could be held
liable to claims of third-party judgment creditors,
like NAMAWU. In this regard, we find American
jurisprudence persuasive. In a decision by the
Supreme Court of New York[71] bearing upon
similar facts, the Court denied piercing the veil of
corporate fiction to favor a judgment creditor who
sued the parent corporation of the debtor,
alleging fraudulent corporate asset-shifting
effected after a prior final judgment. Under a
factual background largely resembling this case at
bar, viz:
In this action, plaintiffs seek to recover the
balance due under judgments they obtained
against Lake George Ventures Inc. (hereinafter
LGV), a subsidiary of defendant that was formed
to develop the Top O the World resort community
overlooking Lake George, by piercing the
corporate veil or upon the theory that LGV's
transfer of certain assets constituted fraudulent
transfers under the Debtor and Creditor Law. We
previously upheld Supreme Court's denial of
defendant's motion for summary judgment
dismissing the complaint (252 A.D.2d 609, 675
N.Y.S.2d 234) and the matter proceeded to a
nonjury trial. Supreme Court thereafter rendered
judgment in favor of defendant upon its findings
that, although defendant dominated LGV, it did
not use that domination to commit a fraud or
wrong on plaintiffs. Plaintiffs appealed.
The trial evidence showed that LGV was
incorporated in November 1985. Defendant's
principal, Francesco Galesi, initially held 90% of
the stock and all of the stock was ultimately
transferred to defendant. Initial project funding
was provided through a $2.5 million loan from
Chemical Bank, secured by defendant's guarantee
of repayment of the loan and completion of the
project. The loan proceeds were utilized to
purchase the real property upon which the project
was to be established. Chemical Bank thereafter
loaned an additional $3.5 million to LGV, again
guaranteed by defendant, and the two loans were
consolidated into a first mortgage loan of $6
million. In 1989, the loan was modified by
splitting the loan into a $1.9 term note on which
defendant was primary obligor and a $4.1 million
project note on which LGV was the obligor and
defendant was a guarantor.
Due to LGV's lack of success in marketing the
project's townhouses and in order to protect itself
from the exercise of Chemical Bank's enforcement
remedies, defendant was forced to make monthly
installments of principal and interest on LGV's
behalf. Ultimately, defendant purchased the
project note from Chemical Bank for $3.1 million,
paid the $1.5 million balance on the term note
and took an assignment of the first mortgage on
the project's realty. After LGV failed to make
payments on the indebtedness over the course of
the succeeding two years, defendant brought an
action to foreclose its mortgage. Ultimately,
defendant obtained a judgment of foreclosure and
sale in the amount of $6,070,246.50. Defendant
bid in the property at the foreclosure sale and
thereafter obtained a deficiency judgment in the
amount of $3,070,246.50.
Following the foreclosure sale, LGV transferred to
defendant all of the shares of Top of the World
Water Company, a separate entity that had been
organized to construct and operate the water
supply and delivery system for the project, in
exchange for a $950,000 reduction in the
deficiency judgment.
 the U.S. Supreme Court of New York held
Based on the foregoing, and accepting that
defendant exercised complete domination and
control over LGV, we are at a loss as to how
plaintiffs perceive themselves to have been
inequitably affected by defendant's foreclosure
action against LGV, by LGV's divestiture of the
water company stock or the sports complex
property, or by defendant's transfer to LGV of a
third party's uncollectible note, accomplished
solely for tax purposes. It is undisputed that LGV
was, and for some period of time had been,
unable to meet its obligations and, at the time of
the foreclosure sale, liens against its property
exceeded the value of its assets by several million
dollars, even including the water company and
sports complex at the values plaintiffs would
assign to them. In fact, even if plaintiffs' analysis
were utilized to eliminate the entire $3 million
deficiency judgment, the fact remains that
subordinate mortgages totaling nearly an
additional $2 million have priority over plaintiffs'
judgments.
As properly concluded by Supreme Court, absent a
finding of any inequitable consequence to
plaintiffs, both causes of action pleaded in the
amended complaint must fail. Fundamentally, a
party seeking to pierce the corporate veil must
show complete domination and control of the
subsidiary by the parent and also that such
domination was used to commit a fraud or wrong
against the plaintiff that resulted in the plaintiff's
injury ( 252 A.D.2d 609, 610, 675 N.Y.S.2d 234,
supra; see, Matter of Morris v. New York State
Dept. of Taxation & Fin., 82 N.Y.2d 135, 141, 603
N.Y.S.2d 807, 623 N.E.2d 1157). Notably,
[e]vidence of domination alone does not suffice
without an additional showing that it led to
inequity, fraud or malfeasance (TNS Holdings v.
MKI Sec. Corp., 92 N.Y.2d 335, 339, 680 N.Y.S.2d
891, 703 N.E.2d 749).x x x x
In reaching that conclusion, we specifically reject
a number of plaintiffs' assertions, including the
entirely erroneous claims that our determination
on the prior appeal (252 A.D.2d 609, 675 N.Y.S.2d
234, supra) set forth a roadmap for the proof
required at trial and mandated a verdict in favor
of plaintiffs upon their production of evidence
that supported the decision's listed facts. To the
contrary, our decision was predicated upon the
existence of such evidence, absent which we
would have granted summary judgment in favor of
defendant. We are equally unpersuaded by
plaintiffs' continued reliance upon defendant's
December 1991 unilateral conversion of its
intercompany loans with LGV from debt to equity,
which constituted nothing more than a
bookkeeping transaction and had no apparent
effect on LGV's obligations to defendant or
defendant's right to foreclose on its mortgage.[72]
This doctrine is good law under Philippine
jurisdiction.
In Concept Builders, Inc. v. National Labor
Relations Commission,[73] we laid down the test
in determining the applicability of the doctrine of
piercing the veil of corporate fiction, to wit:
1. Control, not mere majority or complete
control, but complete domination, not only of
finances but of policy and business practice in
respect to the transaction attacked so that the
corporate entity as to this transaction had at the
time no separate mind, will or existence of its
own.
2. Such control must have been used by the
defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other
positive legal duty, or dishonest and, unjust act in
contravention of plaintiffs legal rights; and,
3. The aforesaid control and breach of duty must
proximately cause the injury or unjust loss
complained of.x x x x
Time and again, we have reiterated that mere
ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock
of a corporation is not, by itself, a sufficient
ground for disregarding a separate corporate
personality.[74] It is basic that a corporation has a
personality separate and distinct from that
composing it as well as from that of any other
legal entity to which it may be related. Clear and
convincing evidence is needed to pierce the veil
of corporate fiction.[75]
In this case, the mere interlocking of directors
and officers does not warrant piercing the
separate corporate personalities of MMC and GHI.
Not only must there be a showing that there was
majority or complete control, but complete
domination, not only of finances but of policy and
business practice in respect to the transaction
attacked, so that the corporate entity as to this
transaction had at the time no separate mind, will
or existence of its own. The mortgage deed
transaction attacked as a basis for piercing the
corporate veil was a transaction that was an
offshoot, a derivative, of the mortgages earlier
constituted in the Promissory Notes dated October
2, 1992. But these Promissory Notes with
mortgage were executed by GHI with APT in the
name of MMC, in a full privatization process. It
appears that if there was any control or
domination exercised over MMC, it was APT, not
GHI, that wielded it. Neither can we conclude
that the constitution of the loan nearly four (4)
years prior to NAMAWUs notice of strike could
have been the proximate cause of the injury of
NAMAWU for having been deprived of MMCs
corporate assets.
On the propriety of injunction to prevent
execution by the NLRC on the properties of third-
party claimants
It is settled that a Regional Trial Court can validly
issue a Temporary Restraining Order (TRO) and,
later, a writ of preliminary injunction to prevent
enforcement of a writ of execution issued by a
labor tribunal on the basis of a third-partys claim
of ownership over the properties levied upon.[76]
While, as a rule, no temporary or permanent
injunction or restraining order in any case
involving or growing out of a labor dispute shall be
issued by any court--where the writ of execution
issued by a labor tribunal is sought to be enforced
upon the property of a stranger to the labor
dispute, even upon a mere prima facie showing of
ownership of such claimant--a separate action for
injunctive relief against such levy may be
maintained in court, since said action neither
involves nor grows out of a labor dispute insofar as
the third party is concerned.[77] Instructively,
National Mines and Allied Workers Union v.
Vera[78]
Petitioners' reliance on the provision of Art. 254 of
the New Labor Code (herein earlier quoted) which
prohibits injunctions or restraining orders in any
case involving or growing out of a 'labor dispute' is
not well-taken. This has no application to the case
at bar. Civil Case No. 2749 is one which neither
"involves" nor "grows out" of a labor dispute. What
'involves' or 'grows out' of a labor dispute is the
NLRC case between petitioners and the judgment
debtor, Philippine Iron Mines. The private
respondents are not parties to the said NLRC case.
Civil Case No. 2749 does not put in issue either
the fact or validity of the proceeding in theNLRC
case nor the decision therein rendered, much less
the writ of execution issued thereunder. It does
not seek to enjoin the execution of the decision
against the properties of the judgment debtor.
What is sought to be tried in Civil Case No. 2749 is
whether the NLRC's decision and writ of
execution, above mentioned, shall be permitted
to be satisfied against properties of private
respondents, and not of the judgment debtor
named in the NLRC decision and writ of execution.
Such a recourse is allowed under the provisions of
Section 17, Rule 39 of the Rules of Court.
To sustain petitioners' theory will inevitably lead
to disastrous consequences and lend judicial
imprimatur to deprivation of property without due
process of law. Simply because a writ of execution
was issued by the NLRC does not authorize the
sheriff implementing the same to levy on
anybody's property. To deny the victim of the
wrongful levy, the recourse such as that availed of
by the herein private respondents, under the
pretext that no court of general jurisdiction can
interfere with the writ of execution issued in a
labor dispute, will be sanctioning a greater evil
than that sought to be avoided by the Labor Code
provision in question. Certainly, that could not
have been the intendment of the law creating the
NLRC. For well-settled is the rule that the power
of a court to execute its judgment extends only
over properties unquestionably belonging to the
judgment debtor.
Likewise, since the third-party claimant is not one
of the parties to the action, he cannot, strictly
speaking, appeal from the order denying his
claim, but he should file a separate reivindicatory
action against the execution creditor or the
purchaser of the property after the sale at public
auction, or a complaint for damages against the
bond filed by the judgment creditor in favor of
the sheriff.[79]
A separate civil action for recovery of ownership
of the property would not constitute interference
with the powers or processes of the labor tribunal
which rendered the judgment to execute upon the
levied properties. The property levied upon being
that of a stranger is not subject to levy. Thus, a
separate action for recovery, upon a claim and
prima facie showing of ownership by the
petitioner, cannot be considered as
interference.[80]
Upon the findings and conclusions we have
reached above, petitioner is situated squarely as
such third-party claimant. The questioned
restraining order of the lower court, as well as the
order granting preliminary injunction, does not
constitute interference with the powers or
processes of the labor department. The
registration of the mortgage document operated
as notice to all on the matter of the mortgagees
prior claims. Official proceedings relative to the
foreclosure of the subject properties constituted a
prima facie showing of ownership of such claimant
to support the issuance of injunctive reliefs.
As correctly held by the lower court:
The subject incidents for TRO and/or Writ of
Injunction were summarily heard and in resolving
the same, the Court believes, that the petitioner
has a clear and unmistakable right over the levied
properties. The existence of the subject Deed of
Real Estate and Chattel Mortgage, the fact that
petitioner initiated a foreclosure of said
properties before the Clerk of Court and Ex-
Officio Sheriff, RTC Branch 61, Kabankalan City on
July 13, 2001, the fact that said Ex-Officio Sheriff
and the Clerk of Court issue a Notice of
Foreclosure, Possession and Control over said
mortgaged properties on July 19, 2001 and the
fact that a Sheriffs Certificate of Sale was issued
on December 3, 2001 are the basis of its
conclusion. Unless said mortgage contract is
annulled or declared null and void, the
presumption of regularity of transaction must be
considered and said document must be looked
[upon] as valid.
Notably, the Office of the Solicitor General also
aptly observed that when the respondent
maintained that the Deed of Real Estate and
Chattel mortgage was entered into in fraud of
creditors, it thereby admitted that the mortgage
was not void, but merely rescissible under Article
1381(3) of the Civil Code; and, therefore, an
independent action is needed to rescind the
contract of mortgage.[81] We, however, hold that
such an independent action cannot now be
maintained, because the mortgage has been
previously recognized to exist, with a valid
consideration, in Republic, etc., v. G Holdings,
Inc.
A final word
The Court notes that the case filed with the lower
court involves a principal action for injunction to
prohibit execution over properties belonging to a
third party not impleaded in the legal dispute
between NAMAWU and MMC. We have observed,
however, that the lower court and the CA failed
to take judicial notice of, or to consider, our
Decisions in Republic, etc., v. G Holdings, Inc.,
and Maricalum Mining Corporation v. Brion and
NAMAWU, in which we respectively recognized the
entitlement of GHI to the shares and the company
notes of MMC (under the Purchase and Sale
Agreement), and the rights of NAMAWU to its
labor claims. At this stage, therefore, neither the
lower court nor the CA, nor even this Court, can
depart from our findings in those two cases
because of the doctrine of stare decisis.
From our discussion above, we now rule that the
trial court, in issuing the questioned orders, did
not commit grave abuse of discretion, because its
issuance was amply supported by factual and legal
bases.
We are not unmindful, however, of the fact that
the labor claims of NAMAWU, acknowledged by
this Court in Maricalum, still awaits final
execution. As success fades from NAMAWUs efforts
to execute on the properties of MMC, which were
validly foreclosed by GHI, we see that NAMAWU
always had, and may still have, ample
supplemental remedies found in Rule 39 of the
Rules of Court in order to protect its rights against
MMC. These include the examination of the
judgment obligor when judgment is
unsatisfied,[82] the examination of the obligors of
judgment obligors,[83] or even the resort to
receivership.[84]
While, theoretically, this case is not ended by this
decision, since the lower court is still to try the
case filed with it and decide it on the merits, the
matter of whether the mortgage and foreclosure
of the assets that are the subject of said
foreclosure is ended herein, for the third and final
time. So also is the consequential issue of the
separate and distinct personalities of GHI and
MMC. Having resolved these principal issues with
certainty, we find no more need to remand the
case to the lower court, only for the purpose of
resolving again the matter of whether GHI owns
the properties that were the subject of the latters
foreclosure.
WHEREFORE, the Petition is GRANTED. The
Decision of the Court of Appeals dated October
14, 2003 is SET ASIDE. The Omnibus Order dated
December 4, 2002 of the Regional Trial Court,
Branch 61 of Kabankalan City, Negros Occidental
is AFFIRMED. No costs.
SO ORDERED.
SPOUSES OMAR and MOSHIERA LATIP, Petitioners, -
versus - ROSALIE PALAA CHUA, Respondent.
G.R. No. 177809
Challenged in this petition for review on certiorari
is the Court of Appeals (CA) Decision in CA-G.R. SP
No. 89300:[1] (1) reversing the decision of the
Regional Trial Court (RTC), Branch 274, Paraaque
City in Civil Case No. 04-0052;[2] and (2)
reinstating and affirming in toto the decision of
the Metropolitan Trial Court (MeTC), Branch 78, of
the same city in Civil Case No. 2001-315.[3]
First, we sift through the varying facts found by
the different lower courts.
The facts parleyed by the MeTC show that
respondent Rosalie Chua (Rosalie) is the owner of
Roferxane Building, a commercial building,
located at No. 158 Quirino Avenue corner
Redemptorist Road, Barangay Baclaran, Paraaque
City.
On July 6, 2001, Rosalie filed a complaint for
unlawful detainer plus damages against
petitioners, Spouses Omar and Moshiera Latip
(Spouses Latip). Rosalie attached to the complaint
a contract of lease over two cubicles in Roferxane
Bldg., signed by Rosalie, as lessor, and by Spouses
Latip, as lessees thereof.
The contract of lease reads:
CONTRACT OF LEASE
KNOW ALL MEN BY THESE PRESENTS:
This Contract of Lease is entered into by and
between:
ROSALIE PALAA CHUA, Filipino, of legal age,
married with office at 2/F JOFERXAN Building,
F.B. Harrison St., Brgy. Baclaran, Paraaque City,
and hereinafter referred to as the LESSOR, - and -
OMAR LATIEF marriage to MOSHIERA LATIEF, also
both Filipino, of legal age with address at 24
Anahan St. RGV Homes Paraaque City, and
hereinafter referred to as the LESSEES.
WITNESSETH
1. That the LESSOR is the owner of the
commercial building erected at the lot of the
Toribio G. Reyes Realty, Inc. situated at 158
Quirino Ave. corner Redemptorist Road, Barangay
Baclaran in Paraaque Ctiy;
2. That LESSOR hereby leases two (2) cubicles
located at the 1st & 2nd Floor, of said building
with an area of 56 square meters under the
following terms and conditions, to wit:
a. That the monthly rental of the two (2) cubicles
in PESOS, SIXTY THOUSAND (P60,000.00),
Philippine Currency. However, due to unstable
power of the peso LESSEES agrees to a yearly
increase of ten (10%) percent of the monthly
rental;
b. That any rental in-arrears shall be paid before
the expiration of the contract to the LESSOR;
c. That LESSEES agree to pay their own water and
electric consumptions in the said premises;
d. That the LESSEES shall not sub-let or make any
alteration in the cubicles without a written
permission from the LESSOR. Provided, however,
that at the termination of the Contract, the lessee
shall return the two cubicles in its original
conditions at their expenses;
e. That the LESSEES agree to keep the cubicles in
a safe and sanitary conditions, and shall not keep
any kinds of flammable or combustible materials.
f. That in case the LESSEES fail to pay the monthly
rental every time it falls due or violate any of the
above conditions shall be enough ground to
terminate this Contract of Lease. Provided,
further, that, if the LESSEES pre-terminate this
Contract they shall pay the rentals for the unused
month or period by way of liquidated damages in
favor of the LESSOR.
3. That this Contract of Lease is for six (6) yrs.
only starting from December _____, 1999 or up to
December ______, 2005.
IN WITNESS WHEREOF, the parties have hereunto
affixed their hands this ___th day of December,
1999 at City of Manila, Philippines.
(sgd.) (sgd.)
ROSALIE PALAA-CHUA MOSHIERA LATIEF L E S S O R
LESSEE
(sgd.) OMAR LATIEF L E S S E E
SIGNED IN THE PRESENCE OF:
(sgd.) (sgd.)
1. Daisy C. Ramos 2. Ferdinand C. Chua
Republic of the Philippines)
C i t y o f M a n i l a )s.s.
ACKNOWLEDGMENT
BEFORE ME, a Notary Public for and in the City of
Manila personally appeared the following persons:
Rosalie P. Chua with CTC No. 05769706 at
Paraaque City on 2/1/99; Moshiera Latief with
CTC No. 12885654 at Paraaque City on 11/11/99;
Omar Latief with CTC No. 12885653 Paraaque City
on Nov. 11, 1999.
known to me and to me known to be the same
persons who executed this instrument consisting
of two (2) pages duly signed by them and the two
(2) instrumental witnesses and acknowledged to
me that the same is their free and voluntarily acts
and deeds.
IN FAITH AND TESTIMONY WHEREOF, I have
hereunto affixed my hand and Notarial Seal this
____th day of December, 1999 at the City of
Manila, Philippines.
Doc. No. _____ ATTY. CALIXTRO B. RAMOS
Page No. _____ NOTARY PUBLIC
Book No. LXV Until December 31, 2000
Series of 1999 PTR # 374145-1/11/99/-Mla.
IBP # 00262-Life Member[4]
A year after the commencement of the lease and
with Spouses Latip already occupying the leased
cubicles, Rosalie, through counsel, sent the
spouses a letter demanding payment of back
rentals and should they fail to do so, to vacate the
leased cubicles. When Spouses Latip did not heed
Rosalies demand, she instituted the aforesaid
complaint.
In their Answer, Spouses Latip refuted Rosalies
claims. They averred that the lease of the two (2)
cubicles had already been paid in full as
evidenced by receipts showing payment to Rosalie
of the total amount of P2,570,000.00. The three
(3) receipts, in Rosalies handwriting, read:
1. I received the amount of P2,000,000.00 (two
million pesos) from [O]mar Latip & Moshi[e]ra
Latip for the payment of 2 cubicles located at 158
Quirino Ave. corner Redemptorist Rd.[,] Baclaran
P[ara]aque City. ROFERLAND[5] Bldg. with the
terms 6 yrs. Contract.
P2,000,000.00 ______(sgd.)______ CHECK #
3767924 Rosalie Chua
FAR EAST BANK ______(sgd.)______ Ferdinand
Chua
2. Received cash P500,000.00 From Moshiera Latip
(sgd.) 12/10/99 Rosalie ChuA Received by
3. Received cash P70,000.00 from Moshiera Latip
12-11-99 ____(sgd.)___ Received by:[6]
Spouses Latip asseverated that sometime in
October 1999, Rosalie offered for sale lease rights
over two (2) cubicles in Roferxane Bldg. Having in
mind the brisk sale of goods during the Christmas
season, they readily accepted Rosalies offer to
purchase lease rights in Roferxane Bldg., which
was still under construction at the time. According
to Spouses Latip, the immediate payment of
P2,570,000.00 would be used to finish
construction of the building giving them first
priority in the occupation of the finished cubicles.
Thereafter, in December 1999, as soon as two (2)
cubicles were finished, Spouses Latip occupied
them without waiting for the completion of five
(5) other stalls. Spouses Latip averred that the
contract of lease they signed had been novated by
their purchase of lease rights of the subject
cubicles. Thus, they were surprised to receive a
demand letter from Rosalies counsel and the
subsequent filing of a complaint against them.
The MeTC ruled in favor of Rosalie, viz.:
WHEREFORE, premises considered, the [Spouses
Latip] and all persons claiming rights under them
are hereby ordered to VACATE the property
subject of this case located at the 1st and 2nd
floors of a Roferxane Building situated at No. 158
Quirino Avenue corner Redemptorist Road,
Barangay Baclaran, Paraaque City. The [Spouses
Latip] are also ordered to PAY [Rosalie] the
amount of SEVEN HUNDRED TWENTY THOUSAND
PESOS (P720,000.00) as rent arrearages for the
period of December 1999 to December 2000 and
thereafter to PAY [Rosalie] the amount of
SEVENTY TWO THOUSAND PESOS (P72,000.00) per
month from January 2001 to December 2002, plus
ten percent (10%) increase for each and every
succeeding years thereafter as stipulated in
paragraph 2(a) of the Contract of Lease x x x,
until the [Spouses Latip] have completely vacated
the leased premises subject of this lease.
Finally[,] the [Spouses Latip] are hereby ordered
to PAY [Rosalie] the amount of TWENTY
THOUSAND PESOS (P20,000.00) as attorneys fees
and TWO THOUSAND PESOS (P2,000.00) per
[Rosalies] appearance in Court as appearance fee
and to PAY the cost of this suit.
[Spouses Latips] counterclaim is hereby DISMISSED
for lack of merit. SO ORDERED.[7]
In stark contrast, the RTC reversed the MeTC and
ruled in favor of Spouses Latip. The RTC did not
give credence to the contract of lease, ruling that
it was not notarized and, in all other substantial
aspects, incomplete. Further on this point, the
RTC noted that the contract of lease lacked: (1)
the signature of Ferdinand Chua, Rosalies
husband; (2) the signatures of Spouses Latip on
the first page thereof; (3) the specific dates for
the term of the contract which only stated that
the lease is for six (6) y[ea]rs only starting from
December 1999 or up to December 2005; (4) the
exact date of execution of the document, albeit
the month of December and year 1999 are
indicated therein; and (5) the provision for
payment of deposit or advance rental which is
supposedly uncommon in big commercial lease
contracts.
The RTC believed the claim of Spouses Latip that
the contract of lease was modified and
supplemented; and the entire lease rentals for the
two (2) cubicles for six (6) years had already been
paid by Spouses Latip in the amount of
P2,570,000.00. As to Rosalies claim that her
receipt of P2,570,000.00 was simply goodwill
payment by prospective lessees to their lessor,
and not payment for the purchase of lease rights,
the RTC shot this down and pointed out that,
apart from her bare allegations, Rosalie did not
adduce evidence to substantiate this claim. On
the whole, the RTC declared an existent lease
between the parties for a period of six (6) years,
and already fully paid for by Spouses Latip. Thus,
Spouses Latip could not be ejected from the
leased premises until expiration of the lease
period.
The RTC disposed of the appeal, viz.:
WHEREFORE, all the foregoing considered, the
appealed decision of the [MeTC] dated January
13, 2004 is reversed as judgment is hereby
rendered for the [Spouses Latip] and against
[Rosalie], ordering the latter to pay the former
(1) the sum of PhP1,000,000.00 as moral damages;
(2) the sum of PhP500,000.00 as exemplary
damages;
(3) the sum of PhP250,000.00 plus PhP3,000.00
per court appearance as and for attorneys fees;
and
(4) costs of suit. SO ORDERED.[8]
In yet another turn of events, the CA, as
previously mentioned, reversed the RTC and
reinstated the decision of the MeTC. The CA ruled
that the contract of lease, albeit lacking the
signature of Ferdinand and not notarized,
remained a complete and valid contract. As the
MeTC had, the CA likewise found that the alleged
defects in the contract of lease did not render the
contract ineffective. On the issue of whether the
amount of P2,570,000.00 merely constituted
payment of goodwill money, the CA took judicial
notice of this common practice in the area of
Baclaran, especially around the Redemptorist
Church. According to the appellate court, this
judicial notice was bolstered by the Joint Sworn
Declaration of the stallholders at Roferxane Bldg.
that they all had paid goodwill money to Rosalie
prior to occupying the stalls thereat. Thus, ruling
on Rosalies appeal, the CA disposed of the case:
WHEREFORE, in view of the foregoing, the Petition
for Review is hereby GRANTED. The assailed
decision of RTC Paraaque City Branch 274 dated
September 24, 2004 is hereby REVERSED and SET
ASIDE, and the January 13, 2004 decision of the
MeTC is REINSTATED and AFFIRMED en toto. SO
ORDERED.[9]
Not surprisingly, Spouses Latip filed the present
appeal.
The singular issue for our resolution is whether
Spouses Latip should be ejected from the leased
cubicles.
As previously adverted to, the CA, in ruling for
Rosalie and upholding the ejectment of Spouses
Latip, took judicial notice of the alleged practice
of prospective lessees in the Baclaran area to pay
goodwill money to the lessor.
We disagree.
Sections 1 and 2 of Rule 129 of the Rules of Court
declare when the taking of judicial notice is
mandatory or discretionary on the courts, thus:
SECTION 1. Judicial notice, when mandatory. A
court shall take judicial notice, without the
introduction of evidence, of the existence and
territorial extent of states, their political history,
forms of government and symbols of nationality,
the law of nations, the admiralty and maritime
courts of the world and their seals, the political
constitution and history of the Philippines, the
official acts of the legislative, executive and
judicial departments of the Philippines, the laws
of nature, the measure of time, and the
geographical divisions.
SEC. 2. Judicial notice, when discretionary. A
court may take judicial notice of matters which
are of public knowledge, or are capable of
unquestionable demonstration or ought to be
known to judges because of their judicial
functions.
On this point, State Prosecutors v. Muro[10] is
instructive:
I. The doctrine of judicial notice rests on the
wisdom and discretion of the courts. The power to
take judicial notice is to be exercised by courts
with caution; care must be taken that the
requisite notoriety exists; and every reasonable
doubt on the subject should be promptly resolved
in the negative.
Generally speaking, matters of judicial notice
have three material requisites: (1) the matter
must be one of common and general knowledge;
(2) it must be well and authoritatively settled and
not doubtful or uncertain; and (3) it must be
known to be within the limits of the jurisdiction of
the court. The principal guide in determining what
facts may be assumed to be judicially known is
that of notoriety. Hence, it can be said that
judicial notice is limited to facts evidenced by
public records and facts of general notoriety.
To say that a court will take judicial notice of a
fact is merely another way of saying that the usual
form of evidence will be dispensed with if
knowledge of the fact can be otherwise acquired.
This is because the court assumes that the matter
is so notorious that it will not be disputed. But
judicial notice is not judicial knowledge. The
mere personal knowledge of the judge is not the
judicial knowledge of the court, and he is not
authorized to make his individual knowledge of a
fact, not generally or professionally known, the
basis of his action. Judicial cognizance is taken
only of those matters which are commonly known.
Things of common knowledge, of which courts
take judicial notice, may be matters coming to
the knowledge of men generally in the course of
the ordinary experiences of life, or they may be
matters which are generally accepted by mankind
as true and are capable of ready and unquestioned
demonstration. Thus, facts which are universally
known, and which may be found in encyclopedias,
dictionaries or other publications, are judicially
noticed, provided they are of such universal
notoriety and so generally understood that they
may be regarded as forming part of the common
knowledge of every person.[11]
We reiterated the requisite of notoriety for the
taking of judicial notice in the recent case of
Expertravel & Tours, Inc. v. Court of Appeals,[12]
which cited State Prosecutors:
Generally speaking, matters of judicial notice
have three material requisites: (1) the matter
must be one of common and general knowledge;
(2) it must be well and authoritatively settled and
not doubtful or uncertain; and (3) it must be
known to be within the limits of the jurisdiction of
the court. The principal guide in determining what
facts may be assumed to be judicially known is
that of notoriety. Hence, it can be said that
judicial notice is limited to facts evidenced by
public records and facts of general notoriety.
Moreover, a judicially noticed fact must be one
not subject to a reasonable dispute in that it is
either: (1) generally known within the territorial
jurisdiction of the trial court; or (2) capable of
accurate and ready determination by resorting to
sources whose accuracy cannot reasonably be
questionable.
Things of common knowledge, of which courts
take judicial notice, may be matters coming to
the knowledge of men generally in the course of
the ordinary experiences of life, or they may be
matters which are generally accepted by mankind
as true and are capable of ready and unquestioned
demonstration. Thus, facts which are universally
known, and which may be found in encyclopedias,
dictionaries or other publications, are judicially
noticed, provided, they are such of universal
notoriety and so generally understood that they
may be regarded as forming part of the common
knowledge of every person. As the common
knowledge of man ranges far and wide, a wide
variety of particular facts have been judicially
noticed as being matters of common knowledge.
But a court cannot take judicial notice of any fact
which, in part, is dependent on the existence or
non-existence of a fact of which the court has no
constructive knowledge.
From the foregoing provisions of law and our
holdings thereon, it is apparent that the matter
which the appellate court took judicial notice of
does not meet the requisite of notoriety. To begin
with, only the CA took judicial notice of this
supposed practice to pay goodwill money to the
lessor in the Baclaran area. Neither the MeTC nor
the RTC, with the former even ruling in favor of
Rosalie, found that the practice was of common
knowledge or notoriously known.
We note that the RTC specifically ruled that
Rosalie, apart from her bare allegation, adduced
no evidence to prove her claim that the amount of
P2,570,000.00 simply constituted the payment of
goodwill money. Subsequently, Rosalie attached
an annex to her petition for review before the CA,
containing a joint declaration under oath by other
stallholders in Roferxane Bldg. that they had paid
goodwill money to Rosalie as their lessor. On this
score, we emphasize that the reason why our
rules on evidence provide for matters that need
not be proved under Rule 129, specifically on
judicial notice, is to dispense with the taking of
the usual form of evidence on a certain matter so
notoriously known, it will not be disputed by the
parties.
However, in this case, the requisite of notoriety is
belied by the necessity of attaching documentary
evidence, i.e., the Joint Affidavit of the
stallholders, to Rosalies appeal before the CA. In
short, the alleged practice still had to be proven
by Rosalie; contravening the title itself of Rule
129 of the Rules of Court What need not be
proved.
Apparently, only that particular division of the CA
had knowledge of the practice to pay goodwill
money in the Baclaran area. As was held in State
Prosecutors, justices and judges alike ought to be
reminded that the power to take judicial notice
must be exercised with caution and every
reasonable doubt on the subject should be ample
reason for the claim of judicial notice to be
promptly resolved in the negative.
Ultimately, on the issue of whether Spouses Latip
ought to be ejected from the leased cubicles,
what remains in evidence is the documentary
evidence signed by both parties the contract of
lease and the receipts evidencing payment of
P2,570,000.00.
We need not be unduly detained by the issue of
which documents were executed first or if there
was a novation of the contract of lease. As had
been found by the RTC, the lease contract and the
receipts for the amount of P2,570,000.00 can be
reconciled or harmonized. The RTC declared:
Definitely, the parties entered into a lease
agreement over two (2) cubicles of the 1st and
2nd floors of Roferxane (Roferland) Building, a
commercial building located at 158 Quirino
Avenue, corner Redemptorist Road, Baclaran,
Paraaque City and belonging to [Rosalie]. The
lease agreement is for a term of six (6) years
commencing in December 1999 up to December
2005. This agreement was embodied in a Contract
of Lease x x x. The terms of this lease contract,
however, are modified or supplemented by
another agreement between the parties executed
and or entered into in or about the time of
execution of the lease contract, which exact date
of execution of the latter is unclear.[13]
We agree with the RTCs holding only up to that
point. There exists a lease agreement between
the parties as set forth in the contract of lease
which is a complete document. It need not be
signed by Ferdinand Chua as he likewise did not
sign the other two receipts for P500,000.00 and
P70,000.00, respectively, which contained only
the signature of Rosalie. Besides, it is undisputed
that Rosalie owns and leases the stalls in
Roferxane Bldg.; thus, doing away with the need
for her husbands consent. The findings of the
three lower courts concur on this fact.
The contract of lease has a period of six (6) years
commencing in December 1999. This fact is again
buttressed by Spouses Latips admission that they
occupied the property forthwith in December
1999, bearing in mind the brisk sales during the
holiday season.
On the conflicting interpretations by the lower
courts of the receipts amounting to
P2,570,000.00, we hold that the practice of
payment of goodwill money in the Baclaran area is
an inadequate subject of judicial notice. Neither
was Rosalie able to provide sufficient evidence
that, apart from the belatedly submitted Joint
Affidavit of the stallholders of Roferxane Bldg.,
the said amount was simply for the payment of
goodwill money, and not payment for advance
rentals by Spouses Latip.
In interpreting the evidence before us, we are
guided by the Civil Code provisions on
interpretation of contracts, to wit:
Art. 1371. In order to judge the intention of the
contracting parties, their contemporaneous and
subsequent acts shall be principally considered.
Art. 1372. However general the terms of a
contract may be, they shall not be understood to
comprehend things that are distinct and cases
that are different from those which the parties
intended to agree.
Art. 1373. If some stipulation of any contract
should admit of several meanings, it shall be
understood as bearing that import which is most
adequate to render it effectual.
The RTC was already on the right track when it
declared that the receipts for P2,570,000.00
modified or supplemented the contract of lease.
However, it made a quantum leap when it ruled
that the amount was payment for rentals of the
two (2) cubicles for the entire six-year period. We
cannot subscribe to this finding. To obviate
confusion and for clarity, the contents of the
receipts, already set forth above, are again
reproduced:
1. I received the amount of P2,000,000.00 (two
million pesos) from [O]mar Latip & Moshi[e]ra
Latip for the payment of 2 cubicles located at 158
Quirino Ave. corner Redemptorist Rd.[,] Baclaran
P[ara]que City. ROFERLAND Bldg. with the terms 6
yrs. Contract.
P2,000,000.00 ______(sgd.)______ CHECK #
3767924 Rosalie Chua FAR EAST
BANK______(sgd.)______ Ferdinand Chua
2. Received cash
P500,000.00 From Moshiera Latip (sgd.) 12/10/99
Rosalie Chua Received by
3. Received cash P70,000.00 froM Moshiera LatiP
12-11-99 ___(sgd.) ____ Received by:[14]
There is nothing on the receipts and on record
that the payment and receipt of P2,570,000.00
referred to full payment of rentals for the whole
period of the lease. All three receipts state
Rosalies receipt of cash in varying amounts. The
first receipt for P2,000,000.00 did state payment
for two (2) cubicles, but this cannot mean full
payment of rentals for the entire lease period
when there are no words to that effect. Further,
two receipts were subsequently executed pointing
to the obvious fact that the P2,000,000.00 is not
for full payment of rentals. Thus, since the
contract of lease remained operative, we find
that Rosalies receipt of the monies should be
considered as advanced rentals on the leased
cubicles. This conclusion is bolstered by the fact
that Rosalie demanded payment of the lease
rentals only in 2000, a full year after the
commencement of the lease.
Finally, we note that the lease ended in 2005.
Consequently, Spouses Latip can be ejected from
the leased premises. They are liable to Rosalie for
unpaid rentals on the lease of the two (2) cubicles
in accordance with the stipulations on rentals in
the Contract of Lease. However, the amount of
P2,570,000.00, covering advance rentals, must be
deducted from this liability of Spouses Latip to
Rosalie.
WHEREFORE, premises considered, the petition is
hereby GRANTED. The decision of the Court of
Appeals in CA-G.R. SP No. 89300 is REVERSED. The
petitioners, spouses Omar and Moshiera Latip, are
liable to respondent Rosalie Chua for unpaid
rentals minus the amount of P2,570,000.00
already received by her as advance rentals. No
costs.
SO ORDERED.
CORINTHIAN GARDENS ASSOCIATION, INC.,
Petitioner, - versus - SPOUSES REYNALDO anD
MARIA LUISA TANJANGCO, and SPOUSES FRANK
and TERESITA CUASO, Respondents.
G.R. No. 160795
Before this Court is a Petition for Review on
Certiorari[1] under Rule 45 of the Rules of Civil
Procedure seeking the reversal of the Court of
Appeals (CA) Decision[2] dated January 31, 2003
in CA-G.R. CV No. 43217, which reversed and set
aside the Decision[3] of the Regional Trial Court
(RTC) of Quezon City, dated March 30, 1993.
The Antecedents:
Respondents-spouses Reynaldo and Maria Luisa
Tanjangco (the Tanjangcos) own Lots 68 and 69
covered by Transfer Certificates of Title (TCT) No.
242245[4] and 282961[5] respectively, located at
Corinthian Gardens Subdivision, Quezon City,
which is managed by petitioner Corinthian
Gardens Association, Inc. (Corinthian). On the
other hand, respondents-spouses Frank and
Teresita Cuaso (the Cuasos) own Lot 65 which is
adjacent to the Tanjangcos lots.
Before the Cuasos constructed their house on Lot
65, a relocation survey was necessary. As
Geodetic Engineer Democrito De Dios (Engr. De
Dios), operating under the business name D.M. De
Dios Realty and Surveying, conducted all the
previous surveys for the subdivision's developer,
Corinthian referred Engr. De Dios to the Cuasos.
Before, during and after the construction of the
said house, Corinthian conducted periodic ocular
inspections in order to determine compliance with
the approved plans pursuant to the Manual of
Rules and Regulations of Corinthian.[6]
Unfortunately, after the Cuasos constructed their
house employing the services of C.B. Paraz &
Construction Co., Inc. (C.B. Paraz) as builder,
their perimeter fence encroached on the
Tanjangcos Lot 69 by 87 square meters.
No amicable settlement was reached between the
parties. Thus, the Tanjangcos demanded that the
Cuasos demolish the perimeter fence but the
latter failed and refused, prompting the
Tanjangcos to file with the RTC a suit against the
Cuasos for Recovery of Possession with
Damages.[7]
Eventually, the Cuasos filed a Third-Party
Complaint[8] against Corinthian, C.B. Paraz and
Engr. De Dios. The Cuasos ascribed negligence to
C.B. Paraz for its failure to ascertain the proper
specifications of their house, and to Engr. De Dios
for his failure to undertake an accurate relocation
survey, thereby, exposing them to litigation. The
Cuasos also faulted Corinthian for approving their
relocation survey and building plans without
verifying their accuracy and in making
representations as to Engr. De Dios' integrity and
competence. The Cuasos alleged that had
Corinthian exercised diligence in performing its
duty, they would not have been involved in a
boundary dispute with the Tanjangcos. Thus, the
Cuasos opined that Corinthian should also be held
answerable for any damages that they might incur
as a result of such construction.
On March 30, 1993, the RTC rendered a Decision in
favor of the Tanjangcos. It ruled that the Cuasos
perimeter wall encroached on the land of the
Tanjangos by 87 square meters. It, however, ruled
that the Cuasos were builders in good faith, and
gave the Tanjangcos the option to sell and the
Cuasos the option to buy the encroaching portion
of the land, at a price to be agreed upon by the
parties within sixty (60) days from receipt of the
said Decision. In the event that the Cuasos were
unable and unwilling to purchase the said portion,
the perimeter wall should be demolished at the
latters expense. The RTC also ordered the Cuasos
to pay monthly rentals of P2,000.00 commencing
from the time of the filing of the complaint. The
RTC likewise held that C.B. Paraz was grossly
negligent in not taking into account the correct
boundaries of Cuasos lot when it constructed the
house. It, thus, ordered C.B. Paraz to pay moral
and exemplary damages as well as attorneys fees
to the Tanjangcos and the Cuasos. The third-party
complaint against Corinthian and Engr. De Dios, on
the other hand, was dismissed for lack of cause of
action. The Tanjangcos filed a Motion for
Reconsideration[9] of the said RTC Decision which
the RTC, however, denied in its Order[10] dated
June 28, 1993. Dissatisfied with the RTC ruling,
the Tanjangcos, the Cuasos, and C.B. Paraz all
appealed to the CA.
On appeal, the CA reversed and set aside the RTC
Decision. It held that the Cuasos acted in bad
faith in land-grabbing the 87 square meter-portion
of Lot 69 as of April 5, 1989. Correlatively, the CA
allowed the Tanjangcos to exercise the rights
granted under Articles 449, 450, 451 and 549 of
the New Civil Code, which include the right to
demand the demolition of the offending perimeter
wall after reimbursing the Cuasos the necessary
expenses for the preservation of the encroached
area. The Cuasos were ordered to pay monthly
rentals of P10,000.00 for the use, enjoyment and
occupancy of the lot from 1989 up to the time
they vacate the property considering the location
and category of the same. They were, likewise,
ordered to pay the Tanjangcos P100,000.00, as
moral damages, P50,000.00 as exemplary
damages, and P150,000.00 as attorneys fees. The
CA also imposed six percent (6%) interest per
annum on all the awards. The Cuasos appeal
against the Tanjangcos, on the other hand, was
dismissed for lack of merit. On the third-party
complaints, Corinthian, C.B. Paraz and Engr. De
Dios were all found negligent in performing their
respective duties and so they were ordered to
contribute five percent (5%) each, or a total of
fifteen percent (15%) to all judgment sums and
amounts that the Cuasos shall eventually pay
under the decision, also with interest of six
percent (6%) per annum.
Only Corinthian filed a Motion for
Reconsideration[11] of the CA Decision within the
15-day reglementary period. No motion for
reconsideration was filed by the Cuasos, C.B.
Paraz and/or Engr. De Dios.
About six (6) months later, or on August 12, 2003,
the Cuasos filed a Comment/Manifestation[12]
praying that they be allowed to adopt Corinthians
Motion for Reconsideration.
In its Resolution[13] dated November 14, 2003,
the CA denied Corinthians Motion for
Reconsideration.
Hence, Corinthian filed the instant Petition for
Review on Certiorari assailing the CA Decision and
Resolution, and impleading the Cuasos as one of
the respondents being the third-party plaintiffs in
the RTC.
This Court gave due course to Corinthians petition
and required the parties to submit their
respective memorandum.[14] In compliance, the
Cuasos submitted their Memorandum[15] and
Supplement to Memorandum,[16] which were both
noted by this Court in its Resolutions dated
January 10, 2005[17] and February 2, 2005, [18]
respectively.
In the meantime, the Tanjangcos moved for
partial entry of judgment of the CA Decision which
was granted by the CA in its Resolution[19] dated
May 26, 2006, directing the issuance of an Entry of
Judgment and a Certification that its Decision
dated January 31 2003 has become final and
executory with respect to the Cuasos, C.B. Paraz
and Engr. De Dios for their failure to file an
appeal assailing the said Decision before this
Court.
The Tanjangcos then moved for the execution of
the judgment against the Cuasos, specifically the
demolition of the perimeter fence,[20] which was
also granted by the RTC in its Order[21] dated
December 18, 2006.
Other than the filing of an Opposition[22] and a
Motion for Reconsideration[23] before the RTC,
the Cuasos prayed for the issuance of a temporary
restraining order (TRO) and/or preliminary
injunction before this Court to enjoin the
demolition of the perimeter fence. They averred
that the premature demolition of the alleged
encroaching perimeter wall and other
improvements will cause grave and irreparable
damage to them, because what is sought to be
demolished is part of their residence. They
claimed that no amount of money will compensate
for the damage they stand to suffer should any
demolition subsequently prove to be wrongful.
They argued that before any execution can be
carried out, it is necessary to first determine
whether or not Corinthian was negligent in
approving the building plan and whether or not it
acted in good faith in doing so. Such
determination, according to the Cuasos, will in
turn determine whether or not they were in good
faith in constructing the house.[24]
The Tanjangcos opposed the Cuasos' application
for TRO. They countered that the only pending
matter with this Court is the appeal by Corinthian;
hence, the implementation of the January 31,
2003 Decision of the CA against the Cuasos will
not preempt the outcome of the said pending
incidents. Also, any action taken by this Court on
Corinthians petition would not benefit the Cuasos
for they did not appeal the adverse decision
against them. Accordingly, they cannot obtain
affirmative relief from this Court by reason or on
account of the appeal taken by Corinthian. The
appeal, they added, is personal to Corinthian.
Finally, they argued that the Cuasos are now
estopped from questioning the enforcement of the
CA Decision since they issued a managers check to
pay the money judgment.[25]
In this Court's Resolution dated July 18, 2007, we
denied the Cuasos' application for TRO and/or writ
of preliminary injunction for lack of merit.
The denial was based on sound legal principles. It
is axiomatic that to be entitled to the injunctive
writ, one must show that there exists a right to be
protected which is directly threatened by the act
sought to be enjoined. Furthermore, there must
be a showing that the invasion of the right is
material and substantial, that the right of
complainant is clear and unmistakable, and that
there is an urgent and paramount necessity for
the writ to issue in order to prevent serious
damage.[26]
In the Cuasos case, their right to injunctive relief
had not been clearly and unmistakably
demonstrated. They failed to show proof that
there is material and substantial invasion of their
right to warrant the issuance of an injunctive
writ. Indeed, the enforcement of the writ of
execution, which would demolish the Cuasos
perimeter fence, is manifestly prejudicial to their
interest. However, they possess no clear and
unmistakable legal right that merits protection
through the writ of preliminary injunction.[27]
Their right to maintain the said fence had been
declared inferior to the Tanjangcos right to the
demolition of the fence, after the CA judgment
had become final and executory as to the Cuasos.
It bears stressing that the Cuasos failed to appeal
the ruling of the CA. This failure to contest the CA
decision before this Court was fatal to their cause.
It had the effect of an admission that they indeed
acted in bad faith, as they accepted the CA ruling.
The decision of the CA, therefore, became binding
and final as to them.[28] As a matter of fact, the
CA already issued a partial entry of judgment
against the Cuasos.
An injunction to stay a final and executory
decision is unavailing except only after a showing
that facts and circumstances exist which would
render execution unjust or inequitable, or that a
change in the situation of the parties occurred.
Here, no such exception exists as shown by the
facts earlier narrated.[29]
While it is true that this Court noted the
Memorandum and Supplemental Memorandum
filed by the Cuasos, such notation was made only
insofar as Corinthian made them respondents in
this petition. This Court cannot grant to the
Cuasos any affirmative relief as they did not file a
petition questioning the CA ruling. Consequently,
the Decision of the CA holding that the Cuasos
acted in bad faith and that the perimeter fence
may now be demolished cannot be put in issue by
the Cuasos. It is a fundamental principle that a
party who does not appeal, or file a petition for
certiorari, is not entitled to any affirmative
relief.[30] An appellee who is not an appellant
may assign errors in his brief where his purpose is
to maintain the judgment, but he cannot seek
modification or reversal of the judgment or claim
affirmative relief unless he has also appealed.[31]
This applies to C.B. Paraz and Engr. De Dios who
likewise failed to assail the aforementioned CA
Decision.
With this matter put to rest, we now go to the
main issues raised by Corinthian, the sole
petitioner in this case, to wit:
a) Whether or not there is legal basis for the Court
of Appeals to hold petitioner Corinthian Gardens
Association, Inc. liable to pay 5% of the judgment
money to Sps. Tanjangco on account of the
encroachment made by Sps. Cuaso[; and]
b) Whether or not the Court of Appeals has
legal basis to increase unilaterally and without
proof the amount prayed for in the Complaint,
i.e., P2,000.00, as reasonable compensation for
the use and enjoyment of the portion of the lot
encroached upon, to P10,000.00.[32]
Corinthian claims that the approval of the building
plan of the Cuasos was not tainted with
negligence as it did not approve the survey
relocation plan but merely the architectural,
structural and sanitary plans for Cuasos' house;
that the purpose of the said approval is not to
ensure that the house to be erected on a
particular lot is constructed within its boundaries
but only to ensure compliance with the Manual of
Rules and Regulations; that while Corinthian
conducts actual site inspections, the inspection
and approval of the building plans are limited to
table inspection only; that the survey relocation
plan was never submitted for Corinthian's
approval; that the acceptance of the builder's
bond did not make Corinthian automatically liable
for the encroachment and for damages; and that
Corinthian approved the building plan with the
good faith and due diligence required under the
circumstances. It, thus, concludes that it cannot
be held liable to pay five percent (5%) of the
money judgment to the Tanjangcos on account of
the encroachment made by the Cuasos. Likewise,
it finds no legal basis for the CA to unilaterally
increase the amount of the adjudged rent from
P2,000.00 to P10,000.00 which was not prayed for
by the Tanjangcos in their complaint and in the
absence of evidence adduced by the parties.[33]
On the other hand, the Tanjangcos stand by the
ruling of the CA and opine that Corinthian was
negligent in approving the building plan of the
Cuasos. They submit that Corinthian's claim that it
merely conducts table inspections of buildings
further bolsters their argument that Corinthian
was negligent in conveniently and unilaterally
restricting and limiting the coverage of its
approval, contrary to its own Manual of Rules and
Regulations; that the acceptance of a builder's
bond does not automatically make Corinthian
liable but the same affirms the fact that a
homeowner can hold it liable for the
consequences of the approval of a building plan;
and that Corinthian, by regularly demanding and
accepting membership dues, must be wary of its
responsibility to protect the rights and interests of
its members. Lastly, the Tanjangcos contend that
a court can take judicial notice of the general
increase in the rentals of real estate, as in this
case, where the CA considered the value of their
lot in the posh-and-swank Corinthian Gardens
Subdivision and the fact that they were deprived
of it for almost two decades. The Tanjangcos pray
that this Court sustain the ruling of the CA.[34]
The instant case is obviously one for tort, as
governed by Article 2176 of the Civil Code, which
provides:
ART. 2176. Whoever by act or omission causes
damage to another, there being fault or
negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties,
is called a quasi-delict and is governed by the
provisions of this Chapter.
In every tort case filed under this provision,
plaintiff has to prove by a preponderance of
evidence: (1) the damages suffered by the
plaintiff; (2) the fault or negligence of the
defendant or some other person for whose act he
must respond; and (3) the connection of cause and
effect between the fault or negligence and the
damages incurred.[35]
Undeniably, the perimeter fence of the Cuasos
encroached on Lot 69 owned by the Tanjangcos by
87 square meters as duly found by both the RTC
and the CA in accordance with the evidence on
record. As a result, the Tanjangcos suffered
damage in having been deprived of the use of that
portion of their lot encroached upon. Thus, the
primordial issue to be resolved in this case is
whether Corinthian was negligent under the
circumstances and, if so, whether such negligence
contributed to the injury suffered by the
Tanjangcos.
A negligent act is an inadvertent act; it may be
merely carelessly done from a lack of ordinary
prudence and may be one which creates a
situation involving an unreasonable risk to another
because of the expectable action of the other, a
third person, an animal, or a force of nature. A
negligent act is one from which an ordinary
prudent person in the actor's position, in the same
or similar circumstances, would foresee such an
appreciable risk of harm to others as to cause him
not to do the act or to do it in a more careful
manner.[36]
The test to determine the existence of negligence
in a particular case may be stated as follows: Did
the defendant in committing the alleged negligent
act use that reasonable care and caution which an
ordinary person would have used in the same
situation? If not, then he is guilty of negligence.
The law, in effect, adopts the standard supplied
by the imaginary conduct of the discreet
paterfamilias in Roman law. The existence of
negligence in a given case is not determined by
reference to the personal judgment of the actor in
the situation before him. The law considers what
would be reckless, blameworthy, or negligent in a
man of ordinary intelligence and prudence, and
determines liability according to that
standard.[37]
By this test, we find Corinthian negligent.
While the issue of Corinthian's alleged negligence
is factual in character,[38] a review by this Court
is proper because the CA's factual findings differ
from those of the RTC's.[39] Thus, after a
meticulous review of the evidence on record, we
hold that the CA committed no reversible error
when it deviated from the findings of fact of the
RTC. The CA's findings and conclusions are
substantiated by the evidence on record and are
more in accord with law and reason. Indeed, it is
clear that Corinthian failed to exercise the
requisite diligence in insuring that the Cuasos
abide by its Manual of Rules and Regulations,
thereby resulting in the encroachment on the
Tanjangcos property.
We agree with the CA when it aptly held:
Corinthian cannot and should not be allowed to
justify or excuse its negligence by claiming that
its approval of the Cuasos building plans was only
limited to a so-called table inspection; and not
actual site measurement. To accept some such
postulate is to put a premium on negligence.
Corinthian was not organized solely for the
defendants Cuasos. It is also the subdivision of the
plaintiffs-spouses Tanjangcos - and of all others
who have their dwelling units or abodes therein.
Pertinently, its Manual of Rules and Regulations
stipulates in Section 3 thereof (under the heading
Construction), thus:
A. Rules and Regulations
No new construction can be started unless the
building plans are approved by the Association and
the appropriate Builders cash bond and pre-
construction fees are paid. The Association will
not allow the entry of construction materials and
process identification cards for workers if the
above conditions are not complied with. Likewise,
all renovations, repairs, additions and
improvements to a finished house except
electrical wiring, will have to be approved by the
Association. Water service connection of a
homeowner who undertakes construction work
without prior approval of the Association will be
cut-off in addition to the sanctions previously
mentioned.
It goes without saying that this Manual of Rules
and Regulations applies to all - or it does not
apply at all. To borrow a popular expression, what
is sauce for the gander is sauce for the goose - or
ought to be. To put it matter-of-factly and
bluntly, thus, its so-called table inspection
approval of the Cuasos building plans is no less of
an approval, as approvals come and go. And since
it is an approval tainted with negligence, the
necessary and inevitable consequences which law
and justice attach to such negligence must, as a
matter of law and justice, also necessarily attach
to Corinthian.
And then again third party defendant-appellee
Corinthian Garden required the posting of a
builders cash bond (Exh. 5-Corinthian) from the
defendants-appellants Cuasos and the third-party
defendant C.B. Paraz Construction to secure the
performance of their undertaking. Surely,
Corinthian does not imply that while it may take
the benefits from the Builders cash bond, it may,
Pilate-like, wash its hands of any responsibility or
liability that would or might arise from the
construction or building of the structure for which
the cash bond was in the first place posted. That
is not only unjust and immoral, but downright
unchristian and iniquitous.
Under the same parity of reasoning, the payment
by the appellants-Cuasos to the appellee
Corinthian of pre-construction and membership
fees in the Association must necessarily entail the
creation of certain obligations on the part of
Corinthian. For duties and responsibilities always
go hand in hand with rights and privileges. That is
the law of life - and that is the law of every
civilized society. It is an axiom of equity that he
who receives the benefits must share the
burdens.[40]
By its Manual of Rules and Regulations, it is
reasonable to assume that Corinthian, through its
representative, in the approval of building plans,
and in the conduct of periodic inspections of on-
going construction projects within the subdivision,
is responsible in insuring compliance with the
approved plans, inclusive of the construction of
perimeter walls, which in this case is the subject
of dispute between the Tanjangcos and the
Cuasos.[41] It is not just or equitable to relieve
Corinthian of any liability when, by its very own
rules, it imposes its authority over all its members
to the end that no new construction can be
started unless the plans are approved by the
Association and the appropriate cash bond and
pre-construction fees are paid. Moreover,
Corinthian can impose sanctions for violating
these rules. Thus, the proposition that the
inspection is merely a table inspection and,
therefore, should exempt Corinthian from
liability, is unacceptable. After all, if the
supposed inspection is merely a table inspection
and the approval granted to every member is a
mere formality, then the purpose of the rules
would be defeated. Compliance therewith would
not be mandatory, and sanctions imposed for
violations could be disregarded. Corinthian's
imprimatur on the construction of the Cuasos'
perimeter wall over the property of the
Tanjangcos assured the Cuasos that everything
was in order.
In sum, Corinthians failure to prevent the
encroachment of the Cuasos perimeter wall into
Tanjangcos property despite the inspection
conducted constitutes negligence and, at the very
least, contributed to the injury suffered by the
Tanjangcos.
On the second issue, our ruling in Spouses Badillo
v. Tayag[42] is instructive:
Citing Sia v. Court of Appeals [272 SCRA 141, May
5, 1997], petitioners argue that the MTC may take
judicial notice of the reasonable rental or the
general price increase of land in order to
determine the amount of rent that may be
awarded to them. In that case, however, this
Court relied on the CA's factual findings, which
were based on the evidence presented before the
trial court. In determining reasonable rent, the
RTC therein took account of the following factors:
1) the realty assessment of the land, 2) the
increase in realty taxes, and 3) the prevailing rate
of rentals in the vicinity. Clearly, the trial court
relied, not on mere judicial notice, but on the
evidence presented before it.
Indeed, courts may fix the reasonable amount of
rent for the use and occupation of a disputed
property. However, petitioners herein erred in
assuming that courts, in determining the amount
of rent, could simply rely on their own
appreciation of land values without considering
any evidence. As we have said earlier, a court
may fix the reasonable amount of rent, but it
must still base its action on the evidence adduced
by the parties.
In Herrera v. Bollos [G.R. No. 138258, January 18,
2002], the trial court awarded rent to the
defendants in a forcible entry case. Reversing the
RTC, this Court declared that the reasonable
amount of rent could be determined not by mere
judicial notice, but by supporting evidence:x x x A
court cannot take judicial notice of a factual
matter in controversy. The court may take judicial
notice of matters of public knowledge, or which
are capable of unquestionable demonstration, or
ought to be known to judges because of their
judicial functions. Before taking such judicial
notice, the court must allow the parties to be
heard thereon. Hence, there can be no judicial
notice on the rental value of the premises in
question without supporting evidence.
Truly, mere judicial notice is inadequate, because
evidence is required for a court to determine the
proper rental value. But contrary to Corinthian's
arguments, both the RTC and the CA found that
indeed rent was due the Tanjangcos because they
were deprived of possession and use of their
property. This uniform factual finding of the RTC
and the CA was based on the evidence presented
below. Moreover, in Spouses Catungal v. Hao,[43]
we considered the increase in the award of rentals
as reasonable given the particular circumstances
of each case. We noted therein that the
respondent denied the petitioners the benefits,
including rightful possession, of their property for
almost a decade.

Similarly, in the instant case, the Tanjangcos were

deprived of possession and use of their property G.R. No. 156052 March 7, 2007
for more than two decades through no fault of
their own. Thus, we find no cogent reason to SOCIAL JUSTICE SOCIETY (SJS), VLADIMIR
disturb the monthly rental fixed by the CA. ALARIQUE T. CABIGAO, and BONIFACIO S.
TUMBOKON, Petitioners,
All told, the CA committed no reversible error. vs.
HON. JOSE L. ATIENZA, JR., in his capacity as
WHEREFORE, the petition is DENIED. The Decision Mayor of the City of Manila, Respondent.
of the Court of Appeals is AFFIRMED. Costs against
petitioner. DECISION

CORONA, J.:

SO ORDERED. In this original petition for mandamus,1

petitioners Social Justice Society (SJS), Vladimir
Alarique T. Cabigao and Bonifacio S. Tumbokon
seek to compel respondent Hon. Jose L. Atienza,
Jr., mayor of the City of Manila, to enforce
Ordinance No. 8027.

The antecedents are as follows.

On November 20, 2001, the Sangguniang

Panlungsod of Manila enacted Ordinance No.
8027.2 Respondent mayor approved the ordinance
on November 28, 2001.3 It became effective on
December 28, 2001, after its publication.4

Ordinance No. 8027 was enacted pursuant to the

police power delegated to local government units,
a principle described as the power inherent in a
government to enact laws, within constitutional
limits, to promote the order, safety, health,
morals and general welfare of the society.5 This is
evident from Sections 1 and 3 thereof which state:

SECTION 1. For the purpose of promoting sound

urban planning and ensuring health, public safety,
and general welfare of the residents of Pandacan
and Sta. Ana as well as its adjoining areas, the
land use of [those] portions of land bounded by
the Pasig River in the north, PNR Railroad Track in
the east, Beata St. in the south, Palumpong St. in
the southwest, and Estero de Pancacan in the
west[,] PNR Railroad in the northwest area, Estero
de Pandacan in the [n]ortheast, Pasig River in the
southeast and Dr. M.L. Carreon in the southwest.
The area of Punta, Sta. Ana bounded by the Pasig
River, Marcelino Obrero St., Mayo 28 St., and F.
Manalo Street, are hereby reclassified from
Industrial II to Commercial I. xxx xxx xxx
SEC. 3. Owners or operators of industries and
other businesses, the operation of which are no
longer permitted under Section 1 hereof, are
hereby given a period of six (6) months from the
date of effectivity of this Ordinance within which
to cease and desist from the operation of
businesses which are hereby in consequence,
disallowed.
Ordinance No. 8027 reclassified the area
described therein from industrial to commercial
and directed the owners and operators of
businesses disallowed under Section 1 to cease
and desist from operating their businesses within
six months from the date of effectivity of the
ordinance. Among the businesses situated in the
area are the so-called "Pandacan Terminals" of the
oil companies Caltex (Philippines), Inc., Petron
Corporation and Pilipinas Shell Petroleum
Corporation.
However, on June 26, 2002, the City of Manila and
the Department of Energy (DOE) entered into a
memorandum of understanding (MOU)6 with the
oil companies in which they agreed that "the
scaling down of the Pandacan Terminals [was] the
most viable and practicable option." Under the
MOU, the oil companies agreed to perform the
following:
Section 1. - Consistent with the objectives stated
above, the OIL COMPANIES shall, upon signing of
this MOU, undertake a program to scale down the
Pandacan Terminals which shall include, among
others, the immediate removal/decommissioning
process of TWENTY EIGHT (28) tanks starting with
the LPG spheres and the commencing of works for
the creation of safety buffer and green zones
surrounding the Pandacan Terminals. xxx
Section 2. – Consistent with the scale-down
program mentioned above, the OIL COMPANIES
shall establish joint operations and management,
including the operation of common, integrated
and/or shared facilities, consistent with
international and domestic technical, safety,
environmental and economic considerations and
standards. Consequently, the joint operations of
the OIL COMPANIES in the Pandacan Terminals
shall be limited to the common and integrated
areas/facilities. A separate agreement covering
the commercial and operational terms and
conditions of the joint operations, shall be
entered into by the OIL COMPANIES.
Section 3. - The development and maintenance of
the safety and green buffer zones mentioned
therein, which shall be taken from the properties
of the OIL COMPANIES and not from the
surrounding communities, shall be the sole
responsibility of the OIL COMPANIES.
The City of Manila and the DOE, on the other
hand, committed to do the following:
Section 1. - The City Mayor shall endorse to the
City Council this MOU for its appropriate action
with the view of implementing the spirit and
intent thereof.
Section 2. - The City Mayor and the DOE shall,
consistent with the spirit and intent of this MOU,
enable the OIL COMPANIES to continuously
operate in compliance with legal requirements,
within the limited area resulting from the joint
operations and the scale down program.
Section 3. - The DOE and the City Mayor shall
monitor the OIL COMPANIES’ compliance with the
provisions of this MOU.
Section 4. - The CITY OF MANILA and the national
government shall protect the safety buffer and
green zones and shall exert all efforts at
preventing future occupation or encroachment
into these areas by illegal settlers and other
unauthorized parties.
The Sangguniang Panlungsod ratified the MOU in
Resolution No. 97.7 In the same resolution, the
Sanggunian declared that the MOU was effective
only for a period of six months starting July 25,
2002.8 Thereafter, on January 30, 2003, the
Sanggunian adopted Resolution No. 139 extending
the validity of Resolution No. 97 to April 30, 2003
and authorizing Mayor Atienza to issue special
business permits to the oil companies. Resolution
No. 13, s. 2003 also called for a reassessment of
the ordinance.10
Meanwhile, petitioners filed this original action
for mandamus on December 4, 2002 praying that
Mayor Atienza be compelled to enforce Ordinance
No. 8027 and order the immediate removal of the
terminals of the oil companies.11
The issues raised by petitioners are as follows:
1. whether respondent has the mandatory legal
duty to enforce Ordinance No. 8027 and order the
removal of the Pandacan Terminals, and
2. whether the June 26, 2002 MOU and the
resolutions ratifying it can amend or repeal
Ordinance No. 8027.12
Petitioners contend that respondent has the
mandatory legal duty, under Section 455 (b) (2) of
the Local Government Code (RA 7160),13 to
enforce Ordinance No. 8027 and order the
removal of the Pandacan Terminals of the oil
companies. Instead, he has allowed them to stay.
Respondent’s defense is that Ordinance No. 8027
has been superseded by the MOU and the
resolutions.14 However, he also confusingly argues
that the ordinance and MOU are not inconsistent
with each other and that the latter has not
amended the former. He insists that the ordinance
remains valid and in full force and effect and that
the MOU did not in any way prevent him from
enforcing and implementing it. He maintains that
the MOU should be considered as a mere guideline
for its full implementation.15
Under Rule 65, Section 316 of the Rules of Court,
a petition for mandamus may be filed 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.
Mandamus is an extraordinary writ that is
employed to compel the performance, when
refused, of a ministerial duty that is already
imposed on the respondent and there is no other
plain, speedy and adequate remedy in the
ordinary course of law. The petitioner should have
a well-defined, clear and certain legal right to the
performance of the act and it must be the clear
and imperative duty of respondent to do the act
required to be done.17
Mandamus will not issue to enforce a right, or to
compel compliance with a duty, which is
questionable or over which a substantial doubt
exists. The principal function of the writ of
mandamus is to command and to expedite, not to
inquire and to adjudicate; thus, it is neither the
office nor the aim of the writ to secure a legal
right but to implement that which is already
established. Unless the right to the relief sought is
unclouded, mandamus will not issue.18
To support the assertion that petitioners have a
clear legal right to the enforcement of the
ordinance, petitioner SJS states that it is a
political party registered with the Commission on
Elections and has its offices in Manila. It claims to
have many members who are residents of Manila.
The other petitioners, Cabigao and Tumbokon, are
allegedly residents of Manila.
We need not belabor this point. We have ruled in
previous cases that when a mandamus proceeding
concerns a public right and its object is to compel
a public duty, the people who are interested in
the execution of the laws are regarded as the real
parties in interest and they need not show any
specific interest.19 Besides, as residents of
Manila, petitioners have a direct interest in the
enforcement of the city’s ordinances. Respondent
never questioned the right of petitioners to
institute this proceeding.
On the other hand, the Local Government Code
imposes upon respondent the duty, as city mayor,
to "enforce all laws and ordinances relative to the
governance of the city.">20 One of these is
Ordinance No. 8027. As the chief executive of the
city, he has the duty to enforce Ordinance No.
8027 as long as it has not been repealed by the
Sanggunian or annulled by the courts.21 He has no
other choice. It is his ministerial duty to do so. In
Dimaporo v. Mitra, Jr.,22 we stated the reason for
this:
These officers cannot refuse to perform their duty
on the ground of an alleged invalidity of the
statute imposing the duty. The reason for this is
obvious. It might seriously hinder the transaction
of public business if these officers were to be
permitted in all cases to question the
constitutionality of statutes and ordinances
imposing duties upon them and which have not
judicially been declared unconstitutional. Officers
of the government from the highest to the lowest
are creatures of the law and are bound to obey
it.23
The question now is whether the MOU entered
into by respondent with the oil companies and the
subsequent resolutions passed by the Sanggunian
have made the respondent’s duty to enforce
Ordinance No. 8027 doubtful, unclear or
uncertain. This is also connected to the second
issue raised by petitioners, that is, whether the
MOU and Resolution Nos. 97, s. 2002 and 13, s.
2003 of the Sanggunian can amend or repeal
Ordinance No. 8027.
We need not resolve this issue. Assuming that the
terms of the MOU were inconsistent with
Ordinance No. 8027, the resolutions which ratified
it and made it binding on the City of Manila
expressly gave it full force and effect only until
April 30, 2003. Thus, at present, there is nothing
that legally hinders respondent from enforcing
Ordinance No. 8027.24
Ordinance No. 8027 was enacted right after the
Philippines, along with the rest of the world,
witnessed the horror of the September 11, 2001
attack on the Twin Towers of the World Trade
Center in New York City. The objective of the
ordinance is to protect the residents of Manila
from the catastrophic devastation that will surely
occur in case of a terrorist attack25 on the
Pandacan Terminals. No reason exists why such a
protective measure should be delayed.
WHEREFORE, the petition is hereby GRANTED.
Respondent Hon. Jose L. Atienza, Jr., as mayor of
the City of Manila, is directed to immediately
enforce Ordinance No. 8027.
SO ORDERED.
TOSHIBA INFORMATION EQUIPMENT (PHILS.), INC.,
Petitioner, - versus - COMMISSIONER OF INTERNAL
REVENUE Respondent.
In this Petition for Review on Certiorari[1] under
Rule 45 of the Rules of Court, petitioner Toshiba
Information Equipment (Philippines), Inc.
(Toshiba) seeks the reversal and setting aside of
(1) the Decision[2] dated August 29, 2002 of the
Court of Appeals in CA-G.R. SP No. 63047, which
found that Toshiba was not entitled to the
credit/refund of its unutilized input Value-Added
Tax (VAT) payments attributable to its export
sales, because it was a tax-exempt entity and its
export sales were VAT-exempt transactions; and
(2) the Resolution[3] dated February 19, 2003 of
the appellate court in the same case, which
denied the Motion for Reconsideration of Toshiba.
The herein assailed judgment of the Court of
Appeals reversed and set aside the Decision[4]
dated October 16, 2000 of the Court of Tax
Appeals (CTA) in CTA Case No. 5762 granting the
claim for credit/refund of Toshiba in the amount
of P1,385,282.08.
Toshiba is a domestic corporation
principally engaged in the business of
manufacturing and exporting of electric
machinery, equipment systems, accessories,
parts, components, materials and goods of all
kinds, including those relating to office
automation and information technology and all
types of computer hardware and software, such as
but not limited to HDD-CD-ROM and personal
computer printed circuit board.[5] It is registered
with the Philippine Economic Zone Authority
(PEZA) as an Economic Zone (ECOZONE) export
enterprise in the Laguna Technopark, Inc., as
evidenced by Certificate of Registration No. 95-99
dated September 27, 1995.[6] It is also registered
with Regional District Office No. 57 of the Bureau
of Internal Revenue (BIR) in San Pedro, Laguna, as
a VAT-taxpayer with Taxpayer Identification No.
(TIN) 004-739-137.[7]
In its VAT returns for the first and second quarters
of 1997,[8] filed on April 14, 1997 and July 21,
1997, respectively, Toshiba declared input VAT
payments on its domestic purchases of taxable
goods and services in the aggregate sum of
P3,875,139.65,[9] with no zero-rated sales.
Toshiba subsequently submitted to the BIR on July
23, 1997 its amended VAT returns for the first and
second quarters of 1997,[10] reporting the same
amount of input VAT payments but, this time,
with zero-rated sales totaling
P7,494,677,000.00.[11]
On March 30, 1999, Toshiba filed with the One-
Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center of the Department of Finance
(DOF One-Stop Shop) two separate applications for
tax credit/refund[12] of its unutilized input VAT
payments for the first half of 1997 in the total
amount of P3,685,446.73.[13]
The next day, on March 31, 1999, Toshiba likewise
filed with the CTA a Petition for Review[14] to toll
the running of the two-year prescriptive period
under Section 230 of the Tax Code of 1977,[15] as
amended.[16] In said Petition, docketed as CTA
Case No. 5762, Toshiba prayed that –
[A]fter due hearing, judgment be rendered
ordering [herein respondent Commissioner of
Internal Revenue (CIR)] to refund or issue to
[Toshiba] a tax refund/tax credit certificate in the
amount of P3,875,139.65 representing unutilized
input taxes paid on its purchase of taxable goods
and services for the period January 1 to June 30,
1997.[17]
The Commissioner of Internal Revenue
(CIR) opposed the claim for tax refund/credit of
Toshiba, setting up the following special and
affirmative defenses in his Answer[18] –
5. [Toshiba’s] alleged claim for refund/tax
credit is subject to administrative routinary
investigation/examination by [CIR’s] Bureau;
6. [Toshiba] failed miserably to show that
the total amount of P3,875,139.65 claimed as VAT
input taxes, were erroneously or illegally
collected, or that the same are properly
documented;
7. Taxes paid and collected are presumed to
have been made in accordance with law; hence,
not refundable;
8. In an action for tax refund, the burden is
on the taxpayer to establish its right to refund,
and failure to sustain the burden is fatal to the
claim for refund;
9. It is incumbent upon [Toshiba] to show
that it has complied with the provisions of Section
204 in relation to Section 229 of the Tax Code;
10. Well-established is the rule that claims for
refund/tax credit are construed in strictissimi
juris against the taxpayer as it partakes the
nature of exemption from tax.[19]
Upon being advised by the CTA,[20] Toshiba and
the CIR filed a Joint Stipulation of Facts and
Issues,[21] wherein the opposing parties “agreed
and admitted” that –
1. [Toshiba] is a duly registered value-added
tax entity in accordance with Section 107 of the
Tax Code, as amended.
2. [Toshiba] is subject to zero percent (0%)
value-added tax on its export sales in accordance
with then Section 100(a)(2)(A) of the Tax Code, as
amended.
3. [Toshiba] filed its quarterly VAT returns
for the first two quarters of 1997 within the
legally prescribed period. x x x x
7. [Toshiba] is subject to zero percent (0%)
value-added tax on its export sales.
8. [Toshiba] has duly filed the instant
Petition for Review within the two-year
prescriptive period prescribed by then Section 230
of the Tax Code.[22]
In the same pleading, Toshiba and the CIR jointly
submitted the following issues for determination
by the CTA – Whether or not [Toshiba] has
incurred input taxes in the amount of
P3,875,139.65 for the period January 1 to June
30, 1997 which are directly attributable to its
export sales[.]
Whether or not the input taxes incurred by
[Toshiba] for the period January 1 to June 30,
1997 have not been carried over to the succeeding
quarters[.]
Whether or not input taxes incurred by [Toshiba]
for the first two quarters of 1997 have not been
offset against any output tax[.]
Whether or not input taxes incurred by [Toshiba]
for the first two quarters of 1997 are properly
substantiated by official receipts and invoices.[23]
During the trial before the CTA, Toshiba presented
documentary evidence in support of its claim for
tax credit/refund, while the CIR did not present
any evidence at all.
With both parties waiving the right to submit their
respective memoranda, the CTA rendered its
Decision in CTA Case No. 5762 on October 16,
2000 favoring Toshiba. According to the CTA, the
CIR himself admitted that the export sales of
Toshiba were subject to zero percent (0%) VAT
based on Section 100(a)(2)(A)(i) of the Tax Code
of 1977, as amended. Toshiba could then claim
tax credit or refund of input VAT paid on its
purchases of goods, properties, or services,
directly attributable to such zero-rated sales, in
accordance with Section 4.102-2 of Revenue
Regulations No. 7-95. The CTA, though, reduced
the amount to be credited or refunded to Toshiba
to P1,385,292.02.
The dispositive portion of the October 16, 2000
Decision of the CTA fully reads –
WHEREFORE, [Toshiba’s] claim for refund of
unutilized input VAT payments is hereby GRANTED
but in a reduced amount of P1,385,282.08
computed as follows:
1st Quarter 2nd
Quarter Total
Amount of claimed input taxes filed
with the DOF One Stop Shop Center
P3,268,682.34 P416,764.39 P3,685,446.73
Less: 1) Input taxes not properly
supported by VAT invoices
and official receipts
a. Per SGV’s verification
(Exh. I) P 242,491.45
P154,391.13 P 396,882.58
b. Per this court’s further
verification (Annex A) P1,852,437.65 P
35,108.00 P1,887,545.65
P189,499.13 P2,300,164.65
Amount Refundable
P1,158,016.82 P227,265.26 P1,385,282.08
Respondent Commissioner of Internal
Revenue is ORDERED to REFUND to [Toshiba] or in
the alternative, ISSUE a TAX CREDIT CERTIFICATE
in the amount of P1,385,282.08 representing
unutilized input taxes paid by [Toshiba] on its
purchases of taxable goods and services for the
period January 1 to June 30, 1997.[24]
Both Toshiba and the CIR sought reconsideration
of the foregoing CTA Decision.
Toshiba asserted in its Motion for
Reconsideration[25] that it had presented proper
substantiation for the P1,887,545.65 input VAT
disallowed by the CTA.
The CIR, on the other hand, argued in his Motion
for Reconsideration[26] that Toshiba was not
entitled to the credit/refund of its input VAT
payments because as a PEZA-registered ECOZONE
export enterprise, Toshiba was not subject to
VAT. The CIR invoked the following statutory and
regulatory provisions –
Section 24 of Republic Act No. 7916[27]
SECTION 24. Exemption from Taxes Under
the National Internal Revenue Code. – Any
provision of existing laws, rules and regulations to
the contrary notwithstanding, no taxes, local and
national, shall be imposed on business
establishments operating within the ECOZONE. In
lieu of paying taxes, five percent (5%) of the gross
income earned by all businesses and enterprises
within the ECOZONE shall be remitted to the
national government. x x x.
Section 103(q) of the Tax Code of 1977, as
amended
 Sec. 103. Exempt transactions. – The
following shall be exempt from the value-added
tax: x x x x
(q) Transactions which are exempt under special
laws, except those granted under Presidential
Decree Nos. 66, 529, 972, 1491, and 1950, and
non-electric cooperatives under Republic Act No.
6938, or international agreements to which the
Philippines is a signatory.
Section 4.103-1 of Revenue Regulations No. 7-95
SEC. 4.103-1. Exemptions. – (A) In
general. – An exemption means that the sale of
goods or properties and/or services and the use or
lease of properties is not subject to VAT (output
tax) and the seller is not allowed any tax credit on
VAT (input tax) previously paid.
The person making the exempt sale of goods,
properties or services shall not bill any output tax
to his customers because the said transaction is
not subject to VAT. On the other hand, a VAT-
registered purchaser of VAT-exempt goods,
properties or services which are exempt from VAT
is not entitled to any input tax on such purchase
despite the issuance of a VAT invoice or receipt.
The CIR contended that under Section 24 of
Republic Act No. 7916, a special law, all
businesses and establishments within the
ECOZONE were to remit to the government five
percent (5%) of their gross income earned within
the zone, in lieu of all taxes, including VAT. This
placed Toshiba within the ambit of Section 103(q)
of the Tax Code of 1977, as amended, which
exempted from VAT the transactions that were
exempted under special laws. Following Section
4.103-1(A) of Revenue Regulations No. 7-95, the
VAT-exemption of Toshiba meant that its sale of
goods was not subject to output VAT and Toshiba
as seller was not allowed any tax credit on the
input VAT it had previously paid.
On January 17, 2001, the CTA issued a
Resolution[28] denying both Motions for
Reconsideration of Toshiba and the CIR.
The CTA took note that the pieces of evidence
referred to by Toshiba in its Motion for
Reconsideration were insufficient substantiation,
being mere schedules of input VAT payments it
had purportedly paid for the first and second
quarters of 1997. While the CTA gives credence
to the report of its commissioned certified public
accountant (CPA), it does not render its decision
based on the findings of the said CPA alone. The
CTA has its own CPA and the tax court itself
conducts an investigation/examination of the
documents presented. The CTA stood by its
earlier disallowance of the amount of
P1,887,545.65 as tax credit/refund because it was
not supported by VAT invoices and/or official
receipts.
The CTA refused to consider the argument that
Toshiba was not entitled to a tax credit/refund
under Section 24 of Republic Act No. 7916 because
it was only raised by the CIR for the first time in
his Motion for Reconsideration. Also, contrary to
the assertions of the CIR, the CTA held that
Section 23, and not Section 24, of Republic Act
No. 7916, applied to Toshiba. According to
Section 23 of Republic Act No. 7916 –
SECTION 23. Fiscal Incentives. – Business
establishments operating within the ECOZONES
shall be entitled to the fiscal incentives as
provided for under Presidential Decree No. 66, the
law creating the Export Processing Zone Authority,
or those provided under Book VI of Executive
Order No. 226, otherwise known as the Omnibus
Investment Code of 1987.
Furthermore, tax credits for exporters using local
materials as inputs shall enjoy the benefits
provided for in the Export Development Act of
1994.
Among the fiscal incentives granted to PEZA-
registered enterprises by the Omnibus Investments
Code of 1987 was the income tax holiday, to wit –
Art. 39. Incentives to Registered Enterprises. – All
registered enterprises shall be granted the
following incentives to the extent engaged in a
preferred area of investment:
(a) Income Tax Holiday. —
(1) For six (6) years from commercial operation
for pioneer firms and four (4) years for non-
pioneer firms, new registered firms shall be fully
exempt from income taxes levied by the national
government. Subject to such guidelines as may be
prescribed by the Board, the income tax
exemption will be extended for another year in
each of the following cases:
(i) The project meets the prescribed ratio of
capital equipment to number of workers set by
the Board;
(ii) Utilization of indigenous raw materials at rates
set by the Board;
(iii) The net foreign exchange savings or earnings
amount to at least US$500,000.00 annually during
the first three (3) years of operation.
The preceding paragraph notwithstanding, no
registered pioneer firm may avail of this incentive
for a period exceeding eight (8) years.
(2) For a period of three (3) years from
commercial operation, registered expanding firms
shall be entitled to an exemption from income
taxes levied by the National Government
proportionate to their expansion under such terms
and conditions as the Board may determine:
Provided, however, That during the period within
which this incentive is availed of by the expanding
firm it shall not be entitled to additional
deduction for incremental labor expense.
(3) The provision of Article 7(14) notwithstanding,
registered firms shall not be entitled to any
extension of this incentive.
The CTA pointed out that Toshiba availed itself of
the income tax holiday under the Omnibus
Investments Code of 1987, so Toshiba was exempt
only from income tax but not from other taxes
such as VAT. As a result, Toshiba was liable for
output VAT on its export sales, but at zero
percent (0%) rate, and entitled to the
credit/refund of the input VAT paid on its
purchases of goods and services relative to such
zero-rated export sales.
Unsatisfied, the CIR filed a Petition for Review[29]
with the Court of Appeals, docketed as CA-G.R. SP
No. 63047.
In its Decision dated August 29, 2002, the Court of
Appeals granted the appeal of the CIR, and
reversed and set aside the Decision dated October
16, 2000 and the Resolution dated January 17,
2001 of the CTA. The appellate court ruled that
Toshiba was not entitled to the refund of its
alleged unused input VAT payments because it
was a tax-exempt entity under Section 24 of
Republic Act No. 7916. As a PEZA-registered
corporation, Toshiba was liable for remitting to
the national government the five percent (5%)
preferential rate on its gross income earned
within the ECOZONE, in lieu of all other national
and local taxes, including VAT.
The Court of Appeals further adjudged that the
export sales of Toshiba were VAT-exempt, not
zero-rated, transactions. The appellate court
found that the Answer filed by the CIR in CTA Case
No. 5762 did not contain any admission that the
export sales of Toshiba were zero-rated
transactions under Section 100(a)(2)(A) of the Tax
Code of 1977, as amended. At the least, what
was admitted by the CIR in said Answer was that
the Tax Code provisions cited in the Petition for
Review of Toshiba in CTA Case No. 5762 were
correct. As to the Joint Stipulation of Facts and
Issues filed by the parties in CTA Case No. 5762,
which stated that Toshiba was subject to zero
percent (0%) VAT on its export sales, the appellate
court declared that the CIR signed the said
pleading through palpable mistake. This palpable
mistake in the stipulation of facts should not be
taken against the CIR, for to do otherwise would
result in suppressing the truth through falsehood.
In addition, the State could not be put in estoppel
by the mistakes or errors of its officials or agents.
Given that Toshiba was a tax-exempt entity under
Republic Act No. 7916, a special law, the Court of
Appeals concluded that the export sales of
Toshiba were VAT-exempt transactions under
Section 109(q) of the Tax Code of 1997, formerly
Section 103(q) of the Tax Code of 1977.
Therefore, Toshiba could not claim refund of its
input VAT payments on its domestic purchases of
goods and services.
The Court of Appeals decreed at the end of its
August 29, 2002 Decision – WHEREFORE, premises
considered, the appealed decision of the Court of
Tax Appeals in CTA Case No. 5762, is hereby
REVERSED and SET ASIDE, and a new one is hereby
rendered finding [Toshiba], being a tax exempt
entity under R.A. No. 7916, not entitled to refund
the VAT payments made in its domestic purchases
of goods and services.[30]
Toshiba filed a Motion for Reconsideration[31] of
the aforementioned Decision, anchored on the
following arguments: (a) the CIR never raised as
an issue before the CTA that Toshiba was tax-
exempt under Section 24 of Republic Act No.
7916; (b) Section 24 of Republic Act No. 7916,
subjecting the gross income earned by a PEZA-
registered enterprise within the ECOZONE to a
preferential rate of five percent (5%), in lieu of all
taxes, did not apply to Toshiba, which availed
itself of the income tax holiday under Section 23
of the same statute; (c) the conclusion of the CTA
that the export sales of Toshiba were zero-rated
was supported by substantial evidence, other than
the admission of the CIR in the Joint Stipulation of
Facts and Issues; and (d) the judgment of the CTA
granting the refund of the input VAT payments
was supported by substantial evidence and should
not have been set aside by the Court of Appeals.
In a Resolution dated February 19, 2003, the Court
of Appeals denied the Motion for Reconsideration
of Toshiba since the arguments presented therein
were mere reiterations of those already passed
upon and found to be without merit by the
appellate court in its earlier Decision. The Court
of Appeals, however, mentioned that it was
incorrect for Toshiba to say that the issue of the
applicability of Section 24 of Republic Act No.
7916 was only raised for the first time on appeal
before the appellate court. The said issue was
adequately raised by the CIR in his Motion for
Reconsideration before the CTA, and was even
ruled upon by the tax court.
Hence, Toshiba filed the instant Petition for
Review with the following assignment of errors –
5.1 THE HONORABLE COURT OF APPEALS
ERRED WHEN IT RULED THAT [TOSHIBA], BEING A
PEZA-REGISTERED ENTERPRISE, IS EXEMPT FROM
VAT UNDER SECTION 24 OF R.A. 7916, AND
FURTHER HOLDING THAT [TOSHIBA’S] EXPORT
SALES ARE EXEMPT TRANSACTIONS UNDER SECTION
109 OF THE TAX CODE.
5.2 THE HONORABLE COURT OF APPEALS
ERRED WHEN IT FAILED TO DISMISS OUTRIGHT AND
GAVE DUE COURSE TO [CIR’S] PETITION
NOTWITHSTANDING [CIR’S] FAILURE TO
ADEQUATELY RAISE IN ISSUE DURING THE TRIAL IN
THE COURT OF TAX APPEALS THE APPLICABILITY
OF SECTION 24 OF R.A. 7916 TO [TOSHIBA’S]
CLAIM FOR REFUND.
5.3 THE HONORABLE COURT OF APPEALS
ERRED WHEN [IT] RULED THAT THE COURT OF TAX
APPEALS’ FINDINGS, WITH REGARD [TOSHIBA’S]
EXPORT SALES BEING ZERO RATED SALES FOR VAT
PURPOSES, WERE BASED MERELY ON THE
ADMISSIONS MADE BY [CIR’S] COUNSEL AND NOT
SUPPORTED BY SUBSTANTIAL EVIDENCE.
5.4 THE HONORABLE COURT OF APPEALS
ERRED WHEN IT REVERSED THE DECISION OF THE
COURT OF TAX APPEALS GRANTING [TOSHIBA’S]
CLAIM FOR REFUND[;][32]
and the following prayer –
WHEREFORE, premises considered, Petitioner
TOSHIBA INFORMATION EQUIPMENT (PHILS.), INC.
most respectfully prays that the decision and
resolution of the Honorable Court of Appeals,
reversing the decision of the CTA in CTA Case No.
5762, be set aside and further prays that a new
one be rendered AFFIRMING AND UPHOLDING the
Decision of the CTA promulgated on October 16,
2000 in CTA Case No. 5762.
Other reliefs, which the Honorable Court may
deem just and equitable under the circumstances,
are likewise prayed for.[33]
The Petition is impressed with merit.
The CIR did not timely raise before the CTA the
issues on the VAT-exemptions of Toshiba and its
export sales.
Upon the failure of the CIR to timely plead and
prove before the CTA the defenses or objections
that Toshiba was VAT-exempt under Section 24 of
Republic Act No. 7916, and that its export sales
were VAT-exempt transactions under Section
103(q) of the Tax Code of 1977, as amended, the
CIR is deemed to have waived the same.
During the pendency of CTA Case No. 5762, the
proceedings before the CTA were governed by the
Rules of the Court of Tax Appeals,[34] while the
Rules of Court were applied suppletorily.[35]
Rule 9, Section 1 of the Rules of Court provides:
SECTION 1. Defenses and objections not pleaded.
– Defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed
waived. However, when it appears from the
pleadings or the evidence on record that the court
has no jurisdiction over the subject matter, that
there is another action pending between the same
parties for the same cause, or that the action is
barred by a prior judgment or by statute of
limitations, the court shall dismiss the claim.
The CIR did not argue straight away in his Answer
in CTA Case No. 5762 that Toshiba had no right to
the credit/refund of its input VAT payments
because the latter was VAT-exempt and its export
sales were VAT-exempt transactions. The Pre-
Trial Brief[36] of the CIR was equally bereft of
such allegations or arguments. The CIR passed up
the opportunity to prove the supposed VAT-
exemptions of Toshiba and its export sales when
the CIR chose not to present any evidence at all
during the trial before the CTA.[37] He missed
another opportunity to present the said issues
before the CTA when he waived the submission of
a Memorandum.[38] The CIR had waited until the
CTA already rendered its Decision dated October
16, 2000 in CTA Case No. 5762, which granted the
claim for credit/refund of Toshiba, before
asserting in his Motion for Reconsideration that
Toshiba was VAT-exempt and its export sales were
VAT-exempt transactions.
The CIR did not offer any explanation as to why he
did not argue the VAT-exemptions of Toshiba and
its export sales before and during the trial held by
the CTA, only doing so in his Motion for
Reconsideration of the adverse CTA judgment.
Surely, said defenses or objections were already
available to the CIR when the CIR filed his Answer
to the Petition for Review of Toshiba in CTA Case
No. 5762.
It is axiomatic in pleadings and practice that no
new issue in a case can be raised in a pleading
which by due diligence could have been raised in
previous pleadings.[39] The Court cannot simply
grant the plea of the CIR that the procedural rules
be relaxed based on the general averment of the
interest of substantive justice. It should not be
forgotten that the first and fundamental concern
of the rules of procedure is to secure a just
determination of every action.[40] Procedural
rules are designed to facilitate the adjudication of
cases. Courts and litigants alike are enjoined to
abide strictly by the rules. While in certain
instances, the Court allows a relaxation in the
application of the rules, it never intends to forge
a weapon for erring litigants to violate the rules
with impunity. The liberal interpretation and
application of rules apply only in proper cases of
demonstrable merit and under justifiable causes
and circumstances. While it is true that 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.
Party litigants and their counsel are well advised
to abide by, rather than flaunt, procedural rules
for these rules illumine the path of the law and
rationalize the pursuit of justice.[41]
The CIR judicially admitted that Toshiba was VAT-
registered and its export sales were subject to
VAT at zero percent (0%) rate.
More importantly, the arguments of the CIR that
Toshiba was VAT-exempt and the latter’s export
sales were VAT-exempt transactions are
inconsistent with the explicit admissions of the
CIR in the Joint Stipulation of Facts and Issues
(Joint Stipulation) that Toshiba was a registered
VAT entity and that it was subject to zero percent
(0%) VAT on its export sales.
The Joint Stipulation was executed and submitted
by Toshiba and the CIR upon being advised to do
so by the CTA at the end of the pre-trial
conference held on June 23, 1999.[42] The
approval of the Joint Stipulation by the CTA, in its
Resolution[43] dated July 12, 1999, marked the
culmination of the pre-trial process in CTA Case
No. 5762.
Pre-trial is an answer to the clarion call for the
speedy disposition of cases. Although it was
discretionary under the 1940 Rules of Court, it
was made mandatory under the 1964 Rules and
the subsequent amendments in 1997. It has been
hailed as “the most important procedural
innovation in Anglo-Saxon justice in the
nineteenth century.”[44]
The nature and purpose of a pre-trial have been
laid down in Rule 18, Section 2 of the Rules of
Court:
SECTION 2. Nature and purpose. – The pre-trial is
mandatory. The court shall consider:
(a) The possibility of an amicable settlement
or of a submission to alternative modes of dispute
resolution;
(b) The simplification of the issues;
(c) The necessity or desirability of
amendments to the pleadings;
(d) The possibility of obtaining stipulations or
admissions of facts and of documents to avoid
unnecessary proof;
(e) The limitation of the number of
witnesses;
(f) The advisability of a preliminary
reference of issues to a commissioner;
(g) The propriety of rendering judgment on
the pleadings, or summary judgment, or of
dismissing the action should a valid ground
therefor be found to exist;
(h) The advisability or necessity of suspending
the proceedings; and
(i) Such other matters as may aid in the
prompt disposition of the action. (Emphasis ours.)
The admission having been made in a stipulation
of facts at pre-trial by the parties, it must be
treated as a judicial admission.[45] Under Section
4, Rule 129 of the Rules of Court, a judicial
admission requires no proof. The admission may
be contradicted only by a showing that it was
made through palpable mistake or that no such
admission was made. The Court cannot lightly set
aside a judicial admission especially when the
opposing party relied upon the same and
accordingly dispensed with further proof of the
fact already admitted. An admission made by a
party in the course of the proceedings does not
require proof.[46]
In the instant case, among the facts expressly
admitted by the CIR and Toshiba in their CTA-
approved Joint Stipulation are that Toshiba “is a
duly registered value-added tax entity in
accordance with Section 107 of the Tax Code, as
amended[,]”[47] that “is subject to zero percent
(0%) value-added tax on its export sales in
accordance with then Section 100(a)(2)(A) of the
Tax Code, as amended.”[48] The CIR was bound
by these admissions, which he could not
eventually contradict in his Motion for
Reconsideration of the CTA Decision dated
October 16, 2000, by arguing that Toshiba was
actually a VAT-exempt entity and its export sales
were VAT-exempt transactions. Obviously,
Toshiba could not have been subject to VAT and
exempt from VAT at the same time. Similarly, the
export sales of Toshiba could not have been
subject to zero percent (0%) VAT and exempt from
VAT as well.
The CIR cannot escape the binding effect of his
judicial admissions.
The Court disagrees with the Court of Appeals
when it ruled in its Decision dated August 29, 2002
that the CIR could not be bound by his admissions
in the Joint Stipulation because (1) the said
admissions were “made through palpable
mistake”[49] which, if countenanced, “would
result in falsehood, unfairness and injustice”;[50]
and (2) the State could not be put in estoppel by
the mistakes of its officials or agents. This ruling
of the Court of Appeals is rooted in its conclusion
that a “palpable mistake” had been committed by
the CIR in the signing of the Joint Stipulation.
However, this Court finds no evidence of the
commission of a mistake, much more, of a
palpable one.
The CIR does not deny that his counsel, Atty.
Joselito F. Biazon, Revenue Attorney II of the BIR,
signed the Joint Stipulation, together with the
counsel of Toshiba, Atty. Patricia B. Bisda.
Considering the presumption of regularity in the
performance of official duty,[51] Atty. Biazon is
presumed to have read, studied, and understood
the contents of the Joint Stipulation before he
signed the same. It rests on the CIR to present
evidence to the contrary.
Yet, the Court observes that the CIR himself never
alleged in his Motion for Reconsideration of the
CTA Decision dated October 16, 2000, nor in his
Petition for Review before the Court of Appeals,
that Atty. Biazon committed a mistake in signing
the Joint Stipulation. Since the CIR did not make
such an allegation, neither did he present any
proof in support thereof. The CIR began to aver
the existence of a palpable mistake only after the
Court of Appeals made such a declaration in its
Decision dated August 29, 2002.
Despite the absence of allegation and evidence by
the CIR, the Court of Appeals, on its own,
concluded that the admissions of the CIR in the
Joint Stipulation were due to a palpable mistake
based on the following deduction –
Scrutinizing the Answer filed by [the CIR], we rule
that the Joint Stipulation of Facts and Issues
signed by [the CIR] was made through palpable
mistake. Quoting paragraph 4 of its Answer, [the
CIR] states:
“4. He ADMITS the allegations contained in
paragraph 5 of the petition only insofar as the
cited provisions of Tax Code is concerned, but
SPECIFICALLY DENIES the rest of the allegations
therein for being mere opinions, arguments or
gratuitous assertions on the part of [Toshiba]
and/or because they are mere erroneous
conclusions or interpretations of the quoted law
involved, the truth of the matter being those
stated hereunder
x x x x”
And paragraph 5 of the petition for review filed by
[Toshiba] before the CTA states:
“5. Petitioner is subject to zero percent (0%)
value-added tax on its export sales in accordance
with then Section 100(a)(2)(A) of the Tax Code x x
x.
x x x x”
As we see it, nothing in said Answer did [the CIR]
admit that the export sales of [Toshiba] were
indeed zero-rated transactions. At the least,
what was admitted only by [the CIR] concerning
paragraph 4 of his Answer, is the fact that the
provisions of the Tax Code, as cited by [Toshiba]
in its petition for review filed before the CTA
were correct.[52]
The Court of Appeals provided no explanation as
to why the admissions of the CIR in his Answer in
CTA Case No. 5762 deserved more weight and
credence than those he made in the Joint
Stipulation. The appellate court failed to
appreciate that the CIR, through counsel, Atty.
Biazon, also signed the Joint Stipulation; and that
absent evidence to the contrary, Atty. Biazon is
presumed to have signed the Joint Stipulation
willingly and knowingly, in the regular
performance of his official duties. Additionally,
the Joint Stipulation[53] of Toshiba and the CIR
was a more recent pleading than the Answer[54]
of the CIR. It was submitted by the parties after
the pre-trial conference held by the CTA, and
subsequently approved by the tax court. If there
was any discrepancy between the admissions of
the CIR in his Answer and in the Joint Stipulation,
the more logical and reasonable explanation
would be that the CIR changed his mind or
conceded some points to Toshiba during the pre-
trial conference which immediately preceded the
execution of the Joint Stipulation. To
automatically construe that the discrepancy was
the result of a palpable mistake is a wide leap
which this Court is not prepared to take without
substantial basis.
The judicial admissions of the CIR in the Joint
Stipulation are not intrinsically false, wrong, or
illegal, and are consistent with the ruling on the
VAT treatment of PEZA-registered enterprises in
the previous Toshiba case.
There is no basis for believing that to bind the CIR
to his judicial admissions in the Joint Stipulation –
that Toshiba was a VAT-registered entity and its
export sales were zero-rated VAT transactions –
would result in “falsehood, unfairness and
injustice.” The judicial admissions of the CIR are
not intrinsically false, wrong, or illegal. On the
contrary, they are consistent with the ruling of
this Court in a previous case involving the same
parties, Commissioner of Internal Revenue v.
Toshiba Information Equipment (Phils.) Inc.[55]
(Toshiba case), explaining the VAT treatment of
PEZA-registered enterprises.
In the Toshiba case, Toshiba sought the refund of
its unutilized input VAT on its purchase of capital
goods and services for the first and second
quarters of 1996, based on Section 106(b) of the
Tax Code of 1977, as amended.[56] In the
Petition at bar, Toshiba is claiming refund of its
unutilized input VAT on its local purchase of goods
and services which are attributable to its export
sales for the first and second quarters of 1997,
pursuant to Section 106(a), in relation to Section
100(a)(1)(A)(i) of the Tax Code of 1977, as
amended, which read –
SEC. 106. Refunds or tax credits of creditable
input tax. – (a) Any VAT-registered person,
whose sales are zero-rated or effectively zero-
rated, may, within two (2) years after the close of
the taxable quarter when the sales were made,
apply for the issuance of a tax credit certificate or
refund of creditable input tax due or paid
attributable to such sales, except transitional
input tax, to the extent that such input tax has
not been applied against output tax: Provided,
however, That in the case of zero-rated sales
under Section 100(a)(2)(A)(i),(ii) and (b) and
Section 102(b)(1) and (2), the acceptable foreign
currency exchange proceeds thereof has been duly
accounted for in accordance with the regulations
of the Bangko Sentral ng Pilipinas (BSP):
Provided, further, That where the taxpayer is
engaged in zero-rated or effectively zero-rated
sale and also in taxable or exempt sale of goods or
properties of services, and the amount of
creditable input tax due or paid cannot be directly
and entirely attributed to any one of the
transactions, it shall be allocated proportionately
on the basis of the volume sales.
SEC. 100. Value-added tax on sale of goods or
properties. – (a) Rate and base of tax. – x x x
xxxx
(2) The following sales by VAT-registered persons
shall be subject to 0%:
(A) Export sales. – The term “export sales”
means:
(i) The sale and actual shipment of goods from
the Philippines to a foreign country, irrespective
of any shipping arrangement that may be agreed
upon which may influence or determine the
transfer of ownership of the goods so exported
and paid for in acceptable foreign currency or its
equivalent in goods or services, and accounted for
in accordance with the rules and regulations of
the Bangko Sentral ng Pilipnas (BSP).
Despite the difference in the legal bases for the
claims for credit/refund in the Toshiba case and
the case at bar, the CIR raised the very same
defense or objection in both – that Toshiba and its
transactions were VAT-exempt. Hence, the ruling
of the Court in the former case is relevant to the
present case.
At the outset, the Court establishes that there is a
basic distinction in the VAT-exemption of a person
and the VAT-exemption of a transaction –
It would seem that petitioner CIR failed to
differentiate between VAT-exempt transactions
from VAT-exempt entities. In the case of
Commissioner of Internal Revenue v. Seagate
Technology (Philippines), this Court already made
such distinction –
An exempt transaction, on the one hand, involves
goods or services which, by their nature, are
specifically listed in and expressly exempted from
the VAT under the Tax Code, without regard to
the tax status – VAT-exempt or not – of the party
to the transaction…
An exempt party, on the other hand, is a person
or entity granted VAT exemption under the Tax
Code, a special law or an international agreement
to which the Philippines is a signatory, and by
virtue of which its taxable transactions become
exempt from VAT x x x.[57]
In effect, the CIR is opposing the claim for
credit/refund of input VAT of Toshiba on two
grounds: (1) that Toshiba was a VAT-exempt
entity; and (2) that its export sales were VAT-
exempt transactions.
It is now a settled rule that based on the Cross
Border Doctrine, PEZA-registered enterprises,
such as Toshiba, are VAT-exempt and no VAT can
be passed on to them. The Court explained in the
Toshiba case that –
PEZA-registered enterprise, which would
necessarily be located within ECOZONES, are VAT-
exempt entities, not because of Section 24 of Rep.
Act No. 7916, as amended, which imposes the five
percent (5%) preferential tax rate on gross income
of PEZA-registered enterprises, in lieu of all taxes;
but, rather, because of Section 8 of the same
statute which establishes the fiction that
ECOZONES are foreign territory.
xxxx
The Philippine VAT system adheres to the Cross
Border Doctrine, according to which, no VAT shall
be imposed to form part of the cost of goods
destined for consumption outside of the territorial
border of the taxing authority. Hence, actual
export of goods and services from the Philippines
to a foreign country must be free of VAT; while,
those destined for use or consumption within the
Philippines shall be imposed with ten percent
(10%) VAT.
Applying said doctrine to the sale of goods,
properties, and services to and from the
ECOZONES, the BIR issued Revenue Memorandum
Circular (RMC) No. 74-99, on 15 October 1999. Of
particular interest to the present Petition is
Section 3 thereof, which reads –
SECTION 3. Tax Treatment of Sales Made by a
VAT Registered Supplier from the Customs
Territory, to a PEZA Registered Enterprise. –
(1) If the Buyer is a PEZA registered enterprise
which is subject to the 5% special tax regime, in
lieu of all taxes, except real property tax,
pursuant to R.A. No. 7916, as amended:
(a) Sale of goods (i.e., merchandise). – This shall
be treated as indirect export hence, considered
subject to zero percent (0%) VAT, pursuant to Sec.
106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No.
7916, in relation to ART. 77(2) of the Omnibus
Investments Code.
(b) Sale of service. – This shall be treated subject
to zero percent (0%) VAT under the “cross border
doctrine” of the VAT System, pursuant to VAT
Ruling No. 032-98 dated Nov. 5, 1998.
(2) If Buyer is a PEZA registered enterprise which
is not embraced by the 5% special tax regime,
hence, subject to taxes under the NIRC, e.g.,
Service Establishments which are subject to taxes
under the NIRC rather than the 5% special tax
regime:
(a) Sale of goods (i.e., merchandise). – This shall
be treated as indirect export hence, considered
subject to zero percent (0%) VAT, pursuant to Sec.
106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No. 7916
in relation to ART. 77(2) of the Omnibus
Investments Code.
(b) Sale of Service. – This shall be treated subject
to zero percent (0%) VAT under the “cross border
doctrine” of the VAT System, pursuant to VAT
Ruling No. 032-98 dated Nov. 5, 1998.
(3) In the final analysis, any sale of goods,
property or services made by a VAT registered
supplier from the Customs Territory to any
registered enterprise operating in the ecozone,
regardless of the class or type of the latter’s PEZA
registration, is actually qualified and thus legally
entitled to the zero percent (0%) VAT.
Accordingly, all sales of goods or property to such
enterprise made by a VAT registered supplier from
the Customs Territory shall be treated subject to
0% VAT, pursuant to Sec. 106(A)(2)(a)(5), NIRC, in
relation to ART. 77(2) of the Omnibus Investments
Code, while all sales of services to the said
enterprises, made by VAT registered suppliers
from the Customs Territory, shall be treated
effectively subject to the 0% VAT, pursuant to
Section 108(B)(3), NIRC, in relation to the
provisions of R.A. No. 7916 and the “Cross Border
Doctrine” of the VAT system.
This Circular shall serve as a sufficient basis to
entitle such supplier of goods, property or services
to the benefit of the zero percent (0%) VAT for
sales made to the aforementioned ECOZONE
enterprises and shall serve as sufficient
compliance to the requirement for prior approval
of zero-rating imposed by Revenue Regulations
No. 7-95 effective as of the date of the issuance
of this Circular.
Indubitably, no output VAT may be passed on to
an ECOZONE enterprise since it is a VAT-exempt
entity. x x x.[58]
The Court, nevertheless, noted in the Toshiba
case that the rule which considers any sale by a
supplier from the Customs Territory to a PEZA-
registered enterprise as export sale, which should
not be burdened by output VAT, was only clearly
established on October 15, 1999, upon the
issuance by the BIR of RMC No. 74-99. Prior to
October 15, 1999, whether a PEZA-registered
enterprise was exempt or subject to VAT
depended on the type of fiscal incentives availed
of by the said enterprise.[59] The old rule, then
followed by the BIR, and recognized and affirmed
by the CTA, the Court of Appeals, and this Court,
was described as follows –
According to the old rule, Section 23 of Rep. Act
No. 7916, as amended, gives the PEZA-registered
enterprise the option to choose between two sets
of fiscal incentives: (a) The five percent (5%)
preferential tax rate on its gross income under
Rep. Act No. 7916, as amended; and (b) the
income tax holiday provided under Executive
Order No. 226, otherwise known as the Omnibus
Investment Code of 1987, as amended.
The five percent (5%) preferential tax rate on
gross income under Rep. Act No. 7916, as
amended, is in lieu of all taxes. Except for real
property taxes, no other national or local tax may
be imposed on a PEZA-registered enterprise
availing of this particular fiscal incentive, not
even an indirect tax like VAT.
Alternatively, Book VI of Exec. Order No. 226, as
amended, grants income tax holiday to registered
pioneer and non-pioneer enterprises for six-year
and four-year periods, respectively. Those
availing of this incentive are exempt only from
income tax, but shall be subject to all other
taxes, including the ten percent (10%) VAT.
This old rule clearly did not take into
consideration the Cross Border Doctrine essential
to the VAT system or the fiction of the ECOZONE
as a foreign territory. It relied totally on the
choice of fiscal incentives of the PEZA-registered
enterprise. Again, for emphasis, the old VAT rule
for PEZA-registered enterprises was based on their
choice of fiscal incentives: (1) If the PEZA-
registered enterprise chose the five percent (5%)
preferential tax on its gross income, in lieu of all
taxes, as provided by Rep. Act No. 7916, as
amended, then it would be VAT-exempt; (2) If the
PEZA-registered enterprise availed of the income
tax holiday under Exec. Order No. 226, as
amended, it shall be subject to VAT at ten
percent (10%). Such distinction was abolished by
RMC No. 74-99, which categorically declared that
all sales of goods, properties, and services made
by a VAT-registered supplier from the Customs
Territory to an ECOZONE enterprise shall be
subject to VAT, at zero percent (0%) rate,
regardless of the latter’s type or class of PEZA
registration; and, thus, affirming the nature of a
PEZA-registered or an ECOZONE enterprise as a
VAT-exempt entity.[60]
To recall, Toshiba is herein claiming the refund of
unutilized input VAT payments on its local
purchases of goods and services attributable to its
export sales for the first and second quarters of
1997. Such export sales took place before
October 15, 1999, when the old rule on the VAT
treatment of PEZA-registered enterprises still
applied. Under this old rule, it was not only
possible, but even acceptable, for Toshiba,
availing itself of the income tax holiday option
under Section 23 of Republic Act No. 7916, in
relation to Section 39 of the Omnibus Investments
Code of 1987, to be subject to VAT, both
indirectly (as purchaser to whom the seller shifts
the VAT burden) and directly (as seller whose
sales were subject to VAT, either at ten percent
[10%] or zero percent [0%]).
A VAT-registered seller of goods and/or services
who made zero-rated sales can claim tax credit or
refund of the input VAT paid on its purchases of
goods, properties, or services relative to such
zero-rated sales, in accordance with Section
4.102-2 of Revenue Regulations No. 7-95, which
provides –
Sec. 4.102-2. Zero-rating. – (a) In general. - A
zero-rated sale by a VAT-registered person, which
is a taxable transaction for VAT purposes, shall
not result in any output tax. However, the input
tax on his purchases of goods, properties or
services related to such zero-rated sale shall be
available as tax credit or refund in accordance
with these regulations.
The BIR, as late as July 15, 2003, when it issued
RMC No. 42-2003, accepted applications for
credit/refund of input VAT on purchases prior to
RMC No. 74-99, filed by PEZA-registered
enterprises which availed themselves of the
income tax holiday. The BIR answered Question
Q-5(1) of RMC No. 42-2003 in this wise –
Q-5: Under Revenue Memorandum Circular
(RMC) No. 74-99, purchases by PEZA-registered
firms automatically qualify as zero-rated without
seeking prior approval from the BIR effective
October 1999.
1) Will the OSS-DOF Center still accept
applications from PEZA-registered claimants who
were allegedly billed VAT by their suppliers before
and during the effectivity of the RMC by issuing
VAT invoices/receipts?
xxxx
A-5(1): If the PEZA-registered enterprise is paying
the 5% preferential tax in lieu of all other taxes,
the said PEZA-registered taxpayer cannot claim
TCC or refund for the VAT paid on purchases.
However, if the taxpayer is availing of the income
tax holiday, it can claim VAT credit provided:
a. The taxpayer-claimant is VAT-registered;
b. Purchases are evidenced by VAT invoices
or receipts, whichever is applicable, with shifted
VAT to the purchaser prior to the implementation
of RMC No. 74-99; and
c. The supplier issues a sworn statement
under penalties of perjury that it shifted the VAT
and declared the sales to the PEZA-registered
purchaser as taxable sales in its VAT returns.
For invoices/receipts issued upon the effectivity
of RMC No. 74-99, the claims for input VAT by
PEZA-registered companies, regardless of the type
or class of PEZA-registration, should be denied.
(Emphases ours.)
Consequently, the CIR cannot herein insist that all
PEZA-registered enterprises are VAT-exempt in
every instance. RMC No. 42-2003 contains an
express acknowledgement by the BIR that prior to
RMC No. 74-99, there were PEZA-registered
enterprises liable for VAT and entitled to
credit/refund of input VAT paid under certain
conditions.
This Court already rejected in the Toshiba case
the argument that sale transactions of a PEZA-
registered enterprise were VAT-exempt under
Section 103(q) of the Tax Code of 1977, as
amended, ratiocinating that –
Section 103(q) of the Tax Code of 1977, as
amended, relied upon by petitioner CIR, relates to
VAT-exempt transactions. These are transactions
exempted from VAT by special laws or
international agreements to which the Philippines
is a signatory. Since such transactions are not
subject to VAT, the sellers cannot pass on any
output VAT to the purchasers of goods, properties,
or services, and they may not claim tax
credit/refund of the input VAT they had paid
thereon.
Section 103(q) of the Tax Code of 1977, as
amended, cannot apply to transactions of
respondent Toshiba because although the said
section recognizes that transactions covered by
special laws may be exempt from VAT, the very
same section provides that those falling under
Presidential Decree No. 66 are not. Presidential
Decree No. 66, creating the Export Processing
Zone Authority (EPZA), is the precursor of Rep.
Act No. 7916, as amended, under which the EPZA
evolved into the PEZA. Consequently, the
exception of Presidential Decree No. 66 from
Section 103(q) of the Tax Code of 1977, as
amended, extends likewise to Rep. Act No. 7916,
as amended.[61] (Emphasis ours.)
In light of the judicial admissions of Toshiba, the
CTA correctly confined itself to the other factual
issues submitted for resolution by the parties.
In accord with the admitted facts – that Toshiba
was a VAT-registered entity and that its export
sales were zero-rated transactions – the stated
issues in the Joint Stipulation were limited to
other factual matters, particularly, on the
compliance by Toshiba with the rest of the
requirements for credit/refund of input VAT on
zero-rated transactions. Thus, during trial,
Toshiba concentrated on presenting evidence to
establish that it incurred P3,875,139.65 of input
VAT for the first and second quarters of 1997
which were directly attributable to its export
sales; that said amount of input VAT were not
carried over to the succeeding quarters; that said
amount of input VAT has not been applied or
offset against any output VAT liability; and that
said amount of input VAT was properly
substantiated by official receipts and invoices.
After what truly appears to be an exhaustive
review of the evidence presented by Toshiba, the
CTA made the following findings –
(1) The amended quarterly VAT returns of
Toshiba for 1997 showed that it made no other
sales, except zero-rated export sales, for the
entire year, in the sum of P2,083,305,000.00 for
the first quarter and P5,411,372,000.00 for the
second quarter. That being the case, all input
VAT allegedly incurred by Toshiba for the first two
quarters of 1997, in the amount of P3,875,139.65,
was directly attributable to its zero-rated sales for
the same period.
(2) Toshiba did carry-over the P3,875,139.65
input VAT it reportedly incurred during the first
two quarters of 1997 to succeeding quarters, until
the first quarter of 1999. Despite the carry-over
of the subject input VAT of P3,875,139.65, the
claim of Toshiba was not affected because it later
on deducted the said amount as “VAT Refund/TCC
Claimed” from its total available input VAT of
P6,841,468.17 for the first quarter of 1999.
(3) Still, the CTA could not allow the
credit/refund of the total input VAT of
P3,875,139.65 being claimed by Toshiba because
not all of said amount was actually incurred by
the company and duly substantiated by invoices
and official receipts. From the P3,875,139.65
claim, the CTA deducted the amounts of (a)
P189,692.92, which was in excess of the
P3,685,446.23 input VAT Toshiba originally
claimed in its application for credit/refund filed
with the DOF One-Stop Shop; (b) P396,882.58,
which SGV & Co., the commissioned CPA,
disallowed for being improperly substantiated,
i.e., supported only by provisional
acknowledgement receipts, or by documents other
than official receipts, or not supported by TIN or
TIN VAT or by any document at all; (c)
P1,887,545.65, which the CTA itself verified as
not being substantiated in accordance with
Section 4.104-5[62] of Revenue Regulations No. 7-
95, in relation to Sections 108[63] and 238[64] of
the Tax Code of 1977, as amended; and (d)
P15,736.42, which Toshiba already applied to its
output VAT liability for the fourth quarter of 1998.
(4) Ultimately, Toshiba was entitled to the
credit/refund of unutilized input VAT payments
attributable to its zero-rated sales in the amounts
of P1,158,016.82 and P227,265.26, for the first
and second quarters of 1997, respectively, or in
the total amount of P1,385,282.08.
Since the aforementioned findings of fact of the
CTA are borne by substantial evidence on record,
unrefuted by the CIR, and untouched by the Court
of Appeals, they are given utmost respect by this
Court.
petitioner Toshiba Information Equipment (Phils.),
Inc. in the amount of P1,385,282.08, representing
the latter’s unutilized input VAT payments for the
first and second quarters of 1997. No
pronouncement as to costs.

The Court will not lightly set aside the conclusions SO ORDERED.
reached by the CTA which, by the very nature of
its functions, is dedicated exclusively to the SOCIAL JUSTICE SOCIETY G.R. No. 156052
resolution of tax problems and has accordingly
developed an expertise on the subject unless (SJS), VLADIMIR ALARIQUE T.
there has been an abuse or improvident exercise
of authority.[65] In Barcelon, Roxas Securities, CABIGAO and BONIFACIO S.
Inc. (now known as UBP Securities, Inc.) v.
Commissioner of Internal Revenue,[66] this Court TUMBOKON,
more explicitly pronounced –
Petitioners, Present:

Jurisprudence has consistently shown that this

Court accords the findings of fact by the CTA with PUNO, C.J., Chairperson,
the highest respect. In Sea-Land Service Inc. v.
Court of Appeals [G.R. No. 122605, 30 April 2001, SANDOVAL-GUTIERREZ,
357 SCRA 441, 445-446], this Court recognizes that
the Court of Tax Appeals, which by the very - v e r s u s - CORONA,
nature of its function is dedicated exclusively to
the consideration of tax problems, has necessarily AZCUNA and
developed an expertise on the subject, and its
conclusions will not be overturned unless there LEONARDO-DE CASTRO, JJ.
has been an abuse or improvident exercise of
authority. Such findings can only be disturbed on
appeal if they are not supported by substantial
evidence or there is a showing of gross error or HON. JOSE L. ATIENZA, JR.,
abuse on the part of the Tax Court. In the
absence of any clear and convincing proof to the in his capacity as Mayor of the
contrary, this Court must presume that the CTA
rendered a decision which is valid in every City of Manila,
respect.
Respondent.

x----------------------x
WHEREFORE, the assailed Decision dated August
29, 2002 and the Resolution dated February 19,
2003 of the Court of Appeals in CA-G.R. SP No.
63047 are REVERSED and SET ASIDE, and the
Decision dated October 16, 2000 of the Court of
Tax Appeals in CTA Case No. 5762 is REINSTATED. CHEVRON PHILIPPINES INC.,
Respondent Commissioner of Internal Revenue is
ORDERED to REFUND or, in the alternative, to PETRON CORPORATION and
ISSUE a TAX CREDIT CERTIFICATE in favor of
PILIPINAS SHELL PETROLEUM petroleum products in the Philippines while Shell
and Petron are engaged in the business of
CORPORATION, manufacturing, refining and likewise importing,
distributing and marketing of petroleum products
Movants-Intervenors. in the Philippines.[2] The DOE is a governmental
agency created under Republic Act (RA) No.
7638[3] and tasked to prepare, integrate,
coordinate, supervise and control all plans,
programs, projects and activities of the
government relative to energy exploration,
x----------------------x development, utilization, distribution and
conservation.[4]

The facts are restated briefly as follows:

DEPARTMENT OF ENERGY,

Movant-Intervenor. Promulgated: Petitioners Social Justice Society, Vladimir

Alarique T. Cabigao and Bonifacio S. Tumbokon, in
an original petition for mandamus under Rule 65
of the Rules of Court, sought to compel
February 13, 2008 respondent Hon. Jose L. Atienza, Jr., then mayor
of the City of Manila, to enforce Ordinance No.
8027. This ordinance was enacted by the
Sangguniang Panlungsod of Manila on November
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 20, 2001,[5] approved by respondent Mayor on
--------x November 28, 2001,[6] and became effective on
December 28, 2001 after publication.[7] Sections
1 and 3 thereof state:

RESOLUTION SECTION 1. For the purpose of promoting sound

CORONA, J.:
After we promulgated our decision in this case on
March 7, 2007, Chevron Philippines Inc. (Chevron),
Petron Corporation (Petron) and Pilipinas Shell
Petroleum Corporation (Shell) (collectively, the oil
companies) and the Republic of the Philippines,
represented by the Department of Energy (DOE),
filed their respective motions for leave to
intervene and for reconsideration of the decision.
urban planning and ensuring health, public safety,
and general welfare of the residents of Pandacan
and Sta. Ana as well as its adjoining areas, the
land use of [those] portions of land bounded by
the Pasig River in the north, PNR Railroad Track in
the east, Beata St. in the south, Palumpong St. in
the southwest, and Estero de Pandacan in the
west[,] PNR Railroad in the northwest area, Estero
de Pandacan in the [n]ortheast, Pasig River in the
southeast and Dr. M.L. Carreon in the southwest.
The area of Punta, Sta. Ana bounded by the Pasig
River, Marcelino Obrero St., Mayo 28 St., and F.
Manalo Street, are hereby reclassified from
Industrial II to Commercial I.

xxx xxx xxx

Chevron[1] is engaged in the business of
importing, distributing and marketing of

SEC. 3. Owners or operators of industries and
other businesses, the operation of which are no
longer permitted under Section 1 hereof, are
hereby given a period of six (6) months from the
date of effectivity of this Ordinance within which
to cease and desist from the operation of
businesses which are hereby in consequence,
disallowed.
Ordinance No. 8027 reclassified the area
described therein from industrial to commercial
and directed the owners and operators of
businesses disallowed under the reclassification to
cease and desist from operating their businesses
within six months from the date of effectivity of
the ordinance. Among the businesses situated in
the area are the so-called Pandacan Terminals of
the oil companies.
On June 26, 2002, the City of Manila and the
Department of Energy (DOE) entered into a
memorandum of understanding (MOU)[8] with the
oil companies. They agreed that the scaling down
of the Pandacan Terminals [was] the most viable
and practicable option. The Sangguniang
Panlungsod ratified the MOU in Resolution No.
97.[9] In the same resolution, the Sanggunian
declared that the MOU was effective only for a
period of six months starting July 25, 2002.[10]
Thereafter, on January 30, 2003, the Sanggunian
adopted Resolution No. 13[11] extending the
validity of Resolution No. 97 to April 30, 2003 and
authorizing the mayor of Manila to issue special
business permits to the oil companies.[12]
This was the factual backdrop presented to the
Court which became the basis of our March 7,
2007 decision. We ruled that respondent had the
ministerial duty under the Local Government Code
(LGC) to enforce all laws and ordinances relative
to the governance of the city,[13] including
Ordinance No. 8027. We also held that we need
not resolve the issue of whether the MOU entered
into by respondent with the oil companies and the
subsequent resolutions passed by the Sanggunian
could amend or repeal Ordinance No. 8027 since
the resolutions which ratified the MOU and made
it binding on the City of Manila expressly gave it
full force and effect only until April 30, 2003. We
concluded that there was nothing that legally
hindered respondent from enforcing Ordinance
No. 8027.
After we rendered our decision on March 7, 2007,
the oil companies and DOE sought to intervene
and filed motions for reconsideration in
intervention on March 12, 2007 and March 21,
2007 respectively. On April 11, 2007, we
conducted the oral arguments in Baguio City to
hear petitioners, respondent and movants-
intervenors oil companies and DOE.
The oil companies called our attention to the fact
that on April 25, 2003, Chevron had filed a
complaint against respondent and the City of
Manila in the Regional Trial Court (RTC) of Manila,
Branch 39, for the annulment of Ordinance No.
8027 with application for writs of preliminary
prohibitory injunction and preliminary mandatory
injunction.[14] The case was docketed as civil
case no. 03-106377. On the same day, Shell filed a
petition for prohibition and mandamus likewise
assailing the validity of Ordinance No. 8027 and
with application for writs of preliminary
prohibitory injunction and preliminary mandatory
injunction.[15] This was docketed as civil case no.
03-106380. Later on, these two cases were
consolidated and the RTC of Manila, Branch 39
issued an order dated May 19, 2003 granting the
applications for writs of preliminary prohibitory
injunction and preliminary mandatory injunction:
WHEREFORE, upon the filing of a total bond of
TWO MILLION (Php 2,000,000.00) PESOS, let a Writ
of Preliminary Prohibitory Injunction be issued
ordering [respondent] and the City of Manila, their
officers, agents, representatives, successors, and
any other persons assisting or acting in their
behalf, during the pendency of the case, to
REFRAIN from taking steps to enforce Ordinance
No. 8027, and let a Writ of Preliminary Mandatory
Injunction be issued ordering [respondent] to issue
[Chevron and Shell] the necessary Business
Permits to operate at the Pandacan Terminal.[16]

Petron likewise filed its own petition in the RTC of
Manila, Branch 42, also attacking the validity of
Ordinance No. 8027 with prayer for the issuance
of a writ of preliminary injunction and/or
temporary restraining order (TRO). This was
docketed as civil case no. 03-106379. In an order
dated August 4, 2004, the RTC enjoined the
parties to maintain the status quo.[17]
Thereafter, in 2006, the city council of Manila
enacted Ordinance No. 8119, also known as the
Manila Comprehensive Land Use Plan and Zoning
Ordinance of 2006.[18] This was approved by
respondent on June 16, 2006.[19]
Aggrieved anew, Chevron and Shell filed a
complaint in the RTC of Manila, Branch 20, asking
for the nullification of Ordinance No. 8119.[20]
This was docketed as civil case no. 06-115334.
Petron filed its own complaint on the same causes
of action in the RTC of Manila, Branch 41.[21] This
was docketed as civil case no. 07-116700.[22] The
court issued a TRO in favor of Petron, enjoining
the City of Manila and respondent from enforcing
Ordinance No. 8119.[23]
Meanwhile, in civil case no. 03-106379, the parties
filed a joint motion to withdraw complaint and
counterclaim on February 20, 2007.[24] In an
order dated April 23, 2007, the joint motion was
granted and all the claims and counterclaims of
the parties were withdrawn.[25]
Given these additional pieces of information, the
following were submitted as issues for our
resolution:
1. whether movants-intervenors should be
allowed to intervene in this case;[26]
2. whether the following are impediments to the
execution of our March 7, 2007 decision:
(a) Ordinance No. 8119, the enactment and
existence of which were not previously brought by
the parties to the attention of the Court and
(b) writs of preliminary prohibitory injunction
and preliminary mandatory injunction and status
quo order issued by the RTC of Manila, Branches
39 and 42 and
3. whether the implementation of Ordinance No.
8027 will unduly encroach upon the DOEs powers
and functions involving energy resources.
During the oral arguments, the parties submitted
to this Courts power to rule on the
constitutionality and validity of Ordinance No.
8027 despite the pendency of consolidated cases
involving this issue in the RTC.[27] The
importance of settling this controversy as fully
and as expeditiously as possible was emphasized,
considering its impact on public interest. Thus, we
will also dispose of this issue here. The parties
were after all given ample opportunity to present
and argue their respective positions. By so doing,
we will do away with the delays concomitant with
litigation and completely adjudicate an issue
which will most likely reach us anyway as the final
arbiter of all legal disputes.
Before we resolve these issues, a brief review of
the history of the Pandacan Terminals is called for
to put our discussion in the proper context.
History Of The Pandacan
Oil Terminals
Pandacan (one of the districts of the City of
Manila) is situated along the banks of the Pasig
river. At the turn of the twentieth century,
Pandacan was unofficially designated as the
industrial center of Manila. The area, then largely
uninhabited, was ideal for various emerging
industries as the nearby river facilitated the
transportation of goods and products. In the
1920s, it was classified as an industrial zone.[28]
Among its early industrial settlers were the oil
companies. Shell established its installation there
on January 30, 1914.[29] Caltex (now Chevron)
followed suit in 1917 when the company began
marketing its products in the country.[30] In 1922,
it built a warehouse depot which was later
converted into a key distribution terminal.[31]
The corporate presence in the Philippines of Esso
(Petrons predecessor) became more keenly felt
when it won a concession to build and operate a
refinery in Bataan in 1957.[32] It then went on to
operate a state-of-the-art lube oil blending plant
in the Pandacan Terminals where it manufactures
lubes and greases.[33]
On December 8, 1941, the Second World War
reached the shores of the Philippine Islands.
Although Manila was declared an open city, the
Americans had no interest in welcoming the
Japanese. In fact, in their zealous attempt to fend
off the Japanese Imperial Army, the United States
Army took control of the Pandacan Terminals and
hastily made plans to destroy the storage facilities
to deprive the advancing Japanese Army of a
valuable logistics weapon.[34] The U.S. Army
burned unused petroleum, causing a frightening
conflagration. Historian Nick Joaquin recounted
the events as follows:
After the USAFFE evacuated the City late in
December 1941, all army fuel storage dumps were
set on fire. The flames spread, enveloping the
City in smoke, setting even the rivers ablaze,
endangering bridges and all riverside buildings.
For one week longer, the open city blazeda cloud
of smoke by day, a pillar of fire by night.[35]
The fire consequently destroyed the Pandacan
Terminals and rendered its network of depots and
service stations inoperative.[36]
After the war, the oil depots were reconstructed.
Pandacan changed as Manila rebuilt itself. The
three major oil companies resumed the operation
of their depots.[37] But the district was no longer
a sparsely populated industrial zone; it had
evolved into a bustling, hodgepodge community.
Today, Pandacan has become a densely populated
area inhabited by about 84,000 people, majority
of whom are urban poor who call it home.[38]
Aside from numerous industrial installations, there
are also small businesses, churches, restaurants,
schools, daycare centers and residences situated
there.[39] Malacaang Palace, the official
residence of the President of the Philippines and
the seat of governmental power, is just two
kilometers away.[40] There is a private school
near the Petron depot. Along the walls of the
Shell facility are shanties of informal settlers.[41]
More than 15,000 students are enrolled in
elementary and high schools situated near these
facilities.[42] A university with a student
population of about 25,000 is located directly
across the depot on the banks of the Pasig
river.[43]
The 36-hectare Pandacan Terminals house the oil
companies distribution terminals and depot
facilities.[44] The refineries of Chevron and Shell
in Tabangao and Bauan, both in Batangas,
respectively, are connected to the Pandacan
Terminals through a 114-kilometer[45]
underground pipeline system.[46] Petrons refinery
in Limay, Bataan, on the other hand, also services
the depot.[47] The terminals store fuel and other
petroleum products and supply 95% of the fuel
requirements of Metro Manila,[48] 50% of Luzons
consumption and 35% nationwide.[49] Fuel can
also be transported through barges along the Pasig
river or tank trucks via the South Luzon
Expressway.
We now discuss the first issue: whether movants-
intervenors should be allowed to intervene in this
case.
Intervention Of The Oil Companies And The DOE
Should Be Allowed In The Interest of Justice
Intervention is a remedy by which a third party,
not originally impleaded in the proceedings,
becomes a litigant therein to enable him, her or it
to protect or preserve a right or interest which
may be affected by such proceedings.[50] The
pertinent rules are Sections 1 and 2, Rule 19 of
the Rules of Court:
SEC. 1. Who may intervene. A person who has a
legal interest in the matter in litigation, or in the
success of either of the parties, or an interest
against both, or is so situated as to be adversely
affected by a distribution or other disposition of
property in the custody of the court or of an
officer thereof may, with leave of court, be
allowed to intervene in the action. The court shall
consider whether or not the intervention will
unduly delay or prejudice the adjudication of the
rights of the original parties, and whether or not
the intervenors rights may be fully protected in a
separate proceeding.
SEC. 2. Time to intervene. The motion to
intervene may be filed at any time before
rendition of judgment by the trial court. A copy of
the pleading-in-intervention shall be attached to
the motion and served on the original parties.
Thus, the following are the requisites
intervention of a non-party:
(1) Legal interest
(a) in the matter in controversy; or
(b) in the success of either of the parties; or
I against both parties; or
(d) person is so situated as to be adversely
affected by a distribution or other disposition of
property in the custody of the court or of an
officer thereof;
(2) Intervention will not unduly delay or prejudice
the adjudication of rights of original parties;
(3) Intervenors rights may not be fully protected
in a separate proceeding[51] and
(g)The motion to intervene may be filed at any
time before rendition of judgment by the trial
court.
For both the oil companies and DOE, the last
requirement is definitely absent. As a rule,
intervention is allowed before rendition of
judgment as Section 2, Rule 19 expressly provides.
Both filed their separate motions after our
decision was promulgated. In Republic of the
Philippines v. Gingoyon,[52] a recently decided
case which was also an original action filed in this
Court, we declared that the appropriate time to
file the motions-in-intervention was before and
not after resolution of the case.[53]
The Court, however, has recognized exceptions to
Section 2, Rule 19 in the interest of substantial
for justice:
The rule on intervention, like all other rules of
procedure, is intended to make the powers of the
Court fully and completely available for justice. It
is aimed to facilitate a comprehensive
adjudication of rival claims overriding
technicalities on the timeliness of the filing
thereof.[54]
The oil companies assert that they have a legal
interest in this case because the implementation
of Ordinance No. 8027 will directly affect their
business and property rights.[55]

[T]he interest which entitles a person to intervene
in a suit between other parties must be in the
matter in litigation and of such direct and
immediate character that the intervenor will
either gain or lose by direct legal operation and
effect of the judgment. Otherwise, if persons not
parties to the action were allowed to intervene,
proceedings would become unnecessarily
complicated, expensive and interminable. And
this would be against the policy of the law. The
words an interest in the subject means a direct
interest in the cause of action as pleaded, one
that would put the intervenor in a legal position
to litigate a fact alleged in the complaint without
the establishment of which plaintiff could not
recover.[56]
We agree that the oil companies have a direct and
immediate interest in the implementation of
Ordinance No. 8027. Their claim is that they will
need to spend billions of pesos if they are
compelled to relocate their oil depots out of
Manila. Considering that they admitted knowing
about this case from the time of its filing on
December 4, 2002, they should have intervened
long before our March 7, 2007 decision to protect
their interests. But they did not.[57] Neither did
they offer any worthy explanation to justify their
late intervention.
Be that as it may, although their motion for
intervention was not filed on time, we will allow
it because they raised and presented novel issues
and arguments that were not considered by the
Court in its March 7, 2007 decision. After all, the
allowance or disallowance of a motion to
intervene is addressed to the sound discretion of
the court before which the case is pending.[58]
Considering the compelling reasons favoring
intervention, we do not think that this will unduly
delay or prejudice the adjudication of rights of
the original parties. In fact, it will be expedited
since their intervention will enable us to rule on
the constitutionality of Ordinance No. 8027
instead of waiting for the RTCs decision.
The DOE, on the other hand, alleges that its
interest in this case is also direct and immediate
as Ordinance No. 8027 encroaches upon its
exclusive and national authority over matters
affecting the oil industry. It seeks to intervene in
order to represent the interests of the members
of the public who stand to suffer if the Pandacan
Terminals operations are discontinued. We will
tackle the issue of the alleged encroachment into
DOEs domain later on. Suffice it to say at this
point that, for the purpose of hearing all sides and
considering the transcendental importance of this
case, we will also allow DOEs intervention.
The Injunctive Writs Are Not Impediments To The
Enforcement Of Ordinance No. 8027
Under Rule 65, Section 3[59] of the Rules of
Court, a petition for mandamus may be filed 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.
According to the oil companies, respondent did
not unlawfully fail or neglect to enforce
Ordinance No. 8027 because he was lawfully
prevented from doing so by virtue of the
injunctive writs and status quo order issued by the
RTC of Manila, Branches 39 and 42.
First, we note that while Chevron and Shell still
have in their favor the writs of preliminary
injunction and preliminary mandatory injunction,
the status quo order in favor of Petron is no longer
in effect since the court granted the joint motion
of the parties to withdraw the complaint and
counterclaim.[60]
Second, the original parties failed to inform the
Court about these injunctive writs. Respondent
(who was also impleaded as a party in the RTC
cases) defends himself by saying that he informed
the court of the pendency of the civil cases and
that a TRO was issued by the RTC in the
consolidated cases filed by Chevron and Shell. It is
true that had the oil companies only intervened
much earlier, the Court would not have been left
in the dark about these facts. Nevertheless,
respondent should have updated the Court, by
way of manifestation, on such a relevant matter.
In his memorandum, respondent mentioned the
issuance of a TRO. Under Section 5 of Rule 58 of
the Rules of Court, a TRO issued by the RTC is
effective only for a period of 20 days. This is why,
in our March 7, 2007 decision, we presumed with
certainty that this had already lapsed.[61]
Respondent also mentioned the grant of injunctive
writs in his rejoinder which the Court, however,
expunged for being a prohibited pleading. The
parties and their counsels were clearly remiss in
their duties to this Court.
In resolving controversies, courts can only
consider facts and issues pleaded by the
parties.[62] Courts, as well as magistrates
presiding over them are not omniscient. They can
only act on the facts and issues presented before
them in appropriate pleadings. They may not even
substitute their own personal knowledge for
evidence. Nor may they take notice of matters
except those expressly provided as subjects of
mandatory judicial notice.
We now proceed to the issue of whether the
injunctive writs are legal impediments to the
enforcement of Ordinance No. 8027.
Section 3, Rule 58 of the Rules of Court
enumerates the grounds for the issuance of a writ
of preliminary injunction:
SEC. 3. Grounds for issuance of preliminary
injunction. ― A preliminary injunction may be
granted when it is established:
(a) That the applicant is entitled to the relief
demanded, and the whole or part of such relief
consists in restraining the commission or
continuance of the act or acts complained of, or
in requiring the performance of an act or acts,
either for a limited period or perpetually;
(b) That the commission, continuance or
nonperformance of the act or acts complained of
during the litigation would probably work injustice
to the applicant; or
(g) IThat a party, court, agency or a person
is doing, threatening, or is attempting to do, or is
procuring or suffering to be done, some act or
acts probably in violation of the rights of the
applicant respecting the subject of the action or
proceeding, and tending to render the judgment
ineffectual.
There are two requisites for the issuance of a
preliminary injunction: (1) the right to be
protected exists prima facie and (2) the acts
sought to be enjoined are violative of that right. It
must be proven that the violation sought to be
prevented will cause an irreparable injustice.
The act sought to be restrained here was the
enforcement of Ordinance No. 8027. It is a settled
rule that an ordinance enjoys the presumption of
validity and, as such, cannot be restrained by
injunction.[63] Nevertheless, when the validity of
the ordinance is assailed, the courts are not
precluded from issuing an injunctive writ against
its enforcement. However, we have declared that
the issuance of said writ is proper only when:

... the petitioner assailing the ordinance has made
out a case of unconstitutionality strong enough to
overcome, in the mind of the judge, the
presumption of validity, in addition to a showing
of a clear legal right to the remedy sought....[64]
(Emphasis supplied)
Judge Reynaldo G. Ros, in his order dated May 19,
2003, stated his basis for issuing the injunctive
writs:
The Court, in resolving whether or not a Writ of
Preliminary Injunction or Preliminary Mandatory
Injunction should be issued, is guided by the
following requirements: (1) a clear legal right of
the complainant; (2) a violation of that right; and
(3) a permanent and urgent necessity for the Writ
to prevent serious damage. The Court believes
that these requisites are present in these cases.
There is no doubt that the plaintiff/petitioners
have been legitimately operating their business in
the Pandacan Terminal for many years and they
have made substantial capital investment therein.
Every year they were issued Business Permits by
the City of Manila. Its operations have not been
declared illegal or contrary to law or morals. In
fact, because of its vital importance to the
national economy, it was included in the
Investment Priorities Plan as mandated under the
Downstream Oil Industry Deregulation Act of 1988
(R.A. 8479). As a lawful business, the
plaintiff/petitioners have a right, therefore, to
continue their operation in the Pandacan Terminal
and the right to protect their investments. This is
a clear and unmistakable right of the
plaintiff/petitioners.
The enactment, therefore, of City Ordinance No.
8027 passed by the City Council of Manila
reclassifying the area where the Pandacan
Terminal is located from Industrial II to
Commercial I and requiring the
plaintiff/petitioners to cease and desist from the
operation of their business has certainly violated
the rights of the plaintiff/petitioners to continue
their legitimate business in the Pandacan Terminal
and deprived them of their huge investments they
put up therein. Thus, before the Court, therefore,
determines whether the Ordinance in question is
valid or not, a Writ of Preliminary Injunction and a
Writ of Mandatory Injunction be issued to prevent
serious and irreparable damage to
plaintiff/petitioners.[65]
Nowhere in the judges discussion can we see that,
in addition to a showing of a clear legal right of
Chevron and Shell to the remedy sought, he was
convinced that they had made out a case of
unconstitutionality or invalidity strong enough to
overcome the presumption of validity of the
ordinance. Statutes and ordinances are presumed
valid unless and until the courts declare the
contrary in clear and unequivocal terms.[66] The
mere fact that the ordinance is alleged to be
unconstitutional or invalid will not entitle a party
to have its enforcement enjoined.[67] The
presumption is all in favor of validity. The reason
for this is obvious:
The action of the elected representatives of the
people cannot be lightly set aside. The councilors
must, in the very nature of things, be familiar
with the necessities of their particular
municipality and with all the facts and
circumstances which surround the subject and
necessitate action. The local legislative body, by
enacting the ordinance, has in effect given notice
that the regulations are essential to the well
being of the people . . . The Judiciary should not
lightly set aside legislative action when there is
not a clear invasion of personal or property rights
under the guise of police regulation.[68]
Xxx
...[Courts] accord the presumption of
constitutionality to legislative enactments, not
only because the legislature is presumed to abide
by the Constitution but also because the
judiciary[,] in the determination of actual cases
and controversies[,] must reflect the wisdom and
justice of the people as expressed through their
representatives in the executive and legislative
departments of the government.[69]
The oil companies argue that this presumption
must be set aside when the invalidity or
unreasonableness appears on the face of the
ordinance itself.[70] We see no reason to set aside
the presumption. The ordinance, on its face, does
not at all appear to be unconstitutional. It
reclassified the subject area from industrial to
commercial. Prima facie, this power is within the
power of municipal corporations:
The power of municipal corporations to divide
their territory into industrial, commercial and
residential zones is recognized in almost all
jurisdictions inasmuch as it is derived from the
police power itself and is exercised for the
protection and benefit of their inhabitants.[71]
Xxx
There can be no doubt that the City of Manila has
the power to divide its territory into residential
and industrial zones, and to prescribe that
offensive and unwholesome trades and
occupations are to be established exclusively in
the latter zone.
Xxx xxx xxx
Likewise, it cannot be denied that the City of
Manila has the authority, derived from the police
power, of forbidding the appellant to continue the
manufacture of toyo in the zone where it is now
situated, which has been declared
residential....[72]
Courts will not invalidate an ordinance unless it
clearly appears that it is unconstitutional. There is
no such showing here. Therefore, the injunctive
writs issued in the Manila RTCs May 19, 2003 order
had no leg to stand on.
We are aware that the issuance of these
injunctive writs is not being assailed as tainted
with grave abuse of discretion. However, we are
confronted with the question of whether these
writs issued by a lower court are impediments to
the enforcement of Ordinance No. 8027 (which is
the subject of the mandamus petition). As already
discussed, we rule in the negative.
Ordinance No. 8027 Was Not Superseded By
Ordinance No. 8119
The March 7, 2007 decision did not take into
consideration the passage of Ordinance No. 8119
entitled An Ordinance Adopting the Manila
Comprehensive Land Use Plan and Zoning
Regulations of 2006 and Providing for the
Administration, Enforcement and Amendment
thereto which was approved by respondent on
June 16, 2006. The simple reason was that the
Court was never informed about this ordinance.
While courts are required to take judicial notice
of the laws enacted by Congress, the rule with
respect to local ordinances is different.
Ordinances are not included in the enumeration of
matters covered by mandatory judicial notice
under Section 1, Rule 129 of the Rules of
Court.[73]
Although, Section 50 of RA 409[74] provides that:
SEC. 50 Judicial notice of ordinances. - All courts
sitting in the city shall take judicial notice of the
ordinances passed by the [Sangguniang
Panglungsod].
This cannot be taken to mean that this Court,
since it has its seat in the City of Manila, should
have taken steps to procure a copy of the
ordinance on its own, relieving the party of any
duty to inform the Court about it.
Even where there is a statute that requires a court
to take judicial notice of municipal ordinances, a
court is not required to take judicial notice of
ordinances that are not before it and to which it
does not have access. The party asking the court
to take judicial notice is obligated to supply the
court with the full text of the rules the party
desires it to have notice of.[75] Counsel should
take the initiative in requesting that a trial court
take judicial notice of an ordinance even where a
statute requires courts to take judicial notice of
local ordinances.[76]
The intent of a statute requiring a court to take
judicial notice of a local ordinance is to remove
any discretion a court might have in determining
whether or not to take notice of an ordinance.
Such a statute does not direct the court to act on
its own in obtaining evidence for the record and a
party must make the ordinance available to the
court for it to take notice.[77]
In its defense, respondent claimed that he did not
inform the Court about the enactment of
Ordinance No. 8119 because he believed that it
was different from Ordinance No. 8027 and that
the two were not inconsistent with each
other.[78]
In the same way that we deem the intervenors
late intervention in this case unjustified, we find
the failure of respondent, who was an original
party here, inexcusable.
The Rule On Judicial Admissions Is Not Applicable
Against Respondent
The oil companies assert that respondent
judicially admitted that Ordinance No. 8027 was
repealed by Ordinance No. 8119 in civil case no.
03-106379 (where Petron assailed the
constitutionality of Ordinance No. 8027) when the
parties in their joint motion to withdraw
complaint and counterclaim stated that the issue
...has been rendered moot and academic by virtue
of the passage of [Ordinance No. 8119].[79] They
contend that such admission worked as an
estoppel against the respondent.
Respondent countered that this stipulation simply
meant that Petron was recognizing the validity
and legality of Ordinance No. 8027 and that it had
conceded the issue of said ordinances
constitutionality, opting instead to question the
validity of Ordinance No. 8119.[80] The oil
companies deny this and further argue that
respondent, in his answer in civil case no. 06-
115334 (where Chevron and Shell are asking for
the nullification of Ordinance No. 8119), expressly
stated that Ordinance No. 8119 replaced
Ordinance No. 8027:[81]
... Under Ordinance No. 8027, businesses whose
uses are not in accord with the reclassification
were given six months to cease [their] operation.
Ordinance No. 8119, which in effect, replaced
Ordinance [No.] 8027, merely took note of the
time frame provided for in Ordinance No. 8119....
Ordinance No. 8119 thus provided for an even
longer term, that is[,] seven years;[82] (Emphasis
supplied)
Rule 129, Section 4 of the Rules of Court provides:
Section 4. Judicial admissions. ― An admission,
verbal or written, made by a party in the course
of the proceedings in the same case, does not
require proof. The admission may be contradicted
only by showing that it was made through
palpable mistake or that no such admission was
made. (Emphasis supplied)
While it is true that a party making a judicial
admission cannot subsequently take a position
contrary to or inconsistent with what was
pleaded,[83] the aforestated rule is not applicable
here. Respondent made the statements regarding
the ordinances in civil case nos. 03-106379 and 06-
115334 which are not the same as this case before
us.[84] To constitute a judicial admission, the
admission must be made in the same case in which
it is offered.
Hence, respondent is not estopped from claiming
that Ordinance No. 8119 did not supersede
Ordinance No. 8027. On the contrary, it is the oil
companies which should be considered estopped.
They rely on the argument that Ordinance No.
8119 superseded Ordinance No. 8027 but, at the
same time, also impugn its (8119s) validity. We
frown on the adoption of inconsistent positions
and distrust any attempt at clever positioning
under one or the other on the basis of what
appears advantageous at the moment. Parties
cannot take vacillating or contrary positions
regarding the validity of a statute[85] or
ordinance. Nonetheless, we will look into the
merits of the argument of implied repeal.
Ordinance No. 8119 Did Not Impliedly Repeal
Ordinance No. 8027
Both the oil companies and DOE argue that
Ordinance No. 8119 repealed Ordinance No. 8027.
They assert that although there was no express
repeal[86] of Ordinance No. 8027, Ordinance No.
8119 impliedly repealed it.
According to the oil companies, Ordinance No.
8119 reclassified the area covering the Pandacan
Terminals to High Density Residential/Mixed Use
Zone (R-3/MXD)[87] whereas Ordinance No. 8027
reclassified the same area from Industrial II to
Commercial I:
SECTION 1. For the purpose of promoting sound
urban planning and ensuring health, public safety,
and general welfare of the residents of Pandacan
and Sta. Ana as well as its adjoining areas, the
land use of [those] portions of land bounded by
the Pasig River in the north, PNR Railroad Track in
the east, Beata St. in the south, Palumpong St. in
the southwest, and Estero de Pancacan in the
west[,] PNR Railroad in the northwest area, Estero
de Pandacan in the [n]ortheast, Pasig River in the
southeast and Dr. M.L. Carreon in the southwest.
The area of Punta, Sta. Ana bounded by the Pasig
River, Marcelino Obrero St., Mayo 28 St., and F.
Manalo Street, are hereby reclassified from
Industrial II to Commercial I. (Emphasis supplied)
Moreover, Ordinance No. 8119 provides for a
phase-out of seven years:
SEC. 72. Existing Non-Conforming Uses and
Buildings. - The lawful use of any building,
structure or land at the time of the adoption of
this Ordinance may be continued, although such
use does not conform with the provision of the
Ordinance, provided:
xxx xxx xxx
(g) In case the non-conforming use is an
industrial use:
xxx xxx xxx
d. The land use classified as non-conforming
shall program the phase-out and relocation of the
non-conforming use within seven (7) years from
the date of effectivity of this Ordinance.
(Emphasis supplied)
This is opposed to Ordinance No. 8027 which
compels affected entities to vacate the area
within six months from the effectivity of the
ordinance:
SEC. 3. Owners or operators of industries and
other businesses, the operation of which are no
longer permitted under Section 1 hereof, are
hereby given a period of six (6) months from the
date of effectivity of this Ordinance within which
to cease and desist from the operation of
businesses which are hereby in consequence,
disallowed.
Ordinance No. 8119 also designated the Pandacan
oil depot area as a Planned Unit
Development/Overlay Zone (O-PUD):
SEC. 23. Use Regulations in Planned Unit
Development/Overlay Zone (O-PUD). O-PUD Zones
are identified specific sites in the City of Manila
wherein the project site is comprehensively
planned as an entity via unitary site plan which
permits flexibility in planning/ design, building
siting, complementarily of building types and land
uses, usable open spaces and the preservation of
significant natural land features, pursuant to
regulations specified for each particular PUD.
Enumerated below are identified PUD:
xxx xxx xxx
6. Pandacan Oil Depot Area
xxx xxx xxx
Enumerated below are the allowable uses:
1. all uses allowed in all zones where it
is located
2. the [Land Use Intensity Control
(LUIC)] under which zones are located shall, in all
instances be complied with
3. the validity of the prescribed LUIC
shall only be [superseded] by the development
controls and regulations specified for each PUD as
provided for each PUD as provided for by the
masterplan of respective PUDs.[88] (Emphasis
supplied)
Respondent claims that in passing Ordinance No.
8119, the Sanggunian did not intend to repeal
Ordinance No. 8027 but meant instead to carry
over 8027s provisions to 8119 for the purpose of
making Ordinance No. 8027 applicable to the oil
companies even after the passage of Ordinance
No. 8119.[89] He quotes an excerpt from the
minutes of the July 27, 2004 session of the
Sanggunian during the first reading of Ordinance
No. 8119:
Member GARCIA: Your Honor, iyong patungkol po
roon sa oil depot doon sa amin sa Sixth District sa
Pandacan, wala pong nakalagay eith sa ordinansa
rito na taliwas o kakaiba roon sa ordinansang
ipinasa noong nakaraang Konseho, iyong
Ordinance No. 8027. So kung ano po ang nandirito
sa ordinansa na ipinasa ninyo last time, iyon lang
po ang ni-lift eithe at inilagay eith. At eith eith
ordinansang iyong naipasa ng huling Konseho, niri-
classify [ninyo] from Industrial II to Commercial C-
1 ang area ng Pandacan kung nasaan ang oil
depot. So ini-lift lang po [eithe] iyong definition,
density, at saka po yon pong ng noong ordinansa
ninyo na siya eith naming inilagay eith, iniba lang
po naming iyong title. So wala po kaming binago
na taliwas o nailagay na taliwas doon sa
ordinansang ipinasa ninyo, ni-lift lang po [eithe]
from Ordinance No. 8027.[90] (Emphasis supplied)
We agree with respondent.
Repeal by implication proceeds on the premise
that where a statute of later date clearly reveals
the intention of the legislature to abrogate a prior
act on the subject, that intention must be given
effect.[91]
There are two kinds of implied repeal. The first is:
where the provisions in the two acts on the same
subject matter are irreconcilably contradictory,
the latter act, to the extent of the conflict,
constitutes an implied repeal of the earlier
one.[92] The second is: if the later act covers the
whole subject of the earlier one and is clearly
intended as a substitute, it will operate to repeal
the earlier law.[93] The oil companies argue that
the situation here falls under the first category.
Implied repeals are not favored and will not be so
declared unless the intent of the legislators is
manifest.[94] As statutes and ordinances are
presumed to be passed only after careful
deliberation and with knowledge of all existing
ones on the subject, it follows that, in passing a
law, the legislature did not intend to interfere
with or abrogate a former law relating to the
same subject matter.[95] If the intent to repeal is
not clear, the later act should be construed as a
continuation of, and not a substitute for, the
earlier act.[96]
These standards are deeply enshrined in our
jurisprudence. We disagree that, in enacting
Ordinance No. 8119, there was any indication of
the legislative purpose to repeal Ordinance No.
8027.[97] The excerpt quoted above is proof that
there was never such an intent. While it is true
that both ordinances relate to the same subject
matter, i.e. classification of the land use of the
area where Pandacan oil depot is located, if there
is no intent to repeal the earlier enactment, every
effort at reasonable construction must be made to
reconcile the ordinances so that both can be given
effect:
The fact that a later enactment may relate to the
same subject matter as that of an earlier statute
is not of itself sufficient to cause an implied
repeal of the prior act, since the new statute may
merely be cumulative or a continuation of the old
one. What is necessary is a manifest indication of
legislative purpose to repeal.[98]
For the first kind of implied repeal, there must be
an irreconcilable conflict between the two
ordinances. There is no conflict between the two
ordinances. Ordinance No. 8027 reclassified the
Pandacan area from Industrial II to Commercial I.
Ordinance No. 8119, in Section 23, designated it
as a Planned Unit Development/Overlay Zone (O-
PUD). In its Annex C which defined the zone
boundaries,[99] the Pandacan area was shown to
be within the High Density Residential/Mixed Use
Zone (R-3/MXD). These zone classifications in
Ordinance No. 8119 are not inconsistent with the
reclassification of the Pandacan area from
Industrial to Commercial in Ordinance No. 8027.
The O-PUD classification merely made Pandacan a
project site ... comprehensively planned as an
entity via unitary site plan which permits
flexibility in planning/design, building siting,
complementarity of building types and land uses,
usable open spaces and the preservation of
significant natural land features....[100] Its
classification as R-3/MXD means that it should be
used primarily for high-rise housing/dwelling
purposes and limited
complementary/supplementary trade, services
and business activities.[101] There is no conflict
since both ordinances actually have a common
objective, i.e., to shift the zoning classification
from industrial to commercial (Ordinance No.
8027) or mixed residential/commercial (Ordinance
No. 8119).

Moreover, it is a well-settled rule in statutory
construction that a subsequent general law does
not repeal a prior special law on the same subject
unless it clearly appears that the legislature has
intended by the latter general act to modify or
repeal the earlier special law. Generalia
specialibus non derogant (a general law does not
nullify a specific or special law).[102] This is so
even if the provisions of the general law are
sufficiently comprehensive to include what was
set forth in the special act.[103] The special act
and the general law must stand together, one as
the law of the particular subject and the other as
the law of general application.[104] The special
law must be taken as intended to constitute an
exception to, or a qualification of, the general act
or provision.[105]
The reason for this is that the legislature, in
passing a law of special character, considers and
makes special provisions for the particular
circumstances dealt with by the special law. This
being so, the legislature, by adopting a general
law containing provisions repugnant to those of
the special law and without making any mention
of its intention to amend or modify such special
law, cannot be deemed to have intended an
amendment, repeal or modification of the
latter.[106]
Ordinance No. 8027 is a special law[107] since it
deals specifically with a certain area described
therein (the Pandacan oil depot area) whereas
Ordinance No. 8119 can be considered a general
law[108] as it covers the entire city of Manila.
The oil companies assert that even if Ordinance
No. 8027 is a special law, the existence of an all-
encompassing repealing clause in Ordinance No.
8119 evinces an intent on the part of the
Sanggunian to repeal the earlier ordinance:
Sec. 84. Repealing Clause. All ordinances, rules,
regulations in conflict with the provisions of this
Ordinance are hereby repealed; PROVIDED, That
the rights that are vested upon the effectivity of
this Ordinance shall not be impaired.
They cited Hospicio de San Jose de Barili, Cebu
City v. Department of Agrarian Reform:[109]
The presence of such general repealing clause in a
later statute clearly indicates the legislative
intent to repeal all prior inconsistent laws on the
subject matter, whether the prior law is a general
law or a special law... Without such a clause, a
later general law will ordinarily not repeal a prior
special law on the same subject. But with such
clause contained in the subsequent general law,
the prior special law will be deemed repealed, as
the clause is a clear legislative intent to bring
about that result.[110]
This ruling in not applicable here. The repealing
clause of Ordinance No. 8119 cannot be taken to
indicate the legislative intent to repeal all prior
inconsistent laws on the subject matter, including
Ordinance No. 8027, a special enactment, since
the aforequoted minutes (an official record of the
discussions in the Sanggunian) actually indicated
the clear intent to preserve the provisions of
Ordinance No. 8027.
To summarize, the conflict between the two
ordinances is more apparent than real. The two
ordinances can be reconciled. Ordinance No. 8027
is applicable to the area particularly described
therein whereas Ordinance No. 8119 is applicable
to the entire City of Manila.
Mandamus Lies To Compel Respondent Mayor To
Enforce Ordinance No. 8027

The oil companies insist that mandamus does not
lie against respondent in consideration of the
separation of powers of the executive and
judiciary.[111] This argument is misplaced.
Indeed,
[the] Courts will not interfere by mandamus
proceedings with the legislative [or executive
departments] of the government in the legitimate
exercise of its powers, except to enforce mere
ministerial acts required by law to be performed
by some officer thereof.[112] (Emphasis Supplied)
since this is the function of a writ of mandamus,
which is the power to compel the performance of
an act which the law specifically enjoins as a duty
resulting from office, trust or station.[113]
They also argue that petitioners had a plain,
speedy and adequate remedy to compel
respondent to enforce Ordinance No. 8027 which
was to seek relief from the President of the
Philippines through the Secretary of the
Department of Interior and Local Government
(DILG) by virtue of the Presidents power of
supervision over local government units. Again,
we disagree. A party need not go first to the DILG
in order to compel the enforcement of an
ordinance. This suggested process would be
unreasonably long, tedious and consequently
injurious to the interests of the local government
unit (LGU) and its constituents whose welfare is
sought to be protected. Besides, petitioners resort
to an original action for mandamus before this
Court is undeniably allowed by the
Constitution.[114]
Ordinance No. 8027 Is Constitutional And Valid
Having ruled that there is no impediment to the
enforcement of Ordinance No. 8027, we now
proceed to make a definitive ruling on its
constitutionality and validity.
The tests of a valid ordinance are well
established. For an ordinance to be valid, it must
not only be within the corporate powers of the
LGU to enact and be passed according to the
procedure prescribed by law, it must also conform
to the following substantive requirements: (1)
must not contravene the Constitution or any
statute; (2) must not be unfair or oppressive; (3)
must not be partial or discriminatory; (4) must not
prohibit but may regulate trade; (5) must be
general and consistent with public policy and (6)
must not be unreasonable.[115]
The City of Manila Has The Power To Enact
Ordinance No. 8027
Ordinance No. 8027 was passed by the
Sangguniang Panlungsod of Manila in the exercise
of its police power. Police power is the plenary
power vested in the legislature to make statutes
and ordinances to promote the health, morals,
peace, education, good order or safety and
general welfare of the people.[116] This power
flows from the recognition that salus populi est
suprema lex (the welfare of the people is the
supreme law).[117] While police power rests
primarily with the national legislature, such power
may be delegated.[118] Section 16 of the LGC,
known as the general welfare clause, encapsulates
the delegated police power to local
governments:[119]
Section 16. General Welfare. ― Every local
government unit shall exercise the powers
expressly granted, those necessarily implied
therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and
effective governance, and those which are
essential to the promotion of the general welfare.
Within their respective territorial jurisdictions,
local government units shall ensure and support,
among other things, the preservation and
enrichment of culture, promote health and safety,
enhance the right of the people to a balanced
ecology, encourage and support the development
of appropriate and self-reliant scientific and
technological capabilities, improve public morals,
enhance economic prosperity and social justice,
promote full employment among their residents,
maintain peace and order, and preserve the
comfort and convenience of their inhabitants.
LGUs like the City of Manila exercise police power
through their respective legislative bodies, in this
case, the Sangguniang Panlungsod or the city
council. Specifically, the Sanggunian can enact
ordinances for the general welfare of the city:
Section. 458. Powers, Duties, Functions and
Compensation. (a) The sangguniang panglungsod,
as the legislative branch of the city, shall enact
ordinances, approve resolutions and appropriate
funds for the general welfare of the city and its
inhabitants pursuant to Section 16 of this Code
xxxx
This police power was also provided for in RA 409
or the Revised Charter of the City of Manila:
Section 18. Legislative powers. The [City Council]
shall have the following legislative powers:
xxx xxx xxx
(g) To enact all ordinances it may deem
necessary and proper for the sanitation and
safety, the furtherance of the prosperity, and the
promotion of the morality, peace, good order,
comfort, convenience, and general welfare of the
city and its inhabitants, and such others as may be
necessary to carry into effect and discharge the
powers and duties conferred by this chapter
xxxx[120]
Specifically, the Sanggunian has the power to
reclassify land within the jurisdiction of the
city.[121]
The Enactment Of Ordinance No. 8027 Is A
Legitimate Exercise Of Police Power
As with the State, local governments may be
considered as having properly exercised their
police power only if the following requisites are
met: (1) the interests of the public generally, as
distinguished from those of a particular class,
require its exercise and (2) the means employed
are reasonably necessary for the accomplishment
of the purpose and not unduly oppressive upon
individuals. In short, there must be a concurrence
of a lawful subject and a lawful method.[122]
Ordinance No. 8027 was enacted for the purpose
of promoting sound urban planning, ensuring
health, public safety and general welfare[123] of
the residents of Manila. The Sanggunian was
impelled to take measures to protect the
residents of Manila from catastrophic devastation
in case of a terrorist attack on the Pandacan
Terminals. Towards this objective, the Sanggunian
reclassified the area defined in the ordinance
from industrial to commercial.
The following facts were found by the Committee
on Housing, Resettlement and Urban Development
of the City of Manila which recommended the
approval of the ordinance:
(1) the depot facilities contained 313.5 million
liters of highly flammable and highly volatile
products which include petroleum gas, liquefied
petroleum gas, aviation fuel, diesel, gasoline,
kerosene and fuel oil among others;
(2) the depot is open to attack through land,
water or air;
(3) it is situated in a densely populated place and
near Malacaang Palace and
(4) in case of an explosion or conflagration in the
depot, the fire could spread to the neighboring
communities.[124]
The ordinance was intended to safeguard the
rights to life, security and safety of all the
inhabitants of Manila and not just of a particular
class.[125] The depot is perceived, rightly or
wrongly, as a representation of western interests
which means that it is a terrorist target. As long
as it there is such a target in their midst, the
residents of Manila are not safe. It therefore
became necessary to remove these terminals to
dissipate the threat. According to respondent:
Such a public need became apparent after the
9/11 incident which showed that what was
perceived to be impossible to happen, to the most
powerful country in the world at that, is actually
possible. The destruction of property and the loss
of thousands of lives on that fateful day became
the impetus for a public need. In the aftermath of
the 9/11 tragedy, the threats of terrorism
continued [such] that it became imperative for
governments to take measures to combat their
effects.[126]
Wide discretion is vested on the legislative
authority to determine not only what the interests
of the public require but also what measures are
necessary for the protection of such
interests.[127] Clearly, the Sanggunian was in the
best position to determine the needs of its
constituents.
In the exercise of police power, property rights of
individuals may be subjected to restraints and
burdens in order to fulfill the objectives of the
government.[128] Otherwise stated, the
government may enact legislation that may
interfere with personal liberty, property, lawful
businesses and occupations to promote the
general welfare.[129] However, the interference
must be reasonable and not arbitrary. And to
forestall arbitrariness, the methods or means used
to protect public health, morals, safety or welfare
must have a reasonable relation to the end in
view.[130]
The means adopted by the Sanggunian was the
enactment of a zoning ordinance which
reclassified the area where the depot is situated
from industrial to commercial. A zoning ordinance
is defined as a local city or municipal legislation
which logically arranges, prescribes, defines and
apportions a given political subdivision into
specific land uses as present and future projection
of needs.[131] As a result of the zoning, the
continued operation of the businesses of the oil
companies in their present location will no longer
be permitted. The power to establish zones for
industrial, commercial and residential uses is
derived from the police power itself and is
exercised for the protection and benefit of the
residents of a locality.[132] Consequently, the
enactment of Ordinance No. 8027 is within the
power of the Sangguniang Panlungsod of the City
of Manila and any resulting burden on those
affected cannot be said to be unjust:
There can be no doubt that the City of Manila has
the power to divide its territory into residential
and industrial zones, and to prescribe that
offensive and unwholesome trades and
occupations are to be established exclusively in
the latter zone.
The benefits to be derived by cities adopting such
regulations (zoning) may be summarized as
follows: They attract a desirable and assure a
permanent citizenship; they foster pride in and
attachment to the city; they promote happiness
and contentment; they stabilize the use and value
of property and promote the peace, [tranquility],
and good order of the city. We do not hesitate to
say that the attainment of these objects affords a
legitimate field for the exercise of the police
power. He who owns property in such a district is
not deprived of its use by such regulations. He
may use it for the purposes to which the section in
which it is located is dedicated. That he shall not
be permitted to use it to the desecration of the
community constitutes no unreasonable or
permanent hardship and results in no unjust
burden.
Xxx xxx xxx
The 14th Amendment protects the citizen in his
right to engage in any lawful business, but it does
not prevent legislation intended to regulate useful
occupations which, because of their nature or
location, may prove injurious or offensive to the
public.[133]
We entertain no doubt that Ordinance No. 8027 is
a valid police power measure because there is a
concurrence of lawful subject and lawful method.
Ordinance No. 8027 Is Not Unfair, Oppressive Or
Confiscatory Which Amounts To Taking Without
Compensation
According to the oil companies, Ordinance No.
8027 is unfair and oppressive as it does not only
regulate but also absolutely prohibits them from
conducting operations in the City of Manila.
Respondent counters that this is not accurate
since the ordinance merely prohibits the oil
companies from operating their businesses in the
Pandacan area.
Indeed, the ordinance expressly delineated in its
title and in Section 1 what it pertained to.
Therefore, the oil companies contention is not
supported by the text of the ordinance.
Respondent succinctly stated that:
The oil companies are not forbidden to do
business in the City of Manila. They may still very
well do so, except that their oil storage facilities
are no longer allowed in the Pandacan area.
Certainly, there are other places in the City of
Manila where they can conduct this specific kind
of business. Ordinance No. 8027 did not render
the oil companies illegal. The assailed ordinance
affects the oil companies business only in so far as
the Pandacan area is concerned.[134]
The oil companies are not prohibited from doing
business in other appropriate zones in Manila. The
City of Manila merely exercised its power to
regulate the businesses and industries in the zones
it established:
As to the contention that the power to regulate
does not include the power to prohibit, it will be
seen that the ordinance copied above does not
prohibit the installation of motor engines within
the municipality of Cabanatuan but only within
the zone therein fixed. If the municipal council of
Cabanatuan is authorized to establish said zone, it
is also authorized to provide what kind of engines
may be installed therein. In banning the
installation in said zone of all engines not
excepted in the ordinance, the municipal council
of Cabanatuan did no more than regulate their
installation by means of zonification.[135]
The oil companies aver that the ordinance is
unfair and oppressive because they have invested
billions of pesos in the depot.[136] Its forced
closure will result in huge losses in income and
tremendous costs in constructing new facilities.
Their contention has no merit. In the exercise of
police power, there is a limitation on or
restriction of property interests to promote public
welfare which involves no compensable taking.
Compensation is necessary only when the states
power of eminent domain is exercised. In eminent
domain, property is appropriated and applied to
some public purpose. Property condemned under
the exercise of police power, on the other hand,
is noxious or intended for a noxious or forbidden
purpose and, consequently, is not
compensable.[137] The restriction imposed to
protect lives, public health and safety from
danger is not a taking. It is merely the prohibition
or abatement of a noxious use which interferes
with paramount rights of the public.
Property has not only an individual function,
insofar as it has to provide for the needs of the
owner, but also a social function insofar as it has
to provide for the needs of the other members of
society.[138] The principle is this:
Police power proceeds from the principle that
every holder of property, however absolute and
unqualified may be his title, holds it under the
implied liability that his use of it shall not be
injurious to the equal enjoyment of others having
an equal right to the enjoyment of their property,
nor injurious to the right of the community. Rights
of property, like all other social and conventional
rights, are subject to reasonable limitations in
their enjoyment as shall prevent them from being
injurious, and to such reasonable restraints and
regulations established by law as the legislature,
under the governing and controlling power vested
in them by the constitution, may think necessary
and expedient.[139]
In the regulation of the use of the property,
nobody else acquires the use or interest therein,
hence there is no compensable taking.[140] In this
case, the properties of the oil companies and
other businesses situated in the affected area
remain theirs. Only their use is restricted although
they can be applied to other profitable uses
permitted in the commercial zone.
Ordinance No. 8027 Is Not
Partial And Discriminatory
The oil companies take the position that the
ordinance has discriminated against and singled
out the Pandacan Terminals despite the fact that
the Pandacan area is congested with buildings and
residences that do not comply with the National
Building Code, Fire Code and Health and
Sanitation Code.[141]
This issue should not detain us for long. An
ordinance based on reasonable classification does
not violate the constitutional guaranty of the
equal protection of the law.[142] The
requirements for a valid and reasonable
classification are: (1) it must rest on substantial
distinctions; (2) it must be germane to the
purpose of the law; (3) it must not be limited to
existing conditions only and (4) it must apply
equally to all members of the same class.[143]
The law may treat and regulate one class
differently from another class provided there are
real and substantial differences to distinguish one
class from another.[144] Here, there is a
reasonable classification. We reiterate that what
the ordinance seeks to prevent is a catastrophic
devastation that will result from a terrorist
attack. Unlike the depot, the surrounding
community is not a high-value terrorist target.
Any damage caused by fire or explosion occurring
in those areas would be nothing compared to the
damage caused by a fire or explosion in the depot
itself. Accordingly, there is a substantial
distinction. The enactment of the ordinance which
provides for the cessation of the operations of
these terminals removes the threat they pose.
Therefore it is germane to the purpose of the
ordinance. The classification is not limited to the
conditions existing when the ordinance was
enacted but to future conditions as well. Finally,
the ordinance is applicable to all businesses and
industries in the area it delineated.
Ordinance No. 8027 is Not Inconsistent With RA
7638 And RA 8479
The oil companies and the DOE assert that
Ordinance No. 8027 is unconstitutional because it
contravenes RA 7638 (DOE Act of 1992)[145] and
RA 8479 (Downstream Oil Industry Deregulation
Law of 1998).[146] They argue that through RA
7638, the national legislature declared it a policy
of the state to ensure a continuous, adequate,
and economic supply of energy[147] and created
the DOE to implement this policy. Thus, under
Section 5 I, DOE is empowered to establish and
administer programs for the exploration,
transportation, marketing, distribution,
utilization, conservation, stockpiling, and storage
of energy resources. Considering that the
petroleum products contained in the Pandacan
Terminals are major and critical energy resources,
they conclude that their administration, storage,
distribution and transport are of national interest
and fall under DOEs primary and exclusive
jurisdiction.[148]
They further assert that the terminals are
necessary for the delivery of immediate and
adequate supply of oil to its recipients in the most
economical way.[149] Local legislation such as
Ordinance No. 8027 (which effectively calls for
the removal of these terminals) allegedly
frustrates the state policy of ensuring a
continuous, adequate, and economic supply of
energy expressed in RA 7638, a national law.[150]
Likewise, the ordinance thwarts the
determination of the DOE that the terminals
operations should be merely scaled down and not
discontinued.[151] They insist that this should not
be allowed considering that it has a nationwide
economic impact and affects public interest
transcending the territorial jurisdiction of the City
of Manila.[152]
According to them, the DOEs supervision over the
oil industry under RA 7638 was subsequently
underscored by RA 8479, particularly in Section 7
thereof:
SECTION 7. Promotion of Fair Trade Practices. ―
The Department of Trade and Industry (DTI) and
DOE shall take all measures to promote fair trade
and prevent cartelization, monopolies,
combinations in restraint of trade, and any unfair
competition in the Industry as defined in Article
186 of the Revised Penal Code, and Articles 168
and 169 of Republic Act No. 8293, otherwise
known as the Intellectual Property Rights Law.
The DOE shall continue to encourage certain
practices in the Industry which serve the public
interest and are intended to achieve efficiency
and cost reduction, ensure continuous supply of
petroleum products, and enhance environmental
protection. These practices may include borrow-
and-loan agreements, rationalized depot and
manufacturing operations, hospitality agreements,
joint tanker and pipeline utilization, and joint
actions on oil spill control and fire prevention.
(Emphasis supplied)
Respondent counters that DOEs regulatory power
does not preclude LGUs from exercising their
police power.[153]
Indeed, ordinances should not contravene existing
statutes enacted by Congress. The rationale for
this was clearly explained in Magtajas vs. Pryce
Properties Corp., Inc.:[154]
The rationale of the requirement that the
ordinances should not contravene a statute is
obvious. Municipal governments are only agents of
the national government. Local councils exercise
only delegated legislative powers conferred on
them by Congress as the national lawmaking body.
The delegate cannot be superior to the principal
or exercise powers higher than those of the latter.
It is a heresy to suggest that the local government
units can undo the acts of Congress, from which
they have derived their power in the first place,
and negate by mere ordinance the mandate of the
statute.
Municipal corporations owe their origin to, and
derive their powers and rights wholly from the
legislature. It breathes into them the breath of
life, without which they cannot exist. As it
creates, so it may destroy. As it may destroy, it
may abridge and control. Unless there is some
constitutional limitation on the right, the
legislature might, by a single act, and if we can
suppose it capable of so great a folly and so great
a wrong, sweep from existence all of the
municipal corporations in the State, and the
corporation could not prevent it. We know of no
limitation on the right so far as to the corporation
themselves are concerned. They are, so to phrase
it, the mere tenants at will of the legislature.
This basic relationship between the national
legislature and the local government units has not
been enfeebled by the new provisions in the
Constitution strengthening the policy of local
autonomy. Without meaning to detract from that
policy, we here confirm that Congress retains
control of the local government units although in
significantly reduced degree now than under our
previous Constitutions. The power to create still
includes the power to destroy. The power to grant
still includes the power to withhold or recall.
True, there are certain notable innovations in the
Constitution, like the direct conferment on the
local government units of the power to tax, which
cannot now be withdrawn by mere statute. By and
large, however, the national legislature is still the
principal of the local government units, which
cannot defy its will or modify or violate it.[155]
The question now is whether Ordinance No. 8027
contravenes RA 7638 and RA 8479. It does not.
Under Section 5 I of RA 7638, DOE was given the
power to establish and administer programs for
the exploration, transportation, marketing,
distribution, utilization, conservation, stockpiling,
and storage of energy resources. On the other
hand, under Section 7 of RA 8749, the DOE shall
continue to encourage certain practices in the
Industry which serve the public interest and are
intended to achieve efficiency and cost reduction,
ensure continuous supply of petroleum products.
Nothing in these statutes prohibits the City of
Manila from enacting ordinances in the exercise of
its police power.
The principle of local autonomy is enshrined in
and zealously protected under the Constitution. In
Article II, Section 25 thereof, the people expressly
adopted the following policy:
Section 25. The State shall ensure the autonomy
of local governments.
An entire article (Article X) of the Constitution has
been devoted to guaranteeing and promoting the
autonomy of LGUs. The LGC was specially
promulgated by Congress to ensure the autonomy
of local governments as mandated by the
Constitution:

Sec. 2. Declaration of Policy. ― (a) It is hereby
declared the policy of the State that the
territorial and political subdivisions of the State
shall enjoy genuine and meaningful local
autonomy to enable them to attain their fullest
development as self-reliant communities and
make them more effective partners in the
attainment of national goals. Toward this end, the
State shall provide for a more responsive and
accountable local government structure instituted
through a system of decentralization whereby
local government units shall be given more
powers, authority, responsibilities, and resources.
The process of decentralization shall proceed
from the National Government to the local
government units. (Emphasis supplied)
We do not see how the laws relied upon by the oil
companies and DOE stripped the City of Manila of
its power to enact ordinances in the exercise of its
police power and to reclassify the land uses within
its jurisdiction. To guide us, we shall make a brief
survey of our decisions where the police power
measure of the LGU clashed with national laws.
In Tan v. Perea,[156] the Court ruled that
Ordinance No. 7 enacted by the municipality of
Daanbantayan, Cebu allowing the operation of
three cockpits was invalid for violating PD 449 (or
the Cockfighting Law of 1974) which permitted
only one cockpit per municipality.
In Batangas CATV, Inc. v. Court of Appeals,[157]
the Sangguniang Panlungsod of Batangas City
enacted Resolution No. 210 granting Batangas
CATV, Inc. a permit to operate a cable television
(CATV) system in Batangas City. The Court held
that the LGU did not have the authority to grant
franchises to operate a CATV system because it
was the National Telecommunications Commission
(NTC) that had the power under EO Nos. 205 and
436 to regulate CATV operations. EO 205
mandated the NTC to grant certificates of
authority to CATV operators while EO 436 vested
on the NTC the power to regulate and supervise
the CATV industry.
In Lina, Jr. v. Pao,[158] we held that Kapasiyahan
Bilang 508, Taon 1995 of the Sangguniang
Panlalawigan of Laguna could not be used as
justification to prohibit lotto in the municipality
of San Pedro, Laguna because lotto was duly
authorized by RA 1169, as amended by BP 42. This
law granted a franchise to the Philippine Charity
Sweepstakes Office and allowed it to operate
lotteries.
In Magtajas v. Pryce Properties Corp., Inc.,[159]
the Sangguniang Panlungsod of Cagayan de Oro
City passed Ordinance Nos. 3353 and 3375-93
prohibiting the operation of casinos in the city.
We ruled that these ordinances were void for
contravening PD 1869 or the charter of the
Philippine Amusements and Gaming Corporation
which had the power to operate casinos.
The common dominator of all of these cases is
that the national laws were clearly and expressly
in conflict with the ordinances/resolutions of the
LGUs. The inconsistencies were so patent that
there was no room for doubt. This is not the case
here.
The laws cited merely gave DOE general powers to
establish and administer programs for the
exploration, transportation, marketing,
distribution, utilization, conservation, stockpiling,
and storage of energy resources and to encourage
certain practices in the [oil] industry which serve
the public interest and are intended to achieve
efficiency and cost reduction, ensure continuous
supply of petroleum products. These powers can
be exercised without emasculating the LGUs of
the powers granted them. When these ambiguous
powers are pitted against the unequivocal power
of the LGU to enact police power and zoning
ordinances for the general welfare of its
constituents, it is not difficult to rule in favor of
the latter. Considering that the powers of the DOE
regarding the Pandacan Terminals are not
categorical, the doubt must be resolved in favor
of the City of Manila:
SECTION 5. Rules of Interpretation. ― In the
interpretation of the provisions of this Code, the
following rules shall apply:
(a) Any provision on a power of a local
government unit shall be liberally interpreted in
its favor, and in case of doubt, any question
thereon shall be resolved in favor of devolution of
powers and of the lower local government unit.
Any fair and reasonable doubt as to the existence
of the power shall be interpreted in favor of the
local government unit concerned;
xxx xxx xxx
(g) IThe general welfare provisions in this Code
shall be liberally interpreted to give more powers
to local government units in accelerating
economic development and upgrading the quality
of life for the people in the community xxxx
The least we can do to ensure genuine and
meaningful local autonomy is not to force an
interpretation that negates powers explicitly
granted to local governments. To rule against the
power of LGUs to reclassify areas within their
jurisdiction will subvert the principle of local
autonomy guaranteed by the Constitution.[160] As
we have noted in earlier decisions, our national
officials should not only comply with the
constitutional provisions on local autonomy but
should also appreciate the spirit and liberty upon
which these provisions are based.[161]
The DOE Cannot Exercise The Power Of Control
Over LGUs
Another reason that militates against the DOEs
assertions is that Section 4 of Article X of the
Constitution confines the Presidents power over
LGUs to one of general supervision:
SECTION 4. The President of the Philippines shall
exercise general supervision over local
governments. Xxxx
Consequently, the Chief Executive or his or her
alter egos, cannot exercise the power of control
over them.[162] Control and supervision are
distinguished as follows:
[Supervision] means overseeing or the power or
authority of an officer to see that subordinate
officers perform their duties. If the latter fail or
neglect to fulfill them, the former may take such
action or step as prescribed by law to make them
perform their duties. Control, on the other hand,
means the power of an officer to alter or modify
or nullify or set aside what a subordinate officer
ha[s] done in the performance of his duties and to
substitute the judgment of the former for that of
the latter.[163]
Supervisory power, when contrasted with control,
is the power of mere oversight over an inferior
body; it does not include any restraining authority
over such body.[164] It does not allow the
supervisor to annul the acts of the
subordinate.[165] Here, what the DOE seeks to do
is to set aside an ordinance enacted by local
officials, a power that not even its principal, the
President, has. This is because:
Under our present system of government,
executive power is vested in the President. The
members of the Cabinet and other executive
officials are merely alter egos. As such, they are
subject to the power of control of the President,
at whose will and behest they can be removed
from office; or their actions and decisions
changed, suspended or reversed. In contrast, the
heads of political subdivisions are elected by the
people. Their sovereign powers emanate from the
electorate, to whom they are directly
accountable. By constitutional fiat, they are
subject to the Presidents supervision only, not
control, so long as their acts are exercised within
the sphere of their legitimate powers. By the
same token, the President may not withhold or
alter any authority or power given them by the
Constitution and the law.[166]
Thus, the President and his or her alter egos, the
department heads, cannot interfere with the
activities of local governments, so long as they act
within the scope of their authority. Accordingly,
the DOE cannot substitute its own discretion for
the discretion exercised by the sanggunian of the
City of Manila. In local affairs, the wisdom of local
officials must prevail as long as they are acting
within the parameters of the Constitution and the
law.[167]
Ordinance No. 8027 Is Not Invalid For Failure To
Comply With RA 7924 And EO 72
The oil companies argue that zoning ordinances of
LGUs are required to be submitted to the
Metropolitan Manila Development Authority
(MMDA) for review and if found to be in
compliance with its metropolitan physical
framework plan and regulations, it shall endorse
the same to the Housing and Land Use Regulatory
Board (HLURB). Their basis is Section 3 (e) of RA
7924:[168]
SECTION 3. Scope of MMDA Services. ― Metro-wide
services under the jurisdiction of the MMDA are
those services which have metro-wide impact and
transcend local political boundaries or entail huge
expenditures such that it would not be viable for
said services to be provided by the individual
[LGUs] comprising Metropolitan Manila. These
services shall include:
xxx xxx xxx
(g) Urban renewal, zoning, and land use
planning, and shelter services which include the
formulation, adoption and implementation of
policies, standards, rules and regulations,
programs and projects to rationalize and optimize
urban land use and provide direction to urban
growth and expansion, the rehabilitation and
development of slum and blighted areas, the
development of shelter and housing facilities and
the provision of necessary social services thereof.
(Emphasis supplied)
Reference was also made to Section 15 of its
implementing rules:
Section 15. Linkages with HUDCC, HLURB, NHA,
LGUs and Other National Government Agencies
Concerned on Urban Renewal, Zoning and Land
Use Planning and Shelter Services. Within the
context of the National Housing and Urban
Development Framework, and pursuant to the
national standards, guidelines and regulations
formulated by the Housing and Land Use
Regulatory Board [HLURB] on land use planning
and zoning, the [MMDA] shall prepare a
metropolitan physical framework plan and
regulations which shall complement and translate
the socio-economic development plan for Metro
Manila into physical or spatial terms, and provide
the basis for the preparation, review, integration
and implementation of local land use plans and
zoning, ordinance of cities and municipalities in
the area.
Said framework plan and regulations shall contain,
among others, planning and zoning policies and
procedures that shall be observed by local
government units in the preparation of their own
plans and ordinances pursuant to Section 447 and
458 of RA 7160, as well as the identification of
sites and projects that are considered to be of
national or metropolitan significance.
Cities and municipalities shall prepare their
respective land use plans and zoning ordinances
and submit the same for review and integration by
the [MMDA] and indorsement to HLURB in
accordance with Executive Order No. 72 and other
pertinent laws.
In the preparation of a Metropolitan Manila
physical framework plan and regulations, the
[MMDA] shall coordinate with the Housing and
Urban Development Coordinating Council, HLURB,
the National Housing Authority, Intramuros
Administration, and all other agencies of the
national government which are concerned with
land use and zoning, urban renewal and shelter
services. (Emphasis supplied)
They also claim that EO 72[169] provides that
zoning ordinances of cities and municipalities of
Metro Manila are subject to review by the HLURB
to ensure compliance with national standards and
guidelines. They cite Section 1, paragraphs I, (e),
(f) and (g):
SECTION 1. Plan formulation or updating. ―
xxx xxx xxx
(g) Cities and municipalities of Metropolitan
Manila shall continue to formulate or update their
respective comprehensive land use plans, in
accordance with the land use planning and zoning
standards and guidelines prescribed by the HLURB
pursuant to EO 392, S. of 1990, and other
pertinent national policies.
Xxx xxx xxx
(e) Pursuant to LOI 729, S. of 1978, EO 648, S. of
1981, and RA 7279, the comprehensive land use
plans of provinces, highly urbanized cities and
independent component cities shall be reviewed
and ratified by the HLURB to ensure compliance
with national standards and guidelines.
(f) Pursuant to EO 392, S. of 1999, the
comprehensive land use plans of cities and
municipalities of Metropolitan Manila shall be
reviewed by the HLURB to ensure compliance with
national standards and guidelines.
(g) Said review shall be completed within three
(3) months upon receipt thereof otherwise, the
same shall be deemed consistent with law, and,
therefore, valid. (Emphasis supplied)
They argue that because Ordinance No. 8027 did
not go through this review process, it is invalid.
The argument is flawed.
RA 7942 does not give MMDA the authority to
review land use plans and zoning ordinances of
cities and municipalities. This was only found in
its implementing rules which made a reference to
EO 72. EO 72 expressly refers to comprehensive
land use plans (CLUPs) only. Ordinance No. 8027 is
admittedly not a CLUP nor intended to be one.
Instead, it is a very specific ordinance which
reclassified the land use of a defined area in order
to prevent the massive effects of a possible
terrorist attack. It is Ordinance No. 8119 which
was explicitly formulated as the Manila [CLUP]
and Zoning Ordinance of 2006. CLUPs are the
ordinances which should be submitted to the
MMDA for integration in its metropolitan physical
framework plan and approved by the HLURB to
ensure that they conform with national guidelines
and policies.
Moreover, even assuming that the MMDA review
and HLURB ratification are necessary, the oil
companies did not present any evidence to show
that these were not complied with. In accordance
with the presumption of validity in favor of an
ordinance, its constitutionality or legality should
be upheld in the absence of proof showing that
the procedure prescribed by law was not
observed. The burden of proof is on the oil
companies which already had notice that this
Court was inclined to dispose of all the issues in
this case. Yet aside from their bare assertion,
they did not present any certification from the
MMDA or the HLURB nor did they append these to
their pleadings. Clearly, they failed to rebut the
presumption of validity of Ordinance No.
8027.[170]
Conclusion
Essentially, the oil companies are fighting for
their right to property. They allege that they
stand to lose billions of pesos if forced to
relocate. However, based on the hierarchy of
constitutionally protected rights, the right to life
enjoys precedence over the right to
property.[171] The reason is obvious: life is
irreplaceable, property is not. When the state or
LGUs exercise of police power clashes with a few
individuals right to property, the former should
prevail.[172]
Both law and jurisprudence support the
constitutionality and validity of Ordinance No.
8027. Without a doubt, there are no impediments
to its enforcement and implementation. Any delay
is unfair to the inhabitants of the City of Manila
and its leaders who have categorically expressed
their desire for the relocation of the terminals.
Their power to chart and control their own destiny
and preserve their lives and safety should not be
curtailed by the intervenors warnings of doomsday
scenarios and threats of economic disorder if the
ordinance is enforced.
Secondary to the legal reasons supporting the
immediate implementation of Ordinance No. 8027
are the policy considerations which drove Manilas
government to come up with such a measure:
... [The] oil companies still were not able to allay
the apprehensions of the city regarding the
security threat in the area in general. No specific
action plan or security measures were presented
that would prevent a possible large-scale terrorist
or malicious attack especially an attack aimed at
Malacaang. The measures that were installed were
more directed towards their internal security and
did not include the prevention of an external
attack even on a bilateral level of cooperation
between these companies and the police and
military.
Xxx xxx xxx
It is not enough for the city government to be told
by these oil companies that they have the most
sophisticated fire-fighting equipments and have
invested millions of pesos for these equipments.
The city government wants to be assured that its
residents are safe at any time from these
installations, and in the three public hearings and
in their position papers, not one statement has
been said that indeed the absolute safety of the
residents from the hazards posed by these
installations is assured.[173]

We are also putting an end to the oil companies
determination to prolong their stay in Pandacan
despite the objections of Manilas residents. As
early as October 2001, the oil companies signed a
MOA with the DOE obliging themselves to:
... undertake a comprehensive and comparative
study ... [which] shall include the preparation of a
Master Plan, whose aim is to determine the scope
and timing of the feasible location of the
Pandacan oil terminals and all associated facilities
and infrastructure including government support
essential for the relocation such as the necessary
transportation infrastructure, land and right of
way acquisition, resettlement of displaced
residents and environmental and social
acceptability which shall be based on mutual
benefit of the Parties and the public.[174]
Now that they are being compelled to discontinue
their operations in the Pandacan Terminals, they
cannot feign unreadiness considering that they
had years to prepare for this eventuality.
Just the same, this Court is not about to provoke a
crisis by ordering the immediate relocation of the
Pandacan Terminals out of its present site. The
enforcement of a decision of this Court, specially
one with far-reaching consequences, should
always be within the bounds of reason, in
accordance with a comprehensive and well-
coordinated plan, and within a time-frame that
complies with the letter and spirit of our
resolution. To this end, the oil companies have no
choice but to obey the law.
A Warning To Petitioners Counsel
We draw the attention of the parties to a matter
of grave concern to the legal profession.
Petitioners and their counsel, Atty. Samson
Alcantara, submitted a four-page memorandum
that clearly contained either substance nor
research. It is absolutely insulting to this Court.
We have always tended towards judicial leniency,
temperance and compassion to those who suffer
from a wrong perception of what the majesty of
the law means. But for a member of the bar, an
officer of the court, to file in this Court a
memorandum of such unacceptable quality is an
entirely different matter.
It is indicative less of a personal shortcoming or
contempt of this Court and more of a lawyers
sorry descent from a high sense of duty and
responsibility. As a member of the bar and as an
officer of the court, a lawyer ought to be keenly
aware that the chief safeguard of the body politic
is respect for the law and its magistrates.
There is nothing more effective than the written
word by which counsel can persuade this Court of
the righteousness of his cause. For if truth were
self-evident, a memorandum would be completely
unnecessary and superfluous.
The inability of counsel to prepare a memorandum
worthy of this Courts consideration is an ejemplo
malo to the legal profession as it betrays no
genuine interest in the cause he claims to
espouse. Or did counsel think he can earn his
moment of glory without the hard work and
dedication called for by his petition?
A Final Word
On Wednesday, January 23, 2008, a defective
tanker containing 2,000 liters of gasoline and
14,000 liters of diesel exploded in the middle of
the street a short distance from the exit gate of
the Pandacan Terminals, causing death, extensive
damage and a frightening conflagration in the
vicinity of the incident. Need we say anthing
about what will happen if it is the estimated 162
to 211 million liters[175] of petroleum products in
the terminal complex which blow up?

WHEREFORE, the motions for leave to intervene of

Chevron Philippines Inc., Petron Corporation and
Pilipinas Shell Petroleum Corporation, and the SO ORDERED.
Republic of the Philippines, represented by the
Department of Energy, are hereby GRANTED. JESUS CUENCO,
Their respective motions for reconsideration are
hereby DENIED. The Regional Trial Court, Manila, Petitioner,
Branch 39 is ORDERED to DISMISS the consolidated
cases of Civil Case No. 03-106377 and Civil Case
No. 03-106380.

We reiterate our order to respondent Mayor of the

City of Manila to enforce Ordinance No. 8027. In
coordination with the appropriate agencies and
other parties involved, respondent Mayor is - versus -
hereby ordered to oversee the relocation and
transfer of the Pandacan Terminals out of its
present site.

To ensure the orderly transfer, movement and

relocation of assets and personnel, the intervenors
Chevron Philippines Inc., Petron Corporation and
Pilipinas Shell Petroleum Corporation shall, within TALISAY TOURIST SPORTS COMPLEX,
a non-extendible period of ninety (90) days, INCORPORATED AND MATIAS B. AZNAR III,
submit to the Regional Trial Court of Manila,
Branch 39, the comprehensive plan and relocation Respondents.
schedule which have allegedly been prepared. The
presiding judge of Manila RTC, Branch 39 will
monitor the strict enforcement of this resolution.
G.R. No. 174154

Atty. Samson Alcantara is hereby ordered to Present:

explain within five (5) days from notice why he
should not be disciplined for his refusal, or
inability, to file a memorandum worthy of the
consideration of this Court. YNARES-SANTIAGO, J.,

Chairperson,
Treble costs against petitioners counsel, Atty.
Samson Alcantara. AUSTRIA-MARTINEZ,

AZCUNA, *
CHICO-NAZARIO, and
NACHURA, JJ.
Promulgated:
October 17, 2008
x------------------------------------------------------------
------------------------x
DECISION
NACHURA, J.:
Before the Court is a petition for review on
certiorari under Rule 45 of the Rules of Court
assailing the Decision dated April 18, 2005 and the
Resolution dated August 15, 2006 of the Court of
Appeals (CA) in CA-G.R. CV No. 65773.
The Facts
The antecedent facts of the case are as follows:
On May 25, 1992, petitioner leased from
respondents for a period of two (2) years, from
May 8, 1992 to May 8, 1994, the Talisay Tourist
Sports Complex, to be operated as a cockpit. The
lease was extended for another four (4) years, or
until May 8, 1998.
Under the Contract of Lease,[1] it was stipulated
that petitioner shall, like a good father of the
family, maintain in good condition the furniture,
chattels and all other equipment and shall, at all
times, keep the leased premises clean and
sanitary. For this purpose, petitioner would allow
the respondents building supervisor or his
authorized representative to make a regular spot
inspection of the leased premises to see to it that
these stipulations are strictly implemented.[2]
Any damage caused to the furniture, chattels,
equipment and parts of the leased premises shall
be the responsibility of petitioner to repair and
compensate.[3] Furthermore, petitioner would
give a deposit equivalent to six (6) months rental
to answer for whatever damages may be caused to
the premises during the period of the lease.[4]
Upon expiration of the contract, respondent
company conducted a public bidding for the lease
of the property. Petitioner participated in the
bidding. The lease was eventually awarded to
another bidder, Mr. Rex Cuaqui Salud.[5]
Thereafter, petitioner wrote four (4) demand
letters to respondents.
The first letter, dated June 8, 1998, reads:
Dear Mr. Aznar:
I was so disheartened that after going through
with the supposed public bidding, haggling with
the terms and conditions of a new lease
agreement and after full compliance of ALL your
requirements and the handshakes signifying the
clinching of the deal, the contract was awarded to
another party. Though I believe I deserve a
renewal, I had to accept your decision with a
heavy heart.
It is now my desire to be released quickly from
whatever liability or responsibility under our
previous contract. Repair works on some damaged
portions were already done. Based on our
contract, par. 5 thereof, it is my understanding
that I am answerable to all damages caused to
furnitures (sic), chattels and other equipments
and minor parts of the leased premises. Once
cleared, I want the return of my deposit of
P500,000.00.
Kindly send your inspector to determine by actual
ocular inspection if the restoration work is to your
satisfaction.
Very truly yours,
JESUS C. CUENCO [signed][6]
Obviously, the letter was not answered, because
on June 17, 1998 petitioner found it necessary to
write respondents a second letter reiterating his
request for the return of the deposit. The second
demand letter reads:
Dear Mr. Aznar:
It has been more than a week since my letter
dated 8 June 1998 requesting the return of my
deposit of P500,000.00. I would assume your
representative had already conducted an ocular
inspection and you were satisfied on the
restoration works made on the premises. As Ive
stated in my said letter, I want to be released as
soon as possible.
I need to know immediately if I still have other
things to comply with as pre-condition for the
release of the deposit. As far as I know, I have
already done my part.
Very truly yours,
JESUS C. CUENCO [signed][7]
With still no response from respondents,
petitioner, on August 14, 1998, sent a third
demand letter which read:
Dear Mr. Aznar:
I am surprised by the unreasonable delay in the
release of my deposit of P500,000.00 in spite of
my full compliance as to repair works on minor
damage to the premises during my term as lessee.
Twice I requested in writing for the immediate
release of my deposit but until now it remains
unheeded. And the so-called inventory which your
lawyer Atty. Algoso[8] promised to give has not
been given. Frankly, I am doubtful of the accuracy
of said inventory, if any, considering the full blast
major renovation now being conducted on the
complex by the new concessionaire. I think its
about time we close the last chapter of the book,
in a manner of speaking, so we can proceed in our
separate distinct ways.
I reiterate my request to please release right now
my deposit of P500,000.00.
Very truly yours,
JESUS C. CUENCO [signed][9]
Finally, on August 18, 1998, petitioner, thru his
counsel, wrote respondents a final demand letter
as follows:
Dear Mr. Aznar:
For ignoring the two letters of my client Mr. Jesus
C. Cuenco, dated June 8 and 17, 1998 regarding
his request for the return of his deposit in the sum
of P500, 000.00, he has decided to endorse the
matter to this office for appropriate action.
It appears that when Mr. Cuenco leased the
cockpit complex he was required to put up a
deposit to answer for damages that may be caused
to furnitures (sic), chattels and other equipments
and minor repairs on the leased premises. When
the lease expired and he failed to get a renewal,
Mr. Cuenco in fulfillment of his obligation under
the contract caused the repair of minor damage to
the premises after which your attention was
invited to get your reaction to the restoration
work. And since he did not receive any objection,
it can be safely premised that the restoration was
to the lessors satisfaction.
Mr. Cuenco informed me that the new
concessionaire has undertaken a full blast major
renovation of the complex. Under this condition
and in the absence of an accurate inventory
conducted in the presence of both parties, it
would be doubly difficult, if not impossible, to
charge Mr. Cuenco of any violation of his
undertaking especially as to deficiency in the
furnitures (sic), chattels and other equipments in
the premises.
In view of all the foregoing, it is consequently
demanded that you return to Mr. Cuenco the
aforesaid sum of P500,000.00 within THREE (3)
DAYS from notice hereof; otherwise, he may be
constrained to seek judicial relief for the return of
the deposit plus interest, damages and attorneys
fees.
Your compliance is enjoined.
Very truly yours, At my instance:
FEDERICO C. CABILAO (signed) JESUS C. CUENCO
(signed)
Counsel for Mr. Jesus C. Cuenco[10]
As all of his demand letters remained unheeded,
on October 21, 1998, petitioner filed a
Complaint[11] for sum of money, damages and
attorneys fees. He maintained that respondents
acted in bad faith in withholding the amount of
the deposit without any justifiable reason.[12]
In their Answer,[13] respondents countered that
petitioner caused physical damage to some
portions of the leased premises and the cost of
repair and replacement of materials amounted to
more than P500,000.00.[14] They also averred
that respondent Matias B. Aznar III (Aznar) cannot
be sued personally under the contract of lease
since a corporation has a separate and distinct
personality from its officers and stockholders, and
there was no allegation that Aznar, who is the
President of the corporation, signed the contract
in his personal capacity.[15]
On March 8, 1999, the RTC issued a Pre-trial
Order,[16] the pertinent portions of which reads:
The following facts were admitted by the
[respondents]:
1. There is no inventory of damages up to this
time;
2. [Petitioner] deposited the amount of
P500,000.00;
3. [Petitioner] sends (sic) several letters of
demand to [respondents] but said letters were not
answered.
4. There was a renovation of the Talisay Tourist
Sports Complex with a qualification that the
renovation is only 10% of the whole amount.
The main issues in this case are as follows:
1. Whether or not [petitioner] is entitled to the
return of the deposit of P500,000.00, with
interest;
2. Whether or not some portions of the complex
sustained physical damage during the operation of
the same by the [petitioner].[17]
On May 24, 1999, the RTC issued an Order[18]
admitting the exhibits of petitioner, consisting of
the contract of lease dated May 4, 1994 and the
four (4) demand letters.
On July 29, 1999, an Order[19] was issued by the
same court formally admitting the respondents
following exhibits: the lease contract, inventory
of the leased property as of June 4, 1998,
inventory of the sports complex dated June 24,
1995, ocular inspection report dated January 15,
1998 and various receipts mostly in the name of
Southwestern University incurred in different
months of 1998.
On August 11, 1999, the RTC rendered a
Decision[20] in favor of petitioner, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in
favor of [petitioner] and against the
[respondents], directing the latter jointly and
severally to return to [petitioner] the sum of
P500,000.00, representing the deposit mentioned
in the Complaint, plus 3% interest per month from
August 18, 1998 until full payment thereof.
The latter are, likewise, directed to pay
[petitioner] the sum of P15,000.00 as and for
litigation expenses.
With costs against the [respondents].
SO ORDERED.[21]
The RTC ratiocinated that respondents failure to
reply to the letters of petitioner raises a
presumption that petitioner has complied with his
end of the contract. The lower court gave
credence to the testimony of respondents witness,
Ateniso Coronado (Coronado), the property
custodian of the respondents, that the sports
complex was repaired and renovated by the new
lessee. The court also considered the admission of
respondents counsel during the pre-trial that no
inventory of the property was conducted on the
leased premises. The RTC debunked the inventory
presented by the respondents during trial as a
mere afterthought to bolster their claim against
petitioner.[22]
Respondents appealed. On April 18, 2005, the CA
rendered a Decision[23] reversing and setting
aside the decision of the RTC. The fallo of the CA
decision reads:
WHEREFORE, with the foregoing, the Decision of
the Regional Trial Court, Branch 13, Cebu City,
dated August 11, 1999, is REVERSED and SET
ASIDE, and a new one entered finding this case in
favor of defendants-appellants Talisay Tourists
Sports Complex and Matias Aznar III.
Consequently, Civil Case No. CEB-22847 for sum of
money, damages, and attorneys fees involving
herein parties, as well as all other claims and
counterclaims are hereby DISMISSED for lack of
factual and legal basis.
No pronouncement as to costs.
SO ORDERED.[24]
The CA ruled in favor of respondents on the basis
of: (1) Coronados testimony that petitioner
continued to hold cockfights two months after the
expiration of the lease contract which was not
refuted by petitioner; (2) the summary of repairs
made on the property showing that respondents
spent the amount of P573,710.17 immediately
prior to the expiration of the lease contract and
shortly thereafter; and (3) the new lessor incurred
expenses amounting to over P3 million when he
shouldered the rest of the repair and renovation
of the subject property.[25]
Hence, the instant petition.
The Issues
Petitioner raised the following issues for
resolution of the Court: (1) whether a judicial
admission is conclusive and binding upon a party
making the admission; and (2) whether such
judicial admission was properly rejected by the
CA.[26]
On the other hand, respondents posed the
following: (1) whether the findings of the CA that
the cockpit sustained damage during the period of
the lease was rendered not in accord with law or
with the applicable decisions of the Court; (2)
whether the CA committed an error of law in
ruling that petitioner is not entitled for the return
of the deposit.[27]
The ultimate question we must resolve is whether
petitioner is entitled to the return of the amount
deposited.
The Ruling of the Court
We rule in the affirmative. Respondents failed to
present sufficient proof to warrant the retention
of the full amount of the deposit given by
petitioner.
The Supreme Court is not a trier of facts, and as a
rule, does not weigh anew the evidence presented
by the parties. However, the instant case is one of
the exceptions to the rule because of the
conflicting decisions of the RTC and the CA based
on contradictory factual findings. Thus, we have
reviewed the records in order to arrive at a
judicious resolution of the case at bench.
Petitioner questions the CAs finding that there
was damage caused the premises while the lease
was still in force. Such finding could only have
been based on alleged inventory of the property
conducted by the respondents. Petitioner takes
exception to this evidence because of the earlier
judicial admission made by respondents counsel
that no inventory was conducted and, accordingly,
any evidence adduced by the respondents
contrary to or inconsistent with the judicial
admission should be rejected.
Indeed, at the pre-trial conference, respondents
counsel made an admission that no inventory was
made on the leased premises, at least up to that
time. This admission was confirmed in the Pre-
Trial Order issued by the trial court on March 8,
1999 after the lease expired on May 8, 1998.
Yet, on July 1, 1999, respondents witness
Coronado testified, as follows:
ATTY. VASQUEZ:
Q Why do you know the defendants?
A Because Talisay Sports Complex is owned by
Aznar Brothers Realty Corporation of which I am
employed as (sic) in charge of the realty
department.
Q How about Matias Aznar III, the defendant here?
A He is the Chairman of the Board.
Q Board of what?
A Of the Aznar Brothers Realty Corporation.
Q Is he the Chairman of Talisay Tourist Sports
Complex?
A Yes, sir.
Q You said that you are in charge of the realty
department, what is your function with respect to
the properties of Talisay Tourist and Sports
Complex?
A I am the in-charge of the administration and
overseeing of the complex owned by Talisay
Sports Complex.
Q When you said that you are in charge of the
administration and overseeing of the complex,
what does it includes (sic)?
A It includes collection of rentals of complex and
routine inspection to determine that there are
missing or damage of (sic) the properties.
Q How long have you been employed with the
Aznar Brothers Realty Company?
A 25 years.
xxxx
Q In your earlier testimony, you said that part of
your function is to conduct routine inspection of
the complex. Now, was there a routine inspection
conducted during the period of the lease contract
between plaintiff and the defendant?
A Yes, we conducted inspection sometime in
January 1998.
Q For what purpose was that inspection?
A The purpose is to determine if there are damage
sustained by the complex.
Q And what was the result of the inspection.
A There were missing and destroyed fixtures and
physical damage sustained by the complex.
xxxx
COURT
xxxx
Q W[h]y did you not take photographs of the
damage sustained by the complex?
A We did not take pictures, Your Honor, because
in fact their personnel were in our presence (sic)
during the inspection, they were accompanied by
us, because we can not conduct inspection
without the presence of the personnel of Jesus
Cuenco, Your Honor, the lessee.
Q Did the personnel of Jesus Cuenco sign any
paper acknowledging receipt of any report?
A There was no refusal, but we did not initiate to
let them sign and confirm.
COURT
Q So, we have to rely on your testimony?
A Yes, sir.[28]
Obviously, it was on Coronados testimony, as well
as on the documentary evidence[29] of an alleged
property inventory conducted on June 4, 1998,
that the CA based its conclusion that the amount
of damage sustained by the leased premises while
in the possession of petitioner exceeded the
amount of petitioners deposit. This contradicts
the judicial admission made by respondents
counsel which should have been binding on the
respondents.
Section 4, Rule 129 of the Rules of Court provides:
SEC. 4. Judicial admissions. An admission, verbal
or written, made by a party in the course of the
proceedings in the same case, does not require
proof. The admission may be contradicted only by
a showing that it was made through palpable
mistake or that no such admission was made.
A party may make judicial admissions in (1) the
pleadings, (2) during the trial, by verbal or
written manifestations or stipulations, or (3) in
other stages of the judicial proceeding.[30] The
stipulation of facts at the pre-trial of a case
constitutes judicial admissions. The veracity of
judicial admissions require no further proof and
may be controverted only upon a clear showing
that the admissions were made through palpable
mistake or that no admissions were made. Thus,
the admissions of parties during the pre-trial, as
embodied in the pre-trial order, are binding and
conclusive upon them.
Respondents did not deny the admission made by
their counsel, neither did they claim that the
same was made through palpable mistake. As
such, the stipulation of facts is incontrovertible
and may be relied upon by the courts. The pre-
trial forms part of the proceedings and matters
dealt therein may not be brushed aside in the
process of decision-making. Otherwise, the real
essence of compulsory pre-trial would be
rendered inconsequential and worthless.[31]
Furthermore, an act performed by counsel within
the scope of a general or implied authority is
regarded as an act of the client which renders
respondents in estoppel. By estoppel is meant that
an admission or representation is conclusive upon
the person making it and cannot be denied or
disproved as against the person relying
thereon.[32]
Thus, respondents are bound by the admissions
made by their counsel at the pre-trial.
Accordingly, the CA committed an error when it
gave ample evidentiary weight to respondents
evidence contradictory to the judicial admission.
The appellate courts findings that the damage in
the premises exceeded the amount of the deposit
is further sought to be justified, thus:
Verily, a perusal of the summary of repairs
amounting to P573,710.17 claimed to have been
made by appellants over the property at about
that time immediately prior to the expiration of
the lease contract and shortly thereafter, would
show that the repairs pertained to repairs on the
drainage, sewage, immediate premises and
structure of the complex. We find the same highly
credible and meritorious considering that as
earlier admitted by appellee, the repairs he made
were minor and were confined only to certain
portions of the complex, although substantial
repairs were done on the cockhouses only, and
that said repairs were done because of a coming
big time derby and not to satisfy the provisions of
the lease contract. Also, by implication, appellee
is stating that the new lessor incurred expenses
amounting to over P3 million when he shouldered
the rest of the repair and renovation of the
complex after the term of lease of appellee.[33]
Yet, upon perusal of the receipts presented by
respondents, we found that majority of the
receipts are under the name of Southwestern
University. In their Memorandum,[34] respondents
aver that Southwestern University and respondent
corporation are sister companies.[35] Even if true,
this matter is of no consequence because
respondent company and Southwestern University
have distinct and separate legal personalities, and
Southwestern University is not a party to this
case. Thus, we cannot just accept respondents
argument that the receipts paid in the name of
Southwestern University should be credited to
respondent company. In any event, they were not
able to prove that those receipts were in fact
used for the repair or maintenance of the
respondents complex.
Furthermore, respondents are not entitled the full
amount of the deposit because the repair and
renovation of the sports complex after the
expiration of petitioners lease were undertaken
not by respondents but by the new lessee. This
can be gleaned from Coronados testimony on
cross-examination, viz.:
Q You do not know. Mr. Witness, is it not a fact
that the new lessee was Wacky Salud?
A Yes, sir.
Q And that was sometime of July or August of
1998?
A They were about to conduct three months repair
of the complex?
Q So, Mr. Wacky Salud conducted, did you say
repair or renovation? Is it renovation or repair?
A There was a renovation and repair.
Q Renovation including repair?
A Yes, sir.
COURT
Q In other words, after the expiration of the
contract of Mr. Cuenco, Wacky Salud took over?
A Yes, he took over that repair and renovation
were no longer included in this presentation, that
is at his own expense.
Q Precisely. In other words, some repairs were
made by Mr. Salud and not by Aznar Brothers
Realty?
A Yes, sir.[36]
Finally, the Court observes that the inventories
presented by respondents were not countersigned
by petitioner or were they presented to the latter
prior to the filing of the case in the RTC. Thus, we
are more inclined to agree with the trial court
that the inventory was made as an
afterthought,[37] in a vain attempt of the
respondents to establish their case.
However, Coronados testimony that petitioner
extended the operation of the sports complex for
a period of two months after the expiration of the
lease without the respondents authority and
without the payment of rentals, remains
unrebutted. Enlightening is the following
testimony:
Q I observed here in No. 16 of your summary, two
months arrears rentals, June to July, how come?
The contract was supposed to expire May 1998?
A Yes, because it had happened on this extension
of the lease because they are still occupying until
July after the expiration of the contract.
COURT
Q You mean to say that they still use the complex
for the purpose for which it was intended, which
is for cockfighting?
WITNESS
A Yes, they are still doing their usual operation.
ATTY. VASQUEZ
Q You mean to say that there were still
cockfighting held in the complex even after May
1998?
A Yes, sir.[38]
This two (2) months over-stay of petitioner in the
leased premises should be charged against the
deposit. Because there was no renewal of the
lease contract, it is understood that the continued
use of the premises is on a monthly basis with the
rental in the amount previously agreed upon by
the parties, in accordance with Articles 1670[39]
and 1687[40] of the Civil Code.
In the Contract of Lease of petitioner and
respondent company, it was agreed that the
rental to be paid shall be the following:
WHEREAS, the FIRST PARTY is the owner of the
Talisay Tourist Sports Complex, Inc. located at
Tabunok, Talisay, Cebu;
WHEREAS, the SECOND PARTY has expressed his
desire to lease said complex (cockpit) and the
FIRST PARTY have agreed to lease/let the same to
the SECOND PARTY subject to the following term
and condition, to wit:
1. In consideration of this lease, the SECOND
PARTY agrees to pay the FIRST PARTY a lump sum
of ONE MILLION PESOS (P1,000,000.00)
representing advance rental for the first year, the
same to be paid on May 8, 1994. Thereafter, the
rental shall be as follows:
Second year - P1,050,000.00 or P87,500.00/month
Third year - 1,100,000.00 or P91,666.67/month
Fourth year - 1,175,000.00 or
P97,916.67/month[41]
Thus, by way of rental for the two-month
overstay, the amount of P195,833.34 should be
deducted from the amount of deposit paid by
petitioner to respondent company.
As to petitioners claim of interest of three percent
(3%) per month on the amount due him, the same
is without legal basis. We note that no amount of
interest was previously agreed upon by the parties
in the contract of lease.
Under Article 2213 of the Civil Code, interest
cannot be recovered upon unliquidated claims or
damages, except when the demand can be
established with reasonable certainty. In the
instant case, the claim of petitioner is
unliquidated or cannot be established with
reasonable certainty upon his filing of the case in
the RTC. This is because of the contending claims
of the parties, specifically, the claim of petitioner
for the return of the P500,000.00 deposit vis-a-vis
the claim of respondents on the arrears in rentals
and on the damage to the premises. It is only now
that the amount that should be returned is
ascertained, i.e., P500,000.00 less the two-
months arrears in rentals amounting to
P195,833.34, the sum of which will earn
interest at the legal rate of six percent (6%) per
annum[42] from the time the case was filed in the
RTC on October 21, 1998.[43] Upon finality of this
decision, the rate of interest shall be twelve
percent (12%) per annum from such finality until
full satisfaction. The foregoing interest rate is
based on the guidelines set by the Court in
Eastern Shipping Lines v. CA, viz.:
I. When an obligation, regardless of its source,
i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be
held liable for damages. The provisions under
Title XVIII on "Damages" of the Civil Code govern
in determining the measure of recoverable
damages.
II. With regard particularly to an award of interest
in the concept of actual and compensatory
damages, the rate of interest, as well as the
accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists
in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be
that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn
legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate
of interest shall be 12% per annum to be
computed from default, i.e., from judicial or
extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
liability but the direct accountability of the
corporation they represent.[45]
WHEREFORE, the petition is PARTLY GRANTED.
The Decision of the Court of Appeals is hereby
REVERSED AND SET ASIDE. The Decision of the RTC
in Civil Case No. CEB-22847 is hereby REINSTATED
with the following modifications:

2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged
on unliquidated claims or damages except when or
until the demand can be established with
reasonable certainty. Accordingly, where the
demand is established with reasonable certainty,
the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot
be so reasonably established at the time the
demand is made, the interest shall begin to run
only from the date of the judgment of the court is
made (at which time the quantification of
damages may be deemed to have been reasonably
ascertained). The actual base for the computation
of legal interest shall, in any case, be on the
amount of finally adjudged.
(1) Talisay Sports Complex, Inc. is solely liable to
return the amount of the deposit after deducting
the amount of the two-months arrears in rentals;
and
(2) The rate of legal interest to be paid is SIX
PERCENT (6%) on the amount due computed from
October 21, 1998, and TWELVE PERCENT (12%)
interest, thereon upon finality of this decision
until full payment thereof.
SO ORDERED.
SOCIAL JUSTICE SOCIETY G.R. No. 156052
(SJS), VLADIMIR ALARIQUE T.
CABIGAO and BONIFACIO S.

TUMBOKON,
3. When the judgment of the court awarding a
sum of money becomes final and executory, the Petitioners, Present:
rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12%
per annum from such finality until its satisfaction,
this interim period being deemed to be by then an PUNO, C.J., Chairperson,
equivalent to a forbearance of credit.[44]
SANDOVAL-GUTIERREZ,

- v e r s u s - CORONA,

AZCUNA and
Concerning the solidary liability of respondents,
we hold that respondent Matias Aznar III is not LEONARDO-DE CASTRO, JJ.
solidarily liable with respondent company. His
function as the President of the company does not
make him personally liable for the obligations of
the latter. A corporation, being a juridical entity, HON. JOSE L. ATIENZA, JR.,
may act only through its directors, officers and
employees. Obligations incurred by them while in his capacity as Mayor of the
acting as corporate agents, are not their personal
City of Manila,

Respondent.

After we promulgated our decision in this case on

March 7, 2007, Chevron Philippines Inc. (Chevron),
x----------------------x Petron Corporation (Petron) and Pilipinas Shell
Petroleum Corporation (Shell) (collectively, the oil
companies) and the Republic of the Philippines,
represented by the Department of Energy (DOE),
filed their respective motions for leave to
intervene and for reconsideration of the decision.
CHEVRON PHILIPPINES INC.,

PETRON CORPORATION and Chevron[1] is engaged in the business of

importing, distributing and marketing of
PILIPINAS SHELL PETROLEUM petroleum products in the Philippines while Shell
and Petron are engaged in the business of
CORPORATION, manufacturing, refining and likewise importing,
distributing and marketing of petroleum products
Movants-Intervenors. in the Philippines.[2] The DOE is a governmental
agency created under Republic Act (RA) No.
7638[3] and tasked to prepare, integrate,
coordinate, supervise and control all plans,
programs, projects and activities of the
government relative to energy exploration,
x----------------------x development, utilization, distribution and
conservation.[4]

The facts are restated briefly as follows:

DEPARTMENT OF ENERGY,

Movant-Intervenor. Promulgated: Petitioners Social Justice Society, Vladimir

Alarique T. Cabigao and Bonifacio S. Tumbokon, in
an original petition for mandamus under Rule 65
of the Rules of Court, sought to compel
February 13, 2008 respondent Hon. Jose L. Atienza, Jr., then mayor
of the City of Manila, to enforce Ordinance No.
8027. This ordinance was enacted by the
Sangguniang Panlungsod of Manila on November
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 20, 2001,[5] approved by respondent Mayor on
--------x November 28, 2001,[6] and became effective on
December 28, 2001 after publication.[7] Sections
1 and 3 thereof state:

RESOLUTION SECTION 1. For the purpose of promoting sound

urban planning and ensuring health, public safety,
and general welfare of the residents of Pandacan
CORONA, J.: and Sta. Ana as well as its adjoining areas, the
land use of [those] portions of land bounded by
the Pasig River in the north, PNR Railroad Track in
the east, Beata St. in the south, Palumpong St. in
the southwest, and Estero de Pandacan in the
west[,] PNR Railroad in the northwest area, Estero
de Pandacan in the [n]ortheast, Pasig River in the
southeast and Dr. M.L. Carreon in the southwest.
The area of Punta, Sta. Ana bounded by the Pasig
River, Marcelino Obrero St., Mayo 28 St., and F.
Manalo Street, are hereby reclassified from
Industrial II to Commercial I.
xxx xxx xxx
SEC. 3. Owners or operators of industries and
other businesses, the operation of which are no
longer permitted under Section 1 hereof, are
hereby given a period of six (6) months from the
date of effectivity of this Ordinance within which
to cease and desist from the operation of
businesses which are hereby in consequence,
disallowed.
Ordinance No. 8027 reclassified the area
described therein from industrial to commercial
and directed the owners and operators of
businesses disallowed under the reclassification to
cease and desist from operating their businesses
within six months from the date of effectivity of
the ordinance. Among the businesses situated in
the area are the so-called Pandacan Terminals of
the oil companies.
On June 26, 2002, the City of Manila and the
Department of Energy (DOE) entered into a
memorandum of understanding (MOU)[8] with the
oil companies. They agreed that the scaling down
of the Pandacan Terminals [was] the most viable
and practicable option. The Sangguniang
Panlungsod ratified the MOU in Resolution No.
97.[9] In the same resolution, the Sanggunian
declared that the MOU was effective only for a
period of six months starting July 25, 2002.[10]
Thereafter, on January 30, 2003, the Sanggunian
adopted Resolution No. 13[11] extending the
validity of Resolution No. 97 to April 30, 2003 and
authorizing the mayor of Manila to issue special
business permits to the oil companies.[12]
This was the factual backdrop presented to the
Court which became the basis of our March 7,
2007 decision. We ruled that respondent had the
ministerial duty under the Local Government Code
(LGC) to enforce all laws and ordinances relative
to the governance of the city,[13] including
Ordinance No. 8027. We also held that we need
not resolve the issue of whether the MOU entered
into by respondent with the oil companies and the
subsequent resolutions passed by the Sanggunian
could amend or repeal Ordinance No. 8027 since
the resolutions which ratified the MOU and made
it binding on the City of Manila expressly gave it
full force and effect only until April 30, 2003. We
concluded that there was nothing that legally
hindered respondent from enforcing Ordinance
No. 8027.
After we rendered our decision on March 7, 2007,
the oil companies and DOE sought to intervene
and filed motions for reconsideration in
intervention on March 12, 2007 and March 21,
2007 respectively. On April 11, 2007, we
conducted the oral arguments in Baguio City to
hear petitioners, respondent and movants-
intervenors oil companies and DOE.
The oil companies called our attention to the fact
that on April 25, 2003, Chevron had filed a
complaint against respondent and the City of
Manila in the Regional Trial Court (RTC) of Manila,
Branch 39, for the annulment of Ordinance No.
8027 with application for writs of preliminary
prohibitory injunction and preliminary mandatory
injunction.[14] The case was docketed as civil
case no. 03-106377. On the same day, Shell filed a
petition for prohibition and mandamus likewise
assailing the validity of Ordinance No. 8027 and
with application for writs of preliminary
prohibitory injunction and preliminary mandatory
injunction.[15] This was docketed as civil case no.
03-106380. Later on, these two cases were
consolidated and the RTC of Manila, Branch 39
issued an order dated May 19, 2003 granting the
applications for writs of preliminary prohibitory
injunction and preliminary mandatory injunction:
WHEREFORE, upon the filing of a total bond of
TWO MILLION (Php 2,000,000.00) PESOS, let a Writ
of Preliminary Prohibitory Injunction be issued
ordering [respondent] and the City of Manila, their
officers, agents, representatives, successors, and
any other persons assisting or acting in their
behalf, during the pendency of the case, to
REFRAIN from taking steps to enforce Ordinance
No. 8027, and let a Writ of Preliminary Mandatory
Injunction be issued ordering [respondent] to issue
[Chevron and Shell] the necessary Business
Permits to operate at the Pandacan Terminal.[16]
Petron likewise filed its own petition in the RTC of
Manila, Branch 42, also attacking the validity of
Ordinance No. 8027 with prayer for the issuance
of a writ of preliminary injunction and/or
temporary restraining order (TRO). This was
docketed as civil case no. 03-106379. In an order
dated August 4, 2004, the RTC enjoined the
parties to maintain the status quo.[17]
Thereafter, in 2006, the city council of Manila
enacted Ordinance No. 8119, also known as the
Manila Comprehensive Land Use Plan and Zoning
Ordinance of 2006.[18] This was approved by
respondent on June 16, 2006.[19]
Aggrieved anew, Chevron and Shell filed a
complaint in the RTC of Manila, Branch 20, asking
for the nullification of Ordinance No. 8119.[20]
This was docketed as civil case no. 06-115334.
Petron filed its own complaint on the same causes
of action in the RTC of Manila, Branch 41.[21] This
was docketed as civil case no. 07-116700.[22] The
court issued a TRO in favor of Petron, enjoining
the City of Manila and respondent from enforcing
Ordinance No. 8119.[23]
Meanwhile, in civil case no. 03-106379, the parties
filed a joint motion to withdraw complaint and
counterclaim on February 20, 2007.[24] In an
order dated April 23, 2007, the joint motion was
granted and all the claims and counterclaims of
the parties were withdrawn.[25]
Given these additional pieces of information, the
following were submitted as issues for our
resolution:
1. whether movants-intervenors should be
allowed to intervene in this case;[26]
2. whether the following are impediments to the
execution of our March 7, 2007 decision:
(a) Ordinance No. 8119, the enactment and
existence of which were not previously brought by
the parties to the attention of the Court and
(b) writs of preliminary prohibitory injunction
and preliminary mandatory injunction and status
quo order issued by the RTC of Manila, Branches
39 and 42 and
3. whether the implementation of Ordinance No.
8027 will unduly encroach upon the DOEs powers
and functions involving energy resources.
During the oral arguments, the parties submitted
to this Courts power to rule on the
constitutionality and validity of Ordinance No.
8027 despite the pendency of consolidated cases
involving this issue in the RTC.[27] The
importance of settling this controversy as fully
and as expeditiously as possible was emphasized,
considering its impact on public interest. Thus, we
will also dispose of this issue here. The parties
were after all given ample opportunity to present
and argue their respective positions. By so doing,
we will do away with the delays concomitant with
litigation and completely adjudicate an issue
which will most likely reach us anyway as the final
arbiter of all legal disputes.
Before we resolve these issues, a brief review of
the history of the Pandacan Terminals is called for
to put our discussion in the proper context.
History Of The Pandacan
Oil Terminals
Pandacan (one of the districts of the City of
Manila) is situated along the banks of the Pasig
river. At the turn of the twentieth century,
Pandacan was unofficially designated as the
industrial center of Manila. The area, then largely
uninhabited, was ideal for various emerging
industries as the nearby river facilitated the
transportation of goods and products. In the
1920s, it was classified as an industrial zone.[28]
Among its early industrial settlers were the oil
companies. Shell established its installation there
on January 30, 1914.[29] Caltex (now Chevron)
followed suit in 1917 when the company began
marketing its products in the country.[30] In 1922,
it built a warehouse depot which was later
converted into a key distribution terminal.[31]
The corporate presence in the Philippines of Esso
(Petrons predecessor) became more keenly felt
when it won a concession to build and operate a
refinery in Bataan in 1957.[32] It then went on to
operate a state-of-the-art lube oil blending plant
in the Pandacan Terminals where it manufactures
lubes and greases.[33]
On December 8, 1941, the Second World War
reached the shores of the Philippine Islands.
Although Manila was declared an open city, the
Americans had no interest in welcoming the
Japanese. In fact, in their zealous attempt to fend
off the Japanese Imperial Army, the United States
Army took control of the Pandacan Terminals and
hastily made plans to destroy the storage facilities
to deprive the advancing Japanese Army of a
valuable logistics weapon.[34] The U.S. Army
burned unused petroleum, causing a frightening
conflagration. Historian Nick Joaquin recounted
the events as follows:
After the USAFFE evacuated the City late in
December 1941, all army fuel storage dumps were
set on fire. The flames spread, enveloping the
City in smoke, setting even the rivers ablaze,
endangering bridges and all riverside buildings.
For one week longer, the open city blazeda cloud
of smoke by day, a pillar of fire by night.[35]
The fire consequently destroyed the Pandacan
Terminals and rendered its network of depots and
service stations inoperative.[36]
After the war, the oil depots were reconstructed.
Pandacan changed as Manila rebuilt itself. The
three major oil companies resumed the operation
of their depots.[37] But the district was no longer
a sparsely populated industrial zone; it had
evolved into a bustling, hodgepodge community.
Today, Pandacan has become a densely populated
area inhabited by about 84,000 people, majority
of whom are urban poor who call it home.[38]
Aside from numerous industrial installations, there
are also small businesses, churches, restaurants,
schools, daycare centers and residences situated
there.[39] Malacaang Palace, the official
residence of the President of the Philippines and
the seat of governmental power, is just two
kilometers away.[40] There is a private school
near the Petron depot. Along the walls of the
Shell facility are shanties of informal settlers.[41]
More than 15,000 students are enrolled in
elementary and high schools situated near these
facilities.[42] A university with a student
population of about 25,000 is located directly
across the depot on the banks of the Pasig
river.[43]
The 36-hectare Pandacan Terminals house the oil
companies distribution terminals and depot
facilities.[44] The refineries of Chevron and Shell
in Tabangao and Bauan, both in Batangas,
respectively, are connected to the Pandacan
Terminals through a 114-kilometer[45]
underground pipeline system.[46] Petrons refinery
in Limay, Bataan, on the other hand, also services
the depot.[47] The terminals store fuel and other
petroleum products and supply 95% of the fuel
requirements of Metro Manila,[48] 50% of Luzons
consumption and 35% nationwide.[49] Fuel can
also be transported through barges along the Pasig
river or tank trucks via the South Luzon
Expressway.
We now discuss the first issue: whether movants-
intervenors should be allowed to intervene in this
case.
Intervention Of The Oil Companies And The DOE
Should Be Allowed In The Interest of Justice
Intervention is a remedy by which a third party,
not originally impleaded in the proceedings,
becomes a litigant therein to enable him, her or it
to protect or preserve a right or interest which
may be affected by such proceedings.[50] The
pertinent rules are Sections 1 and 2, Rule 19 of
the Rules of Court:
SEC. 1. Who may intervene. A person who has a
legal interest in the matter in litigation, or in the
success of either of the parties, or an interest
against both, or is so situated as to be adversely
affected by a distribution or other disposition of
property in the custody of the court or of an
officer thereof may, with leave of court, be
allowed to intervene in the action. The court shall
consider whether or not the intervention will
unduly delay or prejudice the adjudication of the
rights of the original parties, and whether or not
the intervenors rights may be fully protected in a
separate proceeding.
SEC. 2. Time to intervene. The motion to
intervene may be filed at any time before
rendition of judgment by the trial court. A copy of
the pleading-in-intervention shall be attached to
the motion and served on the original parties.
Thus, the following are the requisites for
intervention of a non-party:
(1) Legal interest
(a) in the matter in controversy; or
(b) in the success of either of the parties; or
I against both parties; or
(d) person is so situated as to be adversely
affected by a distribution or other disposition of
property in the custody of the court or of an
officer thereof;
(2) Intervention will not unduly delay or prejudice
the adjudication of rights of original parties;
(3) Intervenors rights may not be fully protected
in a separate proceeding[51] and
(g)The motion to intervene may be filed at any
time before rendition of judgment by the trial
court.
For both the oil companies and DOE, the last
requirement is definitely absent. As a rule,
intervention is allowed before rendition of
judgment as Section 2, Rule 19 expressly provides.
Both filed their separate motions after our
decision was promulgated. In Republic of the
Philippines v. Gingoyon,[52] a recently decided
case which was also an original action filed in this
Court, we declared that the appropriate time to
file the motions-in-intervention was before and
not after resolution of the case.[53]
The Court, however, has recognized exceptions to
Section 2, Rule 19 in the interest of substantial
justice:
The rule on intervention, like all other rules of
procedure, is intended to make the powers of the
Court fully and completely available for justice. It
is aimed to facilitate a comprehensive
adjudication of rival claims overriding
technicalities on the timeliness of the filing
thereof.[54]
The oil companies assert that they have a legal
interest in this case because the implementation
of Ordinance No. 8027 will directly affect their
business and property rights.[55]
[T]he interest which entitles a person to intervene
in a suit between other parties must be in the
matter in litigation and of such direct and
immediate character that the intervenor will
either gain or lose by direct legal operation and
effect of the judgment. Otherwise, if persons not
parties to the action were allowed to intervene,
proceedings would become unnecessarily
complicated, expensive and interminable. And
this would be against the policy of the law. The
words an interest in the subject means a direct
interest in the cause of action as pleaded, one
that would put the intervenor in a legal position
to litigate a fact alleged in the complaint without
the establishment of which plaintiff could not
recover.[56]
We agree that the oil companies have a direct and
immediate interest in the implementation of
Ordinance No. 8027. Their claim is that they will
need to spend billions of pesos if they are
compelled to relocate their oil depots out of
Manila. Considering that they admitted knowing
about this case from the time of its filing on
December 4, 2002, they should have intervened
long before our March 7, 2007 decision to protect
their interests. But they did not.[57] Neither did
they offer any worthy explanation to justify their
late intervention.
Be that as it may, although their motion for
intervention was not filed on time, we will allow
it because they raised and presented novel issues
and arguments that were not considered by the
Court in its March 7, 2007 decision. After all, the
allowance or disallowance of a motion to
intervene is addressed to the sound discretion of
the court before which the case is pending.[58]
Considering the compelling reasons favoring
intervention, we do not think that this will unduly
delay or prejudice the adjudication of rights of
the original parties. In fact, it will be expedited
since their intervention will enable us to rule on
the constitutionality of Ordinance No. 8027
instead of waiting for the RTCs decision.
The DOE, on the other hand, alleges that its
interest in this case is also direct and immediate
as Ordinance No. 8027 encroaches upon its
exclusive and national authority over matters
affecting the oil industry. It seeks to intervene in
order to represent the interests of the members
of the public who stand to suffer if the Pandacan
Terminals operations are discontinued. We will
tackle the issue of the alleged encroachment into
DOEs domain later on. Suffice it to say at this
point that, for the purpose of hearing all sides and
considering the transcendental importance of this
case, we will also allow DOEs intervention.
The Injunctive Writs Are Not Impediments To The
Enforcement Of Ordinance No. 8027
Under Rule 65, Section 3[59] of the Rules of
Court, a petition for mandamus may be filed 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.
According to the oil companies, respondent did
not unlawfully fail or neglect to enforce
Ordinance No. 8027 because he was lawfully
prevented from doing so by virtue of the
injunctive writs and status quo order issued by the
RTC of Manila, Branches 39 and 42.
First, we note that while Chevron and Shell still
have in their favor the writs of preliminary
injunction and preliminary mandatory injunction,
the status quo order in favor of Petron is no longer
in effect since the court granted the joint motion
of the parties to withdraw the complaint and
counterclaim.[60]
Second, the original parties failed to inform the
Court about these injunctive writs. Respondent
(who was also impleaded as a party in the RTC
cases) defends himself by saying that he informed
the court of the pendency of the civil cases and
that a TRO was issued by the RTC in the
consolidated cases filed by Chevron and Shell. It is
true that had the oil companies only intervened
much earlier, the Court would not have been left
in the dark about these facts. Nevertheless,
respondent should have updated the Court, by
way of manifestation, on such a relevant matter.
In his memorandum, respondent mentioned the
issuance of a TRO. Under Section 5 of Rule 58 of
the Rules of Court, a TRO issued by the RTC is
effective only for a period of 20 days. This is why,
in our March 7, 2007 decision, we presumed with
certainty that this had already lapsed.[61]
Respondent also mentioned the grant of injunctive
writs in his rejoinder which the Court, however,
expunged for being a prohibited pleading. The
parties and their counsels were clearly remiss in
their duties to this Court.
In resolving controversies, courts can only
consider facts and issues pleaded by the
parties.[62] Courts, as well as magistrates
presiding over them are not omniscient. They can
only act on the facts and issues presented before
them in appropriate pleadings. They may not even
substitute their own personal knowledge for
evidence. Nor may they take notice of matters
except those expressly provided as subjects of
mandatory judicial notice.
We now proceed to the issue of whether the
injunctive writs are legal impediments to the
enforcement of Ordinance No. 8027.
Section 3, Rule 58 of the Rules of Court
enumerates the grounds for the issuance of a writ
of preliminary injunction:
SEC. 3. Grounds for issuance of preliminary
injunction. ― A preliminary injunction may be
granted when it is established:
(a) That the applicant is entitled to the relief
demanded, and the whole or part of such relief
consists in restraining the commission or
continuance of the act or acts complained of, or
in requiring the performance of an act or acts,
either for a limited period or perpetually;
(b) That the commission, continuance or
nonperformance of the act or acts complained of
during the litigation would probably work injustice
to the applicant; or
(g) IThat a party, court, agency or a person
is doing, threatening, or is attempting to do, or is
procuring or suffering to be done, some act or
acts probably in violation of the rights of the
applicant respecting the subject of the action or
proceeding, and tending to render the judgment
ineffectual.

There are two requisites for the issuance of a
preliminary injunction: (1) the right to be
protected exists prima facie and (2) the acts
sought to be enjoined are violative of that right. It
must be proven that the violation sought to be
prevented will cause an irreparable injustice.
The act sought to be restrained here was the
enforcement of Ordinance No. 8027. It is a settled
rule that an ordinance enjoys the presumption of
validity and, as such, cannot be restrained by
injunction.[63] Nevertheless, when the validity of
the ordinance is assailed, the courts are not
precluded from issuing an injunctive writ against
its enforcement. However, we have declared that
the issuance of said writ is proper only when:
... the petitioner assailing the ordinance has made
out a case of unconstitutionality strong enough to
overcome, in the mind of the judge, the
presumption of validity, in addition to a showing
of a clear legal right to the remedy sought....[64]
(Emphasis supplied)
Judge Reynaldo G. Ros, in his order dated May 19,
2003, stated his basis for issuing the injunctive
writs:
The Court, in resolving whether or not a Writ of
Preliminary Injunction or Preliminary Mandatory
Injunction should be issued, is guided by the
following requirements: (1) a clear legal right of
the complainant; (2) a violation of that right; and
(3) a permanent and urgent necessity for the Writ
to prevent serious damage. The Court believes
that these requisites are present in these cases.
There is no doubt that the plaintiff/petitioners
have been legitimately operating their business in
the Pandacan Terminal for many years and they
have made substantial capital investment therein.
Every year they were issued Business Permits by
the City of Manila. Its operations have not been
declared illegal or contrary to law or morals. In
fact, because of its vital importance to the
national economy, it was included in the
Investment Priorities Plan as mandated under the
Downstream Oil Industry Deregulation Act of 1988
(R.A. 8479). As a lawful business, the
plaintiff/petitioners have a right, therefore, to
continue their operation in the Pandacan Terminal
and the right to protect their investments. This is
a clear and unmistakable right of the
plaintiff/petitioners.
The enactment, therefore, of City Ordinance No.
8027 passed by the City Council of Manila
reclassifying the area where the Pandacan
Terminal is located from Industrial II to
Commercial I and requiring the
plaintiff/petitioners to cease and desist from the
operation of their business has certainly violated
the rights of the plaintiff/petitioners to continue
their legitimate business in the Pandacan Terminal
and deprived them of their huge investments they
put up therein. Thus, before the Court, therefore,
determines whether the Ordinance in question is
valid or not, a Writ of Preliminary Injunction and a
Writ of Mandatory Injunction be issued to prevent
serious and irreparable damage to
plaintiff/petitioners.[65]
Nowhere in the judges discussion can we see that,
in addition to a showing of a clear legal right of
Chevron and Shell to the remedy sought, he was
convinced that they had made out a case of
unconstitutionality or invalidity strong enough to
overcome the presumption of validity of the
ordinance. Statutes and ordinances are presumed
valid unless and until the courts declare the
contrary in clear and unequivocal terms.[66] The
mere fact that the ordinance is alleged to be
unconstitutional or invalid will not entitle a party
to have its enforcement enjoined.[67] The
presumption is all in favor of validity. The reason
for this is obvious:
The action of the elected representatives of the
people cannot be lightly set aside. The councilors
must, in the very nature of things, be familiar
with the necessities of their particular
municipality and with all the facts and
circumstances which surround the subject and
necessitate action. The local legislative body, by
enacting the ordinance, has in effect given notice
that the regulations are essential to the well
being of the people . . . The Judiciary should not
lightly set aside legislative action when there is
not a clear invasion of personal or property rights
under the guise of police regulation.[68]
Xxx
...[Courts] accord the presumption of
constitutionality to legislative enactments, not
only because the legislature is presumed to abide
by the Constitution but also because the
judiciary[,] in the determination of actual cases
and controversies[,] must reflect the wisdom and
justice of the people as expressed through their
representatives in the executive and legislative
departments of the government.[69]
The oil companies argue that this presumption
must be set aside when the invalidity or
unreasonableness appears on the face of the
ordinance itself.[70] We see no reason to set aside
the presumption. The ordinance, on its face, does
not at all appear to be unconstitutional. It
reclassified the subject area from industrial to
commercial. Prima facie, this power is within the
power of municipal corporations:
The power of municipal corporations to divide
their territory into industrial, commercial and
residential zones is recognized in almost all
jurisdictions inasmuch as it is derived from the
police power itself and is exercised for the
protection and benefit of their inhabitants.[71]
Xxx
There can be no doubt that the City of Manila has
the power to divide its territory into residential
and industrial zones, and to prescribe that
offensive and unwholesome trades and
occupations are to be established exclusively in
the latter zone.
Xxx xxx xxx
Likewise, it cannot be denied that the City of
Manila has the authority, derived from the police
power, of forbidding the appellant to continue the
manufacture of toyo in the zone where it is now
situated, which has been declared
residential....[72]
Courts will not invalidate an ordinance unless it
clearly appears that it is unconstitutional. There is
no such showing here. Therefore, the injunctive
writs issued in the Manila RTCs May 19, 2003 order
had no leg to stand on.
We are aware that the issuance of these
injunctive writs is not being assailed as tainted
with grave abuse of discretion. However, we are
confronted with the question of whether these
writs issued by a lower court are impediments to
the enforcement of Ordinance No. 8027 (which is
the subject of the mandamus petition). As already
discussed, we rule in the negative.
Ordinance No. 8027 Was Not Superseded By
Ordinance No. 8119
The March 7, 2007 decision did not take into
consideration the passage of Ordinance No. 8119
entitled An Ordinance Adopting the Manila
Comprehensive Land Use Plan and Zoning
Regulations of 2006 and Providing for the
Administration, Enforcement and Amendment
thereto which was approved by respondent on
June 16, 2006. The simple reason was that the
Court was never informed about this ordinance.
While courts are required to take judicial notice
of the laws enacted by Congress, the rule with
respect to local ordinances is different.
Ordinances are not included in the enumeration of
matters covered by mandatory judicial notice
under Section 1, Rule 129 of the Rules of
Court.[73]
Although, Section 50 of RA 409[74] provides that:
SEC. 50 Judicial notice of ordinances. - All courts
sitting in the city shall take judicial notice of the
ordinances passed by the [Sangguniang
Panglungsod].
This cannot be taken to mean that this Court,
since it has its seat in the City of Manila, should
have taken steps to procure a copy of the
ordinance on its own, relieving the party of any
duty to inform the Court about it.
Even where there is a statute that requires a court
to take judicial notice of municipal ordinances, a
court is not required to take judicial notice of
ordinances that are not before it and to which it
does not have access. The party asking the court
to take judicial notice is obligated to supply the
court with the full text of the rules the party
desires it to have notice of.[75] Counsel should
take the initiative in requesting that a trial court
take judicial notice of an ordinance even where a
statute requires courts to take judicial notice of
local ordinances.[76]
The intent of a statute requiring a court to take
judicial notice of a local ordinance is to remove
any discretion a court might have in determining
whether or not to take notice of an ordinance.
Such a statute does not direct the court to act on
its own in obtaining evidence for the record and a
party must make the ordinance available to the
court for it to take notice.[77]
In its defense, respondent claimed that he did not
inform the Court about the enactment of
Ordinance No. 8119 because he believed that it
was different from Ordinance No. 8027 and that
the two were not inconsistent with each
other.[78]
In the same way that we deem the intervenors
late intervention in this case unjustified, we find
the failure of respondent, who was an original
party here, inexcusable.
The Rule On Judicial Admissions Is Not Applicable
Against Respondent
The oil companies assert that respondent
judicially admitted that Ordinance No. 8027 was
repealed by Ordinance No. 8119 in civil case no.
03-106379 (where Petron assailed the
constitutionality of Ordinance No. 8027) when the
parties in their joint motion to withdraw
complaint and counterclaim stated that the issue
...has been rendered moot and academic by virtue
of the passage of [Ordinance No. 8119].[79] They
contend that such admission worked as an
estoppel against the respondent.
Respondent countered that this stipulation simply
meant that Petron was recognizing the validity
and legality of Ordinance No. 8027 and that it had
conceded the issue of said ordinances
constitutionality, opting instead to question the
validity of Ordinance No. 8119.[80] The oil
companies deny this and further argue that
respondent, in his answer in civil case no. 06-
115334 (where Chevron and Shell are asking for
the nullification of Ordinance No. 8119), expressly
stated that Ordinance No. 8119 replaced
Ordinance No. 8027:[81]
... Under Ordinance No. 8027, businesses whose
uses are not in accord with the reclassification
were given six months to cease [their] operation.
Ordinance No. 8119, which in effect, replaced
Ordinance [No.] 8027, merely took note of the
time frame provided for in Ordinance No. 8119....
Ordinance No. 8119 thus provided for an even
longer term, that is[,] seven years;[82] (Emphasis
supplied)
Rule 129, Section 4 of the Rules of Court provides:
Section 4. Judicial admissions. ― An admission,
verbal or written, made by a party in the course
of the proceedings in the same case, does not
require proof. The admission may be contradicted
only by showing that it was made through
palpable mistake or that no such admission was
made. (Emphasis supplied)
While it is true that a party making a judicial
admission cannot subsequently take a position
contrary to or inconsistent with what was
pleaded,[83] the aforestated rule is not applicable
here. Respondent made the statements regarding
the ordinances in civil case nos. 03-106379 and 06-
115334 which are not the same as this case before
us.[84] To constitute a judicial admission, the
admission must be made in the same case in which
it is offered.
Hence, respondent is not estopped from claiming
that Ordinance No. 8119 did not supersede
Ordinance No. 8027. On the contrary, it is the oil
companies which should be considered estopped.
They rely on the argument that Ordinance No.
8119 superseded Ordinance No. 8027 but, at the
same time, also impugn its (8119s) validity. We
frown on the adoption of inconsistent positions
and distrust any attempt at clever positioning
under one or the other on the basis of what
appears advantageous at the moment. Parties
cannot take vacillating or contrary positions
regarding the validity of a statute[85] or
ordinance. Nonetheless, we will look into the
merits of the argument of implied repeal.
Ordinance No. 8119 Did Not Impliedly Repeal
Ordinance No. 8027
Both the oil companies and DOE argue that
Ordinance No. 8119 repealed Ordinance No. 8027.
They assert that although there was no express
repeal[86] of Ordinance No. 8027, Ordinance No.
8119 impliedly repealed it.
According to the oil companies, Ordinance No.
8119 reclassified the area covering the Pandacan
Terminals to High Density Residential/Mixed Use
Zone (R-3/MXD)[87] whereas Ordinance No. 8027
reclassified the same area from Industrial II to
Commercial I:
SECTION 1. For the purpose of promoting sound
urban planning and ensuring health, public safety,
and general welfare of the residents of Pandacan
and Sta. Ana as well as its adjoining areas, the
land use of [those] portions of land bounded by
the Pasig River in the north, PNR Railroad Track in
the east, Beata St. in the south, Palumpong St. in
the southwest, and Estero de Pancacan in the
west[,] PNR Railroad in the northwest area, Estero
de Pandacan in the [n]ortheast, Pasig River in the
southeast and Dr. M.L. Carreon in the southwest.
The area of Punta, Sta. Ana bounded by the Pasig
River, Marcelino Obrero St., Mayo 28 St., and F.
Manalo Street, are hereby reclassified from
Industrial II to Commercial I. (Emphasis supplied)
Moreover, Ordinance No. 8119 provides for a
phase-out of seven years:
SEC. 72. Existing Non-Conforming Uses and
Buildings. - The lawful use of any building,
structure or land at the time of the adoption of
this Ordinance may be continued, although such
use does not conform with the provision of the
Ordinance, provided:
xxx xxx xxx
(g) In case the non-conforming use is an
industrial use:
xxx xxx xxx
d. The land use classified as non-conforming
shall program the phase-out and relocation of the
non-conforming use within seven (7) years from
the date of effectivity of this Ordinance.
(Emphasis supplied)
This is opposed to Ordinance No. 8027 which
compels affected entities to vacate the area
within six months from the effectivity of the
ordinance:
SEC. 3. Owners or operators of industries and
other businesses, the operation of which are no
longer permitted under Section 1 hereof, are
hereby given a period of six (6) months from the
date of effectivity of this Ordinance within which
to cease and desist from the operation of
businesses which are hereby in consequence,
disallowed.
Ordinance No. 8119 also designated the Pandacan
oil depot area as a Planned Unit
Development/Overlay Zone (O-PUD):
SEC. 23. Use Regulations in Planned Unit
Development/Overlay Zone (O-PUD). O-PUD Zones
are identified specific sites in the City of Manila
wherein the project site is comprehensively
planned as an entity via unitary site plan which
permits flexibility in planning/ design, building
siting, complementarily of building types and land
uses, usable open spaces and the preservation of
significant natural land features, pursuant to
regulations specified for each particular PUD.
Enumerated below are identified PUD:
xxx xxx xxx
6. Pandacan Oil Depot Area
xxx xxx xxx
Enumerated below are the allowable uses:
1. all uses allowed in all zones where it
is located
2. the [Land Use Intensity Control
(LUIC)] under which zones are located shall, in all
instances be complied with
3. the validity of the prescribed LUIC
shall only be [superseded] by the development
controls and regulations specified for each PUD as
provided for each PUD as provided for by the
masterplan of respective PUDs.[88] (Emphasis
supplied)
Respondent claims that in passing Ordinance No.
8119, the Sanggunian did not intend to repeal
Ordinance No. 8027 but meant instead to carry
over 8027s provisions to 8119 for the purpose of
making Ordinance No. 8027 applicable to the oil
companies even after the passage of Ordinance
No. 8119.[89] He quotes an excerpt from the
minutes of the July 27, 2004 session of the
Sanggunian during the first reading of Ordinance
No. 8119:
Member GARCIA: Your Honor, iyong patungkol po
roon sa oil depot doon sa amin sa Sixth District sa
Pandacan, wala pong nakalagay eith sa ordinansa
rito na taliwas o kakaiba roon sa ordinansang
ipinasa noong nakaraang Konseho, iyong
Ordinance No. 8027. So kung ano po ang nandirito
sa ordinansa na ipinasa ninyo last time, iyon lang
po ang ni-lift eithe at inilagay eith. At eith eith
ordinansang iyong naipasa ng huling Konseho, niri-
classify [ninyo] from Industrial II to Commercial C-
1 ang area ng Pandacan kung nasaan ang oil
depot. So ini-lift lang po [eithe] iyong definition,
density, at saka po yon pong ng noong ordinansa
ninyo na siya eith naming inilagay eith, iniba lang
po naming iyong title. So wala po kaming binago
na taliwas o nailagay na taliwas doon sa
ordinansang ipinasa ninyo, ni-lift lang po [eithe]
from Ordinance No. 8027.[90] (Emphasis supplied)
We agree with respondent.
Repeal by implication proceeds on the premise
that where a statute of later date clearly reveals
the intention of the legislature to abrogate a prior
act on the subject, that intention must be given
effect.[91]
There are two kinds of implied repeal. The first is:
where the provisions in the two acts on the same
subject matter are irreconcilably contradictory,
the latter act, to the extent of the conflict,
constitutes an implied repeal of the earlier
one.[92] The second is: if the later act covers the
whole subject of the earlier one and is clearly
intended as a substitute, it will operate to repeal
the earlier law.[93] The oil companies argue that
the situation here falls under the first category.
Implied repeals are not favored and will not be so
declared unless the intent of the legislators is
manifest.[94] As statutes and ordinances are
presumed to be passed only after careful
deliberation and with knowledge of all existing
ones on the subject, it follows that, in passing a
law, the legislature did not intend to interfere
with or abrogate a former law relating to the
same subject matter.[95] If the intent to repeal is
not clear, the later act should be construed as a
continuation of, and not a substitute for, the
earlier act.[96]
These standards are deeply enshrined in our
jurisprudence. We disagree that, in enacting
Ordinance No. 8119, there was any indication of
the legislative purpose to repeal Ordinance No.
8027.[97] The excerpt quoted above is proof that
there was never such an intent. While it is true
that both ordinances relate to the same subject
matter, i.e. classification of the land use of the
area where Pandacan oil depot is located, if there
is no intent to repeal the earlier enactment, every
effort at reasonable construction must be made to
reconcile the ordinances so that both can be given
effect:
The fact that a later enactment may relate to the
same subject matter as that of an earlier statute
is not of itself sufficient to cause an implied
repeal of the prior act, since the new statute may
merely be cumulative or a continuation of the old
one. What is necessary is a manifest indication of
legislative purpose to repeal.[98]
For the first kind of implied repeal, there must be
an irreconcilable conflict between the two
ordinances. There is no conflict between the two
ordinances. Ordinance No. 8027 reclassified the
Pandacan area from Industrial II to Commercial I.
Ordinance No. 8119, in Section 23, designated it
as a Planned Unit Development/Overlay Zone (O-
PUD). In its Annex C which defined the zone
boundaries,[99] the Pandacan area was shown to
be within the High Density Residential/Mixed Use
Zone (R-3/MXD). These zone classifications in
Ordinance No. 8119 are not inconsistent with the
reclassification of the Pandacan area from
Industrial to Commercial in Ordinance No. 8027.
The O-PUD classification merely made Pandacan a
project site ... comprehensively planned as an Ordinance No. 8027 is a special law[107] since it
entity via unitary site plan which permits deals specifically with a certain area described
flexibility in planning/design, building siting, therein (the Pandacan oil depot area) whereas
complementarity of building types and land uses, Ordinance No. 8119 can be considered a general
usable open spaces and the preservation of law[108] as it covers the entire city of Manila.
significant natural land features....[100] Its
classification as R-3/MXD means that it should be
used primarily for high-rise housing/dwelling
purposes and limited The oil companies assert that even if Ordinance
complementary/supplementary trade, services No. 8027 is a special law, the existence of an all-
and business activities.[101] There is no conflict encompassing repealing clause in Ordinance No.
since both ordinances actually have a common 8119 evinces an intent on the part of the
objective, i.e., to shift the zoning classification Sanggunian to repeal the earlier ordinance:
from industrial to commercial (Ordinance No.
8027) or mixed residential/commercial (Ordinance
No. 8119).
Sec. 84. Repealing Clause. All ordinances, rules,
regulations in conflict with the provisions of this
Moreover, it is a well-settled rule in statutory Ordinance are hereby repealed; PROVIDED, That
construction that a subsequent general law does the rights that are vested upon the effectivity of
not repeal a prior special law on the same subject this Ordinance shall not be impaired.
unless it clearly appears that the legislature has
intended by the latter general act to modify or
repeal the earlier special law. Generalia
specialibus non derogant (a general law does not
nullify a specific or special law).[102] This is so
even if the provisions of the general law are They cited Hospicio de San Jose de Barili, Cebu
sufficiently comprehensive to include what was City v. Department of Agrarian Reform:[109]
set forth in the special act.[103] The special act
and the general law must stand together, one as
the law of the particular subject and the other as
the law of general application.[104] The special The presence of such general repealing clause in a
law must be taken as intended to constitute an later statute clearly indicates the legislative
exception to, or a qualification of, the general act intent to repeal all prior inconsistent laws on the
or provision.[105] subject matter, whether the prior law is a general
law or a special law... Without such a clause, a
later general law will ordinarily not repeal a prior
special law on the same subject. But with such
The reason for this is that the legislature, in clause contained in the subsequent general law,
passing a law of special character, considers and the prior special law will be deemed repealed, as
makes special provisions for the particular the clause is a clear legislative intent to bring
circumstances dealt with by the special law. This about that result.[110]
being so, the legislature, by adopting a general
law containing provisions repugnant to those of
the special law and without making any mention
of its intention to amend or modify such special
law, cannot be deemed to have intended an
amendment, repeal or modification of the This ruling in not applicable here. The repealing
latter.[106] clause of Ordinance No. 8119 cannot be taken to
indicate the legislative intent to repeal all prior
inconsistent laws on the subject matter, including
Ordinance No. 8027, a special enactment, since
the aforequoted minutes (an official record of the
discussions in the Sanggunian) actually indicated
the clear intent to preserve the provisions of
Ordinance No. 8027.
To summarize, the conflict between the two
ordinances is more apparent than real. The two
ordinances can be reconciled. Ordinance No. 8027
is applicable to the area particularly described
therein whereas Ordinance No. 8119 is applicable
to the entire City of Manila.
Mandamus Lies To Compel Respondent Mayor To
Enforce Ordinance No. 8027
The oil companies insist that mandamus does not
lie against respondent in consideration of the
separation of powers of the executive and
judiciary.[111] This argument is misplaced.
Indeed,
[the] Courts will not interfere by mandamus
proceedings with the legislative [or executive
departments] of the government in the legitimate
exercise of its powers, except to enforce mere
ministerial acts required by law to be performed
by some officer thereof.[112] (Emphasis Supplied)
since this is the function of a writ of mandamus,
which is the power to compel the performance of
an act which the law specifically enjoins as a duty
resulting from office, trust or station.[113]
They also argue that petitioners had a plain,
speedy and adequate remedy to compel
respondent to enforce Ordinance No. 8027 which
was to seek relief from the President of the
Philippines through the Secretary of the
Department of Interior and Local Government
(DILG) by virtue of the Presidents power of
supervision over local government units. Again,
we disagree. A party need not go first to the DILG
in order to compel the enforcement of an
ordinance. This suggested process would be
unreasonably long, tedious and consequently
injurious to the interests of the local government
unit (LGU) and its constituents whose welfare is
sought to be protected. Besides, petitioners resort
to an original action for mandamus before this
Court is undeniably allowed by the
Constitution.[114]
Ordinance No. 8027 Is Constitutional And Valid
Having ruled that there is no impediment to the
enforcement of Ordinance No. 8027, we now
proceed to make a definitive ruling on its
constitutionality and validity.
The tests of a valid ordinance are well
established. For an ordinance to be valid, it must
not only be within the corporate powers of the
LGU to enact and be passed according to the
procedure prescribed by law, it must also conform
to the following substantive requirements: (1)
must not contravene the Constitution or any
statute; (2) must not be unfair or oppressive; (3)
must not be partial or discriminatory; (4) must not
prohibit but may regulate trade; (5) must be
general and consistent with public policy and (6)
must not be unreasonable.[115]
The City of Manila Has The Power To Enact
Ordinance No. 8027
Ordinance No. 8027 was passed by the
Sangguniang Panlungsod of Manila in the exercise
of its police power. Police power is the plenary funds for the general welfare of the city and its
power vested in the legislature to make statutes inhabitants pursuant to Section 16 of this Code
and ordinances to promote the health, morals, xxxx
peace, education, good order or safety and
general welfare of the people.[116] This power
flows from the recognition that salus populi est
suprema lex (the welfare of the people is the
supreme law).[117] While police power rests
primarily with the national legislature, such power This police power was also provided for in RA 409
may be delegated.[118] Section 16 of the LGC, or the Revised Charter of the City of Manila:
known as the general welfare clause, encapsulates
the delegated police power to local
governments:[119]
Section 18. Legislative powers. The [City Council]
shall have the following legislative powers:

Section 16. General Welfare. ― Every local

government unit shall exercise the powers
expressly granted, those necessarily implied xxx xxx xxx
therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and
effective governance, and those which are
essential to the promotion of the general welfare. (g) To enact all ordinances it may deem
Within their respective territorial jurisdictions, necessary and proper for the sanitation and
local government units shall ensure and support, safety, the furtherance of the prosperity, and the
among other things, the preservation and promotion of the morality, peace, good order,
enrichment of culture, promote health and safety, comfort, convenience, and general welfare of the
enhance the right of the people to a balanced city and its inhabitants, and such others as may be
ecology, encourage and support the development necessary to carry into effect and discharge the
of appropriate and self-reliant scientific and powers and duties conferred by this chapter
technological capabilities, improve public morals, xxxx[120]
enhance economic prosperity and social justice,
promote full employment among their residents,
maintain peace and order, and preserve the
comfort and convenience of their inhabitants.

Specifically, the Sanggunian has the power to

reclassify land within the jurisdiction of the
city.[121]

LGUs like the City of Manila exercise police power

through their respective legislative bodies, in this
case, the Sangguniang Panlungsod or the city
council. Specifically, the Sanggunian can enact
ordinances for the general welfare of the city:

The Enactment Of Ordinance No. 8027 Is A

Legitimate Exercise Of Police Power
Section. 458. Powers, Duties, Functions and
Compensation. (a) The sangguniang panglungsod,
as the legislative branch of the city, shall enact
ordinances, approve resolutions and appropriate

As with the State, local governments may be
considered as having properly exercised their
police power only if the following requisites are
met: (1) the interests of the public generally, as
distinguished from those of a particular class,
require its exercise and (2) the means employed
are reasonably necessary for the accomplishment
of the purpose and not unduly oppressive upon
individuals. In short, there must be a concurrence
of a lawful subject and a lawful method.[122]
Ordinance No. 8027 was enacted for the purpose
of promoting sound urban planning, ensuring
health, public safety and general welfare[123] of
the residents of Manila. The Sanggunian was
impelled to take measures to protect the
residents of Manila from catastrophic devastation
in case of a terrorist attack on the Pandacan
Terminals. Towards this objective, the Sanggunian
reclassified the area defined in the ordinance
from industrial to commercial.
The following facts were found by the Committee
on Housing, Resettlement and Urban Development
of the City of Manila which recommended the
approval of the ordinance:
(1) the depot facilities contained 313.5 million
liters of highly flammable and highly volatile
products which include petroleum gas, liquefied
petroleum gas, aviation fuel, diesel, gasoline,
kerosene and fuel oil among others;
(2) the depot is open to attack through land,
water or air;
(3) it is situated in a densely populated place and
near Malacaang Palace and
(4) in case of an explosion or conflagration in the
depot, the fire could spread to the neighboring
communities.[124]
The ordinance was intended to safeguard the
rights to life, security and safety of all the
inhabitants of Manila and not just of a particular
class.[125] The depot is perceived, rightly or
wrongly, as a representation of western interests
which means that it is a terrorist target. As long
as it there is such a target in their midst, the
residents of Manila are not safe. It therefore
became necessary to remove these terminals to
dissipate the threat. According to respondent:
Such a public need became apparent after the
9/11 incident which showed that what was
perceived to be impossible to happen, to the most
powerful country in the world at that, is actually
possible. The destruction of property and the loss
of thousands of lives on that fateful day became
the impetus for a public need. In the aftermath of
the 9/11 tragedy, the threats of terrorism
continued [such] that it became imperative for
governments to take measures to combat their
effects.[126]
Wide discretion is vested on the legislative
authority to determine not only what the interests
of the public require but also what measures are
necessary for the protection of such
interests.[127] Clearly, the Sanggunian was in the
best position to determine the needs of its
constituents.
In the exercise of police power, property rights of
individuals may be subjected to restraints and
burdens in order to fulfill the objectives of the
government.[128] Otherwise stated, the
government may enact legislation that may
interfere with personal liberty, property, lawful
businesses and occupations to promote the
general welfare.[129] However, the interference
must be reasonable and not arbitrary. And to
forestall arbitrariness, the methods or means used
to protect public health, morals, safety or welfare
must have a reasonable relation to the end in
view.[130]
The means adopted by the Sanggunian was the
enactment of a zoning ordinance which
reclassified the area where the depot is situated
from industrial to commercial. A zoning ordinance
is defined as a local city or municipal legislation
which logically arranges, prescribes, defines and
apportions a given political subdivision into
specific land uses as present and future projection
of needs.[131] As a result of the zoning, the
continued operation of the businesses of the oil
companies in their present location will no longer
be permitted. The power to establish zones for
industrial, commercial and residential uses is
derived from the police power itself and is
exercised for the protection and benefit of the
residents of a locality.[132] Consequently, the
enactment of Ordinance No. 8027 is within the
power of the Sangguniang Panlungsod of the City
of Manila and any resulting burden on those
affected cannot be said to be unjust:
There can be no doubt that the City of Manila has
the power to divide its territory into residential
and industrial zones, and to prescribe that
offensive and unwholesome trades and
occupations are to be established exclusively in
the latter zone.
The benefits to be derived by cities adopting such
regulations (zoning) may be summarized as
follows: They attract a desirable and assure a
permanent citizenship; they foster pride in and
attachment to the city; they promote happiness
and contentment; they stabilize the use and value
of property and promote the peace, [tranquility],
and good order of the city. We do not hesitate to
say that the attainment of these objects affords a
legitimate field for the exercise of the police
power. He who owns property in such a district is
not deprived of its use by such regulations. He
may use it for the purposes to which the section in
which it is located is dedicated. That he shall not
be permitted to use it to the desecration of the
community constitutes no unreasonable or
permanent hardship and results in no unjust
burden.
Xxx xxx xxx
The 14th Amendment protects the citizen in his
right to engage in any lawful business, but it does
not prevent legislation intended to regulate useful
occupations which, because of their nature or
location, may prove injurious or offensive to the
public.[133]
We entertain no doubt that Ordinance No. 8027 is
a valid police power measure because there is a
concurrence of lawful subject and lawful method.
Ordinance No. 8027 Is Not Unfair, Oppressive Or
Confiscatory Which Amounts To Taking Without
Compensation
According to the oil companies, Ordinance No.
8027 is unfair and oppressive as it does not only
regulate but also absolutely prohibits them from
conducting operations in the City of Manila.
Respondent counters that this is not accurate
since the ordinance merely prohibits the oil
companies from operating their businesses in the
Pandacan area.
Indeed, the ordinance expressly delineated in its
title and in Section 1 what it pertained to.
Therefore, the oil companies contention is not
supported by the text of the ordinance.
Respondent succinctly stated that:
The oil companies are not forbidden to do
business in the City of Manila. They may still very
well do so, except that their oil storage facilities
are no longer allowed in the Pandacan area.
Certainly, there are other places in the City of
Manila where they can conduct this specific kind
of business. Ordinance No. 8027 did not render
the oil companies illegal. The assailed ordinance
affects the oil companies business only in so far as
the Pandacan area is concerned.[134]

The oil companies are not prohibited from doing
business in other appropriate zones in Manila. The
City of Manila merely exercised its power to
regulate the businesses and industries in the zones
it established:
As to the contention that the power to regulate
does not include the power to prohibit, it will be
seen that the ordinance copied above does not
prohibit the installation of motor engines within
the municipality of Cabanatuan but only within
the zone therein fixed. If the municipal council of
Cabanatuan is authorized to establish said zone, it
is also authorized to provide what kind of engines
may be installed therein. In banning the
installation in said zone of all engines not
excepted in the ordinance, the municipal council
of Cabanatuan did no more than regulate their
installation by means of zonification.[135]
The oil companies aver that the ordinance is
unfair and oppressive because they have invested
billions of pesos in the depot.[136] Its forced
closure will result in huge losses in income and
tremendous costs in constructing new facilities.
Their contention has no merit. In the exercise of
police power, there is a limitation on or
restriction of property interests to promote public
welfare which involves no compensable taking.
Compensation is necessary only when the states
power of eminent domain is exercised. In eminent
domain, property is appropriated and applied to
some public purpose. Property condemned under
the exercise of police power, on the other hand,
is noxious or intended for a noxious or forbidden
purpose and, consequently, is not
compensable.[137] The restriction imposed to
protect lives, public health and safety from
danger is not a taking. It is merely the prohibition
or abatement of a noxious use which interferes
with paramount rights of the public.
Property has not only an individual function,
insofar as it has to provide for the needs of the
owner, but also a social function insofar as it has
to provide for the needs of the other members of
society.[138] The principle is this:
Police power proceeds from the principle that
every holder of property, however absolute and
unqualified may be his title, holds it under the
implied liability that his use of it shall not be
injurious to the equal enjoyment of others having
an equal right to the enjoyment of their property,
nor injurious to the right of the community. Rights
of property, like all other social and conventional
rights, are subject to reasonable limitations in
their enjoyment as shall prevent them from being
injurious, and to such reasonable restraints and
regulations established by law as the legislature,
under the governing and controlling power vested
in them by the constitution, may think necessary
and expedient.[139]
In the regulation of the use of the property,
nobody else acquires the use or interest therein,
hence there is no compensable taking.[140] In this
case, the properties of the oil companies and
other businesses situated in the affected area
remain theirs. Only their use is restricted although
they can be applied to other profitable uses
permitted in the commercial zone.
Ordinance No. 8027 Is Not
Partial And Discriminatory
The oil companies take the position that the
ordinance has discriminated against and singled
out the Pandacan Terminals despite the fact that
the Pandacan area is congested with buildings and
residences that do not comply with the National
Building Code, Fire Code and Health and
Sanitation Code.[141]
This issue should not detain us for long. An
ordinance based on reasonable classification does
not violate the constitutional guaranty of the
equal protection of the law.[142] The
requirements for a valid and reasonable
classification are: (1) it must rest on substantial
distinctions; (2) it must be germane to the
purpose of the law; (3) it must not be limited to
existing conditions only and (4) it must apply
equally to all members of the same class.[143]
The law may treat and regulate one class
differently from another class provided there are
real and substantial differences to distinguish one
class from another.[144] Here, there is a
reasonable classification. We reiterate that what
the ordinance seeks to prevent is a catastrophic
devastation that will result from a terrorist
attack. Unlike the depot, the surrounding
community is not a high-value terrorist target.
Any damage caused by fire or explosion occurring
in those areas would be nothing compared to the
damage caused by a fire or explosion in the depot
itself. Accordingly, there is a substantial
distinction. The enactment of the ordinance which
provides for the cessation of the operations of
these terminals removes the threat they pose.
Therefore it is germane to the purpose of the
ordinance. The classification is not limited to the
conditions existing when the ordinance was
enacted but to future conditions as well. Finally,
the ordinance is applicable to all businesses and
industries in the area it delineated.
Ordinance No. 8027 is Not Inconsistent With RA
7638 And RA 8479
The oil companies and the DOE assert that
Ordinance No. 8027 is unconstitutional because it
contravenes RA 7638 (DOE Act of 1992)[145] and
RA 8479 (Downstream Oil Industry Deregulation
Law of 1998).[146] They argue that through RA
7638, the national legislature declared it a policy
of the state to ensure a continuous, adequate,
and economic supply of energy[147] and created
the DOE to implement this policy. Thus, under
Section 5 I, DOE is empowered to establish and
administer programs for the exploration,
transportation, marketing, distribution,
utilization, conservation, stockpiling, and storage
of energy resources. Considering that the
petroleum products contained in the Pandacan
Terminals are major and critical energy resources,
they conclude that their administration, storage,
distribution and transport are of national interest
and fall under DOEs primary and exclusive
jurisdiction.[148]
They further assert that the terminals are
necessary for the delivery of immediate and
adequate supply of oil to its recipients in the most
economical way.[149] Local legislation such as
Ordinance No. 8027 (which effectively calls for
the removal of these terminals) allegedly
frustrates the state policy of ensuring a
continuous, adequate, and economic supply of
energy expressed in RA 7638, a national law.[150]
Likewise, the ordinance thwarts the
determination of the DOE that the terminals
operations should be merely scaled down and not
discontinued.[151] They insist that this should not
be allowed considering that it has a nationwide
economic impact and affects public interest
transcending the territorial jurisdiction of the City
of Manila.[152]
According to them, the DOEs supervision over the
oil industry under RA 7638 was subsequently
underscored by RA 8479, particularly in Section 7
thereof:
SECTION 7. Promotion of Fair Trade Practices. ―
The Department of Trade and Industry (DTI) and
DOE shall take all measures to promote fair trade
and prevent cartelization, monopolies,
combinations in restraint of trade, and any unfair
competition in the Industry as defined in Article
186 of the Revised Penal Code, and Articles 168
and 169 of Republic Act No. 8293, otherwise
known as the Intellectual Property Rights Law.
The DOE shall continue to encourage certain
practices in the Industry which serve the public
interest and are intended to achieve efficiency
and cost reduction, ensure continuous supply of
petroleum products, and enhance environmental
protection. These practices may include borrow-
and-loan agreements, rationalized depot and
manufacturing operations, hospitality agreements,
joint tanker and pipeline utilization, and joint
actions on oil spill control and fire prevention.
(Emphasis supplied)
Respondent counters that DOEs regulatory power
does not preclude LGUs from exercising their
police power.[153]
Indeed, ordinances should not contravene existing
statutes enacted by Congress. The rationale for
this was clearly explained in Magtajas vs. Pryce
Properties Corp., Inc.:[154]
The rationale of the requirement that the
ordinances should not contravene a statute is
obvious. Municipal governments are only agents of
the national government. Local councils exercise
only delegated legislative powers conferred on
them by Congress as the national lawmaking body.
The delegate cannot be superior to the principal
or exercise powers higher than those of the latter.
It is a heresy to suggest that the local government
units can undo the acts of Congress, from which
they have derived their power in the first place,
and negate by mere ordinance the mandate of the
statute.
Municipal corporations owe their origin to, and
derive their powers and rights wholly from the
legislature. It breathes into them the breath of
life, without which they cannot exist. As it
creates, so it may destroy. As it may destroy, it
may abridge and control. Unless there is some
constitutional limitation on the right, the
legislature might, by a single act, and if we can
suppose it capable of so great a folly and so great
a wrong, sweep from existence all of the
municipal corporations in the State, and the
corporation could not prevent it. We know of no
limitation on the right so far as to the corporation
themselves are concerned. They are, so to phrase
it, the mere tenants at will of the legislature.
This basic relationship between the national
legislature and the local government units has not
been enfeebled by the new provisions in the
Constitution strengthening the policy of local
autonomy. Without meaning to detract from that
policy, we here confirm that Congress retains
control of the local government units although in
significantly reduced degree now than under our
previous Constitutions. The power to create still
includes the power to destroy. The power to grant
still includes the power to withhold or recall.
True, there are certain notable innovations in the
Constitution, like the direct conferment on the
local government units of the power to tax, which
cannot now be withdrawn by mere statute. By and
large, however, the national legislature is still the
principal of the local government units, which
cannot defy its will or modify or violate it.[155]
The question now is whether Ordinance No. 8027
contravenes RA 7638 and RA 8479. It does not.
Under Section 5 I of RA 7638, DOE was given the
power to establish and administer programs for
the exploration, transportation, marketing,
distribution, utilization, conservation, stockpiling,
and storage of energy resources. On the other
hand, under Section 7 of RA 8749, the DOE shall
continue to encourage certain practices in the
Industry which serve the public interest and are
intended to achieve efficiency and cost reduction,
ensure continuous supply of petroleum products.
Nothing in these statutes prohibits the City of
Manila from enacting ordinances in the exercise of
its police power.
The principle of local autonomy is enshrined in
and zealously protected under the Constitution. In
Article II, Section 25 thereof, the people expressly
adopted the following policy:

Section 25. The State shall ensure the autonomy
of local governments.
An entire article (Article X) of the Constitution has
been devoted to guaranteeing and promoting the
autonomy of LGUs. The LGC was specially
promulgated by Congress to ensure the autonomy
of local governments as mandated by the
Constitution:
Sec. 2. Declaration of Policy. ― (a) It is hereby
declared the policy of the State that the
territorial and political subdivisions of the State
shall enjoy genuine and meaningful local
autonomy to enable them to attain their fullest
development as self-reliant communities and
make them more effective partners in the
attainment of national goals. Toward this end, the
State shall provide for a more responsive and
accountable local government structure instituted
through a system of decentralization whereby
local government units shall be given more
powers, authority, responsibilities, and resources.
The process of decentralization shall proceed
from the National Government to the local
government units. (Emphasis supplied)
We do not see how the laws relied upon by the oil
companies and DOE stripped the City of Manila of
its power to enact ordinances in the exercise of its
police power and to reclassify the land uses within
its jurisdiction. To guide us, we shall make a brief
survey of our decisions where the police power
measure of the LGU clashed with national laws.
In Tan v. Perea,[156] the Court ruled that
Ordinance No. 7 enacted by the municipality of
Daanbantayan, Cebu allowing the operation of
three cockpits was invalid for violating PD 449 (or
the Cockfighting Law of 1974) which permitted
only one cockpit per municipality.
In Batangas CATV, Inc. v. Court of Appeals,[157]
the Sangguniang Panlungsod of Batangas City
enacted Resolution No. 210 granting Batangas
CATV, Inc. a permit to operate a cable television
(CATV) system in Batangas City. The Court held
that the LGU did not have the authority to grant
franchises to operate a CATV system because it
was the National Telecommunications Commission
(NTC) that had the power under EO Nos. 205 and
436 to regulate CATV operations. EO 205
mandated the NTC to grant certificates of
authority to CATV operators while EO 436 vested
on the NTC the power to regulate and supervise
the CATV industry.
In Lina, Jr. v. Pao,[158] we held that Kapasiyahan
Bilang 508, Taon 1995 of the Sangguniang
Panlalawigan of Laguna could not be used as
justification to prohibit lotto in the municipality
of San Pedro, Laguna because lotto was duly
authorized by RA 1169, as amended by BP 42. This
law granted a franchise to the Philippine Charity
Sweepstakes Office and allowed it to operate
lotteries.
In Magtajas v. Pryce Properties Corp., Inc.,[159]
the Sangguniang Panlungsod of Cagayan de Oro
City passed Ordinance Nos. 3353 and 3375-93
prohibiting the operation of casinos in the city.
We ruled that these ordinances were void for
contravening PD 1869 or the charter of the
Philippine Amusements and Gaming Corporation
which had the power to operate casinos.
The common dominator of all of these cases is
that the national laws were clearly and expressly
in conflict with the ordinances/resolutions of the
LGUs. The inconsistencies were so patent that
there was no room for doubt. This is not the case
here.
The laws cited merely gave DOE general powers to
establish and administer programs for the
exploration, transportation, marketing,
distribution, utilization, conservation, stockpiling,
and storage of energy resources and to encourage
certain practices in the [oil] industry which serve
the public interest and are intended to achieve
efficiency and cost reduction, ensure continuous
supply of petroleum products. These powers can
be exercised without emasculating the LGUs of
the powers granted them. When these ambiguous
powers are pitted against the unequivocal power
of the LGU to enact police power and zoning
ordinances for the general welfare of its
constituents, it is not difficult to rule in favor of
the latter. Considering that the powers of the DOE
regarding the Pandacan Terminals are not
categorical, the doubt must be resolved in favor
of the City of Manila:
SECTION 5. Rules of Interpretation. ― In the
interpretation of the provisions of this Code, the
following rules shall apply:
(a) Any provision on a power of a local
government unit shall be liberally interpreted in
its favor, and in case of doubt, any question
thereon shall be resolved in favor of devolution of
powers and of the lower local government unit.
Any fair and reasonable doubt as to the existence
of the power shall be interpreted in favor of the
local government unit concerned;
xxx xxx xxx
(g) IThe general welfare provisions in this Code
shall be liberally interpreted to give more powers
to local government units in accelerating
economic development and upgrading the quality
of life for the people in the community xxxx
The least we can do to ensure genuine and
meaningful local autonomy is not to force an
interpretation that negates powers explicitly
granted to local governments. To rule against the
power of LGUs to reclassify areas within their
jurisdiction will subvert the principle of local
autonomy guaranteed by the Constitution.[160] As
we have noted in earlier decisions, our national
officials should not only comply with the
constitutional provisions on local autonomy but
should also appreciate the spirit and liberty upon
which these provisions are based.[161]
The DOE Cannot Exercise The Power Of Control
Over LGUs
Another reason that militates against the DOEs
assertions is that Section 4 of Article X of the
Constitution confines the Presidents power over
LGUs to one of general supervision:
SECTION 4. The President of the Philippines shall
exercise general supervision over local
governments. Xxxx
Consequently, the Chief Executive or his or her
alter egos, cannot exercise the power of control
over them.[162] Control and supervision are
distinguished as follows:
[Supervision] means overseeing or the power or
authority of an officer to see that subordinate
officers perform their duties. If the latter fail or
neglect to fulfill them, the former may take such
action or step as prescribed by law to make them
perform their duties. Control, on the other hand,
means the power of an officer to alter or modify
or nullify or set aside what a subordinate officer
ha[s] done in the performance of his duties and to
substitute the judgment of the former for that of
the latter.[163]
Supervisory power, when contrasted with control,
is the power of mere oversight over an inferior
body; it does not include any restraining authority
over such body.[164] It does not allow the
supervisor to annul the acts of the
subordinate.[165] Here, what the DOE seeks to do
is to set aside an ordinance enacted by local
officials, a power that not even its principal, the
President, has. This is because:
Under our present system of government,
executive power is vested in the President. The
members of the Cabinet and other executive
officials are merely alter egos. As such, they are
subject to the power of control of the President,
at whose will and behest they can be removed
from office; or their actions and decisions
changed, suspended or reversed. In contrast, the
heads of political subdivisions are elected by the
people. Their sovereign powers emanate from the
electorate, to whom they are directly
accountable. By constitutional fiat, they are
subject to the Presidents supervision only, not
control, so long as their acts are exercised within
the sphere of their legitimate powers. By the
same token, the President may not withhold or
alter any authority or power given them by the
Constitution and the law.[166]
Thus, the President and his or her alter egos, the
department heads, cannot interfere with the
activities of local governments, so long as they act
within the scope of their authority. Accordingly,
the DOE cannot substitute its own discretion for
the discretion exercised by the sanggunian of the
City of Manila. In local affairs, the wisdom of local
officials must prevail as long as they are acting
within the parameters of the Constitution and the
law.[167]
Ordinance No. 8027 Is Not Invalid For Failure To
Comply With RA 7924 And EO 72
The oil companies argue that zoning ordinances of
LGUs are required to be submitted to the
Metropolitan Manila Development Authority
(MMDA) for review and if found to be in
compliance with its metropolitan physical
framework plan and regulations, it shall endorse
the same to the Housing and Land Use Regulatory
Board (HLURB). Their basis is Section 3 (e) of RA
7924:[168]
SECTION 3. Scope of MMDA Services. ― Metro-wide
services under the jurisdiction of the MMDA are
those services which have metro-wide impact and
transcend local political boundaries or entail huge
expenditures such that it would not be viable for
said services to be provided by the individual
[LGUs] comprising Metropolitan Manila. These
services shall include:
xxx xxx xxx
(g) Urban renewal, zoning, and land use
planning, and shelter services which include the
formulation, adoption and implementation of
policies, standards, rules and regulations,
programs and projects to rationalize and optimize
urban land use and provide direction to urban
growth and expansion, the rehabilitation and
development of slum and blighted areas, the
development of shelter and housing facilities and
the provision of necessary social services thereof.
(Emphasis supplied)
Reference was also made to Section 15 of its
implementing rules:
Section 15. Linkages with HUDCC, HLURB, NHA,
LGUs and Other National Government Agencies
Concerned on Urban Renewal, Zoning and Land
Use Planning and Shelter Services. Within the
context of the National Housing and Urban to ensure compliance with national standards and
Development Framework, and pursuant to the guidelines. They cite Section 1, paragraphs I, (e),
national standards, guidelines and regulations (f) and (g):
formulated by the Housing and Land Use
Regulatory Board [HLURB] on land use planning
and zoning, the [MMDA] shall prepare a SECTION 1. Plan formulation or updating. ―
metropolitan physical framework plan and
regulations which shall complement and translate
the socio-economic development plan for Metro
Manila into physical or spatial terms, and provide xxx xxx xxx
the basis for the preparation, review, integration
and implementation of local land use plans and
zoning, ordinance of cities and municipalities in
the area. (g) Cities and municipalities of Metropolitan
Manila shall continue to formulate or update their
respective comprehensive land use plans, in
accordance with the land use planning and zoning
Said framework plan and regulations shall contain, standards and guidelines prescribed by the HLURB
among others, planning and zoning policies and pursuant to EO 392, S. of 1990, and other
procedures that shall be observed by local pertinent national policies.
government units in the preparation of their own
plans and ordinances pursuant to Section 447 and
458 of RA 7160, as well as the identification of
sites and projects that are considered to be of Xxx xxx xxx
national or metropolitan significance.

Cities and municipalities shall prepare their

respective land use plans and zoning ordinances
and submit the same for review and integration by
the [MMDA] and indorsement to HLURB in
accordance with Executive Order No. 72 and other
pertinent laws.
(e) Pursuant to LOI 729, S. of 1978, EO 648, S. of
1981, and RA 7279, the comprehensive land use
plans of provinces, highly urbanized cities and
independent component cities shall be reviewed
and ratified by the HLURB to ensure compliance
with national standards and guidelines.

In the preparation of a Metropolitan Manila

physical framework plan and regulations, the
[MMDA] shall coordinate with the Housing and
Urban Development Coordinating Council, HLURB,
the National Housing Authority, Intramuros
Administration, and all other agencies of the
national government which are concerned with
land use and zoning, urban renewal and shelter
services. (Emphasis supplied)
(f) Pursuant to EO 392, S. of 1999, the
comprehensive land use plans of cities and
municipalities of Metropolitan Manila shall be
reviewed by the HLURB to ensure compliance with
national standards and guidelines.
(g) Said review shall be completed within three
(3) months upon receipt thereof otherwise, the
same shall be deemed consistent with law, and,
therefore, valid. (Emphasis supplied)

They also claim that EO 72[169] provides that

zoning ordinances of cities and municipalities of
Metro Manila are subject to review by the HLURB
They argue that because Ordinance No. 8027 did
not go through this review process, it is invalid.
The argument is flawed.
RA 7942 does not give MMDA the authority to
review land use plans and zoning ordinances of
cities and municipalities. This was only found in
its implementing rules which made a reference to
EO 72. EO 72 expressly refers to comprehensive
land use plans (CLUPs) only. Ordinance No. 8027 is
admittedly not a CLUP nor intended to be one.
Instead, it is a very specific ordinance which
reclassified the land use of a defined area in order
to prevent the massive effects of a possible
terrorist attack. It is Ordinance No. 8119 which
was explicitly formulated as the Manila [CLUP]
and Zoning Ordinance of 2006. CLUPs are the
ordinances which should be submitted to the
MMDA for integration in its metropolitan physical
framework plan and approved by the HLURB to
ensure that they conform with national guidelines
and policies.
Moreover, even assuming that the MMDA review
and HLURB ratification are necessary, the oil
companies did not present any evidence to show
that these were not complied with. In accordance
with the presumption of validity in favor of an
ordinance, its constitutionality or legality should
be upheld in the absence of proof showing that
the procedure prescribed by law was not
observed. The burden of proof is on the oil
companies which already had notice that this
Court was inclined to dispose of all the issues in
this case. Yet aside from their bare assertion,
they did not present any certification from the
MMDA or the HLURB nor did they append these to
their pleadings. Clearly, they failed to rebut the
presumption of validity of Ordinance No.
8027.[170]
Conclusion
Essentially, the oil companies are fighting for
their right to property. They allege that they
stand to lose billions of pesos if forced to
relocate. However, based on the hierarchy of
constitutionally protected rights, the right to life
enjoys precedence over the right to
property.[171] The reason is obvious: life is
irreplaceable, property is not. When the state or
LGUs exercise of police power clashes with a few
individuals right to property, the former should
prevail.[172]
Both law and jurisprudence support the
constitutionality and validity of Ordinance No.
8027. Without a doubt, there are no impediments
to its enforcement and implementation. Any delay
is unfair to the inhabitants of the City of Manila
and its leaders who have categorically expressed
their desire for the relocation of the terminals.
Their power to chart and control their own destiny
and preserve their lives and safety should not be
curtailed by the intervenors warnings of doomsday
scenarios and threats of economic disorder if the
ordinance is enforced.
Secondary to the legal reasons supporting the
immediate implementation of Ordinance No. 8027
are the policy considerations which drove Manilas
government to come up with such a measure:
... [The] oil companies still were not able to allay
the apprehensions of the city regarding the
security threat in the area in general. No specific
action plan or security measures were presented
that would prevent a possible large-scale terrorist
or malicious attack especially an attack aimed at
Malacaang. The measures that were installed were
more directed towards their internal security and
did not include the prevention of an external
attack even on a bilateral level of cooperation
between these companies and the police and
military.
Xxx xxx xxx
It is not enough for the city government to be told
by these oil companies that they have the most
sophisticated fire-fighting equipments and have
invested millions of pesos for these equipments.
The city government wants to be assured that its
residents are safe at any time from these
installations, and in the three public hearings and
in their position papers, not one statement has
been said that indeed the absolute safety of the
residents from the hazards posed by these
installations is assured.[173]
We are also putting an end to the oil companies
determination to prolong their stay in Pandacan
despite the objections of Manilas residents. As
early as October 2001, the oil companies signed a
MOA with the DOE obliging themselves to:
... undertake a comprehensive and comparative
study ... [which] shall include the preparation of a
Master Plan, whose aim is to determine the scope
and timing of the feasible location of the
Pandacan oil terminals and all associated facilities
and infrastructure including government support
essential for the relocation such as the necessary
transportation infrastructure, land and right of
way acquisition, resettlement of displaced
residents and environmental and social
acceptability which shall be based on mutual
benefit of the Parties and the public.[174]
Now that they are being compelled to discontinue
their operations in the Pandacan Terminals, they
cannot feign unreadiness considering that they
had years to prepare for this eventuality.
Just the same, this Court is not about to provoke a
crisis by ordering the immediate relocation of the
Pandacan Terminals out of its present site. The
enforcement of a decision of this Court, specially
one with far-reaching consequences, should
always be within the bounds of reason, in
accordance with a comprehensive and well-
coordinated plan, and within a time-frame that
complies with the letter and spirit of our
resolution. To this end, the oil companies have no
choice but to obey the law.
A Warning To Petitioners Counsel
We draw the attention of the parties to a matter
of grave concern to the legal profession.
Petitioners and their counsel, Atty. Samson
Alcantara, submitted a four-page memorandum
that clearly contained either substance nor
research. It is absolutely insulting to this Court.
We have always tended towards judicial leniency,
temperance and compassion to those who suffer
from a wrong perception of what the majesty of
the law means. But for a member of the bar, an
officer of the court, to file in this Court a
memorandum of such unacceptable quality is an
entirely different matter.
It is indicative less of a personal shortcoming or
contempt of this Court and more of a lawyers
sorry descent from a high sense of duty and
responsibility. As a member of the bar and as an
officer of the court, a lawyer ought to be keenly
aware that the chief safeguard of the body politic
is respect for the law and its magistrates.
There is nothing more effective than the written
word by which counsel can persuade this Court of
the righteousness of his cause. For if truth were
self-evident, a memorandum would be completely
unnecessary and superfluous.
 a non-extendible period of ninety (90) days,
submit to the Regional Trial Court of Manila,
The inability of counsel to prepare a memorandum Branch 39, the comprehensive plan and relocation
worthy of this Courts consideration is an ejemplo schedule which have allegedly been prepared. The
malo to the legal profession as it betrays no presiding judge of Manila RTC, Branch 39 will
genuine interest in the cause he claims to monitor the strict enforcement of this resolution.
espouse. Or did counsel think he can earn his
moment of glory without the hard work and
dedication called for by his petition?
Atty. Samson Alcantara is hereby ordered to
A Final Word explain within five (5) days from notice why he
should not be disciplined for his refusal, or
inability, to file a memorandum worthy of the
consideration of this Court.
On Wednesday, January 23, 2008, a defective
tanker containing 2,000 liters of gasoline and
14,000 liters of diesel exploded in the middle of Treble costs against petitioners counsel, Atty.
the street a short distance from the exit gate of Samson Alcantara.
the Pandacan Terminals, causing death, extensive
damage and a frightening conflagration in the
vicinity of the incident. Need we say anthing
about what will happen if it is the estimated 162
to 211 million liters[175] of petroleum products in
the terminal complex which blow up?

WHEREFORE, the motions for leave to intervene of

Chevron Philippines Inc., Petron Corporation and
Pilipinas Shell Petroleum Corporation, and the SO ORDERED.
Republic of the Philippines, represented by the
Department of Energy, are hereby GRANTED.
Their respective motions for reconsideration are
hereby DENIED. The Regional Trial Court, Manila, JOSHUA S. ALFELOR and G.R. No. 165987
Branch 39 is ORDERED to DISMISS the consolidated
cases of Civil Case No. 03-106377 and Civil Case MARIA KATRINA S.
No. 03-106380.
ALFELOR,

Petitioners, Present:
We reiterate our order to respondent Mayor of the
City of Manila to enforce Ordinance No. 8027. In
coordination with the appropriate agencies and PANGANIBAN, C.J., Chairperson,
other parties involved, respondent Mayor is
hereby ordered to oversee the relocation and YNARES-SANTIAGO,
transfer of the Pandacan Terminals out of its
present site. - versus - AUSTRIA-MARTINEZ,

CALLEJO, SR., and

To ensure the orderly transfer, movement and CHICO-NAZARIO, JJ.

relocation of assets and personnel, the intervenors
Chevron Philippines Inc., Petron Corporation and
Pilipinas Shell Petroleum Corporation shall, within JOSEFINA M. HALASAN, Promulgated:

and THE COURT OF APPEALS,
Respondents. March 31, 2006
x---------------------------------
-----------------x
DECISION
CALLEJO, SR., J.:
This is a Petition for Review on Certiorari seeking
to nullify the Decision[1] of the Court of Appeals
(CA) in CA-G.R. SP No. 74757, as well as the
Resolution[2] dated June 28, 2004 denying the
motion for reconsideration thereof.
On January 30, 1998, the children and heirs of the
late spouses Telesforo and Cecilia Alfelor filed a
Complaint for Partition[3] before the Regional
Trial Court (RTC) of Davao City. Among the
plaintiffs were Teresita Sorongon and her two
children, Joshua and Maria Katrina, who
claimed to be the surviving spouse of Jose Alfelor,
one of the children of the deceased Alfelor
Spouses. The case, docketed as Civil Case No.
26,047-98, was raffled to Branch 17 of said court.
On October 20, 1998, respondent Josefina H.
Halasan filed a Motion for Intervention,[4] alleging
as follows:
1. That she has legal interest in the matter of
litigation in the above-entitled case for partition
between plaintiffs and defendants;
2. That she is the surviving spouse and
primary compulsory heir of Jose K. Alfelor, one of
the children and compulsory heirs of Telesforo I.
Alfelor whose intestate estate is subject to herein
special proceedings for partition;
3. That herein intervenor had not received
even a single centavo from the share of her late
husband Jose K. Alfelor to the intestate estate of
Telesforo K. Alfelor.
WHEREFORE, movant prays that she be allowed to
intervene in this case and to submit attached
Answer in Intervention.[5]
Josefina attached to said motion her Answer in
Intervention,[6] claiming that she was the
surviving spouse of Jose. Thus, the alleged second
marriage to Teresita was void ab initio for having
been contracted during the subsistence of a
previous marriage. Josefina further alleged that
Joshua and Maria Katrina were not her husbands
children. Josefina prayed, among others, for the
appointment of a special administrator to take
charge of the estate. Josefina attached to her
pleading a copy of the marriage contract[7] which
indicated that she and Jose were married on
February 1, 1956.
Since petitioners opposed the motion, the judge
set the motion for hearing. Josefina presented the
marriage contract as well as the Reply-in-
Intervention[8] filed by the heirs of the deceased,
where Teresita declared that she knew of the
previous marriage of the late Jose K. Alfelor with
that of the herein intervenor on February 1,
1956.[9] However, Josefina did not appear in
court.
Teresita testified before the RTC on February 13,
2002.[10] She narrated that she and the deceased
were married in civil rites at Tagum City, Davao
Province on February 12, 1966, and that they
were subsequently married in religious rites at the
Assumption Church on April 30, 1966. Among those
listed as secondary sponsors were Josefinas own
relativesAtty. Margarito Halasan, her brother, and
Valentino Halasan, her father.[11] While she did
not know Josefina personally, she knew that her
husband had been previously married to Josefina
and that the two did not live together as husband
and wife. She knew that Josefina left Jose in
1959. Joses relatives consented to her (Teresitas)
marriage with Jose because there had been no
news of Josefina for almost ten years. In fact, a
few months after the marriage, Josefina
disappeared, and Jose even looked for her in
Cebu, Bohol, and Manila. Despite his efforts, Jose
failed to locate Josefina and her whereabouts
remained unknown.
Teresita further revealed that Jose told her that
he did not have his marriage to Josefina annulled
because he believed in good faith that he had the
right to remarry, not having seen her for more
than seven years. This opinion was shared by Joses
sister who was a judge. Teresita also declared
that she met Josefina in 2001, and that the latter
narrated that she had been married three times,
was now happily married to an Englishman and
residing in the United States.
On September 13, 2002, Judge Renato A. Fuentes
issued an Order[12] denying the motion and
dismissed her complaint, ruling that respondent
was not able to prove her claim. The trial court
pointed out that the intervenor failed to appear
to testify in court to substantiate her claim.
Moreover, no witness was presented to identify
the marriage contract as to the existence of an
original copy of the document or any public
officer who had custody thereof. According to the
court, the determinative factor in this case was
the good faith of Teresita in contracting the
second marriage with the late Jose Alfelor, as she
had no knowledge that Jose had been previously
married. Thus, the evidence of the intervenor did
not satisfy the quantum of proof required to allow
the intervention. Citing Sarmiento v. Court of
Appeals,[13] the RTC ruled that while Josefina
submitted a machine copy of the marriage
contract, the lack of its identification and the
accompanying testimony on its execution and
ceremonial manifestation or formalities required
by law could not be equated to proof of its
validity and legality.
The trial court likewise declared that Teresita and
her children, Joshua and Maria Katrina, were the
legal and legitimate heirs of the late Jose K.
Alfelor, considering that the latter referred to
them as his children in his Statement of Assets and
Liabilities, among others. Moreover, the oppositor
did not present evidence to dispute the same. The
dispositive portion of the Order reads:
WHEREFORE, finding the evidence of intervenor,
Josephina (sic) Halasan through counsel, not
sufficient to prove a preponderance of evidence
and compliance with the basic rules of evidence
to proved (sic) the competent and relevant issues
of the complaint-in-intervention, as legal heir of
the deceased Jose K. Alfelor, the complaint (sic)
of intervention is ordered dismiss (sic) with cost[s]
de oficio.
On the other hand, finding the evidence by
Teresita Sorongon Aleflor, oppositor through
counsel sufficient to proved (sic) the requirement
of the Rules of Evidence, in accordance with duly
supporting and prevailing jurisprudence,
oppositor, Teresita Sorongon Alfelor and her
children, Joshua S. Alfelor and Maria Katrina S.
Alfelor, are declared legal and legitimate Heirs of
the late Jose K. Alfelor, for all purposes, to
entitled (sic) them, in the intestate estate of the
latter in accordance to (sic) law, of all properties
in his name and/or maybe entitled to any testate
or intestate proceedings of his predecessor-[in]-
interest, and to receive such inheritance, they are
legally entitled, along with the other heirs, as the
case maybe (sic).[14]
Josefina filed a Motion for Reconsideration,[15]
insisting that under Section 4, Rule 129 of the
Revised Rules of Court, an admission need not be
proved. She pointed out that Teresita admitted in
her Reply in Intervention dated February 22, 1999
that she (Teresita) knew of Joses previous
marriage to her. Teresita also admitted in her
testimony that she knew of the previous
marriage.[16] Since the existence of the first
marriage was proven in accordance with the basic
rules of evidence, pursuant to paragraph 4, Article
80 of the New Civil Code, the second marriage
was void from the beginning. Moreover, contrary
to the ruling of the trial court, Article 83 of the
Civil Code provides that the person entitled to
claim good faith is the spouse present (thus, the
deceased Jose and not Teresita). Josefina
concluded that if the validity of the second
marriage were to be upheld, and at the same time
admit the existence of the second marriage, an
absurd situation would arise: the late Jose Alfelor
would then be survived by two legitimate spouses.
The trial court denied the motion in its Order[17]
dated October 30, 2002.
Aggrieved, Josefina filed a Petition for Certiorari
under Rule 65 before the CA, alleging that the
RTC acted with grave abuse of discretion
amounting to lack or in excess of jurisdiction in
declaring that she failed to prove the fact of her
marriage to Jose, in considering the bigamous
marriage valid and declaring the second wife as
legal heir of the deceased. Josefina also stressed
that Articles 80 and 83 of the New Civil Code
provide for a presumption of law that any
subsequent marriage is null and void. She insisted
that no evidence was presented to prove that she
had been absent for seven consecutive years
before the second marriage.
In their comment, Teresita and her children
countered that anyone who claims to be the legal
wife must show proof thereof. They pointed out
that Josefina failed to present any of the
following to prove the fact of the previous
marriage: the testimony of a witness to the
matrimony, the couples public and open
cohabitation as husband and wife after the
alleged wedding; the birth and the baptismal
certificates of children during such union, and
other subsequent documents mentioning such
union. Regarding Teresitas alleged admission of
the first marriage in her Reply in Intervention
dated February 22, 1999, petitioners claim that it
was mere hearsay, without probative value, as she
heard of the alleged prior marriage of decedent
Jose Alfelor to Josefina only from other persons,
not based on her own personal knowledge. They
also pointed out that Josefina did not dispute the
fact of having left and abandoned Jose after their
alleged marriage in 1956, and only appeared for
the first time in 1988 during the filing of the case
for partition of the latters share in his parents
estate. They further pointed out that Josefina
does not even use the surname of the deceased
Alfelor. Contrary to the allegations of Josefina,
paragraph 2, Article 83 of the Civil Code, now
Article 41 of the Family Code, is applicable.
Moreover, her inaction all this time brought to
question her claim that she had not been heard of
for more than seven years.
In its Decision dated November 5, 2003, the CA
reversed the ruling of the trial court. It held that
Teresita had already admitted (both verbally and
in writing) that Josefina had been married to the
deceased, and under Section 4, Rule 129 of the
Revised Rules of Evidence, a judicial admission no
longer requires proof. Consequently, there was no
need to prove and establish the fact that Josefa
was married to the decedent. Citing Santiago v.
De los Santos,[18] the appellate court ruled that
an admission made in a pleading cannot be
controverted by the party making such admission,
and is conclusive as to such party; and all contrary
or inconsistent proofs submitted by the party who
made the admission should be ignored whether
objection is interposed by the other party or not.
The CA concluded that the trial court thus gravely
abused its discretion in ordering the dismissal of
Josefinas Complaint-in-Intervention. The
dispositive portion of the decision reads:
WHEREFORE, foregoing premises considered, the
assailed orders, having been issued with grave
abuse of discretion are hereby ANNULLED and SET
ASIDE. Resultantly, the Regional Trial Court,
Branch 17, Davao City, is ordered to admit
petitioners complaint in intervention and to
forthwith conduct the proper proceeding with
dispatch. No costs.
SO ORDERED.[19]

Thus, Joshua and Maria Katrina Alfelor filed the
instant petition, assailing the ruling of the
appellate court.
Petitioners limit the issue to the determination of
whether or not the CA erred in ordering the
admission of private respondents intervention in
S.P. Civil Case No. 26,047-98. They insist that in
setting aside the Orders of the trial court, dated
September 13, 2002 and October 30, 2002, the CA
completely disregarded the hearsay rule. They
aver that while Section 4 of Rule 129 of the
Revised Rules of Evidence provides that an
admission does not require proof, such admission
may be contradicted by showing that it was made
through palpable mistake. Moreover, Teresitas
statement in the Reply-in-Intervention dated
February 22, 1999, admitting knowledge of the
alleged first marriage, is without probative value
for being hearsay.
Private respondent, for her part, reiterates that
the matters involved in this case fall under
Section 4, Rule 129 of the Revised Rules of
Evidence, and thus qualify as a judicial admission
which does not require proof. Consequently, the
CA did not commit any palpable error when it
ruled in her favor.
Petitioners counter that while Teresita initially
admitted knowledge of Joses previous marriage to
private respondent in the said Reply-in-
Intervention, Teresita also testified during the
hearing, for the purpose, that the matter was
merely told to her by the latter, and thus should
be considered hearsay. They also point out that
private respondent failed to appear and
substantiate her Complaint-in-Intervention before
the RTC, and only submitted a machine copy of a
purported marriage contract with the deceased
Jose Alfelor.
The issue in this case is whether or not the first
wife of a decedent, a fact admitted by the other
party who claims to be the second wife, should be
allowed to intervene in an action for partition
involving the share of the deceased husband in the
estate of his parents.
The petition is dismissed.
The fact of the matter is that Teresita Alfelor and
her co-heirs, petitioners herein, admitted the
existence of the first marriage in their Reply- in-
Intervention filed in the RTC, to wit:
1.1. Plaintiff Teresita S. Alfelor admits knowledge
of the previous marriage of the late Jose K.
Alfelor, with that of the herein intervenor were
married on February 1, 1956;[20]
Likewise, when called to testify, Teresita
admitted several times that she knew that her
late husband had been previously married to
another. To the Courts mind, this admission
constitutes a deliberate, clear and unequivocal
statement; made as it was in the course of
judicial proceedings, such statement qualifies as a
judicial admission.[21] A party who judicially
admits a fact cannot later challenge that fact as
judicial admissions are a waiver of proof;[22]
production of evidence is dispensed with.[23] A
judicial admission also removes an admitted fact
from the field of controversy.[24] Consequently,
an admission made in the pleadings cannot be
controverted by the party making such admission
and are conclusive as to such party, and all proofs
to the contrary or inconsistent therewith should
be ignored, whether objection is interposed by
the party or not.[25] The allegations, statements
or admissions contained in a pleading are
conclusive as against the pleader. A party cannot
subsequently take a position contrary of or
inconsistent with what was pleaded.[26]
On the matter of the propriety of allowing her
motion for intervention, the pertinent provision of
the Revised Rules of Court is Section 1, Rule 19,
which provides:

SEC. 1. Who may intervene. A person who has a
legal interest in the matter in litigation, or in the
success of either of the parties, or an interest
against both, or is so situated as to be adversely
affected by a distribution or other disposition of
property in the custody of the court or of an
officer thereof may, with leave of court, be
allowed to intervene in the action. The court shall
consider whether or not the intervention will
unduly delay or prejudice the adjudication of the
rights of the original parties, and whether or not
the intervenors rights may be fully protected in a
separate proceeding.
Under this Rule, intervention shall be allowed
when a person has (1) a legal interest in the
matter in litigation; (2) or in the success of any of
the parties; (3) or an interest against the parties;
(4) or when he is so situated as to be adversely
affected by a distribution or disposition of
property in the custody of the court or an officer
thereof.[27] Intervention is a proceeding in a suit
or action by which a third person is permitted by
the court to make himself a party, either joining
plaintiff in claiming what is sought by the
complaint, or uniting with defendant in resisting
the claims of plaintiff, or demanding something
adversely to both of them; the act or proceeding
by which a third person becomes a party in a suit
pending between others; the admission, by leave
of court, of a person not an original party to
pending legal proceedings, by which such person
becomes a party thereto for the protection of
some right of interest alleged by him to be
affected by such proceedings.[28]
Considering this admission of Teresita, petitioners
mother, the Court rules that respondent Josefina
Halasan sufficiently established her right to
intervene in the partition case. She has shown
that she has legal interest in the matter in
litigation. As the Court ruled in Nordic Asia Ltd. v.
Court of Appeals:[29]
x x x [T]he interest which entitles a person to
intervene in a suit between other parties must be
in the matter in litigation and of such direct and
immediate character that the intervenor will
either gain or lose by direct legal operation and
effect of the judgment. Otherwise, if persons not
parties to the action were allowed to intervene,
proceedings would become unnecessarily
complicated, expensive and interminable. And
this would be against the policy of the law. The
words an interest in the subject means a direct
interest in the cause of action as pleaded, one
that would put the intervenor in a legal position
to litigate a fact alleged in the complaint without
the establishment of which plaintiff could not
recover.[30]
In Uy v. Court of Appeals,[31] the Court allowed
petitioners (who claimed to be the surviving legal
spouse and the legitimate child of the decedent)
to intervene in the intestate proceedings even
after the parties had already submitted a
compromise agreement involving the properties of
the decedent, upon which the intestate court had
issued a writ of execution. In setting aside the
compromise agreement, the Court held that
petitioners were indispensable parties and that in
the interest of adjudicating the whole
controversy, petitioners inclusion in the action for
partition, given the circumstances, not only is
preferable but rightly essential in the proper
disposition of the case.[32]
Contrary to petitioners argument, the case of
Sarmiento v. Court of Appeals[33] is not in point,
as the Court therein did not discuss the propriety
of allowing a motion for intervention, but resolved
the validity of a marriage. In relying on the merits
of the complaint for partition, the Court
ultimately determined the legitimacy of one of
the petitioners therein and her entitlement to a
share in the subject properties.
CONSIDERING THE FOREGOING, the Decision of the
Court of Appeals in CA-G.R. SP No. 74757 is
AFFIRMED. The Regional Trial Court, Branch 17,
Davao City, is ORDERED to admit respondent
Josefina Halasans Complaint-in-Intervention and
forthwith conduct the proper proceedings with
dispatch.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice