Case Materials in Remedial Law I ReviewJurisdictionG.R. No. 131282           January 4, 2002GABRIEL L. DUERO, petitioner, vs.HON.COURT OF APPEALS, and BERNARDO A. ERADEL, respondents.

This petition for certiorari assails the Decisionl dated September 17, 1997, of the Court of Appeals in CA-G.R. No. SP No.. 2340- UDK, entitled Bernardo Eradel vs. Non. Ermelino G. Andal, setting aside all proceedings in Civil Case No.1075, Gabriel L. Duero vs. Bernardo Eradel, before the Branch 27 of the Regional Trial Court of Tandag, Surigao del Sur .The pertinent facts are as follow.Sometime in 1988, according to petitioner, private respondent Bemardo Eradel2 entered and occupied petitioner's land covered by Tax Declaration No. A-16-13-302, located in Baras, San Miguel, Surigao del Sur. As shown in the tax declaration, the land had an assessed value of P5,240. When petitioner politely informed private respondent that the land was his and requested the latter to vacate the land, private respondent refused, but instead threatened him with bodily harm. Despite repeated demands, private respondent remained steadfast in his refusal to leave the land.On June 16, 1995, petitioner filed before the RTC a complaint for Recovery of Possession and Ownership with Damages and Attorney's Fees against private respondent and two others, namely, Apolinario and Inocencio Ruena. Petitioner appended to the complaint the aforementioned tax declaration. The counsel of the Ruenas asked for extension to file their Answer and was given until July 18, 1995. Meanwhile, petitioner and the, Ruenas executed a compromise agreement, which became the trial court's basis for a partial judgment rendered on January 12, 1996. In this agreement, the Ruenas through their counsel, Atty. Eusebio Avila, entered into a Compromise Agreement with herein petitioner, Gabriel Duero. Inter alia, the agreement stated that the Ruenas recognized and bound themselves to respect the ownership and possession of Duero.3 Herein private respondent Eradel was not a party to the agreement, and he was declared in default for failure to file his answer to the complaint.4Petitioner presented his evidence ex parte on February 13, 1996. On May 8, 1996, judgment was rendered in his favor, and private respondent was ordered to peacefully vacate and turn over Lot No.1065 Cad. 537-D to petitioner; pay petitioner P2,000 annual rental from 1988 up the time he vacates the land, and P5,000 as attorney's fees and the cost of the suit.5 Private respondent received a copy of the decision on May 25, 1996.

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Case Materials in Remedial Law I ReviewJurisdictionOn June 10, 1996, private respondent filed a Motion for New Trial, alleging that he has been occupying the land as a tenant of Artemio Laurente, Sr., since 1958. He explained that he turned over the complaint and summons to Laurente in the honest belief that as landlord, the latter had a better right to the land and was responsible to defend any adverse claim on it. However, the trial court denied the motion for new trial.

Meanwhile, RED Conflict Case No.1029, an administrative case between petitioner and applicant-contestants Romeo, Artemio and Jury Laurente, remained pending with the Office of the Regional Director of the Department of Environment and Natural Resources in Davao City. Eventually, it was forwarded to the DENR Regional Office in Prosperidad, Agusan del Sur .On July 24, 1996, private respondent filed before the RTC a Petition for Relief from Judgment, reiterating the same allegation in his Motion for New Trial. He averred that unless there is a determination on who owned the land, he could not be made to vacate the land. He also averred that the judgment of the trial court was void inasmuch as the heirs of Artemio Laurente, Sr., who are indispensable parties, were not impleaded.On September 24, 1996, Josephine, Ana Soledad and Virginia, all surnamed Laurente, grandchildren of Artemio who were claiming ownership of the land, filed a Motion for Intervention. The RTC denied the motion.On October 8, 1996, the trial court issued an order denying the Petition for Relief from Judgment. In a Motion for Reconsideration of said order, private respondent alleged that the RTC had no jurisdiction over the case, since the value of the land was only P5,240 and therefore it was under the jurisdiction of the municipal trial court. On November 22, 1996, the RTC denied the motion for reconsideration.On January 22, 1997, petitioner filed a Motion for Execution, which the RTC granted on January 28. On February 18, 1997, Entry of Judgment was made of record and a writ of execution was issued by the RTC on February 27,1997. On March 12,1997, private respondent filed his petition for certiorari before the Court of Appeals.The Court of Appeals gave due course to the petition, maintaining that private respondent is not estopped from assailing the jurisdiction 'of the RTC, Branch 27 in Tandag, Surigao del Sur, when private respondent filed with said court his Motion for Reconsideration And/Or Annulment of Judgment. The Court of Appeals decreed as follows:IN THE LIGHT OF ALL THE FOREGOING, the Petition is GRANTED. All proceedings in "Gabriel L. Duero vs. Bernardo Eradel, et. al. Civil Case

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Case Materials in Remedial Law I ReviewJurisdiction1075" filed in the Court a quo, including its Decision, Annex "E" of the petition, and its Orders and Writ of Execution and the turn over of the property to the Private Respondent by the Sheriff of the Court a quo, are declared null and void and hereby SET ASIDE, No pronouncement as to costs.

SO ORDERED.6Petitioner now comes before this Court, alleging that the Court of Appeals acted with grave abuse of discretion amounting to lack or in excess of jurisdiction when it held that:

1. THE LOWER COURT HAS NO JURISDICTION OVER THE SUBJECT MA TTER OF THE CASE.2. PRIVATE RESPONDENT WAS NOT THEREBY ESTOPPED FROM QUESTIONING THE JURISDICTION OF THE LOWER COURT EVEN AFTER IT SUCCESSFULLY SOUGHT AFFIRMATIVE RELIEF THEREFROM.3. THE FAlLURE OF PRIVATE RESPONDENT TO FILE HIS ANSWER IS JUSTIFIED. 7The main issue before us is whether the Court of Appeals gravely abused its discretion when it held that the municipal trial court had jurisdiction, and that private respondent was not estopped from assailing the jurisdiction of the RTC after he had filed several motions before it. The secondary issue is whether the Court of appeals erred in holding that private respondent's failure to file an answer to the complaint was justified.At the outset, however, we note that petitioner through counsel submitted to this Court pleadings that contain inaccurate statements. Thus, on page 5 of his petition,8 we find that to bolster the claim that the appellate court erred in holding that the RTC had no jurisdiction, petitioner pointed to Annex E9 of his petition which supposedly is the Certification issued by the Municipal Treasurer of San Miguel, Surigao, specifically containing the notation, "Note: Subject for General Revision Effective 1994." But it appears that Annex E of his petition is not a Certification but a xerox copy of a Declaration of Real Property. Nowhere does the document contain a notation, "Note: Subject for General Revision Effective 1994." Petitioner also asked this Court to refer to Annex F,10 where he said the zonal value of the disputed land was P1.40 per sq.m., thus placing the computed value of the land at the time the complaint was filed before the RTC at P57,113.98, hence beyond the jurisdiction of the municipal court and within the jurisdiction of the regional trial court. However, we find that these annexes are both merely xerox copies. They are obviously without evidentiary weight or value.

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Case Materials in Remedial Law I ReviewJurisdictionComing now to the principal issue, petitioner contends that respondent appellate court acted with grave abuse of discretion. By "grave abuse of discretion" is meant such capricious and whimsical exercise of judgment which is equivalent to an excess or a lack of jurisdiction. The abuse of discretion must be so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law as where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility.11 But here we find that in its decision holding that the municipal court has jurisdiction over the case and that private respondent was not estopped from questioning the jurisdiction of the RTC, respondent Court of Appeals discussed the facts on which its decision is grounded as well as the law and jurisprudence on the matter.12 Its action was neither whimsical nor capricious.

Was private respondent estopped from questioning the jurisdiction of the RTC? In this case, we are in agreement with the Court of Appeals that he was not. While participation in all stages of a case before the trial court, including invocation of its authority in asking for affirmative relief, effectively bars a party by estoppel from challenging the court's jurisdiction,13 we note that estoppel has become an equitable defense that is both substantive and remedial and its successful invocation can bar a right and not merely its equitable enforcement.14 Hence, estoppel ought to be applied with caution. For estoppel to apply, the action giving rise thereto must be unequivocal and intentional because, if misapplied, estoppel may become a tool of injustice.15In the present case, private respondent questions the jurisdiction of RTC in Tandag, Surigao del Sur, on legal grounds. Recall that it was petitioner who filed the complaint against private respondent and two other parties before the said court,16 believing that the RTC had jurisdiction over his complaint. But by then, Republic Act 769117 amending BP 129 had become effective, such that jurisdiction already belongs not to the RTC but to the MTC pursuant to said amendment. Private respondent, an unschooled farmer, in the mistaken belief that since he was merely a tenant of the late Artemio Laurente Sr., his landlord, gave the summons to a Hipolito Laurente, one of the surviving heirs of Artemio Sr., who did not do anything about the summons. For failure to answer the complaint, private respondent was declared in default. He then filed a Motion for New Trial in the same court and explained that he defaulted because of his belief that the suit ought to be answered by his landlord. In that motion he stated that he had by then the evidence to prove that he had a better right than petitioner over the land because of his long, continuous and uninterrupted possession as bona-fide tenant-lessee of the land.18 But his motion was denied. He tried an alternative recourse. He filed before the RTC a Motion for Relief from Judgment. Again, the same court denied his motion, hence he moved for reconsideration of the denial. In his Motion for Reconsideration, he raised for the first time the RTC's lack of

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Case Materials in Remedial Law I ReviewJurisdictionjurisdiction. This motion was again denied. Note that private respondent raised the issue of lack of jurisdiction, not when the case was already on appeal, but when the case, was still before the RTC that ruled him in default, denied his motion for new trial as well as for relief from judgment, and denied likewise his two motions for reconsideration. After the RTC still refused to reconsider the denial of private respondent's motion for relief from judgment, it went on to issue the order for entry of judgment and a writ of execution.

Under these circumstances, we could not fault the Court of Appeals in overruling the RTC and in holding that private respondent was not estopped from questioning the jurisdiction of the regional trial court. The fundamental rule is that, the lack of jurisdiction of the court over an action cannot be waived by the parties, or even cured by their silence, acquiescence or even by their express consent.19 Further, a party may assail the jurisdiction of the court over the action at any stage of the proceedings and even on appeal.20 The appellate court did not err in saying that the RTC should have declared itself barren of jurisdiction over the action. Even if private respondent actively participated in the proceedings before said court, the doctrine of estoppel cannot still be properly invoked against him because the question of lack of jurisdiction may be raised at anytime and at any stage of the action.21 Precedents tell us that as a general rule, the jurisdiction of a court is not a question of acquiescence as a matter of fact, but an issue of conferment as a matter of law.22 Also, neither waiver nor estoppel shall apply to confer jurisdiction upon a court, barring highly meritorious and exceptional circumstances.23 The Court of Appeals found support for its ruling in our decision in Javier vs. Court of Appeals, thus:x x x The point simply is that when a party commits error in filing his suit or proceeding in a court that lacks jurisdiction to take cognizance of the same, such act may not at once be deemed sufficient basis of estoppel. It could have been the result of an honest mistake, or of divergent interpretations of doubtful legal provisions. If any fault is to be imputed to a party taking such course of action, part of the blame should be placed on the court which shall entertain the suit, thereby lulling the parties into believing that they pursued their remedies in the correct forum. Under the rules, it is the duty of the court to dismiss an action 'whenever it appears that the court has no jurisdiction over the subject matter.' (Sec. 2, Rule 9, Rules of Court) Should the Court render a judgment without jurisdiction, such judgment may be impeached or annulled for lack of jurisdiction (Sec. 30, Rule 132, Ibid), within ten (10) years from the finality of the same. [Emphasis ours.]24Indeed, "...the trial court was duty-bound to take judicial notice of the parameters of its jurisdiction and its failure to do so, makes its decision a 'lawless' thing."25

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Case Materials in Remedial Law I ReviewJurisdictionSince a decision of a court without jurisdiction is null and void, it could logically never become final and executory, hence appeal therefrom by writ of error would be out of the question. Resort by private respondent to a petition for certiorari before the Court of Appeals was in order .

In holding that estoppel did not prevent private respondent from questioning the RTC's jurisdiction, the appellate court reiterated the doctrine that estoppel must be applied only in exceptional cases, as its misapplication could result in a miscarriage of justice. Here, we find that petitioner, who claims ownership of a parcel of land, filed his complaint before a court without appropriate jurisdiction. Defendant, a farmer whose tenancy status is still pending before the proper administrative agency concerned, could have moved for dismissal of the case on jurisdictional grounds. But the farmer as defendant therein could not be expected to know the nuances of jurisdiction and related issues. This farmer, who is now the private respondent, ought not to be penalized when he claims that he made an honest mistake when he initially submitted his motions before the RTC, before he realized that the controversy was outside the RTC's cognizance but within the jurisdiction of the municipal trial court. To hold him in estoppel as the RTC did would amount to foreclosing his avenue to obtain a proper resolution of his case. Furthermore, if the RTC's order were to be sustained, he would be evicted from the land prematurely, while RED Conflict Case No.1029 would remain unresolved. Such eviction on a technicality if allowed could result in an injustice, if it is later found that he has a legal right to till the land he now occupies as tenant-lessee.1âwphi1.nêtHaving determined that there was no grave abuse of discretion by the appellate court in ruling that private respondent was not estopped from questioning the jurisdiction of the RTC, we need not tarry to consider in detail the second issue. Suffice it to say that, given the circumstances in this case, no error was committed on this score by respondent appellate court. Since the RTC had no jurisdiction over the case, private respondent had justifiable reason in law not to file an answer, aside from the fact that he believed the suit was properly his landlord's concern.WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals is AFFIRMED. The decision of the Regional Trial Court in Civil Case No.1075 entitled Gabriel L. Duero vs. Bernardo Eradel, its Order that private respondent turn over the disputed land to petitioner, and the Writ of Execution it issued, are ANNULLED and SET ASIDE. Costs against petitioner .SO ORDERED.

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Case Materials in Remedial Law I ReviewJurisdiction

[G.R. No. 139539. February 5, 2002]CEROFERR REALTY CORPORATION, petitioner, vs. COURT OF APPEALS and ERNESTO D. SANTIAGO, respondents.The CaseThis is an appeal via certiorarii from the decision of the Court of Appeals ii dismissing petitioner’s appeal from the orderiii of the Regional Trial Court, Branch 93, Quezon City, which dismissed petitioner’s complaint for damages and injunction with preliminary injunction, as well as its resolutioniv denying reconsideration.vThe FactsThe facts, as found by the Court of Appeals,vi are as follows:“On March 16, 1994, plaintiff (Ceroferr Realty Corporation) filed with the Regional Trial Court, Quezon City, Branch 93, a complaintvii against defendant Ernesto D. Santiago (Santiago), for “damages and injunction, with preliminary injunction.” In the complaint, Ceroferr prayed that Santiago and his agents be enjoined from - claiming possession and ownership over Lot No. 68 of the Tala Estate Subdivision, Quezon City, covered by TCT No. RT-90200 (334555); that Santiago and his agents be prevented from making use of the vacant lot as a jeepney terminal; that Santiago be ordered to pay Ceroferr P650.00 daily as lost income for the use of the lot until possession is restored to the latter; and that Santiago be directed to pay plaintiff Ceroferr moral, actual and exemplary damages and attorney’s fees, plus expenses of litigation.“In his answer, defendant Santiago alleged that the vacant lot referred to in the complaint was within Lot No. 90 of the Tala Estate Subdivision, covered by his TCT No. RT-78 110 (3538); that he was not claiming any portion of Lot No. 68 claimed by Ceroferr; that he had the legal right to fence Lot No. 90 since this belonged to him, and he had a permit for the purpose; that Ceroferr had no color of right over Lot No. 90 and, hence, was not entitled to an injunction to prevent Santiago from exercising acts of ownership thereon; and that the complaint did not state a cause of action.“In the course of the proceedings, an important issue metamorphosed as a result of the conflicting claims of the parties over the vacant lot actually used as a jeepney terminal – the exact identity and location thereof. There was a verification survey, followed by a relocation survey, whereby it would appear that the vacant lot is inside Lot No. 68. The outcome of the survey, however, was vigorously objected to by defendant who insisted that the area is inside his lot. Defendant, in his manifestation

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Case Materials in Remedial Law I ReviewJurisdictiondated November 2, 1994, adverted to the report of a geodetic engineer. Mariano V. Flotildes, to the effect that the disputed portion is inside the boundaries of Lot No. 90 of the Tala Estate Subdivision which is separate and distinct from Lot No. 68, and that the two lots are separated by a concrete fence.

“Because of the competing claims of ownership of the parties over the vacant lot, it became inevitable that the eye of the storm centered on the correctness of property boundaries which would necessarily result in an inquiry as to the regularity and validity of the respective titles of the parties. While both parties have been brandishing separate certificates of title, defendant asserted a superior claim as against that of the plaintiff in that, according to defendant, his title has been confirmed through judicial reconstitution proceedings, whereas plaintiff’s title does not carry any technical description of the property except only as it is designated in the title as Lot No. 68 of the Tala Estate Subdivision.“It thus became clear, at least from the viewpoint of defendant, that the case would no longer merely involve a simple case of collection of damages and injunction – which was the main objective of the complaint - but a review of the title of defendant vis-à-vis that of plaintiff. At this point, defendant filed a motion to dismiss the complaint premised primarily on his contention that the trial court cannot adjudicate the issue of damages without passing over the conflicting claims of ownership of the parties over the disputed portion.“On May 14, 1996, the trial court issued the order now subject of this appeal which, as earlier pointed out, dismissed the case for lack of cause of action and lack of jurisdiction. The court held that plaintiff was in effect impugning the title of defendant which could not be done in the case for damages and injunction before it. The court cited the hoary rule that a Torens certificate of title cannot be the subject of collateral attack but can only be challenged through a direct proceeding. It concluded that it could not proceed to decide plaintiff’s claim for damages and injunction for lack of jurisdiction because its judgment would depend upon a determination of the validity of defendant’s title and the identity of the land covered by it.“From this ruling, plaintiff appealed to this court insisting that the complaint stated a valid cause of action which was determinable from the face thereof, and that, in any event, the trial court could proceed to try and decide the case before it since, under present law, there is now no substantial distinction between the general jurisdiction vested in a regional trial court and its limited jurisdiction when acting as a land registration court, citing Ignacio v. Court of Appeals 246 SCRA 242 (1995).”On March 26, 1999, the Court of Appeals promulgated a decision dismissing the appeal.viii On May 13, 1999, petitioner filed with the Court

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Case Materials in Remedial Law I ReviewJurisdictionof Appeals a motion for reconsideration of the decision.ix On July 29, 1999, the Court of Appeals denied petitioner’s motion for reconsideration for lack of merit.x

Hence, this appeal.xiThe IssuesThe issues are: (1) whether Ceroferr’s complaint states a sufficient cause of action and (2) whether the trial court has jurisdiction to determine the identity and location of the vacant lot involved in the case.The Court’s RulingWe grant the petition.The rules of procedure require that the complaint must state a concise statement of the ultimate facts or the essential facts constituting the plaintiff’s cause of action. A fact is essential if it cannot be stricken out without leaving the statement of the cause of action inadequate. A complaint states a cause of action only when it has its three indispensable elements, namely: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of plaintiff or constituting a breach of the obligation of defendant to the plaintiff for which the latter may maintain an action for recovery of damages.xii If these elements are not extant, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action.xiiiThese elements are present in the case at bar.The complaintxiv alleged that petitioner Ceroferr owned Lot 68 covered by TCT No. RT-90200 (334555). Petitioner Ceroferr used a portion of Lot 68 as a jeepney terminal.The complaint further alleged that respondent Santiago claimed the portion of Lot 68 used as a jeepney terminal since he claimed that the jeepney terminal was within Lot 90 owned by him and covered by TCT No. RT-781 10 (3538) issued in his name.Despite clarification from petitioner Ceroferr that the jeepney terminal was within Lot 68 and not within Lot 90, respondent Santiago persisted in his plans to have the area fenced. He applied for and was issued a fencing permit by the Building Official, Quezon City. It was even alleged in the complaint that respondent- Santiago was preventing petitioner Ceroferr and its agents from entering the property under threats of bodily harm and destroying existing structures thereon.

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Case Materials in Remedial Law I ReviewJurisdictionA defendant who moves to dismiss the complaint on the ground of lack of cause of action, as in this case, hypothetically admits all the averments thereof. The test of sufficiency of the facts found in a complaint as constituting a cause of action is whether or not admitting the facts alleged the court can render a valid judgement upon the same in accordance with the prayer thereof. The hypothetical admission extends to the relevant and material facts well pleaded in the complaint and inferences fairly deducible therefrom. Hence, if the allegations in the complaint furnish sufficient basis by which the complaint can be maintained, the same should not be dismissed regardless of the defense that may be assessed by the defendants.xv

In this case, petitioner Ceroferr’s cause of action has been sufficiently averred in the complaint. If it were admitted that the right of ownership of petitioner Ceroferr to the peaceful use and possession of Lot 68 was violated by respondent Santiago’s act of encroachment and fencing of the same, then petitioner Ceroferr would be entitled to damages.On the issue of jurisdiction, we hold that the trial court has jurisdiction to determine the identity and location of the vacant lot in question.Jurisdiction over the subject matter is conferred by law and is determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein.xvi The jurisdiction of a court over the subject matter is determined by the allegations of the complaint and cannot be made to depend upon the defenses set up in the answer or pleadings filed by the defendant.xviiWhile the lack of jurisdiction of a court may be raised at any stage of an action, nevertheless, the party raising such question may be estopped if he has actively taken part in the very proceedings which he questions and he only objects to the court’s jurisdiction because the judgment or the order subsequently rendered is adverse to him.xviiiIn this case, respondent Santiago may be considered estopped to question the jurisdiction of the trial court for he took an active part in the case. In his answer, respondent Santiago did not question the jurisdiction of the trial court to grant the reliefs prayed for in the complaint. His geodetic engineers were present in the first and second surveys that the LRA conducted. It was only when the second survey report showed results adverse to his case that he submitted a motion to dismiss.Both parties in this case claim that the vacant lot is within their property. This is an issue that can be best resolved by the trial court in the exercise of its general jurisdiction.After the land has been originally registered, the Court of Land Registration ceases to have jurisdiction over contests concerning the

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Case Materials in Remedial Law I ReviewJurisdictionlocation of boundary lines. In such case, the action in personam has to be instituted before an ordinary court of general jurisdiction.xix

The regional trial court has jurisdiction to determine the precise identity and location of the vacant lot used as a jeepney terminal.The FalloIN VIEW WHEREOF, we GRANT the petition. We REVERSE the decision of the Court of Appealsxx and the order of the trial courtxxi dismissing the case. We remand the case to the Regional Trial Court, Branch 93, Quezon City, for further proceedings.No costs.SO ORDERED.G.R. No. 102603 January 18, 1993SPOUSES VILLAMOR DONATO and LUZONIA O. DONATO, petitioner, vs.THE COURT OF APPEALS and HEIRS OF ROSARIO FONTANILLA, represented by RODOLFO RARANG, respondents. This is a Petition to review the decision * of the Court of Appeals in CA-G.R. CV No. 19644, entitled "Heirs of Rosario Fontanilla, represented by Rodolfo F. Rarang, Plaintiffs-Appellees, versus Spouses Villamor and Luzonia O. Donato, Defendants-Appellants" which affirmed in toto the decision ** of the Regional Trial Court in Alaminos, Pangasinan, Branch 54, the dispositive portion of which is reproduced as follows:WHEREFORE, judgment is hereby rendered in favor of plaintiffs:1. ORDERING defendants to vacate lot 5145, CAD, 325-D of the Alaminos Cadastre and to deliver possession thereof to the plaintiffs;2. ORDERING defendants to pay to plaintiffs the sum of TEN THOUSAND PESOS (P10,000.00) as and for attorney's fees, and to pay the cost of the suit.Defendant's counterclaim is hereby DISMISSED for lack of merit.SO ORDERED. 1The antecedent facts, as can be gathered from the findings of the trial court are as quoted:Based on the evidence adduced by the parties as well as their admissions, there is no dispute as to the following facts: As described in par. 2 of the

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Case Materials in Remedial Law I ReviewJurisdictionComplaint, the land in dispute is Lot 5145, CAD, 325-D of the Alaminos Cadastre, located at Brgy. Inerangan, Alaminos, Pangasinan. The said land is an unregistered riceland with an area of 4,280 square meters and used to be owned by Rosario Fontanilla, deceased mother of the plaintiffs, as her paraphernal property . . . . Said Rosario Fontanilla died in 1971 in Davao City . . . and is survived by her five (5) children to wit: Rodolfo, Plotarco, Ernesto, Edgardo, and Lolita, all surnamed Rarang . . . as her heirs. All of the said children . . . were born in Inerangan, Alaminos, Pangasinan; However, between 1957 and 1967, Rosario Fontanilla and her children migrated separately to Davao City . . . .

There is likewise no dispute that defendants are the registered owners of a parcel of land, denominated as Lot No. 5303, CAD, 325-D of Alaminos Cadastre, which is covered by Transfer Certificate of Title No. 5535 and located near the land in question at Brgy. Inerangan, Alaminos, Pangasinan . . . . Sometime in 1982, defendants purchased the aforesaid land from the Rural Bank of Urbiztondo, Inc. after the said bank foreclosed the mortgage constituted thereon by one Carolina Abrigo . . . . Believing that the land which they purchased from the Rural Bank of Urbiztondo is Lot 5145, CAD, 325-A of Alaminos Cadastre, defendants occupied the said land in 1982 and are still in possession of the same up to this date . . . . 2In the complaint, private respondents claim ownership over the parcel of land in dispute allegedly inherited by them from their late mother, Rosario. They contend that petitioners herein own a parcel of land covered by Transfer Certificate of Title No. 5535 and denominated as Lot No. 5303, CAD, 325-D, as appearing in the Registry of Deeds of Pangasinan, which is not the same nor is it identical with the land in dispute.In their answer, however, petitioners maintain that Lot No. 5303 as evidenced by Transfer Certificate of Title No. 5535 was originally applied for titling by one Carolina Abrigo on the strength of a Deed of Sale executed by Jose Ochave as vendor and Carolina Abrigo as vendee. As an affirmative defense, they allege that the parcel subject of this controversy is the very same Lot No. 5303 over which petitioners hold the title of ownership. It was a matter of oversight, they assert, on the part of the Bureau of Lands, that the identity of these parcels was not reflected in their title. According to the petitioners, Jose Ochave's ownership over the same parcel finds support in the Deed of Sale executed by Basilio Rarang, who allegedly derives his authority as Rosario's agent from a Special Power of Attorney duly executed in his favor.During the trial on the merits, private respondents, through Rodolfo Rarang who is the lone witness, disputed the validity of the Special Power of Attorney. The rest of their evidence consisted of documents.

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Case Materials in Remedial Law I ReviewJurisdictionPetitioners countered and presented the Notary Public who notarized the Deed of Sale between Basilio Rarang and Jose Ochave. Among the documents presented by the petitioners were the controverted Deed of Sale and the Special Power of Attorney said to have been executed by Rosario Fontanilla-Rarang in favor of Basilio Rarang.

In finding for the private respondents, the trial court held:The Court finds defendants' claim of ownership of Lot 5145 to be devoid of merit for several reasons:In the first place, the land which defendants brought from the Rural Bank of Urbiztondo, Inc. is Lot 5403, CAD, 325-D of Alaminos Cadastre, which land is covered by TCT No. 5535 in the name of defendants (pp.26-27, TSN, Oct. 2, 1987). Having knowingly bought a registered land, the identity and metes and bounds of which are clearly set forth in detail in its certificate of title, defendants are plainly estopped from claiming that they acquired thereby a parcel of land (Lot 5145) which is entirely distinct and different from the parcel of and (Lot 5303) described and identified in the certificate of title; otherwise, the very purpose and essence of a certificate of title under the Torrens System would thereby be impaired, if not totally negated. Verily, the infirmity of defendants' claim that it was not Lot 5303 which they purchased from the Rural Bank of Urbiztondo is further underscored by their own admission that they have successively mortgaged the said land to the China Banking Corporation and thereafter to the Pangasinan Development Bank (par. 3 of Amended Answer in relation to par. 4 of Complaint). Accordingly, defendants' contention that "the title (TCT No. 5535) is not a true and faithful reproduction of what was actually applied for" and contains discrepancies due to the fault of the Bureau of Lands (pars. 10 and 14, Amended Answer) is beside the point and of no help to defendants' position. Suffice it to state that defendants are deemed to know the identity of the registered land which they were buying when they contracted with the Rural Bank of Urbiztondo.In the second place, the Court is not convinced as to the validity of the sale of the land in question in 1967 by Basilio Rarang in favor of Jose Ochave (Exhibit 6). Article 1874 of the Civil Code provides that:When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.. . . . Defendants point to the Power of Attorney dated September 27, 1966 as sufficient authority, . . . the said Power of Attorney shows on its face that it was not signed by the supposed notary public Anastacio D. Deluao of Davao City, although his name is stamped thereon. The person who appeared, signed, and acknowledged the said Power of Attorney before the notary public was Basilio Rarang (the agent) and not Rosario

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Case Materials in Remedial Law I ReviewJurisdictionRarang (the principal), . . . . The said Power of Attorney was purportedly acknowledged by Basilio Rarang, the supposed attorney-in-fact, on September 22, 1966 or five days before the said Power of Attorney was allegedly signed by Rosario Rarang, the supposed principal. Further, the Court takes note of the fact that the first page of the Power of Attorney, which contains all the material allegations thereof, does not bear any signature at all. Compounding the aforesaid discrepancies of the said Power of Attorney, defendants also failed to present any evidence to prove the genuineness and due execution of said instrument, particularly the supposed signature of Rosario Rarang on the second page thereof. Accordingly, the Court must give credence to the testimony of Rodolfo Rarang (p. 22-28, TSN, July 13, 1987) and concludes that the signature above the typewritten name Rosario Rarang on the second page of the Power of Attorney (Exh.7-A) is not the true signature of plaintiffs' mother Rosario Fontanilla Rarang.

The contention of defendants that they have been in peaceful possession of the land in question since 1982 (par. 15, Amended Answer) and have introduced improvements thereon (pars. 16 and 17, Amended Answer) albeit upon their mistaken belief that it is the land which they purchased from the Rural Bank of Urbiztondo, does not detract anything from the fact that the defendants are illegally occupying plaintiffs' property without any just or legal ground. Neither can defendants be heard to plead good faith as a defense since, by their own admission, they negligently bought a registered land without first examining the title and true identity of the land (p. 23-25, TSN, Oct. 2, 1987). Be that as it may, Article 22 of the Civil code mandates that —Every person who through an act of performance by another or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. 3This decision was affirmed by the Respondent Court in toto. Hence, this appeal.A review of the appellate court's decision is anchored on the following, as stated by the petitioners:A. THE RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE LOWER COURT IN DECLARING THE SPECIAL POWER OF ATTORNEY EXECUTED BY THE LATE MOTHER OF PRIVATE RESPONDENTS AS NULL AND VOID AND RELYING SOLELY ON THE UNCORROBORATED TESTIMONY OF RODOLFO RARANG, WHO IS THE LONE WITNESS IN COURT DESPITE THE FACT THAT THE TWO MATERIAL WITNESSES TO THE EXECUTION OF THE SPECIAL POWER OF ATTORNEY WERE STILL VERY MUCH ALIVE AND ARE IN THEMSELVES CO-PRIVATE RESPONDENTS OF RODOLFO

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Case Materials in Remedial Law I ReviewJurisdictionRARANG, AND WERE NEVER PRESENTED IN COURT TO DISPUTE THE VERACITY OF SAID DOCUMENT.

B. THE HONORABLE COURT OF APPEALS ALSO FAILED TO TAKE INTO CONSIDERATION THE LONG AND CONTINUOUS POSSESSION OF THE PETITIONERS AND THEIR PREDECESSORS-IN-INTEREST IN THE CONCEPT OF OWNERS UNTIL IT WAS TRANSFERRED TO THE PETITIONERS.C. THE HONORABLE COURT OF APPEALS ERRED IN NOT POINTING OUT CATEGORICALLY THE BASIS OF OWNERSHIP OF THE LOT IN DISPUTE WHEN THE RECORDS OF THE CASE DOES NOT BEAR ANY PROOF AS TO THEIR RIGHT OF OWNERSHIP EXCEPT THE TESTIMONY OF PRIVATE RESPONDENT RODOLFO RARANG ON THE STAND THAT THEY INHERITED THE SAME FROM THEIR LATE MOTHER.D. THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT PRIVATE RESPONDENTS WERE NOT PARTIES TO THE SPECIAL POWER OF ATTORNEY, HENCE FAILURE TO DENY SAID ACTIONABLE DOCUMENT UNDER OATH IS NOT DEEMED AN ADMISSION OF ITS GENUINENESS AND DUE EXECUTION.E. THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING THAT PRIVATE RESPONDENTS EITHER WAIVED THEIR RIGHT AND/OR THEIR RIGHTS HAVE ALREADY PRESCRIBED DUE TO INACTION.F. THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING THAT THE TRIAL COURT'S DECISION SHOULD NEVER BE TARNISHED WITH ANY PERCEPTION OF IMPROPRIETY.G. THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONERS ARE GUILTY OF EVIDENT BAD FAITH WAS UNJUSTIFIED.H. THE HONORABLE COURT OF APPEALS' DECISION MUST BE REVERSED FOR IT IS CONTRARY TO LAW AND JURISPRUDENCE ON THE MATTER.The disposition of the first assignment of error involves the appreciation of facts surrounding the execution of the controversial Special Power of Attorney, a task which has been delegated to the trial court. In this jurisdiction, it is a fundamental and settled rule that conclusions and findings of fact by the trial court are entitled to great weight on appeal an should not be disturbed unless for strong and cogent reasons because the trial court is in a better position to examine real evidence, as well as to observe the demeanor of the witnesses while testifying in the case.

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Case Materials in Remedial Law I ReviewJurisdictionAfter a careful study of the records, there appears to be no cogent reason to fault the findings of the trial court that the Special Power of Attorney is null and void. This being the case, all subsequent transactions involving Lot 5145 and springing from the Special Power of Attorney are also null and void. Consequently, on this alone, petitioner's claim of ownership should be rejected outright.

Petitioners assert that the appellate court failed to consider their long and continuous possession over the disputed lot as equivalent to possession in the concept of owners. This is preposterous. How can they be considered possessors in the concept of owners when the land over which they hold title is not the same as that which they possess? Possession, to constitute the foundation of a prescriptive right, must be possession under a claim of title or it must be adverse, 4 Petitioners herein cannot be said to be in possession of the land under a claim of title, since it has been established that petitioners' title covers a different parcel of land; more so, can it be considered that petitioners are in adverse possession thereof.At this juncture, it would be appropriate to rule on the seventh assignment of error. We agree that petitioners are guilty of bad faith. Having been issued a certificate of title, which states the exact metes and bounds of the real property covered, they are thus aware of the extent of their domain. Hence, they are estopped from claiming a piece of land that is entirely distinct from that which is covered by their title. This Court cannot simply support the argument set forth by petitioners based merely on their honest belief that their title pertained to the disputed land.Anent petitioners' fourth assignment of error, We hold that the appellate court did not commit a mistake. While it is true that Section 8, Rule 8 of the Revised Rules of Court provides for the rule on implied admission of the genuineness and due execution of a document subject of an action or defense, the same is not without exception. One such exception is when the adverse party does not appear to be a party to the instrument. 5 Private respondents Lolita and Ernesto were mere witnesses to the Special Power of Attorney in question and as such, they cannot be considered as parties to the instrument. Moreover, the same document should not be afforded a presumption of genuineness and due execution. In view of the various discrepancies found by the trial court, 6 it lacks the veracity to entitle it to any degree of credibility.Neither can prescription be appreciated in favor of herein petitioners. As properly held by the appellate court, petitioners are guilty of evident bad faith. Therefore, for prescription to apply the period that is material for Our consideration is thirty years. Since only twenty years have lapsed from the alleged first transaction concerning the land until the institution of the case at bar, petitioners cannot lay claim as owners by acquisitive prescription. 7

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Case Materials in Remedial Law I ReviewJurisdictionMoreover, private respondents cannot be penalized for having allegedly slept on their rights. Laches is not concerned with mere lapse of time. The mere fact of delay is insufficient to constitute laches. It is required that (1) complainant must have knowledge of the conduct of the defendant or of one under whom he claims, and (2) he must have been afforded an opportunity to institute suit. 8 In the instant case, the first requisite is absent. Even assuming arguendo that the petitioners have been in possession through their predecessors, private respondents were not aware of said possession until Rodolfo Rarang came home in 1985, after which they lost no time in instituting his case. Moreover, there is no absolute rule as to what constitute laches or staleness of demand; each case is to be determined according to its particular circumstances. In the case of Jimenez vs. Fernandez, 9 the court declared that the question of laches is an equitable doctrine and its application is controlled by equitable considerations. The Court further stated that laches cannot be worked to defeat justice or to perpetuate fraud or injustice. It would be rank injustice and patently inequitable to deprive the lawful heirs of their rightful inheritance.

Finding no truth to the petitioners' claim of validity of the instrument from which their title emanates and their argument of title by prescription, we consider it unnecessary to discuss at length or to determine the other issues presented, they being immaterial to the resolution of this appeal.For reasons indicated, the petition for review is hereby DISMISSED. The decision of the respondent Court is AFFIRMED. With costs.SO ORDERED.

G.R. No. 138955           October 29, 2002AMPARO ROXAS, petitioner, vs.HON. COURT OF APPEALS, and MANOTOK REALTY, INC., respondents.This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking the reversal of the decision1 of the Honorable Court of Appeals in CA-G.R. SP No. 44650. The CA had affirmed that of the Regional Trial Court2 of Marikina, Branch 273, in SCA No. 97-198-MK, which earlier overturned the order3 of the Metropolitan Trial Court of Marikina, Branch 76, in Civil Case No. 96-6235, for unlawful detainer.

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Case Materials in Remedial Law I ReviewJurisdictionThe factual antecedents as found by the Court of Appeals are as follows:

A complaint for unlawful detainer was filed by herein private respondent Manotok Realty, Inc. against herein petitioner Amparo Roxas before the Metropolitan Trial Court of Marikina, Branch 76. Manotok Realty, Inc. alleged in its complaint that: it is the registered owner of a parcel of land located at the Manotok-Ramos Subdivision IX, City of Marikina, Metro Manila, known as Lot 14, Block 9 duly covered under Transfer Certificate of Title No. 100498; that sometime on September 18, 1961, plaintiff and defendant entered into a Contract to Sell covering the subject property, however, on September 14, 1973, plaintiff notarially rescinded and cancelled the contract as of June 25, 1966 for defendant’s failure to comply with the terms thereof, specifically for her failure to pay the stipulated monthly payments; that despite receipt of said notice of cancellation however, defendant continued in her possession and occupation of subject parcel of land without any legal basis except by mere tolerance of plaintiff; that defendant since and from that time of the service of the notice of rescission and the demand to vacate on September 14, 1973, defendant has possessed and occupied said property without making any payment to plaintiff of such reasonable compensation for her use and occupancy thereof; that on August 3, 1995, plaintiff needing said property for its own use, made a final demand to defendant, through counsel, to vacate subject property within three (3) months from receipt thereof; that notwithstanding however her receipt of said final demand and the lapse of the three (3) months period within which to vacate, defendant unlawfully failed and refused to vacate the same without legal basis.In her answer, Amparo Roxas denied the material allegations of the complaint, and by way of special and affirmative defenses, alleged that the notice of cancellation has not been received by defendant hence, a condition precedent has not been complied with, thus subject to dismissal; that she has complied with all the terms and conditions of the Contract to Sell, but Manotok Realty, Inc. has not been recording defendant’s compliance, amounting to plaintiff’s dealing in bad faith and with malice afterthought; and by way of special and affirmative defense alleged that there is no cause of action and therefore, the complaint must be dismissed; and by way of counterclaim seeks moral and exemplary damages in the total amount of P200,000.00 and an award of attorney’s fee in the amount of P50,000.00.After the requisite preliminary conference and the submission of affidavits and position papers by both parties, Hon. Judge Jerry B. Gonzales of MeTC, Marikina City, Branch 76, dismissed the complaint on the ground of lack of jurisdiction. In an order dated November 20, 1996, Judge Gonzales ratiocinated:

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Case Materials in Remedial Law I ReviewJurisdictionThis is a clear case of ejectment through accion publiciana, jurisdiction of which belongs to the Regional Trial Court because the cause of action is tolerance.

The Honorable Supreme Court in the case of Magin vs. Avelino,4 127 SCRA 602, said:"Where the possession of the land by another is due to tolerance of owner the action for ejectment is accion publiciana, not unlawful detainer or forcible entry."Under the above doctrine, the demand being that of terminating possession allowed by tolerance of the alleged owner, this Court has no jurisdiction to try the case.5Aggrieved, Manotok Realty, Inc. appealed the matter before the Regional Trial Court of Marikina, Branch 273. The RTC ruled for Manotok Realty, Inc. holding that the MeTC had jurisdiction to hear and decide the case as "the complaint is one for unlawful detainer" as clearly alleged in the complaint, "and not for accion publiciana as incorrectly ruled by the lower court."6The RTC disposed of the case as follows:WHEREFORE, foregoing premises considered, the judgement appealed from is hereby REVERSED and SET ASIDE. Judgment is hereby rendered in favor of plaintiff-appellant and against defendant-appellee Amparo Roxas, ordering the latter and all persons claiming rights under her:1) to immediately vacate and surrender the possession of the premises in question described in paragraph 3 of the complaint;2) to pay plaintiff-appellant the amount of P2,000.00 per month as reasonable compensation for the use and occupation of the subject premises from November 4, 1995 up to the time the premises in question is fully vacated, and possession thereof is surrendered to plaintiff-appellant;3) to pay plaintiff-appellant the sum of TEN THOUSAND (P10,000.00) PESOS as reasonable attorney’s fees, and the costs of suit.SO ORDERED.7The reversal of the MeTC order prompted Amparo Roxas to elevate the matter to the Court of Appeals for review under Rule 42. However, the appellate court affirmed the aforequoted RTC decision opining that Amparo’s reliance on Velez vs. Avelino8 is misplaced for the latter partakes of a different factual setting. The RTC of Marikina had found, inter alia:

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Case Materials in Remedial Law I ReviewJurisdictionIn this particular case, the private respondents from the very beginning occupied the subject premises without any contract and constructed thereon houses sans any building permits. The Court described them as squatters and characterized their possession as one of tolerance…in the case at bench, the petitioner was not a squatter but a lawful possessor of the property by virtue of a contract to sell duly entered into by the petitioner and private respondent. Her occupation became illegal only upon her refusal to vacate despite the cancellation of the contract to sell and a demand letter dated August 3, 1995 for her to vacate.

While in the Velez case, supra, there was no contract, express or implied, at the start, in the case at bench, there was such an express contract to sell that governed the relationship between the petitioner and private respondent… Accordingly, it is imperative in a case of unlawful detainer that the incipient occupancy is founded on some legal authority such as an express or implied contract, which however, has expired. In the Velez case supra, there was no expiration or termination to speak of because there was really no contract in the first place, whereas, in the instant case there was.9The aforesaid finding was upheld by the Court of Appeals.Hence, this petition for review on certiorari raising the lone issue of:lawp!1.netWHETHER OR NOT THE REGULAR COURT HAS JURISDICTION TO TRY AND HEAR THE INSTANT CASE.10While this petition for review does not assign any specific error committed by the court a quo in affirming the decision of the RTC, what petitioner raises is the question of jurisdiction of the regular courts of justice over the subject matter of this case. According to her petition,11 the matter involved in the present petition falls squarely within the jurisdiction of an administrative agency, namely the Housing and Land Use Regulatory Board (HLURB).12 She explains that "this is for the simple reason that the issue between the parties is the determination of whether or not the terms and conditions of their contract to sell are violated." She adds that she is one of the buyers on installment of a subdivision lot in private respondent’s subdivision. For Manotok Realty Inc. is the subdivision owner and/or developer. Consequently, according to petitioner, any question that may arise regarding their contract, be it for non-payment of amortization, specific performance, or in general, violation of any term or condition thereof, including a special instance of ejectment13 if proper, should be resolved before the HLURB by a proper initiatory pleading filed thereat.14Moreover, petitioner Amparo Roxas reiterated in her memorandum15 that although the complaint has been framed to be one for unlawful detainer, the truth is that the matter involves a dispute between a subdivision

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Case Materials in Remedial Law I ReviewJurisdictionowner/developer and a subdivision lot buyer. She further asserts that she could not be estopped from raising the question of lack of jurisdiction of the courts to try and hear the case because, in her position paper filed with the MeTC, she has already raised the argument that the matter was cognizable by the HLURB.

Respondent Manotok Realty, Inc., maintains the contrary, to wit, that the settled rule is that the question of jurisdiction must be raised before the inferior court. Otherwise, petitioner is barred by estoppel or even laches. Respondent contends that in the determination of whether or not an inferior court has jurisdiction over ejectment suits, what determines the nature of the action as well as the court that has jurisdiction over the case are the allegations in the complaint. Citing Sumulong vs. CA,16 private respondent avers that the cause of action in a complaint is not what the designation of the complaint states, but what the allegations in the body of the complaint define or prescribe. Private respondent claims that the CA correctly pointed out that the complaint expressly provides that the case is one for unlawful detainer and not an accion publiciana.In our view, the following issues now appear for the Court’s resolution: (1) whether petitioner could still raise the issue of jurisdiction at this stage of the proceedings; and (2) whether the instant case falls within the exclusive jurisdiction of the HLURB.Considering the circumstances of the cases, including the averments of the parties, we find the present petition without merit.On the first issue, we hold that petitioner is already estopped from raising the issue of jurisdiction. What she raised in her position paper as a special and affirmative defense was the purported failure of the complaint to state a cause of action, arising from an alleged failure to exhaust administrative remedies before the HLURB as a condition precedent to filing a case in court. This is not an explicit attack on the court’s jurisdiction over the subject matter of the complaint, but merely a claim for the need to go through an alleged jurisdictional requirement, namely exhaustion of administrative remedies.Granted that she placed MeTC’s jurisdiction at issue, on the supposition that it is the HLURB that has jurisdiction over Manotok’s complaint below, she abandoned her theory after she obtained a favorable judgment at the MeTC. She chose not to appeal the MeTC’s decision and instead consistently adopted in her pleadings before the RTC and CA, the MeTC’s ruling that the action is one for accion publiciana. Nowhere in her pleadings before the RTC and CA did she raise the argument that jurisdiction properly lies with the HLURB. As earlier mentioned, it was only in her present petition with this Court that she squarely asserted for the first time that the HLURB has exclusive jurisdiction over the instant case.

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Case Materials in Remedial Law I ReviewJurisdictionIndeed, the general rule is that a question of jurisdiction may be raised at any time, even on appeal, provided that doing so does not result in a mockery of the tenets of fair play.17 When, however, a party adopts a particular theory, and the case is tried and decided upon that theory in the court below, he will not be permitted to change his theory on appeal.18 Where the case was tried by the lower court and the parties on a certain theory, it will be reviewed and decided on that theory, insofar as the pleadings, liberally construed, permit, and not be approached from a different point of view.19

Petitioner is bound by the theory behind her arguments before the RTC and CA that the case is properly an accion publiciana as the cause of action arises from the termination of possession by mere tolerance. Her assertion now that the issue involves the determination of whether or not the terms and conditions of the contract to sell have been violated by private respondent, which must be decided by the HLURB, constitutes a change of theory that could require presentation of further evidence. Given this premise, the Court cannot countenance petitioner’s act of adopting inconsistent postures by attacking the jurisdiction of the regular courts to which she has submitted, voluntarily. Estoppel bars her from doing so.1avvphil.netNevertheless, to avoid further delay in this case, let us resolve the second issue of whether the HLURB has the exclusive primary jurisdiction to try and hear the instant case.20In support of her position, petitioner cites Sec. 1 of P.D. 1344,21 to wit:Sec. 1. In the exercise of its function to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide the cases of the following nature:a. Unsound real estate business practices;b. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; andc. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman.In our view, the mere relationship between the parties, i.e., that of being subdivision owner/developer and subdivision lot buyer, does not automatically vest jurisdiction in the HLURB. For an action to fall within the exclusive jurisdiction of the HLURB, the decisive element is the nature of the action as enumerated in Section 1 of P.D. 1344. On this matter, we have consistently held that the concerned administrative

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Case Materials in Remedial Law I ReviewJurisdictionagency, the National Housing Authority (NHA) before and now the HLURB, has jurisdiction over complaints aimed at compelling the subdivision developer to comply with its contractual and statutory obligations.

Thus, in Arranza vs. B.F. Homes, Inc.,22 we sustained the HLURB’s jurisdiction over petitioners’ complaint for specific performance to enforce their rights as purchasers of subdivision lots as regards rights of way, water, open spaces, road and perimeter wall repairs, and security. Also, in Que vs. CA,23 we noted that:… the complaint against Que is distinct from the complaint against GDREC and its officers before the HLURB. The first basically pertains to non-performance by the buyer of her obligations to Klaver, whereas the second deals with non-performance by the seller of its own obligations to the buyer, such that Klaver properly sued them before different fora.Accordingly, the second complaint by Klaver against GDREC and its officers for unsound real estate practices consisting in their unwarranted delay in the delivery of Unit No. 1902-A to him was properly lodged with the HLURB. Moreover, in Siasoco vs. Narvaja,24 we ruled that it is the HLURB, not the trial court that has jurisdiction over complaints for specific performance filed against subdivision developers to compel the latter to execute deeds of absolute sale and to deliver the certificates of titles to buyers.But the antecedent circumstances to the present petition are in stark contrast to those in the cited cases of Arranza and Que. Perusal of paragraphs (a), (b), and (c) of Sec. 1, P.D. 1344 abovecited, vis-à-vis the allegations of the complaint25 for ejectment filed by Manotok Realty, Inc. with the MeTC, shows clearly that the HLURB has no jurisdiction over the complaint. Note particularly pars. (b) and (c) as worded, where the HLURB’s jurisdiction concerns cases commenced by subdivision lot or condominium unit buyers. As to par. (a), concerning "unsound real estate practices," it would appear that the logical complainant would be the buyers and customers against the sellers (subdivision owners and developers or condominium builders and realtors), and not vice versa.Petitioner’s reliance on Francel Realty Corporation vs. CA, is misplaced. In that case, the complaint for unlawful detainer was premised on the "failure of the buyer on installment basis of real property to pay based on the right to stop paying monthly amortizations under P.D. 957."26 That involves, "a determinative question…exclusively cognizable by the HLURB," i.e., a determination of the rights and obligations of parties in a sale of real estate under P.D. 957, not P.D. 1344. Private respondent therein, Francisco Sycip, in fact, filed earlier a complaint against Francel Realty Corp. for "unsound real estate business practices" with the HLURB. Thus, per Mendoza, J., "Petitioner’s cause of action against private respondent [Sycip] should instead be filed as a counterclaim in

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Case Materials in Remedial Law I ReviewJurisdictionHLURB Case No. REM-07-9004-80 in accordance with Rule 6, S.6 of the Rules of Court…"27 That situation does not obtain in the present case.

Petitioner Amparo Roxas’ attempt to bring the case within HLURB’s jurisdiction, by belatedly asserting that the matter involved is the determination of whether or not the terms and conditions of the contract to sell between the parties have been violated, would contravene settled jural principles.First, the jurisdiction of a court over the subject matter is determined by the allegations of the complaint and cannot be made to depend upon the defenses set up in the answer or pleadings filed by the defendant.28 Since there is no dispute that the allegations of the complaint filed below by Manotok Realty, Inc., sufficiently describe unlawful detainer, the MeTC of Marikina properly acquired jurisdiction over the subject matter thereof.Second, the cause of action for unlawful detainer between the present parties springs from the failure of petitioner to vacate the premises upon lawful demand of the owner, the private respondent. For petitioner’s possession of the land in question is allegedly by mere tolerance or permission. Our ruling in Banco de Oro Savings and Mortgage Bank vs. Court of Appeals29 is demonstrably applicable:A person who occupies the land of another at the latter’s tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate upon demand, failing which, a summary action for ejectment is the proper remedy against him.WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 44650 is AFFIRMED. Costs against petitioner.SO ORDERED.

G.R. No. 144025           December 27, 2002SPS. RENE GONZAGA and LERIO GONZAGA, petitioners, vs.HON. COURT OF APPEALS, Second Division, Manila, HON. QUIRICO G. DEFENSOR, Judge, RTC, Branch 36, Sixth Judicial Region, Iloilo City, and LUCKY HOMES, INC., represented by WILSON JESENA, JR., as Manager, respondents.[24]

Case Materials in Remedial Law I ReviewJurisdictionBefore this Court is a petition for review on certiorari seeking the reversal of the decision1 of the Court of Appeals dated December 29, 1999 and its resolution dated June 1, 2000 in CA-G.R. SP No. 54587.

The records disclose that, sometime in 1970, petitioner-spouses purchased a parcel of land from private respondent Lucky Homes, Inc., situated in Iloilo and containing an area of 240 square meters. Said lot was specifically denominated as Lot No. 19 under Transfer Certificate of Title (TCT) No. 28254 and was mortgaged to the Social Security System (SSS) as security for their housing loan. Petitioners then started the construction of their house, not on Lot No. 19 but on Lot No. 18, as private respondent mistakenly identified Lot No. 18 as Lot No. 19. Upon realizing its error, private respondent, through its general manager, informed petitioners of such mistake but the latter offered to buy Lot No. 18 in order to widen their premises. Thus, petitioners continued with the construction of their house. However, petitioners defaulted in the payment of their housing loan from SSS. Consequently, Lot No. 19 was foreclosed by SSS and petitioners’ certificate of title was cancelled and a new one was issued in the name of SSS. After Lot No. 19 was foreclosed, petitioners offered to swap Lot Nos. 18 and 19 and demanded from private respondent that their contract of sale be reformed and another deed of sale be executed with respect to Lot No. 18, considering that their house was built therein. However, private respondent refused. This prompted petitioners to file, on June 13, 1996, an action for reformation of contract and damages with the Regional Trial Court of Iloilo City, Branch 36, which was docketed as Civil Case No. 17115.On January 15, 1998, the trial court2 rendered its decision dismissing the complaint for lack of merit and ordering herein petitioners to pay private respondent the amount of P10,000 as moral damages and another P10,000 as attorney’s fees. The pertinent conclusion of the trial court reads as follows:"Aware of such fact, the plaintiff nonetheless continued to stay in the premises of Lot 18 on the proposal that he would also buy the same. Plaintiff however failed to buy Lot 18 and likewise defaulted in the payment of his loan with the SSS involving Lot 19. Consequently Lot 19 was foreclosed and sold at public auction. Thereafter TCT No. T-29950 was cancelled and in lieu thereof TCT No. T-86612 (Exh. ‘9’) was issued in favor of SSS. This being the situation obtaining, the reformation of instruments, even if allowed, or the swapping of Lot 18 and Lot 19 as earlier proposed by the plaintiff, is no longer feasible considering that plaintiff is no longer the owner of Lot 19, otherwise, defendant will be losing Lot 18 without any substitute therefore (sic). Upon the other hand, plaintiff will be unjustly enriching himself having in its favor both Lot 19 which was earlier mortgaged by him and subsequently foreclosed by SSS, as well as Lot 18 where his house is presently standing.

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Case Materials in Remedial Law I ReviewJurisdiction"The logic and common sense of the situation lean heavily in favor of the defendant. It is evident that what plaintiff had bought from the defendant is Lot 19 covered by TCT No. 28254 which parcel of land has been properly indicated in the instruments and not Lot 18 as claimed by the plaintiff. The contracts being clear and unmistakable, they reflect the true intention of the parties, besides the plaintiff failed to assail the contracts on mutual mistake, hence the same need no longer be reformed."3

On June 22, 1998, a writ of execution was issued by the trial court. Thus, on September 17, 1998, petitioners filed an urgent motion to recall writ of execution, alleging that the court a quo had no jurisdiction to try the case as it was vested in the Housing and Land Use Regulatory Board (HLURB) pursuant to PD 957 (The Subdivision and Condominium Buyers Protective Decree). Conformably, petitioners filed a new complaint against private respondent with the HLURB. Likewise, on June 30, 1999, petitioner-spouses filed before the Court of Appeals a petition for annulment of judgment, premised on the ground that the trial court had no jurisdiction to try and decide Civil Case No. 17115.In a decision rendered on December 29, 1999, the Court of Appeals denied the petition for annulment of judgment, relying mainly on the jurisprudential doctrine of estoppel as laid down in the case of Tijam vs. Sibonghanoy.4Their subsequent motion for reconsideration having been denied, petitioners filed this instant petition, contending that the Court of Appeals erred in dismissing the petition by applying the principle of estoppel, even if the Regional Trial Court, Branch 36 of Iloilo City had no jurisdiction to decide Civil Case No. 17115.At the outset, it should be stressed that petitioners are seeking from us the annulment of a trial court judgment based on lack of jurisdiction. Because it is not an appeal, the correctness of the judgment is not in issue here. Accordingly, there is no need to delve into the propriety of the decision rendered by the trial court.Petitioners claim that the recent decisions of this Court have already abandoned the doctrine laid down in Tijam vs. Sibonghanoy.5 We do not agree. In countless decisions, this Court has consistently held that, while an order or decision rendered without jurisdiction is a total nullity and may be assailed at any stage, active participation in the proceedings in the court which rendered the order or decision will bar such party from attacking its jurisdiction. As we held in the leading case of Tijam vs. Sibonghanoy:6"A party may be estopped or barred from raising a question in different ways and for different reasons. Thus we speak of estoppel in pais, or estoppel by deed or by record, and of estoppel by laches.

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Case Materials in Remedial Law I ReviewJurisdictionx x x

"It has been held that a party cannot invoke the jurisdiction of a court to secure affirmative relief against his opponent and, after obtaining or failing to obtain such relief, repudiate, or question that same jurisdiction x x x x [T]he question whether the court had jurisdiction either of the subject matter of the action or of the parties was not important in such cases because the party is barred from such conduct not because the judgment or order of the court is valid and conclusive as an adjudication, but for the reason that such a practice can not be tolerated –– obviously for reasons of public policy."Tijam has been reiterated in many succeeding cases. Thus, in Orosa vs. Court of Appeals;7 Ang Ping vs. Court of Appeals;8 Salva vs. Court of Appeals;9 National Steel Corporation vs. Court of Appeals;10 Province of Bulacan vs. Court of Appeals;11 PNOC Shipping and Transport Corporation vs. Court of Appeals,12 this Court affirmed the rule that a party’s active participation in all stages of the case before the trial court, which includes invoking the court’s authority to grant affirmative relief, effectively estops such party from later challenging that same court’s jurisdiction.In the case at bar, it was petitioners themselves who invoked the jurisdiction of the court a quo by instituting an action for reformation of contract against private respondents. It appears that, in the proceedings before the trial court, petitioners vigorously asserted their cause from start to finish. Not even once did petitioners ever raise the issue of the court’s jurisdiction during the entire proceedings which lasted for two years. It was only after the trial court rendered its decision and issued a writ of execution against them in 1998 did petitioners first raise the issue of jurisdiction ─ and it was only because said decision was unfavorable to them. Petitioners thus effectively waived their right to question the court’s jurisdiction over the case they themselves filed.Petitioners should bear the consequence of their act. They cannot be allowed to profit from their omission to the damage and prejudice of the private respondent. This Court frowns upon the undesirable practice of a party submitting his case for decision and then accepting the judgment but only if favorable, and attacking it for lack of jurisdiction if not.13Public policy dictates that this Court must strongly condemn any double-dealing by parties who are disposed to trifle with the courts by deliberately taking inconsistent positions, in utter disregard of the elementary principles of justice and good faith.14 There is no denying that, in this case, petitioners never raised the issue of jurisdiction throughout the entire proceedings in the trial court. Instead, they voluntarily and willingly submitted themselves to the jurisdiction of said court. It is now too late in the day for them to repudiate the jurisdiction they were invoking all along.

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Case Materials in Remedial Law I ReviewJurisdictionWHEREFORE, the petition for review is hereby DENIED.

SO ORDERED.

G.R. No. 124644           February 5, 2004ARNEL ESCOBAL, petitioner, vsHON. FRANCIS GARCHITORENA, Presiding Justice of the Sandiganbayan, Atty. Luisabel Alfonso-Cortez, Executive Clerk of Court IV of the Sandiganbayan, Hon. David C. Naval, Presiding Judge of the Regional Trial Court of Naga City, Branch 21, Luz N. Nueca, respondents.This is a petition for certiorari with a prayer for the issuance of a temporary restraining order and preliminary injunction filed by Arnel Escobal seeking the nullification of the remand by the Presiding Justice of the Sandiganbayan of the records of Criminal Case No. 90-3184 to the Regional Trial Court (RTC) of Naga City, Branch 21.The petition at bench arose from the following milieu:The petitioner is a graduate of the Philippine Military Academy, a member of the Armed Forces of the Philippines and the Philippine Constabulary, as well as the Intelligence Group of the Philippine National Police. On March 16, 1990, the petitioner was conducting surveillance operations on drug trafficking at the Sa Harong Café Bar and Restaurant located along Barlin St., Naga City. He somehow got involved in a shooting incident, resulting in the death of one Rodney Rafael N. Nueca. On February 6, 1991, an amended Information was filed with the RTC of Naga City, Branch 21, docketed as Criminal Case No. 90-3184 charging the petitioner and a certain Natividad Bombita, Jr. alias "Jun Bombita" with murder. The accusatory portion of the amended Information reads:That on or about March 16, 1990, in the City of Naga, Philippines, and within the jurisdiction of this Honorable Court by virtue of the Presidential Waiver, dated June 1, 1990, with intent to kill, conspiring and confederating together and mutually helping each other, did, then

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Case Materials in Remedial Law I ReviewJurisdictionand there, willfully, unlawfully and feloniously attack, assault and maul one Rodney Nueca and accused 2Lt Arnel Escobal armed with a caliber .45 service pistol shoot said Rodney Nueca thereby inflicting upon him serious, mortal and fatal wounds which caused his death, and as a consequence thereof, complainant LUZ N. NUECA, mother of the deceased victim, suffered actual and compensatory damages in the amount of THREE HUNDRED SIXTY-SEVEN THOUSAND ONE HUNDRED SEVEN & 95/100 (P367,107.95) PESOS, Philippine Currency, and moral and exemplary damages in the amount of ONE HUNDRED THIRTY-FIVE THOUSAND (P135,000.00) PESOS, Philippine Currency.1

On March 19, 1991, the RTC issued an Order preventively suspending the petitioner from the service under Presidential Decree No. 971, as amended by P.D. No. 1847. When apprised of the said order, the General Headquarters of the PNP issued on October 6, 1992 Special Order No. 91, preventively suspending the petitioner from the service until the case was terminated.2The petitioner was arrested by virtue of a warrant issued by the RTC, while accused Bombita remained at large. The petitioner posted bail and was granted temporary liberty.When arraigned on April 9, 1991,3 the petitioner, assisted by counsel, pleaded not guilty to the offense charged. Thereafter, on December 23, 1991, the petitioner filed a Motion to Quash4 the Information alleging that as mandated by Commonwealth Act No. 408,5 in relation to Section 1, Presidential Decree No. 1822 and Section 95 of R.A. No. 6975, the court martial, not the RTC, had jurisdiction over criminal cases involving PNP members and officers.Pending the resolution of the motion, the petitioner on June 25, 1993 requested the Chief of the PNP for his reinstatement. He alleged that under R.A. No. 6975, his suspension should last for only 90 days, and, having served the same, he should now be reinstated. On September 23, 1993,6 the PNP Region V Headquarters wrote Judge David C. Naval requesting information on whether he issued an order lifting the petitioner’s suspension. The RTC did not reply. Thus, on February 22, 1994, the petitioner filed a motion in the RTC for the lifting of the order of suspension. He alleged that he had served the 90-day preventive suspension and pleaded for compassionate justice. The RTC denied the motion on March 9, 1994.7 Trial thereafter proceeded, and the prosecution rested its case. The petitioner commenced the presentation of his evidence. On July 20, 1994, he filed a Motion to Dismiss8 the case. Citing Republic of the Philippines v. Asuncion, et al.,9 he argued that since he committed the crime in the performance of his duties, the Sandiganbayan had exclusive jurisdiction over the case.On October 28, 1994, the RTC issued an Order10 denying the motion to dismiss. It, however, ordered the conduct of a preliminary hearing to

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Case Materials in Remedial Law I ReviewJurisdictiondetermine whether or not the crime charged was committed by the petitioner in relation to his office as a member of the PNP.

In the preliminary hearing, the prosecution manifested that it was no longer presenting any evidence in connection with the petitioner’s motion. It reasoned that it had already rested its case, and that its evidence showed that the petitioner did not commit the offense charged in connection with the performance of his duties as a member of the Philippine Constabulary. According to the prosecution, they were able to show the following facts: (a) the petitioner was not wearing his uniform during the incident; (b) the offense was committed just after midnight; (c) the petitioner was drunk when the crime was committed; (d) the petitioner was in the company of civilians; and, (e) the offense was committed in a beerhouse called "Sa Harong Café Bar and Restaurant."11For his part, the petitioner testified that at about 10:00 p.m. on March 15, 1990, he was at the Sa Harong Café Bar and Restaurant at Barlin St., Naga City, to conduct surveillance on alleged drug trafficking, pursuant to Mission Order No. 03-04 issued by Police Superintendent Rufo R. Pulido. The petitioner adduced in evidence the sworn statements of Benjamin Cariño and Roberto Fajardo who corroborated his testimony that he was on a surveillance mission on the aforestated date.12On July 31, 1995, the trial court issued an Order declaring that the petitioner committed the crime charged while not in the performance of his official function. The trial court added that upon the enactment of R.A. No. 7975,13 the issue had become moot and academic. The amendatory law transferred the jurisdiction over the offense charged from the Sandiganbayan to the RTC since the petitioner did not have a salary grade of "27" as provided for in or by Section 4(a)(1), (3) thereof. The trial court nevertheless ordered the prosecution to amend the Information pursuant to the ruling in Republic v. Asuncion14 and R.A. No. 7975. The amendment consisted in the inclusion therein of an allegation that the offense charged was not committed by the petitioner in the performance of his duties/functions, nor in relation to his office.lawphi1.nêtThe petitioner filed a motion for the reconsideration15 of the said order, reiterating that based on his testimony and those of Benjamin Cariño and Roberto Fajardo, the offense charged was committed by him in relation to his official functions. He asserted that the trial court failed to consider the exceptions to the prohibition. He asserted that R.A. No. 7975, which was enacted on March 30, 1995, could not be applied retroactively.16The petitioner further alleged that Luz Nacario Nueca, the mother of the victim, through counsel, categorically and unequivocably admitted in her complaint filed with the People’s Law Enforcement Board (PLEB) that he was on an official mission when the crime was committed.

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Case Materials in Remedial Law I ReviewJurisdictionOn November 24, 1995, the RTC made a volte face and issued an Order reversing and setting aside its July 31, 1995 Order. It declared that based on the petitioner’s evidence, he was on official mission when the shooting occurred. It concluded that the prosecution failed to adduce controverting evidence thereto. It likewise considered Luz Nacario Nueca’s admission in her complaint before the PLEB that the petitioner was on official mission when the shooting happened.

The RTC ordered the public prosecutor to file a Re-Amended Information and to allege that the offense charged was committed by the petitioner in the performance of his duties/functions or in relation to his office; and, conformably to R.A. No. 7975, to thereafter transmit the same, as well as the complete records with the stenographic notes, to the Sandiganbayan, to wit:WHEREFORE, the Order dated July 31, 1995 is hereby SET ASIDE and RECONSIDERED, and it is hereby declared that after preliminary hearing, this Court has found that the offense charged in the Information herein was committed by the accused in his relation to his function and duty as member of the then Philippine Constabulary.Conformably with R.A. No. 7975 and the ruling of the Supreme Court in Republic v. Asuncion, et al., G.R. No. 180208, March 11, 1994:(1) The City Prosecutor is hereby ordered to file a Re-Amended Information alleging that the offense charged was committed by the Accused in the performance of his duties/functions or in relation to his office, within fifteen (15) days from receipt hereof;(2) After the filing of the Re-Amended Information, the complete records of this case, together with the transcripts of the stenographic notes taken during the entire proceedings herein, are hereby ordered transmitted immediately to the Honorable Sandiganbayan, through its Clerk of Court, Manila, for appropriate proceedings.17On January 8, 1996, the Presiding Justice of the Sandiganbayan ordered the Executive Clerk of Court IV, Atty. Luisabel Alfonso-Cortez, to return the records of Criminal Case No. 90-3184 to the court of origin, RTC of Naga City, Branch 21. It reasoned that under P.D. No. 1606, as amended by R.A. No. 7975,18 the RTC retained jurisdiction over the case, considering that the petitioner had a salary grade of "23." Furthermore, the prosecution had already rested its case and the petitioner had commenced presenting his evidence in the RTC; following the rule on continuity of jurisdiction, the latter court should continue with the case and render judgment therein after trial.Upon the remand of the records, the RTC set the case for trial on May 3, 1996, for the petitioner to continue presenting his evidence. Instead of adducing his evidence, the petitioner filed a petition for certiorari,

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Case Materials in Remedial Law I ReviewJurisdictionassailing the Order of the Presiding Justice of the Sandiganbayan remanding the records of the case to the RTC.

The threshold issue for resolution is whether or not the Presiding Justice of the Sandiganbayan committed a grave abuse of his discretion amounting to excess or lack of jurisdiction in ordering the remand of the case to the RTC.The petitioner contends that when the amended information was filed with the RTC on February 6, 1991, P.D. No. 1606 was still in effect. Under Section 4(a) of the decree, the Sandiganbayan had exclusive jurisdiction over the case against him as he was charged with homicide with the imposable penalty of reclusion temporal, and the crime was committed while in the performance of his duties. He further asserts that although P.D. No. 1606, as amended by P.D. No. 1861 and by R.A. No. 7975 provides that crimes committed by members and officers of the PNP with a salary grade below "27" committed in relation to office are within the exclusive jurisdiction of the proper RTC, the amendment thus introduced by R.A. No. 7975 should not be applied retroactively. This is so, the petitioner asserts, because under Section 7 of R.A. No. 7975, only those cases where trial has not begun in the Sandiganbayan upon the effectivity of the law should be referred to the proper trial court.The private complainant agrees with the contention of the petitioner. In contrast, the Office of the Special Prosecutor contends that the Presiding Justice of the Sandiganbayan acted in accordance with law when he ordered the remand of the case to the RTC. It asserts that R.A. No. 7975 should be applied retroactively. Although the Sandiganbayan had jurisdiction over the crime committed by the petitioner when the amended information was filed with the RTC, by the time it resolved petitioner’s motion to dismiss on July 31, 1995, R.A. No. 7975 had already taken effect. Thus, the law should be given retroactive effect.The Ruling of the CourtThe respondent Presiding Justice acted in accordance with law and the rulings of this Court when he ordered the remand of the case to the RTC, the court of origin.The jurisdiction of the court over criminal cases is determined by the allegations in the Information or the Complaint and the statute in effect at the time of the commencement of the action, unless such statute provides for a retroactive application thereof. The jurisdictional requirements must be alleged in the Information.19 Such jurisdiction of the court acquired at the inception of the case continues until the case is terminated.20

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Case Materials in Remedial Law I ReviewJurisdictionUnder Section 4(a) of P.D. No. 1606 as amended by P.D. No. 1861, the Sandiganbayan had exclusive jurisdiction in all cases involving the following:

(1) Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII of the Revised Penal Code;(2) Other offenses or felonies committed by public officers and employees in relation to their office, including those employed in government-owned or controlled corporations, whether simple or complexed with other crimes, where the penalty prescribed by law is higher than prision correccional or imprisonment for six (6) years, or a fine of P6,000.00 ….21However, for the Sandiganbayan to have exclusive jurisdiction under the said law over crimes committed by public officers in relation to their office, it is essential that the facts showing the intimate relation between the office of the offender and the discharge of official duties must be alleged in the Information. It is not enough to merely allege in the Information that the crime charged was committed by the offender in relation to his office because that would be a conclusion of law.22 The amended Information filed with the RTC against the petitioner does not contain any allegation showing the intimate relation between his office and the discharge of his duties. Hence, the RTC had jurisdiction over the offense charged when on November 24, 1995, it ordered the re-amendment of the Information to include therein an allegation that the petitioner committed the crime in relation to office. The trial court erred when it ordered the elevation of the records to the Sandiganbayan. It bears stressing that R.A. No. 7975 amending P.D. No. 1606 was already in effect and under Section 2 of the law:In cases where none of the principal accused are occupying positions corresponding to salary grade "27" or higher, as prescribed in the said Republic Act No. 6758, or PNP officers occupying the rank of superintendent or higher, or their equivalent, exclusive jurisdiction thereof shall be vested in the proper Regional Trial Court, Metropolitan Trial Court, Municipal Trial Court, and Municipal Circuit Trial Court, as the case may be, pursuant to their respective jurisdiction as provided in Batas Pambansa Blg. 129.Under the law, even if the offender committed the crime charged in relation to his office but occupies a position corresponding to a salary grade below "27," the proper Regional Trial Court or Municipal Trial Court, as the case may be, shall have exclusive jurisdiction over the case. In this case, the petitioner was a Police Senior Inspector, with salary grade "23." He was charged with homicide punishable by reclusion temporal. Hence, the RTC had exclusive jurisdiction over the crime charged conformably to Sections 20 and 32 of Batas Pambansa Blg. 129, as amended by Section 2 of R.A. No. 7691.

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Case Materials in Remedial Law I ReviewJurisdictionThe petitioner’s contention that R.A. No. 7975 should not be applied retroactively has no legal basis. It bears stressing that R.A. No. 7975 is a substantive procedural law which may be applied retroactively.23

IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED. No pronouncement as to costs.SO ORDERED.G.R. No. 155001            May 5, 2003DEMOSTHENES P. AGAN, JR., JOSEPH B. CATAHAN, JOSE MARI B. REUNILLA, MANUEL ANTONIO B. BOÑE, MAMERTO S. CLARA, REUEL E. DIMALANTA, MORY V. DOMALAON, CONRADO G. DIMAANO, LOLITA R. HIZON, REMEDIOS P. ADOLFO, BIENVENIDO C. HILARIO, MIASCOR WORKERS UNION - NATIONAL LABOR UNION (MWU-NLU), and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), petitioners, vs.PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS and SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and Communications, respondents,MIASCOR GROUNDHANDLING CORPORATION, DNATA-WINGS AVIATION SYSTEMS CORPORATION, MACROASIA-EUREST SERVICES, INC., MACROASIA-MENZIES AIRPORT SERVICES CORPORATION, MIASCOR CATERING SERVICES CORPORATION, MIASCOR AIRCRAFT MAINTENANCE CORPORATION, and MIASCOR LOGISTICS CORPORATION, petitioners-in-intervention,x---------------------------------------------------------xG.R. No. 155547 May 5, 2003SALACNIB F. BATERINA, CLAVEL A. MARTINEZ and CONSTANTINO G. JARAULA, petitioners, vs.PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and Communications, and SECRETARY SIMEON A. DATUMANONG, in his capacity as Head of the Department of Public Works and Highways, respondents,JACINTO V. PARAS, RAFAEL P. NANTES, EDUARDO C. ZIALCITA, WILLY BUYSON VILLARAMA, PROSPERO C. NOGRALES, PROSPERO A. PICHAY, JR., HARLIN CAST ABAYON, and BENASING O. MACARANBON, respondents-intervenors,x---------------------------------------------------------x

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Case Materials in Remedial Law I ReviewJurisdictionG.R. No. 155661 May 5, 2003CEFERINO C. LOPEZ, RAMON M. SALES, ALFREDO B. VALENCIA, MA. TERESA V. GAERLAN, LEONARDO DE LA ROSA, DINA C. DE LEON, VIRGIE CATAMIN RONALD SCHLOBOM, ANGELITO SANTOS, MA. LUISA M. PALCON and SAMAHANG MANGGAGAWA SA PALIPARAN NG PILIPINAS (SMPP), petitioners, vs.PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and Communications, respondents.

Petitioners and petitioners-in-intervention filed the instant petitions for prohibition under Rule 65 of the Revised Rules of Court seeking to prohibit the Manila International Airport Authority (MIAA) and the Department of Transportation and Communications (DOTC) and its Secretary from implementing the following agreements executed by the Philippine Government through the DOTC and the MIAA and the Philippine International Air Terminals Co., Inc. (PIATCO): (1) the Concession Agreement signed on July 12, 1997, (2) the Amended and Restated Concession Agreement dated November 26, 1999, (3) the First Supplement to the Amended and Restated Concession Agreement dated August 27, 1999, (4) the Second Supplement to the Amended and Restated Concession Agreement dated September 4, 2000, and (5) the Third Supplement to the Amended and Restated Concession Agreement dated June 22, 2001 (collectively, the PIATCO Contracts).The facts are as follows:In August 1989, the DOTC engaged the services of Aeroport de Paris (ADP) to conduct a comprehensive study of the Ninoy Aquino International Airport (NAIA) and determine whether the present airport can cope with the traffic development up to the year 2010. The study consisted of two parts: first, traffic forecasts, capacity of existing facilities, NAIA future requirements, proposed master plans and development plans; and second, presentation of the preliminary design of the passenger terminal building. The ADP submitted a Draft Final Report to the DOTC in December 1989.Some time in 1993, six business leaders consisting of John Gokongwei, Andrew Gotianun, Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with then President Fidel V. Ramos to explore the possibility of investing in the construction and operation of a new international airport terminal. To signify their commitment to pursue the project, they formed the Asia's Emerging Dragon Corp. (AEDC) which was registered with the Securities and Exchange Commission (SEC) on September 15, 1993.

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Case Materials in Remedial Law I ReviewJurisdictionOn October 5, 1994, AEDC submitted an unsolicited proposal to the Government through the DOTC/MIAA for the development of NAIA International Passenger Terminal III (NAIA IPT III) under a build-operate-and-transfer arrangement pursuant to RA 6957 as amended by RA 7718 (BOT Law).1

On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting the Prequalification Bids and Awards Committee (PBAC) for the implementation of the NAIA IPT III project.On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal of AEDC to the National Economic and Development Authority (NEDA). A revised proposal, however, was forwarded by the DOTC to NEDA on December 13, 1995. On January 5, 1996, the NEDA Investment Coordinating Council (NEDA ICC) – Technical Board favorably endorsed the project to the ICC – Cabinet Committee which approved the same, subject to certain conditions, on January 19, 1996. On February 13, 1996, the NEDA passed Board Resolution No. 2 which approved the NAIA IPT III project.On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of an invitation for competitive or comparative proposals on AEDC's unsolicited proposal, in accordance with Sec. 4-A of RA 6957, as amended. The alternative bidders were required to submit three (3) sealed envelopes on or before 5:00 p.m. of September 20, 1996. The first envelope should contain the Prequalification Documents, the second envelope the Technical Proposal, and the third envelope the Financial Proposal of the proponent.On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing the availment of the Bid Documents and the submission of the comparative bid proposals. Interested firms were permitted to obtain the Request for Proposal Documents beginning June 28, 1996, upon submission of a written application and payment of a non-refundable fee of P50,000.00 (US$2,000).The Bid Documents issued by the PBAC provided among others that the proponent must have adequate capability to sustain the financing requirement for the detailed engineering, design, construction, operation, and maintenance phases of the project. The proponent would be evaluated based on its ability to provide a minimum amount of equity to the project, and its capacity to secure external financing for the project.On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders to a pre-bid conference on July 29, 1996.

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Case Materials in Remedial Law I ReviewJurisdictionOn August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents. The following amendments were made on the Bid Documents:

a. Aside from the fixed Annual Guaranteed Payment, the proponent shall include in its financial proposal an additional percentage of gross revenue share of the Government, as follows: i. First 5 years 5.0%ii. Next 10 years 7.5%iii. Next 10 years 10.0%

b. The amount of the fixed Annual Guaranteed Payment shall be subject of the price challenge. Proponent may offer an Annual Guaranteed Payment which need not be of equal amount, but payment of which shall start upon site possession.c. The project proponent must have adequate capability to sustain the financing requirement for the detailed engineering, design, construction, and/or operation and maintenance phases of the project as the case may be. For purposes of pre-qualification, this capability shall be measured in terms of:i. Proof of the availability of the project proponent and/or the consortium to provide the minimum amount of equity for the project; andii. a letter testimonial from reputable banks attesting that the project proponent and/or the members of the consortium are banking with them, that the project proponent and/or the members are of good financial standing, and have adequate resources.d. The basis for the prequalification shall be the proponent's compliance with the minimum technical and financial requirements provided in the Bid Documents and the IRR of the BOT Law. The minimum amount of equity shall be 30% of the Project Cost.e. Amendments to the draft Concession Agreement shall be issued from time to time. Said amendments shall only cover items that would not materially affect the preparation of the proponent's proposal.On August 29, 1996, the Second Pre-Bid Conference was held where certain clarifications were made. Upon the request of prospective bidder People's Air Cargo & Warehousing Co., Inc (Paircargo), the PBAC warranted that based on Sec. 11.6, Rule 11 of the Implementing Rules and Regulations of the BOT Law, only the proposed Annual Guaranteed Payment submitted by the challengers would be revealed to AEDC, and that the challengers' technical and financial proposals would remain

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Case Materials in Remedial Law I ReviewJurisdictionconfidential. The PBAC also clarified that the list of revenue sources contained in Annex 4.2a of the Bid Documents was merely indicative and that other revenue sources may be included by the proponent, subject to approval by DOTC/MIAA. Furthermore, the PBAC clarified that only those fees and charges denominated as Public Utility Fees would be subject to regulation, and those charges which would be actually deemed Public Utility Fees could still be revised, depending on the outcome of PBAC's query on the matter with the Department of Justice.

In September 1996, the PBAC issued Bid Bulletin No. 5, entitled "Answers to the Queries of PAIRCARGO as Per Letter Dated September 3 and 10, 1996." Paircargo's queries and the PBAC's responses were as follows:1. It is difficult for Paircargo and Associates to meet the required minimum equity requirement as prescribed in Section 8.3.4 of the Bid Documents considering that the capitalization of each member company is so structured to meet the requirements and needs of their current respective business undertaking/activities. In order to comply with this equity requirement, Paircargo is requesting PBAC to just allow each member of (sic) corporation of the Joint Venture to just execute an agreement that embodies a commitment to infuse the required capital in case the project is awarded to the Joint Venture instead of increasing each corporation's current authorized capital stock just for prequalification purposes.In prequalification, the agency is interested in one's financial capability at the time of prequalification, not future or potential capability.A commitment to put up equity once awarded the project is not enough to establish that "present" financial capability. However, total financial capability of all member companies of the Consortium, to be established by submitting the respective companies' audited financial statements, shall be acceptable.2. At present, Paircargo is negotiating with banks and other institutions for the extension of a Performance Security to the joint venture in the event that the Concessions Agreement (sic) is awarded to them. However, Paircargo is being required to submit a copy of the draft concession as one of the documentary requirements. Therefore, Paircargo is requesting that they'd (sic) be furnished copy of the approved negotiated agreement between the PBAC and the AEDC at the soonest possible time. A copy of the draft Concession Agreement is included in the Bid Documents. Any material changes would be made known to prospective challengers through bid bulletins. However, a final version will be issued before the award of contract.

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Case Materials in Remedial Law I ReviewJurisdictionThe PBAC also stated that it would require AEDC to sign Supplement C of the Bid Documents (Acceptance of Criteria and Waiver of Rights to Enjoin Project) and to submit the same with the required Bid Security.

On September 20, 1996, the consortium composed of People's Air Cargo and Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium) submitted their competitive proposal to the PBAC. On September 23, 1996, the PBAC opened the first envelope containing the prequalification documents of the Paircargo Consortium. On the following day, September 24, 1996, the PBAC prequalified the Paircargo Consortium.On September 26, 1996, AEDC informed the PBAC in writing of its reservations as regards the Paircargo Consortium, which include:a. The lack of corporate approvals and financial capability of PAIRCARGO;b. The lack of corporate approvals and financial capability of PAGS;c. The prohibition imposed by RA 337, as amended (the General Banking Act) on the amount that Security Bank could legally invest in the project;d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for prequalification purposes; ande. The appointment of Lufthansa as the facility operator, in view of the Philippine requirement in the operation of a public utility.The PBAC gave its reply on October 2, 1996, informing AEDC that it had considered the issues raised by the latter, and that based on the documents submitted by Paircargo and the established prequalification criteria, the PBAC had found that the challenger, Paircargo, had prequalified to undertake the project. The Secretary of the DOTC approved the finding of the PBAC.The PBAC then proceeded with the opening of the second envelope of the Paircargo Consortium which contained its Technical Proposal.On October 3, 1996, AEDC reiterated its objections, particularly with respect to Paircargo's financial capability, in view of the restrictions imposed by Section 21-B of the General Banking Act and Sections 1380 and 1381 of the Manual Regulations for Banks and Other Financial Intermediaries. On October 7, 1996, AEDC again manifested its objections and requested that it be furnished with excerpts of the PBAC meeting and the accompanying technical evaluation report where each of the issues they raised were addressed.

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Case Materials in Remedial Law I ReviewJurisdictionOn October 16, 1996, the PBAC opened the third envelope submitted by AEDC and the Paircargo Consortium containing their respective financial proposals. Both proponents offered to build the NAIA Passenger Terminal III for at least $350 million at no cost to the government and to pay the government: 5% share in gross revenues for the first five years of operation, 7.5% share in gross revenues for the next ten years of operation, and 10% share in gross revenues for the last ten years of operation, in accordance with the Bid Documents. However, in addition to the foregoing, AEDC offered to pay the government a total of P135 million as guaranteed payment for 27 years while Paircargo Consortium offered to pay the government a total of P17.75 billion for the same period.

Thus, the PBAC formally informed AEDC that it had accepted the price proposal submitted by the Paircargo Consortium, and gave AEDC 30 working days or until November 28, 1996 within which to match the said bid, otherwise, the project would be awarded to Paircargo.As AEDC failed to match the proposal within the 30-day period, then DOTC Secretary Amado Lagdameo, on December 11, 1996, issued a notice to Paircargo Consortium regarding AEDC's failure to match the proposal.On February 27, 1997, Paircargo Consortium incorporated into Philippine International Airport Terminals Co., Inc. (PIATCO).AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated its objections as regards the prequalification of PIATCO.On April 11, 1997, the DOTC submitted the concession agreement for the second-pass approval of the NEDA-ICC.On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a Petition for Declaration of Nullity of the Proceedings, Mandamus and Injunction against the Secretary of the DOTC, the Chairman of the PBAC, the voting members of the PBAC and Pantaleon D. Alvarez, in his capacity as Chairman of the PBAC Technical Committee.On April 17, 1997, the NEDA-ICC conducted an ad referendum to facilitate the approval, on a no-objection basis, of the BOT agreement between the DOTC and PIATCO. As the ad referendum gathered only four (4) of the required six (6) signatures, the NEDA merely noted the agreement.On July 9, 1997, the DOTC issued the notice of award for the project to PIATCO.

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Case Materials in Remedial Law I ReviewJurisdictionOn July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and PIATCO, through its President, Henry T. Go, signed the "Concession Agreement for the Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III" (1997 Concession Agreement). The Government granted PIATCO the franchise to operate and maintain the said terminal during the concession period and to collect the fees, rentals and other charges in accordance with the rates or schedules stipulated in the 1997 Concession Agreement. The Agreement provided that the concession period shall be for twenty-five (25) years commencing from the in-service date, and may be renewed at the option of the Government for a period not exceeding twenty-five (25) years. At the end of the concession period, PIATCO shall transfer the development facility to MIAA.

On November 26, 1998, the Government and PIATCO signed an Amended and Restated Concession Agreement (ARCA). Among the provisions of the 1997 Concession Agreement that were amended by the ARCA were: Sec. 1.11 pertaining to the definition of "certificate of completion"; Sec. 2.05 pertaining to the Special Obligations of GRP; Sec. 3.02 (a) dealing with the exclusivity of the franchise given to the Concessionaire; Sec. 4.04 concerning the assignment by Concessionaire of its interest in the Development Facility; Sec. 5.08 (c) dealing with the proceeds of Concessionaire's insurance; Sec. 5.10 with respect to the temporary take-over of operations by GRP; Sec. 5.16 pertaining to the taxes, duties and other imposts that may be levied on the Concessionaire; Sec. 6.03 as regards the periodic adjustment of public utility fees and charges; the entire Article VIII concerning the provisions on the termination of the contract; and Sec. 10.02 providing for the venue of the arbitration proceedings in case a dispute or controversy arises between the parties to the agreement.Subsequently, the Government and PIATCO signed three Supplements to the ARCA. The First Supplement was signed on August 27, 1999; the Second Supplement on September 4, 2000; and the Third Supplement on June 22, 2001 (collectively, Supplements).The First Supplement to the ARCA amended Sec. 1.36 of the ARCA defining "Revenues" or "Gross Revenues"; Sec. 2.05 (d) of the ARCA referring to the obligation of MIAA to provide sufficient funds for the upkeep, maintenance, repair and/or replacement of all airport facilities and equipment which are owned or operated by MIAA; and further providing additional special obligations on the part of GRP aside from those already enumerated in Sec. 2.05 of the ARCA. The First Supplement also provided a stipulation as regards the construction of a surface road to connect NAIA Terminal II and Terminal III in lieu of the proposed access tunnel crossing Runway 13/31; the swapping of obligations between GRP and PIATCO regarding the improvement of Sales Road; and the changes in the timetable. It also amended Sec. 6.01

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Case Materials in Remedial Law I ReviewJurisdiction(c) of the ARCA pertaining to the Disposition of Terminal Fees; Sec. 6.02 of the ARCA by inserting an introductory paragraph; and Sec. 6.02 (a) (iii) of the ARCA referring to the Payments of Percentage Share in Gross Revenues.

The Second Supplement to the ARCA contained provisions concerning the clearing, removal, demolition or disposal of subterranean structures uncovered or discovered at the site of the construction of the terminal by the Concessionaire. It defined the scope of works; it provided for the procedure for the demolition of the said structures and the consideration for the same which the GRP shall pay PIATCO; it provided for time extensions, incremental and consequential costs and losses consequent to the existence of such structures; and it provided for some additional obligations on the part of PIATCO as regards the said structures.Finally, the Third Supplement provided for the obligations of the Concessionaire as regards the construction of the surface road connecting Terminals II and III.Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA Terminals I and II, had existing concession contracts with various service providers to offer international airline airport services, such as in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing, and other services, to several international airlines at the NAIA. Some of these service providers are the Miascor Group, DNATA-Wings Aviation Systems Corp., and the MacroAsia Group. Miascor, DNATA and MacroAsia, together with Philippine Airlines (PAL), are the dominant players in the industry with an aggregate market share of 70%.On September 17, 2002, the workers of the international airline service providers, claiming that they stand to lose their employment upon the implementation of the questioned agreements, filed before this Court a petition for prohibition to enjoin the enforcement of said agreements.2On October 15, 2002, the service providers, joining the cause of the petitioning workers, filed a motion for intervention and a petition-in-intervention.On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and Constantino Jaraula filed a similar petition with this Court.3 On November 6, 2002, several employees of the MIAA likewise filed a petition assailing the legality of the various agreements.4On December 11, 2002. another group of Congressmen, Hon. Jacinto V. Paras, Rafael P. Nantes, Eduardo C. Zialcita, Willie B. Villarama, Prospero C. Nograles, Prospero A. Pichay, Jr., Harlin Cast Abayon and Benasing O. Macaranbon, moved to intervene in the case as

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Case Materials in Remedial Law I ReviewJurisdictionRespondents-Intervenors. They filed their Comment-In-Intervention defending the validity of the assailed agreements and praying for the dismissal of the petitions.

During the pendency of the case before this Court, President Gloria Macapagal Arroyo, on November 29, 2002, in her speech at the 2002 Golden Shell Export Awards at Malacañang Palace, stated that she will not "honor (PIATCO) contracts which the Executive Branch's legal offices have concluded (as) null and void."5Respondent PIATCO filed its Comments to the present petitions on November 7 and 27, 2002. The Office of the Solicitor General and the Office of the Government Corporate Counsel filed their respective Comments in behalf of the public respondents.On December 10, 2002, the Court heard the case on oral argument. After the oral argument, the Court then resolved in open court to require the parties to file simultaneously their respective Memoranda in amplification of the issues heard in the oral arguments within 30 days and to explore the possibility of arbitration or mediation as provided in the challenged contracts.In their consolidated Memorandum, the Office of the Solicitor General and the Office of the Government Corporate Counsel prayed that the present petitions be given due course and that judgment be rendered declaring the 1997 Concession Agreement, the ARCA and the Supplements thereto void for being contrary to the Constitution, the BOT Law and its Implementing Rules and Regulations.On March 6, 2003, respondent PIATCO informed the Court that on March 4, 2003 PIATCO commenced arbitration proceedings before the International Chamber of Commerce, International Court of Arbitration (ICC) by filing a Request for Arbitration with the Secretariat of the ICC against the Government of the Republic of the Philippines acting through the DOTC and MIAA.In the present cases, the Court is again faced with the task of resolving complicated issues made difficult by their intersecting legal and economic implications. The Court is aware of the far reaching fall out effects of the ruling which it makes today. For more than a century and whenever the exigencies of the times demand it, this Court has never shirked from its solemn duty to dispense justice and resolve "actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction."6 To be sure, this Court will not begin to do otherwise today.

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Case Materials in Remedial Law I ReviewJurisdictionWe shall first dispose of the procedural issues raised by respondent PIATCO which they allege will bar the resolution of the instant controversy.

Petitioners' Legal Standing to Filethe present Petitionsa. G.R. Nos. 155001 and 155661In G.R. No. 155001 individual petitioners are employees of various service providers7 having separate concession contracts with MIAA and continuing service agreements with various international airlines to provide in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing and other services. Also included as petitioners are labor unions MIASCOR Workers Union-National Labor Union and Philippine Airlines Employees Association. These petitioners filed the instant action for prohibition as taxpayers and as parties whose rights and interests stand to be violated by the implementation of the PIATCO Contracts.Petitioners-Intervenors in the same case are all corporations organized and existing under Philippine laws engaged in the business of providing in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing and other services to several international airlines at the Ninoy Aquino International Airport. Petitioners-Intervenors allege that as tax-paying international airline and airport-related service operators, each one of them stands to be irreparably injured by the implementation of the PIATCO Contracts. Each of the petitioners-intervenors have separate and subsisting concession agreements with MIAA and with various international airlines which they allege are being interfered with and violated by respondent PIATCO.In G.R. No. 155661, petitioners constitute employees of MIAA and Samahang Manggagawa sa Paliparan ng Pilipinas - a legitimate labor union and accredited as the sole and exclusive bargaining agent of all the employees in MIAA. Petitioners anchor their petition for prohibition on the nullity of the contracts entered into by the Government and PIATCO regarding the build-operate-and-transfer of the NAIA IPT III. They filed the petition as taxpayers and persons who have a legitimate interest to protect in the implementation of the PIATCO Contracts.Petitioners in both cases raise the argument that the PIATCO Contracts contain stipulations which directly contravene numerous provisions of the Constitution, specific provisions of the BOT Law and its Implementing Rules and Regulations, and public policy. Petitioners contend that the DOTC and the MIAA, by entering into said contracts, have committed grave abuse of discretion amounting to lack or excess of jurisdiction

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Case Materials in Remedial Law I ReviewJurisdictionwhich can be remedied only by a writ of prohibition, there being no plain, speedy or adequate remedy in the ordinary course of law.

In particular, petitioners assail the provisions in the 1997 Concession Agreement and the ARCA which grant PIATCO the exclusive right to operate a commercial international passenger terminal within the Island of Luzon, except those international airports already existing at the time of the execution of the agreement. The contracts further provide that upon the commencement of operations at the NAIA IPT III, the Government shall cause the closure of Ninoy Aquino International Airport Passenger Terminals I and II as international passenger terminals. With respect to existing concession agreements between MIAA and international airport service providers regarding certain services or operations, the 1997 Concession Agreement and the ARCA uniformly provide that such services or operations will not be carried over to the NAIA IPT III and PIATCO is under no obligation to permit such carry over except through a separate agreement duly entered into with PIATCO.8With respect to the petitioning service providers and their employees, upon the commencement of operations of the NAIA IPT III, they allege that they will be effectively barred from providing international airline airport services at the NAIA Terminals I and II as all international airlines and passengers will be diverted to the NAIA IPT III. The petitioning service providers will thus be compelled to contract with PIATCO alone for such services, with no assurance that subsisting contracts with MIAA and other international airlines will be respected. Petitioning service providers stress that despite the very competitive market, the substantial capital investments required and the high rate of fees, they entered into their respective contracts with the MIAA with the understanding that the said contracts will be in force for the stipulated period, and thereafter, renewed so as to allow each of the petitioning service providers to recoup their investments and obtain a reasonable return thereon.Petitioning employees of various service providers at the NAIA Terminals I and II and of MIAA on the other hand allege that with the closure of the NAIA Terminals I and II as international passenger terminals under the PIATCO Contracts, they stand to lose employment.The question on legal standing is whether such parties have "alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions."9 Accordingly, it has been held that the interest of a person assailing the constitutionality of a statute must be direct and personal. He must be able to show, not only that the law or any government act is invalid, but also that he sustained or is in imminent danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. It must appear that the person complaining has been or is about to be denied

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Case Materials in Remedial Law I ReviewJurisdictionsome right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute or act complained of.10

We hold that petitioners have the requisite standing. In the above-mentioned cases, petitioners have a direct and substantial interest to protect by reason of the implementation of the PIATCO Contracts. They stand to lose their source of livelihood, a property right which is zealously protected by the Constitution. Moreover, subsisting concession agreements between MIAA and petitioners-intervenors and service contracts between international airlines and petitioners-intervenors stand to be nullified or terminated by the operation of the NAIA IPT III under the PIATCO Contracts. The financial prejudice brought about by the PIATCO Contracts on petitioners and petitioners-intervenors in these cases are legitimate interests sufficient to confer on them the requisite standing to file the instant petitions.b. G.R. No. 155547In G.R. No. 155547, petitioners filed the petition for prohibition as members of the House of Representatives, citizens and taxpayers. They allege that as members of the House of Representatives, they are especially interested in the PIATCO Contracts, because the contracts compel the Government and/or the House of Representatives to appropriate funds necessary to comply with the provisions therein.11 They cite provisions of the PIATCO Contracts which require disbursement of unappropriated amounts in compliance with the contractual obligations of the Government. They allege that the Government obligations in the PIATCO Contracts which compel government expenditure without appropriation is a curtailment of their prerogatives as legislators, contrary to the mandate of the Constitution that "[n]o money shall be paid out of the treasury except in pursuance of an appropriation made by law."12Standing is a peculiar concept in constitutional law because in some cases, suits are not brought by parties who have been personally injured by the operation of a law or any other government act but by concerned citizens, taxpayers or voters who actually sue in the public interest. Although we are not unmindful of the cases of Imus Electric Co. v. Municipality of Imus13 and Gonzales v. Raquiza14 wherein this Court held that appropriation must be made only on amounts immediately demandable, public interest demands that we take a more liberal view in determining whether the petitioners suing as legislators, taxpayers and citizens have locus standi to file the instant petition. In Kilosbayan, Inc. v. Guingona,15 this Court held "[i]n line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of Congress, and even association of planters, and non-profit civic organizations were allowed to initiate and prosecute actions before this Court to question the constitutionality or validity of laws, acts, decisions, rulings, or orders of

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Case Materials in Remedial Law I ReviewJurisdictionvarious government agencies or instrumentalities."16 Further, "insofar as taxpayers' suits are concerned . . . (this Court) is not devoid of discretion as to whether or not it should be entertained."17 As such ". . . even if, strictly speaking, they [the petitioners] are not covered by the definition, it is still within the wide discretion of the Court to waive the requirement and so remove the impediment to its addressing and resolving the serious constitutional questions raised."18 In view of the serious legal questions involved and their impact on public interest, we resolve to grant standing to the petitioners.

Other Procedural MattersRespondent PIATCO further alleges that this Court is without jurisdiction to review the instant cases as factual issues are involved which this Court is ill-equipped to resolve. Moreover, PIATCO alleges that submission of this controversy to this Court at the first instance is a violation of the rule on hierarchy of courts. They contend that trial courts have concurrent jurisdiction with this Court with respect to a special civil action for prohibition and hence, following the rule on hierarchy of courts, resort must first be had before the trial courts.After a thorough study and careful evaluation of the issues involved, this Court is of the view that the crux of the instant controversy involves significant legal questions. The facts necessary to resolve these legal questions are well established and, hence, need not be determined by a trial court.The rule on hierarchy of courts will not also prevent this Court from assuming jurisdiction over the cases at bar. The said rule may be relaxed when the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of this Court's primary jurisdiction.19It is easy to discern that exceptional circumstances exist in the cases at bar that call for the relaxation of the rule. Both petitioners and respondents agree that these cases are of transcendental importance as they involve the construction and operation of the country's premier international airport. Moreover, the crucial issues submitted for resolution are of first impression and they entail the proper legal interpretation of key provisions of the Constitution, the BOT Law and its Implementing Rules and Regulations. Thus, considering the nature of the controversy before the Court, procedural bars may be lowered to give way for the speedy disposition of the instant cases.Legal Effect of the Commencementof Arbitration Proceedings by

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Case Materials in Remedial Law I ReviewJurisdictionPIATCO

There is one more procedural obstacle which must be overcome. The Court is aware that arbitration proceedings pursuant to Section 10.02 of the ARCA have been filed at the instance of respondent PIATCO. Again, we hold that the arbitration step taken by PIATCO will not oust this Court of its jurisdiction over the cases at bar.In Del Monte Corporation-USA v. Court of Appeals,20 even after finding that the arbitration clause in the Distributorship Agreement in question is valid and the dispute between the parties is arbitrable, this Court affirmed the trial court's decision denying petitioner's Motion to Suspend Proceedings pursuant to the arbitration clause under the contract. In so ruling, this Court held that as contracts produce legal effect between the parties, their assigns and heirs, only the parties to the Distributorship Agreement are bound by its terms, including the arbitration clause stipulated therein. This Court ruled that arbitration proceedings could be called for but only with respect to the parties to the contract in question. Considering that there are parties to the case who are neither parties to the Distributorship Agreement nor heirs or assigns of the parties thereto, this Court, citing its previous ruling in Salas, Jr. v. Laperal Realty Corporation,21 held that to tolerate the splitting of proceedings by allowing arbitration as to some of the parties on the one hand and trial for the others on the other hand would, in effect, result in multiplicity of suits, duplicitous procedure and unnecessary delay.22 Thus, we ruled that the interest of justice would best be served if the trial court hears and adjudicates the case in a single and complete proceeding.It is established that petitioners in the present cases who have presented legitimate interests in the resolution of the controversy are not parties to the PIATCO Contracts. Accordingly, they cannot be bound by the arbitration clause provided for in the ARCA and hence, cannot be compelled to submit to arbitration proceedings. A speedy and decisive resolution of all the critical issues in the present controversy, including those raised by petitioners, cannot be made before an arbitral tribunal. The object of arbitration is precisely to allow an expeditious determination of a dispute. This objective would not be met if this Court were to allow the parties to settle the cases by arbitration as there are certain issues involving non-parties to the PIATCO Contracts which the arbitral tribunal will not be equipped to resolve.Now, to the merits of the instant controversy.IIs PIATCO a qualified bidder?Public respondents argue that the Paircargo Consortium, PIATCO's predecessor, was not a duly pre-qualified bidder on the unsolicited

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Case Materials in Remedial Law I ReviewJurisdictionproposal submitted by AEDC as the Paircargo Consortium failed to meet the financial capability required under the BOT Law and the Bid Documents. They allege that in computing the ability of the Paircargo Consortium to meet the minimum equity requirements for the project, the entire net worth of Security Bank, a member of the consortium, should not be considered.

PIATCO relies, on the other hand, on the strength of the Memorandum dated October 14, 1996 issued by the DOTC Undersecretary Primitivo C. Cal stating that the Paircargo Consortium is found to have a combined net worth of P3,900,000,000.00, sufficient to meet the equity requirements of the project. The said Memorandum was in response to a letter from Mr. Antonio Henson of AEDC to President Fidel V. Ramos questioning the financial capability of the Paircargo Consortium on the ground that it does not have the financial resources to put up the required minimum equity of P2,700,000,000.00. This contention is based on the restriction under R.A. No. 337, as amended or the General Banking Act that a commercial bank cannot invest in any single enterprise in an amount more than 15% of its net worth. In the said Memorandum, Undersecretary Cal opined:The Bid Documents, as clarified through Bid Bulletin Nos. 3 and 5, require that financial capability will be evaluated based on total financial capability of all the member companies of the [Paircargo] Consortium. In this connection, the Challenger was found to have a combined net worth of P3,926,421,242.00 that could support a project costing approximately P13 Billion.It is not a requirement that the net worth must be "unrestricted." To impose that as a requirement now will be nothing less than unfair.The financial statement or the net worth is not the sole basis in establishing financial capability. As stated in Bid Bulletin No. 3, financial capability may also be established by testimonial letters issued by reputable banks. The Challenger has complied with this requirement.To recap, net worth reflected in the Financial Statement should not be taken as the amount of the money to be used to answer the required thirty percent (30%) equity of the challenger but rather to be used in establishing if there is enough basis to believe that the challenger can comply with the required 30% equity. In fact, proof of sufficient equity is required as one of the conditions for award of contract (Section 12.1 IRR of the BOT Law) but not for pre-qualification (Section 5.4 of the same document).23Under the BOT Law, in case of a build-operate-and-transfer arrangement, the contract shall be awarded to the bidder "who, having satisfied the minimum financial, technical, organizational and legal standards" required by the law, has submitted the lowest bid and most favorable

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Case Materials in Remedial Law I ReviewJurisdictionterms of the project.24 Further, the 1994 Implementing Rules and Regulations of the BOT Law provide:

Section 5.4 Pre-qualification Requirements.xxx           xxx           xxxc. Financial Capability: The project proponent must have adequate capability to sustain the financing requirements for the detailed engineering design, construction and/or operation and maintenance phases of the project, as the case may be. For purposes of pre-qualification, this capability shall be measured in terms of (i) proof of the ability of the project proponent and/or the consortium to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable banks attesting that the project proponent and/or members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources. The government agency/LGU concerned shall determine on a project-to-project basis and before pre-qualification, the minimum amount of equity needed. (emphasis supplied)Pursuant to this provision, the PBAC issued PBAC Bulletin No. 3 dated August 16, 1996 amending the financial capability requirements for pre-qualification of the project proponent as follows:6. Basis of Pre-qualificationThe basis for the pre-qualification shall be on the compliance of the proponent to the minimum technical and financial requirements provided in the Bid Documents and in the IRR of the BOT Law, R.A. No. 6957, as amended by R.A. 7718.The minimum amount of equity to which the proponent's financial capability will be based shall be thirty percent (30%) of the project cost instead of the twenty percent (20%) specified in Section 3.6.4 of the Bid Documents. This is to correlate with the required debt-to-equity ratio of 70:30 in Section 2.01a of the draft concession agreement. The debt portion of the project financing should not exceed 70% of the actual project cost.Accordingly, based on the above provisions of law, the Paircargo Consortium or any challenger to the unsolicited proposal of AEDC has to show that it possesses the requisite financial capability to undertake the project in the minimum amount of 30% of the project cost through (i) proof of the ability to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable banks attesting that the project proponent or members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources.

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Case Materials in Remedial Law I ReviewJurisdictionAs the minimum project cost was estimated to be US$350,000,000.00 or roughly P9,183,650,000.00,25 the Paircargo Consortium had to show to the satisfaction of the PBAC that it had the ability to provide the minimum equity for the project in the amount of at least P2,755,095,000.00.

Paircargo's Audited Financial Statements as of 1993 and 1994 indicated that it had a net worth of P2,783,592.00 and P3,123,515.00 respectively.26 PAGS' Audited Financial Statements as of 1995 indicate that it has approximately P26,735,700.00 to invest as its equity for the project.27 Security Bank's Audited Financial Statements as of 1995 show that it has a net worth equivalent to its capital funds in the amount of P3,523,504,377.00.28We agree with public respondents that with respect to Security Bank, the entire amount of its net worth could not be invested in a single undertaking or enterprise, whether allied or non-allied in accordance with the provisions of R.A. No. 337, as amended or the General Banking Act:Sec. 21-B. The provisions in this or in any other Act to the contrary notwithstanding, the Monetary Board, whenever it shall deem appropriate and necessary to further national development objectives or support national priority projects, may authorize a commercial bank, a bank authorized to provide commercial banking services, as well as a government-owned and controlled bank, to operate under an expanded commercial banking authority and by virtue thereof exercise, in addition to powers authorized for commercial banks, the powers of an Investment House as provided in Presidential Decree No. 129, invest in the equity of a non-allied undertaking, or own a majority or all of the equity in a financial intermediary other than a commercial bank or a bank authorized to provide commercial banking services: Provided, That (a) the total investment in equities shall not exceed fifty percent (50%) of the net worth of the bank; (b) the equity investment in any one enterprise whether allied or non-allied shall not exceed fifteen percent (15%) of the net worth of the bank; (c) the equity investment of the bank, or of its wholly or majority-owned subsidiary, in a single non-allied undertaking shall not exceed thirty-five percent (35%) of the total equity in the enterprise nor shall it exceed thirty-five percent (35%) of the voting stock in that enterprise; and (d) the equity investment in other banks shall be deducted from the investing bank's net worth for purposes of computing the prescribed ratio of net worth to risk assets.xxx           xxx           xxxFurther, the 1993 Manual of Regulations for Banks provides:

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Case Materials in Remedial Law I ReviewJurisdictionSECTION X383. Other Limitations and Restrictions. — The following limitations and restrictions shall also apply regarding equity investments of banks.

a. In any single enterprise. — The equity investments of banks in any single enterprise shall not exceed at any time fifteen percent (15%) of the net worth of the investing bank as defined in Sec. X106 and Subsec. X121.5.Thus, the maximum amount that Security Bank could validly invest in the Paircargo Consortium is only P528,525,656.55, representing 15% of its entire net worth. The total net worth therefore of the Paircargo Consortium, after considering the maximum amounts that may be validly invested by each of its members is P558,384,871.55 or only 6.08% of the project cost,29 an amount substantially less than the prescribed minimum equity investment required for the project in the amount of P2,755,095,000.00 or 30% of the project cost.The purpose of pre-qualification in any public bidding is to determine, at the earliest opportunity, the ability of the bidder to undertake the project. Thus, with respect to the bidder's financial capacity at the pre-qualification stage, the law requires the government agency to examine and determine the ability of the bidder to fund the entire cost of the project by considering the maximum amounts that each bidder may invest in the project at the time of pre-qualification.The PBAC has determined that any prospective bidder for the construction, operation and maintenance of the NAIA IPT III project should prove that it has the ability to provide equity in the minimum amount of 30% of the project cost, in accordance with the 70:30 debt-to-equity ratio prescribed in the Bid Documents. Thus, in the case of Paircargo Consortium, the PBAC should determine the maximum amounts that each member of the consortium may commit for the construction, operation and maintenance of the NAIA IPT III project at the time of pre-qualification. With respect to Security Bank, the maximum amount which may be invested by it would only be 15% of its net worth in view of the restrictions imposed by the General Banking Act. Disregarding the investment ceilings provided by applicable law would not result in a proper evaluation of whether or not a bidder is pre-qualified to undertake the project as for all intents and purposes, such ceiling or legal restriction determines the true maximum amount which a bidder may invest in the project.Further, the determination of whether or not a bidder is pre-qualified to undertake the project requires an evaluation of the financial capacity of the said bidder at the time the bid is submitted based on the required documents presented by the bidder. The PBAC should not be allowed to speculate on the future financial ability of the bidder to undertake the project on the basis of documents submitted. This would open doors to

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Case Materials in Remedial Law I ReviewJurisdictionabuse and defeat the very purpose of a public bidding. This is especially true in the case at bar which involves the investment of billions of pesos by the project proponent. The relevant government authority is duty-bound to ensure that the awardee of the contract possesses the minimum required financial capability to complete the project. To allow the PBAC to estimate the bidder's future financial capability would not secure the viability and integrity of the project. A restrictive and conservative application of the rules and procedures of public bidding is necessary not only to protect the impartiality and regularity of the proceedings but also to ensure the financial and technical reliability of the project. It has been held that:

The basic rule in public bidding is that bids should be evaluated based on the required documents submitted before and not after the opening of bids. Otherwise, the foundation of a fair and competitive public bidding would be defeated. Strict observance of the rules, regulations, and guidelines of the bidding process is the only safeguard to a fair, honest and competitive public bidding.30Thus, if the maximum amount of equity that a bidder may invest in the project at the time the bids are submitted falls short of the minimum amounts required to be put up by the bidder, said bidder should be properly disqualified. Considering that at the pre-qualification stage, the maximum amounts which the Paircargo Consortium may invest in the project fell short of the minimum amounts prescribed by the PBAC, we hold that Paircargo Consortium was not a qualified bidder. Thus the award of the contract by the PBAC to the Paircargo Consortium, a disqualified bidder, is null and void.While it would be proper at this juncture to end the resolution of the instant controversy, as the legal effects of the disqualification of respondent PIATCO's predecessor would come into play and necessarily result in the nullity of all the subsequent contracts entered by it in pursuance of the project, the Court feels that it is necessary to discuss in full the pressing issues of the present controversy for a complete resolution thereof. IIIs the 1997 Concession Agreement valid?Petitioners and public respondents contend that the 1997 Concession Agreement is invalid as it contains provisions that substantially depart from the draft Concession Agreement included in the Bid Documents. They maintain that a substantial departure from the draft Concession Agreement is a violation of public policy and renders the 1997 Concession Agreement null and void.

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Case Materials in Remedial Law I ReviewJurisdictionPIATCO maintains, however, that the Concession Agreement attached to the Bid Documents is intended to be a draft, i.e., subject to change, alteration or modification, and that this intention was clear to all participants, including AEDC, and DOTC/MIAA. It argued further that said intention is expressed in Part C (6) of Bid Bulletin No. 3 issued by the PBAC which states:

6. Amendments to the Draft Concessions AgreementAmendments to the Draft Concessions Agreement shall be issued from time to time. Said amendments shall only cover items that would not materially affect the preparation of the proponent's proposal.By its very nature, public bidding aims to protect the public interest by giving the public the best possible advantages through open competition. Thus:Competition must be legitimate, fair and honest. In the field of government contract law, competition requires, not only `bidding upon a common standard, a common basis, upon the same thing, the same subject matter, the same undertaking,' but also that it be legitimate, fair and honest; and not designed to injure or defraud the government.31An essential element of a publicly bidded contract is that all bidders must be on equal footing. Not simply in terms of application of the procedural rules and regulations imposed by the relevant government agency, but more importantly, on the contract bidded upon. Each bidder must be able to bid on the same thing. The rationale is obvious. If the winning bidder is allowed to later include or modify certain provisions in the contract awarded such that the contract is altered in any material respect, then the essence of fair competition in the public bidding is destroyed. A public bidding would indeed be a farce if after the contract is awarded, the winning bidder may modify the contract and include provisions which are favorable to it that were not previously made available to the other bidders. Thus:It is inherent in public biddings that there shall be a fair competition among the bidders. The specifications in such biddings provide the common ground or basis for the bidders. The specifications should, accordingly, operate equally or indiscriminately upon all bidders.32The same rule was restated by Chief Justice Stuart of the Supreme Court of Minnesota:The law is well settled that where, as in this case, municipal authorities can only let a contract for public work to the lowest responsible bidder, the proposals and specifications therefore must be so framed as to permit free and full competition. Nor can they enter into a contract with the best bidder containing substantial provisions beneficial to him, not included or

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Case Materials in Remedial Law I ReviewJurisdictioncontemplated in the terms and specifications upon which the bids were invited.33

In fact, in the PBAC Bid Bulletin No. 3 cited by PIATCO to support its argument that the draft concession agreement is subject to amendment, the pertinent portion of which was quoted above, the PBAC also clarified that "[s]aid amendments shall only cover items that would not materially affect the preparation of the proponent's proposal."While we concede that a winning bidder is not precluded from modifying or amending certain provisions of the contract bidded upon, such changes must not constitute substantial or material amendments that would alter the basic parameters of the contract and would constitute a denial to the other bidders of the opportunity to bid on the same terms. Hence, the determination of whether or not a modification or amendment of a contract bidded out constitutes a substantial amendment rests on whether the contract, when taken as a whole, would contain substantially different terms and conditions that would have the effect of altering the technical and/or financial proposals previously submitted by other bidders. The alterations and modifications in the contract executed between the government and the winning bidder must be such as to render such executed contract to be an entirely different contract from the one that was bidded upon.In the case of Caltex (Philippines), Inc. v. Delgado Brothers, Inc.,34 this Court quoted with approval the ruling of the trial court that an amendment to a contract awarded through public bidding, when such subsequent amendment was made without a new public bidding, is null and void:The Court agrees with the contention of counsel for the plaintiffs that the due execution of a contract after public bidding is a limitation upon the right of the contracting parties to alter or amend it without another public bidding, for otherwise what would a public bidding be good for if after the execution of a contract after public bidding, the contracting parties may alter or amend the contract, or even cancel it, at their will? Public biddings are held for the protection of the public, and to give the public the best possible advantages by means of open competition between the bidders. He who bids or offers the best terms is awarded the contract subject of the bid, and it is obvious that such protection and best possible advantages to the public will disappear if the parties to a contract executed after public bidding may alter or amend it without another previous public bidding.35Hence, the question that comes to fore is this: is the 1997 Concession Agreement the same agreement that was offered for public bidding, i.e., the draft Concession Agreement attached to the Bid Documents? A close comparison of the draft Concession Agreement attached to the Bid

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Case Materials in Remedial Law I ReviewJurisdictionDocuments and the 1997 Concession Agreement reveals that the documents differ in at least two material respects:

a. Modification on the PublicUtility Revenues and Non-PublicUtility Revenues that may becollected by PIATCOThe fees that may be imposed and collected by PIATCO under the draft Concession Agreement and the 1997 Concession Agreement may be classified into three distinct categories: (1) fees which are subject to periodic adjustment of once every two years in accordance with a prescribed parametric formula and adjustments are made effective only upon written approval by MIAA; (2) fees other than those included in the first category which maybe adjusted by PIATCO whenever it deems necessary without need for consent of DOTC/MIAA; and (3) new fees and charges that may be imposed by PIATCO which have not been previously imposed or collected at the Ninoy Aquino International Airport Passenger Terminal I, pursuant to Administrative Order No. 1, Series of 1993, as amended. The glaring distinctions between the draft Concession Agreement and the 1997 Concession Agreement lie in the types of fees included in each category and the extent of the supervision and regulation which MIAA is allowed to exercise in relation thereto.For fees under the first category, i.e., those which are subject to periodic adjustment in accordance with a prescribed parametric formula and effective only upon written approval by MIAA, the draft Concession Agreement includes the following:36(1) aircraft parking fees;(2) aircraft tacking fees;(3) groundhandling fees;(4) rentals and airline offices;(5) check-in counter rentals; and(6) porterage fees.Under the 1997 Concession Agreement, fees which are subject to adjustment and effective upon MIAA approval are classified as "Public Utility Revenues" and include:37(1) aircraft parking fees;

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Case Materials in Remedial Law I ReviewJurisdiction(2) aircraft tacking fees;

(3) check-in counter fees; and(4) Terminal Fees.The implication of the reduced number of fees that are subject to MIAA approval is best appreciated in relation to fees included in the second category identified above. Under the 1997 Concession Agreement, fees which PIATCO may adjust whenever it deems necessary without need for consent of DOTC/MIAA are "Non-Public Utility Revenues" and is defined as "all other income not classified as Public Utility Revenues derived from operations of the Terminal and the Terminal Complex."38 Thus, under the 1997 Concession Agreement, ground handling fees, rentals from airline offices and porterage fees are no longer subject to MIAA regulation.Further, under Section 6.03 of the draft Concession Agreement, MIAA reserves the right to regulate (1) lobby and vehicular parking fees and (2) other new fees and charges that may be imposed by PIATCO. Such regulation may be made by periodic adjustment and is effective only upon written approval of MIAA. The full text of said provision is quoted below:Section 6.03. Periodic Adjustment in Fees and Charges. Adjustments in the aircraft parking fees, aircraft tacking fees, groundhandling fees, rentals and airline offices, check-in-counter rentals and porterage fees shall be allowed only once every two years and in accordance with the Parametric Formula attached hereto as Annex F. Provided that adjustments shall be made effective only after the written express approval of the MIAA. Provided, further, that such approval of the MIAA, shall be contingent only on the conformity of the adjustments with the above said parametric formula. The first adjustment shall be made prior to the In-Service Date of the Terminal.The MIAA reserves the right to regulate under the foregoing terms and conditions the lobby and vehicular parking fees and other new fees and charges as contemplated in paragraph 2 of Section 6.01 if in its judgment the users of the airport shall be deprived of a free option for the services they cover.39On the other hand, the equivalent provision under the 1997 Concession Agreement reads:Section 6.03 Periodic Adjustment in Fees and Charges.xxx           xxx           xxx(c) Concessionaire shall at all times be judicious in fixing fees and charges constituting Non-Public Utility Revenues in order to ensure that End Users are not unreasonably deprived of services. While the vehicular parking fee, porterage fee and greeter/well wisher fee constitute Non-

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Case Materials in Remedial Law I ReviewJurisdictionPublic Utility Revenues of Concessionaire, GRP may intervene and require Concessionaire to explain and justify the fee it may set from time to time, if in the reasonable opinion of GRP the said fees have become exorbitant resulting in the unreasonable deprivation of End Users of such services.40

Thus, under the 1997 Concession Agreement, with respect to (1) vehicular parking fee, (2) porterage fee and (3) greeter/well wisher fee, all that MIAA can do is to require PIATCO to explain and justify the fees set by PIATCO. In the draft Concession Agreement, vehicular parking fee is subject to MIAA regulation and approval under the second paragraph of Section 6.03 thereof while porterage fee is covered by the first paragraph of the same provision. There is an obvious relaxation of the extent of control and regulation by MIAA with respect to the particular fees that may be charged by PIATCO.Moreover, with respect to the third category of fees that may be imposed and collected by PIATCO, i.e., new fees and charges that may be imposed by PIATCO which have not been previously imposed or collected at the Ninoy Aquino International Airport Passenger Terminal I, under Section 6.03 of the draft Concession Agreement MIAA has reserved the right to regulate the same under the same conditions that MIAA may regulate fees under the first category, i.e., periodic adjustment of once every two years in accordance with a prescribed parametric formula and effective only upon written approval by MIAA. However, under the 1997 Concession Agreement, adjustment of fees under the third category is not subject to MIAA regulation.With respect to terminal fees that may be charged by PIATCO,41 as shown earlier, this was included within the category of "Public Utility Revenues" under the 1997 Concession Agreement. This classification is significant because under the 1997 Concession Agreement, "Public Utility Revenues" are subject to an "Interim Adjustment" of fees upon the occurrence of certain extraordinary events specified in the agreement.42 However, under the draft Concession Agreement, terminal fees are not included in the types of fees that may be subject to "Interim Adjustment."43Finally, under the 1997 Concession Agreement, "Public Utility Revenues," except terminal fees, are denominated in US Dollars44 while payments to the Government are in Philippine Pesos. In the draft Concession Agreement, no such stipulation was included. By stipulating that "Public Utility Revenues" will be paid to PIATCO in US Dollars while payments by PIATCO to the Government are in Philippine currency under the 1997 Concession Agreement, PIATCO is able to enjoy the benefits of depreciations of the Philippine Peso, while being effectively insulated from the detrimental effects of exchange rate fluctuations.

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Case Materials in Remedial Law I ReviewJurisdictionWhen taken as a whole, the changes under the 1997 Concession Agreement with respect to reduction in the types of fees that are subject to MIAA regulation and the relaxation of such regulation with respect to other fees are significant amendments that substantially distinguish the draft Concession Agreement from the 1997 Concession Agreement. The 1997 Concession Agreement, in this respect, clearly gives PIATCO more favorable terms than what was available to other bidders at the time the contract was bidded out. It is not very difficult to see that the changes in the 1997 Concession Agreement translate to direct and concrete financial advantages for PIATCO which were not available at the time the contract was offered for bidding. It cannot be denied that under the 1997 Concession Agreement only "Public Utility Revenues" are subject to MIAA regulation. Adjustments of all other fees imposed and collected by PIATCO are entirely within its control. Moreover, with respect to terminal fees, under the 1997 Concession Agreement, the same is further subject to "Interim Adjustments" not previously stipulated in the draft Concession Agreement. Finally, the change in the currency stipulated for "Public Utility Revenues" under the 1997 Concession Agreement, except terminal fees, gives PIATCO an added benefit which was not available at the time of bidding.

b. Assumption by theGovernment of the liabilities ofPIATCO in the event of the latter'sdefault thereofUnder the draft Concession Agreement, default by PIATCO of any of its obligations to creditors who have provided, loaned or advanced funds for the NAIA IPT III project does not result in the assumption by the Government of these liabilities. In fact, nowhere in the said contract does default of PIATCO's loans figure in the agreement. Such default does not directly result in any concomitant right or obligation in favor of the Government. However, the 1997 Concession Agreement provides:Section 4.04 Assignment.xxx           xxx           xxx(b) In the event Concessionaire should default in the payment of an Attendant Liability, and the default has resulted in the acceleration of the payment due date of the Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and Concessionaire shall immediately inform GRP in writing of such default. GRP shall, within one hundred eighty (180) Days from receipt of the joint written notice of the Unpaid

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Case Materials in Remedial Law I ReviewJurisdictionCreditors and Concessionaire, either (i) take over the Development Facility and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified, to be substituted as concessionaire and operator of the Development Facility in accordance with the terms and conditions hereof, or designate a qualified operator acceptable to GRP to operate the Development Facility, likewise under the terms and conditions of this Agreement; Provided that if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and Concessionaire written notice of its choice, GRP shall be deemed to have elected to take over the Development Facility with the concomitant assumption of Attendant Liabilities.

(c) If GRP should, by written notice, allow the Unpaid Creditors to be substituted as concessionaire, the latter shall form and organize a concession company qualified to take over the operation of the Development Facility. If the concession company should elect to designate an operator for the Development Facility, the concession company shall in good faith identify and designate a qualified operator acceptable to GRP within one hundred eighty (180) days from receipt of GRP's written notice. If the concession company, acting in good faith and with due diligence, is unable to designate a qualified operator within the aforesaid period, then GRP shall at the end of the 180-day period take over the Development Facility and assume Attendant Liabilities.The term "Attendant Liabilities" under the 1997 Concession Agreement is defined as:Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the books of the Concessionaire as owing to Unpaid Creditors who have provided, loaned or advanced funds actually used for the Project, including all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further including amounts owed by Concessionaire to its suppliers, contractors and sub-contractors.Under the above quoted portions of Section 4.04 in relation to the definition of "Attendant Liabilities," default by PIATCO of its loans used to finance the NAIA IPT III project triggers the occurrence of certain events that leads to the assumption by the Government of the liability for the loans. Only in one instance may the Government escape the assumption of PIATCO's liabilities, i.e., when the Government so elects and allows a qualified operator to take over as Concessionaire. However, this circumstance is dependent on the existence and availability of a qualified operator who is willing to take over the rights and obligations of PIATCO under the contract, a circumstance that is not entirely within the control of the Government.Without going into the validity of this provision at this juncture, suffice it to state that Section 4.04 of the 1997 Concession Agreement may be

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Case Materials in Remedial Law I ReviewJurisdictionconsidered a form of security for the loans PIATCO has obtained to finance the project, an option that was not made available in the draft Concession Agreement. Section 4.04 is an important amendment to the 1997 Concession Agreement because it grants PIATCO a financial advantage or benefit which was not previously made available during the bidding process. This financial advantage is a significant modification that translates to better terms and conditions for PIATCO.

PIATCO, however, argues that the parties to the bidding procedure acknowledge that the draft Concession Agreement is subject to amendment because the Bid Documents permit financing or borrowing. They claim that it was the lenders who proposed the amendments to the draft Concession Agreement which resulted in the 1997 Concession Agreement.We agree that it is not inconsistent with the rationale and purpose of the BOT Law to allow the project proponent or the winning bidder to obtain financing for the project, especially in this case which involves the construction, operation and maintenance of the NAIA IPT III. Expectedly, compliance by the project proponent of its undertakings therein would involve a substantial amount of investment. It is therefore inevitable for the awardee of the contract to seek alternate sources of funds to support the project. Be that as it may, this Court maintains that amendments to the contract bidded upon should always conform to the general policy on public bidding if such procedure is to be faithful to its real nature and purpose. By its very nature and characteristic, competitive public bidding aims to protect the public interest by giving the public the best possible advantages through open competition.45 It has been held that the three principles in public bidding are (1) the offer to the public; (2) opportunity for competition; and (3) a basis for the exact comparison of bids. A regulation of the matter which excludes any of these factors destroys the distinctive character of the system and thwarts the purpose of its adoption.46 These are the basic parameters which every awardee of a contract bidded out must conform to, requirements of financing and borrowing notwithstanding. Thus, upon a concrete showing that, as in this case, the contract signed by the government and the contract-awardee is an entirely different contract from the contract bidded, courts should not hesitate to strike down said contract in its entirety for violation of public policy on public bidding. A strict adherence on the principles, rules and regulations on public bidding must be sustained if only to preserve the integrity and the faith of the general public on the procedure.Public bidding is a standard practice for procuring government contracts for public service and for furnishing supplies and other materials. It aims to secure for the government the lowest possible price under the most favorable terms and conditions, to curtail favoritism in the award of government contracts and avoid suspicion of anomalies and it places all

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Case Materials in Remedial Law I ReviewJurisdictionbidders in equal footing.47 Any government action which permits any substantial variance between the conditions under which the bids are invited and the contract executed after the award thereof is a grave abuse of discretion amounting to lack or excess of jurisdiction which warrants proper judicial action.

In view of the above discussion, the fact that the foregoing substantial amendments were made on the 1997 Concession Agreement renders the same null and void for being contrary to public policy. These amendments convert the 1997 Concession Agreement to an entirely different agreement from the contract bidded out or the draft Concession Agreement. It is not difficult to see that the amendments on (1) the types of fees or charges that are subject to MIAA regulation or control and the extent thereof and (2) the assumption by the Government, under certain conditions, of the liabilities of PIATCO directly translates concrete financial advantages to PIATCO that were previously not available during the bidding process. These amendments cannot be taken as merely supplements to or implementing provisions of those already existing in the draft Concession Agreement. The amendments discussed above present new terms and conditions which provide financial benefit to PIATCO which may have altered the technical and financial parameters of other bidders had they known that such terms were available.IIIDirect Government GuaranteeArticle IV, Section 4.04(b) and (c), in relation to Article 1.06, of the 1997 Concession Agreement provides:Section 4.04 Assignmentxxx           xxx           xxx(b) In the event Concessionaire should default in the payment of an Attendant Liability, and the default resulted in the acceleration of the payment due date of the Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and Concessionaire shall immediately inform GRP in writing of such default. GRP shall within one hundred eighty (180) days from receipt of the joint written notice of the Unpaid Creditors and Concessionaire, either (i) take over the Development Facility and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified to be substituted as concessionaire and operator of the Development facility in accordance with the terms and conditions hereof, or designate a qualified operator acceptable to GRP to operate the Development Facility, likewise under the terms and conditions of this Agreement; Provided, that if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and Concessionaire written notice of its choice, GRP shall be deemed to have elected to take over the

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Case Materials in Remedial Law I ReviewJurisdictionDevelopment Facility with the concomitant assumption of Attendant Liabilities.

(c) If GRP, by written notice, allow the Unpaid Creditors to be substituted as concessionaire, the latter shall form and organize a concession company qualified to takeover the operation of the Development Facility. If the concession company should elect to designate an operator for the Development Facility, the concession company shall in good faith identify and designate a qualified operator acceptable to GRP within one hundred eighty (180) days from receipt of GRP's written notice. If the concession company, acting in good faith and with due diligence, is unable to designate a qualified operator within the aforesaid period, then GRP shall at the end of the 180-day period take over the Development Facility and assume Attendant Liabilities.….Section 1.06. Attendant LiabilitiesAttendant Liabilities refer to all amounts recorded and from time to time outstanding in the books of the Concessionaire as owing to Unpaid Creditors who have provided, loaned or advanced funds actually used for the Project, including all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further including amounts owed by Concessionaire to its suppliers, contractors and sub-contractors.48It is clear from the above-quoted provisions that Government, in the event that PIATCO defaults in its loan obligations, is obligated to pay "all amounts recorded and from time to time outstanding from the books" of PIATCO which the latter owes to its creditors.49 These amounts include "all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses."50 This obligation of the Government to pay PIATCO's creditors upon PIATCO's default would arise if the Government opts to take over NAIA IPT III. It should be noted, however, that even if the Government chooses the second option, which is to allow PIATCO's unpaid creditors operate NAIA IPT III, the Government is still at a risk of being liable to PIATCO's creditors should the latter be unable to designate a qualified operator within the prescribed period.51 In effect, whatever option the Government chooses to take in the event of PIATCO's failure to fulfill its loan obligations, the Government is still at a risk of assuming PIATCO's outstanding loans. This is due to the fact that the Government would only be free from assuming PIATCO's debts if the unpaid creditors would be able to designate a qualified operator within the period provided for in the contract. Thus, the Government's assumption of liability is virtually out of its control. The Government under the circumstances provided for in the 1997 Concession Agreement is at the mercy of the existence, availability and willingness of a qualified operator. The above contractual

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Case Materials in Remedial Law I ReviewJurisdictionprovisions constitute a direct government guarantee which is prohibited by law.

One of the main impetus for the enactment of the BOT Law is the lack of government funds to construct the infrastructure and development projects necessary for economic growth and development. This is why private sector resources are being tapped in order to finance these projects. The BOT law allows the private sector to participate, and is in fact encouraged to do so by way of incentives, such as minimizing the unstable flow of returns,52 provided that the government would not have to unnecessarily expend scarcely available funds for the project itself. As such, direct guarantee, subsidy and equity by the government in these projects are strictly prohibited.53 This is but logical for if the government would in the end still be at a risk of paying the debts incurred by the private entity in the BOT projects, then the purpose of the law is subverted.Section 2(n) of the BOT Law defines direct guarantee as follows:(n) Direct government guarantee — An agreement whereby the government or any of its agencies or local government units assume responsibility for the repayment of debt directly incurred by the project proponent in implementing the project in case of a loan default.Clearly by providing that the Government "assumes" the attendant liabilities, which consists of PIATCO's unpaid debts, the 1997 Concession Agreement provided for a direct government guarantee for the debts incurred by PIATCO in the implementation of the NAIA IPT III project. It is of no moment that the relevant sections are subsumed under the title of "assignment". The provisions providing for direct government guarantee which is prohibited by law is clear from the terms thereof.The fact that the ARCA superseded the 1997 Concession Agreement did not cure this fatal defect. Article IV, Section 4.04(c), in relation to Article I, Section 1.06, of the ARCA provides:Section 4.04 Securityxxx           xxx           xxx(c) GRP agrees with Concessionaire (PIATCO) that it shall negotiate in good faith and enter into direct agreement with the Senior Lenders, or with an agent of such Senior Lenders (which agreement shall be subject to the approval of the Bangko Sentral ng Pilipinas), in such form as may be reasonably acceptable to both GRP and Senior Lenders, with regard, inter alia, to the following parameters:xxx           xxx           xxx

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Case Materials in Remedial Law I ReviewJurisdiction(iv) If the Concessionaire [PIATCO] is in default under a payment obligation owed to the Senior Lenders, and as a result thereof the Senior Lenders have become entitled to accelerate the Senior Loans, the Senior Lenders shall have the right to notify GRP of the same, and without prejudice to any other rights of the Senior Lenders or any Senior Lenders' agent may have (including without limitation under security interests granted in favor of the Senior Lenders), to either in good faith identify and designate a nominee which is qualified under sub-clause (viii)(y) below to operate the Development Facility [NAIA Terminal 3] or transfer the Concessionaire's [PIATCO] rights and obligations under this Agreement to a transferee which is qualified under sub-clause (viii) below;

xxx           xxx           xxx(vi) if the Senior Lenders, acting in good faith and using reasonable efforts, are unable to designate a nominee or effect a transfer in terms and conditions satisfactory to the Senior Lenders within one hundred eighty (180) days after giving GRP notice as referred to respectively in (iv) or (v) above, then GRP and the Senior Lenders shall endeavor in good faith to enter into any other arrangement relating to the Development Facility [NAIA Terminal 3] (other than a turnover of the Development Facility [NAIA Terminal 3] to GRP) within the following one hundred eighty (180) days. If no agreement relating to the Development Facility [NAIA Terminal 3] is arrived at by GRP and the Senior Lenders within the said 180-day period, then at the end thereof the Development Facility [NAIA Terminal 3] shall be transferred by the Concessionaire [PIATCO] to GRP or its designee and GRP shall make a termination payment to Concessionaire [PIATCO] equal to the Appraised Value (as hereinafter defined) of the Development Facility [NAIA Terminal 3] or the sum of the Attendant Liabilities, if greater. Notwithstanding Section 8.01(c) hereof, this Agreement shall be deemed terminated upon the transfer of the Development Facility [NAIA Terminal 3] to GRP pursuant hereto;xxx           xxx           xxxSection 1.06. Attendant LiabilitiesAttendant Liabilities refer to all amounts in each case supported by verifiable evidence from time to time owed or which may become owing by Concessionaire [PIATCO] to Senior Lenders or any other persons or entities who have provided, loaned, or advanced funds or provided financial facilities to Concessionaire [PIATCO] for the Project [NAIA Terminal 3], including, without limitation, all principal, interest, associated fees, charges, reimbursements, and other related expenses (including the fees, charges and expenses of any agents or trustees of such persons or entities), whether payable at maturity, by acceleration or otherwise, and further including amounts owed by Concessionaire

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Case Materials in Remedial Law I ReviewJurisdiction[PIATCO] to its professional consultants and advisers, suppliers, contractors and sub-contractors.54

It is clear from the foregoing contractual provisions that in the event that PIATCO fails to fulfill its loan obligations to its Senior Lenders, the Government is obligated to directly negotiate and enter into an agreement relating to NAIA IPT III with the Senior Lenders, should the latter fail to appoint a qualified nominee or transferee who will take the place of PIATCO. If the Senior Lenders and the Government are unable to enter into an agreement after the prescribed period, the Government must then pay PIATCO, upon transfer of NAIA IPT III to the Government, termination payment equal to the appraised value of the project or the value of the attendant liabilities whichever is greater. Attendant liabilities as defined in the ARCA includes all amounts owed or thereafter may be owed by PIATCO not only to the Senior Lenders with whom PIATCO has defaulted in its loan obligations but to all other persons who may have loaned, advanced funds or provided any other type of financial facilities to PIATCO for NAIA IPT III. The amount of PIATCO's debt that the Government would have to pay as a result of PIATCO's default in its loan obligations -- in case no qualified nominee or transferee is appointed by the Senior Lenders and no other agreement relating to NAIA IPT III has been reached between the Government and the Senior Lenders -- includes, but is not limited to, "all principal, interest, associated fees, charges, reimbursements, and other related expenses . . . whether payable at maturity, by acceleration or otherwise."55It is clear from the foregoing that the ARCA provides for a direct guarantee by the government to pay PIATCO's loans not only to its Senior Lenders but all other entities who provided PIATCO funds or services upon PIATCO's default in its loan obligation with its Senior Lenders. The fact that the Government's obligation to pay PIATCO's lenders for the latter's obligation would only arise after the Senior Lenders fail to appoint a qualified nominee or transferee does not detract from the fact that, should the conditions as stated in the contract occur, the ARCA still obligates the Government to pay any and all amounts owed by PIATCO to its lenders in connection with NAIA IPT III. Worse, the conditions that would make the Government liable for PIATCO's debts is triggered by PIATCO's own default of its loan obligations to its Senior Lenders to which loan contracts the Government was never a party to. The Government was not even given an option as to what course of action it should take in case PIATCO defaulted in the payment of its senior loans. The Government, upon PIATCO's default, would be merely notified by the Senior Lenders of the same and it is the Senior Lenders who are authorized to appoint a qualified nominee or transferee. Should the Senior Lenders fail to make such an appointment, the Government is then automatically obligated to "directly deal and negotiate" with the Senior Lenders regarding NAIA IPT III. The only way the Government would not be liable for PIATCO's debt is for a qualified nominee or

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Case Materials in Remedial Law I ReviewJurisdictiontransferee to be appointed in place of PIATCO to continue the construction, operation and maintenance of NAIA IPT III. This "pre-condition", however, will not take the contract out of the ambit of a direct guarantee by the government as the existence, availability and willingness of a qualified nominee or transferee is totally out of the government's control. As such the Government is virtually at the mercy of PIATCO (that it would not default on its loan obligations to its Senior Lenders), the Senior Lenders (that they would appoint a qualified nominee or transferee or agree to some other arrangement with the Government) and the existence of a qualified nominee or transferee who is able and willing to take the place of PIATCO in NAIA IPT III.

The proscription against government guarantee in any form is one of the policy considerations behind the BOT Law. Clearly, in the present case, the ARCA obligates the Government to pay for all loans, advances and obligations arising out of financial facilities extended to PIATCO for the implementation of the NAIA IPT III project should PIATCO default in its loan obligations to its Senior Lenders and the latter fails to appoint a qualified nominee or transferee. This in effect would make the Government liable for PIATCO's loans should the conditions as set forth in the ARCA arise. This is a form of direct government guarantee.The BOT Law and its implementing rules provide that in order for an unsolicited proposal for a BOT project may be accepted, the following conditions must first be met: (1) the project involves a new concept in technology and/or is not part of the list of priority projects, (2) no direct government guarantee, subsidy or equity is required, and (3) the government agency or local government unit has invited by publication other interested parties to a public bidding and conducted the same.56 The failure to meet any of the above conditions will result in the denial of the proposal. It is further provided that the presence of direct government guarantee, subsidy or equity will "necessarily disqualify a proposal from being treated and accepted as an unsolicited proposal."57 The BOT Law clearly and strictly prohibits direct government guarantee, subsidy and equity in unsolicited proposals that the mere inclusion of a provision to that effect is fatal and is sufficient to deny the proposal. It stands to reason therefore that if a proposal can be denied by reason of the existence of direct government guarantee, then its inclusion in the contract executed after the said proposal has been accepted is likewise sufficient to invalidate the contract itself. A prohibited provision, the inclusion of which would result in the denial of a proposal cannot, and should not, be allowed to later on be inserted in the contract resulting from the said proposal. The basic rules of justice and fair play alone militate against such an occurrence and must not, therefore, be countenanced particularly in this instance where the government is exposed to the risk of shouldering hundreds of million of dollars in debt.

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Case Materials in Remedial Law I ReviewJurisdictionThis Court has long and consistently adhered to the legal maxim that those that cannot be done directly cannot be done indirectly.58 To declare the PIATCO contracts valid despite the clear statutory prohibition against a direct government guarantee would not only make a mockery of what the BOT Law seeks to prevent -- which is to expose the government to the risk of incurring a monetary obligation resulting from a contract of loan between the project proponent and its lenders and to which the Government is not a party to -- but would also render the BOT Law useless for what it seeks to achieve –- to make use of the resources of the private sector in the "financing, operation and maintenance of infrastructure and development projects"59 which are necessary for national growth and development but which the government, unfortunately, could ill-afford to finance at this point in time.

IVTemporary takeover of business affected with public interestArticle XII, Section 17 of the 1987 Constitution provides:Section 17. In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or business affected with public interest.The above provision pertains to the right of the State in times of national emergency, and in the exercise of its police power, to temporarily take over the operation of any business affected with public interest. In the 1986 Constitutional Commission, the term "national emergency" was defined to include threat from external aggression, calamities or national disasters, but not strikes "unless it is of such proportion that would paralyze government service."60 The duration of the emergency itself is the determining factor as to how long the temporary takeover by the government would last.61 The temporary takeover by the government extends only to the operation of the business and not to the ownership thereof. As such the government is not required to compensate the private entity-owner of the said business as there is no transfer of ownership, whether permanent or temporary. The private entity-owner affected by the temporary takeover cannot, likewise, claim just compensation for the use of the said business and its properties as the temporary takeover by the government is in exercise of its police power and not of its power of eminent domain.Article V, Section 5.10 (c) of the 1997 Concession Agreement provides:Section 5.10 Temporary Take-over of operations by GRP.….

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Case Materials in Remedial Law I ReviewJurisdiction(c) In the event the development Facility or any part thereof and/or the operations of Concessionaire or any part thereof, become the subject matter of or be included in any notice, notification, or declaration concerning or relating to acquisition, seizure or appropriation by GRP in times of war or national emergency, GRP shall, by written notice to Concessionaire, immediately take over the operations of the Terminal and/or the Terminal Complex. During such take over by GRP, the Concession Period shall be suspended; provided, that upon termination of war, hostilities or national emergency, the operations shall be returned to Concessionaire, at which time, the Concession period shall commence to run again. Concessionaire shall be entitled to reasonable compensation for the duration of the temporary take over by GRP, which compensation shall take into account the reasonable cost for the use of the Terminal and/or Terminal Complex, (which is in the amount at least equal to the debt service requirements of Concessionaire, if the temporary take over should occur at the time when Concessionaire is still servicing debts owed to project lenders), any loss or damage to the Development Facility, and other consequential damages. If the parties cannot agree on the reasonable compensation of Concessionaire, or on the liability of GRP as aforesaid, the matter shall be resolved in accordance with Section 10.01 [Arbitration]. Any amount determined to be payable by GRP to Concessionaire shall be offset from the amount next payable by Concessionaire to GRP.62

PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision on temporary government takeover and obligate the government to pay "reasonable cost for the use of the Terminal and/or Terminal Complex."63 Article XII, section 17 of the 1987 Constitution envisions a situation wherein the exigencies of the times necessitate the government to "temporarily take over or direct the operation of any privately owned public utility or business affected with public interest." It is the welfare and interest of the public which is the paramount consideration in determining whether or not to temporarily take over a particular business. Clearly, the State in effecting the temporary takeover is exercising its police power. Police power is the "most essential, insistent, and illimitable of powers."64 Its exercise therefore must not be unreasonably hampered nor its exercise be a source of obligation by the government in the absence of damage due to arbitrariness of its exercise.65 Thus, requiring the government to pay reasonable compensation for the reasonable use of the property pursuant to the operation of the business contravenes the Constitution.VRegulation of MonopoliesA monopoly is "a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right (or power) to carry on a particular business or trade, manufacture a particular article,

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Case Materials in Remedial Law I ReviewJurisdictionor control the sale of a particular commodity."66 The 1987 Constitution strictly regulates monopolies, whether private or public, and even provides for their prohibition if public interest so requires. Article XII, Section 19 of the 1987 Constitution states:

Sec. 19. The state shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.Clearly, monopolies are not per se prohibited by the Constitution but may be permitted to exist to aid the government in carrying on an enterprise or to aid in the performance of various services and functions in the interest of the public.67 Nonetheless, a determination must first be made as to whether public interest requires a monopoly. As monopolies are subject to abuses that can inflict severe prejudice to the public, they are subject to a higher level of State regulation than an ordinary business undertaking.In the cases at bar, PIATCO, under the 1997 Concession Agreement and the ARCA, is granted the "exclusive right to operate a commercial international passenger terminal within the Island of Luzon" at the NAIA IPT III.68 This is with the exception of already existing international airports in Luzon such as those located in the Subic Bay Freeport Special Economic Zone ("SBFSEZ"), Clark Special Economic Zone ("CSEZ") and in Laoag City.69 As such, upon commencement of PIATCO's operation of NAIA IPT III, Terminals 1 and 2 of NAIA would cease to function as international passenger terminals. This, however, does not prevent MIAA to use Terminals 1 and 2 as domestic passenger terminals or in any other manner as it may deem appropriate except those activities that would compete with NAIA IPT III in the latter's operation as an international passenger terminal.70 The right granted to PIATCO to exclusively operate NAIA IPT III would be for a period of twenty-five (25) years from the In-Service Date71 and renewable for another twenty-five (25) years at the option of the government.72 Both the 1997 Concession Agreement and the ARCA further provide that, in view of the exclusive right granted to PIATCO, the concession contracts of the service providers currently servicing Terminals 1 and 2 would no longer be renewed and those concession contracts whose expiration are subsequent to the In-Service Date would cease to be effective on the said date.73The operation of an international passenger airport terminal is no doubt an undertaking imbued with public interest. In entering into a Build–Operate-and-Transfer contract for the construction, operation and maintenance of NAIA IPT III, the government has determined that public interest would be served better if private sector resources were used in its construction and an exclusive right to operate be granted to the private entity undertaking the said project, in this case PIATCO. Nonetheless, the privilege given to PIATCO is subject to reasonable regulation and supervision by the Government through the MIAA, which

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Case Materials in Remedial Law I ReviewJurisdictionis the government agency authorized to operate the NAIA complex, as well as DOTC, the department to which MIAA is attached.74

This is in accord with the Constitutional mandate that a monopoly which is not prohibited must be regulated.75 While it is the declared policy of the BOT Law to encourage private sector participation by "providing a climate of minimum government regulations,"76 the same does not mean that Government must completely surrender its sovereign power to protect public interest in the operation of a public utility as a monopoly. The operation of said public utility can not be done in an arbitrary manner to the detriment of the public which it seeks to serve. The right granted to the public utility may be exclusive but the exercise of the right cannot run riot. Thus, while PIATCO may be authorized to exclusively operate NAIA IPT III as an international passenger terminal, the Government, through the MIAA, has the right and the duty to ensure that it is done in accord with public interest. PIATCO's right to operate NAIA IPT III cannot also violate the rights of third parties.Section 3.01(e) of the 1997 Concession Agreement and the ARCA provide:3.01 Concession Periodxxx           xxx           xxx(e) GRP confirms that certain concession agreements relative to certain services and operations currently being undertaken at the Ninoy Aquino International Airport passenger Terminal I have a validity period extending beyond the In-Service Date. GRP through DOTC/MIAA, confirms that these services and operations shall not be carried over to the Terminal and the Concessionaire is under no legal obligation to permit such carry-over except through a separate agreement duly entered into with Concessionaire. In the event Concessionaire becomes involved in any litigation initiated by any such concessionaire or operator, GRP undertakes and hereby holds Concessionaire free and harmless on full indemnity basis from and against any loss and/or any liability resulting from any such litigation, including the cost of litigation and the reasonable fees paid or payable to Concessionaire's counsel of choice, all such amounts shall be fully deductible by way of an offset from any amount which the Concessionaire is bound to pay GRP under this Agreement.During the oral arguments on December 10, 2002, the counsel for the petitioners-in-intervention for G.R. No. 155001 stated that there are two service providers whose contracts are still existing and whose validity extends beyond the In-Service Date. One contract remains valid until 2008 and the other until 2010.77

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Case Materials in Remedial Law I ReviewJurisdictionWe hold that while the service providers presently operating at NAIA Terminal 1 do not have an absolute right for the renewal or the extension of their respective contracts, those contracts whose duration extends beyond NAIA IPT III's In-Service-Date should not be unduly prejudiced. These contracts must be respected not just by the parties thereto but also by third parties. PIATCO cannot, by law and certainly not by contract, render a valid and binding contract nugatory. PIATCO, by the mere expedient of claiming an exclusive right to operate, cannot require the Government to break its contractual obligations to the service providers. In contrast to the arrastre and stevedoring service providers in the case of Anglo-Fil Trading Corporation v. Lazaro78 whose contracts consist of temporary hold-over permits, the affected service providers in the cases at bar, have a valid and binding contract with the Government, through MIAA, whose period of effectivity, as well as the other terms and conditions thereof, cannot be violated.

In fine, the efficient functioning of NAIA IPT III is imbued with public interest. The provisions of the 1997 Concession Agreement and the ARCA did not strip government, thru the MIAA, of its right to supervise the operation of the whole NAIA complex, including NAIA IPT III. As the primary government agency tasked with the job,79 it is MIAA's responsibility to ensure that whoever by contract is given the right to operate NAIA IPT III will do so within the bounds of the law and with due regard to the rights of third parties and above all, the interest of the public.VICONCLUSIONIn sum, this Court rules that in view of the absence of the requisite financial capacity of the Paircargo Consortium, predecessor of respondent PIATCO, the award by the PBAC of the contract for the construction, operation and maintenance of the NAIA IPT III is null and void. Further, considering that the 1997 Concession Agreement contains material and substantial amendments, which amendments had the effect of converting the 1997 Concession Agreement into an entirely different agreement from the contract bidded upon, the 1997 Concession Agreement is similarly null and void for being contrary to public policy. The provisions under Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997 Concession Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA, which constitute a direct government guarantee expressly prohibited by, among others, the BOT Law and its Implementing Rules and Regulations are also null and void. The Supplements, being accessory contracts to the ARCA, are likewise null and void.

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Case Materials in Remedial Law I ReviewJurisdictionWHEREFORE, the 1997 Concession Agreement, the Amended and Restated Concession Agreement and the Supplements thereto are set aside for being null and void.

SO ORDERED.SEPARATE OPINIONSVITUG, J.:This Court is bereft of jurisdiction to hear the petitions at bar. The Constitution provides that the Supreme Court shall exercise original jurisdiction over, among other actual controversies, petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.1 The cases in question, although denominated to be petitions for prohibition, actually pray for the nullification of the PIATCO contracts and to restrain respondents from implementing said agreements for being illegal and unconstitutional.Section 2, Rule 65 of the Rules of Court states:"When the proceedings of any tribunal, corporation, board, officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent to desist from further proceedings in the action or matter specified therein, or otherwise granting such incidental reliefs as law and justice may require."The rule is explicit. A petition for prohibition may be filed against a tribunal, corporation, board, officer or person, exercising judicial, quasi-judicial or ministerial functions. What the petitions seek from respondents do not involve judicial, quasi-judicial or ministerial functions. In prohibition, only legal issues affecting the jurisdiction of the tribunal, board or officer involved may be resolved on the basis of undisputed facts.2 The parties allege, respectively, contentious evidentiary facts. It would be difficult, if not anomalous, to decide the jurisdictional issue on the basis of the contradictory factual submissions made by the parties.3 As the Court has so often exhorted, it is not a trier of facts.The petitions, in effect, are in the nature of actions for declaratory relief under Rule 63 of the Rules of Court. The Rules provide that any person interested under a contract may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his

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Case Materials in Remedial Law I ReviewJurisdictionrights or duties thereunder.4 The Supreme Court assumes no jurisdiction over petitions for declaratory relief which are cognizable by regional trial courts.5

As I have so expressed in Tolentino vs. Secretary of Finance,6 reiterated in Santiago vs. Guingona, Jr.7 , the Supreme Court should not be thought of as having been tasked with the awesome responsibility of overseeing the entire bureaucracy. Pervasive and limitless, such as it may seem to be under the 1987 Constitution, judicial power still succumbs to the paramount doctrine of separation of powers. The Court may not at good liberty intrude, in the guise of sovereign imprimatur, into every affair of government. What significance can still then remain of the time-honored and widely acclaimed principle of separation of powers if, at every turn, the Court allows itself to pass upon at will the disposition of a co-equal, independent and coordinate branch in our system of government. I dread to think of the so varied uncertainties that such an undue interference can lead to.Accordingly, I vote for the dismissal of the petition.Quisumbing, and Azcuna, JJ., concur.PANGANIBAN, J.:The five contracts for the construction and the operation of Ninoy Aquino International Airport (NAIA) Terminal III, the subject of the consolidated Petitions before the Court, are replete with outright violations of law, public policy and the Constitution. The only proper thing to do is declare them all null and void ab initio and let the chips fall where they may. Fiat iustitia ruat coelum.The facts leading to this controversy are already well presented in the ponencia. I shall not burden the readers with a retelling thereof. Instead, I will cut to the chase and directly address the two sets of gut issues:1. The first issue is procedural: Does the Supreme Court have original jurisdiction to hear and decide the Petitions? Corollarily, do petitioners have locus standi and should this Court decide the cases without any mandatory referral to arbitration?2. The second one is substantive in character: Did the subject contracts violate the Constitution, the laws, and public policy to such an extent as to render all of them void and inexistent?My answer to all the above questions is a firm "Yes."The Procedural Issue:Jurisdiction, Standing and Arbitration

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Case Materials in Remedial Law I ReviewJurisdictionDefinitely and surely, the issues involved in these Petitions are clearly of transcendental importance and of national interest. The subject contracts pertain to the construction and the operation of the country's premiere international airport terminal - an ultramodern world-class public utility that will play a major role in the country's economic development and serve to project a positive image of our country abroad. The five build-operate-&-transfer (BOT) contracts, while entailing the investment of billions of pesos in capital and the availment of several hundred millions of dollars in loans, contain provisions that tend to establish a monopoly, require the disbursements of public funds sans appropriations, and provide government guarantees in violation of statutory prohibitions, as well as other provisions equally offensive to law, public policy and the Constitution. Public interest will inevitably be affected thereby.

Thus, objections to these Petitions, grounded upon (a) the hierarchy of courts, (b) the need for arbitration prior to court action, and (c) the alleged lack of sufficient personality, standing or interest, being in the main procedural matters, must now be set aside, as they have been in past cases. This Court must be permitted to perform its constitutional duty of determining whether the other agencies of government have acted within the limits of the Constitution and the laws, or if they have gravely abused the discretion entrusted to them.1Hierarchy of CourtsThe Court has, in the past, held that questions relating to gargantuan government contracts ought to be settled without delay.2 This holding applies with greater force to the instant cases. Respondent Piatco is partly correct in averring that petitioners can obtain relief from the regional trial courts via an action to annul the contracts.Nevertheless, the unavoidable consequence of having to await the rendition and the finality of any such judgment would be a prolonged state of uncertainty that would be prejudicial to the nation, the parties and the general public. And, in light of the feared loss of jobs of the petitioning workers, consequent to the inevitable pretermination of contracts of the petitioning service providers that will follow upon the heels of the impending opening of NAIA Terminal III, the need for relief is patently urgent, and therefore, direct resort to this Court through the special civil action of prohibition is thus justified.3Contrary to Piatco's argument that the resolution of the issues raised in the Petitions will require delving into factual questions,4 I submit that their disposition ultimately turns on questions of law.5 Further, many of the significant and relevant factual questions can be easily addressed by an examination of the documents submitted by the parties. In any event, the Petitions raise some novel questions involving the application of the amended BOT Law, which this Court has seen fit to tackle.

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Case Materials in Remedial Law I ReviewJurisdictionArbitration

Should the dispute be referred to arbitration prior to judicial recourse? Respondent Piatco claims that Section 10.02 of the Amended and Restated Concession Agreement (ARCA) provides for arbitration under the auspices of the International Chamber of Commerce to settle any dispute or controversy or claim arising in connection with the Concession Agreement, its amendments and supplements. The government disagrees, however, insisting that there can be no arbitration based on Section 10.02 of the ARCA, since all the Piatco contracts are void ab initio. Therefore, all contractual provisions, including Section 10.02 of the ARCA, are likewise void, inexistent and inoperative. To support its stand, the government cites Chavez v. Presidential Commission on Good Government:6 "The void agreement will not be rendered operative by the parties' alleged performance (partial or full) of their respective prestations. A contract that violates the Constitution and the law is null and void ab initio and vests no rights and creates no obligations. It produces no legal effect at all."As will be discussed at length later, the Piatco contracts are indeed void in their entirety; thus, a resort to the aforesaid provision on arbitration is unavailing. Besides, petitioners and petitioners-in-intervention have pointed out that, even granting arguendo that the arbitration clause remained a valid provision, it still cannot bind them inasmuch as they are not parties to the Piatco contracts. And in the final analysis, it is unarguable that the arbitration process provided for under Section 10.02 of the ARCA, to be undertaken by a panel of three (3) arbitrators appointed in accordance with the Rules of Arbitration of the International Chamber of Commerce, will not be able to address, determine and definitively resolve the constitutional and legal questions that have been raised in the Petitions before us.Locus StandiGiven this Court's previous decisions in cases of similar import, no one will seriously doubt that, being taxpayers and members of the House of Representatives, Petitioners Baterina et al. have locus standi to bring the Petition in GR No. 155547. In Albano v. Reyes,7 this Court held that the petitioner therein, suing as a citizen, taxpayer and member of the House of Representatives, was sufficiently clothed with standing to bring the suit questioning the validity of the assailed contract. The Court cited the fact that public interest was involved, in view of the important role of the Manila International Container Terminal (MICT) in the country's economic development and the magnitude of the financial consideration. This, notwithstanding the fact that expenditure of public funds was not required under the assailed contract.In the cases presently under consideration, petitioners' personal and substantial interest in the controversy is shown by the fact that certain

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Case Materials in Remedial Law I ReviewJurisdictionprovisions in the Piatco contracts create obligations on the part of government (through the DOTC and the MIAA) to disburse public funds without prior congressional appropriations.

Petitioners thus correctly assert that the injury to them has a twofold aspect: (1) they are adversely affected as taxpayers on account of the illegal disbursement of public funds; and (2) they are prejudiced qua legislators, since the contractual provisions requiring the government to incur expenditures without appropriations also operate as limitations upon the exclusive power and prerogative of Congress over the public purse. As members of the House of Representatives, they are actually deprived of discretion insofar as the inclusion of those items of expenditure in the budget is concerned. To prevent such encroachment upon the legislative privilege and obviate injury to the institution of which they are members, petitioners-legislators have locus standi to bring suit.Messrs. Agan et al. and Lopez et al., are likewise taxpayers and thus possessed of standing to challenge the illegal disbursement of public funds. Messrs. Agan et al., in particular, are employees (or representatives of employees) of various service providers that have (1) existing concession agreements with the MIAA to provide airport services necessary to the operation of the NAIA and (2) service agreements to furnish essential support services to the international airlines operating at the NAIA.On the other hand, Messrs. Lopez et al. are employees of the MIAA. These petitioners (Messrs. Agan et al. and Messrs. Lopez et al.) are confronted with the prospect of being laid off from their jobs and losing their means of livelihood when their employer-companies are forced to shut down or otherwise retrench and cut back on manpower. Such development would result from the imminent implementation of certain provisions in the contracts that tend toward the creation of a monopoly in favor of Piatco, its subsidiaries and related companies.Petitioners-in-intervention are service providers in the business of furnishing airport-related services to international airlines and passengers in the NAIA and are therefore competitors of Piatco as far as that line of business is concerned. On account of provisions in the Piatco contracts, petitioners-in-intervention have to enter into a written contract with Piatco so as not to be shut out of NAIA Terminal III and barred from doing business there. Since there is no provision to ensure or safeguard free and fair competition, they are literally at its mercy. They claim injury on account of their deprivation of property (business) and of the liberty to contract, without due process of law.And even if petitioners and petitioners-in-intervention were not sufficiently clothed with legal standing, I have at the outset already established that, given its impact on the public and on national interest,

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Case Materials in Remedial Law I ReviewJurisdictionthis controversy is laden with transcendental importance and constitutional significance. Hence, I do not hesitate to adopt the same position as was enunciated in Kilosbayan v. Guingona Jr.8 that "in cases of transcendental importance, the Court may relax the standing requirements and allow a suit to prosper even when there is no direct injury to the party claiming the right of judicial review."9

The Substantive Issue:Violations of the Constitution and the LawsFrom the Outset, the Bidding Process Was Flawed and TaintedAfter studying the documents submitted and arguments advanced by the parties, I have no doubt that, right at the outset, Piatco was not qualified to participate in the bidding process for the Terminal III project, but was nevertheless permitted to do so. It even won the bidding and was helped along by what appears to be a series of collusive and corrosive acts.The build-operate-and-transfer (BOT) project for the NAIA Passenger Terminal III comes under the category of an "unsolicited proposal," which is the subject of Section 4-A of the BOT Law.10 The unsolicited proposal was originally submitted by the Asia's Emerging Dragon Corporation (AEDC) to the Department of Transportation and Communications (DOTC) and the Manila International Airport Authority (MIAA), which reviewed and approved the proposal.The draft of the concession agreement as negotiated between AEDC and DOTC/MIAA was endorsed to the National Economic Development Authority (NEDA-ICC), which in turn reviewed it on the basis of its scope, economic viability, financial indicators and risks; and thereafter approved it for bidding.The DOTC/MIAA then prepared the Bid Documents, incorporating therein the negotiated Draft Concession Agreement, and published invitations for public bidding, i.e., for the submission of comparative or competitive proposals. Piatco's predecessor-in-interest, the Paircargo Consortium, was the only company that submitted a competitive bid or price challenge.At this point, I must emphasize that the law requires the award of a BOT project to the bidder that has satisfied the minimum requirements; and met the technical, financial, organizational and legal standards provided in the BOT Law. Section 5 of this statute states:"Sec. 5. Public bidding of projects. - . . ."In the case of a build-operate-and-transfer arrangement, the contract shall be awarded to the bidder who, having satisfied the minimum financial, technical, organizational and legal standards required by this

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Case Materials in Remedial Law I ReviewJurisdictionAct, has submitted the lowest bid and most favorable terms for the project, based on the present value of its proposed tolls, fees, rentals and charges over a fixed term for the facility to be constructed, rehabilitated, operated and maintained according to the prescribed minimum design and performance standards, plans and specifications. . . ." (Emphasis supplied.)

The same provision requires that the price challenge via public bidding "must be conducted under a two-envelope/two-stage system: the first envelope to contain the technical proposal and the second envelope to contain the financial proposal." Moreover, the 1994 Implementing Rules and Regulations (IRR) provide that only those bidders that have passed the prequalification stage are permitted to have their two envelopes reviewed.In other words, prospective bidders must prequalify by submitting their prequalification documents for evaluation; and only the pre-qualified bidders would be entitled to have their bids opened, evaluated and appreciated. On the other hand, disqualified bidders are to be informed of the reason for their disqualification. This procedure was confirmed and reiterated in the Bid Documents, which I quote thus: "Prequalified proponents will be considered eligible to move to second stage technical proposal evaluation. The second and third envelopes of pre-disqualified proponents will be returned."11Aside from complying with the legal and technical requirements (track record or experience of the firm and its key personnel), a project proponent desiring to prequalify must also demonstrate its financial capacity to undertake the project. To establish such capability, a proponent must prove that it is able to raise the minimum amount of equity required for the project and to procure the loans or financing needed for it. Section 5.4(c) of the 1994 IRR provides:"Sec. 5.4. Prequalification Requirements. - To pre-qualify, a project proponent must comply with the following requirements:x x x           x x x           x x x"c. Financial Capability. The project proponent must have adequate capability to sustain the financing requirements for the detailed engineering design, construction, and/or operation and maintenance phases of the project, as the case may be. For purposes of prequalification, this capability shall be measured in terms of: (i) proof of the ability of the project proponent and/or the consortium to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable banks attesting that the project proponent and/or members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources. The government Agency/LGU concerned shall determine on a project-to-

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Case Materials in Remedial Law I ReviewJurisdictionproject basis, and before prequalification, the minimum amount of equity needed. . . . ." (Italics supplied)

Since the minimum amount of equity for the project was set at 30 percent12 of the minimum project cost of US$350 million, the minimum amount of equity required of any proponent stood at US$105 million. Converted to pesos at the exchange rate then of P26.239 to US$1.00 (as quoted by the Bangko Sentral ng Pilipinas), the peso equivalent of the minimum equity was P2,755,095,000.However, the combined equity or net worth of the Paircargo consortium stood at only P558,384,871.55.13 This amount was only slightly over 6 percent of the minimum project cost and very much short of the required minimum equity, which was equivalent to 30 percent of the project cost. Such deficiency should have immediately caused the disqualification of the Paircargo consortium. This matter was brought to the attention of the Prequalification and Bidding Committee (PBAC).Notwithstanding the glaring deficiency, DOTC Undersecretary Primitivo C. Cal, concurrent chair of the PBAC, declared in a Memorandum dated 14 October 1996 that "the Challenger (Paircargo consortium) was found to have a combined net worth of P3,926,421,242.00 that could support a project costing approximately P13 billion." To justify his conclusion, he asserted: "It is not a requirement that the networth must be `unrestricted'. To impose this as a requirement now will be nothing less than unfair."He further opined, "(T)he networth reflected in the Financial Statement should not be taken as the amount of money to be used to answer the required thirty (30%) percent equity of the challenger but rather to be used in establishing if there is enough basis to believe that the challenger can comply with the required 30% equity. In fact, proof of sufficient equity is required as one of the conditions for award of contract (Sec. 12.1 of IRR of the BOT Law) but not for prequalification (Sec. 5.4 of same document)."On the basis of the foregoing dubious declaration, the Paircargo consortium was deemed prequalified and thus permitted to proceed to the other stages of the bidding process.By virtue of the prequalified status conferred upon the Paircargo, Undersecretary Cal's findings in effect relieved the consortium of the need to comply with the financial capability requirement imposed by the BOT Law and IRR. This position is unmistakably and squarely at odds with the Supreme Court's consistent doctrine emphasizing the strict application of pertinent rules, regulations and guidelines for the public bidding process, in order to place each bidder - actual or potential - on the same footing. Thus, it is unarguably irregular and contrary to the very concept of public bidding to permit a variance between the

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Case Materials in Remedial Law I ReviewJurisdictionconditions under which bids are invited and those under which proposals are submitted and approved.Republic v. Capulong,14 teaches that if one bidder is relieved from having to conform to the conditions that impose some duty upon it, that bidder is not contracting in fair competition with those bidders that propose to be bound by all conditions. The essence of public bidding is, after all, an opportunity for fair competition and a basis for the precise comparison of bids.15 Thus, each bidder must bid under the same conditions; and be subject to the same guidelines, requirements and limitations. The desired result is to be able to determine the best offer or lowest bid, all things being equal.

Inasmuch as the Paircargo consortium did not possess the minimum equity equivalent to 30 percent of the minimum project cost, it should not have been prequalified or allowed to participate further in the bidding. The Prequalification and Bidding Committee (PBAC) should therefore not have opened the two envelopes of the consortium containing its technical and financial proposals; required AEDC to match the consortium's bid; 16 or awarded the Concession Agreement to the consortium's successor-in-interest, Piatco.As there was effectively no public bidding to speak of, the entire bidding process having been flawed and tainted from the very outset, therefore, the award of the concession to Paircargo's successor Piatco was void, and the Concession Agreement executed with the latter was likewise void ab initio. For this reason, Piatco cannot and should not be allowed to benefit from that Agreement.17AEDC Was Deprived of the Right to Match PIATCO's Price ChallengeIn DOTC PBAC Bid Bulletin No. 4 (par. 3), Undersecretary Cal declared that, for purposes of matching the price challenge of Piatco, AEDC as originator of the unsolicited proposal would be permitted access only to the schedule of proposed Annual Guaranteed Payments submitted by Piatco, and not to the latter's financial and technical proposals that constituted the basis for the price challenge in the first place. This was supposedly in keeping with Section 11.6 of the 1994 IRR, which provides that proprietary information is to be respected, protected and treated with utmost confidentiality, and is therefore not to form part of the bidding/tender and related documents.This pronouncement, I believe, was a grievous misapplication of the mentioned provision. The "proprietary information" referred to in Section 11.6 of the IRR pertains only to the proprietary information of the originator of an unsolicited proposal, and not to those belonging to a challenger. The reason for the protection accorded proprietary information at all is the fact that, according to Section 4-A of the BOT Law as amended, a proposal qualifies as an "unsolicited proposal" when

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Case Materials in Remedial Law I ReviewJurisdictionit pertains to a project that involves "a new concept or technology", and/or a project that is not on the government's list of priority projects.

To be considered as utilizing a new concept or technology, a project must involve the possession of exclusive rights (worldwide or regional) over a process; or possession of intellectual property rights over a design, methodology or engineering concept.18 Patently, the intent of the BOT Law is to encourage individuals and groups to come up with creative innovations, fresh ideas and new technology. Hence, the significance and necessity of protecting proprietary information in connection with unsolicited proposals. And to make the encouragement real, the law also extends to such individuals and groups what amounts to a "right of first refusal" to undertake the project they conceptualized, involving the use of new technology or concepts, through the mechanism of matching a price challenge.A competing bid is never just any figure conjured from out of the blue; it is arrived at after studying economic, financial, technical and other, factors; it is likewise based on certain assumptions as to the nature of the business, the market potentials, the probable demand for the product or service, the future behavior of cost items, political and other risks, and so on. It is thus self-evident that in order to be able to intelligently match a bid or price challenge, a bidder must be given access to the assumptions and the calculations that went into crafting the competing bid.In this instance, the financial and technical proposals of Piatco would have provided AEDC with the necessary information to enable it to make a reasonably informed matching bid. To put it more simply, a bidder unable to access the competitor's assumptions will never figure out how the competing bid came about; requiring him to "counter-propose" is like having him shoot at a target in the dark while blindfolded.By withholding from AEDC the challenger's financial and technical proposals containing the critical information it needed, Undersecretary Cal actually and effectively deprived AEDC of the ability to match the price challenge. One could say that AEDC did not have the benefit of a "level playing field." It seems to me, though, that AEDC was actually shut out of the game altogether.At the end of the day, the bottom line is that the validity and the propriety of the award to Piatco had been irreparably impaired.Delayed Issuance of the Notice of Award Violated the BOT Law and the IRRSection 9.5 of the IRR requires that the Notice of Award must indicate the time frame within which the winner of the bidding (and therefore the prospective awardee) shall submit the prescribed performance security, proof of commitment of equity contributions, and indications of sources

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Case Materials in Remedial Law I ReviewJurisdictionof financing (loans); and, in the case of joint ventures, an agreement showing that the members are jointly and severally responsible for the obligations of the project proponent under the contract.

The purpose of having a definite and firm timetable for the submission of the aforementioned requirements is not only to prevent delays in the project implementation, but also to expose and weed out unqualified proponents, who might have unceremoniously slipped through the earlier prequalification process, by compelling them to put their money where their mouths are, so to speak.Nevertheless, this provision can be easily circumvented by merely postponing the actual issuance of the Notice of Award, in order to give the favored proponent sufficient time to comply with the requirements. Hence, to avert or minimize the manipulation of the post-bidding process, the IRR not only set out the precise sequence of events occurring between the completion of the evaluation of the technical bids and the issuance of the Notice of Award, but also specified the timetables for each such event. Definite allowable extensions of time were provided for, as were the consequences of a failure to meet a particular deadline.In particular, Section 9.1 of the 1994 IRR prescribed that within 30 calendar days from the time the second-stage evaluation shall have been completed, the Committee must come to a decision whether or not to award the contract and, within 7 days therefrom, the Notice of Award must be approved by the head of agency or local government unit (LGU) concerned, and its issuance must follow within another 7 days thereafter.Section 9.2 of the IRR set the procedure applicable to projects involving substantial government undertakings as follows: Within 7 days after the decision to award is made, the draft contract shall be submitted to the ICC for clearance on a no-objection basis. If the draft contract includes government undertakings already previously approved, then the submission shall be for information only.However, should there be additional or new provisions different from the original government undertakings, the draft shall have to be reviewed and approved. The ICC has 15 working days to act thereon, and unless otherwise specified, its failure to act on the contract within the specified time frame signifies that the agency or LGU may proceed with the award. The head of agency or LGU shall approve the Notice of Award within seven days of the clearance by the ICC on a no-objection basis, and the Notice itself has to be issued within seven days thereafter.The highly regulated time-frames within which the agents of government were to act evinced the intent to impose upon them the duty to act expeditiously throughout the process, to the end that the project be prosecuted and implemented without delay. This regulated scenario was likewise intended to discourage collusion and substantially reduce the

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Case Materials in Remedial Law I ReviewJurisdictionopportunity for agents of government to abuse their discretion in the course of the award process.

Despite the clear timetables set out in the IRR, several lengthy and still-unexplained delays occurred in the award process, as can be observed from the presentation made by the counsel for public respondents,19 quoted hereinbelow:"11 Dec. 1996 - The Paircargo Joint Venture was informed by the PBAC that AEDC failed to match and that negotiations preparatory to Notice of Award should be commenced. This was the decision to award that should have commenced the running of the 7-day period to approve the Notice of Award, as per Section 9.1 of the IRR, or to submit the draft contract to the ICC for approval conformably with Section 9.2."01 April 1997 - The PBAC resolved that a copy of the final draft of the Concession Agreement be submitted to the NEDA for clearance on a no-objection basis. This resolution came more than 3 months too late as it should have been made on the 20th of December 1996 at the latest."16 April 1997 - The PBAC resolved that the period of signing the Concession Agreement be extended by 15 days."18 April 1997 - NEDA approved the Concession Agreement. Again this is more than 3 months too late as the NEDA's decision should have been released on the 16th of January 1997 or fifteen days after it should have been submitted to it for review."09 July 1997 - The Notice of Award was issued to PIATCO. Following the provisions of the IRR, the Notice of Award should have been issued fourteen days after NEDA's approval, or the 28th of January 1997. In any case, even if it were to be assumed that the release of NEDA's approval on the 18th of April was timely, the Notice of Award should have been issued on the 9th of May 1997. In both cases, therefore, the release of the Notice of Award occurred in a decidedly less than timely fashion."This chronology of events bespeaks an unmistakable disregard, if not disdain, by the persons in charge of the award process for the time limitations prescribed by the IRR. Their attitude flies in the face of this Court's solemn pronouncement in Republic v. Capulong,20 that "strict observance of the rules, regulations and guidelines of the bidding process is the only safeguard to a fair, honest and competitive public bidding."From the foregoing, the only conclusion that can possibly be drawn is that the BOT law and its IRR were repeatedly violated with unmitigated impunity - and by agents of government, no less! On account of such violation, the award of the contract to Piatco, which undoubtedly gained time and benefited from the delays, must be deemed null and void from the beginning.

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Case Materials in Remedial Law I ReviewJurisdictionFurther Amendments Resulted in a Substantially Different Contract, Awarded Without Public Bidding

But the violations and desecrations did not stop there. After the PBAC made its decision on December 11, 1996 to award the contract to Piatco, the latter negotiated changes to the Contract bidded out and ended up with what amounts to a substantially new contract without any public bidding. This Contract was subsequently further amended four more times through negotiation and without any bidding. Thus, the contract actually executed between Piatco and DOTC/MIAA on July 12, 1997 (the Concession Agreement or "CA") differed from the contract bidded out (the draft concession agreement or "DCA") in the following very significant respects:1. The CA inserted stipulations creating a monopoly in favor of Piatco in the business of providing airport-related services for international airlines and passengers.212. The CA provided that government is to answer for Piatco's unpaid loans and debts (lumped under the term Attendant Liabilities) in the event Piatco fails to pay its senior lenders.223. The CA provided that in case of termination of the contract due to the fault of government, government shall pay all expenses that Piatco incurred for the project plus the appraised value of the Terminal.234. The CA imposed new and special obligations on government, including delivery of clean possession of the site for the terminal; acquisition of additional land at the government's expense for construction of road networks required by Piatco's approved plans and specifications; and assistance to Piatco in securing site utilities, as well as all necessary permits, licenses and authorizations.245. Where Section 3.02 of the DCA requires government to refrain from competing with the contractor with respect to the operation of NAIA Terminal III, Section 3.02(b) of the CA excludes and prohibits everyone, including government, from directly or indirectly competing with Piatco, with respect to the operation of, as well as operations in, NAIA Terminal III. Operations in is sufficiently broad to encompass all retail and other commercial business enterprises operating within Terminal III, inclusive of the businesses of providing various airport-related services to international airlines, within the scope of the prohibition.6. Under Section 6.01 of the DCA, the following fees are subject to the written approval of MIAA: lease/rental charges, concession privilege fees for passenger services, food services, transportation utility concessions, groundhandling, catering and miscellaneous concession fees, porterage fees, greeter/well-wisher fees, carpark fees, advertising fees, VIP facilities fees and others. Moreover, adjustments to the groundhandling

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Case Materials in Remedial Law I ReviewJurisdictionfees, rentals and porterage fees are permitted only once every two years and in accordance with a parametric formula, per DCA Section 6.03. However, the CA as executed with Piatco provides in Section 6.06 that all the aforesaid fees, rentals and charges may be adjusted without MIAA's approval or intervention. Neither are the adjustments to these fees and charges subject to or limited by any parametric formula.25

7. Section 1.29 of the DCA provides that the terminal fees, aircraft tacking fees, aircraft parking fees, check-in counter fees and other fees are to be quoted and paid in Philippine pesos. But per Section 1.33 of the CA, all the aforesaid fees save the terminal fee are denominated in US Dollars.8. Under Section 8.07 of the DCA, the term attendant liabilities refers to liabilities pertinent to NAIA Terminal III, such as payment of lease rentals and performance of other obligations under the Land Lease Agreement; the obligations under the Tenant Agreements; and payment of all taxes, fees, charges and assessments of whatever kind that may be imposed on NAIA Terminal III or parts thereof. But in Section 1.06 of the CA, Attendant Liabilities refers to unpaid debts of Piatco: "All amounts recorded and from time to time outstanding in the books of (Piatco) as owing to Unpaid Creditors who have provided, loaned or advanced funds actually used for the Project, including all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further including amounts owed by [Piatco] to its suppliers, contractors and subcontractors."9. Per Sections 8.04 and 8.06 of the DCA, government may, on account of the contractors breach, rescind the contract and select one of four options: (a) take over the terminal and assume all its attendant liabilities; (b) allow the contractor's creditors to assign the Project to another entity acceptable to DOTC/MIAA; (c) pay the contractor rent for the facilities and equipment the DOTC may utilize; or (d) purchase the terminal at a price established by independent appraisers. Depending on the option selected, government may take immediate possession and control of the terminal and its operations. Government will be obligated to compensate the contractor for the "equivalent or proportionate contract costs actually disbursed," but only where government is the one in breach of the contract. But under Section 8.06(a) of the CA, whether on account of Piatco's breach of contract or its inability to pay its creditors, government is obliged to either (a) take over Terminal III and assume all of Piatco's debts or (b) permit the qualified unpaid creditors to be substituted in place of Piatco or to designate a new operator. And in the event of government's breach of contract, Piatco may compel it to purchase the terminal at fair market value, per Section 8.06(b) of the CA.10. Under the DCA, any delay by Piatco in the payment of the amounts due the government constitutes breach of contract. However, under the CA, such delay does not necessarily constitute breach of contract, since

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Case Materials in Remedial Law I ReviewJurisdictionPiatco is permitted to suspend payments to the government in order to first satisfy the claims of its secured creditors, per Section 8.04(d) of the CA.

It goes without saying that the amendment of the Contract bidded out (the DCA or draft concession agreement) - in such substantial manner, without any public bidding, and after the bidding process had been concluded on December 11, 1996 - is violative of public policy on public biddings, as well as the spirit and intent of the BOT Law. The whole point of going through the public bidding exercise was completely lost. Its very rationale was totally subverted by permitting Piatco to amend the contract for which public bidding had already been concluded. Competitive bidding aims to obtain the best deal possible by fostering transparency and preventing favoritism, collusion and fraud in the awarding of contracts. That is the reason why procedural rules pertaining to public bidding demand strict observance.26In a relatively early case, Caltex v. Delgado Brothers,27 this Court made it clear that substantive amendments to a contract for which a public bidding has already been finished should only be awarded after another public bidding:"The due execution of a contract after public bidding is a limitation upon the right of the contracting parties to alter or amend it without another public bidding, for otherwise what would a public bidding be good for if after the execution of a contract after public bidding, the contracting parties may alter or amend the contract, or even cancel it, at their will? Public biddings are held for the protection of the public, and to give the public the best possible advantages by means of open competition between the bidders. He who bids or offers the best terms is awarded the contract subject of the bid, and it is obvious that such protection and best possible advantages to the public will disappear if the parties to a contract executed after public bidding may alter or amend it without another previous public bidding."28The aforementioned case dealt with the unauthorized amendment of a contract executed after public bidding; in the situation before us, the amendments were made also after the bidding, but prior to execution. Be that as it may, the same rationale underlying Caltex applies to the present situation with equal force. Allowing the winning bidder to renegotiate the contract for which the bidding process has ended is tantamount to permitting it to put in anything it wants. Here, the winning bidder (Piatco) did not even bother to wait until after actual execution of the contract before rushing to amend it. Perhaps it believed that if the changes were made to a contract already won through bidding (DCA) instead of waiting until it is executed, the amendments would not be noticed or discovered by the public.

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Case Materials in Remedial Law I ReviewJurisdictionIn a later case, Mata v. San Diego,29 this Court reiterated its ruling as follows:

"It is true that modification of government contracts, after the same had been awarded after a public bidding, is not allowed because such modification serves to nullify the effects of the bidding and whatever advantages the Government had secured thereby and may also result in manifest injustice to the other bidders. This prohibition, however, refers to a change in vital and essential particulars of the agreement which results in a substantially new contract."Piatco's counter-argument may be summed up thus: There was nothing in the 1994 IRR that prohibited further negotiations and eventual amendments to the DCA even after the bidding had been concluded. In fact, PBAC Bid Bulletin No. 3 states: "[A]mendments to the Draft Concession Agreement shall be issued from time to time. Said amendments will only cover items that would not materially affect the preparation of the proponent's proposal."I submit that accepting such warped argument will result in perverting the policy underlying public bidding. The BOT Law cannot be said to allow the negotiation of contractual stipulations resulting in a substantially new contract after the bidding process and price challenge had been concluded. In fact, the BOT Law, in recognition of the time, money and effort invested in an unsolicited proposal, accords its originator the privilege of matching the challenger's bid.Section 4-A of the BOT Law specifically refers to a "lower price proposal" by a competing bidder; and to the right of the original proponent "to match the price" of the challenger. Thus, only the price proposals are in play. The terms, conditions and stipulations in the contract for which public bidding has been concluded are understood to remain intact and not be subject to further negotiation. Otherwise, the very essence of public bidding will be destroyed - there will be no basis for an exact comparison between bids.Moreover, Piatco misinterpreted the meaning behind PBAC Bid Bulletin No. 3. The phrase amendments . . . from time to time refers only to those amendments to the draft concession agreement issued by the PBAC prior to the submission of the price challenge; it certainly does not include or permit amendments negotiated for and introduced after the bidding process, has been terminated.Piatco's Concession Agreement Was Further Amended, (ARCA) Again Without Public BiddingNot satisfied with the Concession Agreement, Piatco - once more without bothering with public bidding - negotiated with government for still more substantial changes. The result was the Amended and Restated

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Case Materials in Remedial Law I ReviewJurisdictionConcession Agreement (ARCA) executed on November 26, 1998. The following changes were introduced:

1. The definition of Attendant Liabilities was further amended with the result that the unpaid loans of Piatco, for which government may be required to answer, are no longer limited to only those loans recorded in Piatco's books or loans whose proceeds were actually used in the Terminal III project.302. Although the contract may be terminated due to breach by Piatco, it will not be liable to pay the government any Liquidated Damages if a new operator is designated to take over the operation of the terminal.313. The Liquidated Damages which government becomes liable for in case of its breach of contract were substantially increased.324. Government's right to appoint a comptroller for Piatco in case the latter encounters liquidity problems was deleted.335. Government is made liable for Incremental and Consequential Costs and Losses in case it fails to comply or cause any third party under its direct or indirect control to comply with the special obligations imposed on government.346. The insurance policies obtained by Piatco covering the terminal are now required to be assigned to the Senior Lenders as security for the loans; previously, their proceeds were to be used to repair and rehabilitate the facility in case of damage.357. Government bound itself to set the initial rate of the terminal fee, to be charged when Terminal III begins operations, at an amount higher than US$20.368. Government waived its defense of the illegality of the contract and even agreed to be liable to pay damages to Piatco in the event the contract was declared illegal.379. Even though government may be entitled to terminate the ARCA on account of breach by Piatco, government is still liable to pay Piatco the appraised value of Terminal III or the Attendant Liabilities, if the termination occurs before the In-Service Date.38 This condition contravenes the BOT Law provision on termination compensation.10. Government is obligated to take the administrative action required for Piatco's imposition, collection and application of all Public Utility Revenues.39 No such obligation existed previously.11. Government is now also obligated to perform and cause other persons and entities under its direct or indirect control to perform all

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Case Materials in Remedial Law I ReviewJurisdictionacts necessary to perfect the security interests to be created in favor of Piatco's Senior Lenders.40 No such obligation existed previously.

12. DOTC/MIAA's right of intervention in instances where Piatco's Non-Public Utility Revenues become exorbitant or excessive has been removed.4113. The illegality and unenforceability of the ARCA or any of its material provisions was made an event of default on the part of government only, thus constituting a ground for Piatco to terminate the ARCA.4214. Amounts due from and payable by government under the contract were made payable on demand - net of taxes, levies, imposts, duties, charges or fees of any kind except as required by law.4315. The Parametric Formula in the contract, which is utilized to compute for adjustments/increases to the public utility revenues (i.e., aircraft parking and tacking fees, check-in counter fee and terminal fee), was revised to permit Piatco to input its more costly short-term borrowing rates instead of the longer-terms rates in the computations for adjustments, with the end result that the changes will redound to its greater financial benefit.16. The Certificate of Completion simply deleted the successful performance-testing of the terminal facility in accordance with defined performance standards as a pre-condition for government's acceptance of the terminal facility.44In sum, the foregoing revisions and amendments as embodied in the ARCA constitute very material alterations of the terms and conditions of the CA, and give further manifestly undue advantage to Piatco at the expense of government. Piatco claims that the changes to the CA were necessitated by the demands of its foreign lenders. However, no proof whatsoever has been adduced to buttress this claim.In any event, it is quite patent that the sum total of the aforementioned changes resulted in drastically weakening the position of government to a degree that seems quite excessive, even from the standpoint of a businessperson who regularly transacts with banks and foreign lenders, is familiar with their mind-set, and understands what motivates them. On the other hand, whatever it was that impelled government officials concerned to accede to those grossly disadvantageous changes, I can only hazard a guess.There is no question in my mind that the ARCA was unauthorized and illegal for lack of public bidding and for being patently disadvantageous to government.

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Case Materials in Remedial Law I ReviewJurisdictionThe Three Supplements Imposed New Obligations on Government, Also Without Prior Public Bidding

After Piatco had managed to breach the protective rampart of public bidding, it recklessly went on a rampage of further assaults on the ARCA.The First Supplement Is as Void as the ARCAIn the First Supplement ("FS") executed on August 27, 1999, the following changes were made to the ARCA:1. The amounts payable by Piatco to government were reduced by allowing additional exceptions to the Gross Revenues in which government is supposed to participate.452. Made part of the properties which government is obliged to construct and/or maintain and keep in good repair are (a) the access road connecting Terminals II and III - the construction of this access road is the obligation of Piatco, in lieu of its obligation to construct an Access Tunnel connecting Terminals II and III; and (b) the taxilane and taxiway - these are likewise part of Piatco's obligations, since they are part and parcel of the project as described in Clause 1.3 of the Bid Documents .463. The MIAA is obligated to provide funding for the maintenance and repair of the airports and facilities owned or operated by it and by third persons under its control. It will also be liable to Piatco for the latter's losses, expenses and damages as well as liability to third persons, in case MIAA fails to perform such obligations. In addition, MIAA will also be liable for the incremental and consequential costs of the remedial work done by Piatco on account of the former's default.474. The FS also imposed on government ten (10) "Additional Special Obligations," including the following:(a) Working for the removal of the general aviation traffic from the NAIA airport complex48(b) Providing through MIAA the land required by Piatco for the taxilane and one taxiway at no cost to Piatco49(c) Implementing the government's existing storm drainage master plan50(d) Coordinating with DPWH the financing, the implementation and the completion of the following works before the In-Service Date: three left-turning overpasses (EDSA to Tramo St., Tramo to Andrews Ave., and Manlunas Road to Sales Ave.);51 and a road upgrade and improvement program involving widening, repair and resurfacing of Sales Road, Andrews Avenue and Manlunas Road; improvement of Nichols Interchange; and removal of squatters along Andrews Avenue.52

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Case Materials in Remedial Law I ReviewJurisdiction(e) Dealing directly with BCDA and the Phil. Air Force in acquiring additional land or right of way for the road upgrade and improvement program.53

5. Government is required to work for the immediate reversion to MIAA of the Nayong Pilipino National Park.546. Government's share in the terminal fees collected was revised from a flat rate of P180 to 36 percent thereof; together with government's percentage share in the gross revenues of Piatco, the amount will be remitted to government in pesos instead of US dollars.55 This amendment enables Piatco to benefit from the further erosion of the peso-dollar exchange rate, while preventing government from building up its foreign exchange reserves.7. All payments from Piatco to government are now to be invoiced to MIAA, and payments are to accrue to the latter's exclusive benefit.56 This move appears to be in support of the funds MIAA advanced to DPWH.I must emphasize that the First Supplement is void in two respects. First, it is merely an amendment to the ARCA, upon which it is wholly dependent; therefore, since the ARCA is void, inexistent and not capable of being ratified or amended, it follows that the FS too is void, inexistent and inoperative. Second, even assuming arguendo that the ARCA is somehow remotely valid, nonetheless the FS, in imposing significant new obligations upon government, altered the fundamental terms and stipulations of the ARCA, thus necessitating a public bidding all over again. That the FS was entered into sans public bidding renders it utterly void and inoperative.The Second Supplement Is Similarly Void and InexistentThe Second Supplement ("SS") was executed between the government and Piatco on September 4, 2000. It calls for Piatco, acting not as concessionaire of NAIA Terminal III but as a public works contractor, to undertake - in the government's stead - the clearing, removal, demolition and disposal of improvements, subterranean obstructions and waste materials at the project site.57The scope of the works, the procedures involved, and the obligations of the contractor are provided for in Parts II and III of the SS. Section 4.1 sets out the compensation to be paid, listing specific rates per cubic meter of materials for each phase of the work - excavation, leveling, removal and disposal, backfilling and dewatering. The amounts collectible by Piatco are to be offset against the Annual Guaranteed Payments it must pay government.

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Case Materials in Remedial Law I ReviewJurisdictionThough denominated as Second Supplement, it was nothing less than an entirely new public works contract. Yet it, too, did not undergo any public bidding, for which reason it is also void and inoperative.

Not surprisingly, Piatco had to subcontract the works to a certain Wintrack Builders, a firm reputedly owned by a former high-ranking DOTC official. But that is another story altogether.The Third Supplement Is Likewise Void and InexistentThe Third Supplement ("TS"), executed between the government and Piatco on June 22, 2001, passed on to the government certain obligations of Piatco as Terminal III concessionaire, with respect to the surface road connecting Terminals II and III.By way of background, at the inception of and forming part of the NAIA Terminal III project was the proposed construction of an access tunnel crossing Runway 13/31, which. would connect Terminal III to Terminal II. The Bid Documents in Section 4.1.2.3[B][i] declared that the said access tunnel was subject to further negotiation; but for purposes of the bidding, the proponent should submit a bid for it as well. Therefore, the tunnel was supposed to be part and parcel of the Terminal III project.However, in Section 5 of the First Supplement, the parties declared that the access tunnel was not economically viable at that time. In lieu thereof, the parties agreed that a surface access road (now called the T2-T3 Road) was to be constructed by Piatco to connect the two terminals. Since it was plainly in substitution of the tunnel, the surface road construction should likewise be considered part and parcel of the same project, and therefore part of Piatco's obligation as well. While the access tunnel was estimated to cost about P800 million, the surface road would have a price tag in the vicinity of about P100 million, thus producing significant savings for Piatco.Yet, the Third Supplement, while confirming that Piatco would construct the T2-T3 Road, nevertheless shifted to government some of the obligations pertaining to the former, as follows:1. Government is now obliged to remove at its own expense all tenants, squatters, improvements and/or waste materials on the site where the T2-T3 road is to be constructed.58 There was no similar obligation on the part of government insofar as the access tunnel was concerned.2. Should government fail to carry out its obligation as above described, Piatco may undertake it on government's behalf, subject to the terms and conditions (including compensation payments) contained in the Second Supplement.59

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Case Materials in Remedial Law I ReviewJurisdiction3. MIAA will answer for the operation, maintenance and repair of the T2-T3 Road.60

The TS depends upon and is intended to supplement the ARCA as well as the First Supplement, both of which are void and inexistent and not capable of being ratified or amended. It follows that the TS is likewise void, inexistent and inoperative. And even if, hypothetically speaking, both ARCA and FS are valid, still, the Third Supplement - imposing as it does significant new obligations upon government - would in effect alter the terms and stipulations of the ARCA in material respects, thus necessitating another public bidding. Since the TS was not subjected to public bidding, it is consequently utterly void as well. At any rate, the TS created new monetary obligations on the part of government, for which there were no prior appropriations. Hence it follows that the same is void ab initio.In patiently tracing the progress of the Piatco contracts from their inception up to the present, I noted that the whole process was riddled with significant lapses, if not outright irregularity and wholesale violations of law and public policy. The rationale of beginning at the beginning, so to speak, will become evident when the question of what to do with the five Piatco contracts is discussed later on.In the meantime, I shall take up specific, provisions or changes in the contracts and highlight the more prominent objectionable features.Government Directly Guarantees Piatco DebtsCertainly the most discussed provision in the parties' arguments is the one creating an unauthorized, direct government guarantee of Piatco's obligations in favor of the lenders.Section 4-A of the BOT Law as amended states that unsolicited proposals, such as the NAIA Terminal III Project, may be accepted by government provided inter alia that no direct government guarantee, subsidy or equity is required. In short, such guarantee is prohibited in unsolicited proposals. Section 2(n) of the same legislation defines direct government guarantee as "an agreement whereby the government or any of its agencies or local government units (will) assume responsibility for the repayment of debt directly incurred by the project proponent in implementing the project in case of a loan default."Both the CA and the ARCA have provisions that undeniably create such prohibited government guarantee. Section 4.04 (c)(iv) to (vi) of the ARCA, which is similar to Section 4.04 of the CA, provides thus:"(iv) that if Concessionaire is in default under a payment obligation owed to the Senior Lenders, and as a result thereof the Senior Lenders

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Case Materials in Remedial Law I ReviewJurisdictionhave become entitled to accelerate the Senior Loans, the Senior Lenders shall have the right to notify GRP of the same . . .;

(v) . . . the Senior Lenders may after written notification to GRP, transfer the Concessionaire's rights and obligations to a transferee . . .;(vi) if the Senior Lenders . . . are unable to . . . effect a transfer . . ., then GRP and the Senior Lenders shall endeavor . . . to enter into any other arrangement relating to the Development Facility . . . If no agreement relating to the Development Facility is arrived at by GRP and the Senior Lenders within the said 180-day period, then at the end thereof the Development Facility shall be transferred by the Concessionaire to GRP or its designee and GRP shall make a termination payment to Concessionaire equal to the Appraised Value (as hereinafter defined) of the Development Facility or the sum of the Attendant Liabilities, if greater. . . ."In turn, the term Attendant Liabilities is defined in Section 1.06 of the ARCA as follows:"Attendant Liabilities refer to all amounts in each case supported by verifiable evidence from time to time owed or which may become, owing by Concessionaire to Senior Lenders or any other persons or entities who have provided, loaned or advanced funds or provided financial facilities to Concessionaire for the Project, including, without limitation, all principal, interest, associated fees, charges, reimbursements, and other related expenses (including the fees, charges and expenses of any agents or trustees of such persons or entities), whether payable at maturity, by acceleration or otherwise, and further including amounts owed by Concessionaire to its professional consultants and advisers, suppliers, contractors and sub-contractors."Government's agreement to pay becomes effective in the event of a default by Piatco on any of its loan obligations to the Senior Lenders, and the amount to be paid by government is the greater of either the Appraised Value of Terminal III or the aggregate amount of the moneys owed by Piatco - whether to the Senior Lenders or to other entities, including its suppliers, contractors and subcontractors. In effect, therefore, this agreement already constitutes the prohibited assumption by government of responsibility for repayment of Piatco's debts in case of a loan default. In fine, a direct government guarantee.It matters not that there is a roundabout procedure prescribed by Section 4.04(c)(iv), (v) and (vi) that would require, first, an attempt (albeit unsuccessful) by the Senior Lenders to transfer Piatco's rights to a transferee of their choice; and, second, an effort (equally unsuccessful) to "enter into any other arrangement" with the government regarding the Terminal III facility, before government is required to make good on its guarantee. What is abundantly clear is the fact that, in the devious

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Case Materials in Remedial Law I ReviewJurisdictionlabyrinthine process detailed in the aforesaid section, it is entirely within the Senior Lenders' power, prerogative and control - exercisable via a mere refusal or inability to agree upon "a transferee" or "any other arrangement" regarding the terminal facility - to push the process forward to the ultimate contractual cul-de-sac, wherein government will be compelled to abjectly surrender and make good on its guarantee of payment.

Piatco also argues that there is no proviso requiring government to pay the Senior Lenders in the event of Piatco's default. This is literally true, in the sense that Section 4.04(c)(vi) of ARCA speaks of government making the termination payment to Piatco, not to the lenders. However, it is almost a certainty that the Senior Lenders will already have made Piatco sign over to them, ahead of time, its right to receive such payments from government; and/or they may already have had themselves appointed its attorneys-in-fact for the purpose of collecting and receiving such payments.Nevertheless, as petitioners-in-intervention pointed out in their Memorandum,61 the termination payment is to be made to Piatco, not to the lenders; and there is no provision anywhere in the contract documents to prevent it from diverting the proceeds to its own benefit and/or to ensure that it will necessarily use the same to pay off the Senior Lenders and other creditors, in order to avert the foreclosure of the mortgage and other liens on the terminal facility. Such deficiency puts the interests of government at great risk. Indeed, if the unthinkable were to happen, government would be paying several hundreds of millions of dollars, but the mortgage liens on the facility may still be foreclosed by the Senior Lenders just the same.Consequently, the Piatco contracts are also objectionable for grievously failing to adequately protect government's interests. More accurately, the contracts would consistently weaken and do away with protection of government interests. As such, they are therefore grossly lopsided in favor of Piatco and/or its Senior Lenders.While on this subject, it is well to recall the earlier discussion regarding a particularly noticeable alteration of the concept of "Attendant Liabilities." In Section 1.06 of the CA defining the term, the Piatco debts to be assumed/paid by government were qualified by the phrases recorded and from time to time outstanding in the books of the Concessionaire and actually used for the project. These phrases were eliminated from the ARCA's definition of Attendant Liabilities.Since no explanation has been forthcoming from Piatco as to the possible justification for such a drastic change, the only conclusion, possible is that it intends to have all of its debts covered by the guarantee, regardless of whether or not they are disclosed in its books. This has particular reference to those borrowings which were obtained in violation

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Case Materials in Remedial Law I ReviewJurisdictionof the loan covenants requiring Piatco to maintain a minimum 70:30 debt-to-equity ratio, and even if the loan proceeds were not actually used for the project itself.

This point brings us back to the guarantee itself. In Section 4.04(c)(vi) of ARCA, the amount which government has guaranteed to pay as termination payment is the greater of either (i) the Appraised Value of the terminal facility or (ii) the aggregate of the Attendant Liabilities. Given that the Attendant Liabilities may include practically any Piatco debt under the sun, it is highly conceivable that their sum may greatly exceed the appraised value of the facility, and government may end up paying very much more than the real worth of Terminal III. (So why did government have to bother with public bidding anyway?)In the final analysis, Section 4.04(c)(iv) to (vi) of the ARCA is diametrically at odds with the spirit and the intent of the BOT Law. The law meant to mobilize private resources (the private sector) to take on the burden and the risks of financing the construction, operation and maintenance of relevant infrastructure and development projects for the simple reason that government is not in a position to do so. By the same token, government guarantee was prohibited, since it would merely defeat the purpose and raison d'être of a build-operate-and-transfer project to be undertaken by the private sector.To the extent that the project proponent is able to obtain loans to fund the project, those risks are shared between the project proponent on the one hand, and its banks and other lenders on the other. But where the proponent or its lenders manage to cajol or coerce the government into extending a guarantee of payment of the loan obligations, the risks assumed by the lenders are passed right back to government. I cannot understand why, in the instant case, government cheerfully assented to re-assuming the risks of the project when it gave the prohibited guarantee and thus simply negated the very purpose of the BOT Law and the protection it gives the government.Contract Termination Provisions in the Piatco Contracts Are VoidThe BOT Law as amended provides for contract termination as follows:"Sec. 7. Contract Termination. - In the event that a project is revoked, cancelled or terminated by the government through no fault of the project proponent or by mutual agreement, the Government shall compensate the said project proponent for its actual expenses incurred in the project plus a reasonable rate of return thereon not exceeding that stated in the contract as of the date of such revocation, cancellation or termination: Provided, That the interest of the Government in this instances [sic] shall be duly insured with the Government Service Insurance System or any other insurance entity duly accredited by the Office of the Insurance Commissioner: Provided, finally, That the cost of

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Case Materials in Remedial Law I ReviewJurisdictionthe insurance coverage shall be included in the terms and conditions of the bidding referred to above.

"In the event that the government defaults on certain major obligations in the contract and such failure is not remediable or if remediable shall remain unremedied for an unreasonable length of time, the project proponent/contractor may, by prior notice to the concerned national government agency or local government unit specifying the turn-over date, terminate the contract. The project proponent/contractor shall be reasonably compensated by the Government for equivalent or proportionate contract cost as defined in the contract."The foregoing statutory provision in effect provides for the following limited instances when termination compensation may be allowed:1. Termination by the government through no fault of the project proponent2. Termination upon the parties' mutual agreement3. Termination by the proponent due to government's default on certain major contractual obligationsTo emphasize, the law does not permit compensation for the project proponent when contract termination is due to the proponent's own fault or breach of contract.This principle was clearly violated in the Piatco Contracts. The ARCA stipulates that government is to pay termination compensation to Piatco even when termination is initiated by government for the following causes:"(i) Failure of Concessionaire to finish the Works in all material respects in accordance with the Tender Design and the Timetable;(ii) Commission by Concessionaire of a material breach of this Agreement . . .;(iii) . . . a change in control of Concessionaire arising from the sale, assignment, transfer or other disposition of capital stock which results in an ownership structure violative of statutory or constitutional limitations;(iv) A pattern of continuing or repeated non-compliance, willful violation, or non-performance of other terms and conditions hereof which is hereby deemed a material breach of this Agreement . . ."62As if that were not bad enough, the ARCA also inserted into Section 8.01 the phrase "Subject to Section 4.04." The effect of this insertion is that in those instances where government may terminate the contract on account of Piatco's breach, and it is nevertheless required under the

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Case Materials in Remedial Law I ReviewJurisdictionARCA to make termination compensation to Piatco even though unauthorized by law, such compensation is to be equivalent to the payment amount guaranteed by government - either a) the Appraised Value of the terminal facility or (b) the aggregate of the Attendant Liabilities, whichever amount is greater!

Clearly, this condition is not in line with Section 7 of the BOT Law. That provision permits a project proponent to recover the actual expenses it incurred in the prosecution of the project plus a reasonable rate of return not in excess of that provided in the contract; or to be compensated for the equivalent or proportionate contract cost as defined in the contract, in case the government is in default on certain major contractual obligations.Furthermore, in those instances where such termination compensation is authorized by the BOT Law, it is indispensable that the interest of government be duly insured. Section 5.08 the ARCA mandates insurance coverage for the terminal facility; but all insurance policies are to be assigned, and all proceeds are payable, to the Senior Lenders. In brief, the interest being secured by such coverage is that of the Senior Lenders, not that of government. This can hardly be considered compliance with law.In essence, the ARCA provisions on termination compensation result in another unauthorized government guarantee, this time in favor of Piatco.A Prohibited Direct Government Subsidy, Which at the Same Time Is an Assault on the National HonorStill another contractual provision offensive to law and public policy is Section 8.01(d) of the ARCA, which is a "bolder and badder" version of Section 8.04(d) of the CA.It will be recalled that Section 4-A of the BOT Law as amended prohibits not only direct government guarantees, but likewise a direct government subsidy for unsolicited proposals. Section 13.2. b. iii. of the 1999 IRR defines a direct government subsidy as encompassing "an agreement whereby the Government . . . will . . . postpone any payments due from the proponent."Despite the statutory ban, Section 8.01 (d) of the ARCA provides thus:"(d) The provisions of Section 8.01(a) notwithstanding, and for the purpose of preventing a disruption of the operations in the Terminal and/or Terminal Complex, in the event that at any time Concessionaire is of the reasonable opinion that it shall be unable to meet a payment obligation owed to the Senior Lenders, Concessionaire shall give prompt notice to GRP, through DOTC/MIAA and to the Senior Lenders. In such circumstances, the Senior Lenders (or the Senior Lenders'

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Case Materials in Remedial Law I ReviewJurisdictionRepresentative) may ensure that after making provision for administrative expenses and depreciation, the cash resources of Concessionaire shall first be used and applied to meet all payment obligations owed to the Senior Lenders. Any excess cash, after meeting such payment obligations, shall be earmarked for the payment of all sums payable by Concessionaire to GRP under this Agreement. If by reason of the foregoing GRP should be unable to collect in full all payments due to GRP under this Agreement, then the unpaid balance shall be payable within a 90-day grace period counted from the relevant due date, with interest per annum at the rate equal to the average 91-day Treasury Bill Rate as of the auction date immediately preceding the relevant due date. If payment is not effected by Concessionaire within the grace period, then a spread of five (5%) percent over the applicable 91-day Treasury Bill Rate shall be added on the unpaid amount commencing on the expiry of the grace period up to the day of full payment. When the temporary illiquidity of Concessionaire shall have been corrected and the cash position of Concessionaire should indicate its ability to meet its maturing obligations, then the provisions set forth under this Section 8.01(d) shall cease to apply. The foregoing remedial measures shall be applicable only while there remains unpaid and outstanding amounts owed to the Senior Lenders." (Emphasis supplied)

By any manner of interpretation or application, Section 8.01(d) of the ARCA clearly mandates the indefinite postponement of payment of all of Piatco's obligations to the government, in order to ensure that Piatco's obligations to the Senior Lenders are paid in full first. That is nothing more or less than the direct government subsidy prohibited by the BOT Law and the IRR. The fact that Piatco will pay interest on the unpaid amounts owed to government does not change the situation or render the prohibited subsidy any less unacceptable.But beyond the clear violations of law, there are larger issues involved in the ARCA. Earlier, I mentioned that Section 8.01(d) of the ARCA completely eliminated the proviso in Section 8.04(d) of the CA which gave government the right to appoint a financial controller to manage the cash position of Piatco during situations of financial distress. Not only has government been deprived of any means of monitoring and managing the situation; worse, as can be seen from Section 8.01(d) above-quoted, the Senior Lenders have effectively locked in on the right to exercise financial controllership over Piatco and to allocate its cash resources to the payment of all amounts owed to the Senior Lenders before allowing any payment to be made to government.In brief, this particular provision of the ARCA has placed in the hands of foreign lenders the power and the authority to determine how much (if at all) and when the Philippine government (as grantor of the franchise) may be allowed to receive from Piatco. In that situation, government will

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Case Materials in Remedial Law I ReviewJurisdictionbe at the mercy of the foreign lenders. This is a situation completely contrary to the rationale of the BOT Law and to public policy.

The aforesaid provision rouses mixed emotions - shame and disgust at the parties' (especially the government officials') docile submission and abject servitude and surrender to the imperious and excessive demands of the foreign lenders, on the one hand; and vehement outrage at the affront to the sovereignty of the Republic and to the national honor, on the other. It is indeed time to put an end to such an unbearable, dishonorable situation.The Piatco Contracts Unarguably Violate Constitutional InjunctionsI will now discuss the manner in which the Piatco Contracts offended the Constitution.The Exclusive Right Granted to Piatco to Operate a Public Utility Is Prohibited by the ConstitutionWhile Section 2.02 of the ARCA spoke of granting to Piatco "a franchise to operate and maintain the Terminal Complex," Section 3.02(a) of the same ARCA granted to Piatco, for the entire term of the concession agreement, "the exclusive right to operate a commercial international passenger terminal within the Island of Luzon" with the exception of those three terminals already existing63 at the time of execution of the ARCA.Section 11 of Article XII of the Constitution prohibits the grant of a "franchise, certificate, or any other form of authorization for the operation of a public utility" that is "exclusive in character."In its Opinion No. 078, Series of 1995, the Department of justice held that "the NAIA Terminal III which . . . is a 'terminal for public use' is a public utility." Consequently, the constitutional prohibition against the exclusivity of a franchise applies to the franchise for the operation of NAIA Terminal III as well.What was granted to Piatco was not merely a franchise, but an "exclusive right" to operate an international passenger terminal within the "Island of Luzon." What this grant effectively means is that the government is now estopped from exercising its inherent power to award any other person another franchise or a right to operate such a public utility, in the event public interest in Luzon requires it. This restriction is highly detrimental to government and to the public interest. Former Secretary of Justice Hernando B. Perez expressed this point well in his Memorandum for the President dated 21 May 2002:"Section 3.02 on 'Exclusivity'

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Case Materials in Remedial Law I ReviewJurisdiction"This provision gives to PIATCO (the Concessionaire) the exclusive right to operate a commercial international airport within the Island of Luzon with the exception of those already existing at the time of the execution of the Agreement, such as the airports at Subic, Clark and Laoag City. In the case of the Clark International Airport, however, the provision restricts its operation beyond its design capacity of 850,000 passengers per annum and the operation of new terminal facilities therein until after the new NAIA Terminal III shall have consistently reached or exceeded its design capacity of ten (10) million passenger capacity per year for three (3) consecutive years during the concession period.

"This is an onerous and disadvantageous provision. It effectively grants PIATCO a monopoly in Luzon and ties the hands of government in the matter of developing new airports which may be found expedient and necessary in carrying out any future plan for an inter-modal transportation system in Luzon."Additionally, it imposes an unreasonable restriction on the operation of the Clark International Airport which could adversely affect the operation and development of the Clark Special Economic Zone to the economic prejudice of the local constituencies that are being benefited by its operation." (Emphasis supplied)While it cannot be gainsaid that an enterprise that is a public utility may happen to constitute a monopoly on account of the very nature of its business and the absence of competition, such a situation does not however constitute justification to violate the constitutional prohibition and grant an exclusive franchise or exclusive right to operate a public utility.Piatco's contention that the Constitution does not actually prohibit monopolies is beside the point. As correctly argued,64 the existence of a monopoly by a public utility is a situation created by circumstances that do not encourage competition. This situation is different from the grant of a franchise to operate a public utility, a privilege granted by government. Of course, the grant of a franchise may result in a monopoly. But making such franchise exclusive is what is expressly proscribed by the Constitution.Actually, the aforementioned Section 3.02 of the ARCA more than just guaranteed exclusivity; it also guaranteed that the government will not improve or expand the facilities at Clark - and in fact is required to put a cap on the latter's operations - until after Terminal III shall have been operated at or beyond its peak capacity for three consecutive years.65 As counsel for public respondents pointed out, in the real world where the rate of influx of international passengers can fluctuate substantially from year to year, it may take many years before Terminal III sees three consecutive years' operations at peak capacity. The Diosdado Macapagal International Airport may thus end up stagnating for a long time. Indeed,

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Case Materials in Remedial Law I ReviewJurisdictionin order to ensure greater profits for Piatco, the economic progress of a region has had to be sacrificed.The Piatco Contracts Violate the Time Limitation on Franchises

Section 11 of Article XII of the Constitution also provides that "no franchise, certificate or any other form of authorization for the operation of a public utility shall be . . . for a longer period than fifty years." After all, a franchise held for an unreasonably long time would likely give rise to the same evils as a monopoly.The Piatco Contracts have come up with an innovative way to circumvent the prohibition and obtain an extension. This fact can be gleaned from Section 8.03(b) of the ARCA, which I quote thus:"Sec. 8.03. Termination Procedure and Consequences of Termination. -a) x x x           x x x           x x xb) In the event the Agreement is terminated pursuant to Section 8.01 (b) hereof, Concessionaire shall be entitled to collect the Liquidated Damages specified in Annex 'G'. The full payment by GRP to Concessionaire of the Liquidated Damages shall be a condition precedent to the transfer by Concessionaire to GRP of the Development Facility. Prior to the full payment of the Liquidated Damages, Concessionaire shall to the extent practicable continue to operate the Terminal and the Terminal Complex and shall be entitled to retain and withhold all payments to GRP for the purpose of offsetting the same against the Liquidated Damages. Upon full payment of the Liquidated Damages, Concessionaire shall immediately transfer the Development Facility to GRP on 'as-is-where-is' basis."The aforesaid easy payment scheme is less beneficial than it first appears. Although it enables government to avoid having to make outright payment of an obligation that will likely run into billions of pesos, this easy payment plan will nevertheless cost government considerable loss of income, which it would earn if it were to operate Terminal III by itself. Inasmuch as payments to the concessionaire (Piatco) will be on "installment basis," interest charges on the remaining unpaid balance would undoubtedly cause the total outstanding balance to swell. Piatco would thus be entitled to remain in the driver's seat and keep operating the terminal for an indefinite length of time.The Contracts Create Two Monopolies for PiatcoBy way of background, two monopolies were actually created by the Piatco contracts. The first and more obvious one refers to the business of operating an international passenger terminal in Luzon, the business end of which involves providing international airlines with parking space for

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Case Materials in Remedial Law I ReviewJurisdictiontheir aircraft, and airline passengers with the use of departure and arrival areas, check-in counters, information systems, conveyor systems, security equipment and paraphernalia, immigrations and customs processing areas; and amenities such as comfort rooms, restaurants and shops.

In furtherance of the first monopoly, the Piatco Contracts stipulate that the NAIA Terminal III will be the only facility to be operated as an international passenger terminal;66 that NAIA Terminals I and II will no longer be operated as such;67 and that no one (including the government) will be allowed to compete with Piatco in the operation of an international passenger terminal in the NAIA Complex.68 Given that, at this time, the government and Piatco are the only ones engaged in the business of operating an international passenger terminal, I am not acutely concerned with this particular monopolistic situation.There was however another monopoly within the NAIA created by the subject contracts for Piatco - in the business of providing international airlines with the following: groundhandling, in-flight catering, cargo handling, and aircraft repair and maintenance services. These are lines of business activity in which are engaged many service providers (including the petitioners-in-intervention), who will be adversely affected upon full implementation of the Piatco Contracts, particularly Sections 3.01(d)69 and (e)70 of both the ARCA and the CA.On the one hand, Section 3.02(a) of the ARCA makes Terminal III the only international passenger terminal at the NAIA, and therefore the only place within the NAIA Complex where the business of providing airport-related services to international airlines may be conducted. On the other hand, Section 3.01(d) of the ARCA requires government, through the MIAA, not to allow service providers with expired MIAA contracts to renew or extend their contracts to render airport-related services to airlines. Meanwhile, Section 3.01(e) of the ARCA requires government, through the DOTC and MIAA, not to allow service providers - those with subsisting concession agreements for services and operations being conducted at Terminal I - to carry over their concession agreements, services and operations to Terminal III, unless they first enter into a separate agreement with Piatco. The aforementioned provisions vest in Piatco effective and exclusive control over which service provider may and may not operate at Terminal III and render the airport-related services needed by international airlines. It thereby possesses the power to exclude competition. By necessary implication, it also has effective control over the fees and charges that will be imposed and collected by these service providers.This intention is exceedingly clear in the declaration by Piatco that it is "completely within its rights to exclude any party that it has not contracted with from NAIA Terminal III."71

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Case Materials in Remedial Law I ReviewJurisdictionWorse, there is nothing whatsoever in the Piatco Contracts that can serve to restrict, control or regulate the concessionaire's discretion and power to reject any service provider and/or impose any term or condition it may see fit in any contract it enters into with a service provider. In brief, there is no safeguard whatsoever to ensure free and fair competition in the service-provider sector.

In the meantime, and not surprisingly, Piatco is first in line, ready to exploit the unique business opportunity. It announced72 that it has accredited three groundhandlers for Terminal III. Aside from the Philippine Airlines, the other accredited entities are the Philippine Airport and Ground Services Globeground, Inc. ("PAGSGlobeground") and the Orbit Air Systems, Inc. ("Orbit"). PAGSGlobeground is a wholly-owned subsidiary of the Philippine Airport and Ground Services, Inc. or PAGS,73 while Orbit is a wholly-owned subsidiary of Friendship Holdings, Inc.,74 which is in turn owned 80 percent by PAGS.75 PAGS is a service provider owned 60 percent by the Cheng Family;76 it is a stockholder of 35 percent of Piatco77 and is the latter's designated contractor-operator for NAIA Terminal III.78Such entry into and domination of the airport-related services sector appear to be very much in line with the following provisions contained in the First Addendum to the Piatco Shareholders Agreement,79 executed on July 6, 1999, which appear to constitute a sort of master plan to create a monopoly and combinations in restraint of trade:"11. The Shareholders shall ensure:a. x x x           x x x           x x x.;b. That (Phil. Airport and Ground Services, Inc.) PAGS and/or its designated Affiliates shall, at all times during the Concession Period, be exclusively authorized by (PIATCO) to engage in the provision of ground-handling, catering and fueling services within the Terminal Complex.c. That PAIRCARGO and/or its designated Affiliate shall, during the Concession Period, be the only entities authorized to construct and operate a warehouse for all cargo handling and related services within the Site."Precisely, proscribed by our Constitution are the monopoly and the restraint of trade being fostered by the Piatco Contracts through the erection of barriers to the entry of other service providers into Terminal III. In Tatad v. Secretary of the Department of Energy,80 the Court ruled:". . . [S]ection 19 of Article XII of the Constitution . . . mandates: 'The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.'

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Case Materials in Remedial Law I ReviewJurisdiction"A monopoly is a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right or power to carry on a particular business or trade, manufacture a particular article, or control the sale or the whole supply of a particular commodity. It is a form of market structure in which one or only a few firms dominate the total sales of a product or service. On the other hand, a combination in restraint of trade is an agreement or understanding between two or more persons, in the form of a contract, trust, pool, holding company, or other form of association, for the purpose of unduly restricting competition, monopolizing trade and commerce in a certain commodity, controlling its production, distribution and price, or otherwise interfering with freedom of trade without statutory authority. Combination in restraint of trade refers to the means while monopoly refers to the end.

"x x x           x x x           x x x"Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses competition. The desirability of competition is the reason for the prohibition against restraint of trade, the reason for the interdiction of unfair competition, and the reason for regulation of unmitigated monopolies. Competition is thus the underlying principle of [S]ection 19, Article XII of our Constitution, . . ."81Gokongwei Jr. v. Securities and Exchange Commission82 elucidates the criteria to be employed: "A 'monopoly' embraces any combination the tendency of which is to prevent competition in the broad and general sense, or to control prices to the detriment of the public. In short, it is the concentration of business in the hands of a few. The material consideration in determining its existence is not that prices are raised and competition actually excluded, but that power exists to raise prices or exclude competition when desired."83 (Emphasis supplied)The Contracts Encourage Monopolistic Pricing, TooAside from creating a monopoly, the Piatco contracts also give the concessionaire virtually limitless power over the charging of fees, rentals and so forth. What little "oversight function" the government might be able and minded to exercise is less than sufficient to protect the public interest, as can be gleaned from the following provisions:"Sec. 6.06. Adjustment of Non-Public Utility Fees and Charges"For fees, rentals and charges constituting Non-Public Utility Revenues, Concessionaire may make any adjustments it deems appropriate without need for the consent of GRP or any government agency subject to Sec. 6.03(c)."Section 6.03(c) in turn provides:

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Case Materials in Remedial Law I ReviewJurisdiction"(c) Concessionaire shall at all times be judicious in fixing fees and charges constituting Non-Public Utility Revenues in order to ensure that End Users are not unreasonably deprived of services. While the vehicular parking fee, porterage fee and greeter/wellwisher fee constitute Non-Public Utility Revenues of Concessionaire, GRP may require Concessionaire to explain and justify the fee it may set from time to time, if in the reasonable opinion of GRP the said fees have become exorbitant resulting in the unreasonable deprivation of End Users of such services."

It will be noted that the above-quoted provision has no teeth, so the concessionaire can defy the government without fear of any sanction. Moreover, Section 6.06 - taken together with Section 6.03(c) of the ARCA - falls short of the standard set by the BOT Law as amended, which expressly requires in Section 2(b) that the project proponent is "allowed to charge facility users appropriate tolls, fees, rentals and charges not exceeding those proposed in its bid or as negotiated and incorporated in the contract x x x."The Piatco Contracts Violate Constitutional Prohibitions Against Impairment of Contracts and Deprivation of Property Without Due ProcessEarlier, I discussed how Section 3.01(e)84 of both the CA and the ARCA requires government, through DOTC/MIAA, not to permit the carry-over to Terminal III of the services and operations of certain service providers currently operating at Terminal I with subsisting contracts.By the In-Service Date, Terminal III shall be the only facility to be operated as an international passenger terminal at the NAIA;85 thus, Terminals I and II shall no longer operate as such,86 and no one shall be allowed to compete with Piatco in the operation of an international passenger terminal in the NAIA.87 The bottom line is that, as of the In-Service Date, Terminal III will be the only terminal where the business of providing airport-related services to international airlines and passengers may be conducted at all.Consequently, government through the DOTC/MIAA will be compelled to cease honoring existing contracts with service providers after the In-Service Date, as they cannot be allowed to operate in Terminal III.In short, the CA and the ARCA obligate and constrain government to break its existing contracts with these service providers.Notably, government is not in a position to require Piatco to accommodate the displaced service providers, and it would be unrealistic to think that these service providers can perform their service contracts in some other international airport outside Luzon. Obviously, then, these displaced service providers are - to borrow a quaint expression - up the

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Case Materials in Remedial Law I ReviewJurisdictionriver without a paddle. In plainer terms, they will have lost their businesses entirely, in the blink of an eye.

What we have here is a set of contractual provisions that impair the obligation of contracts and contravene the constitutional prohibition against deprivation of property without due process of law.88Moreover, since the displaced service providers, being unable to operate, will be forced to close shop, their respective employees - among them Messrs. Agan and Lopez et al. - have very grave cause for concern, as they will find themselves out of employment and bereft of their means of livelihood. This situation comprises still another violation of the constitution prohibition against deprivation of property without due process.True, doing business at the NAIA may be viewed more as a privilege than as a right. Nonetheless, where that privilege has been availed of by the petitioners-in-intervention service providers for years on end, a situation arises, similar to that in American Inter-fashion v. GTEB.89 We held therein that a privilege enjoyed for seven years "evolved into some form of property right which should not be removed x x x arbitrarily and without due process." Said pronouncement is particularly relevant and applicable to the situation at bar because the livelihood of the employees of petitioners-intervenors are at stake.The Piatco Contracts Violate Constitutional ProhibitionAgainst Deprivation of Liberty Without Due ProcessThe Piatco Contracts by locking out existing service providers from entry into Terminal III and restricting entry of future service providers, thereby infringed upon the freedom - guaranteed to and heretofore enjoyed by international airlines - to contract with local service providers of their choice, and vice versa.Both the service providers and their client airlines will be deprived of the right to liberty, which includes the right to enter into all contracts,90 and/or the right to make a contract in relation to one's business.91By Creating New Financial Obligations for Government, Supplements to the ARCA Violate the Constitutional Ban on Disbursement of Public Funds Without Valid AppropriationClearly prohibited by the Constitution is the disbursement of public funds out of the treasury, except in pursuance of an appropriation made by law.92 The immediate effect of this constitutional ban is that all the various agencies of government are constrained to limit their expenditures to the amounts appropriated by law for each fiscal year; and to carefully count their cash before taking on contractual commitments. Giving flesh and form to the injunction of the fundamental

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Case Materials in Remedial Law I ReviewJurisdictionlaw, Sections 46 and 47 of Executive Order 292, otherwise known as the Administrative Code of 1987, provide as follows:

"Sec. 46. Appropriation Before Entering into Contract. - (1) No contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor, the unexpended balance of which, free of other obligations, is sufficient to cover the proposed expenditure; and . ."Sec. 47. Certificate Showing Appropriation to Meet Contract. - Except in the case of a contract for personal service, for supplies for current consumption or to be carried in stock not exceeding the estimated consumption for three (3) months, or banking transactions of government-owned or controlled banks, no contract involving the expenditure of public funds by any government agency shall be entered into or authorized unless the proper accounting official of the agency concerned shall have certified to the officer entering into the obligation that funds have been duly appropriated for the purpose and that the amount necessary to cover the proposed contract for the current calendar year is available for expenditure on account thereof, subject to verification by the auditor concerned. The certificate signed by the proper accounting official and the auditor who verified it, shall be attached to and become an integral part of the proposed contract, and the sum so certified shall not thereafter be available for expenditure for any other purpose until the obligation of the government agency concerned under the contract is fully extinguished."Referring to the aforequoted provisions, this Court has held that "(I)t is quite evident from the tenor of the language of the law that the existence of appropriations and the availability of funds are indispensable pre-requisites to or conditions sine qua non for the execution of government contracts. The obvious intent is to impose such conditions as a priori requisites to the validity of the proposed contract."93Notwithstanding the constitutional ban, statutory mandates and Jurisprudential precedents, the three Supplements to the ARCA, which were not approved by NEDA, imposed on government the additional burden of spending public moneys without prior appropriation.In the First Supplement ("FS") dated August 27, 1999, the following requirements were imposed on the government:• To construct, maintain and keep in good repair and operating condition all airport support services, facilities, equipment and infrastructure owned and/or operated by MIAA, which are not part of the Project or which are located outside the Site, even though constructed by Concessionaire - including the access road connecting Terminals II and III and the taxilane, taxiways and runways

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Case Materials in Remedial Law I ReviewJurisdiction• To obligate the MIAA to provide funding for the upkeep, maintenance and repair of the airports and facilities owned or operated by it and by third persons under its control in order to ensure compliance with international standards; and holding MIAA liable to Piatco for the latter's losses, expenses and damages as well as for the latter's liability to third persons, in case MIAA fails to perform such obligations; in addition, MIAA will also be liable for the incremental and consequential costs of the remedial work done by Piatco on account of the former's default.

• Section 4 of the FS imposed on government ten (10) "Additional Special Obligations," including the following:o Providing thru MIAA the land required by Piatco for the taxilane and one taxiway, at no cost to Piatcoo Implementing the government's existing storm drainage master plano Coordinating with DPWH the financing, implementation and completion of the following works before the In-Service Date: three left-turning overpasses (Edsa to Tramo St., Tramo to Andrews Ave., and Manlunas Road to Sales Ave.) and a road upgrade and improvement program involving widening, repair and resurfacing of Sales Road, Andrews Avenue and Manlunas Road; improvement of Nichols Interchange; and removal of squatters along Andrews Avenueo Dealing directly with BCDA and the Philippine Air Force in acquiring additional land or right of way for the road upgrade and improvement programo Requiring government to work for the immediate reversion to MIAA of the Nayong Pilipino National Park, in order to permit the building of the second west parallel taxiway

• Section 5 of the FS also provides that in lieu of the access tunnel, a surface access road (T2-T3) will be constructed. This provision requires government to expend funds to purchase additional land from Nayong Pilipino and to clear the same in order to be able to deliver clean possession of the site to Piatco, as required in Section 5(c) of the FS.On the other hand, the Third Supplement ("TS") obligates the government to deliver, within 120 days from date thereof, clean possession of the land on which the T2-T3 Road is to be constructed.The foregoing contractual stipulations undeniably impose on government the expenditures of public funds not included in any congressional appropriation or authorized by any other statute. Piatco however attempts to take these stipulations out of the ambit of Sections 46 and 47

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Case Materials in Remedial Law I ReviewJurisdictionof the Administrative Code by characterizing them as stipulations for compliance on a "best-efforts basis" only.

To determine whether the additional obligations under the Supplements may really be undertaken on a best-efforts basis only, the nature of each of these obligations must be examined in the context of its relevance and significance to the Terminal III Project, as well as of any adverse impact that may result if such obligation is not performed or undertaken on time. In short, the criteria for determining whether the best-efforts basis will apply is whether the obligations are critical to the success of the Project and, accordingly, whether failure to perform them (or to perform them on time) could result in a material breach of the contract.Viewed in this light, the "Additional Special Obligations" set out in Section 4 of the FS take on a different aspect. In particular, each of the following may all be deemed to play a major role in the successful and timely prosecution of the Terminal III Project: the obtention of land required by PIATCO for the taxilane and taxiway; the implementation of government's existing storm drainage master plan; and coordination with DPWH for the completion of the three left-turning overpasses before the In-Service Date, as well as acquisition and delivery of additional land for the construction of the T2-T3 access road.Conversely, failure to deliver on any of these obligations may conceivably result in substantial prejudice to the concessionaire, to such an extent as to constitute a material breach of the Piatco Contracts. Whereupon, the concessionaire may outrightly terminate the Contracts pursuant to Section 8.01(b)(i) and (ii) of the ARCA and seek payment of Liquidated Damages in accordance with Section 8.02(a) of the ARCA; or the concessionaire may instead require government to pay the Incremental and Consequential Losses under Section 1.23 of the ARCA.94 The logical conclusion then is that the obligations in the Supplements are not to be performed on a best-efforts basis only, but are unarguably mandatory in character.Regarding MIAA's obligation to coordinate with the DPWH for the complete implementation of the road upgrading and improvement program for Sales, Andrews and Manlunas Roads (which provide access to the Terminal III site) prior to the In-Service Date, it is essential to take note of the fact that there was a pressing need to complete the program before the opening of Terminal III.95 For that reason, the MIAA was compelled to enter into a memorandum of agreement with the DPWH in order to ensure the timely completion of the road widening and improvement program. MIAA agreed to advance the total amount of P410.11 million to DPWH for the works, while the latter was committed to do the following:"2.2.8. Reimburse all advance payments to MIAA including but not limited to interest, fees, plus other costs of money within the periods

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Case Materials in Remedial Law I ReviewJurisdictionCY2004 and CY2006 with payment of no less than One Hundred Million Pesos (PhP100M) every year.

"2.2.9. Perform all acts necessary to include in its CY2004 to CY2006 budget allocation the repayments for the advances made by MIAA, to ensure that the advances are fully repaid by CY2006. For this purpose, DPWH shall include the amounts to be appropriated for reimbursement to MIAA in the "Not Needing Clearance" column of their Agency Budget Matrix (ABM) submitted to the Department of Budget and Management."It can be easily inferred, then, that DPWH did not set aside enough funds to be able to complete the upgrading program for the crucially situated access roads prior to the targeted opening date of Terminal III; and that, had MIAA not agreed to lend the P410 Million, DPWH would not have been able to complete the program on time. As a consequence, government would have been in breach of a material obligation. Hence, this particular undertaking of government may likewise not be construed as being for best-efforts compliance only.They also Infringe on the Legislative Prerogative and Power Over the Public PurseBut the particularly sad thing about this transaction between MIAA and DPWH is the fact that both agencies were maneuvered into (or allowed themselves to be maneuvered into) an agreement that would ensure delivery of upgraded roads for Piatco's benefit, using funds not allocated for that purpose. The agreement would then be presented to Congress as a done deal. Congress would thus be obliged to uphold the agreement and support it with the necessary allocations and appropriations for three years, in order to enable DPWH to deliver on its committed repayments to MIAA. The net result is an infringement on the legislative power over the public purse and a diminution of Congress' control over expenditures of public funds - a development that would not have come about, were it not for the Supplements. Very clever but very illegal!EPILOGUEWhat Do We Do Now?In the final analysis, there remains but one ultimate question, which I raised during the Oral Argument on December 10, 2002: What do we do with the Piatco Contracts and Terminal III?96 (Feeding directly into the resolution of the decisive question is the other nagging issue: Why should we bother with determining the legality and validity of these contracts, when the Terminal itself has already been built and is practically complete?)Prescinding from all the foregoing disquisition, I find that all the Piatco contracts, without exception, are void ab initio, and therefore inoperative. Even the very process by which the contracts came into

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Case Materials in Remedial Law I ReviewJurisdictionbeing - the bidding and the award - has been riddled with irregularities galore and blatant violations of law and public policy, far too many to ignore. There is thus no conceivable way, as proposed by some, of saving one (the original Concession Agreement) while junking all the rest.

Neither is it possible to argue for the retention of the Draft Concession Agreement (referred to in the various pleadings as the Contract Bidded Out) as the contract that should be kept in force and effect to govern the situation, inasmuch as it was never executed by the parties. What Piatco and the government executed was the Concession Agreement which is entirely different from the Draft Concession Agreement.Ultimately, though, it would be tantamount to an outrageous, grievous and unforgivable mutilation of public policy and an insult to ourselves if we opt to keep in place a contract - any contract - for to do so would assume that we agree to having Piatco continue as the concessionaire for Terminal III.Despite all the insidious contraventions of the Constitution, law and public policy Piatco perpetrated, keeping Piatco on as concessionaire and even rewarding it by allowing it to operate and profit from Terminal III - instead of imposing upon it the stiffest sanctions permissible under the laws - is unconscionable.It is no exaggeration to say that Piatco may not really mind which contract we decide to keep in place. For all it may care, we can do just as well without one, if we only let it continue and operate the facility. After all, the real money will come not from building the Terminal, but from actually operating it for fifty or more years and charging whatever it feels like, without any competition at all. This scenario must not be allowed to happen.If the Piatco contracts are junked altogether as I think they should be, should not AEDC automatically be considered the winning bidder and therefore allowed to operate the facility? My answer is a stone-cold 'No'. AEDC never won the bidding, never signed any contract, and never built any facility. Why should it be allowed to automatically step in and benefit from the greed of another?Should government pay at all for reasonable expenses incurred in the construction of the Terminal? Indeed it should, otherwise it will be unjustly enriching itself at the expense of Piatco and, in particular, its funders, contractors and investors - both local and foreign. After all, there is no question that the State needs and will make use of Terminal III, it being part and parcel of the critical infrastructure and transportation-related programs of government.In Melchor v. Commission on Audit,97 this Court held that even if the contract therein was void, the principle of payment by quantum meruit

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Case Materials in Remedial Law I ReviewJurisdictionwas found applicable, and the contractor was allowed to recover the reasonable value of the thing or services rendered (regardless of any agreement as to the supposed value), in order to avoid unjust enrichment on the part of government. The principle of quantum meruit was likewise applied in Eslao v. Commission on Audit,98 because to deny payment for a building almost completed and already occupied would be to permit government to unjustly enrich itself at the expense of the contractor. The same principle was applied in Republic v. Court of Appeals.99

One possible practical solution would be for government - in view of the nullity of the Piatco contracts and of the fact that Terminal III has already been built and is almost finished - to bid out the operation of the facility under the same or analogous principles as build-operate-and-transfer projects. To be imposed, however, is the condition that the winning bidder must pay the builder of the facility a price fixed by government based on quantum meruit; on the real, reasonable - not inflated - value of the built facility.How the payment or series of payments to the builder, funders, investors and contractors will be staggered and scheduled, will have to be built into the bids, along with the annual guaranteed payments to government. In this manner, this whole sordid mess could result in something truly beneficial for all, especially for the Filipino people.WHEREFORE, I vote to grant the Petitions and to declare the subject contracts NULL and VOID.G.R. No.148004             January 22, 2007VINCENT E. OMICTIN, Petitioner, vs.HON. COURT OF APPEALS (Special Twelfth Division) and GEORGE I. LAGOS, Respondents.This is a petition for certiorari1 with prayer for a writ of preliminary injunction seeking the nullification of the decision rendered by the Court of Appeals (CA) on June 30, 2000, and its resolution, dated March 5, 2001 in CA-G.R. SP No. 55834 entitled "George I. Lagos v. Hon. Reinato G. Quilala, Presiding Judge of RTC, Br. 57, Makati, Hon. Elizabeth Tayo Chua, Asst. City Prosecutor, Makati City, and Vincent E. Omictin."In its assailed decision, the CA declared the existence of a prejudicial question and ordered the suspension of the criminal proceedings initiated by petitioner Vincent E. Omictin on behalf of Saag Phils., Inc. against private respondent George I. Lagos, in view of a pending case before the Securities and Exchange Commission (SEC) filed by the latter against the former, Saag Pte. (S) Ltd., Nicholas Ng, Janifer Yeo and Alex Y. Tan.

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Case Materials in Remedial Law I ReviewJurisdictionThe facts are as follows:

Petitioner Vincent E. Omictin, Operations Manager Ad Interim of Saag Phils., Inc., filed a complaint for two counts of estafa with the Office of the City Prosecutor of Makati against private respondent George I. Lagos. He alleged that private respondent, despite repeated demands, refused to return the two company vehicles entrusted to him when he was still the president of Saag Phils., Inc..On February 26, 1999, public prosecutor Alex G. Bagaoisan recommended the indictment of private respondent, and on the same day, respondent was charged with the crime of estafa under Article 315, par. 1(b) of the Revised Penal Code before the Regional Trial Court (RTC), Branch 57 of Makati City. The case was docketed as Criminal Case No. 99-633, entitled "People of the Philippines v. George I. Lagos."On June 4, 1999, private respondent filed a motion to recuse praying that Presiding Judge Reinato G. Quilala inhibit himself from hearing the case based on the following grounds:a) In an order, dated May 28, 1999, the presiding judge summarily denied respondent’s motion: 1) to defer issuance of the warrant of arrest; and 2) to order reinvestigation. b) Immediately before the issuance of the above-mentioned order, the presiding judge and Atty. Alex Y. Tan, SAAG Philippines, Inc.’s Ad Interim President, were seen together.2On June 24, 1999, private respondent filed a motion to suspend proceedings on the basis of a prejudicial question because of a pending petition with the Securities and Exchange Commission (SEC) involving the same parties. It appears that on January 7, 1999, private respondent filed SEC Case No. 01-99-6185 for the declaration of nullity of the respective appointments of Alex Y. Tan and petitioner as President Ad Interim and Operations Manager Ad Interim of Saag Phils., Inc., declaration of dividends, recovery of share in the profits, involuntary dissolution and the appointment of a receiver, recovery of damages and an application for a temporary restraining order (TRO) and injunction against Saag (S) Pte. Ltd., Nicholas Ng, Janifer Yeo, Tan and petitioner. 3In the action before the SEC, private respondent averred that Saag (S) Pte. Ltd. is a foreign corporation organized and existing under the laws of Singapore, and is fully owned by Saag Corporation (Bhd). On July 1, 1994, he was appointed as Area Sales Manager in the Philippines by Thiang Shiang Hiang, Manager of Saag (S) Pte. Ltd. Pursuant to his appointment, respondent was authorized to organize a local joint venture corporation to be known as Saag Philippines, Inc. for the wholesale trade

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Case Materials in Remedial Law I ReviewJurisdictionand service of industrial products for oil, gas and power industries in the Philippines.

On September 9, 1994, Saag Philippines, Inc. was incorporated with Saag (S) Pte. Ltd. as the majority stockholder. Private respondent was appointed to the board of directors, along with Rommel I. Lagos, Jose E. Geronimo, Gan Ching Lai and Thiang Shiang Hiang, and was elected president of the domestic corporation. Later, due to intra-corporate disputes, Gan and Thiang resigned and divested their shares in Saag Corporation (Bhd), thereby resulting in a change in the controlling interest in Saag (S) Pte. Ltd. Barely three months after, or on June 23, 1998, private respondent resigned his post as president of Saag Phils., Inc. while still retaining his position as a director of the company.4 According to private respondent, the joint venture agreement (JVA) between him or Saag Phils., Inc. and Saag (S) Pte. Ltd. provided that should the controlling interest in the latter company, or its parent company Saag Corp. (Bhd), be acquired by any other person or entity without his prior consent, he has the option either to require the other stockholders to purchase his shares or to terminate the JVA and dissolve Saag Phils., Inc. altogether. Thus, pursuant to this provision, since private respondent did not give his consent as regards the transfer of shares made by Gan and Thiang, he made several requests to Nicholas Ng, who replaced Gan as director, and Janifer Yeo, Executive Director of Saag (S) Pte. Ltd., to call for a board meeting in order to discuss the following: a) implementation of the board resolution declaring dividends; b) acquisition of private respondent’s shares by Saag (S) Pte. Ltd.; c) dissolution of Saag Phils., Inc.; and d) the termination of the JVA.Ng and Yeo failed to appear, however, in the scheduled board meetings. Instead, on September 30, 1998 they issued a letter appointing Alex Y. Tan as President Ad Interim of Saag Phils., Inc. Tan, in turn, appointed petitioner Omictin as the company’s Operations Manager Ad Interim. Citing as a reason the absence of a board resolution authorizing the continued operations of Saag Phils., Inc., private respondent retained his possession of the office equipment of the company in a fiduciary capacity as director of the corporation pending its dissolution and/or the resolution of the intra-corporate dispute. He likewise changed the locks of the offices of the company allegedly to prevent Tan and petitioner from seizing company property. Private respondent stressed that Tan’s appointment was invalid because it was in derogation of the company by-laws requiring that the president must be chosen from among the directors, and elected by the affirmative vote of a majority of all the members of the board of directors.5 As Tan’s appointment did not have the acquiescence of the board of directors,

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Case Materials in Remedial Law I ReviewJurisdictionpetitioner’s appointment by the former is likewise allegedly invalid. Thus, neither has the power or the authority to represent or act for Saag Phils., Inc. in any transaction or action before the SEC or any court of justice.

The trial court, in an order dated September 8, 1999, denied respondent’s motion to suspend proceedings and motion to recuse.His motion for reconsideration having been denied by the trial court in its order issued on October 29, 1999, respondent filed with the CA the petition for certiorari[6] assailing the aforesaid orders. On June 30, 2000, the CA rendered its challenged decision. The pertinent portion reads:In a case for estafa, a valid demand made by an offended party is one of the essential elements. It appears from the records that the delay of delivery of the motor vehicles by petitioner to Saag Corporation is by reason of petitioner’s contention that the demand made by Omictin and Atty. Tan to him to return the subject vehicles is not a valid demand. As earlier mentioned, petitioner filed a case with the SEC questioning therein private respondents’ appointment.If the SEC should rule that the dissolution of Saag Phils. is proper, or that the appointments of private respondents are invalid, the criminal case will eventually be dismissed due to the absence of one of the essential elements of the crime of estafa. Based on the foregoing, it is clear that a prejudicial question exists which calls for the suspension of the criminal proceedings before the lower court.WHEREFORE, in view of the foregoing, the assailed Order of September 8, 1999 and October 29, 1999, are hereby MODIFIED. The motion to suspend proceedings is hereby GRANTED and respondent court is hereby enjoined from hearing Criminal Case No. 99-633, entitled "People of the Philippines v. George I. Lagos," until the termination of the case with the Securities and Exchange Commission. The denial of the motion to recuse is hereby AFFIRMED.SO ORDERED.7Incidentally, on January 18, 2001, the SEC case8 was transferred to the Regional Trial Court (RTC) of Mandaluyong City, Branch 214, pursuant to A.M. No. 00-11-03-SC9 implementing the Securities and Regulation Code (Republic Act No. 8799)10 enacted on July 19, 2000, vesting in the RTCs jurisdiction over intra-corporate disputes.11Meanwhile, on March 5, 2001, the CA, addressing petitioner’s motion for reconsideration of the aforementioned decision, issued its assailed resolution:

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Case Materials in Remedial Law I ReviewJurisdictionConsidering that the petition for review on certiorari of the 30 June 2000 decision of this Court, filed by the Office of the Solicitor General before the Supreme Court has already TERMINATED on November 20, 2000 and a corresponding entry of judgment has already been issued by the High Court, that the same is final and executory, the private respondent’s motion for reconsideration of the decision 30 June 2000 before this Court is NOTED for being moot and academic.

SO ORDERED.12Hence, this petition raises the following issues:IRESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION -A) WHEN IT DECREED THAT A PREJUDICIAL QUESTION EXISTS IN THE SEC CASE FILED BY PRIVATE RESPONDENT AGAINST SAAG (S) PTE. LTD., A FOREIGN CORPORATION, ALTHOUGH THE PRIVATE COMPLAINANT IN THE CRIMINAL CASE FOR ESTAFA (WHERE PRIVATE RESPONDENT IS THE ACCUSED THEREIN) IS ACTUALLY SAAG PHILIPPINES, INC. A DOMESTIC CORPORATION WITH A SEPARATE JURIDICAL PERSONALITY OF ITS OWN AND WHICH IS NOT EVEN A PARTY IN THE SEC CASE; AND,B) WHEN IT ORDERED THE SUSPENSION OF THE PROCEEDINGS IN CRIMINAL CASE NO. 99-633 AGAINST PRIVATE RESPONDENT.IITHIS PETITION FOR CERTIORARI IS THE ONLY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE PREMISES.In support of the above, petitioner argues, as follows:1. The action before the SEC and the criminal case before the trial court do not involve any prejudicial question.13 SEC Case No. 01-99-6185 mainly involves the dissolution of Saag (S) Pte. Ltd., the appointment of a receiver, the distribution of profits, and the authority of petitioner and Tan to represent Saag Phils., Inc. The entity which is being sued is Saag (S) Pte. Ltd., a foreign corporation over which the SEC has yet to acquire jurisdiction. Hence, any decision that may be rendered in the SEC case will neither be determinative of the innocence or guilt of the accused nor bind Saag Phils., Inc. because the same was not made a party to the action even if the former is its holding corporation;2. Saag Phils., Inc. has a separate corporate existence and is to be treated as a separate entity from its holding or parent company, Saag (S) Pte. Ltd. The mere fact that one or more corporations are owned or

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Case Materials in Remedial Law I ReviewJurisdictioncontrolled by the same or single stockholder is not a sufficient ground for disregarding separate corporate personalities;

3. Private respondent’s petition with the SEC seeks affirmative relief against Saag (S) Pte. Ltd. for the enforcement or application of the alleged terms of the joint venture agreement (JVA) that he purportedly entered into with the foreign corporation while he was still its Area Sales Manager in the Philippines. The foreign corporation is not licensed to do business in the Philippines, thus, a party to a contract with a foreign corporation doing business in the Philippines without a license is not entitled to relief from the latter; and4. There is no pending civil or administrative case in SEC against Saag Phils., Inc. that warrants the application of a prejudicial question and the consequent suspension of the criminal action it has instituted against private respondent. If any, the action before the SEC was merely a ploy to delay the resolution of the criminal case and eventually frustrate the outcome of the estafa case.In sum, the main issue is whether or not a prejudicial question exists to warrant the suspension of the criminal proceedings pending the resolution of the intra-corporate controversy that was originally filed with the SEC.A prejudicial question is defined as that which arises in a case, the resolution of which is a logical antecedent of the issue involved therein and the cognizance of which pertains to another tribunal.14 Here, the case which was lodged originally before the SEC and which is now pending before the RTC of Mandaluyong City by virtue of Republic Act No. 8799 involves facts that are intimately related to those upon which the criminal prosecution is based. Ultimately, the resolution of the issues raised in the intra-corporate dispute will determine the guilt or innocence of private respondent in the crime of estafa filed against him by petitioner before the RTC of Makati. As correctly stated by the CA, one of the elements of the crime of estafa with abuse of confidence under Article 315, par. 1(b) of the Revised Penal Code is a demand made by the offended party to the offender:The elements of estafa with abuse of confidence under subdivision No. 1, par. (b) of Art. 315 are as follows:1. That money, goods, or other personal property be received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return the same;2. That there be misrepresentation or conversion of such money or property by the offender, or denial on his part of such receipt;

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Case Materials in Remedial Law I ReviewJurisdiction3. That such misappropriation or conversion or denial is to the prejudice of another; and

4. That there is a demand made by the offended party to the offender.15Logically, under the circumstances, since the alleged offended party is Saag Phils., Inc., the validity of the demand for the delivery of the subject vehicles rests upon the authority of the person making such a demand on the company’s behalf. Private respondent is challenging petitioner’s authority to act for Saag Phils., Inc. in the corporate case pending before the RTC of Mandaluyong, Branch 214. Taken in this light, if the supposed authority of petitioner is found to be defective, it is as if no demand was ever made, hence, the prosecution for estafa cannot prosper. Moreover, the mere failure to return the thing received for safekeeping or on commission, or for administration, or under any other obligation involving the duty to deliver or to return the same or deliver the value thereof to the owner could only give rise to a civil action and does not constitute the crime of estafa. This is because the crime is committed by misappropriating or converting money or goods received by the offender under a lawful transaction. As stated in the case of United States v. Bleibel:16The crime of estafa is not committed by the failure to return the things received for sale on commission, or to deliver their value, but, as this class of crime is defined by law, by misappropriating or converting the money or goods received on commission. Delay in the fulfillment of a commission or in the delivery of the sum on such account received only involves civil liability. So long as the money that a person is under obligation to deliver is not demanded of him, and he fails to deliver it for having wrongfully disposed of it, there is no estafa, whatever be the cause of the debt.Likewise, by analogy, the doctrine of primary jurisdiction may be applied in this case. The issues raised by petitioner particularly the status of Saag Phils., Inc. vis-à-vis Saag (S) Pte. Ltd., as well as the question regarding the supposed authority of the latter to make a demand on behalf of the company, are proper subjects for the determination of the tribunal hearing the intra-corporate case which in this case is the RTC of Mandaluyong, Branch 214. These issues would have been referred to the expertise of the SEC in accordance with the doctrine of primary jurisdiction had the case not been transferred to the RTC of Mandaluyong.Strictly speaking, the objective of the doctrine of primary jurisdiction is to guide a court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some question arising in the proceeding before the court.17 The court cannot or will not determine a controversy involving a question which is within the jurisdiction of the administrative

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Case Materials in Remedial Law I ReviewJurisdictiontribunal prior to resolving the same, where the question demands the exercise of sound administrative discretion requiring special knowledge, experience and services in determining technical and intricate matters of fact.18

While the above doctrine refers specifically to an administrative tribunal, the Court believes that the circumstances in the instant case do not proscribe the application of the doctrine, as the role of an administrative tribunal such as the SEC in determining technical and intricate matters of special competence has been taken on by specially designated RTCs by virtue of Republic Act No. 8799.19 Hence, the RTC of Mandaluyong where the intra-corporate case is pending has the primary jurisdiction to determine the issues under contention relating to the status of the domestic corporation, Saag Phils., Inc., vis-à-vis Saag Pte. Ltd.; and the authority of petitioner to act on behalf of the domestic corporation, the determination of which will have a direct bearing on the criminal case. The law recognizes that, in place of the SEC, the regular courts now have the legal competence to decide intra-corporate disputes.20 In view of the foregoing, the Court finds no substantial basis in petitioner’s contention that the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction. Absent a showing of a despotic, whimsical and arbitrary exercise of power by the CA, the petition must fail.WHEREFORE, the petition is DISMISSED. The decision and resolution of the Court of Appeals in CA-G.R. SP No. 55834, dated June 30, 2000 and March 5, 2001, respectively, are AFFIRMED.No costs.SO ORDERED.G.R. No. 154599             January 21, 2004THE LIGA NG MGA BARANGAY NATIONAL, petitioner, vs.THE CITY MAYOR OF MANILA, HON. JOSE ATIENZA, JR., and THE CITY COUNCIL OF MANILA, respondents.This petition for certiorari under Rule 65 of the Rules of Court seeks the nullification of Manila City Ordinance No. 8039, Series of 2002,1 and respondent City Mayor’s Executive Order No. 011, Series of 2002,2 dated 15 August 2002 , for being patently contrary to law.The antecedents are as follows:

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Case Materials in Remedial Law I ReviewJurisdictionPetitioner Liga ng mga Barangay National (Liga for brevity) is the national organization of all the barangays in the Philippines, which pursuant to Section 492 of Republic Act No. 7160, otherwise known as The Local Government Code of 1991, constitutes the duly elected presidents of highly-urbanized cities, provincial chapters, the metropolitan Manila Chapter, and metropolitan political subdivision chapters.

Section 493 of that law provides that "[t]he liga at the municipal, city, provincial, metropolitan political subdivision, and national levels directly elect a president, a vice-president, and five (5) members of the board of directors." All other matters not provided for in the law affecting the internal organization of the leagues of local government units shall be governed by their respective constitution and by-laws, which must always conform to the provisions of the Constitution and existing laws.3On 16 March 2000, the Liga adopted and ratified its own Constitution and By-laws to govern its internal organization.4 Section 1, third paragraph, Article XI of said Constitution and By-Laws states:All other election matters not covered in this Article shall be governed by the "Liga Election Code" or such other rules as may be promulgated by the National Liga Executive Board in conformity with the provisions of existing laws.By virtue of the above-cited provision, the Liga adopted and ratified its own Election Code.5 Section 1.2, Article I of the Liga Election Code states:1.2 Liga ng mga Barangay Provincial, Metropolitan, HUC/ICC Chapters. There shall be nationwide synchronized elections for the provincial, metropolitan, and HUC/ICC chapters to be held on the third Monday of the month immediately after the month when the synchronized elections in paragraph 1.1 above was held. The incumbent Liga chapter president concerned duly assisted by the proper government agency, office or department, e.g. Provincial/City/NCR/Regional Director, shall convene all the duly elected Component City/Municipal Chapter Presidents and all the current elected Punong Barangays (for HUC/ICC) of the respective chapters in any public place within its area of jurisdiction for the purpose of reorganizing and electing the officers and directors of the provincial, metropolitan or HUC/ICC Liga chapters. Said president duly assisted by the government officer aforementioned, shall notify, in writing, all the above concerned at least fifteen (15) days before the scheduled election meeting on the exact date, time, place and requirements of the said meeting.The Liga thereafter came out with its Calendar of Activities and Guidelines in the Implementation of the Liga Election Code of 2002,6 setting on 21 October 2002 the synchronized elections for highly

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Case Materials in Remedial Law I ReviewJurisdictionurbanized city chapters, such as the Liga Chapter of Manila, together with independent component city, provincial, and metropolitan chapters.lawphi1.net

On 28 June 2002, respondent City Council of Manila enacted Ordinance No. 8039, Series of 2002, providing, among other things, for the election of representatives of the District Chapters in the City Chapter of Manila and setting the elections for both chapters thirty days after the barangay elections. Section 3 (A) and (B) of the assailed ordinance read:SEC. 3. Representation Chapters. — Every Barangay shall be represented in the said Liga Chapters … by the Punong Barangay…or, in his absence or incapacity, by the kagawad duly elected for the purpose among its members….A. District ChapterAll elected Barangay Chairman in each District shall elect from among themselves the President, Vice-President and five (5) members of the Board….B. City ChapterThe District Chapter representatives shall automatically become members of the Board and they shall elect from among themselves a President, Vice-President, Secretary, Treasurer, Auditor and create other positions as it may deem necessary for the management of the chapter.The assailed ordinance was later transmitted to respondent City Mayor Jose L. Atienza, Jr., for his signature and approval.On 16 July 2002, upon being informed that the ordinance had been forwarded to the Office of the City Mayor, still unnumbered and yet to be officially released, the Liga sent respondent Mayor of Manila a letter requesting him that said ordinance be vetoed considering that it encroached upon, or even assumed, the functions of the Liga through legislation, a function which was clearly beyond the ambit of the powers of the City Council.7Respondent Mayor, however, signed and approved the assailed city ordinance and issued on 15 August 2002 Executive Order No. 011, Series of 2002, to implement the ordinance.Hence, on 27 August 2002, the Liga filed the instant petition raising the following issues:IWHETHER OR NOT THE RESPONDENT CITY COUNCIL OF MANILA COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK

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Case Materials in Remedial Law I ReviewJurisdictionOF OR IN EXCESS OF JURISDICTION, WHEN IT ENACTED CITY ORDINANCE NO. 8039 S. 2002 PURPOSELY TO GOVERN THE ELECTIONS OF THE MANILA CHAPTER OF THE LIGA NG MGA BARANGAYS AND WHICH PROVIDES A DIFFERENT MANNER OF ELECTING ITS OFFICERS, DESPITE THE FACT THAT SAID CHAPTER’S ELECTIONS, AND THE ELECTIONS OF ALL OTHER CHAPTERS OF THE LIGA NG MGA BARANGAYS FOR THAT MATTER, ARE BY LAW MANDATED TO BE GOVERNED BY THE LIGA CONSTITUTION AND BY-LAWS AND THE LIGA ELECTION CODE.

IIWHETHER OR NOT THE RESPONDENT CITY MAYOR OF MANILA COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION WHEN HE ISSUED EXECUTIVE ORDER NO. 011 TO IMPLEMENT THE QUESTIONED CITY ORDINANCE NO. 8039 S. 2002.In support of its petition, the Liga argues that City Ordinance No. 8039, Series of 2002, and Executive Order No. 011, Series of 2002, contradict the Liga Election Code and are therefore invalid. There exists neither rhyme nor reason, not to mention the absence of legal basis, for the Manila City Council to encroach upon, or even assume, the functions of the Liga by prescribing, through legislation, the manner of conducting the Liga elections other than what has been provided for by the Liga Constitution and By-laws and the Liga Election Code. Accordingly, the subject ordinance is an ultra vires act of the respondents and, as such, should be declared null and void.As for its prayer for the issuance of a temporary restraining order, the petitioner cites as reason therefor the fact that under Section 5 of the assailed city ordinance, the Manila District Chapter elections would be held thirty days after the regular barangay elections. Hence, it argued that the issuance of a temporary restraining order and/or preliminary injunction would be imperative to prevent the implementation of the ordinance and executive order.On 12 September 2002, Barangay Chairman Arnel Peña, in his capacity as a member of the Liga ng mga Barangay in the City Chapter of Manila, filed a Complaint in Intervention with Urgent Motion for the Issuance of Temporary Restraining Order and/or Preliminary Injunction.8 He supports the position of the Liga and prays for the declaration of the questioned ordinance and executive order, as well as the elections of the Liga ng mga Barangay pursuant thereto, to be null and void. The assailed ordinance prescribing for an "indirect manner of election" amended, in effect, the provisions of the Local Government Code of 1991, which provides for the election of the Liga officers at large. It also violated and curtailed the rights of the petitioner and intervenor, as well as the other

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Case Materials in Remedial Law I ReviewJurisdiction896 Barangay Chairmen in the City of Manila, to vote and be voted upon in a direct election.

On 25 October 2002, the Office of the Solicitor General (OSG) filed a Manifestation in lieu of Comment.9 It supports the petition of the Liga, arguing that the assailed city ordinance and executive order are clearly inconsistent with the express public policy enunciated in R.A. No. 7160. Local political subdivisions are able to legislate only by virtue of a valid delegation of legislative power from the national legislature. They are mere agents vested with what is called the power of subordinate legislation. Thus, the enactments in question, which are local in origin, cannot prevail against the decree, which has the force and effect of law.On the issue of non-observance by the petitioners of the hierarchy-of-courts rule, the OSG posits that technical rules of procedure should be relaxed in the instant petition. While Batas Pambansa Blg. 129, as amended, grants original jurisdiction over cases of this nature to the Regional Trial Court (RTC), the exigency of the present petition, however, calls for the relaxation of this rule. Section 496 (should be Section 491) of the Local Government Code of 1991 primarily intended that the Liga ng mga Barangay determine the representation of the Liga in the sanggunians for the immediate ventilation, articulation, and crystallization of issues affecting barangay government administration. Thus, the immediate resolution of this petition is a must.On the other hand, the respondents defend the validity of the assailed ordinance and executive order and pray for the dismissal of the present petition on the following grounds: (1) certiorari under Rule 65 of the Rules of Court is unavailing; (2) the petition should not be entertained by this Court in view of the pendency before the Regional Trial Court of Manila of two actions or petitions questioning the subject ordinance and executive order; (3) the petitioner is guilty of forum shopping; and (4) the act sought to be enjoined is fait accompli.The respondents maintain that certiorari is an extraordinary remedy available to one aggrieved by the decision of a tribunal, officer, or board exercising judicial or quasi-judicial functions. The City Council and City Mayor of Manila are not the "board" and "officer" contemplated in Rule 65 of the Rules of Court because both do not exercise judicial functions. The enactment of the subject ordinance and issuance of the questioned executive order are legislative and executive functions, respectively, and thus, do not fall within the ambit of "judicial functions." They are both within the prerogatives, powers, and authority of the City Council and City Mayor of Manila, respectively. Furthermore, the petition failed to show with certainty that the respondents acted without or in excess of jurisdiction or with grave abuse of discretion.The respondents also asseverate that the petitioner cannot claim that it has no other recourse in addressing its grievance other than this petition

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Case Materials in Remedial Law I ReviewJurisdictionfor certiorari. As a matter of fact, there are two cases pending before Branches 33 and 51 of the RTC of Manila (one is for mandamus; the other, for declaratory relief) and three in the Court of Appeals (one is for prohibition; the two other cases, for quo warranto), which are all akin to the present petition in the sense that the relief being sought therein is the declaration of the invalidity of the subject ordinance. Clearly, the petitioner may ask the RTC or the Court of Appeals the relief being prayed for before this Court. Moreover, the petitioner failed to prove discernible compelling reasons attending the present petition that would warrant cognizance of the present petition by this Court.

Besides, according to the respondents, the petitioner has transgressed the proscription against forum-shopping in filing the instant suit. Although the parties in the other pending cases and in this petition are different individuals or entities, they represent the same interest.With regard to petitioner's prayer for temporary restraining order and/ or preliminary injunction in its petition, the respondents maintain that the same had become moot and academic in view of the elections of officers of the City Liga ng mga Barangay on 15 September 2002 and their subsequent assumption to their respective offices.10 Since the acts to be enjoined are now fait accompli, this petition for certiorari with an application for provisional remedies must necessarily fail. Thus, where the records show that during the pendency of the case certain events or circumstances had taken place that render the case moot and academic, the petition for certiorari must be dismissed.After due deliberation on the pleadings filed, we resolve to dismiss this petition for certiorari.First, the respondents neither acted in any judicial or quasi-judicial capacity nor arrogated unto themselves any judicial or quasi-judicial prerogatives. A petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure is a special civil action that may be invoked only against a tribunal, board, or officer exercising judicial or quasi-judicial functions.Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:SECTION 1. Petition for certiorari. — When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.

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Case Materials in Remedial Law I ReviewJurisdictionElsewise stated, for a writ of certiorari to issue, the following requisites must concur: (1) it must be directed against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or officer must have acted without or in excess of jurisdiction or with grave abuse of discretion amounting lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law.

A respondent is said to be exercising judicial function where he has the power to determine what the law is and what the legal rights of the parties are, and then undertakes to determine these questions and adjudicate upon the rights of the parties.11Quasi-judicial function, on the other hand, is "a term which applies to the actions, discretion, etc., of public administrative officers or bodies … required to investigate facts or ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for their official action and to exercise discretion of a judicial nature."12Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that there be a law that gives rise to some specific rights of persons or property under which adverse claims to such rights are made, and the controversy ensuing therefrom is brought before a tribunal, board, or officer clothed with power and authority to determine the law and adjudicate the respective rights of the contending parties.13The respondents do not fall within the ambit of tribunal, board, or officer exercising judicial or quasi-judicial functions. As correctly pointed out by the respondents, the enactment by the City Council of Manila of the assailed ordinance and the issuance by respondent Mayor of the questioned executive order were done in the exercise of legislative and executive functions, respectively, and not of judicial or quasi-judicial functions. On this score alone, certiorari will not lie.Second, although the instant petition is styled as a petition for certiorari, in essence, it seeks the declaration by this Court of the unconstitutionality or illegality of the questioned ordinance and executive order. It, thus, partakes of the nature of a petition for declaratory relief over which this Court has only appellate, not original, jurisdiction.14 Section 5, Article VIII of the Constitution provides:Sec. 5. The Supreme Court shall have the following powers:(1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.

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Case Materials in Remedial Law I ReviewJurisdiction(2) Review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court may provide, final judgments and orders of lower courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question. (Italics supplied).As such, this petition must necessary fail, as this Court does not have original jurisdiction over a petition for declaratory relief even if only questions of law are involved.15Third, even granting arguendo that the present petition is ripe for the extraordinary writ of certiorari, there is here a clear disregard of the hierarchy of courts. No special and important reason or exceptional and compelling circumstance has been adduced by the petitioner or the intervenor why direct recourse to this Court should be allowed.We have held that this Court’s original jurisdiction to issue a writ of certiorari (as well as of prohibition, mandamus, quo warranto, habeas corpus and injunction) is not exclusive, but is concurrent with the Regional Trial Courts and the Court of Appeals in certain cases. As aptly stated in People v. Cuaresma:16This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the writs an absolute, unrestrained freedom of choice of the court to which application therefor0 will be directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and also serves as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard of that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level ("inferior") courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Court’s original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition. This is [an] established policy. It is a policy necessary to prevent inordinate demands upon the Court’s time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court’s docket.As we have said in Santiago v. Vasquez,17 the propensity of litigants and lawyers to disregard the hierarchy of courts in our judicial system by seeking relief directly from this Court must be put to a halt for two reasons: (1) it would be an imposition upon the precious time of this Court; and (2) it would cause an inevitable and resultant delay, intended or otherwise, in the adjudication of cases, which in some instances had to

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Case Materials in Remedial Law I ReviewJurisdictionbe remanded or referred to the lower court as the proper forum under the rules of procedure, or as better equipped to resolve the issues because this Court is not a trier of facts.

Thus, we shall reaffirm the judicial policy that this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts, and exceptional and compelling circumstances justify the availment of the extraordinary remedy of writ of certiorari, calling for the exercise of its primary jurisdiction.18Petitioner’s reliance on Pimentel v. Aguirre19 is misplaced because the non-observance of the hierarchy-of-courts rule was not an issue therein. Besides, what was sought to be nullified in the petition for certiorari and prohibition therein was an act of the President of the Philippines, which would have greatly affected all local government units. We reiterated therein that when an act of the legislative department is seriously alleged to have infringed the Constitution, settling the controversy becomes the duty of this Court. The same is true when what is seriously alleged to be unconstitutional is an act of the President, who in our constitutional scheme is coequal with Congress.We hesitate to rule that the petitioner and the intervenor are guilty of forum-shopping. Forum-shopping exists where the elements of litis pendentia are present or when a final judgment in one case will amount to res judicata in the other. For litis pendentia to exist, the following requisites must be present: (1) identity of parties, or at least such parties as are representing the same interests in both actions; (2) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; and (3) identity with respect to the two preceding particulars in the two cases, such that any judgment that may be rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other case.20In the instant petition, and as admitted by the respondents, the parties in this case and in the alleged other pending cases are different individuals or entities; thus, forum-shopping cannot be said to exist. Moreover, even assuming that those five petitions are indeed pending before the RTC of Manila and the Court of Appeals, we can only guess the causes of action and issues raised before those courts, considering that the respondents failed to furnish this Court with copies of the said petitions.WHEREFORE, the petition is DISMISSED.SO ORDERED.G.R. No. 139791. December 12, 2003

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Case Materials in Remedial Law I ReviewJurisdictionMANILA BANKERS LIFE INSURANCE CORPORATION, petitioner, vs. EDDY NG KOK WEI, respondent.

Before us is a petition for review on certiorari assailing the Decision1 dated March 26, 1999 and Resolution2 dated August 5, 1999 of the Court of Appeals in CA-G.R. CV No. 40504, entitled “Eddy Ng Kok Wei vs. Manila Bankers Life Insurance Corporation”.The factual antecedents as borne by the records are:Eddy Ng Kok Wei, respondent, is a Singaporean businessman who ventured into investing in the Philippines. On November 29, 1988, respondent, in a Letter of Intent addressed to Manila Bankers Life Insurance Corporation, petitioner, expressed his intention to purchase a condominium unit at Valle Verde Terraces.Subsequently or on December 5, 1988, respondent paid petitioner a reservation fee of P50,000.00 for the purchase of a 46-square meter condominium unit (Unit 703) valued at P860,922.00. On January 16, 1989, respondent paid 90% of the purchase price in the sum of P729,830.00.Consequently, petitioner, through its President, Mr. Antonio G. Puyat, executed a Contract to Sell in favor of the respondent. The contract expressly states that the subject condominium unit “shall substantially be completed and delivered” to the respondent “within fifteen (15) months” from February 8, 1989 or on May 8, 1990, and that “(S)hould there be no substantial completion and fail(ure) to deliver the unit on the date specified, a penalty of 1% of the total amount paid (by respondent) shall be charged against (petitioner)”.Considering that the stipulated 15-month period was at hand, respondent returned to the Philippines sometime in April, 1990.In a letter dated April 5, 1990, petitioner, through its Senior Assistant Vice-President, Mr. Mario G. Zavalla, informed respondent of the substantial completion of his condominium unit, however, due to various uncontrollable forces (such as coup d‘ etat attempts, typhoon and steel and cement shortage), the final turnover is reset to May 31, 1990.Meanwhile, on July 5, 1990, upon receipt of petitioner’s notice of delivery dated May 31, 1990, respondent again flew back to Manila. He found the unit still uninhabitable for lack of water and electric facilities.1 Annex “A” of the Petition for Review, Rollo at 27-57.2 Annex “C”, id. at 63-65.

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Case Materials in Remedial Law I ReviewJurisdictionOnce more, petitioner issued another notice to move-in addressed to its building administrator advising the latter that respondent is scheduled to move in on August 22, 1990.

On October 5, 1990, respondent returned to the Philippines only to find that his condominium unit was still unlivable. Exasperated, he was constrained to send petitioner a letter dated November 21, 1990 demanding payment for the damages he sustained. But petitioner ignored such demand, prompting respondent to file with the Regional Trial Court, Branch 150, Makati City, a complaint against the former for specific performance and damages, docketed as Civil Case No. 90-3440.Meanwhile, during the pendency of the case, respondent finally accepted the condominium unit and on April 12, 1991, occupied the same. Thus, respondent’s cause of action has been limited to his claim for damages.On December 18, 1992, the trial court rendered a Decision3 finding the petitioner liable for payment of damages due to the delay in the performance of its obligation to the respondent. The dispositive portion reads:“WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant, ordering Manila Bankers Life Insurance Corporation to pay plaintiff Eddy Ng Kok Wei the following:1. One percent (1%) of the total amount plaintiff paid defendant;2. P100,000.00 as moral damages;3. P50,000.00 as exemplary damages;4. P25,000.00 by way of attorney’s fees; andCost of suit.“SO ORDERED.”On appeal, the Court of Appeals, in a Decision dated March 26, 1999, affirmed in toto the trial court’s award of damages in favor of the respondent.Unsatisfied, petitioner filed a motion for reconsideration but was denied by the Appellate Court in a Resolution dated August 5, 1999.Hence, this petition for review on certiorari. Petitioner contends that the trial court has no jurisdiction over the instant case; and that the Court of Appeals erred in affirming the trial court’s finding that petitioner incurred unreasonable delay in the delivery of the condominium unit to respondent.3 Annex “H”, id. at 83-89.

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Case Materials in Remedial Law I ReviewJurisdictionOn petitioner’s contention that the trial court has no jurisdiction over the instant case, Section 1 (c) of Presidential Decree No. 1344, as amended, provides:

“SECTION 1. – In the exercise of its functions to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority [now Housing and Land Use Regulatory Board (HLURB)]4 shall have exclusive jurisdiction to hear and decide cases of the following nature:x x x“C. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lots or condominium units against the owner, developer, dealer, broker or salesman.x x x.”Pursuant to the above provisions, it is the HLURB which has jurisdiction over the instant case. We have consistently held that complaints for specific performance with damages by a lot or condominium unit buyer against the owner or developer falls under the exclusive jurisdiction of the HLURB.5While it may be true that the trial court is without jurisdiction over the case, petitioner’s active participation in the proceedings estopped it from assailing such lack of it. We have held that it is an undesirable practice of a party participating in the proceedings and submitting its case for decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction, when adverse.6Here, petitioner failed to raise the question of jurisdiction before the trial court and the Appellate Court. In effect, petitioner confirmed and ratified the trial court’s jurisdiction over this case. Certainly, it is now in estoppel and can no longer question the trial court’s jurisdiction.4 Jurisdiction was originally vested in the National Housing Authority (NHA) under P.D. No. 957, as amended by P.D. No. 1344. Under E.O. No. 648 of February 7, 1981, this jurisdiction was transferred to the Human Settlements Regulatory Commission (HSRC) which, pursuant to E.O. No. 90 of December 17, 1986, was renamed as the Housing and Land Use Regulatory Board (HLURB).5 See Solid Homes, Inc. vs. Payawal, G.R. No. 84811, August 29, 1989, 177 SCRA 72; C.T. Torres Enterprises, Inc. vs. Hibionada, G.R. No. 80916, November 9, 1990, 191 SCRA 268; Tejada vs. Homestead Property Corporation, G.R. No. 79622, September 29, 1989, 178 SCRA 164; Alcasid vs. Court of Appeals, G.R. No. 94927, January 22, 1993, 217 SCRA 437; Fajardo vs. Bautista, G.R. Nos. 102193-97, May 10, 1994, 232 SCRA 291.6 See Producers Bank of the Philippines vs. NLRC, et al, G.R. No. 118069, November 16, 1998, 298 SCRA 517; TCL Sales Corporation vs. Court of Appeals, G.R. No. 129777, January 5, 2001, 349 SCRA 35; Alday vs. FGU Insurance Corporation, G.R. No. 138822, January 23, 2001, 350 SCRA 113.

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Case Materials in Remedial Law I ReviewJurisdictionOn petitioner’s claim that it did not incur delay, suffice it to say that this is a factual issue. Time and again, we have ruled that “the factual findings of the trial court are given weight when supported by substantial evidence and carries more weight when affirmed by the Court of Appeals.”7 Whether or not petitioner incurred delay and thus, liable to pay damages as a result thereof, are indeed factual questions.

The jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, is limited to reviewing only errors of law, not of fact, unless the factual findings being assailed are not supported by evidence on record or the impugned judgment is based on a misapprehension of facts.8 These exceptions are not present here.WHEREFORE, the petition is DENIED. The assailed Decision dated March 26, 1999 and Resolution dated August 5, 1999 of the Court of Appeals are hereby AFFIRMED IN TOTO.Costs against the petitioner.SO ORDERED.G.R. No. 79578 March 13, 1991RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), petitioner, vs.HON. COURT OF APPEALS, and SPOUSES MINERVA TIMAN and FLORES TIMAN, respondents.A social condolence telegram sent through the facilities of the petitioner gave rise to the present petition for review on certiorari assailing the decision 1 of the respondent Court of Appeals which affirmed in toto the judgment 2 of the trial court, dated February 14, 1985, the dispositive portion of which reads:WHEREFORE, premises considered, judgment is hereby rendered:1. Ordering the defendant RCPI to pay plaintiff the amount of P30,848.05 representing actual and compensatory damages; P10,000.00 as moral damages and P5,000.00 as exemplary damages.7 Lim vs. Chan, G.R. No. 127227, February 28, 2001, 353 SCRA 55, 59, citing Valgoson’s Realty, Inc. vs. Court of Appeals, 295 SCRA 449 (1998).8 Cosmos Bottling Corporation vs. NLRC, G.R. No. 146397, July 1, 2003, citing De Rama vs. Court of Appeals, 351 SCRA 94 (2001).

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Case Materials in Remedial Law I ReviewJurisdiction2. Awarding of attorney's fees in the sum of P5,000.00. Costs against the defendant.

SO ORDERED. 3The facts as gleaned from the records of the case are as follows:On January 24, 1983, private respondents-spouses Minerva Timan and Flores Timan sent a telegram of condolence to their cousins, Mr. and Mrs. Hilario Midoranda, at Trinidad, Calbayog City, through petitioner Radio Communications of the Philippines, Inc. (RCPI, hereinafter) at Cubao, Quezon City, to convey their deepest sympathy for the recent death of the mother-in-law of Hilario Midoranda 4 to wit:MR. & MRS. HILARIO MIDORANDATRINIDAD, CALBAYOG CITYMAY GOD GIVE YOU COURAGE AND STRENGTH TO BEAR YOUR LOSS. OUR DEEPEST SYMPATHY TO YOU AND MEMBERS OF THE FAMILY.MINER & FLORY. 5The condolence telegram was correctly transmitted as far as the written text was concerned. However, the condolence message as communicated and delivered to the addressees was typewritten on a "Happy Birthday" card and placed inside a "Christmasgram" envelope. Believing that the transmittal to the addressees of the aforesaid telegram in that nonsuch manner was done intentionally and with gross breach of contract resulting to ridicule, contempt, and humiliation of the private respondents and the addressees, including their friends and relatives, the spouses Timan demanded an explanation. Unsatisfied with RCPI's explanations in its letters, dated March 9 and April 20, 1983, the Timans filed a complaint for damages. 6The parties stipulated at the pre-trial that the issue to be resolved by the trial court was:WHETHER or not the act of delivering the condolence message in a Happy Birthday" card with a "Christmasgram" envelope constitutes a breach of contract on the part of the defendant. If in the affirmative, whether or not plaintiff is entitled to damages. 7 The trial court rendered judgment in favor of the respondents Timans which was affirmed in toto by the Court of Appeals. RCPI now submits the following assignment of errors: I

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Case Materials in Remedial Law I ReviewJurisdictionTHE RESPONDENT COURT ERRED IN CONDEMNING PETITIONER TO PAY ACTUAL AND COMPENSATORY DAMAGES IN THE AMOUNT OF P30,848.05.

IITHE RESPONDENT COURT ERRED IN CONDEMNING PETITIONER TO PAY MORAL DAMAGES IN THE AMOUNT OF P10,000.00.IIITHE RESPONDENT COURT ERRED IN CONDEMNING PETITIONER TO PAY EXEMPLARY DAMAGES IN THE AMOUNT OF P5,000.00.IVTHE RESPONDENT COURT ERRED IN CONDEMNING PETITIONER TO PAY ATTORNEYS FEES IN THE AMOUNT OF P5,000.00 PLUS COSTS OF SUIT. 8The four assigned errors are going to be discussed jointly because they are all based on the same findings of fact.We fully agree with the appellate court's endorsement of the trial court's conclusion that RCPI, a corporation dealing in telecommunications and offering its services to the public, is engaged in a business affected with public interest. As such, it is bound to exercise that degree of diligence expected of it in the performance of its obligation. 9One of RCPI's main arguments is that it still correctly transmitted the text of the telegram and was received by the addressees on time despite the fact that there was "error" in the social form and envelope used. 10 RCPI asserts that there was no showing that it has any motive to cause harm or damage on private respondents:Petitioner humbly submits that the "error" in the social form used does not come within the ambit of fraud, malice or bad faith as understood/defined under the law. 11We do not agree.In a distinctly similar case, 12 and oddly also involving the herein petitioner as the same culprit, we held:Petitioner is a domestic corporation engaged in the business of receiving and transmitting messages. Everytime a person transmits a message through the facilities of the petitioner, a contract is entered into. Upon receipt of the rate or fee fixed, the petitioner undertakes to transmit the message accurately . . . As a corporation, the petitioner can act only through its employees. Hence the acts of its employees in receiving and

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Case Materials in Remedial Law I ReviewJurisdictiontransmitting messages are the acts of the petitioner. To hold that the petitioner is not liable directly for the acts of its employees in the pursuit of petitioner's business is to deprive the general public availing of the services of the petitioner of an effective and adequate remedy. 13

Now, in the present case, it is self-evident that a telegram of condolence is intended and meant to convey a message of sorrow and sympathy. Precisely, it is denominated "telegram of condolence" because it tenders sympathy and offers to share another's grief. It seems out of this world, therefore, to place that message of condolence in a birthday card and deliver the same in a Christmas envelope for such acts of carelessness and incompetence not only render violence to good taste and common sense, they depict a bizarre presentation of the sender's feelings. They ridicule the deceased's loved ones and destroy the atmosphere of grief and respect for the departed.Anyone who avails of the facilities of a telegram company like RCPI can choose to send his message in the ordinary form or in a social form. In the ordinary form, the text of the message is typed on plain newsprint paper. On the other hand, a social telegram is placed in a special form with the proper decorations and embellishments to suit the occasion and the message and delivered in an envelope matching the purpose of the occasion and the words and intent of the message. The sender pays a higher amount for the social telegram than for one in the ordinary form. It is clear, therefore, that when RCPI typed the private respondents' message of condolence in a birthday card and delivered the same in a colorful Christmasgram envelope, it committed a breach of contract as well as gross negligence. Its excuse that it had run out of social condolence cards and envelopes 14 is flimsy and unacceptable. It could not have been faulted had it delivered the message in the ordinary form and reimbursed the difference in the cost to the private respondents. But by transmitting it unfittingly—through other special forms clearly, albeit outwardly, portraying the opposite feelings of joy and happiness and thanksgiving—RCPI only exacerbated the sorrowful situation of the addressees and the senders. It bears stress that this botchery exposed not only the petitioner's gross negligence but also its callousness and disregard for the sentiments of its clientele, which tantamount to wanton misconduct, for which it must be held liable for damages.It is not surprising that when the Timans' telegraphic message reached their cousin, it became the joke of the Midorandas' friends, relatives, and associates who thought, and rightly so, that the unpardonable mix-up was a mockery of the death of the mother-in-law of the senders' cousin. Thus it was not unexpected that because of this unusual incident, which caused much embarrassment and distress to respondent Minerva Timan, he suffered nervousness and hypertension resulting in his confinement for three days starting from April 4, 1983 at the Capitol Medical Center in Quezon City. 15

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Case Materials in Remedial Law I ReviewJurisdictionThe petitioner argues that "a court cannot rely on speculation, conjectures or guess work as to the fact and amount of damages, but must depend on the actual proof that damages had been suffered and evidence of the actualamount. 16 In other words, RCPI insists that there is no causal relation of the illness suffered by Mr. Timan with the foul-up caused by the petitioner. But that is a question of fact. The findings of fact of the trial court and the respondent court concur in favor of the private respondents. We are bound by such findings—that is the general rule well-established by a long line of cases. Nothing has been shown to convince us to justify the relaxation of this rule in the petitioner's favor. On the contrary, these factual findings are supported by substantial evidence on record.

Anent the award of moral and exemplary damages assigned as errors, the findings of the respondent court are persuasive.. . . When plaintiffs placed an order for transmission of their social condolence telegram, defendant did not inform the plaintiff of the exhaustion of such social condolence forms. Defendant-appellant accepted through its authorized agent or agency the order and received the corresponding compensation therefor. Defendant did not comply with its contract as intended by the parties and instead of transmitting the condolence message in an ordinary form, in accordance with its guidelines, placed the condolence message expressing sadness and sorrow in forms conveying joy and happiness. Under the circumstances, We cannot accept the defendant's plea of good faith predicated on such exhaustion of social condolence forms. Gross negligence or carelessness can be attributed to defendant-appellant in not supplying its various stations with such sufficient and adequate social condolence forms when it held out to the public sometime in January, 1983, the availability of such social condolence forms and accepted for a fee the transmission of messages on said forms. Knowing that there are no such forms as testified to by its Material Control Manager Mateo Atienza, and entering into a contract for the transmission of messages in such forms, defendant-appellant committed acts of bad faith, fraud or malice. . . . 17RCPI's argument that it can not be held liable for exemplary damages, being penal or punitive in character, 18 is without merit. We have so held in many cases, and oddly, quite a number of them likewise involved the herein petitioner as the transgressor.xxx xxx xxx. . . In contracts and quasi-contracts, exemplary damages may be awarded if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. There was gross negligence on the part of RCPI personnel in transmitting the wrong telegram, of which

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Case Materials in Remedial Law I ReviewJurisdictionRCPI must be held liable. Gross carelessness or negligence constitutes wanton misconduct.

xxx xxx xxx. . . punitive damages may be recovered for wilful or wantonly negligent acts in respect of messages, even though those acts are neither authorized nor ratified (Arkansas & L.R. Co. vs. Stroude 91 SW 18; West vs. Western U. Tel. Co., 17 P807; Peterson vs. Western U. Tel. Co., 77 NW 985; Brown vs. Western U. Tel. Co., 6 SE 146). Thus, punitive damages have been recovered for mistakes in the transmission of telegrams (Pittman vs. Western Union Tel. Co., 66 SO 977; Painter vs. Western Union Tel. Co., 84 SE 293) (emphasis supplied). 19We wish to add a little footnote to this Decision. By merely reviewing the number of cases that has reached this Court in which the petitioner was time and again held liable for the same causes as in the present case breach of contract and gross negligence—the ineluctable conclusion is that it has not in any way reformed nor improved its services to the public. It must do so now or else next time the Court may be constrained to adjudge stricter sanctions.WHEREFORE, premises considered, the decision appealed from is AFFIRMED in toto.Costs against the petitioner.SO ORDERED.G.R. No. 151149             September 7, 2004GEORGE KATON, petitioner, vs.MANUEL PALANCA JR., LORENZO AGUSTIN, JESUS GAPILANGO and JUAN FRESNILLO, respondents.Where prescription, lack of jurisdiction or failure to state a cause of action clearly appear from the complaint filed with the trial court, the action may be dismissed motu proprio by the Court of Appeals, even if the case has been elevated for review on different grounds. Verily, the dismissal of such cases appropriately ends useless litigations.The CaseBefore us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the December 8, 2000 Decision2 and the November 20, 2001 Resolution3 of the Court of Appeals in CA-GR SP No. 57496. The assailed Decision disposed as follows:

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Case Materials in Remedial Law I ReviewJurisdiction"Assuming that petitioner is correct in saying that he has the exclusive right in applying for the patent over the land in question, it appears that his action is already barred by laches because he slept on his alleged right for almost 23 years from the time the original certificate of title has been issued to respondent Manuel Palanca, Jr., or after 35 years from the time the land was certified as agricultural land. In addition, the proper party in the annulment of patents or titles acquired through fraud is the State; thus, the petitioner’s action is deemed misplaced as he really does not have any right to assert or protect. What he had during the time he requested for the re-classification of the land was the privilege of applying for the patent over the same upon the land’s conversion from forest to agricultural.

"WHEREFORE, the petition is hereby DISMISSED. No pronouncement as to cost."4The assailed Resolution, on the other hand, denied the Motion for Reconsideration filed by petitioner. It affirmed the RTC’s dismissal of his Complaint in Civil Case No. 3231, not on the grounds relied upon by the trial court, but because of prescription and lack of jurisdiction.The Antecedent FactsThe CA narrates the antecedent facts as follows:"On August 2, 1963, herein [P]etitioner [George Katon] filed a request with the District Office of the Bureau of Forestry in Puerto Princesa, Palawan, for the re-classification of a piece of real property known as Sombrero Island, located in Tagpait, Aborlan, Palawan, which consists of approximately 18 hectares. Said property is within Timberland Block of LC Project No. 10-C of Aborlan, Palawan, per BF Map LC No. 1582."Thereafter, the Bureau of Forestry District Office, Puerto Princesa, Palawan, ordered the inspection, investigation and survey of the land subject of the petitioner’s request for eventual conversion or re-classification from forest to agricultural land, and thereafter for George Katon to apply for a homestead patent."Gabriel Mandocdoc (now retired Land Classification Investigator) undertook the investigation, inspection and survey of the area in the presence of the petitioner, his brother Rodolfo Katon (deceased) and his cousin, [R]espondent Manuel Palanca, Jr. During said survey, there were no actual occupants on the island but there were some coconut trees claimed to have been planted by petitioner and [R]espondent Manuel Palanca, Jr. (alleged overseer of petitioner) who went to the island from time to time to undertake development work, like planting of additional coconut trees.

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Case Materials in Remedial Law I ReviewJurisdiction"The application for conversion of the whole Sombrero Island was favorably endorsed by the Forestry District Office of Puerto Princesa to its main office in Manila for appropriate action. The names of Felicisimo Corpuz, Clemente Magdayao and Jesus Gapilango and Juan Fresnillo were included in the endorsement as co-applicants of the petitioner.

"In a letter dated September 23, 1965, then Asst. Director of Forestry R.J.L. Utleg informed the Director of Lands, Manila, that since the subject land was no longer needed for forest purposes, the same is therefore certified and released as agricultural land for disposition under the Public Land Act."Petitioner contends that the whole area known as Sombrero Island had been classified from forest land to agricultural land and certified available for disposition upon his request and at his instance. However, Mr. Lucio Valera, then [l]and investigator of the District Land Office, Puerto Princesa, Palawan, favorably endorsed the request of [R]espondents Manuel Palanca Jr. and Lorenzo Agustin, for authority to survey on November 15, 1965. On November 22, a second endorsement was issued by Palawan District Officer Diomedes De Guzman with specific instruction to survey vacant portions of Sombrero Island for the respondents consisting of five (5) hectares each. On December 10, 1965, Survey Authority No. R III-342-65 was issued authorizing Deputy Public Land Surveyor Eduardo Salvador to survey ten (10) hectares of Sombrero Island for the respondents. On December 23, 1990, [R]espondent Lorenzo Agustin filed a homestead patent application for a portion of the subject island consisting of an area of 4.3 hectares."Records show that on November 8, 1996, [R]espondent Juan Fresnillo filed a homestead patent application for a portion of the island comprising 8.5 hectares. Records also reveal that [R]espondent Jesus Gapilango filed a homestead application on June 8, 1972. Respondent Manuel Palanca, Jr. was issued Homestead Patent No. 145927 and OCT No. G-7089 on March 3, 19775 with an area of 6.84 hectares of Sombrero Island."Petitioner assails the validity of the homestead patents and original certificates of title covering certain portions of Sombrero Island issued in favor of respondents on the ground that the same were obtained through fraud. Petitioner prays for the reconveyance of the whole island in his favor. "On the other hand, [R]espondent Manuel Palanca, Jr. claims that he himself requested for the reclassification of the island in dispute and that on or about the time of such request, [R]espondents Fresnillo, Palanca and Gapilango already occupied their respective areas and introduced numerous improvements. In addition, Palanca said that petitioner never filed any homestead application for the island. Respondents deny that Gabriel Mandocdoc undertook the inspection and survey of the island.

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Case Materials in Remedial Law I ReviewJurisdiction"According to Mandocdoc, the island was uninhabited but the respondents insist that they already had their respective occupancy and improvements on the island. Palanca denies that he is a mere overseer of the petitioner because he said he was acting for himself in developing his own area and not as anybody’s caretaker.

"Respondents aver that they are all bona fide and lawful possessors of their respective portions and have declared said portions for taxation purposes and that they have been faithfully paying taxes thereon for twenty years."Respondents contend that the petitioner has no legal capacity to sue insofar as the island is concerned because an action for reconveyance can only be brought by the owner and not a mere homestead applicant and that petitioner is guilty of estoppel by laches for his failure to assert his right over the land for an unreasonable and unexplained period of time."In the instant case, petitioner seeks to nullify the homestead patents and original certificates of title issued in favor of the respondents covering certain portions of the Sombrero Island as well as the reconveyance of the whole island in his favor. The petitioner claims that he has the exclusive right to file an application for homestead patent over the whole island since it was he who requested for its conversion from forest land to agricultural land."6Respondents filed their Answer with Special and/or Affirmative Defenses and Counterclaim in due time. On June 30, 1999, they also filed a Motion to Dismiss on the ground of the alleged defiance by petitioner of the trial court’s Order to amend his Complaint so he could thus effect a substitution by the legal heirs of the deceased, Respondent Gapilango. The Motion to Dismiss was granted by the RTC in its Order dated July 29, 1999.Petitioner’s Motion for Reconsideration of the July 29, 1999 Order was denied by the trial court in its Resolution dated December 17, 1999, for being a third and prohibited motion. In his Petition for Certiorari before the CA, petitioner charged the trial court with grave abuse of discretion on the ground that the denied Motion was his first and only Motion for Reconsideration of the aforesaid Order.Ruling of the Court of AppealsInstead of limiting itself to the allegation of grave abuse of discretion, the CA ruled on the merits. It held that while petitioner had caused the reclassification of Sombrero Island from forest to agricultural land, he never applied for a homestead patent under the Public Land Act. Hence, he never acquired title to that land.

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Case Materials in Remedial Law I ReviewJurisdictionThe CA added that the annulment and cancellation of a homestead patent and the reversion of the property to the State were matters between the latter and the homestead grantee. Unless and until the government takes steps to annul the grant, the homesteader’s right thereto stands.

Finally, granting arguendo that petitioner had the exclusive right to apply for a patent to the land in question, he was already barred by laches for having slept on his right for almost 23 years from the time Respondent Palanca’s title had been issued. In the Assailed Resolution, the CA acknowledged that it had erred when it ruled on the merits of the case. It agreed with petitioner that the trial court had acted without jurisdiction in perfunctorily dismissing his September 10, 1999 Motion for Reconsideration, on the erroneous ground that it was a third and prohibited motion when it was actually only his first motion.Nonetheless, the Complaint was dismissed motu proprio by the challenged Resolution of the CA Special Division of five members – with two justices dissenting – pursuant to its "residual prerogative" under Section 1 of Rule 9 of the Rules of Court.From the allegations of the Complaint, the appellate court opined that petitioner clearly had no standing to seek reconveyance of the disputed land, because he neither held title to it nor even applied for a homestead patent. It reiterated that only the State could sue for cancellation of the title issued upon a homestead patent, and for reversion of the land to the public domain.Finally, it ruled that prescription had already barred the action for reconveyance. First, petitioner’s action was brought 24 years after the issuance of Palanca’s homestead patent. Under the Public Land Act, such action should have been taken within ten years from the issuance of the homestead certificate of title. Second, it appears from the submission (Annex "F" of the Complaint) of petitioner himself that Respondents Fresnillo and Palanca had been occupying six hectares of the island since 1965, or 33 years before he took legal steps to assert his right to the property. His action was filed beyond the 30-year prescriptive period under Articles 1141 and 1137 of the Civil Code.Hence, this Petition.7 IssuesIn his Memorandum, petitioner raises the following issues:"1. Is the Court of Appeals correct in resolving the Petition for Certiorari based on an issue not raised (the merits of the case) in the Petition?

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Case Materials in Remedial Law I ReviewJurisdiction"2. Is the Court of Appeals correct in invoking its alleged ‘residual prerogative’ under Section 1, Rule 9 of the 1997 Rules of Civil Procedure in resolving the Petition on an issue not raised in the Petition?"8

The Court’s RulingThe Petition has no merit.First Issue:Propriety of Ruling on the MeritsThis is not the first time that petitioner has taken issue with the propriety of the CA’s ruling on the merits. He raised it with the appellate court when he moved for reconsideration of its December 8, 2000 Decision. The CA even corrected itself in its November 20, 2001 Resolution, as follows:"Upon another review of the case, the Court concedes that it may indeed have lost its way and been waylaid by the variety, complexity and seeming importance of the interests and issues involved in the case below, the apparent reluctance of the judges, five in all, to hear the case, and the volume of the conflicting, often confusing, submissions bearing on incidental matters. We stand corrected."9That explanation should have been enough to settle the issue. The CA’s Resolution on this point has rendered petitioner’s issue moot. Hence, there is no need to discuss it further. Suffice it to say that the appellate court indeed acted ultra jurisdictio in ruling on the merits of the case when the only issue that could have been, and was in fact, raised was the alleged grave abuse of discretion committed by the trial court in denying petitioner’s Motion for Reconsideration. Settled is the doctrine that the sole office of a writ of certiorari is the correction of errors of jurisdiction. Such writ does not include a review of the evidence,10 more so when no determination of the merits has yet been made by the trial court, as in this case. Second Issue:Dismissal for Prescription and Lack of JurisdictionPetitioner next submits that the CA erroneously invoked its "residual prerogatives" under Section 1 of Rule 9 of the Rules of Court when it motu proprio dismissed the Petition for lack of jurisdiction and prescription. According to him, residual prerogative refers to the power that the trial court, in the exercise of its original jurisdiction, may still validly exercise even after perfection of an appeal. It follows that such powers are not possessed by an appellate court.

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Case Materials in Remedial Law I ReviewJurisdictionPetitioner has confused what the CA adverted to as its "residual prerogatives" under Section 1 of Rule 9 of the Rules of Court with the "residual jurisdiction" of trial courts over cases appealed to the CA.

Under Section 1 of Rule 9 of the Rules of Court, defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived, except when (1) lack of jurisdiction over the subject matter, (2) litis pendentia, (3) res judicata and (4) prescription are evident from the pleadings or the evidence on record. In the four excepted instances, the court shall motu proprio dismiss the claim or action. In Gumabon v. Larin11 we explained thus:"x x x [T]he motu proprio dismissal of a case was traditionally limited to instances when the court clearly had no jurisdiction over the subject matter and when the plaintiff did not appear during trial, failed to prosecute his action for an unreasonable length of time or neglected to comply with the rules or with any order of the court. Outside of these instances, any motu proprio dismissal would amount to a violation of the right of the plaintiff to be heard. Except for qualifying and expanding Section 2, Rule 9, and Section 3, Rule 17, of the Revised Rules of Court, the amendatory 1997 Rules of Civil Procedure brought about no radical change. Under the new rules, a court may motu proprio dismiss a claim when it appears from the pleadings or evidence on record that it has no jurisdiction over the subject matter; when there is another cause of action pending between the same parties for the same cause, or where the action is barred by a prior judgment or by statute of limitations. x x x."12 (Italics supplied)On the other hand, "residual jurisdiction" is embodied in Section 9 of Rule 41 of the Rules of Court, as follows:"SEC. 9. Perfection of appeal; effect thereof. – A party’s appeal by notice of appeal is deemed perfected as to him upon the filing of the notice of appeal in due time."A party’s appeal by record on appeal is deemed perfected as to him with respect to the subject matter thereof upon the approval of the record on appeal filed in due time."In appeals by notice of appeal, the court loses jurisdiction over the case upon the perfection of the appeals filed in due time and the expiration of the time to appeal of the other parties."In appeals by record on appeal, the court loses jurisdiction only over the subject matter thereof upon the approval of the records on appeal filed in due time and the expiration of the time to appeal of the other parties."In either case, prior to the transmittal of the original record or the record on appeal, the court may issue orders for the protection and

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Case Materials in Remedial Law I ReviewJurisdictionpreservation of the rights of the parties which do not involve any matter litigated by the appeal, approve compromises, permit appeals of indigent litigants, order execution pending appeal in accordance with Section 2 of Rule 39, and allow withdrawal of the appeal." (Italics supplied)

The "residual jurisdiction" of trial courts is available at a stage in which the court is normally deemed to have lost jurisdiction over the case or the subject matter involved in the appeal. This stage is reached upon the perfection of the appeals by the parties or upon the approval of the records on appeal, but prior to the transmittal of the original records or the records on appeal.13 In either instance, the trial court still retains its so-called residual jurisdiction to issue protective orders, approve compromises, permit appeals of indigent litigants, order execution pending appeal, and allow the withdrawal of the appeal. The CA’s motu proprio dismissal of petitioner’s Complaint could not have been based, therefore, on residual jurisdiction under Rule 41. Undeniably, such order of dismissal was not one for the protection and preservation of the rights of the parties, pending the disposition of the case on appeal. What the CA referred to as residual prerogatives were the general residual powers of the courts to dismiss an action motu proprio upon the grounds mentioned in Section 1 of Rule 9 of the Rules of Court and under authority of Section 2 of Rule 114 of the same rules. To be sure, the CA had the excepted instances in mind when it dismissed the Complaint motu proprio "on more fundamental grounds directly bearing on the lower court’s lack of jurisdiction"15 and for prescription of the action. Indeed, when a court has no jurisdiction over the subject matter, the only power it has is to dismiss the action.16 Jurisdiction over the subject matter is conferred by law and is determined by the allegations in the complaint and the character of the relief sought.17 In his Complaint for "Nullification of Applications for Homestead and Original Certificate of Title No. G-7089 and for Reconveyance of Title,"18 petitioner averred:"2. That on November 10, 1965, without the knowledge of [petitioner, Respondent] Manuel Palanca Jr., [petitioner’s] cousin, in connivance with his co-[respondent], Lorenzo Agustin, x x x fraudulently and in bad faith: 2.1. x x x made the request for authority to survey as a pre-requisite to the filing of an application for homestead patent in his name and that of his Co-[Respondent] Agustin, [despite being] fully aware that [Petitioner] KATON had previously applied or requested for re-classification and certification of the same land from forest land to agricultural land which request was favorably acted upon and approved as mentioned earlier; a clear case of intrinsic fraud and misrepresentation;x x x           x x x           x x x

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Case Materials in Remedial Law I ReviewJurisdiction2.3. In stating in his application for homestead patent that he was applying for the VACANT PORTION of Sombrero Island where there was none, the same constituted another clear case of fraud and misrepresentation;

"3. That the issuance of Homestead Patent No. 145927 and OCT No. G-7089 in the name of [Respondent] Manuel Palanca Jr. and the filing of Homestead Patent Applications in the names of [respondents], Lorenzo Agustin, Jesus Gapilango and Juan Fresnillo[,] having been done fraudulently and in bad faith, are ipso facto null and void and of no effect whatsoever."19x x x           x x x           x x x"x x x. By a wrongful act or a willful omission and intending the effects with natural necessity arise knowing from such act or omission, [Respondent Palanca] on account of his blood relation, first degree cousins, trust, interdependence and intimacy is guilty of intrinsic fraud [sic]. x x x."20Thereupon, petitioner prayed, among others, for a judgment (1) nullifying the homestead patent applications of Respondents Agustin, Fresnillo and Gapilango as well as Homestead Patent No. 145927 and OCT No. G-7089 in the name of Respondent Palanca; and (2) ordering the director of the Land Management Bureau to reconvey the Sombrero Island to petitioner.21The question is, did the Complaint sufficiently allege an action for declaration of nullity of the free patent and certificate of title or, alternatively, for reconveyance? Or did it plead merely for reversion? The Complaint did not sufficiently make a case for any of such actions, over which the trial court could have exercised jurisdiction. In an action for nullification of title or declaration of its nullity, the complaint must contain the following allegations: 1) that the contested land was privately owned by the plaintiff prior to the issuance of the assailed certificate of title to the defendant; and 2) that the defendant perpetuated a fraud or committed a mistake in obtaining a document of title over the parcel of land claimed by the plaintiff.22 In these cases, the nullity arises not from fraud or deceit, but from the fact that the director of the Land Management Bureau had no jurisdiction to bestow title; hence, the issued patent or certificate of title was void ab initio.23 In an alternative action for reconveyance, the certificate of title is also respected as incontrovertible, but the transfer of the property or title thereto is sought to be nullified on the ground that it was wrongfully or erroneously registered in the defendant’s name.24 As with an annulment of title, a complaint must allege two facts that, if admitted, would entitle

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Case Materials in Remedial Law I ReviewJurisdictionthe plaintiff to recover title to the disputed land: (1) that the plaintiff was the owner of the land, and (2) that the defendant illegally dispossessed the plaintiff of the property.25 Therefore, the defendant who acquired the property through mistake or fraud is bound to hold and reconvey to the plaintiff the property or the title thereto.26

In the present case, nowhere in the Complaint did petitioner allege that he had previously held title to the land in question. On the contrary, he acknowledged that the disputed island was public land,27 that it had never been privately titled in his name, and that he had not applied for a homestead under the provisions of the Public Land Act.28 This Court has held that a complaint by a private party who alleges that a homestead patent was obtained by fraudulent means, and who consequently prays for its annulment, does not state a cause of action; hence, such complaint must be dismissed.29Neither can petitioner’s case be one for reversion. Section 101 of the Public Land Act categorically declares that only the solicitor general or the officer in his stead may institute such an action.30 A private person may not bring an action for reversion or any other action that would have the effect of canceling a free patent and its derivative title, with the result that the land thereby covered would again form part of the public domain.31 Thus, when the plaintiff admits in the complaint that the disputed land will revert to the public domain even if the title is canceled or amended, the action is for reversion; and the proper party who may bring action is the government, to which the property will revert.32 A mere homestead applicant, not being the real party in interest, has no cause of action in a suit for reconveyance.33 As it is, vested rights over the land applied for under a homestead may be validly claimed only by the applicant, after approval by the director of the Land Management Bureau of the former’s final proof of homestead patent.34 Consequently, the dismissal of the Complaint is proper not only because of lack of jurisdiction, but also because of the utter absence of a cause of action,35 a defense raised by respondents in their Answer.36 Section 2 of Rule 3 of the Rules of Court37 ordains that every action must be prosecuted or defended in the name of the real party in interest, who stands to be benefited or injured by the judgment in the suit. Indeed, one who has no right or interest to protect has no cause of action by which to invoke, as a party-plaintiff, the jurisdiction of the court.38Finally, assuming that petitioner is the proper party to bring the action for annulment of title or its reconveyance, the case should still be dismissed for being time-barred.39 It is not disputed that a homestead patent and an Original Certificate of Title was issued to Palanca on February 21, 1977,40 while the Complaint was filed only on October 6, 1998. Clearly, the suit was brought way past ten years from the date of

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Case Materials in Remedial Law I ReviewJurisdictionthe issuance of the Certificate, the prescriptive period for reconveyance of fraudulently registered real property.41

It must likewise be stressed that Palanca’s title -- which attained the status of indefeasibility one year from the issuance of the patent and the Certificate of Title in February 1977 -- is no longer open to review on the ground of actual fraud. Ybanez v. Intermediate Appellate Court42 ruled that a certificate of title, issued under an administrative proceeding pursuant to a homestead patent, is as indefeasible as one issued under a judicial registration proceeding one year from its issuance; provided, however, that the land covered by it is disposable public land, as in this case.In Aldovino v. Alunan,43 the Court has held that when the plaintiff’s own complaint shows clearly that the action has prescribed, such action may be dismissed even if the defense of prescription has not been invoked by the defendant. In Gicano v. Gegato,44 we also explained thus:"x x x [T]rial courts have authority and discretion to dismiss an action on the ground of prescription when the parties' pleadings or other facts on record show it to be indeed time-barred; (Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis of a motion to dismiss (Sec. 1,f, Rule 16, Rules of Court), or an answer which sets up such ground as an affirmative defense (Sec. 5, Rule 16), or even if the ground is alleged after judgment on the merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the defense has not been asserted at all, as where no statement thereof is found in the pleadings (Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27 SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has been declared in default (PNB v. Perez, 16 SCRA 270). What is essential only, to repeat, is that the facts demonstrating the lapse of the prescriptive period be otherwise sufficiently and satisfactorily apparent on the record; either in the averments of the plaintiff's complaint, or otherwise established by the evidence."45 (Italics supplied)Clearly then, the CA did not err in dismissing the present case. After all, if and when they are able to do so, courts must endeavor to settle entire controversies before them to prevent future litigations.46 WHEREFORE, the Petition is hereby DENIED, and the assailed Resolution AFFIRMED. The dismissal of the Complaint in Civil Case No. 3231 is SUSTAINED on the grounds of lack of jurisdiction, failure to state a cause of action and prescription. Costs against petitioner. SO ORDERED.

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Case Materials in Remedial Law I ReviewJurisdiction

G.R. No. 151242               June 15, 2005PROTON PILIPINAS CORPORATION, AUTOMOTIVE PHILIPPINES, ASEA ONE CORPORATION and AUTOCORP, Petitioners, vs.BANQUE NATIONALE DE PARIS,1 Respondent.It appears that sometime in 1995, petitioner Proton Pilipinas Corporation (Proton) availed of the credit facilities of herein respondent, Banque Nationale de Paris (BNP). To guarantee the payment of its obligation, its co-petitioners Automotive Corporation Philippines (Automotive), Asea One Corporation (Asea) and Autocorp Group (Autocorp) executed a corporate guarantee2 to the extent of US$2,000,000.00. BNP and Proton subsequently entered into three trust receipt agreements dated June 4, 1996,3 January 14, 1997,4 and April 24, 1997.5Under the terms of the trust receipt agreements, Proton would receive imported passenger motor vehicles and hold them in trust for BNP. Proton would be free to sell the vehicles subject to the condition that it would deliver the proceeds of the sale to BNP, to be applied to its obligations to it. In case the vehicles are not sold, Proton would return them to BNP, together with all the accompanying documents of title.Allegedly, Proton failed to deliver the proceeds of the sale and return the unsold motor vehicles.Pursuant to the corporate guarantee, BNP demanded from Automotive, Asea and Autocorp the payment of the amount of US$1,544,984.406 representing Proton's total outstanding obligations. These guarantors refused to pay, however. Hence, BNP filed on September 7, 1998 before the Makati Regional Trial Court (RTC) a complaint against petitioners praying that they be ordered to pay (1) US$1,544,984.40 plus accrued interest and other related charges thereon subsequent to August 15, 1998 until fully paid and (2) an amount equivalent to 5% of all sums due from petitioners as attorney's fees.The Makati RTC Clerk of Court assessed the docket fees which BNP paid at P352,116.307 which was computed as follows:8

First Cause of Action $ 844,674.07Second Cause of Action 171,120.53

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Case Materials in Remedial Law I ReviewJurisdictionThird Cause of Action 529,189.80

$1,544,984.40 5% as Attorney's Fees $ 77,249.22 TOTAL ………….. $1,622,233.62Conversion rate to peso x 43_TOTAL ………….. P69,756,000.00(roundoff)

Computation based on Rule 141:

COURT JDFP 69,756,000.00 P 69.606.000.00- 150,000.00 x .00369,606,000.00 208,818.00x .002 + 450.00139,212.00 P 209,268.00+ 150.00P 139,362.00LEGAL : P139,362.00

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Case Materials in Remedial Law I ReviewJurisdiction+ 209,268.00

P348,630.00 x 1% = P3,486.30P 139,362.00+ 209,268.003,486.00P 352,116.30 - Total fees paid by the plaintiff

To the complaint, the defendants-herein petitioners filed on October 12, 1998 a Motion to Dismiss9 on the ground that BNP failed to pay the correct docket fees to thus prevent the trial court from acquiring jurisdiction over the case.10 As additional ground, petitioners raised prematurity of the complaint, BNP not having priorly sent any demand letter.11By Order12 of August 3, 1999, Branch 148 of the Makati RTC denied petitioners' Motion to Dismiss, viz:Resolving the first ground relied upon by the defendant, this court believes and so hold that the docket fees were properly paid. It is the Office of the Clerk of Court of this station that computes the correct docket fees, and it is their duty to assess the docket fees correctly, which they did.1avvphi1.zw+Even granting arguendo that the docket fees were not properly paid, the court cannot just dismiss the case. The Court has not yet ordered (and it will not in this case) to pay the correct docket fees, thus the Motion to dismiss is premature, aside from being without any legal basis.As held in the case of National Steel Corporation vs. CA, G.R. No. 123215, February 2, 1999, the Supreme Court said:x x xAlthough the payment of the proper docket fees is a jurisdictional requirement, the trial court may allow the plaintiff in an action to pay the same within a reasonable time within the expiration of applicable prescription or reglementary period. If the plaintiff fails to comply with

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Case Materials in Remedial Law I ReviewJurisdictionthis requirement, the defendant should timely raise the issue of jurisdiction or else he would be considered in estoppel. In the latter case, the balance between appropriate docket fees and the amount actually paid by the plaintiff will be considered a lien or (sic) any award he may obtain in his favor.

As to the second ground relied upon by the defendants, in that a review of all annexes to the complaint of the plaintiff reveals that there is not a single formal demand letter for defendants to fulfill the terms and conditions of the three (3) trust agreements.In this regard, the court cannot sustain the submission of defendant. As correctly pointed out by the plaintiff, failure to make a formal demand for the debtor to pay the plaintiff is not among the legal grounds for the dismissal of the case. Anyway, in the appreciation of the court, this is simply evidentiary.x x xWHEREFORE, for lack of merit, the Motion to Dismiss interposed by the defendants is hereby DENIED.13 (Underscoring supplied)Petitioners filed a motion for reconsideration14 of the denial of their Motion to Dismiss, but it was denied by the trial court by Order15 of October 3, 2000.Petitioners thereupon brought the case on certiorari and mandamus16 to the Court of Appeals which, by Decision17 of July 25, 2001, denied it in this wise:… Section 7(a) of Rule 141 of the Rules of Court excludes interest accruing from the principal amount being claimed in the pleading in the computation of the prescribed filing fees. The complaint was submitted for the computation of the filing fee to the Office of the Clerk of Court of the Regional Trial Court of Makati City which made an assessment that respondent paid accordingly. What the Office of the Clerk of Court did and the ruling of the respondent Judge find support in the decisions of the Supreme Court in Ng Soon vs. Alday and Tacay vs. RTC of Tagum, Davao del Norte. In the latter case, the Supreme Court explicitly ruled that "where the action is purely for recovery of money or damages, the docket fees are assessed on the basis of the aggregate amount claimed, exclusive only of interests and costs."Assuming arguendo that the correct filing fees was not made, the rule is that the court may allow a reasonable time for the payment of the prescribed fees, or the balance thereof, and upon such payment, the defect is cured and the court may properly take cognizance of the action unless in the meantime prescription has set in and consequently barred

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Case Materials in Remedial Law I ReviewJurisdictionthe right of action. Here respondent Judge did not make any finding, and rightly so, that the filing fee paid by private respondent was insufficient.

On the issue of the correct dollar-peso rate of exchange, the Office of the Clerk of Court of the RTC of Makati pegged it at P 43.21 to US$1. In the absence of any office guide of the rate of exchange which said court functionary was duty bound to follow, the rate he applied is presumptively correct.Respondent Judge correctly ruled that the matter of demand letter is evidentiary and does not form part of the required allegations in a complaint. Section 1, Rule 8 of the 1997 Rules of Civil Procedure pertinently provides:"Every pleading shall contain in a methodical and logical form, a plain, concise and direct statement of the ultimate facts on which the party pleading relies for his claim or defense, as the case may be, omitted the statement of mere evidentiary facts."Judging from the allegations of the complaint particularly paragraphs 6, 12, 18, and 23 where allegations of imputed demands were made upon the defendants to fulfill their respective obligations, annexing the demand letters for the purpose of putting up a sufficient cause of action is not required.In fine, respondent Judge committed no grave abuse of discretion amounting to lack or excess of jurisdiction to warrant certiorari and mandamus.18 (Underscoring supplied)Their Motion for Reconsideration19 having been denied by the Court of Appeals,20 petitioners filed the present petition for review on certiorari21 and pray for the following reliefs:WHEREFORE, in view of all the foregoing, it is most respectfully prayed of this Honorable Court to grant the instant petition by REVERSING and SETTING ASIDE the questioned Decision of July 25, 2001 and the Resolution of December 18, 2001 for being contrary to law, to Administrative Circular No. 11-94 and Circular No. 7 and instead direct the court a quo to require Private Respondent Banque to pay the correct docket fee pursuant to the correct exchange rate of the dollar to the peso on September 7, 1998 and to quantify its claims for interests on the principal obligations in the first, second and third causes of actions in its Complaint in Civil Case No. 98-2180.22 (Underscoring supplied)Citing Administrative Circular No. 11-94,23 petitioners argue that BNP failed to pay the correct docket fees as the said circular provides that in the assessment thereof, interest claimed should be included. There being an underpayment of the docket fees, petitioners conclude, the trial court did not acquire jurisdiction over the case.

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Case Materials in Remedial Law I ReviewJurisdictionAdditionally, petitioners point out that the clerk of court, in converting BNP's claims from US dollars to Philippine pesos, applied the wrong exchange rate of US $1 = P43.00, the exchange rate on September 7, 1998 when the complaint was filed having been pegged at US $1 = P43.21. Thus, by petitioners' computation, BNP's claim as of August 15, 1998 was actually P70,096,714.72,24 not P69,756,045.66.

Furthermore, petitioners submit that pursuant to Supreme Court Circular No. 7,25 the complaint should have been dismissed for failure to specify the amount of interest in the prayer.Circular No. 7 reads:TO: JUDGES AND CLERKS OF COURT OF THE COURT OF TAX APPEALS, REGIONAL TRIAL COURTS, METROPOLITAN TRIAL COURTS IN CITIES, MUNICIPAL TRIAL COURTS, MUNICIPAL CIRCUIT TRIAL COURTS, SHARI'A DISTRICT COURTS;AND THE INTEGRATED BAR OF THE PHILIPPINESSUBJECT: ALL COMPLAINTS MUST SPECIFY AMOUNT OF DAMAGES SOUGHT NOT ONLY IN THE BODY OF THE PLEADING, BUT ALSO IN THE PRAYER IN ORDER TO BE ACCEPTED AND ADMITTED FOR FILING. THE AMOUNT OF DAMAGES SO SPECIFIED IN THE COMPLAINT SHALL BE THE BASIS FOR ASSESSING THE AMOUNT OF THE FILING FEES.In Manchester Development Corporation vs. Court of Appeals, No. L-75919, May 7, 1987, 149 SCRA 562, this Court condemned the practice of counsel who in filing the original complaint omitted from the prayer any specification of the amount of damages although the amount of over P78 million is alleged in the body of the complaint. This Court observed that "(T)his is clearly intended for no other purpose than to evade the payment of the correct filing fees if not to mislead the docket clerk, in the assessment of the filing fee. This fraudulent practice was compounded when, even as this Court had taken cognizance of the anomaly and ordered an investigation, petitioner through another counsel filed an amended complaint, deleting all mention of the amount of damages being asked for in the body of the complaint. xxx"For the guidance of all concerned, the WARNING given by the court in the afore-cited case is reproduced hereunder:"The Court serves warning that it will take drastic action upon a repetition of this unethical practice.To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar pleadings should specify the amount of damages being prayed for not only in the body of the pleading but also in the prayer, and said damages shall be considered in the assessment of

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Case Materials in Remedial Law I ReviewJurisdictionthe filing fees in any case. Any pleading that fails to comply with this requirement shall not be accepted nor admitted, or shall otherwise be expunged from the record.

The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An amendment of the complaint or similar pleading will not thereby vest jurisdiction in the Court, much less the payment of the docket fee based on the amount sought in the amended pleading. The ruling in the Magaspi case (115 SCRA 193) in so far as it is inconsistent with this pronouncement is overturned and reversed."Strict compliance with this Circular is hereby enjoined.Let this be circularized to all the courts hereinabove named and to the President and Board of Governors of the Integrated Bar of the Philippines, which is hereby directed to disseminate this Circular to all its members.March 24, 1988.(Sgd). CLAUDIO TEEHANKEEChief Justice(Emphasis and underscoring supplied)On the other hand, respondent maintains that it had paid the filing fee which was assessed by the clerk of court, and that there was no violation of Supreme Court Circular No. 7 because the amount of damages was clearly specified in the prayer, to wit:2. On the FIRST CAUSE OF ACTION -(c) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS EIGHT HUNDRED FORTY FOUR THOUSAND SIX HUNDRED SEVENTY FOUR AND SEVEN CENTS (US$ 844,674.07), plus accrued interests and other related charges thereon subsequent to August 15, 1998, until fully paid; and (ii) an amount equivalent to 5% of all sums due from said Defendant, as and for attorney's fees;3. On the SECOND CAUSE OF ACTION -(d) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS ONE HUNDRED TWENTY AND FIFTY THREE CENTS (US$171,120.53), plus accrued interests and other related charges thereon subsequent to August 15, 1998 until fully paid; and (ii) an amount equivalent to 5% of all sums due from said Defendant, as and for attorney's fees;4. On the THIRD CAUSE OF ACTION -

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Case Materials in Remedial Law I ReviewJurisdiction(e) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS FIVE HUNDRED TWENTY NINE THOUSAND ONE HUNDRED EIGHTY NINE AND EIGHTY CENTS (US$529,189.80), plus accrued interests and other related charges thereon subsequent to August 15, 1998 until fully paid; and (ii) an amount equivalent to 5% or all sums due from said Defendant, as and for attorney's fees;

5. On ALL THE CAUSES OF ACTION -Defendants AUTOMOTIVE CORPORATION PHILIPPINES, ASEA ONE CORPORATION and AUTOCORP GROUP to be ordered to pay Plaintiff BNP the aggregate sum of (i) US DOLLARS ONE MILLION FIVE HUNDRED FORTY FOUR THOUSAND NINE HUNDRED EIGHTY FOUR AND FORTY CENTS (US$1,544,984.40) (First through Third Causes of Action), plus accrued interest and other related charges thereon subsequent to August 15, 1998 until fully paid; and (ii) an amount equivalent to 5% of all sums due from said Defendants, as and for attorney's fees.26Moreover, respondent posits that the amount of US$1,544,984.40 represents not only the principal but also interest and other related charges which had accrued as of August 15, 1998. Respondent goes even further by suggesting that in light of Tacay v. Regional Trial Court of Tagum, Davao del Norte27 where the Supreme Court held,Where the action is purely for the recovery of money or damages, the docket fees are assessed on the basis of the aggregate amount claimed, exclusive only of interests and costs.28 (Emphasis and underscoring supplied),it made an overpayment.When Tacay was decided in 1989, the pertinent rule applicable was Section 5 (a) of Rule 141 which provided for the following:SEC. 5. Clerks of Regional Trial Courts. - (a) For filing an action or proceeding, or a permissive counter-claim or cross-claim not arising out of the same transaction subject of the complaint, a third-party complaint and a complaint in intervention and for all services in the same, if the sum claimed, exclusive of interest, of the value of the property in litigation, or the value of the estate, is:

1. Less than P 5,000.00 ….……………………………… P 32.002. P 5,000.00 or more but less than P 10,000.00 ………… 48.00

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Case Materials in Remedial Law I ReviewJurisdiction

3. P 10,000.00 or more but less than P 20,000.00 ……….. 64.004. P 20,000.00 or more but less than P 40,000.00 ……….. 80.005. P 40,000.00 or more but less than P 60,000.00 ……….. 120.006. P 60,000.00 or more but less than P 80,000.00 ………. 160.007. P 80,000.00 or more but less than P 150,000.00 ……… 200.008. And for each P 1,000.00 in excess of P 150,000.00 ..... 4.009. When the value of the case cannot be estimated ……… 400.0010. When the case does not concern property (naturalization, adoption, legal separation, etc.) ..……... 64.0011. In forcible entry and illegal detainer cases appealed from inferior courts …………………………………. 40.00

If the case concerns real estate, the assessed value thereof shall be considered in computing the fees.In case the value of the property or estate or the sum claim is less or more in accordance with the appraisal of the court, the difference of fees shall be refunded or paid as the case may be.When the complaint in this case was filed in 1998, however, as correctly pointed out by petitioners, Rule 141 had been amended by Administrative Circular No. 11-9429 which provides:BY RESOLUTION OF THE COURT, DATED JUNE 28, 1994, PURSUANT TO SECTION 5 (5) OF ARTICLE VIII OF THE CONSTITUTION, RULE 141, SECTION 7 (a) AND (d), and SECTION 8 (a) and (b) OF THE RULES OF COURT ARE HEREBY AMENDED TO READ AS FOLLOWS:

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Case Materials in Remedial Law I ReviewJurisdictionRULE 141

LEGAL FEESx x xSec. 7. Clerks of Regional Trial Courts(a) For filing an action or a permissive counterclaim or money claim against an estate not based on judgment, or for filing with leave of court a third-party, fourth-party, etc. complaint, or a complaint in intervention, and for all clerical services in the same, if the total sum claimed, inclusive of interest, damages of whatever kind, attorney's fees, litigation expenses, and costs, or the stated value of the property in litigation, is:

1. Not more than P 100,000.00 …………………………… P 400.002. P 100,000.00, or more but not more than P 150,000.00 … 600.003. For each P 1,000.00 in excess of P 150,000.00 …………. 5.00

x x xSec. 8. Clerks of Metropolitan and Municipal Trial Courts(a) For each civil action or proceeding, where the value of the subject matter involved, or the amount of the demand, inclusive of interest, damages or whatever kind, attorney's fees, litigation expenses, and costs, is:

1. Not more than P 20,000.00 …………………………… ... P 120.002. More than P 20,000.00 but not more than P 100,000.00 …. 400.003. More than P 100,000.00 but not more than P 200,000.00 … 850.00

(Emphasis and underscoring supplied)The clerk of court should thus have assessed the filing fee by taking into consideration "the total sum claimed, inclusive of interest, damages of whatever kind, attorney's fees, litigation expenses, and costs, or the

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Case Materials in Remedial Law I ReviewJurisdictionstated value of the property in litigation." Respondent's and the Court of Appeals' reliance then on Tacay was not in order.

Neither was, for the same reason, the Court of Appeals' reliance on the 1989 case of Ng Soon v. Alday,30 where this Court held:…The failure to state the rate of interest demanded was not fatal not only because it is the Courts which ultimately fix the same, but also because Rule 141, Section 5(a) of the Rules of Court, itemizing the filing fees, speaks of "the sum claimed, exclusive of interest." This clearly implies that the specification of the interest rate is not that indispensable.Factually, therefore, not everything was left to "guesswork" as respondent Judge has opined. The sums claimed were ascertainable, sufficient enough to allow a computation pursuant to Rule 141, section 5(a).Furthermore, contrary to the position taken by respondent Judge, the amounts claimed need not be initially stated with mathematical precision. The same Rule 141, section 5(a) (3rd paragraph), allows an appraisal "more or less . "31 Thus:"In case the value of the property or estate or the sum claimed is less or more in accordance with the appraisal of the court, the difference of fee shall be refunded or paid as the case may be."In other words, a final determination is still to be made by the Court, and the fees ultimately found to be payable will either be additionally paid by the party concerned or refunded to him, as the case may be. The above provision clearly allows an initial payment of the filing fees corresponding to the estimated amount of the claim subject to adjustment as to what later may be proved.". . . there is merit in petitioner's claim that the third paragraph of Rule 141, Section 5(a) clearly contemplates a situation where an amount is alleged or claimed in the complaint but is less or more than what is later proved. If what is proved is less than what was claimed, then a refund will be made; if more, additional fees will be exacted. Otherwise stated, what is subject to adjustment is the difference in the fee and not the whole amount" (Pilipinas Shell Petroleum Corp., et als., vs. Court of Appeals, et als., G.R. No. 76119, April 10, 1989).32 (Emphasis and underscoring supplied)Respecting the Court of Appeals' conclusion that the clerk of court did not err when he applied the exchange rate of US $1 = P43.00 "[i]n the absence of any office guide of the rate of exchange which said court functionary was duty bound to follow,[hence,] the rate he applied is presumptively correct," the same does not lie. The presumption of regularity of the clerk of court's application of the exchange rate is not

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Case Materials in Remedial Law I ReviewJurisdictionconclusive.33 It is disputable.34 As such, the presumption may be overturned by the requisite rebutting evidence.35 In the case at bar, petitioners have adequately proven with documentary evidence36 that the exchange rate when the complaint was filed on September 7, 1998 was US $1 = P43.21.

In fine, the docket fees paid by respondent were insufficient.With respect to petitioner's argument that the trial court did not acquire jurisdiction over the case in light of the insufficient docket fees, the same does not lie.True, in Manchester Development Corporation v. Court of Appeals,37 this Court held that the court acquires jurisdiction over any case only upon the payment of the prescribed docket fees,38 hence, it concluded that the trial court did not acquire jurisdiction over the case.It bears emphasis, however, that the ruling in Manchester was clarified in Sun Insurance Office, Ltd. (SIOL) v. Asuncion39 when this Court held that in the former there was clearly an effort to defraud the government in avoiding to pay the correct docket fees, whereas in the latter the plaintiff demonstrated his willingness to abide by paying the additional fees as required.The principle in Manchester could very well be applied in the present case. The pattern and the intent to defraud the government of the docket fee due it is obvious not only in the filing of the original complaint but also in the filing of the second amended complaint.However, in Manchester, petitioner did not pay any additional docket fee until the case was decided by this Court on May 7, 1987. Thus, in Manchester, due to the fraud committed on the government, this Court held that the court a quo did not acquire jurisdiction over the case and that the amended complaint could not have been admitted inasmuch as the original complaint was null and void.In the present case, a more liberal interpretation of the rules is called for considering that, unlike Manchester, private respondent demonstrated his willingness to abide by the rules by paying the additional docket fees as required. The promulgation of the decision in Manchester must have had that sobering influence on private respondent who thus paid the additional docket fee as ordered by the respondent court. It triggered his change of stance by manifesting his willingness to pay such additional docket fee as may be ordered.Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering the total amount of the claim. This is a matter which the clerk of court of the lower court and/or his duly authorized docket clerk or clerk in charge should determine and, thereafter, if any

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Case Materials in Remedial Law I ReviewJurisdictionamount is found due, he must require the private respondent to pay the same.

Thus, the Court rules as follows:1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject-matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period.2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period.3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the same has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee.40 (Emphasis and underscoring supplied)The ruling in Sun Insurance Office was echoed in the 2005 case of Heirs of Bertuldo Hinog v. Hon. Achilles Melicor:41Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its non-payment at the time of filing does not automatically cause the dismissal of the case, as long as the fee is paid within the applicable prescriptive or reglementary period, more so when the party involved demonstrates a willingness to abide by the rules prescribing such payment. Thus, when insufficient filing fees were initially paid by the plaintiffs and there was no intention to defraud the government, the Manchester rule does not apply . (Emphasis and underscoring supplied; citations omitted)In the case at bar, respondent merely relied on the assessment made by the clerk of court which turned out to be incorrect. Under the circumstances, the clerk of court has the responsibility of reassessing what respondent must pay within the prescriptive period, failing which the complaint merits dismissal.Parenthetically, in the complaint, respondent prayed for "accrued interest… subsequent to August 15, 1998 until fully paid." The complaint

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Case Materials in Remedial Law I ReviewJurisdictionhaving been filed on September 7, 1998, respondent's claim includes the interest from August 16, 1998 until such date of filing.

Respondent did not, however, pay the filing fee corresponding to its claim for interest from August 16, 1998 until the filing of the complaint on September 7, 1998. As priorly discussed, this is required under Rule 141, as amended by Administrative Circular No. 11-94, which was the rule applicable at the time. Thus, as the complaint currently stands, respondent cannot claim the interest from August 16, 1998 until September 7, 1998, unless respondent is allowed by motion to amend its complaint within a reasonable time and specify the precise amount of interest petitioners owe from August 16, 1998 to September 7, 199842and pay the corresponding docket fee therefor.With respect to the interest accruing after the filing of the complaint, the same can only be determined after a final judgment has been handed down. Respondent cannot thus be made to pay the corresponding docket fee therefor. Pursuant, however, to Section 2, Rule 141, as amended by Administrative Circular No. 11-94, respondent should be made to pay additional fees which shall constitute a lien in the event the trial court adjudges that it is entitled to interest accruing after the filing of the complaint.Sec. 2. Fees as lien. - Where the court in its final judgment awards a claim not alleged, or a relief different or more than that claimed in the pleading, the party concerned shall pay the additional fees which shall constitute a lien on the judgment in satisfaction of said lien. The clerk of court shall assess and collect the corresponding fees.In Ayala Corporation v. Madayag,43 in interpreting the third rule laid down in Sun Insurance regarding awards of claims not specified in the pleading, this Court held that the same refers only to damages arising after the filing of the complaint or similar pleading as to which the additional filing fee therefor shall constitute a lien on the judgment.… The amount of any claim for damages, therefore, arising on or before the filing of the complaint or any pleading should be specified. While it is true that the determination of certain damages as exemplary or corrective damages is left to the sound discretion of the court, it is the duty of the parties claiming such damages to specify the amount sought on the basis of which the court may make a proper determination, and for the proper assessment of the appropriate docket fees. The exception contemplated as to claims not specified or to claims although specified are left for determination of the court is limited only to any damages that may arise after the filing of the complaint or similar pleading for then it will not be possible for the claimant to specify nor speculate as to the amount thereof.44 (Emphasis and underscoring supplied; citation omitted)1avvphi1.zw+

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Case Materials in Remedial Law I ReviewJurisdictionWHEREFORE, the petition is GRANTED in part. The July 25, 2001 Decision and the December 18, 2001 Resolution of the Court Appeals are hereby MODIFIED. The Clerk of Court of the Regional Trial Court of Makati City is ordered to reassess and determine the docket fees that should be paid by respondent, BNP, in accordance with the Decision of this Court, and direct respondent to pay the same within fifteen (15) days, provided the applicable prescriptive or reglementary period has not yet expired. Thereafter, the trial court is ordered to proceed with the case with utmost dispatch.

SO ORDERED.A.M. No. MTJ-02-1391             June 7, 2004(Formerly A.M. OCA IPI No. 00-936-MTJ)RODOLFO RAMA RIÑO, complainant, vs.JUDGE ALFONSO R. CAWALING, MUNICIPAL CIRCUIT TRIAL COURT, CAJIDIOCAN, ROMBLON, respondent.The instant administrative complaint arose when Rodolfo Rama Riño, in a verified Letter-Complaint dated September 5, 2000, charged Judge Alfonso R. Cawaling of the Municipal Circuit Trial Court, Cajidiocan, Romblon, with bias and partiality, abuse of authority and gross ignorance of the law relative to Criminal Case No. 4511 entitled "People of the Philippines v. Rodolfo Rama Riño," for grave threats.1The complainant alleged that he was the accused in the said case, and that the respondent judge conducted a preliminary investigation2 on October 27, 1999 without due notice to him. According to the complainant, the respondent, prematurely and with undue haste, issued a warrant3 for his arrest on October 28, 1999, considering that there was no necessity in placing him (the complainant) in police custody. In his comment,4 the respondent alleged that contrary to the allegations of the complainant, the subpoena was served on him at his given address and that of his witnesses, pursuant to Section 3, Rule 112 of the Revised Rules of Criminal Procedure. Thereafter, he submitted his counter-affidavit, and the case was set for preliminary investigation in the afternoon of October 27, 1999. After the preliminary investigation, a warrant for the arrest of the complainant was issued, and the latter forthwith posted his bail bond and was released. The respondent also narrated that on the scheduled arraignment of the complainant on August 16, 2000, the complainant was present and was assisted by counsel, Atty. Cecilio R. Dianco, who moved for the deferment of the arraignment and pre-trial of the case, and asked for his inhibition on the ground that an administrative case had already been filed against the respondent before the Court. The respondent alleged that out of

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Case Materials in Remedial Law I ReviewJurisdictiondelicadeza, he inhibited himself, and that the order of inhibition was thereafter approved by Judge Placido C. Marquez. The respondent also averred that Criminal Case No. 4511 was not covered by the Rules on Summary Procedure, the imposable penalty being higher than six months. As such, he had no alternative but to issue the warrant of arrest against the complainant.

In its Report5 dated November 14, 2001, the Court Administrator recommended that the instant administrative complaint be re-docketed as an administrative matter and that the respondent judge be penalized to pay a fine of P10,000 for gross ignorance of the law, considering that the offense charged in Criminal Case No. 4511 is covered by the Rules on Summary Procedure.6 The case was then referred to Judge Vedasto B. Marco, Executive Judge, Regional Trial Court, Romblon, for investigation, report and recommendation.7 In his Report and Recommendation dated January 15, 2004, the Executive Judge made the following findings:From the foregoing, and the evidence submitted specifically the records of Criminal Case No. 4511, it appear (sic) that respondent judge did not violate the Rules of Procedure when he conducted the preliminary investigation of the case against Rodolfo Riño nor did he show biased (sic) and partiality against the latter. The complainant was afforded all the rights to preliminary investigation and the warrant was issued more than a year after it was in Court.8 It was recommended that the respondent be absolved of any liability.We do not agree.Under the Revised Penal Code, grave threats is penalized with imprisonment of one (1) month and one (1) day to six (6) months (arresto mayor) and a fine not exceeding P500.00, if the threat is not subject to a condition.9 Thus, the subject criminal cases should have been tried under the Revised Rules on Summary Procedure, considering that such rules are applicable to criminal cases where the penalty prescribed by law for the offense charged is imprisonment not exceeding six (6) months or a fine not exceeding P1,000.00 or both, irrespective of other imposable penalties, accessory or otherwise or of the civil liability arising therefrom.10 The respondent applied the regular procedure; he issued a warrant of arrest against the complainant after making a preliminary examination of the affidavit against the latter. Hence, the complainant was constrained to post bail, which was no longer necessary considering that the charge against him was simply grave threats. Section 2 of the Revised Rules on Summary Procedure provides that "upon the filing of a civil or criminal action, the court shall issue an order

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Case Materials in Remedial Law I ReviewJurisdictiondeclaring whether or not the case shall be governed by (the) Rule." The said provision further states that "patently erroneous determination to avoid the application of the (Rules on Summary Procedure) is a ground for disciplinary action." As we held in Agunday v. Tresvalles,11

… (The) provision cannot be read as applicable only where the failure to apply the rule is deliberate or malicious. Otherwise, the policy of the law to provide for the expeditious and summary disposition of cases covered by it could be easily frustrated. Hence, requiring judges to make the determination of the applicability of the rule on summary procedure upon the filing of the case is the only guaranty that the policy of the law will be fully realized. …12It is clear then that the respondent judge ought to be sanctioned for his failure to apply the proper procedure. A judge should be the epitome of competence, integrity and independence to be able to render justice and uphold public confidence in the legal system.13 He must be conversant with basic legal principles and well-settled doctrines. He should strive for excellence and seek the truth with passion.14 The respondent failed in this regard and, by his actuations, exhibited gross ignorance of the law. WHEREFORE, for gross ignorance of the law, respondent Judge Alfonso R. Cawaling of the Municipal Circuit Trial Court, Cajidiocan, Romblon, is FINED Five Thousand Pesos (P5,000.00), and is STERNLY WARNED that a repetition of the same or similar act shall be dealt with more severely.SO ORDERED.

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i Under Rule 45, Revised Rules of Court.ii In CA-G. R. CV No. 54413, promulgated on March 26, 1999, Petition, Annex “A”, Rollo, pp. 25-30. Oswaldo D. Agcaoili, J., ponente, Corona Ibay-Somera and Eloy R. Bello, Jr., JJ., concurring.iii In Civil Case No. 94-19833, dated May 14, 1996, Petition, Annex “H”, Rollo, pp. 63-64. Judge Demetrio B. Macapagal, Sr., presiding.iv Dated July 29, 1999, Petition, Annex “B”, Rollo, p. 31.v Motion for Reconsideration, CA Rollo, pp. 134-139.vi With editorial changes.vii Petition, Annex “C”, Rollo, pp. 32-41.viii Petition, Annex “A”, Rollo, pp. 25-30.ix CA Rollo, pp. 134-139.x Petition, Annex “B”, Rollo, p. 31.xi Filed on September 24, 1999. Rollo, pp. 8-21. On January 17, 2000, we resolved to give due course to the petition (Rollo, pp. 94-95).xii Uy v. Evangelista, G. R. No. 140365, July 11, 2001, citing Parañaque Kings Enterprises, Inc. v. Court of Appeals, 268 SCRA 727 (1997).xiii Uy v. Evangelista, G. R. No. 140365, July 11, 2001, citing San Lorenzo Village Association, Inc. v. Court of Appeals, 288 SCRA 115 (1998).xiv Petition, Annex “C”, Rollo, pp. 32-41.xv Fil-Estate Golf and Development, Inc. v. Court of Appeals, 333 Phil. 465, 490-491 (1996).xvi Saura v. Saura, Jr., 313 SCRA 465, 472 (1999).xvii Torres v. Court of Appeals, 363 Phil. 539, 547 (1999), citing Ganadin v. Ramos, 99 SCRA, 613, 621-622 (1980).xviii National Steel Corporation v. Court of Appeals, 362 Phil. 150, 160 (1999), citing Martinez v. De la Merced, 174 SCRA 182 (1989).xix Peña, Narciso, et al., Registration of Land Titles and Deeds (1994 Revised Edition), p. 439, citing Aguilar v. Chiu, 195 Phil. 613 (1981).xx In CA-G. R. CV No. 54413.xxi In Civil Case No. 94-19833.