Republic of the PhilippinesSUPREME COURTManila

THIRD DIVISION

G.R. No. 141180            January 11, 2005

GERTRUDES TEH, petitioner, vs.THE PEOPLE of the PHILIPPINES, respondent.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us is the petition for review on certiorari filed by Gertrudes Teh assailing the Resolution1 of the Court of Appeals dated October 4, 1999 in CA-G.R. CR No. 23482 dismissing her petition for review and its Resolution dated November 29, 1999 denying her motion for reconsideration.

The factual backdrop of this case is as follows:

Petitioner Gertrudes Teh and Josalie Baguio were charged with estafa before the Municipal Trial Courts in Cities (MTCC), Branch 2, Davao City. The Information, docketed as Criminal Case No. 45,542-B-96, reads:

"That on or about December 18, 1995, in the City of Davao, Philippines, and within the jurisdiction of this Honorable Court, above-mentioned accused received on consignment basis from Rodson’s Collection Center, represented by Elizabeth E. Maridable, goods worth P1,583.00 with the express obligation on her part to sell the consigned items and to remit the proceeds from the sale or to return the same if unsold to said complainant; but far from complying with the aforesaid obligation, with grave abuse of confidence and in violation of trust and with intent to defraud, the said accused willfully and unlawfully failed to remit the proceeds from the sale nor to return the same items despite demands therefore, thereby misappropriating and converting the same to her personal use and benefit, to the damage and prejudice of herein complainant in the said amount.

CONTRARY TO LAW."

Upon arraignment, petitioner, assisted by counsel, pleaded not guilty to the charge. Josalie Baguio has remained at large.1a\^/phi1.net

The evidence for the prosecution show that petitioner was formerly an area manager of Rodson’s Collection Center which sells various personal products, such as ladies’ T-shirts and perfumes, men’s cologne, care soap and shading strip. Under her were several dealers, one of whom was Josalie Baguio. Based on a "ride on" system, the area manager was allowed in certain instances to withdraw stocks for sale in the name of the dealer, provided that both would sign a trust receipt agreement. The trust receipt agreement provides that they should remit the proceeds of the goods sold within a specified time. If not sold, then they should return the unsold items to Rodson’s Collection Center.

On December 18, 1995, petitioner and Josalie Baguio withdrew from the Rodson’s Collection Center several items consisting of men’s cologne, soap, and other sundries worth P1,583.00. Both signed the required trust receipt agreement.

However, petitioner and Josalie failed to remit the proceeds of the sale despite Rodson’s Collection Center’s several demands, hence, they were charged with estafa.

Petitioner contends that while she signed the trust receipt agreement, however, she did so only for the purpose of identifying her as the area manager of Josalie Baguio. She denied receiving any item. The stocks withdrawn were for the account of Josalie.

On February 15, 1999, the MTCC rendered its Decision, the dispositive portion of which reads:

"WHEREFORE, finding accused GERTRUDES TEH guilty beyond reasonable doubt, she is hereby sentenced to an imprisonment of THREE (3) MONTHS of arresto mayor as minimum to TWO (2) YEARS and FOUR (4) MONTHS of prision correccional as maximum; to indemnify the offended party the sum of ONE THOUSAND FIVE HUNDRED EIGHTY THREE PESOS (P1,583.00) and to pay the proportionate share of the costs.

Accused is further ordered to indemnify the offended party expenses incurred in enforcing her claim from the time the case was filed in 1996 to its final termination in 1999, which the Court hereby fixed as reasonable in the amount of One Thousand Pesos (P1,000.00).

As regards accused JOSALIE S. BAGUIO who remains at-large, let the case be sent to the ARCHIVES to be withdrawn therefrom as soon as she is apprehended.1awphi1.nét

SO ORDERED."2

In finding petitioner guilty as charged, the MTCC ruled that inasmuch as she signed the trust receipt agreement, she is bound by the terms stipulated therein. Her failure to remit the proceeds or to return the goods to Rodson’s Collection Center constitutes estafa under Article 315(1) of the Revised Penal Code.

On appeal, the Regional Trial Court (RTC), Branch 10, Davao City, affirmed the MTCC Decision.

Petitioner then elevated the matter to the Court of Appeals by way of a petition for review.

However, the Court of Appeals dismissed the petition for being insufficient in form, not being accompanied by duplicate original or certified true copies of the documents and material parts of the record that would support the allegations. Moreover, there was no written explanation why service of the petition was not done personally.

Petitioner filed a motion for reconsideration but was denied by the Appellate Court.

Hence, the instant petition. Petitioner submits that the Court of Appeals erred in holding that she failed to comply with Section 2, Rule 42 and Section 11, Rule 13 of the 1997 Rules of Civil Procedure, as amended.

In his comment on the petition, the Solicitor General maintains that the Court of Appeals did not err in dismissing the petition in CA-G.R. CR No. 23482.

Section 2, Rule 42 of the same Rules provides:

"SEC. 2. Form and contents. – The petition shall be filed in seven (7) legible copies, with the original copy intended for the court being indicated as such by the petitioner, and shall (a) state the full names of the parties to the case, without impleading the lower courts or judges thereof either as petitioners or respondents; (b) indicate the specific material dates showing that it was filed on time; (c) set forth concisely a statement of the matters involved, the issues raised, the specification of errors of fact or law, or both, allegedly committed by the Regional Trial Court, and the reasons or arguments relied upon for the allowance of the appeal; (d) be accompanied by clearly legible duplicate originals or true copies of the judgments or final orders of both lower courts, certified correct by the clerk of court of the Regional Trial Court, the requisite number of plain copies thereof and of the pleadings and other material portions of the record as would support the allegations of the petition.

x x x"

We note that petitioner herself admits that the only documents attached to the petition in CA-G.R. CR No. 23482 were certified true copies of the Decisions of the RTC and the MTCC. There were no copies of the pleadings filed below or other material portions of the record which would support the allegations in the petition. Indeed, this is contrary to Section 2, Rule 42 quoted above.

Section 11, Rule 13 of the 1997 Rules of Civil Procedure reads:

"SEC. 11. Priorities in modes of service and filing. – Whenever practicable, the service and filing of pleadings and other papers shall be done personally. Except with respect to papers emanating from the court, a resort to other modes must be accompanied by a written explanation why the service or filing was not done personally. A violation of this Rule may be cause to consider the paper as not filed."

Again, petitioner admits that she failed to comply with the above provision. She contends, however, that no prejudice was caused to the parties by her non-compliance.

Clearly, petitioner violated both provisions quoted above which warrants the dismissal of her petition by the Court of Appeals.1awphi1.nét

We thus rule that in dismissing the petition in CA-G.R. CR No. 23482, the Court of Appeals did not commit any error.

WHEREFORE, the petition is DENIED. The Resolutions of the Court of Appeals dated October 4, 1999 and November 29, 1999 in CA-G.R. CR No. 23482 are AFFIRMED. Costs against petitioner.

SO ORDERED.

Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.

Footnotes

1 Rollo, pp. 36-38. Per Associate Justice Remedios Salazar-Fernando and concurred in by Associate Justices Buenaventura Guerrero (retired) and Portia Aliño-Hormachuelos.

2 Id. at 54-55.

SECOND DIVISION

 JUAN DE DIOS CARLOS,

 Petitioner,    

        - versus -    THE HONORABLE COURT OF APPEALS and SPOUSES PEDRO R. BALBANERO and JOVITA AMITHS BALBANERO,

Respondents.

     G.R. No. 134473      Present:        PUNO, J., Chairperson,          SANDOVAL-GUTIERREZ,     CORONA,     AZCUNA, and     GARCIA, JJ.      Promulgated:       March 30, 2006 

 x------------------------------------------------------------------------------------x   

D E C I S I O N  

GARCIA, J.:                        

 

 

 

        By this petition for certiorari and mandamus under Rule 65 of the Rules of Court, petitioner Juan De

Dios Carlos assails and seeks the setting aside of the May 20, 1998 Resolution [1] of the Court of Appeals

(CA) in CA- G.R. CV No. 57625 which denied his motion to dismiss private respondents’ appeal from an

earlier decision of the Regional Trial Court (RTC) of Muntinlupa City, Branch 256, in Civil Case No. 94-1964.

The mandamus aspect of the petition prays the Court to compel the CA to dismiss said appeal.

 

        The facts:

 

        Civil Case No. 94-1964, entitled Juan de Dios Carlos v. Felicidad S. Vda. de Carlos, et al.,  is an action

for partition, recovery of property, reconveyance with damages. Petitioner is the plaintiff in that case while

the herein private respondents are two of the defendants therein. The case was earlier concluded between

the petitioner and the other defendants. However, a full-blown trial transpired as between the petitioner

and the herein private respondents.

 

        Involved in that case  is  a  parcel of land located at Alabang, Muntinlupa City, covered by Transfer

Certificate of Title (TCT) No. 139061 in the name of petitioner’s deceased brother Teofilo Carlos. It

was previously registered in the name of petitioner’s father, Felix Carlos. 

        Prior to Felix’s death, Teofilo, a lawyer, advised his father to transfer all his properties to one of the

children in order to avoid payment of inheritance taxes and other expenses. Felix agreed, provided that

the rights of all the other heirs will be respected and their shares duly delivered to them. The subject

property was among those transferred to Teofilo.

 

        Before the intended property partition could be effected,  however, Teofilo died, survived by his

spouse, Felicidad Carlos. Sometime in the early part of 1994, the petitioner demanded the division of the

subject property and asked Felicidad for reimbursement of the expenses he advanced for Teofilo’s

hospitalization and burial.  The request irked Felicidad who told the petitioner that the property no longer

pertained to the Carlos family, the same having already been lost in a court case with the herein

respondent spouses Pedro Balbanero and Jovita Amiths-Balbanero. This prompted the petitioner to file the

partition case, Civil Case No. 94-1964,  against Felicidad.

 

        Petitioner would, upon inquiry, later discover about a sales agreement over the subject property

which his brother Teofilo, during his lifetime, entered into with the private respondent spouses. This

agreement, as it turned out, was the subject of a litigation which culminated in the CA ordering Teofilo to

comply with the terms thereof  by executing in favor of the private respondent spouses a deed of absolute

sale for the entire property upon payment of the agreed purchase price.

 

        Subsequent events saw the petitioner  asking the  private respondents  to exclude his  one-half

(1/2)  share  in the  property from the sales transaction. Upon being rebuffed, the petitioner proceeded to

implead the private respondents in the partition case.

 

        After due proceedings, the trial court, in a decision[2] dated November 28, 1997, upheld the hereditary

nature of the subject property and declared that the registration of the title in the name of Teofilo Carlos

established an implied trust in favor of the other compulsory heirs, such as the petitioner, with respect to

their respective shares in the estate of the decedent Felix Carlos. Dispositively, the decision reads:

             WHEREFORE, judgment is hereby rendered in favor of the plaintiff [now petitioner] and against defendants [now respondents] spouses Balbanero as follows: 

1.         Declaring and confirming the ownership by plaintiff of an undivided one-half (1/2) share of the net area, after deducting the 2,331 square meters adjudicated to the plaintiffs in Civil Case No. 11975 of the property covered by [TCT] No. 139061 of the Register of Deeds of Makati City.

 2.         Ordering the exclusion of the said plaintiff’s one-half (1/2) undivided share

from any deed of absolute sale should one be ordered executed in favor of defendants spouses Balbanero in Civil Case No. 18358 entitled “Pedro Balbanero, et al. v. Teofilo Carlos, et al.,” before Branch 60, Regional Trial Court of Makati City;

 3.         Declaring that the other half of the said property covered by TCT No. 139061,

which pertained to Teofilo Carlos, is subject to plaintiff’s right of pre-emption or redemption;

 4.         Ordering defendants spouses Balbanero to pay plaintiff the amount of

Php100,000.00 as moral damages and Php250,000.00 as attorney’s fees; 5.         Ordering the dismissal of defendants spouses Balbanero’s counterclaims. Costs against defendants spouses Balbanero. SO ORDERED. (Words in bracket added.)

  

        From the aforementioned decision, two (2) Notices of Appeal were filed, the first, dated December 9,

1997, being filed by  the private respondents’ counsel wherein counsel acknowledged receipt of a copy of

the same decision on December 5, 1997.[3] The second notice, dated December 8, 1997, was filed by a

certain Atty. Alejandro Abesamis, who attached therewith official receipts in the amounts of P352.00

and P48.00, or a total of P400.00.[4]Atty. Abesamis entered his appearance for the first time at this stage.                    

        At the CA, the appeal was docketed as CA-G.R. CV No. 57625.

 

          On March 3, 1998, the petitioner, as plaintiff-appellee in the appellate proceedings before the CA,

filed a Motion to Dismiss Appeal [5]on ground that the records allegedly do not show that the private

respondents have paid the correct amount of the appellate court docket and other lawful fees. As the

petitioner alleged, the amount thus paid for the appeal was P20.00 short of the legal requirement. 

        In a resolution[6] dated March 16, 1998, the CA directed the

private  respondents  to  remit  the  P20.00 balance of the docket fee.

 

        On March 23, 1998, the private respondents submitted their Compliance[7]  by transmitting a postal

money order for P20.00. On the same day, the petitioner interposed a motion for reconsideration of

the March 16, 1998 CA resolution.

On May 20, 1998, the CA issued the herein challenged Resolution [8] denying petitioner’s

aforementioned Motion to Dismiss Appeal, followed by another  Resolution[9] denying petitioner’s motion

for reconsideration.

 

        Petitioner is now before us via the present recourse, basically  faulting the CA for not dismissing the

private respondents’ appeal on account of their failure to tender the full payment of the appellate court

docket and other lawful fees.

 

        There is no dispute that the private respondents timely filed their appeal to the CA, remitting, in

consonance with Section 4, Rule 41 of the Rules of Court, the amount of P400.00 representing the

appellate court docket and lawful  fees as fixed and assessed by the RTC clerk of court.  Accordingly, with

such proof of payment of said fees, the RTC transmitted to the CA the original records or the record on

appeal.

 

        Private respondents’ attention to the deficiency in their payment of appellate court docket and other

lawful fees was called for the first time by the petitioner himself when he  moved for the dismissal of the

former’s appeal. Instead, however, of issuing the desired dismissal action,  the CA issued a resolution

dated March 16, 1998 requiring the private respondents to remit, within five days from their receipt

thereof, the additional amount of P20.00 for payment of the appellate docket fee, which they promptly did.

        In their comment, private respondents attribute their inability to pay the correct amount of the

appellate court docket and other lawful fees to the error in computation committed by the RTC clerk of

court. Pressing the point, they state that the clerk of court overlooked Section 7 of the CA Revised Internal

Rules, as amended,   which sets forth the true/accurate assessment

of  docketing  fee  and  legal  research  fund in ordinary appeal in civil cases. Private respondents disclaim

any participation in what turned out to be an erroneous     assessment of docket and other appeal fees.

They thus score the petitioner for making much of the mistake/error committed by the RTC clerk of court

and for capitalizing on sheer technicality to  deprive them of their  right  to due process.

 

        We rule in favor of the private respondents.

 

It may be, as the Court has consistently held, that the payment of docket

fees  within  the  prescribed  period is jurisdictional and is necessary for the perfection

of  an  appeal. [10] But time and again, the Court, bearing in mind the importance and purpose of the

remedy of appeal in our judicial structure, has advised courts to proceed with caution on matters of docket

and appeal fees lest they undermine one’s  right to  appeal or deprive a party-

litigant  “the  amplest  opportunity  for  the proper and just disposition of his cause, freed from the

constraints of technicalities.”[11]  In line with this sound policy, we have thus held that, in appealed cases,

the failure to pay the appellate court docket fee does not, without more, automatically result in the

dismissal of the appeal nor affect the court’s jurisdiction, the dismissal being discretionary on the part of

the appellate court.  As we stressed in Santos v. Court of Appeals:[12]   Case after case, this Court stressed the rule that failure to pay the appellate court

docket fee within the reglementary period confers a discretionary, and not mandatory, power to dismiss the proposed appeal, and that such power should be used in the exercise of the court’s sound judgment in accordance with the tenets of justice and fair play and with a great deal of circumspection considering all attendant circumstances. Said “discretion must be exercised wisely and prudently, never capriciously, with a view to substantial justice.”

  

Furthermore, Section 5 of Rule 141 of the Rules of Court, on the payment of appellate docket fees

in appeals from the RTC to the CA and this Court,  provides in pertinent part:                 Sec. 5. Fees to be paid by the advancing party. - 

xxx  If the fees are not paid, the court may refuse to proceed with the action until they are paid and may dismiss the appeal or the action or proceeding.

 

Given the foregoing perspective, the appellate court may very well extend the time for the payment

of the docket fees should an appellant provide a justifiable reason for his failure to pay the correct amount

of docket fees within the prescribed period, such as  fraud, accident, mistake, excusable negligence, or a

similar supervening casualty, without fault on the part of the appellant.[13]  In  Mactan Cebu International

Airport Authority v. Court of Appeals,[14]  the Court held that the failure of the Solicitor General to pay the

docket fees within the reglementary period was excusable since the 1997 Rules of Civil Procedure -

requiring the payment of the docket fees to the court which rendered the judgment within the period for

taking an appeal – took effect only fourteen days prior to the filing of the notice of appeal.

 

Here, there can be no quibbling that the erroneous assessment by the RTC clerk of court accounted

for  the private respondents’ failure to pay the correct amount of docket fees. And when so required by the

CA to address the deficiency, they immediately complied. [15]

 

All told, the private respondents cannot be faulted with prejudice  for their failure to pay the

required docket fees.  For, given the prevailing circumstances, there was no intention on their part to

engage in dilatory tactics or circumvent the Rules of Court. On the contrary, their subsequent  payment of

the P20.00 deficiency immediately when directed to do so by the CA was indicative of their good faith and

willingness to comply with the Rules.[16]

 

WHEREFORE, the petition is DENIED and the assailed Resolution of the Court of Appeals

dated May 20, 1998is AFFIRMED.         

            SO ORDERED.      

CANCIO C. GARCIAAssociate Justice

         WE CONCUR:    

REYNATO S. PUNOAssociate Justice

Chairperson   

ANGELINA SANDOVAL-GUTIERREZAssociate Justice

RENATO C. CORONAAssociate Justice

   

ADOLFO S. AZCUNAAssociate Justice

   

 

[1]               Penned by Associate Justice Quirino D. Abad Santos, Jr. (ret.) with Associate Justices Ruben T.Reyes  (now Presiding Justice) and Eloy R. Bello, Jr. (ret.), concurring; Rollo, p. 31.  

[2]               Original Records, pp. 538-555.[3]               Rollo, p. 39.[4]               Id. at 43.[5]               Id. at  38-42.[6]               Id. at  29.[7]               Id. at 76-77.[8]               Id. at 31-33.[9]               Id. at 36.  [10]             Uy vs. CA, G.R. No. 126337,  February 12, 1998, 286  SCRA  343.[11]             Moslares vs. CA, G.R. No. 129774,  June 26, 1998, 291 SCRA 440.[12]             Santos vs. CA, G.R. No. 114762, February 14, 1996, 253 SCRA 632, citing Fontana vs.

Bonsubre, G.R. No. L-56315, November 25, 1986, 145 SCRA 663.[13]             Guevarra vs. CA, G.R. No. L-43714, January 15, 1988, 157 SCRA 32, citing cases.[14]             Mactan Cebu International Airport Authority vs. Mangubat, G.R. No. 136121, August 16, 1999,

312 SCRA 463.[15]             Rollo, pp. 76-77.

[16]             Yambao vs. CA, G.R. No. 140894, November 27, 2000, 346 SCRA 141.

G.R. No. 166980             April 4, 2007

CARMELO C. BERNARDO, Petitioner, vs.PEOPLE OF THE PHILIPPINES and F.T. YLANG-YLANG MARKETING CORPORATION, Respondents.

D E C I S I O N

CARPIO MORALES, J.:

Petitioner Carmelo C. Bernardo assails the Resolutions1 of the Court of Appeals (CA) dated July 30, 2004 and January 14, 2005 dismissing his petition and denying reconsideration, respectively.

Petitioner was charged before the Metropolitan Trial Court (MeTC) of Manila with six counts of violation of Batas Pambansa Blg. 22 (B.P. 22), otherwise known as the Bouncing Checks Law, for issuing on December 3, 1997 six postdated checks in equal amounts of P22,500. Save for the check numbers and dates of maturity, four Informations under Criminal Case Nos. 320977 to 320980 were similarly worded as follows:

That on or about December 3, 1997, in the City of Manila, Philippines, the said accused, did then and there wilfully, unlawfully, feloniously make or draw and issue to F.T. YLANG-YLANG MARKETING, CORP. rep. by Dennis Tan to apply on account or for value PHILIPPINE SAVINGS BANK check no. 0007806 [0007805, 0007804, 0007803] dated April 30, [March 30, February 28, January 30] 1998 payable to YLANG-YLANG MFG. in the amount of P22,500.00 said accused well knowing that at the time of issue she did not have sufficient funds in or credit with the drawee bank for payment of such check in full upon its presentment, which check when presented for payment within ninety (90) days from the date thereof was subsequently dishonored by the drawee bank for reason "Account Closed" and despite receipt of notice of such dishonor, said accused failed to pay said F.T. YLANG-YLANG MARKETING CORP. the amount of the check or to make arrangement for full payment of the same within five (5) banking days after receiving said notice.

Contrary to law.2

The two Informations under Criminal Case Nos. 320975-76 averred that Check Nos. 0007808 and 0007807 respectively dated June 30, 1998 and May 30, 1998 "would be dishonored by the drawee bank for the reason ‘Account Closed’ if presented for payment as the account against which it was drawn ha[d] already been closed even before [their] said date[s]."3

Upon arraignment, petitioner, assisted by a counsel de oficio, pleaded "not guilty" to the offenses charged. At the pre-trial conference on August 25, 1999, petitioner failed to appear despite notice, prompting Branch 24 of the MeTC to issue a warrant of arrest against him and set the cases for trial in absentia.

After the prosecution presented its first witness, petitioner filed a Waiver of Appearance, a Motion to Lift Warrant of Arrest, and a Motion to Quash on the ground that the facts charged in the Informations under Criminal Case Nos. 320975-76 do not constitute an offense.

By Order of April 5, 2000, the trial court lifted the warrant of arrest in view of petitioner’s appearance but denied the Motion to Quash for lack of merit.

At the following trial date, petitioner failed to appear despite notice, drawing the trial court to proceed with his trial in absentia and issue warrant of arrest4 against him.

By Decision5 of October 23, 2001 promulgated in absentia on December 13, 2001, the trial court found petitioner guilty beyond reasonable doubt of violating B.P. 22 in all the cases. He was, in each case, sentenced to suffer the penalty of imprisonment of One (1) Year, to pay a fine of Twenty-Two Thousand Five Hundred Pesos (P22,500), and to indemnify private complainant in the amount of Twenty-Two Thousand Five Hundred Pesos (P22,500).

Ten months following the promulgation of the judgment, petitioner posted a bond before another branch of the court. Petitioner having been convicted and no motion having been filed for his provisional liberty pending any appeal from or motion for reconsideration of the Decision, the trial court cancelled the bond and issued an alias warrant of arrest.6

Petitioner thereupon filed an Urgent Motion for New Trial and/or to Set Aside Trial and Judgment

(Motion for New Trial) which was, by Order7of January 10, 2003, denied following his and his counsel’s failure to appear at the hearing of the motion and comply with the rule on proper service of a motion.8 Petitioner’s Urgent Motion for Reconsideration was likewise denied, by Order9 of May 26, 2003.

Petitioner appealed the Orders dated January 10, 2003 and May 26, 2003 as well as the Decision dated October 23, 2001 to the Regional Trial Court (RTC) of Manila, Branch 26 of which, by Decision of December 22, 2003, affirmed10 the judgment with modification as to the penalties imposed, thus:

WHEREFORE PREMISES CONSIDERED, the appealed decision is hereby affirmed with modification. This Court finds accused/appellant Carmelo C. Bernardo GUILTY beyond reasonable doubt for Violation of Batas Pambansa Bilang 22 but set [sic] aside the penalty of imprisonment and hereby sentences her [sic] to pay a fine of P22,500.00 in each case, with subsidiary imprisonment in case of insolvency or non-payment not to exceed six (6) months, and, to pay private complainant F.T. YLANG-YLANG MARKETING CORPORATION the total amount of P113,500.00 by way of indemnity.

Meanwhile, the alias warrant of arrest issued against accused x x x

is hereby ordered lifted and set aside.

No pronouncement as to costs. (Underscoring supplied)

SO ORDERED.11

Petitioner filed a Motion for Partial Reconsideration of the RTC decision but it was denied.

Unsatisfied, petitioner elevated the case to the CA.

Petitioner filed with the appellate court a Motion for Extension of Time to File Petition for Review within 30 days from June 1, 2004, the 15th day from his counsel’s receipt of the RTC Order denying his Motion for Partial Reconsideration.

The Court of Appeals, by Resolution of June 21, 2004, granted petitioner an extension, but only 15 days pursuant to Section 1 of Rule 42,12to file his Petition.

Apparently unaware of the above-said Resolution of June 21, 2004 under which his petition would be filed not later than June 16, 2004, petitioner used up the 30-day extension sought and filed his petition on July 1, 2004. Petitioner in fact received the June 21, 2004 Resolution only on July 9, 2004.13

By Resolution14 of July 30, 2004, the appellate court denied petitioner’s petition due course for having been filed 15 days late and for failure to attach the MeTC Decision and other pertinent and material documents. Petitioner’s Motion for Reconsideration was likewise denied by Resolution15 of January 14, 2005, the appellate court noting that the MeTC Decision attached to the Motion for Reconsideration was a mere photocopy and uncertified.

Hence, the instant petition faulting the appellate court:

A. . . . IN RECKONING THE PERIOD OF 15 DAYS EXTENSION FROM THE EXPIRY DATE OF THE ORIGINAL PERIOD OF 15 DAYS FROM RECEIPT OF THE DECISION OF THE REGIONAL TRIAL COURT OR FINAL ORDER APPEALED FROM, INSTEAD OF FROM DATE OF THE RECEIPT OF THE ORDER GRANTING EXTENSION;

B. . . . IN APPLYING THE RULES OF PROCEDURE VERY STRICTLY AND IN UTTER DISREGARD OF ITS INTERNAL RULES WHICH LIBERALLY ALLOW COMPLETION OF PORTIONS OF RECORDS IN COMPLIANCE WITH THE RULES AND THE SETTLED JURISPRUDENCE APPLYING LIBERALLY THE RULES OF PROCEDURE;

C. . . . [IN NOT] CONSIDER[ING] THE MERITS OF THE PETITION FOR REVIEW.16 (Underscoring supplied)

Petitioner argues that the 15-day extension granted to him by the appellate court should be reckoned from his date of receipt of its June 21, 2004 Resolution.

The argument fails. A.M. No. 00-2-14-SC17 issued on February 29, 2000 is clear. It provides that "[a]ny extension of time to file the required pleading should . . . be counted from the expiration of the period . . ." The extension should thus be tacked to the original period, to commence

immediately after the expiration of such period. The court has no discretion to reckon the commencement of the extension from a date later than the expiration of such original period, not even if the expiry date is a Saturday, Sunday, or a legal holiday.18

Petitioner’s reliance on the 1989 case of Vda. de Capulong v. Workmen’s Insurance Co., Inc.19 on this point does not thus lie. Parenthetically, the factual milieus in Vda. de Capulong and the present case are dissimilar. The respondent in Vda. de Capulong specifically moved that it be given an additional period "from receipt of the order" of the court allowing extension, and the court granted an extension of time without indicating when it would commence. In the present case, petitioner prayed for a period of extension to be counted from the expiration of the original period or "from June 1, 2004," which date the appellate court correctly used in reckoning the extension.20

Petitioner goes on to fault the appellate court in not resolving his motion for extension before the expiration of the 15-day extension so that he would have known that his request for 30 days was not granted.

Petitioner’s position does not lie too.

Section 1 of Rule 42 is clear. The Court of Appeals may grant an "additional period of 15 days only" within which to file the petition for review. Albeit under the same section, a "further extension" not to exceed 15 days may be granted "for the most compelling reason," petitioner had no basis to assume that his request for a 30-day extension is meritorious and would be granted.21

Motions for extension are not granted as a matter of right but in the sound discretion of the court, and lawyers should never presume that their motions for extension or postponement would be granted or that they would be granted the length of time they pray for.22

Petitioner claims, however, that his motion for extension presented a compelling reason for the grant of a further extension. Justifying the 30-day period sought, petitioner explains that he was implicitly seeking both a 15-day extension and a further extension of 15 days.

The wording of the rule with respect to further extension is couched in restrictive terms. Section 1 of Rule 42 provides that "[n]o further extension shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days."

Petitioner’s motion for extension was anchored on a lone ground, his counsel’s being "pre-occupied in the preparation of petitions, memoranda, briefs, and other lengthy pleadings in cases as important as this case" and in "daily court appearance and personal commitments." Sustaining petitioner’s lone ground would obliterate the distinguishing essence of a further extension for it would do away with the necessity of presenting compelling grounds addressed to the sound discretion of the court.

But crediting arguendo petitioner’s "implicit" justification, this Court sees no reason to disturb the exercise by the appellate court of its discretion in denying a "cumulative" extension and in effectively ruling that heavy workload of counsel is not a most compelling reason.

Respecting the second assigned error, the CA correctly dismissed petitioner’s appeal for failure to comply with Section 2 (d) of Rule 42, which specifically requires that both lower courts’ judgments or final orders must be attached to the petition in the required form – clearly legible duplicate originals or certified true copies. Indeed, petitioner fell short in his compliance. He attached to his petition only the RTC Decision of December 22, 2003 and its Order of May 4, 2004. He did not attach thereto the MeTC Orders dated January 10, 2003 and May 26, 2003, and the Decision dated October 23, 2001 which were appealed23 to the RTC and which were likewise adverse to him.24 While to his Motion for Reconsideration, he attached the October 23, 2001 Decision, it was not in the required form, and while he attached a duplicate original of the May 26, 2003 Order, he failed to submit the January 10, 2003 Order.

There is no cogent reason to deviate from such requirement under Section 2(d) of Rule 42, the mandatory tenor of which has been held to be discernible and well settled.25

Petitioner having failed to perfect his appeal, the RTC judgment had become final and executory.26 This leaves it unnecessary to dwell on petitioner’s assertion that he was denied due process of law and the right to counsel before the trial court.

Suffice it to state that the requisites of a valid trial in absentia, viz, (1) the accused has already been arraigned, (2) he has been duly notified of the trial, and (3) his failure to appear is unjustifiable, are, as reflected above, present in the case.27

Estrada v. People28 should, under the facts and circumstances attendant to the case, dispel any lingering doubts of petitioner on the validity of the trial court’s proceedings.

The holding of trial in absentia is authorized under Section 14 (2), Article III of the 1987 Constitution which provides that "after arraignment, trial may proceed notwithstanding the absence of the accused provided that he has been duly notified and his failure to appear is unjustifiable." x x x

x x x Conformably with our decision in People v. Salas, [the] escape should have been considered a waiver of their right to be present at their trial, and the inability of the court to notify them of the subsequent hearings did not prevent it from continuing with their trial. They were deemed to have received notice. The same fact of their escape made their failure to appear unjustified because they have, by escaping, placed themselves beyond the pale and protection of the law. This being so, then pursuant to Gimenez v. Nazareno, the trial against the fugitives, just like those of the others, should have been brought to its ultimate conclusion. Thereafter, the trial court had the duty to rule on the evidence presented by the prosecution against all the accused and to render its judgment accordingly. It should not wait for the fugitives’ re-appearance or re-arrest. They were deemed to have waived their right to present evidence on their own behalf and to confront and cross-examine the witnesses who testified against them.29(Emphasis and italics in the original)

As for the promulgation of judgment in absentia, the following pertinent provision of Section 6 of Rule 120 should likewise put to rest any doubts on its validity:

The judgment is promulgated by reading it in the presence of the accused and any judge of the court in which it was rendered. However, if the conviction is for a light offense, the judgment may be pronounced in the presence of his counsel or representative. When the judge is absent or outside the province or city, the judgment may be promulgated by the clerk of court.

x x x x

The proper clerk of court shall give notice to the accused personally or through his bondsman or warden and counsel, requiring him to be present at the promulgation of the decision. If the accused was tried in absentia because he jumped bail or escaped from prison, the notice to him shall be served at his last known address.

In case the accused fails to appear at the scheduled date of promulgation of judgment despite notice, the promulgation shall be made by recording the judgment in the criminal docket and serving him a copy thereof at his last known address or thru his counsel.

x x x x (Italics in the original; emphasis supplied)

A word on the modified penalty imposed by the RTC. Contrary to its reasoning, the penalty of imprisonment in cases of violation of B.P. 22 was not deleted. As clarified by Administrative Circular 13-2001, the clear tenor and intention of Administrative Circular 12-2000 is not to remove imprisonment as an alternative penalty, but to lay down a rule of preference in the application of the penalties provided for in B.P. 22.30

Since the prosecution did not raise the matter as an issue and, at any rate, there is no showing of repeated violation or wanton bad faith on the part of petitioner, the non-imposition of the penalty of imprisonment is in order.

WHEREFORE, in light of the foregoing, the petition is DENIED.

SO ORDERED.

CONCHITA CARPIO MORALESAssociate Justice

WE CONCUR:

LEONARDO A. QUISUMBINGAssociate Justice

Chairperson

ANTONIO T. CARPIOAssociate Justice

DANTE O. TINGAAsscociate Justice

PRESBITERO J. VELASCO, JR.Associate Justice

Footnotes

1 CA rollo, pp. 41, 94-95, respectively. Penned by Justice Eliezer R. De Los Santos with the concurrence of Justice Delilah Vidallon-Magtolis and Justice Arturo D. Brion. Justice Monina Arevalo Zenarosa, vice Justice Brion, concurred in the second Resolution.

2 Records, pp. 5-8.

3 Id. at 3-4.

4 Records show that no motion to lift the May 3, 2000 Warrant of Arrest was filed by petitioner’s counsel de parte before his appearance as such was considered withdrawn on August 16, 2000. This Court observes that the issuance of the warrant of arrest was unnecessary since petitioner already filed a waiver of appearance and even consented to the waiver of appearance clause in his bond. While petitioner could have been still compelled to appear in court for identification purposes, the April 5, 2000 Order did notspecifically require petitioner to appear at said trial date nor was the testimony of the prosecution witness intended to identify petitioner. Notably, the matter of identification was never raised as an issue as petitioner never disputed his identity as the accused in this case. (Vide rollo, pp. 32, 91, 102-104, 277-291; Carredo v. People, G.R. No. 77542, March 19, 1990, 183 SCRA 273)

5 Id. at 186-189. The Decision was penned by Judge Jorge Emmanuel M. Lorredo, then pairing judge of Branch 24, MeTC, Manila.

6 Id. at 224-225.

7 Id. at 244.

8 Rules of Court, Rule 15, Secs. 5-6, Rule 121, Sec. 4.

9 Records, p. 267.

10 The RTC denied the appeal sub silentio insofar as the Orders dated January 10, 2003 and May 26, 2003 are concerned. No appeal may be taken from an order denying a motion for new trial, the appropriate recourse being a special civil action for certiorari. (Vide Rules of Court, Rule 41, Sec. 1 (a) in relation to Rule 40, Sec. 9; Casalla v. People, 439 Phil. 958 [2002]) Moreover, petitioner was barred from availing of the remedies allowed by the Rules against the judgment since he did not file the proper motion for leave of court within the given period. (Vide Rules of Court, Rule 120, Sec. 6, last par.; Teope v. People, G.R. No. 149687, April 14, 2004, 427 SCRA 540) The lower court/prosecution, however, failed to notice/raise these grounds in dismissing/opposing the appeal.

11 Id. at 322-323. Penned by Judge Oscar P. Barrientos in Criminal Case Nos. 03-216527 to 32.

12 "x x x The petition shall be filed and served within fifteen (15) days from notice of the decision sought to be reviewed or of the denial of petitioner’s motion for new trial or reconsideration filed in due time after judgment. Upon proper motion and the payment of the full amount of the docket and other lawful fees and the deposit for costs before the expiration of the reglementary period, the Court of Appeals may grant an additional period of fifteen (15) days only within which to file the petition for review. No further extension shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days." (Emphasis supplied)

13 Rollo, p. 16.

14 Id. at 32.

15 Id. at 35-36.

16 Id. at 15.

17 "Whereas, the aforecited provision [Section 1, Rule 22] applies in the matter of filing of pleadings in courts when the due date falls on a Saturday, Sunday, or legal holiday, in which case, the filing of the said pleading on the next working day is deemed on time;

"Whereas, the question has been raised if the period is extended ipso jure to the next working day immediately following where the last day of the period is a Saturday, Sunday or legal holiday so that when a motion for extension of time is filed, the period of extension is to be reckoned from the next working day and not from the original expiration of the period;

"NOW THEREFORE, the Court Resolves, for the guidance of the Bench and the Bar, to declare that Section 1, Rule 22 speaks only of "the last day of the period" so that when a party seeks an extension and the same is granted, the due date ceases to be the last day and hence, the provision no longer applies. Any extension of time to file the required pleading should therefore be counted from the expiration of the period regardless of the fact that the said due date is a Saturday, Sunday or legal holiday." (Underscoring supplied)

18 Luz v. National Amnesty Commission, G.R. No. 159708, September 24, 2004, 439 SCRA 111.

19 G.R. No. 30960, October 5, 1989, 178 SCRA 314.

20 Vide CA rollo, pp. 4, 7.

21 Vide Videogram Regulatory Board v. Court of Appeals, 332 Phil. 820 (1996).

22 Cosmo Entertainment Management, Inc. v. La Ville Commercial Corporation, G.R. No. 152801, August 20, 2004, 437 SCRA 145, 150.

23 Records, p. 270.

24 Cf. Ramos v. Court of Appeals, 341 Phil. 157 (1997), which ruled that a petitioner is not required to attach to the petition before the Court of Appeals a certified true copy– but only a true or plain copy– of the MeTC Decision since petitioner is not appealing therefrom as it was rendered in her favor.

25 Vide Atillo v. Bombay, 404 Phil. 179, 188 (2001), as differentiated from the directory nature of the second part of the rule requiring the attachment of "pleadings and other material portions of the record" from which the appellate court has the discretion to determine the sufficiency to make out a prima facie case.

26 Vide Borlongan v. Buenaventura, G.R. No. 167234, February 27, 2006, 483 SCRA 405-406.

27 Vide People v. Salas, 227 Phil. 152 (1986); Vide People v. Valeriano, G.R. Nos. 103604-605, September 23, 1993, 226 SCRA 694, where it was held that one who jumps bail can never offer a justifiable reason for his non-appearance during the trial.

28 G.R. No. 162371, August 25, 2005, 468 SCRA 233.

29 Id. at 245-246.

30 Tan v. Mendez, Jr., 432 Phil. 760, 773 (2002).

THIRD DIVISION

G.R. No. 138777             September 22, 2004

JOY G. TAN, petitioner, vs.SALIC B. DUMARPA, respondent.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Suits should as much as possible be decided on the merits and not on technicalities. In this regard, we have often admonished courts to be liberal as default judgments are frowned upon and not looked upon with favor for they may amount to a positive and considerable injustice to petitioner and the possibility of such serious consequences necessitates a careful examination of the grounds upon which petitioner asks that it be set aside.1

Before us is a petition for review on certiorari2 assailing the Judgment by Default3 dated January 28, 1999 and the Order4 dated May 3, 1999, both rendered by the Regional Trial Court, Branch 9, Marawi City, Lanao del Sur in Civil Case No. 1474-97, "Salic B. Dumarpa vs. Joy Tan, doing business under the name and style of Casa Blanca Restaurant."

The factual antecedents as borne by the records are:

On May 30, 1995, Prosecutor Ortillano D. Tan and other prosecutors of Region XII filed with the Office of the Ombudsman in Mindanao a criminal complaint for malversation of public funds and violation of Section 3 (e) of R.A. No. 30195 against then Regional State Prosecutor Salic B. Dumarpa, respondent herein, docketed as Case No. OMB-MIN-95-0506.

The complaint alleges that sometime in October 1992, Prosecutor Tan engaged the services of Joy G. Tan, petitioner, as caterer for the Witness Protection Security and Benefit Program seminar conducted on October 16, 1992 at Marawi City. After the seminar, Prosecutor Tan paid petitioner, through Wilfredo C. Sotto, P11,632.00 in cash and P10,000.00 in PNB Check No. 33060 for her catering services. In turn, petitioner issued to Tan the corresponding receipt dated October 16, 1992 (cash invoice no. 10931). Later, Prosecutor Tan found that Regional Prosecutor Dumarpa, respondent, to cover his cash advance of P30,000.00 from the Department of Justice, obtained surreptitiously from petitioner another receipt (cash invoice no. 10887) showing his payment for the latter’s catering services for two seminars conducted purportedly in Cotabato City and Marawi City. In support of the above criminal complaint were affidavits of petitioner and Wilfredo C. Sotto.

Meantime, petitioner’s affidavit denouncing respondent for malversation of government funds was published in the Manila Standard, Manila Times, Bandera, and other newspapers of general circulation. Respondent claimed that such malicious publication discredited his honor and reputation. Thus, he filed with the Office of the City Prosecutor of Marawi City a criminal complaint for libel against petitioner, docketed as I.S. No. 97D-0110. The City Prosecutor found probable cause and recommended that petitioner be charged with libel in court. Respondent also filed with the Regional Trial Court, Branch 9, Marawi City Civil Case No. 1474-97 against her for damages with prayer for issuance of a writ of attachment.

Subsequently, petitioner filed in Civil Case No. 1474-97 her answer with motion to dismiss the complaint on the ground of failure to state a cause of action. She alleged that her affidavit against respondent was executed in good faith and without malice. Being merely a supporting affidavit to a criminal complaint for malversation filed by Prosecutor Tan against respondent, the same is absolutely privileged and, therefore, not actionable.

On March 26, 1998, the trial court denied petitioner’s motion to dismiss the complaint and set the pre-trial conference on July 30, 1998. But during the pre-trial, petitioner and counsel did not appear. According to the trial court, they were duly notified. Thus, petitioner was declared as in default and respondent was allowed to present his evidence ex-parte. After he rested his case, the trial court rendered the assailed Judgment by Default dated January 28, 1999, the dispositive portion of which reads:

"The plaintiff, having proven his claim preponderantly, judgment is hereby rendered in favor of plaintiff Salic B. Dumarpa and against defendant Joy Tan, ordering said defendant:

1. To pay unto plaintiff Salic Dumarpa the sum of Seven Hundred Thousand (P700,000.00) Pesos as actual and compensatory damages;

2. To pay unto plaintiff the sum of One Million (P1,000,000.00) Pesos as moral damages; and the further sum of P100,000.00 as attorney’s fees and costs.

SO ORDERED."

On February 26, 1999, petitioner filed a motion for reconsideration of the Judgment by Default on the ground that her counsel did not receive a copy of the Order denying her motion to dismiss and setting the pre-trial conference on July 30, 1998. On March 11, 1999, respondent filed a motion for execution and opposition to the motion for reconsideration.

On May 3, 1999, the trial court issued an Order resolving petitioner’s motion for reconsideration and respondent’s motion for execution. In this Order, the trial court denied petitioner’s motion for reconsideration on the ground that it does not allege specifically the findings of fact which are not supported by evidence or conclusion contrary to law. The trial court then ruled that the motion is pro

forma and does not toll the running of the period to appeal. Thus, the Judgment by Default has become final and executory. The trial court then granted respondent’s motion for execution.

Hence, petitioner, on June 1, 1999, directly filed with this Court the instant petition for review on certiorari assailing -

"1. THE PROPRIETY OF FILING RESPONDENT’S CIVIL COMPLAINT FOR DAMAGES (BASED ON AN ALLEGED LIBELOUS ACT COMMITTED BY PETITIONER WHEN SHE EXECUTED AN AFFIDAVIT BEFORE THE OFFICE OF THE CITY PROSECUTOR) EVEN BEFORE THE RESOLUTION OF THE CRIMINAL COMPLAINT FOR LIBEL.

"2. THE APPLICABILITY OF THE LAW ON PRIVILEGED COMMUNICATION ON PETITIONER’S AFFIDAVIT."

Respondent, in his comment, contends that the instant petition should be denied, not being the proper remedy.

In Indiana Aerospace University vs. Commission on Higher Education,6 we held:

"The remedies available to a defendant declared in default are as follows: (a) a motion to set aside the order of default under Section 3 (b), Rule 9 of the Rules of Court, if the default was discovered before judgment could be rendered; (2) a motion for new trial under Section 1(a) of Rule 37, if the default was discovered after judgment but while appeal is still available; (3) a petition for relief under Rule 38, if judgment has become final and executory; and (4) an appeal from the judgment under Section 1, Rule 41, even if no petition to set aside the order of default has been resorted to."

Here, petitioner came to know of the Judgment by Default after it was promulgated by the trial court while appeal was still available. In fact, she filed a motion for reconsideration which was denied. Thereafter, what she should have done pursuant to the Rules, was to file with the trial court a motion for new trial or an ordinary appeal7 with the Court of Appeals. Instead, she came directly to this Court via the instantpetition for review on certiorari.

However, in the interest of justice, we consider the instant petition, pro hac vice, a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended. It appears prima facie from petitioner’s allegations that the trial court committed grave abuse of discretion in rendering the Judgment by Default. If such allegations are true and the trial court’s fatal error remains uncorrected, then petitioner will suffer great injustice.

Indeed, where as here, there is a strong showing that grave miscarriage of justice would result from the strict application of the

Rules, we will not hesitate to relax the same in the interest of substantial justice.8

In Cusi-Hernandez vs. Diaz,9 this Court, speaking through Mr. Justice Artemio V. Panganiban, held that "cases should be determined on the merits, after full opportunity to all parties for ventilation of their causes and defenses, rather than on technicality or some procedural imperfections. In that way, the ends of justice would be served better."

In fact, "procedural rules are created not to hinder or delay but to facilitate and promote the administration of justice. It is far better to dispose of the case on the merits which is a primordial end rather than on a technicality, if it be the case that may result in injustice."10

In Paras vs. Baldado11 and Alberto vs. Court of Appeals,12 we ruled that "(w)hat should guide judicial action is the principle that a party-litigant is to be given the fullest opportunity to establish the merits of his complaint or defense rather than for him to lose life, liberty, honor or property on technicalities. x x x (T)he rules of procedure should be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed."

We thus resolve the basic issue of whether or not the trial judge committed grave abuse of discretion in rendering the Judgment by Default.

It may be recalled that in denying petitioner’s motion for reconsideration of the Judgment by Default, the trial court held that petitioner failed to specify (a) its findings not supported by evidence and (b) its erroneous conclusion of law. Actually, the issue being raised by petitioner in her motion is that she and her counsel were not duly notified of the pre-trial on July 30, 1998. But the trial court did not resolve this issue and denied outright petitioner’s motion.

Had the trial court set the motion for hearing and gave petitioner a chance to prove her allegation, it could have determined whether she was indeed notified or not of the pre-trial set on July 30, 1998. Then the trial court could have resolved whether or not to reconsider the Judgment by Default.

Verily, by denying petitioner’s motion for reconsideration on the wrong ground that it is pro forma and by declaring her as in default and allowing respondent to present his evidence ex parte, the trial court deprived petitioner of her right to due process, i.e., the fundamental rule that a person be accorded an opportunity to be heard.13 To allow a trial to proceed against petitioner who could not present her defenses apparently for lack of notice, is a denial of her right to be heard, our most basic understanding of due process. We stress that the essence of due process is simply an opportunity to seek a reconsideration of the assailed action or ruling, such as the trial court’s Order denying petitioner’s motion for reconsideration and its Judgment by Default. The trial court denied petitioner this opportunity.

We, therefore, hold that the said Order and Judgment by Default are tainted with a capricious, arbitrary and whimsical exercise of power. Clearly, the trial judge committed grave abuse of discretion.

WHEREFORE, the instant petition, considered as one for certiorari, is GRANTED. The Judgment by Default dated January 28, 1999 and the Order dated May 3, 1999 are SET ASIDE. The Regional Trial Court, Branch 9, Marawi City, Lanao del Sur is ordered to hear Civil Case No. 1474-97 on the merits with deliberate dispatch.

SO ORDERED.

Panganiban, Corona, and Carpio Morales, JJ., concur.

Footnotes

1 See Diaz vs. Diaz, G.R. No. 135885, April 28, 2000, 331 SCRA 302, 322-323, citing Gerales vs. Court of Appeals, 218 SCRA 638 (1993) and Montinola, Jr. vs. Republic Planters Bank, 161 SCRA 45 (1988).

2 Pursuant to Section 2 (c), Rule 41 of the 1997 Rules of Civil Procedure, as amended, which provides:

"Sec. 2. Modes of appeal. – x x x

x x x

(c) Appeal by certiorari. - In all cases where only questions of law are raised or involved, the appeal shall be to the Supreme Court by petition for review on certiorari in accordance with Rule 45."

3 Annex "F", Petition, Rollo at 28-34.

4 Annex "H", id. at 13-14.

5 Otherwise known as the Anti-Graft and Corrupt Practices Act.

6 G.R. No. 139371, April 4, 2001, 356 SCRA 367, 379, citing Lina vs. Court of Appeals, 135 SCRA 637 (1985).

7 See Umandap vs. Sabio, Jr., G.R. No. 140244, August 29, 2000, 339 SCRA 243, 252.

8 Coronel vs. Hon. Aniano A. Desierto, G.R. No. 149022, April 8, 2003 at 9, citing People vs. Flores, 336 Phil. 58 (1997).

9 G.R. No. 140436, July 18, 2000, 336 SCRA 113, 120, citing Republic vs. Court of Appeals, 292 SCRA 243 (1998).

10 AFP Mutual Benefit Association vs. Court of Appeals, G.R. No. 126745, July 26, 1999, 311 SCRA 143, 157, citing Udan vs. Amon, 23 SCRA 837 (1968) and Medrano & Associates, Inc. vs. Roxas & Co., 183 SCRA 580 (1990).

11 G.R. No. 140713, March 8, 2001, 354 SCRA 141, 145.

12 G.R. No. 119088, June 30, 2000, 334 SCRA 756.

13 City Government of Makati City vs. Civil Service Commission, G.R. No. 131392, February 6, 2002, 376 SCRA 248.

SECOND DIVISION                                                       

CYNTHIA C. ALABAN,              G.R. No. 156021

FRANCIS COLLADO, JOSE                             

P. COLLADO, JUDITH              Present:

PROVIDO, CLARITA PROVIDO,

ALFREDO PROVIDO, MANUEL            PUNO, J.,

PROVIDO, JR., LORNA DINA                         Chairman,

E. PROVIDO, SEVERO ARENGA,         AUSTRIA-MARTINEZ,

JR., SERGIO ARENGA, EDUARDO      CALLEJO, SR.,

ARENGA, CAROL ARENGA, RUTH      TINGA,  and

BABASA, NORMA HIJASTRO,             CHICO-NAZARIO, JJ.

DOLORES M. FLORES, ANTONIO               

MARIN, JR., JOSE MARIN, SR., and       

MATHILDE MARIN,                                  Promulgated:

                        Petitioners,

                                                         September 23, 2005

 

                 -  versus  -

 

 

COURT OF APPEALS and

FRANCISCO H. PROVIDO,

                     Respondents.

x-------------------------------------------------------------------x

 

 D E C I S I O N

 

TINGA, J.:

 

        This is a petition for review of the Resolutions[1] of the Court of Appeals (CA) in CA-G.R. SP  No. 69221,[2] dismissing petitioners’ petition for annulment of judgment.

 

On 8 November 2000, respondent Francisco Provido (respondent) filed a petition, docketed as SP

Proc. No. 00-135, for the probate of the Last Will and Testament[3]  of   the late Soledad Provido

Elevencionado (“decedent”), who died on 26 October 2000 in Janiuay, Iloilo. [4]  Respondent alleged that he

was the heir of the decedent and the executor of her will.   On 30 May 2001, the Regional Trial Court

(RTC), Branch 68, in P.D. Monfort North, Dumangas, Iloilo, rendered its Decision,[5] allowing the probate of

the will of the decedent and directing the issuance of letters testamentary to respondent.[6]

 

        More than four (4) months later, or on 4 October 2001,  herein petitioners filed a motion for the

reopening of the probate proceedings.[7]   Likewise, they filed an opposition to the allowance of the will of

the decedent, as well as the issuance of letters testamentary to respondent,[8] claiming that they are the

intestate heirs of the decedent.    Petitioners claimed that the RTC did not acquire jurisdiction over the

petition due to non-payment of the correct docket fees, defective publication, and lack of notice to the

other heirs.  Moreover, they alleged that  the will  could not have been probated because: (1) the signature

of the decedent was forged; (2) the will was not executed in accordance with law, that is,  the witnesses

failed to sign below the attestation clause; (3) the decedent lacked testamentary capacity to execute and

publish a will; (4) the will was executed by force and under  duress and improper pressure; (5) the

decedent had no intention to make a will at the time of affixing of her signature; and (6) she did not know

the properties to be disposed of, having included in the will properties which no longer belonged to her.  

Petitioners prayed that the letters testamentary issued to respondent be withdrawn and the estate of the

decedent disposed of under intestate succession.[9]

 

        On 11 January 2002, the RTC issued an Order[10]  denying petitioners’ motion for being unmeritorious. 

Resolving the issue of jurisdiction, the RTC held that petitioners were deemed notified of the hearing by

publication and that the deficiency in the payment of docket fees is not a ground for the outright dismissal

of the petition. It merely required respondent to pay the deficiency. [11]  Moreover, the RTC’s Decision was

already final and executory even before petitioners’ filing of the motion to reopen.[12]

 

        Petitioners thereafter filed a petition[13] with an application for preliminary injunction with the CA,

seeking the annulment of the RTC’s Decision dated 30 May 2001 and Order dated 11 January 2002.  They

claimed that after the death of the decedent,  petitioners, together with respondent, held several

conferences to discuss the matter of dividing the estate of the decedent, with respondent agreeing to a

one-sixth (1/6) portion as his share.  Petitioners allegedly drafted a compromise agreement to implement

the division of the estate.  Despite receipt of the agreement, respondent refused to sign and return the

same.  Petitioners opined that respondent feigned interest in participating in the compromise agreement

so that they would not suspect his intention to secure the probate of the will.[14]  They claimed  that they

learnt of the probate proceedings only in July of 2001, as a result of which they filed their motion to reopen

the proceedings and admit their opposition to the probate of the will only on 4 October 2001. They argued

that the RTC Decision should be annulled and set aside on the ground of extrinsic fraud and lack of

jurisdiction on the part of the RTC.[15] 

 

        In its Resolution[16] promulgated on 28 February 2002, the CA dismissed the petition.  It found that

there was no showing that petitioners failed to avail of or resort to the ordinary remedies of new trial,

appeal, petition for relief from judgment, or other appropriate remedies through no fault of their own. [17] 

Moreover, the CA declared as baseless petitioners’ claim that the proceedings in the RTC was attended by

extrinsic fraud. Neither was there any showing that they availed of this ground in a motion for new trial or

petition for relief from judgment in the RTC, the CA added.[18]  Petitioners sought reconsideration of

the Resolution, but the same was denied by the CA for lack of merit.[19]

 

        Petitioners now come to this Court, asserting that the CA committed grave abuse of discretion

amounting to lack of jurisdiction when it dismissed their petition for the alleged failure to show that they

have not availed of or resorted to the remedies of new trial, appeal, petition for relief from judgment or

other remedies through no fault of their own, and held that petitioners were not denied their day in court

during the proceedings before the RTC.[20]  In addition, they assert that this Court has yet to decide a case

involving Rule 47 of the Rules of Court and, therefore, the instant petition should be given due course for

the guidance of the bench and bar.[21]

 

        For his part, respondent claims that petitioners were in a position to avail of the remedies provided in

Rules 37 and 38, as they in fact did when they filed a motion for new trial. [22] Moreover, they could have

resorted to a petition for relief from judgment since they learned of the RTC’s judgment only three and a

half months after its promulgation.[23]  Respondent likewise maintains that no extrinsic fraud exists to

warrant the annulment of the RTC’s Decision, since there was no showing that they were denied their day

in court.  Petitioners were not made parties to the probate proceedings because the decedent did not

institute them as her heirs.[24]  Besides, assuming arguendo that petitioners are heirs of the decedent, lack

of notice to them is not a fatal defect since personal notice upon the heirs is a matter of procedural

convenience and not a jurisdictional requisite.[25]  Finally, respondent charges petitioners of forum–

shopping, since the latter have a pending suit involving the same issues as those in  SP No. 00-135, that is 

SP No. 1181[26] filed before Branch 23, RTC of General Santos City and subsequently pending on appeal

before the CA in CA-G.R. No.74924.[27]

 

It appears that one of the petitioners herein, Dolores M. Flores (“Flores”), who is a niece of the

decedent, filed a petition for letters of administration with the RTC of General Santos City, claiming that

the decedent died intestate without any issue, survived by five groups of collateral heirs. Flores, armed

with a Special Power of Attorney from most of the other petitioners, prayed for her appointment as

administratrix of the estate of the decedent.  The RTC  dismissed the petition on the ground of lack of

jurisdiction, stating that the probate court in Janiuay, Iloilo  has jurisdiction since the venue for a petition

for the settlement of the estate of a decedent is the place where the decedent died.  This is also in

accordance with the rule that the first court acquiring jurisdiction shall continue hearing the case to the

exclusion of other courts, the RTC added.[28]  On 9 January 2002, Flores filed a Notice of Appeal [29]and on

28 January 2002, the case was ordered  forwarded to the CA.[30]

 

Petitioners maintain that they were not made parties to the case in which the decision sought to be

annulled was rendered and, thus, they could not have availed of the ordinary remedies of new trial,

appeal, petition for relief from judgment and other appropriate remedies, contrary to the ruling of the CA. 

They aver that respondent’s offer of a false compromise and his failure to notify them of the probate of the

will constitute extrinsic fraud that necessitates the annulment of the RTC’s judgment.[31]

 

        The petition is devoid of merit.

 

Section 37 of the Rules of Court allows an aggrieved party to file a motion for new trial on the

ground of fraud, accident,  mistake,  or  excusable  negligence.  The  same Rule permits the filing of a

motion for reconsideration on the grounds  of excessive award of damages, insufficiency of evidence to

justify the decision or final order, or that the decision or final order is contrary to law. [32]   Both motions

should be filed within the period for taking an appeal, or fifteen (15) days from notice of the judgment or

final order.

 

Meanwhile, a petition for relief from judgment under Section 3 of Rule 38 is resorted to when a

judgment or final order is entered, or any other proceeding is thereafter taken, against a party in any court

through fraud, accident, mistake, or excusable negligence.  Said party may file a petition in the same court

and in the same case to set aside the judgment, order or proceeding.  It must be filed within sixty (60)

days after the petitioner learns of the judgment and within six (6) months after entry thereof.[33]

 

        A motion for new trial or reconsideration and a petition for relief from judgment are remedies

available only  to  parties  in  the  proceedings  where  the assailed judgment is rendered.[34]   In fact, it has

been held that a person who was never a party to the case, or even summoned to appear therein, cannot

avail of a petition for relief from judgment.[35] 

 

        However, petitioners in this case are mistaken in asserting that they are not or have not become

parties to the probate proceedings. 

 

Under the Rules of Court, any executor, devisee, or legatee named in a will, or any other person

interested in the estate may, at any time after the death of the testator, petition the court having

jurisdiction to have the will allowed.[36]  Notice of the time and place for proving the will must be published

for three (3) consecutive weeks, in a newspaper of general circulation in the province,[37] as well as

furnished to the designated or other known heirs, legatees, and devisees of the testator. [38] Thus, it has

been held that a proceeding for the probate of a will is one in rem, such that with the corresponding

publication of the petition the court's jurisdiction extends to all persons interested in said will or in the

settlement of the estate of the decedent.[39] 

 

Publication is notice to the whole world that the proceeding has for its object to bar indefinitely all

who might be minded to make an objection of any sort against the right sought to be established.  It is the

publication of such notice that brings in the whole world as a party in the case and vests the court with

jurisdiction to hear and decide it.[40]   Thus, even though petitioners were not mentioned in the petition for

probate, they eventually became parties thereto as a consequence of the publication of the notice of

hearing.

 

        As parties to the probate proceedings, petitioners could have validly availed of the remedies of

motion for new trial or reconsideration and petition for relief from judgment. In fact, petitioners filed a

motion to reopen, which is essentially a motion for new trial, with petitioners praying for the reopening of

the case and the setting of further proceedings.  However, the motion was denied for having been filed out

of time, long after the Decision became final and executory.  

       

        Conceding that petitioners became aware of the Decision after it had become final, they could have

still filed a petition for relief from judgment after the denial of their motion to reopen. Petitioners claim that

they learned of the Decision only on 4 October 2001, or almost four (4) months from the time

theDecision had attained finality.  But they failed to avail of the remedy.

 

For failure to make use without sufficient justification of the said remedies available to them,

petitioners could no longer resort to a petition for annulment of judgment; otherwise, they would benefit

from their own inaction or negligence.[41] Even casting aside the procedural requisite, the petition for

annulment of judgment must still fail for failure to comply with the substantive requisites, as the appellate

court ruled.  

 An action for annulment of judgment is a remedy in law independent of the case where the

judgment sought to be annulled was rendered.[42]  The purpose of such action is to have the final and

executory judgment set aside so that there will be a renewal of litigation.  It is resorted to in cases where

the ordinary remedies of new trial, appeal, petition for relief from judgment, or other appropriate remedies

are no longer available through no fault of the petitioner,[43] and is based on only two grounds: extrinsic

fraud, and lack of jurisdiction or denial of due process.[44]    A person need not be a party to the judgment

sought to be annulled, and it is only essential that he can prove his allegation that the judgment was

obtained by the use of fraud and collusion and he would be adversely affected thereby.[45] 

 An action to annul a final judgment on the ground of fraud lies only if the fraud is extrinsic or

collateral in character.[46]  Fraud is regarded as extrinsic where it prevents a party from having a trial or

from presenting his entire case to the court, or where it operates upon matters pertaining not to the

judgment itself but to the manner in which it is procured. The overriding consideration when extrinsic fraud

is alleged is that the fraudulent scheme of the prevailing litigant prevented a party from having his day in

court.[47]  To sustain their allegation of extrinsic fraud, petitioners assert that as a result of respondent’s

deliberate omission or concealment of their names, ages and residences as the other heirs of the decedent

in his petition for allowance of the will, they were not notified of the proceedings, and thus they were

denied their day in court.  In addition, they claim that respondent’s offer of a false compromise even

before the filing of the petition prevented them from appearing and opposing the petition for probate.   

  The Court is not convinced.

  According to the Rules, notice is required to be personally given to known heirs, legatees, and

devisees of the testator.[48] A perusal of the will shows that respondent was instituted as the sole heir of

the decedent.   Petitioners, as nephews and nieces of the decedent, are neither compulsory nor testate

heirs[49] who are entitled to be notified of the probate proceedings under the Rules.  Respondent had no

legal obligation to mention petitioners in the petition for probate, or to personally notify them of the

same.       

 

Besides, assuming arguendo that petitioners are entitled to be so notified, the purported infirmity is cured by the publication of the notice.  After all, personal notice upon the  heirs is a matter of procedural convenience and not a jurisdictional requisite.[50] 

The non-inclusion of petitioners’ names in the petition and the alleged failure to personally notify

them of the proceedings do not constitute extrinsic fraud.   Petitioners were not denied their day in court,

as they were not prevented from participating in the proceedings and presenting their case  before the

probate court. 

 

 One other vital point is the issue of forum-shopping against petitioners. Forum-shopping consists of filing multiple suits in different courts, either simultaneously or successively, involving the same parties, to ask the courts to rule on the same or related causes and/or to grant the same or substantially same reliefs,[51] on the supposition that one or the other court would make a favorable disposition. [52]   Obviously, the parties in the instant case, as well as in the appealed case before the CA, are the same.  Both cases deal with the existence and validity of the alleged will of the decedent, with petitioners anchoring their cause on the state of intestacy. In the probate proceedings, petitioners’ position has always been that the decedent left no will and if she did, the will does not comply with the requisites of a valid will.  Indeed, that position is the bedrock of their present petition.  Of course, respondent maintains the contrary stance.  On the other hand, in the petition for letters of administration, petitioner Flores prayed   for   her  appointment  as  administratrix  of  the estate on the theory that the decedent died intestate. The petition was dismissed on the ground of lack of jurisdiction, and it is this order of dismissal which is the subject of review in CA-G.R. No. 74924. Clearly, therefore, there is forum-shopping. 

 Moreover, petitioners failed to inform the Court of the said pending case in their certification

against forum- shopping.  Neither have they done so at any time thereafter.  The Court notes that even in

the petition for annulment of judgment, petitioners failed to inform the CA of the pendency of their appeal

in CA-G.R. No. 74924, even though the notice of appeal was filed way before the petition for annulment of

judgment was instituted. 

 

WHEREFORE, the petition is DENIED.  Costs against petitioners. 

 

SO ORDERED.

     DANTE O. TINGa Associate Justice

   

 [1]Dated 8 February 2002 and 12 November 2002. [2]Cynthia C. Alaban, et al. v. Gerardo D. Diaz, et al. [3]Rollo, pp. 47-52. [4]Entitled “In Re: Petition for Probate of Will of Decedent Soledad Provido Elevencionado, Francisco

H. Provido, Petitioner”; Id. at 31-32. [5]Id. at  34-37. [6]Ibid. [7]Id. at 38-39. [8]Id. at 41-45. [9]Id. at 42-44.

 [10]Id. at 53-56. [11]Id. at 55, 56. [12]Id. at  55. [13]Docketed as CA-G.R. SP No. 69221. [14]Rollo, pp. 58-59.

 [15]Id. at  62. [16]Id. at  69. [17]Ibid. [18]Id. at 70. [19]Resolution dated 12 November 2002, Id. at 92. [20]Id. at 15. [21]Id. at 15. [22]Id. at 103. [23]Id. at 107. [24]Id. at 108 [25]Id. at 109. [26]Entitled “In the Matter of the Issuance of Letters of Administration in the Intestate Estate of

Soledad Provido-Elevencionado, Dolores M. Flores, Petitioner.” [27]Rollo, pp. 109-110. [28]Id. at 126. [29]CA Rollo, p.78. [30]Id. at 79. [31]Id. at 21.

 [32]Sec. 1, Rule 37. [33]Sec. 1, Rule 38. [34]Section 1 of Rule 37 of the Rules of Court provides:

       Section 1.  Grounds of and period for filing motion for new trial or reconsideration.-  Within the period for taking an appeal, theaggrieved party may move the trial court to set aside the judgment or final order and grant a new trial for one or more of the following causes materially affecting the substantial rights of said party:

           . . . .

 

            Meanwhile, Sections 1  and 2 of Rule 38 state:

 

Section 1.  Petition for relief from judgment, order, or other proceedings.- When a judgment or final order is entered, or any other proceeding is thereafter taken against a party in any court through fraud, accident, mistake or excusable negligence, he may file a petition in such court and in the same case praying that the judgment, order or proceeding be set aside.

 

Section 2.  Petition for relief from denial of appeal.-  When a judgment or final order is rendered by any court in a  case, and a partythereto, by fraud, accident, mistake, or excusable negligence, has been prevented from taking an appeal, he may file a petition in such court and in the same case praying that the appeal be given due course.

(Emphasis supplied.) [35]Metropolitan Bank and Trust Co. v. Alejo, G.R. No. 141970, 10 September 2001, 364  SCRA  812,

817. [36]Sec. 1, Rule 76, Rules of Court.

 [37]Sec. 3, Rule 76, id. [38]Sec. 4, Rule 76, id. [39]Abut v. Abut, 150-A Phil. 679,  683 (1972). [40]Barco v. Court of Appeals,  G.R. No. 120587, 20 January 2004, 420 SCRA 162, 174, citing  Adez

Realty v. Court of Appeals, G.R. No. 100643, 14 August 1992, 22 SCRA 623, 628. [41]Manipor, et al. v. Spouses Ricafort,  G.R. No. 150159,  25 July 2003, 407 SCRA 298, 303. [42]Islamic Da’Wah Council of the Philippines v. Court of Appeals, G.R. No. 80892, 29 September

1989, 178 SCRA 185, 184. [43]Sec. 1, Rule 47, Rules of Court. [44]Pinlac v. Court of Appeals, G.R. No. 91486, 19 January 2001, 349 SCRA  635, 650. [45]Islamic Da’Wah Council of the Philippines v. Court of Appeals, supra note 42 at 187. [46]Bobis et al. v. Court of Appeals, et al.,  G.R. No. 113796, 14 December 2000, 348 SCRA 23, 27-28. [47]Teodoro v. Court of Appeals, 437 Phil. 336, 345 (2002).

 [48]Sec. 3, Rule 76, Rules of Court. [49]Art. 842, Civil Code. [50]F.D. REGALADO, REMEDIAL LAW COMPENDIUM, Vol. II (2001 ed.) p. 27, citing  In Re Estate of

Johnson, 39 Phil 156; In Re Testate Estate of Deceased Jose B. Suntay, 95 Phil 500; Abut v. Abut, et al.,   150-A Phil. 679 (1972).

 [51]J. FERIA & M.C.S. NOCHE, CIVIL PROCEDURE ANNOTATED Vol. 1 (2001) p. 297.

 [52]Gatmaytan v. Court of Appeals, 335 Phil. 155, 167 (1997).

THIRD DIVISION

G.R. No. 128099             December 20, 2006

FELIX CAMITAN, FRANCISCO CAMITAN, SEVERO CAMITAN and VICTORIA CAMITAN, petitioners, vs.THE HONORABLE COURT OF APPEALS and THE FIDELITY INVESTMENT CORPORATION, respondents

DECISION

TINGA, J.:

On 13 December 1967, the spouses Mateo Camitan and Lorenza Alcazar (spouses Camitan) sold to Fidelity Investment Corporation (respondent) a parcel of land covered by Transfer Certificate of Title (TCT) No. T-(11982)T-3188 located in Barangay Maunong, Calamba, Laguna. Upon the execution of the Deed of Absolute Sale, the spouses Camitan delivered to respondent corporation (respondent) the owner’s duplicate certificate of title (Owner’s Copy). From then on, respondent has been paying the real estate taxes due on the property and has remained in actual physical possession thereof.1

On 29 December 1993, after the death of the spouses Camitan, without the knowledge of respondent, the heirs of the spouses-petitioners herein - filed a petition for the issuance of a new Owner’s Copy,2 However, it appears that respondent was not given notice of such proceedings. The trial court issued an order of general default.3 After an ex parte presentation of evidence by the petitioners, the trial court granted the petition and directed the Register of Deeds of Laguna to issue a new Owner’s Copy, while at the same time declaring void the first Owner’s Copy, per its Order dated 08 March 1995.4

When respondent learned of the petition and order for the first time in March 1995, it caused the annotation of a notice of sale on the title of the property. Thereafter, on 26 April 1995, it filed a Notice of Adverse Claim with the Register of Deeds of Calamba, Laguna.5

In a Petition6 for annulment of judgment and cancellation of title before the Court of Appeals, respondent argued that the Order dated 08 March 1995 is null and void, having been issued by the trial court without jurisdiction since the Owner’s Copy of TCT No. T-(11982)T-3188 exists and has been in its possession, and not lost as petitioners alleged. Moreover, it claimed that petitioners have no standing to file the petition, not being the registered owners of the property, nor persons in interest, since all the rights and interest of the spouses Camitan had already been transferred to respondent upon the sale of the property. Respondent further accused petitioners of perjury; intentionally suppressing from the trial court the fact that they were not in possession of the property; and not serving notice on respondent despite knowledge that it was in actual possession of the property.7

The Court of Appeals granted the petition and ordered the annulment of the impugned Order.8 It found that the Owner’s Copy is in the possession of respondent since 1967. Thus, petitioners do not own the property, nor do they have any interest thereon that could have been the subject of succession. Moreover, the Court of Appeals found that petitioners committed perjury in executing their Joint Affidavit of Loss in support of their petition before the trial court as they made it appear that the Owner’s Copy was still in the possession of the spouses Camitan, when in fact, as early as 1967, the same had already been given to respondent. Finally, citing Demetriou v. Court of Appeals9 the Court of Appeals concluded that the trial court could not have acquired jurisdiction over the petition because the Owner’s

Copy was never lost in the first place.10 Petitioners sought reconsideration of the Resolution, but the motion was denied for lack of merit.11

Petitioners now claim that they have no knowledge of the purported sale and that they were not aware of any claim whatsoever over the property in question for over twenty-seven-(27) years, stressing that property is still registered, declared for taxation, and realty taxes paid thereon in the name of the spouses Camitan.12 They argue that the Court of Appeals erred in finding that the Owner’s Copy was not lost but was in fact in the possession of respondent since there was no documentary proof to support such conclusion. According to petitioners, respondent was not able to present even a photocopy of the Owner’s Copy to prove its possession thereof since 1967 and thus the Court of Appeals did not acquire jurisdiction over the petition for annulment.13

Petitioners add that respondent is guilty of estoppel and laches in asserting its alleged rights over the property. The unexplained concealment for a long time of its possession of the purported deed of absolute sale and Owner’s Copy, and its non-registration of the deed in its name run counter to the natural course of things and are devoid of credence.14

Lastly, petitioners allege that the property in question could be a portion of the land surrendered to the Presidential Commission on Good Government (PCGG) as part of the ill-gotten wealth of former President Ferdinand Marcos, and that the sole purpose of respondent’s concealment of the deed of absolute sale is to prevent sequestration thereof.15

On the other hand, respondent argues that its non-registration of title does not affect its ownership of the property because by the execution of the deed of absolute sale, the spouses Camitan had effectively divested themselves of all the rights, title and interest over the property. Moreover, save for their bare allegations, petitioners have not been able to rebut the presumptive authenticity of the deed of absolute sale. Lastly, respondent posits that there is no basis for the allegation that the property in question is part of the former President’s ill-gotten wealth.16

Anent the claim that it failed to attach even a photocopy of the Owner’s Copy, respondent claims that there is no rule which requires that the such document should be included in a petition for annulment of judgment. Besides, petitioners never disputed respondent’s possession of the title, but in fact merely categorized such possession as one in bad faith. More importantly, the argument that respondents should have attached the Owner’s Copy of the title was raised for the first time in petitioners’ motion for reconsideration of this Court’s resolution dated 18 June 1997 dismissing the instant petition.17 Finally, respondent maintains that petitioners are estopped from questioning the jurisdiction of the Court of Appeals since they actively participated in the proceedings therein.18

In a nutshell, the petition presents a very simple question: Whether the Court of Appeals erred when it ordered the annulment of the 08 March 1995 Order of the trial court which directed the Register of Deeds to issue a second Owner’s Copy of the title.

The Court of Appeals did not. The petition must be denied.

Annulment of judgment is a recourse equitable in character, allowed only in exceptional cases as where there is no available or other adequate remedy.19 An action for annulment of judgment is grounded only on two justifications: (1) extrinsic fraud; and (2) lack of jurisdiction or denial of due process. The purpose of

such action is to have the final and executory judgment set aside so that there will be a renewal of litigation.20

The annulment of the Order dated 08 March 1995 was premised on the lack of jurisdiction of the trial court, apparently brought about by the fact that, as found by the Court of Appeals, the duplicate certificate of the title was not lost nor destroyed, but has remained in the possession of respondent which purchased the real property from the spouses Camitan in 1967. The Court finds no reason to disturb the finding of the appellate court.

The petition for issuance of the new Owner’s Copy before the trial court was filed pursuant to Presidential Decree No. 1529, otherwise known as the "Property Registration Decree," Section No. 109 of which provides:

SEC. 109. Notice and replacement of lost duplicate certificate.—In case of loss or theft of an owner’s duplicate certificate of title, due notice under oath shall be sent by the owner or by someone in his behalf to the Register of Deeds of the province or city where the land lies as soon as the loss or theft is discovered. If a duplicate certificate is lost or destroyed, or cannot be produced by a person applying for the entry of a new certificate to him or for the registration of any instrument, a sworn statement of the fact of such loss or destruction may be filed by the registered owner or other person in interest and registered.

Upon the petition of the registered owner or other person in interest, the court may, after notice and due hearing, direct the issuance of a new duplicate certificate, which shall contain a memorandum of the fact that it is issued in place of the lost duplicate certificate, but shall in all respects be entitled to like faith and credit as the original duplicate, and shall thereafter be regarded as such for all purposes of this decree.

Thus, before a duplicate certificate of title can be replaced, the petitioner under the foregoing provision must establish that the duplicate certificate was lost or destroyed. This Court has consistently held that a trial court does not acquire jurisdiction over a petition for the issuance of a new owner’s duplicate certificate of title, if the original is in fact not lost but is in the possession of an alleged buyer.21 In other words, the fact of loss of the duplicate certificate is jurisdictional.

Petitioners question the Court of Appeals’ Resolution, claiming that respondent failed to attach to its petition for annulment of judgment of the Owner’s Copy itself, or even a photocopy thereof. Thus, they argue there was no proof that respondent has been in possession of the duplicate certificate. That being the situation, the trial court validly acquired jurisdiction over their petition for issuance of a new Owner’s Copy, petitioners conclude.

Respondent, so it appears, did not attach to its petition for annulment of judgment the Owner’s Copy of the title. This lapse, however, does not suffice as basis to set aside the questioned resolutions of the Court of Appeals.

A review of the records of the case shows that petitioners never questioned respondent’s possession of the Owner’s Copy, its actual and physical possession and occupation of the property, as well as its payment of real estate taxes due on the property.

In its petition for annulment before the Court of Appeals, respondent alleged that:

4. On December 13, 1967, the spouses Camitan sold the Property to petitioner, as documented by a "Deed of Absolute Sale" dated 13 December 1967, a copy of which is attached hereto as annex "C". Pursuant to the said Deed of Absolute Sale, petitioner paid the purchase price in full.

5. Upon the execution of the Deed of Absolute Sale, the vendors delivered to petitioner the owner’s duplicate copy of the Title, which Title has since been in the possession of petitioner. Also, since 1967 and to this day, petitioner has been in actual physical possession and continuous occupation of the above-described Property. Moreover, petitioner has been the one paying the real estate taxes due on the Property.22

While for its part, respondent treated the allegations perfunctorily in this wise in its Comment:

SPECIFIC DENIALS

x x x x

2. Private respondents deny specifically paragraphs 4 and 5 of the said petition for lack of knowledge and information sufficient to form a belief as to the truth of falsity of the allegations contained therein and as heretofore substantiated.23

The relevant provisions of the Rules of Court are Sections 10 and 11, Rule 8, which read:

SEC. 10. Specific denial. — A defendant must specify each material allegation of fact the truth of which he does not admitand, whenever practicable, shall set forth the substance of the matters upon which he relies to support his denial. Where a defendant desires to deny only a part of an averment, he shall specify so much of it as is true and material and shall deny only the remainder. Where a defendant is without knowledge or information sufficient to form a belief as to the truth of a material averment made in the complaint, he shall so state, and this shall have the effect of a denial. (Emphasis supplied)

SEC.11. Allegation not specifically denied deemed admitted.— Material averment in the complaint, other than those as to the amount of unliquidated damages, shall be deemed admitted when not specifically denied. Allegations of usury in a complaint to recover usurious interest are deemed admitted if not denied under oath. (Emphasis supplied)

Although petitioners put their unmistakably sparse denial of respondent’s allegations relative to the execution of the deed of sale in its favor and its possession of the Owner’s Copy under the heading "SPECIFIC DENIALS" and anteceding it with the adverb "specifically,’ the same cannot function as an operative denial within the purview of the Rules. A denial is not specific simply because it is so qualified by the defendant. A general denial does not become specific by the use of the word "specifically." When the matters of whether the defendant alleges having no knowledge or information sufficient to form a belief, are plainly and necessarily within the defendant’s knowledge, his alleged ignorance or lack of information

will not be considered as a specific denial.24 In one case, it was held that when a respondent makes a "specific denial" of a material allegation of the petition without setting forth the substance of the matters relied upon to support its general denial, when such matters were plainly within its knowledge and the defendant could not logically pretend ignorance as to the same, said defendant fails to properly tender an issue.25 Petitioners’ "specific denial" in this case is ineffective and amounts to an admission pursuant to Rule 8, Sec. 11 of the Rules of Court.

Petitioners make an issue of the lack of material evidence to support the Court of Appeals’ conclusion that the Owner’s Copy was not lost, because respondent failed to attach the said Owner’s Copy or even a photocopy thereof. The argument is unavailing.

Firstly, there is no need of proof because of petitioners’ implied admission thereof.

Secondly, the matter should have been raised in the proceedings before the Court of Appeals and not before this Court. Despite various opportunities, petitioners failed to do so before the Court of Appeals. In fact, it was only in petitioners’ Motion for Reconsideration of our

Resolution dated 18 June 1997 dismissing their petition26 that they claimed that the Court of Appeals committed "grave error tantamount to lack of jurisdiction thereof when it declared annulled the contested Order x x x x for lack of material evidence to support that the said title was lost."27 We have consistently held that matters, theories or arguments not brought out in the original proceedings cannot be considered on review or appeal where they are raised for the first time.28

Finally, having actively participated in the proceedings before the Court of Appeals, petitioners can no longer question its authority.29

Everything considered, the Court of Appeals was satisfied that the Owner’s Copy of the TCT No. (T-11982) T-3188 is not lost, but rather, as admitted by petitioners, it has been in the possession of another person. We find no reason to disturb the said finding.

Petitioners’ other claims, to wit: (i) respondent is guilty of estoppel and laches in asserting its rights over the property; (ii) respondent is guilty of fraud and bad faith when it concealed the possession of the deed of absolute sale of the property and the Owner’s Copy, and when it failed to register and have the title of the property transferred to its name; and (iii) the property in question could be a part of ill-gotten wealth surrendered to the PCGG, are immaterial and irrelevant to the case. Thus, there is no need to dwell on them. The instant petition merely questions the propriety of the annulment order on the ground of the trial court’s lack of jurisdiction. Any other issues, such as the ownership of the property, or the motives for the non-registration of the sale or the non-transfer of the title are beyond the ambit of the petition. Besides, the determination of said issues necessitates a factual inquiry which this Court does not perform in a petition for review.30

WHEREFORE, the petition is DENIED and the challenged resolution of the Court of Appeals is AFFIRMED, with costs against petitioners.

SO ORDERED.

Quisumbing, J., Chairperson, Carpio, Carpio Morales, and Velasco, Jr.,, JJ., concur.

Footnotes

1 Respondent’s Petition in the Court of Appeals, Rollo, pp. 85-94, 87.

2 Docketed as SLRC Case No. 1199-1993-C, raffled to Branch 35, Regional Trial Court of Calamba.

3 Order dated 08 March 1995, rollo, pp. 61-62.

4 Id. at 82-84.

5 Id. at 248.

6 Id. at 161-170 and 237-246.

7 Id.

8 Resolution of the Court of Appeals dated 31 May 1996, id. at 115-119.

9 G.R. No. 115595, 14 November 1994, 238 SCRA 158, 162.

10 Rollo, pp. 117-118.

11 Id. at 132.

12 Id. at 44.

13 Reply (for the Petitioners); id. at 317-321.

14 Id. at 45-48.

15 Id. at 48-50.

16 Id. at 232-234.

17 The petition was dismissed for being filed out of time and for failure to submit an affidavit of service of copies to respondents. The petition, however, was reinstated on 25 August 1997 upon the motion for reconsideration filed by petitioners.

18 Id. at 327-330.

19 Espinosa v. Court of Appeals, G.R. No. 128686, 28 May 2004, 430 SCRA 96, 103, citing Barco v. Court of Appeals, G.R. No. 120587, 20 January 2004, 420 SCRA 162.

20 Hi-Tone Marketing Corporation v. Baikal Realty Corporation, G.R. No. 149992, 20 August 2004, 437 SCRA 121, 131.

21 Straight Times, Inc. v. Court of Appeals, 356 Phil. 217, 227-228 (1998); Demetriou v. Court of Appeals, supra note 9; Arcelona. v. Court of Appeals,345 Phil. 250, 265 (1997).

22 Rollo, p. 87.

23 Comment to the petition for annulment, id. at 97-113, 111.

24 Philippine National Bank v. Court of Appeals, G.R. No. 126153, 14 January 2004, 419 SCRA 281, 287, citing Vergara v. Suelto, 156 SCRA 753 (1987).

25 J.P. Juan & Sons, Inc. v. Lianga Industries, Inc., 139 Phil. 77, 84.

26 Rollo, pp. 148-149.

27 Id. at 153.

28 De Rama v. Court of Appeals, G.R. No. 131136, 28 February 2001, 353 SCRA 94, 108, citing Salafranca v. Philamlife Village Homeowners Association, Inc., 300 SCRA 469, 480 (1998).

29 Spouses Refugia, et al. v. Court of Appeals, G.R. No. 118284, 05 July 1996, 258 SCRA 317, 356.

30 Naguiat v. Court of Appeals, 459 Phil. 237, 241 (2003).

SECOND DIVISION  ESTATE OF TARCILA VDA. DE                                             VILLEGAS,                             Petitioner,                                    - versus -                                            G.R. No. 143006  JESUS R. GABOYA, JOSE CUENCOBORROMEO, and RICARDO V.                Present:REYES, in their capacity asAdministrators of the Intestate Estate                      PUNO, J., Chairperson,of Vito Borromeo, CESAR GILLAMAC,              SANDOVAL-GUTIERREZ,in his capacity as the Register of Deeds                  CORONA,of Cebu City, PILAR N. VDA. DE                        AZCUNA, andBORROMEO, MARIA B. PUTONG,                             GARCIA, JJ.FEDERICO V. BORROMEO, JOSEBORROMEO, CONSUELO V.BORROMEO, CANUTO V.                        Promulgated:BORROMEO, JR., PATROCINIO B.HERRERA, EMILIO A. BORROMEO, JR.,          July 14, 2006CORAZON A. BORROMEO, EDUARDOBORROMEO, TOMAS BORROMEO,AMELIA BORROMEO, COSMEBORROMEO, PETRA C. BORROMEO,JOSE ANTONIO BORROMEO,                                   VITALIANA BORROMEO VDA. DELEONTING, JOSE C. BORROMEO,FORTUNATO BORROMEO, AMELINDAB. TALAM, ANGELITA BORROMEO,MARIA B. VDA. DE REUNILLA,JOSEFINA BORROMEO NERI,PRESCILLANO TITO BORROMEO,AMELIA R. BORROMEO, ESTATE OFSALUD BORROMEO, MARIA B. ATEGA,SISTER ROSARIO BORROMEO, SISTERLUZ BORROMEO, HERMINIGILDANONNENKAMP, FE BORROMEOQUEROS, HON. FERNANDO RUIZ,HON. NUMERIANO ESTENZO, ATTY.FILIBERTO LEONARDO, ATTY.NAZARIO PACQUIAO, ATTY.CIPRIANO RACAZA, ATTY. EMILIOBENITEZ, JR., ATTY. CASTOR Y.HONTANOSAS, ATTY. BENJAMINRALLON, ATTY. CALIXTO P.VALLENTE, ATTY. GAUDISIO C.VILLAGONZALO, HON. ALFREDOBENIPAYO, ATTY. CESAR GONZALES,ATTY. NICOLAS JUMAPAO, ATTY.RAUL SESBRENO, ATTY. MIGUELCUENCO, ATTY. FILEMONFERNANDEZ, ATTY. QUIRICO DELMAR, ATTY. DOMINGO ANTIGUA,ATTY. VICENTE JAYME, ATTY.ROSARIO DE JESUS ALANO, AMPAROMERCADO ZOSA, ATTY. FRANCISZOSA, ANGELO ZOSA, LORNAZOSA, ZONIA ZOSA, NORA ZOSA,ROLANDO ZOSA, ELBERT ZOSA,EVELYN ZOSA, JOCELYN ZOSA,MANUEL ZOSA, JR., and MA.LOURDES ZOSA,                                      Respondents.x ---------------------------------------------------------------------------------------- x  

DECISION 

AZCUNA, J.:  

          This is a petition for review on certiorari of the Resolutions of the Court of Appeals in CA-G.R. CV No.

57852 promulgated on July 28, 1999 and April 18, 2000.  The Resolution dated July 28, 1999 dismissed

petitioner’s appeal, while the Resolution datedApril 18, 2000 denied petitioner’s motion for

reconsideration.  

 

          The antecedents are as follows:

 

          Vito Borromeo and Juliana Evangelista were husband and wife.  Juliana died intestate on August 13,

1939, while Vito died onMarch 13, 1952.  They had no children but left extensive properties in

the province of Cebu.

 

Special Proceedings No. 916-R

 

          On April 19, 1952, Jose H. Junquera filed in the  Court of First Instance of Cebu a petition for the

probate of a document, purportedly  Vito Borromeo’s  will,  devising all his properties to Tomas, Fortunato

and Amelia, all surnamed Borromeo, in equal and undivided shares, and designating Junquera as

executor.  On May 28, 1960, in Special Proceedings No. 916-R, the trial court denied the probate as the will

was found to be a forgery.  In Junquera v. Borromeo,[1] promulgated on March 30, 1967, this Court affirmed

the trial court’s decision.

 

          Special Proceedings No. 916-R was converted into an intestate proceeding for the settlement of the

estate of Vito Borromeo. Several persons appeared before the court claiming to be heirs of Vito Borromeo.

 

          On April 10, 1969, the trial court, invoking Article 972 of the Civil Code, issued an order declaring the

following, to the exclusion of all others, as the intestate heirs of Vito Borromeo:  Jose Cuenco Borromeo,

Judge Crispin Borromeo, Vitaliana Borromeo, Patrocinio Borromeo Herrera, Salud Borromeo, Asuncion

Borromeo, Marcial Borromeo, Amelinda Borromeo de Talam, and the heirs of Canuto Borromeo.  The trial

court also ordered that the assets of the intestate estate of Vito Borromeo be divided into 4/9 and 5/9

groups and distributed in equal shares among the nine intestate heirs.

 

On April 21 and 30, 1969, the declared heirs, except for Patrocinio B. Herrera, signed an agreement

to partition the properties of the deceased Vito Borromeo.  The agreement was approved by the trial court

in its Order of August 15, 1969.  In the Order, the trial court directed the Administrator, Atty. Jesus Gaboya,

Jr., to partition the properties of the deceased in the way and manner they were divided and partitioned in

the Agreement of Partition.

 

On October 2, 1969, Tarcila Vda. de Villegas filed a Third Party Claim and/or Claim in Intervention in

Special Proceedings No. 916-R claiming ownership and seeking recovery of the one-half share of the late

Juliana Evangelista de Borromeo in the conjugal properties left by the Spouses Vito Borromeo and Juliana

Evangelista.  Tarcila Vda. de Villegas was the wife of deceased Arturo Villegas, alleged nephew and heir of

Juliana Evangelista.   The trial court denied Tarcila’s claim in intervention on the ground that as a probate

court, it had no jurisdiction to determine with finality the question of ownership over the said one-half

portion.

 

          On August 25, 1972, Fortunato Borromeo, who had earlier claimed to be an heir under the forged

will, filed a motion before the trial court praying that he be declared as one of the heirs of the deceased

Vito Borromeo, alleging that he is an illegitimate son of the deceased and that in the declaration of heirs

made by the trial court, he was omitted, in disregard of the law making him a forced heir entitled to

receive a legitime like all other forced heirs.

 

On June 25, 1973, the trial court dismissed the motion since it was already barred by the Order

dated April 10, 1969 declaring the persons named therein as the legal heirs of the deceased Vito

Borromeo.

 

Fortunato filed a motion for reconsideration, and claimed that in a Waiver of Hereditary Rights

dated July 31, 1967, five of the nine heirs relinquished to him their shares in the disputed estate. 

 

In an Order dated December 24, 1974, the trial court declared Fortunato Borromeo as entitled to

5/9 of the estate of Vito Borromeo after concluding that the five declared heirs who signed the waiver

agreement assigning their hereditary rights to Fortunato had lost the same rights. A motion for

reconsideration of the Order was denied on July 7, 1975. 

 

On appeal to the Court of Appeals, the same was certified to this Court as only questions of law

were involved.  The case, docketed as G.R. No. L-41174, was decided together with four other

cases[2]  stemming from Special Proceedings No. 916-R inBorromeo-Herrera v. Borromeo[3]  promulgated

on July 23, 1987.  The dispositive portion of the Decision reads: WHEREFORE, -- (1)               In G.R. No. 41171, the order of the respondent judge dated December 24, 1974,

declaring the respondent entitled to 5/9 of the estate of the late Vito Borromeo and the order dated July 7, 1975, denying the petitioner’s motion for reconsideration of the aforementioned order are hereby SET ASIDE for being NULL and VOID;

 (2)               In G.R. No. 55000, the order of the trial court declaring the waiver document

valid is hereby SET ASIDE; (3)               In G.R. No. 63818, the petition is hereby DENIED. The issue in the decision of

the Intermediate Appellate Court disqualifying and ordering the inhibition of Judge Francisco P. Burgos from further hearing Special Proceedings No. 916-R is declared moot and academic.  The judge who has taken over the sala of retired Judge Francisco P. Burgos shall immediately conduct hearings with a view to terminating

the proceedings.  In the event that the successor-judge is likewise disqualified, the order of the Intermediate Appellate Court directing the Executive Judge of the 

Regional Trial Court of Cebu to re-raffle the case shall be implemented; 

(4)               In G.R. No. 65995, the petition is hereby GRANTED.  The issue seeking to restrain Judge Francisco P. Burgos from further acting in G.R. No. 63818 is MOOT and  ACADEMIC;

 (5)               In G.R. No.  62895, the trial court is hereby ordered to speedily terminate the

(sic) close Special Proceedings No. 916-R, subject to the submission of an inventory of the real properties of the estate and an accounting of the cash and bank deposits  by the petitioner-administrator of the estate as required by this Court in its Resolution dated June 15, 1983; and

 (6)               The portion of the Order of August 15, 1969, segregating 40% of the market

value of the estate from which attorney’s fees shall be taken and paid should be, as it is hereby DELETED.  The lawyers should collect from the heirs-distributees who individually hired them, attorney’s fees according to the nature of the services rendered but in amounts which should not exceed more than 20% of the market value of the property the latter acquired from the estate as beneficiaries.

 SO ORDERED.[4]

  

On  May 29, 1989, herein petitioner filed a Motion to  Liquidate the Conjugal Properties and

Separate Paraphernal Properties of the Wife of Decedent  Vito Borromeo  during the pendency of Special

Proceedings No. 916-R at the Regional Trial Court of Cebu. Petitioner also filed a motion for

resolution.  Both motions were denied by the trial court in its Order of August 25, 1989.

 

 On October 31, 1989, petitioner filed with the  Court of Appeals  a petition for certiorari with a

prayer for injunction  seeking the annulment and setting aside of the trial court’s Order dated August 25,

1989.  The petition was docketed as CA-G.R. SP No. 19284, entitled Estate of Tarcila Vda. de Villegas v.

Honorable German Lee, et al.

In a Decision[5] promulgated on August 30, 1990, the Court of Appeals dismissed the petition for lack of

merit.

 

On November 20, 1990, petitioner filed a petition for certiorari questioning the decision of the Court

of Appeals with this Court, docketed as G.R. No. 98179.  The petition was denied due to failure to comply

with the following requirements of the Rules of Court: (1) Full payment of the prescribed docketing and

other fees at the time of the filing of the petition; and (2) a clearly legible duplicate original or certified

true copy of the decision, judgment, resolution or order subject of the petition appended to the petition.

 

Civil Case No. R-11841

 

Meantime, on August 26, 1970, petitioner Estate of Tarcila[6] filed with the Regional Trial Court of

Cebu the instant civil case for accounting, liquidation of conjugal partnership, separation and delivery of

property, docketed as Civil Case No. R-11841, which was incidentally raffled off to the same branch trying

Special Proceedings No. 916-R.  

 

On February 28, 1989, the trial court dismissed Civil Case No. R-11841.  The dispositive portion of

the Order of dismissal reads:

             WHEREFORE, in view of the fact that the plaintiff has not pursued her claims properly, by filing an intervention in Sp. Proc. No. 916 and on account of laches, the plaintiff’s claim in this case may be deemed to have been barred by laches as held in the case of Go Chi Gun & Go Away, et al. versus Go Cho, 96 Phil. 622.  This Court also hereby resolves to dismiss this case for having become moot and academic by virtue of the decision of the Supreme Court in the five enumerated cases in relation to Sp. Proc. No. 916. 

IT IS SO ORDERED.[7]  

On May 16, 1989, the trial court denied the motion for reconsideration of the Order of dismissal.

 

Petitioner appealed to the Court of Appeals. In a Decision[8]  dated December 8, 1992 in CA-G.R. CV

No. 21826, the Court of Appeals set aside the Order of dismissal and remanded the case to the court of

origin for further proceedings. 

 

In a Resolution dated February 18, 1993, the Court of Appeals denied the motion for

reconsideration filed by respondent Raul R. Sesbreno,[9] and a motion filed by petitioner for the appellate

court to direct the Regional Trial Court of Cebu, Branch 15 to segregate its alleged one-half portion from

the Vito Borromeo estate proceedings pending determination of Civil Case No. R-11841. 

 

Raul Sesbreno filed before this Court a petition for review on certiorari of the Decision of the Court

of Appeals datedDecember 8, 1992, which set aside the Order of dismissal of the trial court.   This Court

denied the petition in a Resolution[10] datedOctober 19, 1994.

 

While some defendants filed their respective Answers and counterclaims with the trial court,

defendants Jose Borromeo, Maria B. Putong, Federico Borromeo, Consuelo Borromeo, Benjamin S. Rallon,

and the Estate of Salud Borromeo filed on October 11, 1996 an Amended Motion to Dismiss Civil Case No.

R-11841 on the ground that plaintiff’s cause of action was already barred by a prior judgment, and the

plaintiff failed to prosecute its action for an unreasonable length of time. Plaintiff (petitioner) filed an

Opposition to the Amended Motion to Dismiss.

On September 15, 1997, the trial court issued an Order dismissing the case, the dispositive portion

of which reads: WHEREFORE, in view of the foregoing considerations, this Court resolves to finally

DISMISS this case on the grounds of prescription, laches and estoppel and, that the cause of action is now barred by a prior judgment. 

SO ORDERED.[11]

  

Petitioner appealed to the Court of Appeals. Respondents filed a Motion to Dismiss Appeal on the

following grounds: (a) Appellant did not state in the caption all the names of the defendants-appellees who

number more that 50 in all in violation of  Sec. 1, Rule 44 of the 1997 Rules of Civil Procedure; (b)

appellant failed to follow Sec. 4,[12] Rule 41, Rules of Civil Procedure; and (c) appellant failed to follow  Sec.

13 (a), (c) and (d), Rule 44 of the Rules of Civil Procedure. Petitioner filed an Opposition to the motion. 

 

In a Resolution promulgated on July 28, 1999 in CA-G.R. CV No. 57852, the Court of Appeals  stated

that appellant (petitioner) validly refuted the first two grounds, but failed  to justify its non-compliance with

the third ground, that is, compliance with paragraphs (a), (c) and (d) of Sec. 13, Rule 44  of the Rules of

Civil Procedure.

 

The Court of Appeals found, thus:

 A perusal of the appellant’s brief reveals that it does not have a subject index with a

digest of the arguments and page references, a table of cases alphabetically arranged; under the heading ”Statement of the 

Case” there is no statement as to the summary of the proceedings, the appealed rulings and orders of the court; and there is no “Statement of the Facts” showing a clear and concise statement in a narrative form the facts admitted by both parties and those in controversy in clear violation of the Revised Rules of Court, thereby warranting dismissal of the appeal.  The appeal can even be considered as dilatory.[13]

  The dispositive portion of the Resolution reads:  

WHEREFORE, the motion to dismiss appeal is granted, and the appeal is hereby dismissed. 

SO ORDERED.[14]

  

In a Resolution[15] dated April 18, 2000, the Court of Appeals denied petitioner’s motion for

reconsideration for lack of merit.

 

On June 13, 2000, petitioner filed this petition for review on certiorari of the decision of the Court of

Appeals.

 

Petitioner raises the following issues: 

I 

WHETHER OR NOT THE APPELLANT’S BRIEF IN CA-G.R. CV NO. 57852 SUBSTANTIALLY COMPLIED WITH THE REQUIREMENTS OF SEC. 13 (A), (C) AND (D) RULE 44 OF THE 1997 RULES OF CIVIL PROCEDURE.

 II

 WHETHER OR NOT THE ORDER DATED SEPTEMBER 15, 1997 DISMISSING THE

COMPLAINT IN CIVIL CASE NO. R-11841 IS NULL AND VOID FOR BEING CONTRARY TO THE DECISION OF THE COURT OF APPEALS IN CA-G.R. NO. 21826 WHICH JUSTIFIES SETTING ASIDE TECHNICALITIES AND THE AFOREMENTIONED SEPTEMBER 15, 1997 ORDER.[16]

  

Petitioner contends that it has substantially complied with the requirements of Sec. 13 (a), (c) and

(d), Rule 44 of the Rules of Civil Procedure. It prays for a liberal construction of the Rules in accordance

with Sec. 6, Rule 1 of the Rules of Court in order to promote its objective of securing a just, speedy and

inexpensive determination of every action and proceeding.

 

An examination of the Appellant’s Brief shows that, indeed, petitioner failed to comply with the

requirements of   Sec. 13 (a), (c) and (d), Rule 44 of the Rules of Civil Procedure, which provides:

  SEC. 13. Contents of appellant’s brief.--The appellant’s brief shall contain, in the

order herein indicated, the following:  (a)                A subject index of the matter in the brief with a digest of the arguments and

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

x x x(c)                Under the heading “Statement of the Case,” a clear and concise statement of

the nature of the action, a summary of the proceedings, the appealed rulings and orders of the court, the nature of the judgment and any other matters necessary to an understanding of the nature of the controversy, with page references to the record;

 (d)               Under the heading “Statement of Facts,” a clear and concise statement in a

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

   

The Appellant’s Brief does not have a subject index of the matter in the brief as specified in Sec. 13

(a), Rule 44 of the Rules of Court. Moreover, the Statement of the Case has no statement of the summary

of the proceedings, the appealed rulings and orders of the court, with page references to the record as

required by Sec. 13 (c), Rule 44 of the Rules of Court. Further, the Appellant’s Brief has no portion entitled

“Statement of Facts,” and, therefore, no clear and concise statement in narrative form of the facts

admitted by both parties and those in controversy, with page references to the record, in violation of Sec.

13 (d), Rule 44 of the Rules of Court.

 

The Court of Appeals was, therefore, justified in dismissing the appeal under Sec. 1 (f), Rule 50 of

the Rules of Court, thus: 

SEC. 1.  Grounds for dismissal of appeal. –An appeal may be dismissed by the Court of Appeals, on its own motion or on that of the appellee, on the following grounds:

 x x x

 (f) Absence of specific assignment of  errors in the appellant’s brief or of page

references     to the record as required in section 13, paragraphs (a), (c), (d) and (f) of     Rule 44.[17] 

  

In Del Rosario v. Court of Appeals[18] and Bucad v. Court of Appeals,[19] the Court dismissed the

appeal for a similar violation by the appellants of Sec. 1, Rule 50 of the Rules of Court.   

 

The right to appeal is a statutory right and a party who seeks to avail of the right must faithfully

comply with the rules.[20] Petitioner’s plea for liberal application of the rules would mean deviation from the

aforementioned rules, which cannot be tolerated. These rules are designed to facilitate the orderly

disposition of appealed cases.[21] 

 

As a result, there is no need to discuss the second issue raised by petitioner.  

`WHEREFORE, the petition is DENIED.  The Resolutions of the Court of Appeals dated July 28,

1999 and April 18, 2000are AFFIRMED.

 

Costs against petitioner.

 

SO ORDERED.

 

 ADOLFO S. AZCUNA

                                                                         Associate Justice  

WE CONCUR:   

REYNATO S. PUNOChairperson

Associate Justice   

                  ANGELINA SANDOVAL-GUTIERREZ           RENATO C. CORONA                  Associate Justice                                           Associate Justice    

CANCIO C. GARCIAAssociate Justice

  

[1]               No. L-18498,  19 SCRA 656.[2]               Docketed as G.R. No. L-55000,  G.R. No. L-62895,  G.R. No. L-63818 and G.R. No. L-65995.[3]               G.R. No. L-41174,  G.R. No. L-55000,  G.R. No. L-62895,  G.R. No. L-63818 and G.R. No. L-

65995, July 23, 1987, 152 SCRA 171.[4]               Id. at  195-196.[5]               Records, Vol. IV, p. 2.[6]               Tarcila died on August 4, 1970.[7]               CA Decision, CA-G.R. CV No. 21826, Rollo,  p. 83.[8]               Id. at  81.[9]               Also spelled as “Sesbreño.”[10]             Records, Vol. IV, p. 13.[11]             Id. at 258.[12]             SEC. 4.  Appellate court docket and other lawful fees.—Within the period for taking an appeal,

the appellant shall pay to the clerk of the court which rendered the judgment or final order appealed from, the full amount of the appellate court docket and other lawful fees. Proof of payment of said fees shall be transmitted to the appellate court together with the original record or  the record on appeal.

[13]             Rollo, p. 43.[14]             Id. at 44.[15]             Id. at 46.

[16]             Id. at 27.[17]             Underscoring  supplied.[18]             G.R. No. 113890, February 22, 1995, 241 SCRA 553.[19]             G.R. No. 93783, December 11, 1992, 216 SCRA 423.[20]             Supra, note 18, at 557.[21]             Ibid.

SPECIAL SECOND DIVISION 

[G.R. No. 173942, June 25, 2008] 

FIL-ESTATE PROPERTIES, INC. AND FAIRWAYS AND BLUE-WATERS RESORT AND COUNTRY CLUB, INC., PETITIONERS, VS. HON. MARIETTA J. HOMENA-VALENCIA, IN HER CAPACITY AS

PRESIDING JUDGE OF BRANCH 1, REGIONAL TRIAL COURT, KALIBO, AKLAN, AND SULLIAN SY NAVAL, RESPONDENTS.

R E S O L U T I O N 

TINGA, J,:

For resolution is a Motion for Reconsideration[1] dated 19 November 2007 filed by petitioners Fil-Estate Properties, Inc. and Blue-waters Resort and Country Club, seeking reconsideration of the Decision[2] of this Court dated 15 October 2007 which denied their petition.

A brief recapitulation of the relevant facts, even though they have already been narrated in the Decision, is in order.

In 1998, private respondent Sullian Sy Naval filed a complaint[3] against petitioners, seeking the recovery of a parcel of land which petitioners had allegedly taken possession of by constructing a golf course within the vicinity of her property. Counsel for petitioners failed to attend the pre-trial, and only private respondent presented evidence before the Regional Trial Court (RTC) of Aklan which heard the complaint. The RTC rendered a decision[4] in favor of private respondent of which petitioners moved for reconsideration.

The crux of the present matter lies with the facts surrounding the motion for reconsideration. The motion was filed on 10 May 2000,[5] thirteen (13) days after petitioners received their copy of the RTC's decision. On 26 July 2000, the RTC issued an order[6] of even date denying the motion. Petitioners alleged in their petition that they received the order denying the motion for reconsideration on 9 August 2000. They filed a Notice of Appeal on 11 August 2000,[7] but the postal money orders purchased and obtained to pay the filing fee were posted

only on 25 August 2000, or beyond the reglementary period to perfect the appeal. Consequently, the RTC denied the appeal[8] and such denial was sustained by the Court of Appeals after petitioners filed a special civil action for certiorari[9] assailing the RTC's refusal to give due course to the appeal.

The Petition[10] before this Court relied on a rather idiosyncratic theory that only upon the adoption of the amendments to Section 13, Rule 41 of the Rules of Civil Procedure effective 1 May 2000 did it become obligatory on the part of trial courts to dismiss appeals on account of the failure to pay the full docket fees. The Court, in its 15 October 2007 Decision,[11] rejected this theory and reaffirmed the rule ordaining the disallowance of the appeal or notice of appeal when the docket fee is not paid in full within the period for taking the appeal.

The present Motion for Reconsideration[12] centers on a different line of argument: that following our 2005 decision in Neypes v. Court of Appeals,[13] their Notice of Appeal was perfected on time as the full docket fees were paid within fifteen (15) days from their receipt of the RTC's order denying their motion for reconsideration. Neypeshas established a new rule whereby an appellant is granted a fresh 15-day period, reckoned from receipt of the order denying the motion for reconsideration, within which to perfect the appeal.

Petitioners clarify that they received the RTC's order denying their motion for reconsideration on 11 August 2005,[14] a fact which is confirmed by the case records even though the petition had misstated that said order was received on 9 August 2005. Petitioners argue that following Neypes, they were entitled to a new 15-day period, i.e., until 26 August 2005 or one (1) day after they had posted the full appellate docket fees, to perfect the appeal.

Most vitally, petitioners point out that on 10 October 2007, or just five (5) days before the promulgation of the assailed Decision, the Court through the Third Division rendered a decision in Sps. De los Santos v. Vda. De Mangubat[15] declaring that theNeypes ruling indeed can be retroactively applied to prior instances.

Private respondent filed her Comment[16] on the Motion for Reconsideration. She insists that Neypes should not be retroactively applied, but she fails to cite any authority on that argument or otherwise contend with the ruling in Sps. De los Santos.

The determinative issue is whether the "fresh period" rule announced in Neypes could retroactively apply in cases where the period for appeal had lapsed prior to 14 September 2005 when Neypes was promulgated. That question may be answered with the guidance of the general rule that procedural laws may be given retroactive effect to actions pending and undetermined at the time of their passage, there being no vested rights in the rules of procedure.[17] Amendments to procedural rules are procedural or remedial in character as they do not create new or remove vested rights, but only operate in furtherance of the remedy or confirmation of rights already existing.[18]

Sps. De los Santos reaffirms these principles and categorically warrants that Neypesbears the quested retroactive effect, to wit:Procedural law refers to the adjective law which prescribes rules and forms of procedure in order that courts may be able to administer justice. Procedural laws do not come within the legal conception of a retroactive law, or the general rule against the retroactive operation of statues they may be given retroactive effect on actions pending and undetermined at the time of their passage and this will not violate any right of a person who may feel that he is adversely affected, insomuch as there are no vested rights in rules of procedure.

The "fresh period rule" is a procedural law as it prescribes a fresh period of 15 days within which an appeal may be made in the event that the motion for reconsideration is denied by the lower court. Following the rule on retroactivity of procedural laws, the "fresh period rule" should be applied to pending actions, such as the present case.

Also, to deny herein petitioners the benefit of the "fresh period rule" will amount to injustice, if not absurdity, since the subject notice of judgment and final order were issued two years later or in the year 2000, as compared to the notice of judgment and final order in Neypeswhich were issued in 1998. It will be incongruous and illogical that parties receiving notices of judgment and final orders issued in the year 1998 will enjoy the benefit of the "fresh period rule" while those later rulings of the lower courts such as in the instant case, will not.[19]

Notably, the subject incidents in Sps. De los Santos occurred in August 2000, at the same month as the relevant incidents at bar. There is no reason to adopt herein a rule that is divergent from that in Sps. De los Santos.

We have reexamined the petition to ascertain whether there is any other impediment to granting favorable relief to petitioners based on the retroactive application of theNeypes doctrine.

Private respondent does argue in her comment on the petition[20] and on the motion for reconsideration[21] that petitioners' special civil action for certiorari before the Court of Appeals was not timely lodged. This argument is premised on petitioners' requested relief that direct that proceedings de novo be had starting from pre-trial, by annulling the RTC's decision and the court's ruling on the motion for reconsideration, which was filed by petitioners beyond the 60-day period mandated by Section 4, Rule 65 of the Rules of Court for filing a special civil action for certiorari.

Petitioners, in their Reply,[22] argue that the certiorari action was timely filed since the RTC had disallowed the notice of appeal in its 13 September 2000 Order, a copy of which was received by petitioners on 22 September 2000 or within the 60-day period prior to the filing of their certiorari petition.

Certainly, the RTC's order denying the notice of appeal was timely assailed by petitioners via a special civil action filed with the Court of Appeals. Granting positive relief on that point would have the effect of giving due course to the notice of appeal. But is there basis for this Court to take the extra step as requested by petitioners and go as far as to annul the RTC's rulings that granted the complaint filed by private respondent?

We deem the challenges raised by petitioners against the correctness of the RTC's decision and its subsequent resolution on the motion for reconsideration as inappropriate for this Court to decide. Such issues may very well be tackled in petitioners' appeal before the Court of Appeals. After all, as is now conceded, the appeal was timely filed and the existence of such appeal would, per Section 1, Rule 65, bar the certiorari action from correcting errors which may be reversed on appeal. Besides, the resolution of such issues requires a certain level of factual determination, especially as to the circumstances surrounding the resignation of the counsel who had initially appeared in behalf of the petitioners, the service of the order resetting the pre-trial and all subsequent notices of trial to petitioners after private respondent had been allowed to present evidence ex parte. Unlike the Court of Appeals, this Court is not a trier of facts.[23]

WHEREFORE, the motion for reconsideration is GRANTED and the instant petition is GRANTED IN PART. The assailed rulings of the Court of Appeals and the RTC Order dated 13 September 2000 are SET ASIDE. The Court of Appeals is DIRECTED to give due course to petitioners' appeal in Civil Case No. 5626, and to hear and decide such appeal with deliberate dispatch. No pronouncement as to costs.

SO ORDERED.

Quisumbing, (Chairperson), Carpio, Carpio-Morales, and Velasco, Jr., concur.

[1] Rollo, pp. 424-436.

[2] Id. at 406-423.

[3] Id. at 72-77.

[4] Id. at 99-108.

[5] Id. at 109-111.

[6] Id. at 118-121.

[7] Id. at 122-123.

[8] Id. at 124-125.

[9] Id. at 126-153.

[10] Id. at 10-56.

[11] Supra note 2.

[12] Supra note 1.

[13] G.R. No. 141524, 14 September 2005, 469 SCRA 633.

[14] Rollo, pp. 432-433. Petitioners support this assertion by attaching to their Motion for Reconsideration a copy of the registry receipt which indicated that its then counsel, Atty. Uytiepo, received the order on "8/11/00." See id. at 438.

[15] G.R. No. 149508, 10 October 2007, 535 SCRA 411.

[16] Rollo, pp. 446-455.

[17] Pfizer,Inc. v. Galan, 410 Phil. 483, 491 (2001).

[18] Id.

[19] De los Santos v. Vda. De Mangubat, supra note 15, at 422-423.

[20] Rollo, pp. 337-353.

[21] Id. at 446-456.

[22] Id. at 358-373.

[23] See, e.g., Naguiat v. Court of Appeals, 459 Phil. 237, 241-242 (2003).

    

 SECOND DIVISION

                                                       JUAN DE DIOS CARLOS,                 G.R. No.  135830                    Petitioner,                                                            Present:                                                            PUNO, J.,             -  versus  -                                              Chairman,                                                           AUSTRIA-MARTINEZ,                                                           CALLEJO, SR.,                                                           TINGA,  andFELICIDAD SANDOVAL, also              CHICO-NAZARIO, JJ.known as FELICIDAD S. VDA.                     DE CARLOS or FELICIDAD S.CARLOS or FELICIDAD              Promulgated:SANDOVAL DE CARLOS, and TEOFILO CARLOS II,                             Respondents.                 September 30, 2005 x-------------------------------------------------------------------x SIDDCOR (now MEGA PACIFIC)      G.R. No.  136035INSURANCE CORPORATION,                       Petitioner,  

-        versus  -  FELICIAD SANDOVAL VDA. DECARLOS and TEOFILO CARLOS II,                      Respondents. x------------------------------------------------------------------x   

 SIDDCOR (now MEGA PACIFIC)      G.R. No.  137743INSURANCE CORPORATION,                      Petitioner,  

-        versus  -  HON. COURT OF APPEALS (FORMERSPECIAL FOURTH DIVISION), HON.ALBERTO L. LERMA and/or theREGIONAL TRIAL COURT OF THECITY OF MUNTINLUPA, BRANCH 256,FELICIDAD SANDOVAL, also known asFELICIDAD S. VDA. DE CARLOS ORFELICIDAD S. CARLOS OR FELICIDADSANDOVAL CARLOS OR FELICIDADSANDOVAL VDA. DE CARLOS andTEOFILO CARLOS II,                          Respondents. x-------------------------------------------------------------------x  

D E C I S I O N 

TINGA, J.: 

        These consolidated petitions emanated from a civil case filed by Juan de Dios Carlos (“Carlos”)

against  respondents Felicidad Sandoval (“Sandoval”) and Teofilo Carlos II (Teofilo II) docketed with the

Regional Trial Court (RTC) of Muntinlupa City as Civil Case No. 95-135.

 

 

 

        In his Complaint before the RTC, Carlos asserted that he was the sole surviving compulsory heir of his

parents, Felix B. Carlos and Felipa Elemia,[1] who had acquired during their marriage, six parcels of land

(subject properties). His brother, Teofilo (“Teofilo”), died intestate in 1992. At the time of his death, Teofilo

was apparently married to Sandoval, and cohabiting with her and their child, respondent Teofilo II.

Nonetheless, Carlos alleged in his Complaint that Teofilo and Sandoval were not validly married as they

had not obtained any marriage license.[2] Furthermore, Carlos also asserted that  Teofilo II could not be

considered as Teofilo’s child. As a result, Carlos concluded that he was also the sole heir of his brother

Teofilo, since the latter had died without leaving any heirs.

 

        Carlos also claimed that Teofilo, prior to their father Felix’s  death in 1963, developed a scheme to

save the elder Carlos’s estate from inheritance taxes. Under the scheme, the properties of the father

would be transferred to Teofilo who would, in turn, see to it that the shares of the legal heirs are protected

and delivered to them. Felix assented to the plan, and the subject properties were transferred in the name

of Teofilo. After Teofilo’s death, Carlos entered into certain agreements with Sandoval in connection with

the subject properties. Carlos did so, believing that the latter was the lawful wife of his brother Teofilo.

Subsequently though, Carlos discovered that Sandoval and his brother were never validly married, as their

marriage was contracted without a marriage license.[3]

 

Carlos now sought to nullify these agreements with Sandoval for want of consideration, the premise

for these contracts being non-existent. Thus, Carlos prayed of the RTC to declare the alleged marriage

between Teofilo and Sandoval void ab initio, provided that Teofilo died without issue, order that new titles

covering the subject properties be issued in the name of Carlos, and require Sandoval to restitute Carlos in

the amount of P18,924,800.00.[4]

 

        Carlos likewise prayed for the issuance of the provisional relief of preliminary attachment. The RTC

issued an Order dated 7 September 1995 granting the prayer for preliminary attachment, and on 15

September 1995, a writ of preliminary attachment. Carlos posted a bond  for  P20,000,000.00  issued  by  

herein   petitioner

SIDDCOR Insurance Corporation (SIDDCOR).[5] Shortly thereafter, a Notice of Garnishment was served upon

the Philippine National Bank (PNB) over the deposit accounts maintained by respondents. 

Respondents filed an Urgent Motion to Discharge the Writ of Attachment, which was opposed by

Carlos. On 4 December 1995, the RTC rendered an order denying the  motion. This caused respondents to

file a Petition for Certiorari with the Court of Appeals, seeking to set aside the RTC order granting the writ

of preliminary attachment denying the motion for the discharge of the writ. This case was docketed as CA-

G.R. SP No. 39267.[6]  

On 27 February 1996, the Court of Appeals Second Division promulgated its Decision in CA-G.R. SP

No. 39267, wherein it granted the Petition for Certiorari and ordered the discharge and dissolution of the

Writ of Attachment and Notice of Garnishment.[7] The Court of Appeals found that there was no sufficient

cause of action to warrant the preliminary attachment, since Carlos had merely alleged general averments

in order to support his prayer.[8] Carlos elevated the said Decision to this Court by way ofPetition for

Review on Certiorari, which was docketed as G.R. No. L-125717. In a Resolution dated 21 October 1996,

the Court denied Carlos’s Petition, and thus the Court of Appeals’ Decision ordering the dissolution of the

Writ of Attachment and Notice of Garnishment became final.       

        In the meantime, the hearing on Carlos’s Complaint ensued before the RTC. Respondents duly filed

their Answer and thereafter filed a Motion for Summary Judgment. Carlos opposed the motion and

countered with his own Motion for Summary Judgment.   On 8 April 1996, the RTC rendered a summary

judgment in favor of Carlos. Carlos’s victory was wholesale, with the RTC making the following

pronouncements:

 1. Declaring the marriage between defendant Felicidad Sandoval and Teofilo Carlos

solemnized at Silang, Cavite, on May 14, 1962, evidenced by the Marriage Contract submitted in this case, null and void ab initio for lack of the requisite marriage license;

 2. Declaring that the defendant minor, Teofilo S. Carlos II, is not the natural, illegitimate,

or legally adopted child of the late Teofilo E. Carlos; 3. Ordering defendant Sandoval to pay and restitute to plaintiff the sum

of P18,924,800.00, together with the interest thereon at the legal rate from date of filing of the instant complaint until fully paid;

 

  4. Declaring plaintiff as the sole and exclusive owner of the parcel of land, less the

portion adjudicated to the plaintiffs in Civil Case No. 11975, covered by TCT No. 139061 of the Register of Deeds of Makati City, and ordering said Register of Deeds to cancel said title and to issue another title in the sole name of plaintiff herein;

 5. Declaring the Contract, Annex K of the Complaint, between plaintiff and defendant

Sandoval null and void, and ordering the Register of Deeds of Makati City to cancel TCT No. 139058 in the name of Teofilo Carlos, and to issue another title in the sole name of the plaintiff herein;

 6. Declaring the Contract, Annex M of the Complaint, between plaintiff and defendant

Sandoval null and void; 7. Ordering the cancellation of TCT No. 210877 in the names of defendant Sandoval and

defendant minor Teofilo S. Carlos II and ordering the Register of Deeds of Manila to issue another title in the exclusive name of plaintiff herein.

 8. Ordering the cancellation of TCT No. 210878 in the names of defendant Sandoval and

defendant minor Teofilo S. Carlos II and ordering the Register of Deeds of Manila to issue another title in the sole name of plaintiff herein.[9]

 

 

        Upon promulgation of the Summary Judgment, Carlos moved before the RTC for execution pending

appeal. The RTC granted the motion for execution pending appeal upon the filing of a bond. [10] On 27 May

1996, the RTC issued a Writ of Execution.

 

 

Meanwhile, respondents filed a Motion for Reconsideration of the Summary Judgment, which was

denied in an Order dated 20 May 1996. Respondents then appealed the RTC Decision to the Court of

Appeals, wherein such appeal was docketed as CA-G.R. CV No. 53229. The case was raffled to the

appellate courts’ Fourteenth Division for completion of records.  Sandoval and Carlos also filed a Petitionfor

Certiorari with Temporary Restraining Order dated 2 June 1996. This special civil action primarily attacked

the allowance of execution pending appeal, and prayed for the annulment of the Order granting execution

pending appeal, and of the Writ of Execution

 

        On 10 December 1996, in CA-G.R. CV No. 53229, respondents filed a Motion for Judgment On the

Attachment Bond.  They noted that the Court of Appeals had already ruled that the Writ of Preliminary

Attachment issued by the RTC was improperly granted and that its Decision, as affirmed by the Supreme

Court, had attained finality. Accordingly, they were entitled to damages under Section 20, Rule 57 of the

then Rules of Civil Procedure, which governed claims for damages on account of unlawful attachment. In

support of their allegation of damages, they cite the Notice of Garnishment served on PNB  Malolos

Branch, where Felicidad Carlos maintained deposits amounting to P15,546,121.98.[11] Also presented in

support of the motion was a Notice of Delivery/Payment by the RTC Sheriff, directing the PNB Malolos

Branch to deliver the amounts previously garnished by virtue of the Writ of Execution dated 27 May 1996;[12] a Manifestation filed by PNB dated 19 July 1996 in CA-G.R. SP No. 40819, stating that PNB had already

delivered to the RTC Sheriff on 27 June 1996 the amount of P15,384,509.98 drawn against the accounts of

Carlos; and a Certification to the same effect issued by the PNB Malolos Branch. In an Addendum to Motion

for Judgment on the Attachment Bond, respondents additionally prayed for moral and exemplary damages.[13]

 

        After various pleadings were duly filed by the parties, the Court of Appeals Special Fourth Division

issued a Resolution dated 23 March 1998, certifying that all the necessary pleadings have been filed, and

that the case may already be referred to the Raffle Committee for assignment to a ponente for study and

report. The same Resolution likewise denied without elaboration a Motion to Dismiss on the ground of

forum-shopping filed earlier by Carlos.[14]

 

On such denial, Carlos filed a Motion for Reconsideration. Respondents likewise filed a Motion for

Partial Reconsideration dated 17 April 1998, arguing that under the Revised Internal Rules of the Court of

Appeals (RIRCA), the case may be re-raffled for assignment for study and report only after there is a

resolution that the case is deemed submitted for decision.[15] They pointed out that re-raffle could not yet

be effected, as  there were still pending incidents, particularly the motions for reconsideration of Carlos

and themselves, as well as the Motion for Judgment on Attachment Bond. 

        On 26 June 1998, the Court of Appeals Former Special Fourth Division promulgated two resolutions.[16] The first, in response to Carlos’s Motion for Reconsideration, again denied Carlos’s Motion to

Dismiss the Appeal and Motion for Suspension, but explained the reasons for such denial. 

        The second resolution is at the center of the present petitions. The assailed Resolution agreed with

respondents that it was first necessary to resolve the pending incidents before the case could be re-raffled

for study  and  report.  Accordingly,  the   Court   of  Appeals

proceeded to rule on these pending incidents. While the first resolution dwelt on the pending motions filed

by Carlos, this Resolution tackled the other matter left unresolved, the Motion for Judgment on Attachment

Bond. The Court of Appeals found the claim for damages meritorious, citing the earlier decisions ruling that

Carlos was not entitled to the preliminary attachment. Invoking Section 20, Rule 57 of the Rules of Court,

as well as jurisprudence,[17] the Court of Appeals ruled that it was not necessary for the determination of

damages on the injunction bond to await the decision on appeal.

 

        The Court of Appeals then proceeded to determine to what damages respondents were entitled to. In

ruling that the award of actual damages was warranted, the court noted:

                    It is also not disputed that the PNB, on June 27, 1996, issued two manager’s checks: MC No. 938541 for P4,932,621.09 and MC 938542 for P10,451,888.89 payable to the order of “Luis C. Bucayon II, Sheriff IV, RTC, Branch 256, Muntinlupa”, duly received by the latter in the total amount of PESOS FIFTEEN MILLION THREE HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED NINE & 98/100 (P15,384,509.98), drawn against the accounts of Ms. Felicidad Sandoval Vda. de Carlos which were earlier garnished for the satisfaction of the above-mentioned writ of attachment (Annex “E”, Motion for Judgment on the Attachment Bond, pp. 7-8)[18]

                             . . .  .

 

                   The contention of [Carlos] that the writ of attachment was not implemented falls flat on the face of the manifestation of PNB that the delivery of the garnished P15,384,509.98 to him was effected through the sheriff.[19]

  

        The Court of Appeals found that moral and exemplary damages were not warranted, there being no

malice in pursuing the attachment. The appellate court also found the claim of P2,000,000.00 for

attorney’s fees as excessive, and reduced the sum by half. Correspondingly, the dispositive portion of the

assailed Resolution reads:

                    WHEREFORE, premises considered, judgment is hereby rendered against the

attachment bond, ordering SIDDCOR INSURANCE CORPORATION and plaintiff-appellee to pay defendants-appellants, jointly and severally, the sum of P15,384,509.98 and 12% interest per annum from June 27, 1996 when the unlawful garnishment was effected until fully paid and P1,000,000.00 as attorney’s fees with 6% interest thereon from the trial court’s decision on April 8, 1986 until fully paid.

                    SO ORDERED.[20]

 

Both Carlos and SIDDCOR filed their respective motions for reconsideration of the Resolution. For

their part, respondents filed a Motion for Immediate Execution dated 7 August 1998 in regard to

theResolution of 26 June 1998 awarding them damages.

 

In the Resolution dated 10 October 1998,[21] the Court of Appeals denied the motions for

reconsideration and granted the Motion for Immediate Execution. In granting the Motion for Immediate

Execution, the Court of Appeals cited the reasons that the appeal to be undertaken from the 26 June

1998 Resolution was patently dilatory; that there were no material and substantial defenses against the

motion for judgment on the attachment bond, rendering the appeal pro-forma and dilatory; that Sandoval

was of advanced age and might not enjoy the fruits of the judgment on the attachment bond; and that

immediate execution would end her suffering due to the arbitrary garnishment of her account pursuant to

an improper attachment.[22]

 

In its Motion for Reconsideration, SIDDCOR explicitly assailed the allowance of the Motion for

Immediate Execution.[23] This was denied by the Court of Appeals in a Resolution dated 22 December 1998.[24]

 

        From these antecedents, the following petitions were filed before this Court:     

 

 G.R. No. 135830

 

        This Appeal by Certiorari with Prayer for Temporary Restraining Order/Preliminary Injunction dated 26

October 1998 filed by Carlos assailed the two resolutions of the Court of Appeals both dated 26 June 1998,

as well as the Resolution of 10 October 1998, which denied Carlos’s motion for reconsideration. Carlos

argues that the Court of Appeals, through the Former Special Fourth Division, could not have resolved

the Motion for Judgment on the Attachment Bond since the case had not yet been re-raffled under the two-

raffle system for study and report; that the Court of Appeals erred in resolving the motion without

conducting any hearing; that the Court of Appeals had no jurisdiction over the motion as the docketing

fees had not yet been filed; that the motion for judgment, which did not contain any certification against

forum-shopping, was an application subject to the requirements of certification against forum-shopping;

that there was no supporting evidence to support the award of damages; and that the Court of Appeals

committed grave abuse of discretion in denying the Motion for Reconsiderationwithout adverting to

specific reasons mentioned for the denial of each issue.[25]

 

        Carlos likewise ascribes grave abuse of discretion to the Court of Appeals in its other Resolutiondated

26 June 1998 for its refusal to dismiss CA-G.R. CV No. 53229 on the ground of forum-shopping, adding that

the appellate court should have deferred resolution of the Motion for Judgment on the Attachment

Bond  considering the prejudicial question raised in Carlos’s motion to dismiss the main case on the

ground of forum-shopping.

 

G.R. No. 136035

 

        This concerns a Petition for Review filed by SIDDCOR, likewise challenging the Resolution of 26 June

1998 of the Court of Appeals and the 10 October 1998 Resolution wherein Siddcor’s Motion for

Reconsideration, among others, was denied. Siddcor argues therein that the Court of Appeals erred in

ruling on the motion for damages without awaiting judgment in the main case; granting that damages may

be awarded, these should encompass only such damages incurred during the pendency of the appeal; and

that a hearing was necessary to prove the claim for damages and the appellate court erred in granting the

award for damages despite lack of hearing.

 

G.R. No. 137743

 

        The third petition for adjudication, a Petition for Certiorari under Rule 65 with Prayer for Temporary

Restraining Order or Preliminary Injunction, was also filed by SIDDCOR. This petition, dated 8 March 1999,

specifically assails the allowance by the Court of Appeals of the immediate execution of the award of

damages, made through the resolutions dated 10 October 1998 and 22 December 1998.

 

SIDDCOR hereunder argues that Section 2, Rule 39 of the Rules of Civil Procedure requires that

execution of a judgment or final order pending appeal may be made only on motion of the prevailing party

and may be made “even before the expiration of the period to appeal.”[26]  Respondents had argued in

their Motion for Immediate Execution that the judgment sought to be executed (that on the attachment

bond) was interlocutory and not appealable, yet cited rulings on execution pending appeal under Section

2, Rule 39 in support of their position. SIDDCOR cites this inconsistency as proof of a change of theory on

the part of respondents which could not be done for the theories are incompatible. Such being the case,

SIDDCOR argues, the Court of Appeals gravely abused its discretion in granting immediate execution since

respondents had filed its motion on the premise that the award on the judgment bond was interlocutory

and not appealable. SIDDCOR also claims that the judgment on the attachment bond is not interlocutory,

citing Stronghold Insurance Co., Inc. v. Court of Appeals[27] wherein it was ruled that such indeed

constitutes a final and appealable order.

 

SIDDCOR points out that no hearing was conducted on the Motion for Immediate Execution despite

the requirement in Section 2, Rule 39 that “discretionary execution may only issue upon good reasons to

be stated in a special order after due hearing.” SIDDCOR likewise notes that the motion granting

immediate execution was granted in the very same resolution which had denied the motion for

reconsideration of the resolution sought to be immediately executed. For SIDDCOR, such constituted a

denial of procedural due process insofar as its statutory right to appeal was concerned, as the resolution

that it intended to appeal from was already the subject of immediate execution.

 

Finally, SIDDCOR contests the special reasons cited by the Court of Appeals in granting the Motion

for Immediate Execution.

 Facts Arising Subsequent to the Filing of Instant Petitions

 

On 7 May 1999, the Court of Appeals issued a Writ of Execution directing the enforcement of the

judgment on the attachment bond.[28] However, in a Resolution dated 9 June 1999, this Court through the

First Division issued a Temporary Restraining Order, enjoining the enforcement of the said Writ of

Execution.

 

On 15 October 2002, the Court of Appeals First Division rendered a Decision[29] on the merits of CA-

G.R. CV No. 53229, setting aside the Summary Judgment and ordering the remand of the case for further

proceedings.[30] Both parties filed their respective motions for reconsideration. [31]  In addition, Carlos filed a

motion to inhibit the author of the assailed decision, Justice Rebecca de Guia-Salvador, [32]  who thereafter

agreed to inhibit herself.[33] Then on 7 August 2003, the Court of Appeals Former First Division issued

a Resolution deferring action on the motions for reconsideration in light of the temporary restraining order

issued by this Court until the resolution of the present petitions.

 

The factual background may be complicated, but the court need only concern itself with the

propriety of the judgment on the attachment bond and the subsequent moves to secure immediate

execution of such judgment. Should this Court be called upon to tackle the merits of the original action,

Carlos’s complaint, it shall be in the review of the final resolution of the Court of Appeals in CA-G.R. CV No.

53229.

 Consolidation of Issues inG.R. Nos. 135830 and 136035

 

The petitions in G.R. Nos. 135830 and 136035 are concerned with the award of damages on the

attachment bond. They may be treated separately from the petition in G.R. No. 137743, which relates to

the immediate execution of the said award.

 We consolidate the main issues in G.R. Nos. 135830 and 136035, as follows: (1) whether the

assailed judgment on the attachment bond could have been rendered, as it was, prior to the adjudication

of the main case; (2) whether the Court of Appeals properly complied with the hearing requirement under

Section 20, Rule 57 prior to its judgment on the attachment bond; and (3) whether the Court of Appeals

properly ascertained the amount of damages it awarded in the judgment on the attachment bond.

 

Resolving these issues requires the determination of  the proper scope and import of Section 20,

Rule 57 of the 1997 Rules of Civil Procedure. The provision governs the disposal of claims for damages on

account of improper, irregular or excessive attachment.

 SECTION 20. Claim for damages on account of improper, irregular or excessive

attachment.—An application for damages on account of improper, irregular or excessive attachment must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching obligee or his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. Such damages may be awarded only after proper hearing and shall be included in the judgment on the main case.

 If the judgment of the appellate court be favorable to the party against whom the

attachment was issued, he must claim damages sustained during the pendency of the appeal by filing an application in the appellate court with notice to the party in whose favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes executory. The appellate court may allow the application to be heard and decided by the trial court.

 Nothing herein contained shall prevent the party against whom the attachment was

issued from recovering in the same action the damages awarded to him from any property of the attaching obligee not exempt from execution should the bond or deposit given by the latter be insufficient or fail to fully satisfy the award. (Emphasis supplied.)

  

Section 20 essentially allows the application to be filed at any time before the judgment becomes

executory. It should be filed in the same case that is the main action, and cannot be instituted separately.[34] It should be filed with the court having jurisdiction over the case at the time of the application. [35] The

remedy provided by law is exclusive and by failing to file a motion for the determination of the damages

on time and while the judgment is still under the control of the court, the claimant loses his right to

damages.[36]

 

There is no question in this case that the Motion for Judgment on the Attachment Bond filed by

respondents on 10 December 1996 was properly filed since it was filed with the Court of Appeals during

the pendency of the appeal in the main case and also as an incident thereto. The core questions though lie

in the proper interpretation of the condition under Section 20, Rule 57 that reads: “Such damages may be

awarded only after proper hearing and shall be included in the judgment on the main case.” Petitioners

assert that there was no proper hearing on the application for damages and that the Court of Appeals had

wrongfully acted on the application in that it resolved it prior to the rendition of the main judgment.  “Such Damages May Be AwardedOnly After Proper Hearing….”

 

        We first discuss whether the “proper hearing” requirement under Section 20, Rule 57 had been

satisfied prior to the award by the Court of Appeals of damages on the attachment bond. 

Section 20 of Rule 57 requires that there be a “proper hearing” before the application for damages

on the attachment bond may be granted. The hearing requirement ties with the indispensable demand of

procedural due process.  Due notice to the adverse party and its surety setting forth the facts supporting

the applicant's right to damages and the amount thereof under the bond is essential. No judgment for

damages may be entered and executed against the surety without  giving  it  an   opportunity   to be

heard as to the reality or reasonableness of the damages resulting from the wrongful issuance of the writ.[37]

 

In Paramount Insurance v. Court of Appeals,[38] the Court held that under the rule, it was neither

mandatory nor fatal that there should be a separate hearing in order that damages upon the bond can be

claimed, ascertained and awarded.[39] What is necessary only is for the attaching party and his surety or

sureties to be duly notified and given the opportunity to be heard.[40]

 

In this case, both Carlos and SIDDCOR were duly notified by the appellate court of the Motion for

Judgment on the Attachment Bond and were required to file their respective  comments  thereto.[41] 

Carlos  and SIDDCOR filed  their  respective  comments  in opposition to private respondents’ motion.[42] Clearly, all the relevant parties had been afforded the bare right to be heard on the matter.

 

Concededly, the facts of this case differ from that in Paramount, wherein the award of damages was

predicated under Section 8, Rule 58, and the trial on the merits included the claim for damages on the

attachment bond. The Court did note therein that the counsel of the surety was present during the

hearings.[43] In this case, unlike in Paramount, there were no open court hearings conducted by the Court of

Appeals, and it is precisely this absence that the petitioners assert as fatal.

 

Plainly, there is no express requirement under the rule that the hearing be done in open court, or

that the parties be allowed to confront adverse witnesses to the claim of damages on the bond. The proper

scope of the hearing requirement was explained before Paramount in Peroxide Philippines Corp. v. Court of

Appeals,[44] thus:

 . . . [It] is undeniable that when the attachment is challenged for having been illegally or improperly issued, there must be a hearing with the burden of proof to sustain the writ being on the attaching creditor. That hearing embraces not only the right to present evidence but also a reasonable opportunity to know the claims of the opposing parties and meet them. The right to

submit arguments implies that opportunity, otherwise the right would be a barren one. It means a fair and open hearing.

 

 

        From this pronouncement, we can discern that the “proper hearing” contemplated would not merely

encompass the right of the parties to submit their respective positions, but also to present evidence in

support of their claims, and to rebut the submissions and evidence of the adverse party. This is especially

crucial considering that the necessary elements to be established in an application for damages are

essentially factual: namely, the fact of damage or injury, and the quantifiable amount of damages

sustained. Such matters cannot be established on the mere say-so of the applicant, but require evidentiary

support. At the same time, there was no equivocal statement from the Court in Peroxide that the hearing

required under the rule should be a full-blown hearing on the merits

 

        In this case, we rule that the demands of a “proper hearing” were satisfied as of the time the Court of

Appeals rendered its assailed judgment on the attachment bond. The circumstances in this case that we

consider particularly telling are the settled premises that the judicial finding on the wrongfulness of the

attachment was then already conclusive and beyond review, and that the amount of actual damages

sustained  was likewise indubitable as it  indeed could be found in the official case record in CA-G.R. CV No.

53229. As a result, petitioners would have been precluded from either raising the defenses that the

preliminary attachment was valid or disputing the amount of actual damages sustained by reason of the

garnishment. The only matter of controversy that could be litigable through the traditional hearing would

be the matter of moral and exemplary damages, but the Court of Appeals appropriately chose not to

award such damages.

 

        Moreover, petitioners were afforded the opportunity to counter the arguments extended by the

respondents. They fully availed of that right by submitting their respective comments/oppositions. In fine,

the due process guarantee has been satisfied in this case.

 

It should be noted that this case poses a situation different from what is normally contemplated

under Section 20, Rule 57—wherein the very wrongfulness of the attachment remains one of the issues in

contention in the main case. In such a case, there would be a greater demand for a more extensive

hearing on the application of damages. The modality of hearing should remain within the discretion of the

court having jurisdiction to hear the application for damages.  The only demand, concordant to due

process, would be the satisfaction of the right to be heard, to present evidence, and to rebut the evidence

and arguments of the opposing party. 

Some disquisition is necessary on whether or not, as petitioners submit, a full-blown hearing in

open court is compulsory under Section 20, Rule 57. To impose this as a mandatory requirement would

ultimately prove too onerous to our judicial system. Perhaps such a demand would be less burdensome on

the regional trial courts, which, as a matter of routine, receive testimonial or documentary evidence

offered de novo, and to formulate conclusions on the admissibility and credibility of the same. 

        However, a different situation applies if it is the Court of Appeals or the Supreme Court before which

the application for damages is filed. Both these courts, which are capacitated to receive and act on such

actions, are generally not triers of facts, and do not, in the course of daily routine, conduct hearings. It is

partly for such reason that Section 20, Rule 57 authorizes these appellate courts to refer the application

for damages to the trial court for hearing and decision. The trial courts are functionally attuned to

ascertain and evaluate at the first instance the necessary factual premises that would establish the right to

damages. Still, reference of the application for damages to the trial court is discretionary on the part of the

appellate courts. The latter, despite their traditional appellate jurisdiction and review function, are still

empowered under Section 20 to rule on the application for damages, notwithstanding the factual

dimension such question presents. 

        To impose as mandatory on the Court of Appeals or the Supreme Court to hear the application for

damages through full-blown hearings in open court is supremely unwise and beyond the demands of

Section 20, Rule 57. The effect would be unduly disruptive on the daily workflow of appellate courts such

as the Court of Appeals and the Supreme Court, which rarely conduct open court hearings. Neither could

the Court see what is so markedly special about an application for damages, fact-oriented as it may be,

that would require it to be heard by the appellate courts in open court when no such mandatory rule

applies to other judicial matters for resolution that are also factual in nature. 

For example, the review of death penalty convictions by the Court of Appeals and the Supreme

Court necessitates a thorough evaluation of the evidence presented, notwithstanding the prior factual

appreciation made by the trial court.[45] Notwithstanding the factual nature of the questions involved, there

is no rule requiring the Court of Appeals or the Supreme Court to call death penalty cases for hearing or

oral argument. If no such mandatory rule for hearing is imposed on the appellate courts when the supreme

penalty of death is involved, why then should an exceptional rule be imposed in the case for the relatively

insignificant application for damages on the attachment bond?

 

If open court hearings are ever resorted to by appellate courts, such result from the exercise of

discretion rather than by imposition by statute or procedural rule. Indeed, there is no existing statute,

procedural rule, or jurisprudential fiat that makes it mandatory on the Court of Appeals or the Supreme

Court to conduct an open-court hearing on any matter for resolution. There is nothing demonstrably urgent

with an application for damages under Section 20, Rule 57 that would necessitate this Court to adopt an

unprecedented rule mandating itself or the Court of Appeals to conduct full-blown open court hearings on

a particular type of action.

 

        This pronouncement does not contradict our ruling in Hanil Development v. IAC,[46] which Carlos

interprets as requiring the Court of Appeals to conduct a proper hearing on an application for damages on

the attachment bond. Hanil concerned the refusal by the Intermediate Appellate Court (now Court of

Appeals) to take cognizance of the application for damages on the attachment bond, such refusal being

reversed by the Court, which ruled that the Intermediate Appellate Court (IAC) had jurisdiction to accept

and rule on such application. While the Court therein recognized that the IAC was empowered to try cases

and conduct hearings, or otherwise perform acts necessary to resolve factual issues in cases, [47] it did not

require the appellate court to conduct a hearing in open court, but merely to reinstate the application for

damages. 

Admittedly, the dispositive portion of Hanil required the Court of Appeals to conduct hearings on

the application for damages,[48] but nowhere in the decision was a general rule laid down mandating the

appellate court to conduct such hearings in open court. The ascertainment of the need to conduct full-

blown hearings is best left to the discretion of the appellate court which chooses to hear the application. At

the same time, the Court cautions the appellate courts to carefully exercise their discretion in determining

the need for open-court hearings on the application for damages on the attachment bond. The Court does

not sanction the indolent award of damages on the attachment bond by the appellate court without

affording the adverse party and the bonding company concerned the opportunity to present their sides

and adduce evidence in their behalf, or on the basis of unsubstantiated evidence.

 “…And Shall be Included in theJudgment on the Main Case”

 

Section 20, Rule 57 does state that the award of damages shall be included in the judgment on the

main case, and seemingly indicates that it should not be rendered prior to the adjudication of the main

case.

 

The rule, which guarantees a right to damages incurred by reason of wrongful attachment, has long

been recognized in this jurisdiction.[49] Under Section 20, Rule 57 of the 1964 Rules of Court, it was

provided that there must be first a judgment on the action in favor of the party against whom attachment

was issued before damages can be claimed by such party.[50] The Court however subsequently clarified

that under the rule, “recovery for damages may be had by the party thus prejudiced by the wrongful

attachment, even if the judgment be adverse to him.”[51]

 

The language used in the 1997 revision of the Rules of Civil Procedure leaves no doubt that there is

no longer need for a favorable judgment in favor of the party against whom attachment was issued in

order that damages may be awarded. It is indubitable that even a party who loses the action in main but is

able to establish a right to damages by reason of improper, irregular, or excessive attachment may be

entitled to damages. This bolsters the notion that the claim for damages arising from such wrongful

attachment may arise and be decided separately from the merits of the main action. As noted by the Court

in Philippine Charter Insurance Corp. v. Court of Appeals:[52]

 

 

 The surety does not, to be sure, become liable on its bond simply because judgment is

subsequently rendered against the party who obtained the preliminary attachment. The surety becomes liable only when and if "the court shall finally adjudge that the applicant was not entitled to the attachment." This is so regardless of the nature and character of the judgment on the merits of the principal claims, counterclaims or cross-claims, etc. asserted by the parties against each other. Indeed, since an applicant's cause of action may be entirely different from the ground relied upon by him for a preliminary attachment, it may well be that although the evidence warrants judgment in favor of said applicant, the proofs may nevertheless also establish that said applicant's proferred ground for attachment was inexistent or specious and hence, the writ should not have issued at all;i.e., he was not entitled thereto in the first place. In that event, the final verdict should logically award to the applicant the relief sought in his basic pleading, but at the same time sentence him—usually on the basis of a counterclaim—to pay damages caused to his adversary by the wrongful attachment. [Emphasis supplied.]

  

Moreover, a separate rule—Section 8, Rule 58— covers instances when it is the trial court that

awards damages upon the bond for preliminary injunction of the adverse party. Tellingly, it requires that

the amount of damages to be awarded be claimed, ascertained, and awarded under the same procedure

prescribed in Section 20 of Rule 57. 

In this case, we are confronted with a situation wherein the determination that the attachment was

wrongful did not come from the trial court, or any court having jurisdiction over the main action. It was

rendered by the Court of Appeals in the exercise of its certiorari jurisdiction in the original action reviewing

the propriety of the issuance of the Writ of Preliminary Attachment against the private respondents. Said

ruling attained finality when it was affirmed by this Court. 

The courts are thus bound to respect the conclusiveness of this final judgment, deeming as it does

the allowance by the RTC of preliminary attachment as improper. This conclusion is no longer subject to

review, even by the court called upon to resolve the application for damages on the attachment bond. The

only matter left for adjudication is the proper amount of damages. 

Nevertheless, Section 20, Rule 57 explicitly provides that the award for damages be included in the

judgment on the main case. This point was apparently not lost on the Court of Appeals when it rendered

its Resolution dated 23 March 1998, certifying that the case may now be referred to the Raffle Committee

for assignment to a ponente. The appellate court stated therein: “The Resolution of defendants-appellants’

motion for judgment on the attachment may be incorporated in the decision by the ponentefor study and

report,”[53] and such observation is in conformity with Section 20. 

However, this reasoning was assailed by respondents, who argued that the motion for judgment on

the attachment bond was a pending incident that should be decided before the case can be re-raffled to

aponente for decision. Respondents may be generally correct on the point that a case can only be deemed

submitted for decision only after all pending incidents are resolved. Yet since Section 20, Rule 57 provides

that their application for damages on the attachment bond “shall be included in the judgment on the main

case,” it is clear that the award for damages need not be resolved before the case is submitted for

decision, but should instead be resolved and included in the judgment on the main case, or the decision on

the Appeal by Certiorari filed by the respondents. 

Thus, the action of the Court of Appeals in resolving the application for damages even before the

main judgment was issued does not conform to Section 20, Rule 57. However, the special particular

circumstances of this case lead us to rule that such error is not mortal to the award of damages. 

As noted earlier, the award of damages was made after a proper hearing had occurred wherein all

the concerned parties had been given the opportunity to present their arguments and evidence in support

and in rebuttal of the application for damages. The premature award of damages does not negate the fact

that the parties were accorded due process, and indeed availed of their right to be heard.

 

Moreover, we are compelled to appreciate the particular circumstance in this case that the right of

private respondents to acquire relief through the award of damages on account of the wrongful preliminary

attachment has been conclusively affirmed by the highest court of the land. This differs from the normal

situation under Section 20, Rule 57 wherein the court having jurisdiction over the main action is still

required to ascertain whether the applicant actually has a right to damages. To mandatorily require that

the award of damages be included in the judgment in the main case makes all the sense if the right to

damages would be ascertained at the same time the main judgment is made. However, when the said

right is already made viable by reason of a final judgment which is no longer subject to review, there

should be no unnecessary impediments to its immediate implementation. 

        And finally, any ruling on our part voiding the award of damages solely for the reason that it was not

included in the judgment on the main case, and remanding the motion to the Court of Appeals for proper

adjudication together with the main case may exhibit fealty to the letter of the procedural rule, but not its

avowed aims of promoting a just and speedy disposition of every action and proceeding. After all, if we

were to compel the Court of Appeals to decide again on the application for damages and incorporate its

ruling in the judgment on the main action, the appellate court will be examining exactly the same evidence

and applying exactly the same rules as it already did when it issued the assailed resolution awarding

damages on the bond. This would be unnecessarily redundant especially considering that the Supreme

Court had already affirmed that there was wrongful attachment in this case.

 

There is also the fact that remanding the question of damages, singly for the purpose of adhering to

the letter of the procedural rule, would further prolong the resolution of the main case, which has been

with the Court of Appeals for more than nine years now.[54] Our Rules of Court precisely requires liberal

construction of the procedural rules to promote the objective of securing a just, speedy and inexpensive

disposition of every action and proceeding.[55] With this precept, all the more justification is supplied for

allowing the award for damages despite its apparent prematurity, if it is in all other respects proper.

 The same reasons apply in resolving the question of whether the Court of Appeals could have

decided the Motion for Judgment on the Attachment Bond considering that the case had not yet been re-

raffled under the two-raffle system for study and report. Under Section 5, Rule 3 of the RIRCA, a case filed

with the Court of Appeals undergoes two raffles for assignment to a particular Justice. The first raffle is

made for completion of records.[56] Afterwards, “all raffled appealed cases, the records of which have been

completed and submitted for decision, shall be re-raffled for assignment to a Justice for study and

report.”[57]

 

The fact that Section 20, Rule 57 provides that the award of damages on the attachment bond

“shall be included in the judgment on the main case” necessarily implies that it is to be made only after

the case has been re-raffled for study and report, and concurrently decided with the judgment of

the ponentein the main case. Again, the Court of Appeals failed to consider Section 20, Rule 57 when it

acted upon the application even before the second raffle was made.

 

Had Section 20, Rule 57 been faithfully complied with, a different Justice of the Court of Appeals

would have penned the ruling on the application for damages, in accordance with the RIRCA. Yet this

circumstance does not outweigh the other considerations earlier mentioned that would warrant a liberal

interpretation of the procedural rules in favor of respondents. The parties had adduced all their arguments

and evidence before the Court of Appeals, and indeed, these were appreciated on first instance by Justice

Demetria, who eventually penned the assailed resolutions. There was already a final determination that

the attachment was wrongful. And any delay brought about by requiring that it be theponencia,

determined after the second raffle, who decides the application for damages may bear pro

formaadherence to the letter of the rule, but would only cause the delay of the resolution of this long-

pending case. Procedural rules are designed, and must therefore be so interpreted as, to give effect to

lawful and valid claims and not to frustrate them.[58]

 

Even SIDDCOR acknowledges that there are recognized instances where the award of damages or

judgment on the attachment bond may not be included in the decision on the main case, such as if the

main case was dismissed for lack of jurisdiction and no claim for damages could have been presented in

the main case.[59]

 Scope of DamagesProperly Awardable 

 

        Next, we examine the particular award of damages made in this case, consisting of P15,384,509.98,

plus interest, as well as P1,000,000.00 as attorney’s fees. There seems to be no dispute that the former

amount constituted the amount drawn against the account of Sandoval by reason of the writ of execution

issued by the trial court on 27 May 1996. This fact was confirmed by the PNB, in its Manifestation dated19

July 1996, confirming the garnishment. 

        Respondents’ burden in proving damages in this case was considerably lessened by the fact that

there was already a final judgment, no longer subject to review, that the preliminary attachment allowed

by the trial court was indeed wrongful. Hence, all that was necessary to be proved was the amount of

damage actually sustained by respondents by reason of the wrongful attachment. It is unquestioned that

by virtue of the writ of preliminary attachment, a Notice of Garnishment was served upon the PNB over

deposit accounts maintained by respondents. Said Notice of Garnishment placed under the control of the

RTC all the accounts maintained by respondents, and prevented the transfer or disposition of these

accounts.[60] Then the subsequent Writ of Execution dated 27 May 1996 ordered the delivery to Carlos of

these accounts earlier subjected to garnishment.[61]

 

        Clearly, the amount of actual pecuniary loss sustained by respondents has been well established.

The Manifestation submitted by the PNB further affirmed the actual amount seized by Carlos, an amount

which could not have been acquired had it not been for the writ of preliminary attachment which was

wrongfully issued.

 

        Carlos lamely argues in his petition that there was no concrete or supporting evidence to justify the

amount of actual damages, a claim that is belied by the official case records. The more substantive

argument is presented by SIDDCOR, which submits that any damages that may be awarded to

respondents can include only those that were incurred, if any, during the pendency of the appeal.  But this

contention is belied by Section 4, Rule 57 of the 1997 Rules of Civil Procedure, which provides that the

bond issued for preliminary attachment is conditioned that the applicant “will pay all the costs which may

be adjudged to the adverse party and all damages which he may sustain by reason of the

attachment, if the court shall finally adjudge that the applicant was not entitled thereto.”[62]

 

        The case Paramount Insurance Corp. v. Court of Appeals[63] is instructive. It discusses the scope of the

bond executed by upon an application for preliminary injunction, [64] which similarly covers “all damages

which [may be] sustain[ed] by reason of the injunction or temporary restraining order if the court should

finally decide that the applicant was not entitled thereto.”[65] The surety in that case claimed that it could

be liable “only to the amount of damages accruing from the time the injunction bond was issued until the

termination of the case, and not from the time the suit was commenced.” [66]In rebutting this claim, the

Court ruled:  

. . . . Rule 58, Section 4(b), provides that a bond is executed in favor of the party enjoined to answer for all damages which he may sustain by reason of the injunction. This Court already had occasion to rule on this matter in Mendoza v. Cruz, where it held that "(t)he injunction bond is intended as a security for damages in case it is finally decided that the injunction ought not to have been granted. It is designed to cover all damages which the party enjoined can possibly suffer. Its principal purpose is to protect the enjoined party against loss or damage by reason of an injunction." No distinction was made as to when the damages should have been incurred.[67]

 

 

        Our ruling in Philippine Charter Insurance Corp. v. Court of Appeals, relied upon by the Court of

Appeals, squarely applies to this case:

 Under the circumstances, too, there can be no gainsaying the surety’s full awareness of

its undertakings under its bond: that, as the law puts it: "the plaintiff will pay all costs which may be adjudged to the defendant(s), and all damages which may be sustained by reason of the attachment, if the same shall finally be adjudged to have been wrongful and without cause," and that those damages plainly comprehended not only those sustained during the trial of the action but also those during the pendency of the appeal. This is the law, and this is how the surety's liability should be understood. The surety's liability may be enforced whether the application for damages for wrongful attachment be submitted in the original proceedings before the Trial Court, or on appeal, so long as the judgment has not become executory. The surety's liability is not and cannot be limited to the damages caused by the improper attachment only during the pendency of the appeal. That would be absurd. The plain and patent intendment of the law is that the surety shall answer for all damages that the party may suffer as a result of the illicit attachment, for all the time that the attachment was in force; from levy to dissolution. . . .

 The fact that the second paragraph of the rule speaks only of "damages

sustained during the pendency of the appeal" is of no moment; it obviously proceeds from the assumption in the first paragraph that the award for the damages suffered during the pendency of the case in the trial court was in fact "included in the final judgment" (or applied for therein before the appeal was perfected or the judgment became executory); hence, it states that the damages additionally suffered thereafter, i.e., during the pendency of the appeal, should be claimed before the judgment of the appellate tribunal becomes executory. It however bears repeating that where. as in the case at bar, the judgment of the Trial Court has expressly or impliedly sustained the attachment and thus has given rise to no occasion to speak of, much less, file an application for damages for wrongful attachment, and it is only in the decision of the Court of Appeals that the attachment is declared wrongful and that the applicant "was not entitled thereto," the rule is, as it should be, that it is entirely proper at this time for the application for damages for such wrongful attachment to be filed—i.e., for all the            damages sustained thereby, during all the time that it was in force, not only during the pendency of the appeal. . . .[68]

 

 

The rule is thus well-settled that the bond issued upon an application for preliminary attachment

answers for all damages, incurred at whatever stage, which are sustained by reason of the attachment.

The award of actual damages by the Court of Appeals is thus proper in amount. However, we disagree that

the rate of legal interest be counted from the date of the “unlawful garnishment,” or on 27 June 1996.

Properly, interest should start to accrue only from the moment it had been finally determined that the

attachment was unlawful, since it is on that basis that the right to damages comes to existence. In this

case, legal interest commences from the date the Court of Appeals decision in CA-G.R. SP No. 39267

became final, by reason of its affirmation by this Court.

 

        The award of attorney’s fees in the amount of P1,000,000.00 is also questioned before this Court,

considering that the Court of Appeals did not award moral or exemplary damages. The general rule may

be that an award of attorney’s fees should be deleted where the award of moral and exemplary damages

are eliminated.[69] Nonetheless, attorney’s fees may be awarded under the Civil Code where the court

deems it just and equitable that attorney’s fees and expenses of litigation should be recovered, [70] even if

moral and exemplary damages are unavailing.[71]

 

        Particularly, the Court has recognized as just and equitable that attorney's fees be awarded when a

party is compelled to incur expenses to lift a wrongfully issued writ of attachment. [72] The amount of money

garnished, and the length of time respondents have been deprived from use of their money by reason of

the wrongful attachment, all militate towards a finding that attorney’s fees are just and equitable under

the circumstances. However, we deem the amount of P1,000,000.00 as excessive, and modify the award

of attorney’s fees to P500,000.00 which represents merely approximately three percent of the actual

damages suffered by and awarded to respondents. We also delete the imposition of legal interest made by

the Court of Appeals on the awarded attorney’s fees. 

 

Other Issues Raised in G.R. No. 135830

 

        The issues raised in G.R. No. 136035 have been dispensed with, and the remaining issues in G.R. No.

135830 are relatively minor. There is no need to dwell at length on them.

 

        Carlos insists that respondents were liable to have paid docket fees upon filing of their  Motion for

Judgment on Attachment Bond, on the theory that they claimed therein for the first time the alleged

damages resulting from the dissolved attachment. The said motion is characterized as an initiatory

proceeding because it is claimed therein for the first time, the damages arising from the attachment. In

the same vein, Carlos argues that the absence of a certification against forum-shopping attached to the

motion renders the said motion as fatal. Again, it is pointed out that initiatory pleadings must contain the

said certification against forum-shopping.

 

        Our ruling in Santo Tomas University Hospital v. Surla[73] is instructive. It was argued therein that the

requirement of the certification against forum-shopping, as contained in Administrative Circular No. 04-94,[74] covered compulsory counterclaims. The Court ruled otherwise:

 It bears stressing, once again, that the real office of Administrative Circular No. 04-94,

made effective on 01 April 1994, is to curb the malpractice commonly referred to also as forum-shopping. . . . The language of the circular distinctly suggests that it is primarily intended to cover an initiatory pleading or an incipient application of a party asserting a claim for relief.

 It should not be too difficult, the foregoing rationale of the circular aptly

taken, to sustain the view that the circular in question has not, in fact, been contemplated to include a kind of claim which, by its very nature as being auxiliary to the proceeding in the suit and as deriving its substantive and jurisdictional support therefrom, can only be appropriately pleaded in the answer and not remain outstanding for independent resolution except by the court where the main case pends. Prescinding from the foregoing, the proviso in the second paragraph of Section 5, Rule 8, of the 1997 Rules of Civil Procedure, i.e., that the violation of the anti-forum shopping rule "shall not be curable by mere amendment . . . but shall be cause for the dismissal of the case without prejudice," being predicated on the applicability of the need for a certification against forum shopping, obviously does not include a claim which cannot be independently set up.[75] (Emphasis supplied.)

 

 

        It is clear that under Section 20, Rule 57, the application for damages on the attachment bond cannot

be independently set up, but must be filed in the main case, before the judgment therein becomes final

and executory. Santo Tomas squarely applies in determining that no certification against forum-shopping

was required in the Motion for Judgment on the Attachment Bond. The same reasoning also sustains a

ruling that neither legal fees were required for the filing of the said motion. Section 1, Rule 141 of the

Rules of Court provides that legal fees are prescribed upon the filing of the pleading or other application

which initiates an action or proceeding.[76] Since the said application for judgment on the attachment bond

cannot be considered as an initiatory pleading, as it cannot be independently set up from the main action,

it is not likewise chargeable with legal fees. 

        As to the issue relating to the other Resolution dated 26 June 1998 denying the motion to dismiss

appeal on the ground of forum-shopping, we find Carlos’s arguments as unmeritorious. Forum-shopping

allegedly existed because petitioners had filed two cases before the Court of Appeals, CA-G.R. CV No.

53229, and the Petition for Certiorari with Temporary Restraining Order dated 2 June 1996 attacking the

allowance of execution pending appeal. Evidently, the two causes of action in these two petitions are

different, CA-G.R. CV No. 53229 being an appeal from the Summary Judgment rendered by the RTC, and

the second petition assailing the subsequent allowance by the RTC of execution pending appeal. There is

no identity between these two causes of action that would warrant a finding of forum-shopping.

 

Issues Raised in G.R. No. 137743

 

        To recount, respondents, having obtained a favorable decision on their Motion for Judgment on the

Attachment Bond, filed a Motion for Immediate Execution of the award of damages. This was granted by

the Court of Appeals in its Resolution dated 16 October 1998, said resolution now specifically assailed by

SIDDCOR in G.R. No. 137743.

 

        In their Motion for Immediate Execution, respondents’ theory in seeking the immediate execution of

the award of damages was that said award was not subject to appeal, the ruling thereupon being an

interlocutory order.[77] This position was not adopted by the Court of Appeals in its 16 October

1998Resolution, which was otherwise favorably disposed to respondents. Instead, the Court of Appeals

predicated the immediate execution on the following grounds: (1) that the judicial finding that the writ of

preliminary attachment was wrongful was already final and beyond review; (2) there were no material and

substantial defenses against the motion for the issuance of the judgment bond; (3) Sandoval was elderly

and sickly, without means of livelihood and may not be able to enjoy the fruits of the judgment on the

attachment bond; (4) that immediate execution would end her suffering caused by the arbitrary

garnishment of her PNB account.

 

        There is no doubt that a judgment on the attachment bond is a final and appealable order. As stated

earlier, it is, under normal course, included in the main judgment, which in turn is final and appealable.

Respondents admit that they had erred in earlier characterizing the said judgment as an interlocutory

order. Still, SIDDCOR argues that such earlier error is fatal, and that the Court of Appeals abused its

discretion in ruling on the motion on a theory different from that urged on by respondents. 

        By no means could respondents be deemed as estopped from changing their legal theory, since the

rule on estoppel applies to questions of fact and not questions of law. [78] Moreover, courts are empowered

to decide cases even if the parties raise legal rationales other than that which would actually apply in the

case. The basis of whether respondents are entitled to immediate execution arises from law, particularly

Section 2(a), Rule 39 of the Rules of Court, and not solely on whatever allegations may be raised by the

movant.

 

        Thus, we find no grave abuse of discretion on the part of the Court of Appeals, even though it allowed

execution pending appeal on a legal basis different from that originally adduced by respondents. After all,

the reasoning ultimately employed by the appellate court is correct, and it hardly would be judicious to

require the lower court to adhere to the movant’s erroneous ratiocination and preclude the proper

application of the law. 

        We need not review in length the justification of the Court of Appeals in allowing execution pending

appeal. The standard set under Section 2(a), Rule 39 merely requires “good reasons,” a “special order,”

and “due hearing.” Due hearing would not require a hearing in open court, but simply the right to be

heard, which SIDDCOR availed of when it filed its opposition to the motion for immediate execution.

TheResolution dated 16 October 1998 satisfies the “special order” requirement, and it does enumerate at

length the “good reasons” for allowing execution pending appeal. As to the appreciation of “good

reasons,” we simply note that the advanced age alone of Sandoval would have sufficiently justified

execution pending appeal, pursuant to the well-settled jurisprudential rule.[79] The wrongfulness of the

attachment, and the length of time respondents have been deprived of their money by reason of the

wrongful attachment further justifies execution pending appeal under these circumstances.

 

        WHEREFORE, the petitions are DISMISSED. The Temporary Restraining Order issued in

theResolution dated 9 June 1999 is hereby LIFTED. The assailed Resolution of the Court of Appeals Special

Fourth Division dated 26 June 1998 is AFFIRMED with the MODIFICATIONS that the legal interest on the

award of actual damages should commence from the date of the finality of the Decision of the Court of

Appeals in CA G.R. SP No. 39267 and that the award of attorney’s fees is in the amount of P500,000. Costs

against petitioners.

 

        SO ORDERED. DANTE O. TINGA                                                  Associate Justice 

 

WE CONCUR:  REYNATO  S. PUNO

Associate JusticeChairman

  

MA. ALICIA AUSTRIA-MARTINEZ    ROMEO J. CALLEJO, SR.           Associate Justice                            Associate Justice   

MINITA V. CHICO-NAZARIOAssociate Justice

  

 [1]Carlos alleged that there were other compulsory heirs of his parents, but they had waived all their

claims, rights and participations in the properties in the estate. See G.R. No. 136035, Rollo, p. 83.  

[2]Id. at 87. [3]Ibid. 

 [4]Id. at 99-101.  [5]G.R. No. 135830 Rollo, p. 4. SIDDCOR is now known as Mega Pacific Insurance Corporation.  [6]Ibid. 

 [7]In a Decision penned by then Court of Appeals Justice Fidel T. Purisima, and concurred in by

Justices F. Martin, Jr. and C. Carpio-Morales. Justices Purisima and Carpio-Morales were subsequently elevated to the Supreme Court. Justice Purisima has retired from the Court.

 [8]Records, p. 31. 

 [9]G.R. No. 136035, Rollo, pp. 137-138.  [10]Records, p. 163.  [11]Records, p. 18. Sandoval maintained a Savings Account with P546,121.98, a Time Deposit

Account of P10,000,000.00, and Treasury Bills worth P5,000,000.00.  [12]Records, p. 34. Strangely enough, the Notice of Delivery/Payment is actually addressed to the

Branch Manager of the Bank of the Philippine Islands, Malolos Branch, though respondents characterized the document in their Motion as having been addressed to the Branch Manager of PNB Malolos. See Records, p. 13. 

[13]Records, p. 42.  [14]Records, p. 433. 

 [15]Id. at 450.

 [16]Both resolutions penned by  Justice D. Demetria, concurred in by Justices O. Amin and R.

Barcelona. [17]Particularly the cases of Raymundo v. Carpio, 33 Phil. 395 (1904) and Hanil Development Co.,

Ltd. v. ICA, 228 Phil. 529 (1986). Record, pp. 458-460.  

[18]Records, p. 463. [19]Id. at 468. 

 [20]G.R. No.  135830, Rollo, p. 59. [21]Records, pp. 1023-1026.  [22]Id. at 1024-1025. 

 [23]G.R. No. 137743, Rollo, pp. 96-105. 

 [24]Id. at 32. 

 [25]G.R. 135830, Rollo, p. 10.  [26]See Section 2, Rule 39, 1997 Rules of Civil Procedure; Records, p. 1114.   [27]G.R. No.  84979, 6 November 1989, 179 SCRA 117.  [28]G.R. No. 136035 Rollo, pp. 228-231.  [29]Penned by Justice R. de Guia-Salvador, concurred in by Justices C. Garcia (now Associate Justice

of this Court) and B. Abesamis.  

[30]Records, p. 1565. 

[31]Respondents argued that the Court of Appeals should decide the case itself rather than remand the matter to the trial court. Records, pp. 1868-1870.  

[32]See Records, pp. 1930-1936.  

[33]In a Resolution dated 11 February 2003.  

[34]See Paramount Insurance Corp. v. Court of Appeals, 369 Phil. 641 (1999). 

[35]A necessary conclusion following our pronouncement in Rivera v. Talavera, 112 Phil. 209 (1961). “Upon the other hand, it was improper for the plaintiffs to ask the Court of First Instance to assess damages against the sureties while the appeal was pending, unless the Court of Appeals had granted permission to do so. The reason is plain: It was the Court of Appeals that had jurisdiction over the case. The trial court had lost jurisdiction upon perfection of the appeal, and could no longer act except to adopt conservatory measures. It follows then . . . that the Court of First Instance could not validly entertain the supplemental complaint seeking to hold the sureties liable, unless the Court of Appeals referred the matter to it.”   

[36]See Heirs of Maningo v. IAC, G.R. Nos. 73559-62, 26 March 1990, 183 SCRA 691 citing Cantos v. Mair, 36 Phil. 350 (1970); Japco v. The City of Manila, 48 Phil. 851 ((1926); Cruz v. Manila Surety & Fidelity Co., Inc., et al., 92 Phil. 699 (1953). 

 [37]International Terminal Container Services v. Court of Appeals, G.R. No. 90530, 7 October  1992,

214 SCRA  456. [38]369 Phil. 641 (1999). [39]Id. at 652. 

 [40]Ibid. 

 [41]Records, p. 69. 

 [42]See Records, pp. 53-59, 64-66.

 [43]Paramount Insurance Corp. v. Court of Appeals, supra note 34 at 652. 

 [44]G.R. No. 92813, 31 July 1991, 199 SCRA 882. [45]“Where life and liberty are at stake, all possible avenues to determine his guilt or innocence must

be accorded an accused, and no care in the evaluation of the facts can ever be overdone.” People v. Mateo, G.R. Nos. 147678-87, 433 SCRA 640 (2004).

 [46]Supra note 17. 

 [47]Id. at 567. 

 [48]Id. at 570.  [49]See, e.g., Raymundo v. Carpio, 33 Phil. 395, 396 (1916). 

 [50]The relevant portion of Section 20, Rule 57 of the 1964 Rules of Court reads: 

 SECTION 20.  Claim for damages on account of improper, irregular or excessive attachment.—If the judgment on the action be in favor of the party against whom attachment was issued, he may recover, upon the bond given or deposit made by the attaching creditor, any damages resulting from the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the final

judgment. The application must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. . . . (Emphasis supplied.)  [51]See Zaragosa v. Fidelino, G.R. No. L-29723, 163 SCRA 443 (1988). “It thus seems indeed that the

first sentence of Section 20 precludes recovery of damages by a party against whom an attachment is issued and enforced if the judgment be adverse to him. This is not however correct. Although a party be adjudged liable to another, if it be established that the attachment issued at the latter's instance was wrongful and the former had suffered injury thereby, recovery for damages may be had by the party thus prejudiced by the wrongful attachment, even if the judgment be adverse to him. Slight reflection will show the validity of this proposition. For it is entirely possible for a plaintiff to have a meritorious cause of action against a defendant but have no proper ground for a preliminary attachment. In such a case, if the plaintiff nevertheless applies for and somehow succeeds in obtaining an attachment, but is subsequently declared by final judgment as not entitled thereto, and the defendant shows that he has suffered damages by reason of the attachment, there can be no gainsaying that indemnification is justly due the latter.”

 [52]G.R. No. 88379, 179 SCRA 468 (1989).  [53]Records, p. 433.  [54]As noted earlier, a judgment on the main case was rendered by the Court of Appeals in 2002, but

the motions for reconsideration filed by the parties were deferred resolution, pending adjudication of these petitions now before the Court. Supra note 29. 

[55]See Section 6, Rule 1, 1997 Rules of Civil Procedure.   [56]See Section 5(a), Rule 3, RIRCA.  [57]See Section 5(b), ibid. [58]Mobil Oil, Philippines v. Court of Appeals, G.R. No. 103072, 20 August  1993, 225 SCRA 486. [59]G.R. No. 136035, Rollo, p. 42, citing Santos v. Court of Appeals, 95 Phil. 360 (1954).  [60]Records, p. 33.  [61]Id. at 34.  [62]Section 4, Rule 57, Rules of Court. 

 [63]Supra note 34.  [64]Under Section 4(b), Rule 58, Rules of Court. 

 [65]Ibid.

 [66]Paramount Insurance Corp. v. Court of Appeals, supra note 34 at 653. [67]Ibid. Emphasis supplied.

 [68]Supra note 52 at 477-478. [69]See PAL v. Miano, 312 Phil. 287 (1995); Ibaan Rural Bank v. Court of Appeals, 378 Phil. 707

(1999); Cathay Pacific v. Spouses Vazquez, 447 Phil. 306 (2003). 

[70]See Article 2208(11), Civil Code.  

[71]See Escobin v. NLRC, 351 Phil. 973 (1998); People v. Torpio, G.R. No. 138984, 4 June 2004, 342 SCRA 213;  Wildvalley Shipping Corp. v. Court of Appeals, G.R. No. 119602,  6 October 2000, 342 SCRA 213.

 [72]MC Engineering, Inc. v. Court of Appeals, 429 Phil. 634, 667 (2002); Lazatin v. Twaño, 112 Phil.

733 (1961).  [73]355  Phil.  804 (1998). [74]Since incorporated in Section 5, Rule 7,  1997 Rules of Civil Procedure.  [75]Santo Tomas University Hospital v. Surla, supra note 73 at 813-815.  [76]See Section 1, Rule 141, Rules of Court. 

 [77]G.R. No. 137743, Rollo, pp. 89-90.  [78]Tañada and Macapagal v. Cuenco, 103 Phil. 1093 (1958).   [79]See Borja v. Court of Appeals, G.R. No. L-37944,  30 June  1988, 163 SCRA 175; De Leon v.

Soriano, 95 Phil. 806 (1954); Philippine Bank of Communications v. Court of Appeals, 344 Phil.  777 (1997). 

SECOND DIVISION

G.R. No. 142731             June 8, 2006

BANK OF THE PHILIPPINE ISLANDS (formerly FAR EAST BANK AND TRUST COMPANY), Petitioner, vs.COURT OF APPEALS and JIMMY T. GO, Respondents.

D E C I S I O N

AZCUNA, J.:

This is a petition for review on certiorari filed by Bank of the Philippine Islands of the decision and resolution of the Court of Appeals, which in turn partially denied a petition for certiorari questioning the temporary restraining order (TRO) and preliminary injunction issued by Judge Urbano C. Victorio, Sr. 1

The facts as narrated in the Court of Appeals decision are as follows:

Petitioner, Far East Bank and Trust Company, granted a total of eight (8) loans to Noah’s Arc Merchandising (Noah’s Ark, for brevity). Per Certificate of Registration issued by the Department of Trade and Industry (Rollo, p. 40), Noah’s Ark is a single proprietorship owned by Mr. Albert T. Looyuko. The said loans were evidenced by identical Promissory Notes all signed by Albert T. Looyuko, private respondent Jimmy T. Go and one Wilson Go. Likewise, all loans were secured by real estate mortgage constituted over a parcel of land covered by Transfer Certificate of Title [No.] 160277 registered in the names of Mr. Looyuko and herein private respondent. Petitioner, claiming that Noah’s Ark defaulted in its obligations, extrajudicially foreclosed the mortgage. The auction sale was set on 14 April 1998 but on 8 April 1998 private respondent filed a complaint for damages with prayer [for] issuance of TRO and/or writ of preliminary injunction seeking [to] enjoin the auction sale. [I]n the Order dated 14 April 1998 a temporary restraining order was issued and in the same order the application for Preliminary Injunction was set for hearing [i]n the afternoon of the same day (Rollo, p. 142).2

In an order3 dated April 15, 1998, Judge Victorio extended the TRO for another 15 days, for a total of 20 days. The Court of Appeals decision continues thus:

After hearing, the 7 May 1998 Order granted the application for preliminary injunction which shall take effect upon posting of a bond in the amount of Two Hundred Thousand Pesos (P200,000.00). The dispositive portion read:

"WHEREFORE, it appearing that the acts complained of would be in violation of plaintiff’s right and would work injustice to the plaintiff and so as not to render ineffectual whatever judgment may be issued in this case, the application [for] preliminary injunction is hereby granted and the defendants and all persons acting in their behalf are hereby ordered to cease, desist, and refrain from proceeding with the scheduled foreclosure and public auction sale of the mortgaged property covered by TCT No. 160277 until further orders from this Court.

This Order shall be effective upon petitioner’s filing of a bond in the amount of Two Hundred Thousand Pesos (P200,000.00) to answer for any and all damages that defendants may suffer by reason of the issuance of the writ of preliminary injunction.

As prayed for, defendants are hereby directed to file their answer on or before May 14, 1998. Copy furnished plaintiff.

SO ORDERED." (Rollo p. 175)

Private-respondent then filed a bond as required by the order. Petitioner moved for a reconsideration of the aforementioned order which motion was denied in the Order dated 30 July 1998 on the ground that the extrajudicial foreclosure was premature as to four (4)

promissory notes. The dispositive portion read:

"WHEREFORE, premises considered, the motion for reconsideration is hereby denied and the other pending incident pertaining thereto are noted and this case be set for pre-trial.

LET THEREFORE, a notice of pre-trial be sent to the parties.

SO ORDERED." (Rollo, p. 219)4

After petitioner’s motion for reconsideration was denied in an order dated July 30, 1998, petitioner filed a petition for certiorari with the Court of Appeals, praying that the orders dated May 7, 1998 and July 30, 1998, granting the writ of preliminary injunction and denying the motion for reconsideration, respectively, be annulled and set aside and the writ of preliminary injunction be dissolved. Furthermore, petitioner asked to be allowed to proceed with the auction sale of the property.

The Court of Appeals promulgated its decision dated August 26, 1999 which partially denied the petition for certiorari, stating as follows:

The issue in this case is: "Whether the trial court erred in the issuance of the Writ of Preliminary Injunction or not."

Petitioner averred that private respondent had not shown any right which should be protected by an injunction. Private respondent naturally claimed otherwise and asserted that since four (4) of the promissory notes have not yet matured there was no basis to foreclose the mortgage (Comment, p 15). He also claimed that his right to due process entitles him to legal demand prior to the filing of the foreclosure proceedings against the subject property (Comment, p. 16).

It has been held that an injunction may be issued in order to preserve the status quo. Thus, in Cagayan de Oro City Landless Residents Association, Inc., v. Court of Appeals (254 SCRA 220 [1996]) it was held:

As an extraordinary remedy, injunction is calculated to preserve the status quo of things and is generally availed of to prevent actual or threatened acts, until the merits of the case can be heard. x x x. (254 SCRA 228).

In the case at bar, there is a need to first settle the question of whether the demand made by petitioner was sufficient to render private respondent in default or not. In Rose Packing Co., Inc. v. Court of Appeals (167 SCRA 309 [1988]) it was held that the question of whether the debtor is in default should first be settled to determine if the foreclosure was proper. In the same case it was also held that said question should be resolved by the trial court, to wit:

While petitioner corporation does not deny, in fact, it admits its indebtedness to respondent bank (Brief for Petitioner, pp. 7-11), there were matters that needed the preservation of the status quo between the parties. The foreclosure sale was premature.

First was the question of whether or not petitioner corporation was already in default.

x x x

Petitioner corporation alleges that there had been no demand on the part of respondent bank previous to its filing a complaint against petitioner and Rene Knecht personally for collection on petitioner’s indebtedness (Brief for Petitioner, p.13). For an obligation to become due there must generally be a demand. Default generally begins from the moment the creditor demands the performance of the obligation. Without such demand, judicial or extrajudicial, the effects of default will not arise. (Namarco v. Federation of United Namarco Distributors, Inc. 49 SCRA 238 [1973]; Borje v. CFI of Misamis Occidental, 88 SCRA 576 [1979]. Whether petitioner corporation is already in default or not and whether demand had been properly made or not had to be determined in the lower court. (167 SCRA 317-318).

We now come to the matter of sufficiency of the bond filed by private respondent. Petitioner claims that the P200,000.00 bond is grossly insufficient. It argued, thus:

By enjoining petitioner from conducting the auction sale of the mortgaged property, petitioner has already suffered damages in the amount of P715,077.78 representing filing and publication fees. Yet damages to be incurred by petitioner by reason of the injunction are not limited to filing and publication fees, granting that the case will drag on for more tha[n] a year, which is usually the case. The injunction would deprive petitioner FEBTC of its own income from the foreclosed property or from the proceeds of the foreclosure sale. Obviously it is easily more

than P200,000.00 (Rollo, p. 31).

The Court agrees with petitioner that the amount of the bond is insufficient. In Valencia v. Court of Appeals, (263 SCRA 275 [1996]) the Supreme Court explained that the bond is for the protection against loss or damage by reason of the injunction, to wit:

The said bond was supposed to answer only for damages which may be sustained by private respondents, against whom the mandatory injunction was issued, by reason of the issuance thereof, and not to answer for damages caused by the actuations of petitioner, which may or may not be related at all to the implementation of the mandatory injunction. The purpose of the injunction bond is to protect the defendant against loss or damage by reason of the injunction in case the court finally decides that the plaintiff was not entitled to it, and the bond is usually conditioned accordingly. Thus, the bondsmen are obligated to account to the defendant in the injunction suit for all damages, or costs and reasonable counsel’s fees incurred or sustained by the latter in case it is determined that the injunction was wrongfully issued. (263 SCRA 288-289)

Private respondent’s contention that considering the market value of the property, the bond is reasonable and proper (Rollo, p. 240) cannot be upheld considering that no proof of the value of the property was even presented to buttress this assertion.

However, the insufficiency of the amount of the bond prescribed by the trial court does not warrant the lifting of the writ of injunction. The Court notes that under Section 7, Rule 58 of the 1997 Rules of Civil Procedure the applicant, in case the bond is insufficient, may still file one sufficient in amount, to wit:

Sec. 7. Service of copies of bond; effect of disapproval of same. - - x x x. If the applicant’s bond is found to be insufficient in amount, or if the surety or sureties thereon fail to justify, and a bond sufficient in amount with sufficient sureties approved after justification is not filed forthwith, the injunction shall be dissolved. x x x.

The Court considers a bond of Five Million Pesos (P5,000,000.00) to be more appropriate in the present case.

WHEREFORE, considering the foregoing premises the petition for certiorari is DENIED; however, private respondent is ordered to file an injunctive bond in the amount of P5,000,000.00.

SO ORDERED.5

Petitioner filed a motion for reconsideration which was denied in a resolution dated April 3, 2000 by the Court of Appeals on the ground that all the matters raised in the motion for reconsideration had already been passed upon in the decision.6

Petitioner filed the instant petition for review on certiorari questioning the August 26, 1999 decision and the April 3, 2000 resolution. The following issues were raised by petitioner:

3.1 Whether the Honorable Court of Appeals can resolve the issue of the sufficiency of demand.

3.2 Whether private respondent Go is entitled to a temporary restraining order and a writ of preliminary injunction.

3.3 Whether the Complaint of private respondent Go has been rendered moot and academic.

For the purpose of clarity, the issues are restated thus:

1. Whether or not the private respondent was entitled to the TRO and writ of preliminary injunction.

2. Whether or not the TRO and writ of preliminary injunction were properly issued by Judge Victorio.

On the first issue, this Court finds that private respondent was not entitled to the TRO and the writ of preliminary injunction. Section 3 of Rule 58 of the Rules of Court provides the grounds for the issuance of a preliminary injunction, to wit:

A preliminary injunction may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.

As will be discussed below, private respondent is not entitled to the relief of injunction against the extrajudicial foreclosure and auction sale. Neither are the extrajudicial foreclosure and auction sale violative of private respondent’s rights.

Private respondent claimed that demand was not made upon him, in spite of the fact that he co-signed the promissory notes. He also argues that only four of the eight promissory notes secured by the mortgage had become due. A reading of the promissory notes discloses that as co-signor, private respondent waived demand. Furthermore, the promissory notes contain an acceleration clause, to wit:

Upon the happening of any of the following events, FAR EAST BANK AND TRUST COMPANY or the holder, may at its option, forthwith accelerate maturity and the unpaid balance of the principal, as well as interest and other charges which have accrued, shall become due and payable without demand or notice[:](1) default in payment or performance of any obligation of any of the undersigned to FAR EAST BANK AND TRUST COMPANY or its affiliated companies;

x x x

I/We hereby waive any diligence, presentment, demand, protest or notice of non-payment o[r] dishonor with respect to this note or any extension thereof.7 (Emphasis added)

The Civil Code in Article 11698 provides that one incurs in delay or is in default from the time the obligor demands the fulfillment of the obligation from the obligee. However, the law expressly provides that demand is not necessary under certain circumstances, and one of these circumstances is when the parties expressly waive demand. Hence, since the co-signors expressly waived demand in the promissory notes, demand was unnecessary for them to be in default.

Private respondent further argues that by withholding the lease payments Far East Bank and Trust Company (FEBTC) owed Noah’s Ark for the space FEBTC was leasing from Noah’s Ark and applying said amounts to the outstanding obligation of Noah’s Ark, as expressed in a letter from FEBTC dated May 19, 1998,9 FEBTC has waived default, novated the contract of loan as embodied in the promissory notes and is therefore estopped from foreclosing on the mortgaged property.

This Court disagrees. FEBTC’s act of withholding the lease payments and applying them to the outstanding obligation of Noah’s Ark is merely an acknowledgement of the legal compensation that occurred by operation of law between the parties. The Court has expounded on compensation and more specifically on legal compensation as follows:

x x x compensation is a mode of extinguishing to the concurrent amount the obligations of persons who in their own right and as principals are reciprocally debtors and creditors of each other. Legal compensation takes place by operation of law when all the requisites are present, as opposed to conventional compensation which takes place when the parties agree to compensate their mutual obligations even in the absence of some requisites.10

The Civil Code enumerates the requisites of legal compensation, thus:

Art. 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.

Art. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a

principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

It is clear from the facts that FEBTC and Noah’s Ark are both principal obligors and creditors of each other. Their debts to each other both consist in a sum of money. As discussed above, the eight promissory notes of Noah’s Ark are all due; and the lease payments owed by FEBTC become due each month. Noah’s Ark’s debt is liquidated and demandable; and FEBTC’s lease payments are liquidated and are demandable every month as they fall due. Lastly, there is no retention or controversy commenced by third persons over either of the debts.

Novation did not occur as private respondent argued. The Court has declared that a contract cannot be novated in the absence of a new contract executed between the parties.11 The legal compensation, which was acknowledged by FEBTC in its May 19, 1998 letter, occurred by operation of law, as discussed above. As a consequence, it cannot be considered a new contract between the parties. Hence, the loan agreement, as embodied in the promissory notes and the real estate mortgage, subsists.

Since the compensation between the parties occurred by operation of law, FEBTC did not waive Noah’s Ark’s default.

As a result of the absence of novation or waiver of default, FEBTC is therefore not estopped from proceeding with the foreclosure.

Private respondent further argues in his memorandum that FEBTC was in bad faith when it initiated the foreclosure proceedings because Noah’s Ark had been requesting for accounting and reconciliation of its account and the application of interest payment, and that there were on-going negotiations with FEBTC for the settlement and restructuring of the loan obligation. From the evidence on hand, it is clear that FEBTC was acting within its rights. Private respondent did not present any other agreement signed by the parties subsequent to the promissory notes and mortgage contract which can be considered as replacing, altering, or novating the contractual rights between the parties. Even if Noah’s Ark was trying to seek an accounting and reconciliation of its account and even if it was trying to negotiate a restructuring of its loan obligation, it cannot deny the fact that it had already defaulted on the entire loan obligation. This gave FEBTC the right to exercise its contractual rights to foreclose on the security of the debt, which in this case was the real estate mortgage subject of this case. FEBTC was therefore just exercising its contractual rights when it initiated foreclosure proceedings and cannot be considered to have acted in bad faith.

With regard to the second issue, this Court finds that the TRO and the writ of preliminary injunction were improperly issued by Judge Victorio. First of all, on substantive grounds, as discussed above, private respondent was not entitled to the TRO and the writ of preliminary injunction.

Second, the issuance of the TRO was, on procedural grounds, irregular. Section 5, Rule 58 of the Rules of Civil Procedure provides:

Preliminary injunction not granted without notice; exception. – No preliminary injunction shall be granted without hearing and prior notice to the party or person sought to be enjoined. If it shall appear from facts shown by affidavits or by the verified application that great or irreparable injury would result to the applicant before the matter can be heard on notice, the court to which the application for preliminary injunction was made, may issue a temporary restraining order to be effective only for a period of twenty (20) days from notice to the party or person sought to be enjoined. Within the said twenty-day period, the court must order said party or person to show cause, at a specified time and place, why the injunction should not be granted, determine within the same period whether or not the preliminary injunction shall be granted, and accordingly issue the corresponding order.

Judge Victorio, in an order dated April 14, 1998, issued a TRO for five days, then, in an order dated April 15, 1998, extended it for fifteen more days, totaling twenty days. However, in the first order, Judge Victorio excluded Saturdays and Sundays; and in the latter order he added legal holidays to the exclusions. As quoted above, a TRO is effective only for a period of twenty

days from notice to the party sought to be enjoined. The rule does not specify that the counting of the twenty-day period is only limited to working days or that Saturdays, Sundays and legal holidays are excluded from the twenty-day period. The law simply states twenty days from notice. Section 1, Rule 22 of the Rules of Court is pertinent, to wit:

How to compute time. – In computing any period of time prescribed or allowed by these Rules, or by order of the court, or by any applicable statute, the day of the act or event from which the designated period of time begins to run is to be excluded and the date of performance included. If the last day of the period, as thus computed, falls on a Saturday, a Sunday, or a legal holiday in the place where the court sits, the time shall not run until the next working day.

It is clear from the last sentence of this section that non-working days (Saturdays, Sundays and legal holidays) are excluded from the counting of the period only when the last day of the period falls on such days. The Rule does not provide for any other circumstance in which non-working days would affect the counting of a prescribed period. Hence, Judge Victorio exceeded the authority granted to lower courts, in Section 5, Rule 58 of the Rules of Court, when he excluded non-working days from the counting of the twenty-day period.

In sum, private respondent was not entitled to the TRO nor to the preliminary injunction, and the period granted in the TRO issued by Judge Victorio exceeded that prescribed in the Rules of Court.

WHEREFORE, the petition is GRANTED and the decision12 and resolution13 of the Court of Appeals dated August 26, 1999 and April 3, 2000, respectively, are PARTIALLY REVERSED and SET ASIDE, retaining only the portion which increases the amount of the injunctive bond to Five Million Pesos (P5,000,000). The writ of preliminary injunction issued by Judge Urbano C. Victorio, Sr., in an order14 dated May 7, 1998 in Civil Case No. 98-88266, is hereby DISSOLVED. No costs.

SO ORDERED.

ADOLFO S. AZCUNAAssociate Justice

WE CONCUR:

REYNATO S. PUNOChairperson

Associate Justice

ANGELINA SANDOVAL-GUTIERREZAssociate Justice

RENATO C. CORONAAsscociate Justice

CANCIO C. GARCIAAssociate Justice

Footnotes

1 By virtue of a merger of the Bank of the Philippine Islands and Far East Bank and Trust Company the corporate life of the latter has terminated and the merged entity is now called Bank of the Philippine Islands; See, Manifestation and Urgent Motion for Extension of Time, dated April 25, 2000; CA Rollo, unnumbered.

2 Rollo, p. 39.

3 Records, p. 60.

4 Rollo, pp. 39-41.

5 Rollo, pp. 41-45.

6 Id. at 47.

7 Rollo, pp. 50-57.

8 ART. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or law expressly so declare; x x x.

9 NOAH’S ARK BUILDING

Escolta, Manila

Attention : MS. JULIET T. GO

Administrator

This is to inform you that in view of the non-payment of Noah’s Ark Merchandising of its loan obligation with Far East Bank and Trust Company, we have withheld the February 1998 to May 1998 rental payments to your office and have correspondingly applied said amount to the outstanding obligation of Noah’s Ark Merchandising. We will continue to do so for the succeeding months until such time said loan is fully settled.

Please note that we have not been delinquent in our rental payments and should not be charged with penalties for non-remittance of the same. x x x

10 PNB MEDECOR v. Uy, 415 Phil. 348, 359 (2001).

11 Bert Osmeña & Associates Inc. v. CA, 205 Phil. 328 (1983); Tiu Siuco v. Habana, 45 Phil. 707 (1924).

12 Rollo, pp. 38–45.

13 Id. at 47.

14 Records, pp. 113-115.SECOND DIVISION

G.R. No. 142731             June 8, 2006

BANK OF THE PHILIPPINE ISLANDS (formerly FAR EAST BANK AND TRUST COMPANY), Petitioner, vs.

COURT OF APPEALS and JIMMY T. GO, Respondents.

D E C I S I O N

AZCUNA, J.:

This is a petition for review on certiorari filed by Bank of the Philippine Islands of the decision and resolution of the Court of Appeals, which in turn partially denied a petition for certiorari

questioning the temporary restraining order (TRO) and preliminary injunction issued by Judge Urbano C. Victorio, Sr. 1

The facts as narrated in the Court of Appeals decision are as follows:

Petitioner, Far East Bank and Trust Company, granted a total of eight (8) loans to Noah’s Arc Merchandising (Noah’s Ark, for brevity). Per Certificate of Registration issued by the

Department of Trade and Industry (Rollo, p. 40), Noah’s Ark is a single proprietorship owned by Mr. Albert T. Looyuko. The said loans were evidenced by identical Promissory Notes all signed by Albert T. Looyuko, private respondent Jimmy T. Go and one Wilson Go. Likewise, all loans were secured by real estate mortgage constituted over a parcel of land covered by Transfer Certificate of Title [No.] 160277 registered in the names of Mr. Looyuko and herein private respondent. Petitioner, claiming that Noah’s Ark defaulted in its obligations, extrajudicially

foreclosed the mortgage. The auction sale was set on 14 April 1998 but on 8 April 1998 private respondent filed a complaint for damages with prayer [for] issuance of TRO and/or writ of

preliminary injunction seeking [to] enjoin the auction sale. [I]n the Order dated 14 April 1998 a temporary restraining order was issued and in the same order the application for Preliminary

Injunction was set for hearing [i]n the afternoon of the same day (Rollo, p. 142).2

In an order3 dated April 15, 1998, Judge Victorio extended the TRO for another 15 days, for a

total of 20 days. The Court of Appeals decision continues thus:

After hearing, the 7 May 1998 Order granted the application for preliminary injunction which shall take effect upon posting of a bond in the amount of Two Hundred Thousand Pesos

(P200,000.00). The dispositive portion read:

"WHEREFORE, it appearing that the acts complained of would be in violation of plaintiff’s right and would work injustice to the plaintiff and so as not to render ineffectual whatever judgment may be issued in this case, the application [for] preliminary injunction is hereby granted and the defendants and all persons acting in their behalf are hereby ordered to cease, desist, and

refrain from proceeding with the scheduled foreclosure and public auction sale of the mortgaged property covered by TCT No. 160277 until further orders from this Court.

This Order shall be effective upon petitioner’s filing of a bond in the amount of Two Hundred Thousand Pesos (P200,000.00) to answer for any and all damages that defendants may suffer

by reason of the issuance of the writ of preliminary injunction.

As prayed for, defendants are hereby directed to file their answer on or before May 14, 1998. Copy furnished plaintiff.

SO ORDERED." (Rollo p. 175)

Private-respondent then filed a bond as required by the order. Petitioner moved for a reconsideration of the aforementioned order which motion was denied in the Order dated 30

July 1998 on the ground that the extrajudicial foreclosure was premature as to four (4) promissory notes. The dispositive portion read:

"WHEREFORE, premises considered, the motion for reconsideration is hereby denied and the other pending incident pertaining thereto are noted and this case be set for pre-trial.

LET THEREFORE, a notice of pre-trial be sent to the parties.

SO ORDERED." (Rollo, p. 219)4

After petitioner’s motion for reconsideration was denied in an order dated July 30, 1998, petitioner filed a petition for certiorari with the Court of Appeals, praying that the orders dated

May 7, 1998 and July 30, 1998, granting the writ of preliminary injunction and denying the motion for reconsideration, respectively, be annulled and set aside and the writ of preliminary

injunction be dissolved. Furthermore, petitioner asked to be allowed to proceed with the auction sale of the property.

The Court of Appeals promulgated its decision dated August 26, 1999 which partially denied the petition for certiorari, stating as follows:

The issue in this case is: "Whether the trial court erred in the issuance of the Writ of Preliminary Injunction or not."

Petitioner averred that private respondent had not shown any right which should be protected by an injunction. Private respondent naturally claimed otherwise and asserted that since four

(4) of the promissory notes have not yet matured there was no basis to foreclose the mortgage (Comment, p 15). He also claimed that his right to due process entitles him to legal demand

prior to the filing of the foreclosure proceedings against the subject property (Comment, p. 16).

It has been held that an injunction may be issued in order to preserve the status quo. Thus, in Cagayan de Oro City Landless Residents Association, Inc., v. Court of Appeals (254 SCRA 220

[1996]) it was held:

As an extraordinary remedy, injunction is calculated to preserve the status quo of things and is generally availed of to prevent actual or threatened acts, until the merits of the case can be

heard. x x x. (254 SCRA 228).

In the case at bar, there is a need to first settle the question of whether the demand made by petitioner was sufficient to render private respondent in default or not. In Rose Packing Co., Inc. v. Court of Appeals (167 SCRA 309 [1988]) it was held that the question of whether the debtor is in default should first be settled to determine if the foreclosure was proper. In the same case

it was also held that said question should be resolved by the trial court, to wit:

While petitioner corporation does not deny, in fact, it admits its indebtedness to respondent bank (Brief for Petitioner, pp. 7-11), there were matters that needed the preservation of the

status quo between the parties. The foreclosure sale was premature.

First was the question of whether or not petitioner corporation was already in default.

x x x

Petitioner corporation alleges that there had been no demand on the part of respondent bank previous to its filing a complaint against petitioner and Rene Knecht personally for collection on

petitioner’s indebtedness (Brief for Petitioner, p.13). For an obligation to become due there must generally be a demand. Default generally begins from the moment the creditor demands the performance of the obligation. Without such demand, judicial or extrajudicial, the effects of default will not arise. (Namarco v. Federation of United Namarco Distributors, Inc. 49 SCRA 238 [1973]; Borje v. CFI of Misamis Occidental, 88 SCRA 576 [1979]. Whether petitioner corporation

is already in default or not and whether demand had been properly made or not had to be determined in the lower court. (167 SCRA 317-318).

We now come to the matter of sufficiency of the bond filed by private respondent. Petitioner claims that the P200,000.00 bond is grossly insufficient. It argued, thus:

By enjoining petitioner from conducting the auction sale of the mortgaged property, petitioner has already suffered damages in the amount of P715,077.78 representing filing and publication

fees. Yet damages to be incurred by petitioner by reason of the injunction are not limited to filing and publication fees, granting that the case will drag on for more tha[n] a year, which is

usually the case. The injunction would deprive petitioner FEBTC of its own income from the foreclosed property or from the proceeds of the foreclosure sale. Obviously it is easily more

than P200,000.00 (Rollo, p. 31).

The Court agrees with petitioner that the amount of the bond is insufficient. In Valencia v. Court of Appeals, (263 SCRA 275 [1996]) the Supreme Court explained that the bond is for the

protection against loss or damage by reason of the injunction, to wit:

The said bond was supposed to answer only for damages which may be sustained by private respondents, against whom the mandatory injunction was issued, by reason of the issuance thereof, and not to answer for damages caused by the actuations of petitioner, which may or

may not be related at all to the implementation of the mandatory injunction. The purpose of the injunction bond is to protect the defendant against loss or damage by reason of the injunction in case the court finally decides that the plaintiff was not entitled to it, and the bond is usually conditioned accordingly. Thus, the bondsmen are obligated to account to the defendant in the injunction suit for all damages, or costs and reasonable counsel’s fees incurred or sustained by

the latter in case it is determined that the injunction was wrongfully issued. (263 SCRA 288-289)

Private respondent’s contention that considering the market value of the property, the bond is reasonable and proper (Rollo, p. 240) cannot be upheld considering that no proof of the value of

the property was even presented to buttress this assertion.

However, the insufficiency of the amount of the bond prescribed by the trial court does not warrant the lifting of the writ of injunction. The Court notes that under Section 7, Rule 58 of the

1997 Rules of Civil Procedure the applicant, in case the bond is insufficient, may still file one sufficient in amount, to wit:

Sec. 7. Service of copies of bond; effect of disapproval of same. - - x x x. If the applicant’s bond is found to be insufficient in amount, or if the surety or sureties thereon fail to justify, and a

bond sufficient in amount with sufficient sureties approved after justification is not filed forthwith, the injunction shall be dissolved. x x x.

The Court considers a bond of Five Million Pesos (P5,000,000.00) to be more appropriate in the present case.

WHEREFORE, considering the foregoing premises the petition for certiorari is DENIED; however, private respondent is ordered to file an injunctive bond in the amount of P5,000,000.00.

SO ORDERED.5

Petitioner filed a motion for reconsideration which was denied in a resolution dated April 3, 2000 by the Court of Appeals on the ground that all the matters raised in the motion for

reconsideration had already been passed upon in the decision.6

Petitioner filed the instant petition for review on certiorari questioning the August 26, 1999

decision and the April 3, 2000 resolution. The following issues were raised by petitioner:

3.1 Whether the Honorable Court of Appeals can resolve the issue of the sufficiency of demand.

3.2 Whether private respondent Go is entitled to a temporary restraining order and a writ of preliminary injunction.

3.3 Whether the Complaint of private respondent Go has been rendered moot and academic.

For the purpose of clarity, the issues are restated thus:

1. Whether or not the private respondent was entitled to the TRO and writ of preliminary injunction.

2. Whether or not the TRO and writ of preliminary injunction were properly issued by Judge Victorio.

On the first issue, this Court finds that private respondent was not entitled to the TRO and the writ of preliminary injunction. Section 3 of Rule 58 of the Rules of Court provides the grounds

for the issuance of a preliminary injunction, to wit:

A preliminary injunction may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in

requiring the performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the

applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.

As will be discussed below, private respondent is not entitled to the relief of injunction against the extrajudicial foreclosure and auction sale. Neither are the extrajudicial foreclosure and

auction sale violative of private respondent’s rights.

Private respondent claimed that demand was not made upon him, in spite of the fact that he co-signed the promissory notes. He also argues that only four of the eight promissory notes

secured by the mortgage had become due. A reading of the promissory notes discloses that as co-signor, private respondent waived demand. Furthermore, the promissory notes contain an

acceleration clause, to wit:

Upon the happening of any of the following events, FAR EAST BANK AND TRUST COMPANY or the holder, may at its option, forthwith accelerate maturity and the unpaid balance of the principal, as well as interest and other charges which have accrued, shall become due and

payable without demand or notice[:](1) default in payment or performance of any obligation of any of the undersigned to FAR EAST BANK AND TRUST COMPANY or its affiliated companies;

x x x

I/We hereby waive any diligence, presentment, demand, protest or notice of non-payment o[r] dishonor with respect to this note or any extension thereof.7 (Emphasis added)

The Civil Code in Article 11698 provides that one incurs in delay or is in default from the time the obligor demands the fulfillment of the obligation from the obligee. However, the law

expressly provides that demand is not necessary under certain circumstances, and one of these circumstances is when the parties expressly waive demand. Hence, since the co-signors

expressly waived demand in the promissory notes, demand was unnecessary for them to be in default.

Private respondent further argues that by withholding the lease payments Far East Bank and Trust Company (FEBTC) owed Noah’s Ark for the space FEBTC was leasing from Noah’s Ark and applying said amounts to the outstanding obligation of Noah’s Ark, as expressed in a letter from

FEBTC dated May 19, 1998,9 FEBTC has waived default, novated the contract of loan as embodied in the promissory notes and is therefore estopped from foreclosing on the mortgaged

property.

This Court disagrees. FEBTC’s act of withholding the lease payments and applying them to the outstanding obligation of Noah’s Ark is merely an acknowledgement of the legal compensation

that occurred by operation of law between the parties. The Court has expounded on compensation and more specifically on legal compensation as follows:

x x x compensation is a mode of extinguishing to the concurrent amount the obligations of persons who in their own right and as principals are reciprocally debtors and creditors of each other. Legal compensation takes place by operation of law when all the requisites are present,

as opposed to conventional compensation which takes place when the parties agree to compensate their mutual obligations even in the absence of some requisites.10

The Civil Code enumerates the requisites of legal compensation, thus:

Art. 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.

Art. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

It is clear from the facts that FEBTC and Noah’s Ark are both principal obligors and creditors of each other. Their debts to each other both consist in a sum of money. As discussed above, the

eight promissory notes of Noah’s Ark are all due; and the lease payments owed by FEBTC become due each month. Noah’s Ark’s debt is liquidated and demandable; and FEBTC’s lease payments are liquidated and are demandable every month as they fall due. Lastly, there is no

retention or controversy commenced by third persons over either of the debts.

Novation did not occur as private respondent argued. The Court has declared that a contract cannot be novated in the absence of a new contract executed between the parties.11 The legal

compensation, which was acknowledged by FEBTC in its May 19, 1998 letter, occurred by operation of law, as discussed above. As a consequence, it cannot be considered a new contract between the parties. Hence, the loan agreement, as embodied in the promissory notes and the

real estate mortgage, subsists.

Since the compensation between the parties occurred by operation of law, FEBTC did not waive Noah’s Ark’s default.

As a result of the absence of novation or waiver of default, FEBTC is therefore not estopped from proceeding with the foreclosure.

Private respondent further argues in his memorandum that FEBTC was in bad faith when it initiated the foreclosure proceedings because Noah’s Ark had been requesting for accounting and reconciliation of its account and the application of interest payment, and that there were on-going negotiations with FEBTC for the settlement and restructuring of the loan obligation.

From the evidence on hand, it is clear that FEBTC was acting within its rights. Private respondent did not present any other agreement signed by the parties subsequent to the

promissory notes and mortgage contract which can be considered as replacing, altering, or novating the contractual rights between the parties. Even if Noah’s Ark was trying to seek an

accounting and reconciliation of its account and even if it was trying to negotiate a restructuring of its loan obligation, it cannot deny the fact that it had already defaulted on the entire loan obligation. This gave FEBTC the right to exercise its contractual rights to foreclose

on the security of the debt, which in this case was the real estate mortgage subject of this case. FEBTC was therefore just exercising its contractual rights when it initiated foreclosure

proceedings and cannot be considered to have acted in bad faith.

With regard to the second issue, this Court finds that the TRO and the writ of preliminary

injunction were improperly issued by Judge Victorio. First of all, on substantive grounds, as discussed above, private respondent was not entitled to the TRO and the writ of preliminary

injunction.

Second, the issuance of the TRO was, on procedural grounds, irregular. Section 5, Rule 58 of the Rules of Civil Procedure provides:

Preliminary injunction not granted without notice; exception. – No preliminary injunction shall be granted without hearing and prior notice to the party or person sought to be enjoined. If it

shall appear from facts shown by affidavits or by the verified application that great or irreparable injury would result to the applicant before the matter can be heard on notice, the court to which the application for preliminary injunction was made, may issue a temporary

restraining order to be effective only for a period of twenty (20) days from notice to the party or person sought to be enjoined. Within the said twenty-day period, the court must order said

party or person to show cause, at a specified time and place, why the injunction should not be granted, determine within the same period whether or not the preliminary injunction shall be

granted, and accordingly issue the corresponding order.

Judge Victorio, in an order dated April 14, 1998, issued a TRO for five days, then, in an order dated April 15, 1998, extended it for fifteen more days, totaling twenty days. However, in the first order, Judge Victorio excluded Saturdays and Sundays; and in the latter order he added

legal holidays to the exclusions. As quoted above, a TRO is effective only for a period of twenty days from notice to the party sought to be enjoined. The rule does not specify that the counting

of the twenty-day period is only limited to working days or that Saturdays, Sundays and legal holidays are excluded from the twenty-day period. The law simply states twenty days from

notice. Section 1, Rule 22 of the Rules of Court is pertinent, to wit:

How to compute time. – In computing any period of time prescribed or allowed by these Rules, or by order of the court, or by any applicable statute, the day of the act or event from which the designated period of time begins to run is to be excluded and the date of performance included. If the last day of the period, as thus computed, falls on a Saturday, a Sunday, or a legal holiday

in the place where the court sits, the time shall not run until the next working day.

It is clear from the last sentence of this section that non-working days (Saturdays, Sundays and legal holidays) are excluded from the counting of the period only when the last day of the

period falls on such days. The Rule does not provide for any other circumstance in which non-working days would affect the counting of a prescribed period. Hence, Judge Victorio exceeded

the authority granted to lower courts, in Section 5, Rule 58 of the Rules of Court, when he excluded non-working days from the counting of the twenty-day period.

In sum, private respondent was not entitled to the TRO nor to the preliminary injunction, and the period granted in the TRO issued by Judge Victorio exceeded that prescribed in the Rules of

Court.

WHEREFORE, the petition is GRANTED and the decision12 and resolution13 of the Court of Appeals dated August 26, 1999 and April 3, 2000, respectively, are PARTIALLY

REVERSED and SET ASIDE, retaining only the portion which increases the amount of the injunctive bond to Five Million Pesos (P5,000,000). The writ of preliminary injunction issued by Judge Urbano C. Victorio, Sr., in an order14 dated May 7, 1998 in Civil Case No. 98-88266, is

hereby DISSOLVED. No costs.

SO ORDERED.

ADOLFO S. AZCUNAAssociate Justice

WE CONCUR:

REYNATO S. PUNOChairperson

Associate Justice

ANGELINA SANDOVAL-GUTIERREZAssociate Justice

RENATO C. CORONAAsscociate Justice

CANCIO C. GARCIAAssociate Justice

Footnotes

1 By virtue of a merger of the Bank of the Philippine Islands and Far East Bank and Trust Company the corporate life of the latter has terminated and the merged entity is now called Bank of the Philippine Islands; See, Manifestation and Urgent Motion for Extension of Time,

dated April 25, 2000; CA Rollo, unnumbered.

2 Rollo, p. 39.

3 Records, p. 60.

4 Rollo, pp. 39-41.

5 Rollo, pp. 41-45.

6 Id. at 47.

7 Rollo, pp. 50-57.

8 ART. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or law expressly so declare; x x x.

9 NOAH’S ARK BUILDING

Escolta, Manila

Attention : MS. JULIET T. GO

Administrator

This is to inform you that in view of the non-payment of Noah’s Ark Merchandising of its loan obligation with Far East Bank and Trust Company, we have withheld the February 1998 to May

1998 rental payments to your office and have correspondingly applied said amount to the outstanding obligation of Noah’s Ark Merchandising. We will continue to do so for the

succeeding months until such time said loan is fully settled.

Please note that we have not been delinquent in our rental payments and should not be charged with penalties for non-remittance of the same. x x x

10 PNB MEDECOR v. Uy, 415 Phil. 348, 359 (2001).

11 Bert Osmeña & Associates Inc. v. CA, 205 Phil. 328 (1983); Tiu Siuco v. Habana, 45 Phil. 707 (1924).

12 Rollo, pp. 38–45.

13 Id. at 47.

14 Records, pp. 113-115.

 

 

 

FIRST DIVISION  

SPOUSES MANUEL & LUISA TAN LEE, RENWICK WARREN LEE and JANSSEN THADDEUS LEE,

                                Petitioners,

 

 

 

          -  versus  -

 

 

 

HON. COURT OF APPEALS and CHINA BANKING CORPORATION ,

                                Respondents.

  G.R. No. 147191  Present:

 PANGANIBAN, C.J.       Chairperson,YNARES-SANTIAGO,AUSTRIA-MARTINEZ,

CALLEJO, SR., and

CHICO-NAZARIO, JJ.

 

 

Promulgated:

 

July 27, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - -  - - - - - - - - - - - - - - - - - - - - - -x

 

 

D E C I S I O N 

 

CHICO-NAZARIO, J.:

 

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, with prayer for the issuance of a Temporary Restraining Order (TRO) or a Preliminary Injunction against the Decision [1] of the Court of Appeals promulgated on 24 October 2000 and its Resolution[2] dated 19 February 2001, which nullified and set aside the Orders dated 25 March 1999 and 11 May 1999 of Hon. Francisco L. Calingin, Presiding Judge of Branch 22, Regional Trial Court (RTC), Misamis Oriental.  In said Orders, Judge Calingin issued a Writ of Preliminary Injunction against respondent China Banking Corporation (CBC) from conducting and proceeding with the extrajudicial foreclosure and public auction sale of the subject mortgaged properties.

 

The facts as found by the Court of Appeals are as follows:

 

In 1992, CBC granted the spouses Lee credit facilities in the amount of P5 Million.  For this facility, private respondents constituted onFebruary 11, 1992 a real estate mortgage (REM) over the Borja property (Annex “B”, Petition).

 

Against the secured credit accommodation, the spouses Lee initially borrowed P5 Million, the loan covered by promissory note (P/N) #TLS-20 that was to mature [i]n February 1997.  While paying their amortization obligation under this note, the spouses Lee were able to secure as they did secure additional loans drawn against the usable/available portion of the credit facility.

 

Subsequently, to finance a building construction project, the spouses Lee’s original credit facility was increased to P20 Million. To secure the increased facility and all loan availments/drawings made or to be made against such facility, the REM over the Borja property was correspondingly amended.  The “Amendment to Real Estate Mortgage” (Annex “B-1”, Petition), was signed by private respondents and Renwick Warren’s wife, Marivic.

 

Against this facility as increased, CBC, as participant of the Land Bank of the Philippine[s] (LBP)-administered Countryside Loan Fund (CLF) agreed to grant the spouses Lee, via bridge financing, a P20 Million loan to be sourced from its (CBC’s) availment under the CLC program. In a letter-notice of June 16, 1997, CBC-Borja Branch manager Ronaldo Uy informed Manuel Lee of the approval by the Bank’s Executive committee of his term loan in the amount of P20 Million to be funded out of the LBP-CLF, subject, inter alia, to the following terms/conditions:

 

“E.  Against Real Estate Mortgage (REM) on the three parcels of land described under TCT Nos. 52273, 56321 and 56322 together with the proposed 3-storey commercial building, located at J.R. Borja Street . . . .” (Annex ‘F’, Petition).

 

Manuel Lee handwrote his conformity to the conditions aforestated on the letter-notice itself.

 

On September 22, 1997, Manuel Lee and CBC formalized the P20 Million loan by executing a “LOAN AGREEMENT” (Annex “G”, Petition), which thus paved the way for the release of the funds under the LBP-CLF to the former.  Under the terms of this agreement, the loan ofP20 Million shall be secured by a real estate mortgage over the Borja property.  The series of replacements and/or conversion of the promissory notes vis-a-vis the P20 Million drawn down led to the execution of P/N #TLS-228 for P17,260,000.00 and P/N #TLS-229 for P2,740,000.00 (Annex “C”, Petition).

 

Meanwhile, [i]n January 1995, the spouses Lee executed in favor of the Bank REM over the Lumbia property as security for a P2 Million credit facility (Annex “I”, Petition).  They would later execute the “Amendment to the Real Estate Mortgage” (Annex “I-1”) over the land [“described under TCT No. T-23215”] to secure an increased credit facility.  From this facility, the spouses Lee obtained a loan of P5 Million as evidenced, after renewal or restructuring, by P/N BDS-2021 and P/N BDS-2125 dated February 13, 1997 and October 31, 1997, respectively, for P2.5 Million each (Annex “D”, Petition).

 

Subsequent events show the spouses Lee defaulting, starting November 1997, on their monthly amortization payments under the two (2) separate secured facilities.  Consequently, and owing to the acceleration clause embodied in the covering promissory notes, CBC, thru its Mr. Uy, sent the spouses Lee a letter dated June 22, 1998 demanding a full settlement of account (Annex “J”, Petition).  Another demand letter dated August 11, 1998 with a threat of foreclosure of mortgage followed (Annex “K”, Petition).

 

In a letter of July 8, 1998, Manuel Lee, responding to the first demand letter, informed Uy that he (Lee) could not, due to cash flow problem, remit the required full payment.  Mr. Lee, however, assured payment “as soon as funds would be available” (Annex “L”, Petition).

 

On October 9, 1998, CBC, thru counsel, wrote the spouses Lee, again demanding full liquidation of overdue accounts specifically covered by P/N Nos. TLS-228, TLS-229, BDS-2021 and BDS-2125, this time totaling P24,833,333.34, or face extra-judicial foreclosure of mortgages (Annex “M”, Petition).  Answering, Mr. Lee, in his letter of October 23, 1998, reiterated his commitment to pay the family’s account covered by the aforementioned (4) four promissory notes.  He, however, in effect pleaded for the deferment of the foreclosure of their mortgages so as not “to prejudice the negotiations [they] are pursuing ... to produce the funds to pay off our loans with [the] Bank” (Annex “N”, Petition).

 

Towards the end of 1998, CBC sent a fourth demand letter dated December 21, 1998.  In their reply-letter of January 6, 1999, the spouses Lee acknowledged receipt of the December 21, 1998 letter and requested that they be given up to March 1999 to settle.  In the same breath, they ask that the Bank make “representation with [its] Manila Lawyer, to hold in abeyance whatever legal action they wish to take” (Annex “P”, Petition).

 

Unbeknownst to CBC while it was earnestly demanding payment, the spouses Lee, joined by their sons, filed on December 28, 1998 a suit with the Regional Trial Court at Cagayan de Oro City against the Bank for specific performance and cancellation of real estate mortgage.  There, they contended that the real estate mortgage on the Borja property had been effectively terminated, the same having been constituted to secure a loan of P5 Million under P/N #TLS-20 which had already been paid.  Docketed as Civil Case No. 98-765, the complaint was raffled to Branch 22 of the Court presided by the respondent judge.

 

In reaction to what it presently describes as a “con job done on it by the private respondent,” CBC set in motion the deferred extrajudicial foreclosure proceedings and scheduled, per Notice of Auction Sale by Notary Public Virgilio Cabanlet dated January 18, 1999 (Annex “Q”, Petition), the auction sale of the Borja and the Lumbia properties on February 15, 1999.  Thereupon, the Lees filed an Ex parte motion for injunctive relief, alleging that the foreclosure, if not restrained, will cause irreparable injury to them and would prejudice their rights before the trial court.

 

On February 12, 1999, the respondent judge issued a temporary restraining order (TRO) enjoining CBC, et al., from proceeding with the scheduled auction and set hearing dates on the application for preliminary injunction.  Due to this development, CBC reset the foreclosure sale toMarch 29, 1999, or after the effectivity of the TRO thus issued.  Reacting, the Lees interposed a motion to cite CBC, et al., in contempt of court for violating the anti-forum shopping rule, with a prayer to restrain those concerned from proceeding with the March 29, 1999 auction sale.

 

In the hearing on the issuance of the injunction, Manuel Lee in essence testified that he and the rest of his family signed the “Amendment to Real Estate Mortgage” (Annex “B-1”, supra) in blank, thinking that it covered the Lumbia property.  He also alleged that the only obligation, represented by P/N #TLS-20 for P5 Million, secured by the mortgage on the Borja Property dated February 11, 1992 (Annex “B”, supra), had already been paid.  On this premise, he added, there was hardly any necessity to amend the said mortgage document.

 

CBC, for its part, adduced testimonial evidence to traverse the Lees’ claim respecting the signing of aforementioned deed in blank and about the alleged settlement of their loan.  It also presented documentary evidence inter alia consisting of the demand letters adverted to earlier, the fifty-five (55) promissory notes the spouses Lee had executed in the Bank’s favor, the June 16, 1998 letter of Uy to Manuel Lee, supra, and a copy of the “Loan Agreement” (Annex “G,” supra).

 

After the conclusion of the March 19, 1999 setting, another hearing was scheduled for March 29, 1999.

 

On March 25, 1999, however, respondent judge issued the first assailed order (Annex “A”, Petition), granting private respondents’ motion for the issuance of preliminary injunction with the following proferred justification:

 

            “Based on plaintiffs evidence presented and because of another purported extra judicial foreclosure on March 29, 1999, which this Court finds to be an utter disregard of the proceeding which is still ongoing and there being bad faith on the part of the defendants in pursuing the same. . . this Court finds enough reason for the issuance of the writ of preliminary injunction . . . so as . . . to prevent any irreparable damages or injuries to plaintiffs, and likewise to prevent the claim of plaintiffs which is still to be investigated, heard and adjudicated, from becoming moot and academic.”

 

On May 11, 1999, the respondent judge issued his second assailed order denying CBC’s motion for reconsideration, as amended (Annex “A-2”, Petition).[3]  

 

 

On 19 July 1999, CBC filed a Petition for Certiorari against petitioners and Judge Calingin with the Court of Appeals, praying for the annulment of the Orders rendered on 25 March 1999 and 11 May 1999.

 

On 19 August 1999, the Court of Appeals dismissed the Petition for having been belatedly filed.  Upon motion for reconsideration filed by respondent CBC, the Court of Appeals reinstated the petition on 10 January 2000.

 

On 24 October 2000, the Court of Appeals issued the assailed Decision, disposing of the case as follows:

 

WHEREFORE, the instant petition is hereby GRANTED.  Accordingly, the assailed orders of the respondent judge dated March 25, 1999and May 11, 1999, are hereby NULLIFIED and SET ASIDE.[4]

 

 

          On 14 November 2000, petitioners filed a motion for reconsideration with prayer for the Issuance of a Temporary Restraining Order or Preliminary Injunction to stop the sale of the subject properties.  The Court of Appeals issued a TRO on 12 December 2000.

 

Respondent CBC, nonetheless, proceeded with the conduct of the public auction sale on 14 December 2000.  Subsequently, the Court of Appeals denied petitioners’ motion for reconsideration in its assailed Resolution dated 19 February 2001. 

 

Hence, this petition where petitioners bring before this Court the following assignment of errors:

 

1. THAT THE PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RENDERING THE DECISION DATED OCTOBER 24, 2000 WHEN IT BASED THE ALLEGATIONS OF FACTS ENTIRELY FROM [THE] “STATEMENT OF FACTS PROPOUNDED BY THE PUBLIC RESPONDENT CBC IN ITS PETITION FOR CERTIORARI IN CA-G.R. SP NO. 53789 WHICH ARE NOT THE FACTS ESTABLISHED OR PROVEN IN THE HEARING FOR THE PURPOSE OF DETERMINING THE PROPRIETY OF THE ISSUANCE OF THE WRIT OF PRELIMINARY INJUNCTION ISSUED BY THE TRIAL COURT ON MARCH 25, 1999 AND RE-AFFIRMED ON MAY 11, 1999 IN CIVIL CASE NO. 98-765.

 

2. THAT, PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN FINDING THAT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE TRIAL COURT WHEN IT MEASURED AND DETERMINED THE ACTUATIONS OF THE SAID COURT BASED UPON THE FACTS NOT PRESENTED AND ESTABLISHED, AS YET IN THE TRIAL COURT, THE FACT BEING THAT, TRIAL ON THE MERIT IN CIVIL CASE NO. 98-765 HAS NOT YET STARTED BEFORE THE SAID COURT.

 

3. THAT, THE PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT NULLIFIED AND SET ASIDE THEMARCH 25, 1999 AND MAY 11, 1999 ORDERS OF THE TRIAL COURT IN CIVIL CASE NO. 98-765 THEREBY VIOLATED THE CONSTITUTIONAL RIGHT OF THE HEREIN PETITIONERS TO DUE PROCESS IN THEIR COMPLAINT AGAINST PRIVATE RESPONDENT BECAUSE IT RENDERED THE ISSUES IN SAID CASE TO BECOME MOOT AND ACADEMIC, AND, PREJUDICIAL TO THE PROPRIETARY RIGHTS OF PETITIONERS, THAT WOULD CAUSE IRREPARABLE DAMAGE TO THEM IF NOT TIMELY RECALLED OR REVERSED BY THE ISSUANCE OF THIS HONORABLE SUPREME COURT OF A TRO/PRELIMINARY INJUNCTION; FURTHER, THE CIVIL CASE BEFORE RTC, BRANCH 22, CAGAYAN DE ORO CITY, WOULD RESULT IN ITS DISMISSAL BY THE IMPLEMENTATION OF THE OCTOBER 24, 2000 DECISION OF THE PUBLIC RESPONDENT COURT OF APPEALS.

 

4. THAT, THE PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NULLIFYING THE MARCH 25, 1999AND MAY 11, 1999 INTERLOCUTORY ORDERS OF THE TRIAL COURT IN CIVIL CASE NO. 98-765 BY DISREGARDING THE TIME-HONORED AND JUDICIALLY MANDATED PRINCIPLE THAT “THE ASSESSMENTS AND EVALUATION OF FACTS IN THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION, INVOLVES FACTUAL FINDINGS, ORDINARILY LEFT TO THE TRIAL COURT FOR ITS CONCLUSION AND DETERMINATION”; HENCE, THERE IS NO ABUSE, MUCH LESS GRAVE ABUSE, OF DISCRETION HERE (LOPEZ V. COURT OF APPEALS, 322 SCRA 686, 693 [2000]; REYES V. COURT OF APPEALS, 321 SCRA 368, 374 [1999]; SAULOG V. COURT OF APPEALS, 262 SCRA 51, 59 [1996]; INTER-ASIA SERVICES CORP. [INTERNATIONAL] V. COURT OF APPEALS, 263 SCRA 408, 415 [1996]).

 

5, THAT, THE ALLEGED AUCTION SALE CONDUCTED BY PRIVATE RESPONDENT THRU ITS AGENT NOTARY PUBLIC, ATTY. VIRGILIO CABANLET ON THE REAL ESTATE PROPERTIES OF PETITIONERS SUBJECT TO THE WRIT OF PRELIMINARY INJUNCTION ISSUED BY THE TRIAL COURT IN CIVIL CASE NO. 98-765 ON DECEMBER 14, 2000, IS NULL AND VOID.

 

6. THAT, THE PUBLIC RESPONDENT ERRED IN TAKING JURISDICTION OVER THE PETITION FOR CERTIORARI FILED BY PRIVATE RESPONDENT IN CA-G.R. SP. NO. 53789 AFTER IT FOUND THE PETITION TO HAVE BEEN FILED OUT OF TIME.[5]

 

 

THE INSTANT PETITION IS NOT RENDERED MOOT BY  THE AUCTIONSALE HELD ON 14 DECEMBER 2000 

 

Since respondent CBC alleges that the issue as to the propriety of a Writ of Preliminary Injunction is mooted by the sale of the subject properties at public auction, it is but proper to resolve this issue first.

 Petitioners claim that the alleged auction sale conducted on 14 December 2000 was illegally

conducted for two reasons: (1) the alleged public auction sale was not conducted in accordance with the Resolution of this Court in Administrative Matter No. 99-10-05-0 issued on 14 December 1999; and (2) the Court of Appeals issued a TRO dated 12 December 2000 restraining and enjoining CBC and its agent, notary public Virgilio J. Cabanlet, from selling the subject property on 14 December 2000.[6]

 In Administrative Matter No. 99-10-05-0, this Court laid down the procedure for an extra-judicial

foreclosure of a mortgage. The same provides in part that: [N]o auction sale shall be held unless there are at least two (2) participating bidders, otherwise the sale shall be postponed to another date.  If on the new date set for the sale there shall not be at least two (2) bidders, the sale shall then proceed.  The names of the bidders shall be reported by the sheriff or the notary public who conducted the sale to the Clerk of Court before the issuance of the certificate of sale.  Petitioners claim Cabanlet never made any report to the Clerk of Court of Executive Judge of the

RTC of Cagayan de Oro City on the fact of the presence of at least two bidders present in the auction sale of 14 December 2000.  Petitioners further claim that they were present during the public auction and revealed that the only bidder present was respondent CBC.[7] 

 As further proof of the irregularity of the conduct of the 14 December 2000 auction sale, petitioners

disclose an alleged discrepancy in the amount claimed to be the bid of respondent CBC and that contained in the certificate of sale executed by Cabanlet.  The Certificate of Sale showed the highest bid by respondent CBC was P32,400,000.00,[8] while in the 21 May 2000 letter of respondent CBC through its counsel, the highest bid was stated as P48,900,000.00.[9]

 According to respondent CBC, there was no discrepancy as petitioners had mortgaged two

properties - the Borja property and the Lumbia property – which were covered by different Transfer Certificates of Title.  It explained that in the same public auction, the Borja property was sold for P32,400,000.00 per the Certificate of Sale mentioned above, while the Lumbia property was, in turn, sold for P16,500,000.00 as evidenced by another Cerificate of Sale.[10]  Hence, the total amount of P48,900,000.00 was stated as the proceeds of the auction sale.[11]

 On the claim that Administrative Matter No. 99-10-05-0 had not been complied with, respondent

CBC points to the fact that the Certificates of Sale contain a Certification executed by Clerk of Court Atty. Beverly S. Beja and Executive Judge Noli T. Catli affiriming compliance with the above-cited administrative matter, viz:

 THIS IS TO CERTIFY that the foregoing foreclosure was done in accordance with

Administrative Order No. 99-10-05-0 of the Supreme Court dated December 14,1999 and all pertinent laws on the matter.

                                                                                                                       (SGD.) ATTY. BEVERLY S. BEJA                                                                        Clerk of Court

Approved:             (SGD.) NOLI T. CATLI                 Executive Judge[12]

 

 Respondent CBC claims that the presumptions that official duty has been regularly performed and

that the law has been obeyed find application herein.  Thus, it maintains that there is no necessity for the pertinent Certificate of Sale or the Certification issued by the Clerk of Court to state with particularity that at least two bidders were present at the public auction held on 14 December 2000.[13]

 On this point, it bears to emphasize that the requirement under Administrative Matter No. 99-10-

05-0 was for the sheriff or the notary public to report   the names of the bidders   to the Clerk of Court   before the issuance of the Certificate of Sale . Such requirement cannot be expanded to include a statement in the Certificate of Sale mentioning the names of the bidders or even the fact that at least two bidders were present.  The presumption of regularity in the performance of official duties furthermore gives petitioners the burden to prove the irregularities they allege attended the proceedings in the public auction of the subject properties. This bare assertions will not suffice to overturn such presumption, and hence, petitioners’ first ground for the nullity of the 14 December 2000 auction sale (violation of Administrative Matter No. 99-10-05-0) must fail. 

 We now go to the alleged illegal holding of the auction sale on 14 December 2000 despite the

issuance of a TRO by the Court of Appeals restraining and enjoining respondent CBC and its agent, notary public Virgilio J. Cabanlet, from auctioning the subject property.

 The Court of Appeals issued on 12 December 2000 a TRO providing as follows: 

Pending resolution of private respondents’ Motion for Reconsideration relative to this Court’s decision of October 24, 2000, and it being alleged in the same Motion that petitioner has scheduled the auction sale of the properties subject hereof to December 14, 2000, a temporary restraining order is hereby issued enjoining petitioner and those acting for and in its behalf or under its supervision, direction and control from proceeding with the scheduled auction sale on December 14, 2000 or at any other date until further orders from this court.

 Meanwhile, petitioner is hereby required, within ten (10) days from notice hereof, to

file its comment to respondents’ aforementioned Motion for Reconsideration and their subsequent URGENT MOTION FOR ORAL ARGUMENT ON MOTION FOR RECONSIDERATION.[14]

  

Petitioners claim that the TRO issued on 12 December 2000 was served to respondent CBC through Cabanlet, who received a machine copy of the same on 13 December 2000.   They further claim that the “original duplicate copy” thereof was shown to Cabanlet and CBC Branch Manager Romualdo Uy on 14 December 2000 at 10 a.m. at the entrance of the City Hall of Cagayan de Oro City, but Cabanlet and Uy were advised by respondent CBC’s counsel to disregard said notice.[15]

 Respondent CBC maintains that Cabanlet is not their counsel of record in the instant action, and

therefore service to him cannot be considered as service on the bank.  Petitioners, however, claim that, as a general rule, “whatever is sufficient to put a prudent person on inquiry amounts to notice, provided that inquiry would lead to the discovery of the requisite fact by the exercise of diligence and understanding.”[16]  Petitioners further claim that Cabanlet is the locally retained lawyer of respondent CBC for its Cagayan de Oro City branches.[17]

 Respondent CBC has not denied actual knowledge on the part of its officers regarding the TRO,

stubbornly parrying all of petitioners’ allegations with their argument that Cabanlet is not their counsel of record in the instant action.

 In general, one cannot be punished for violating an injunction or an order for an injunction unless it

is shown that such injunction or order was served on him personally or that he had notice of the issuance or making of such injunction or order.  Where, however, a party has actual notice of an injunction, clearly informing him from what he must abstain, he is bound by the injunction from that time, and will be punished for a violation thereof, even though it may not have served, or may have been served on him defectively.[18]

 It is altogether immaterial how defendant acquires information of the existence of the injunction;

when once he has been apprised of the fact he is legally bound to desist from what he is restrained and inhibited from doing.  Persons who are parties to a proceeding for an injunction only by representation, and are not served personally with notice of the injunction, may be found guilty of contempt for violating the injunction where it is shown that they must have known of the injunction and its contents.[19]

 In Verzosa v. Court of Appeals,[20] petitioner Wilfredo Verzosa sought to have the property

mortgaged by respondent Fe Uson foreclosed.  Respondent Uson filed an amended[21] complaint for annulment of mortgage with prayer for the issuance of a writ of preliminary injunction.  Five days later, the foreclosure sale proceeded and the property was sold to respondent Verzosa as the highest bidder.   Upon Uson’s application for a preliminary injunction embodied in a second amended complaint, the trial court issued an order directing the subsequent buyer of the property to cease and desist from entering, making constructions, and performing any act of possession or ownership upon the land in question.  Petitioner assailed the order as it allegedly grants an injunction to restrain consummated acts.  This Court, speaking through then Associate Justice Artemio Panganiban (now Chief Justice), held:

 Where the acts have been performed prior to the filing of the injunction suit, the

general rule is that the consummated acts can no longer be restrained by injunction. However, “where the acts are performed after the injunction suit is brought, a defendant may not as [a matter] of right proceed to perform the acts sought to be restrained and then be heard to assert in the suit that the injunction will not lie because he has performed these acts before final hearing has been had, but after the beginning of the action. A defendant thus acts at his peril.”  It has been held that “[t]he general rule of law is that, where a defendant completes, after the beginning of an action, the act thereby sought to be restrained, and before the issue of any final order or decree, the court has the power to, and may, compel, by a mandatory injunction, the restoration of the former condition of things and thereby prevent the giving of an advantage by reason of the wrongful act.     And where a defendant does not act thus sought to be restrained, he proceeds at his peril, and the court in which the action is pending may compel a restoration of the former status or grant to the plaintiff such relief as may be proper.”

 In this case, an action was brought to enjoin Petitioner Verzosa from proceeding with

the mortgage sale, yet he proceeded to do so while the action was still pending.  Such conduct is reprehensible.  “If one in the face of a pending suit for injunction, does the thing sought to be enjoined, he cannot thus outwit equity and the court, but must restore the status quo. x x x  Even where an injunction has not been issued, if the suit is one for injunction, the defendant, if he does the thing sought to be enjoined does so at his peril.  Hence, in proceeding with the mortgage sale and subsequently selling the property to Pilar Martinez, Petitioner Verzosa was acting at his peril.” [22]  (Emphases supplied.)

  

Furthermore, notwithstanding the stand of both parties, the fact remains that the Decision of the Court of Appeals annulling the grant of preliminary injunction in favor of petitioners has not yet become final on 14 December 2000.  In fact, such Decision has not yet become final and executory even on the very date of this Decision, in view of petitioners’ appeal with us under Rule 45 of the 1997 Rules of Civil Procedure.  The preliminary injunction, therefore, issued by the trial court remains valid until the Decision of the Court of Appeals annulling the same attains finality, and violation thereof constitutes indirect contempt[23] which, however, requires either a formal charge or a verified petition.[24]

 The willful disobedience of an injunction order may constitute a criminal, as well as a civil,

contempt.  However, it has been held that the violation of an injunction is not direct criminal contempt within the contemplation of a statute pertaining to conduct summarily punishable as direct criminal contempt.  Such violation is an indirect contempt where it does not occur in the immediate presence of the court or so close as to interrupt or disturb court proceedings.[25]

 An injunction or restraining order which is not void must be obeyed while it remains in full force and

effect, and has not been overturned, that is, in general, until the injunction or restraining order has been set aside, vacated, or modified by the court which granted it, or until the order or decree awarding it has been reversed on appeal or error.  The injunction must be obeyed irrespective of the ultimate validity of the order, and no matter how unreasonable and unjust the injunction may be in its terms.   Defendant cannot avoid compliance with the commands, or excuse his violation, of the injunction by simply moving to dissolve it, or by the pendency of a motion to modify it.[26]  The fact that an injunction or restraining order has been dissolved or terminated, or has expired, does not necessarily protect a person in a proceeding against him for a violation of the injunction or order while it was in force, as by acts between granting of the injunction and its termination, at least where the proceeding is one to punish for a criminal contempt.[27]

 Respondent CBC seemed so eager and anxious to render moot the petition for cancellation of real

estate mortgage contract, taking advantage for that matter of a perceived gap between a preliminary injunction and a TRO to proceed with the contested public auction.  Their actuations emulate those of the respondent in the case of National Power Corporation v. Province of Lanao del Sur,[28] where we held:

 The fact that the telegraphic temporary restraining order issued by this Court was

received by the respondent governor of Lanao del Sur at 2:30 p.m. and by respondent provincial treasurer at 3:00 p.m. of January 22, 1991, or an hour and an hour and a half, respectively, after the registration of the sale with the Register of Deeds of the province, and several hours after the close of the auction sale, is of no moment.  Ordinarily, this Court would have been overjoyed to hear about said Register of Deeds (or any government functionary for that matter) moving with blinding speed, except that in this case, it is more than patent that such precipitate action was prompted not in the least by respondents’ anticipation that this Court was about to act on petitioner’s application for a writ of preliminary injunction and/or temporary restraining order.  The respondents’ all-too-obvious attempt at rendering nugatory and inutile any injunctive relief this Court may grant is useless and brings them only rebuke and condemnation. Clearly, legally and equitably rooted in and proceeding from the foregoing discussion is the ineludible conclusion that the auction sale and registration of subject properties are totally bereft of any legal basis and therefore null and void, and cannot vest title over the said real properties nor over the hydroelectric power plant complex built upon them, in favor of respondent province.

  

Courts, however, have a limited inherent power to void acts done in violation of an injunction.  Transfers in violation of an injunction are invalid as to the person seeking the injunction or those claiming under that person, and may be set aside if attacked in a proper manner. [29]

 However, because an injunction operates in personam, an act done in violation of an injunction is

not a nullity as to third persons.  If an injunction prohibits the defendant from transferring property, but the defendant transfers the property to an innocent third person, the transferee obtains good title and the injunction does not affect the transferee’s right.[30]

 Based on the foregoing, we have two possible courses of action: (1) if the subject property has not

been alienated to a third person, to declare the auction sale on 14 December 2000 as void; or (2) if the subject property has been alienated to a third person not a party to this petition, to enjoin acts similar to those enjoined in Verzosa, depending on the status of the main case and of the subject property.  Since we are, as of the moment, unaware of such developments, it is sufficient to say for the meantime that the issue regarding the validity of the preliminary injunction issued by the trial court has not yet become moot.

 THE COURT OF APPEALS CORRECTLY GAVE DUE COURSE TO RESPONDENT CBC’S PETITION FOR CERTIORARI 

 

As stated above, it was on 19 July 1999 when respondent CBC filed a Petition for Certiorari against petitioners and Judge Calingin with the Court of Appeals, praying for the annulment of the Orders of the

trial court rendered on 25 March 1999 and 11 May 1999.  Respondent CBC received notice of the 25 March 1999 and 11 May 1999 Orders on 29 March 1999 and 18 May 1999, respectively.  19 July 1999 is thus 112 days and 62 days from said Orders, respectively.

 

Section 4, Rule 65 of the 1997 Rules of Civil Procedure originally provides:

 

SEC. 4. Where petition filed. – The petition may be filed not later than sixty (60) days from notice of the judgment, order or resolution sought to be assailed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court.  It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, x x x.

 

 

On 19 August 1999, the Court of Appeals dismissed the petition for having been belatedly filed.  Upon motion for reconsideration filed by respondent CBC on 22 September 1999, the Court of Appeals reinstated the petition on 10 January 2000.[31]  The Court of Appeals stated that it did so “(i)n the interest of substantial justice, and in line with the ruling that rules of procedure are not to be applied with severity or rigidity.”[32]

 

Petitioners claim that such reinstatement of the petition constitutes a reversible error on the part of the Court of Appeals, as the latter had allegedly lost jurisdiction to entertain a petition questioning the 25 March 1999 and 18 May 1999 Orders, as the same has already become “final and unappealable.”[33]

 Petitioners’ claim is devoid of merit.  As regards the 11 May 1999 Order, the Court of Appeals had clearly not yet lost jurisdiction to

entertain respondent CBC’s Petition for Certiorari questioning the same, as the petition should be considered to have been filed within the 60-day period.  The 60th day from the notice of denial of respondent CBC’s Motion for Reconsideration or 17 July 1999, falls on a Saturday, and therefore the last day of the 60-day period should be considered to be that of the next working day.[34]

 As regards the 25 March 1999 Order, it can be gleaned from respondent CBC’s Motion for

Reconsideration[35] and Amended/Supplemental Motion for Reconsideration[36] that they believed in good faith that they had complied with Section 4, Rule 65 of the 1997 Rules of Civil Procedure.   Respondent CBC argued in said motions that the then Section 4, Rule 65 should be interpreted in the light of the requirement under Section 1 of the same Rule that a Petition for Certiorari may be availed of only when there is no other adequate remedy available in the ordinary course of law.  And since a Motion for Reconsideration, is an adequate remedy which should be availed of, it asserts that the 60-day period should be counted from the notice of the denial of the same, in the absence of a provision, similar to that in Section 3, Rule 41,[37] providing for the mere interruption of the period.

 Section 4, Rule 65 was, in fact, amended and is now worded according to how respondent CBC

perceived it to be: 

SEC. 4. When and where petition filed. – The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution.  In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of the denial of said motion.

  

Following, therefore, the mandate contained in Section 6, Rule 1 of the 1997 Rules of Civil Procedure,[38] we have held that, when the higher consideration of justice so demands, technical rules may be relaxed to stay the dismissal of an appeal or like recourse on mere technicalities.  This ideal becomes all the more imperative when non-compliance is not intended for delay.[39]

 THERE WAS GRAVE ABUSE OF DISCRETION ON THE PART OF THE TRIAL COURT

 Having brushed aside all the collateral issues in this petition, we finally go into the merits of

petitioners’ claim that the Regional Trial Court had not gravely abused its discretion in granting a writ of preliminary injunction in favor of petitioners.  As intimated by respondents, such determination involves an analysis of the Order alleged to be a product of grave abuse of discretion. [40]  Such Order provides in full the following:

 This is a verified complaint for specific performance and cancellation of real estate

mortgage contract with damages filed by plaintiffs over parcels of land covered by Transfer Certificate of Titles Nos. T-56322, T-52273, T-56321, and T-23215.  Before filing their answer defendants filed an extrajudicial foreclosure of the above-described properties, and consequently for the auction sale of the properties by a Notary Public, which was scheduled on February 15, 1999.  Plaintiffs, through counsel, in a separate verified petition dated February 1, 1999, prayed for the issuance of a writ of preliminary injunction enjoining Notary Public Virgilio J. Cabanlet from conducting the extrajudicial foreclosure and auction sale on the date above-mentioned of the aforesaid parcels of land.  On February 12, 1999 after summary hearing, the Court issued a temporary restraining order, thereby enjoining said Notary Public Virgilio J. Cabanlet from conducting the extrajudicial foreclosure and auction sale on February 15, 1999.  The life span of the TRO is only for twenty (20) days, and in the meantime, the hearing on the propriety for the issuance of preliminary injunction is still ongoing and the next schedule is on March 29, 1999 for the reception of evidence for the defendants herein.  However, this Court is duly informed that another extrajudicial foreclosure and auction sale of aforementioned mortgaged parcels of land is scheduled on March 29, 1999 by defendants, again through Notary Public Virgilio J. Cabanlet, prompting plaintiffs to ask the Court to enjoin the purported extrajudicial foreclosure and sale at public auction.

 

Based on plaintiffs’ evidence already presented and because of another purported extrajudicial foreclosure on March 29, 1999, which this Court finds to be an utter disregard of the proceeding which is still ongoing and there being bad faith on the part of defendants in pursuing the same despite pendency of this case, this Court finds enough reason for the issuance of the writ of preliminary injunction prayed for so as to preserve the status quo, to prevent any irreparable damages or injuries to plaintiffs, and likewise to prevent the claim of plaintiffs which is still to be investigated, heard and adjudicated, from becoming moot and academic.

 

WHEREFORE, let a writ of preliminary injunction be issued forthwith in this case, ordering defendants herein China Banking Corporation, Romualdo I. Uy, and Bernardo T. Moradas, and Notary Public Virgilio J. Cabanlet or any of their representative, agent, or person acting on their behalf, to cease and desist from conducting and proceeding with the extrajudicial foreclosure and public auction sale on March 29, 1999 on the mortgaged properties described and mentioned in the notice of auction sale by Notary Public Virgilio J. Cabanlet, dated March 4, 1999.  This writ of preliminary injunction shall continue to be enforced until the final determination of the main issue of this case or until further orders from this Court and upon filing of the bond by plaintiffs as provided for in the rules in the amount of ONE MILLION PESOS (P1,000,000.00)[41]

 

 

In brief, the Court of Appeals nullified the above order on the ground of grave abuse of discretion, sustaining respondent CBC’s claim that there was an absence of legal basis or requisites to justify the issuance of the writ of preliminary injunction, and that Judge Calingin issued the writ despite the admitted defaults incurred by the spouses Lee in the payment of their loans juxtaposed with the validity and continued effectivity of the mortgages on the Borja and Lumbia properties.  The Court of Appeals further ruled:

 

Private respondents’ posture that they were duped into signing in blank what turned out to be the amendment to the original real estate mortgage (Annex “B-1”) over the Borja property thinking that the document covered the smaller Lumbia property may be given plausibility if all of them are unlettered, which they do no[t] appear to be.  Significantly, private respondents, along with respondent Renwick Warren’s wife, Marivic, signed Annex “B-1.”  It should be noted, however, that the Lumbia property is registered in the name of the spouses Lee only.  The fact, however, that Janssen Thaddeus and Renwick Warren both signed Annex “B-1,” when only the spouses Lee’s signature thereon is necessary if the intention was to mortgage the Lumbia lot, shatters their posture about being duped.

 

With the view We take of this case, private respondents are latching their case on this proposition: that they had settled all their accountabilities with the Bank, and, therefore, allowing the latter to foreclose on the mortgage heretofore constituted to secure their loans would cause them irreparable injury.

 

We are not the least persuaded.  Based on the entire showing from both sides during the hearing for injunction, respondents Manuel Lee and Luisa Lee have not paid their overdue loans and other availments granted them under the credit facilities in question to warrant the cancellation of the mortgages put up to secure the credit accommodations.  On the other hand, petitioner has clearly established its status as unpaid mortgagor-creditor entitled to foreclose the mortgages, a remedy provided by law (Caltex vs. IAC, 176 SCRA 741), and the mortgage contract itself.  In short, the minimum legal requisites for a preliminary injunction to issue have not been satisfied.  The assailed issuance, therefore, by the respondent judge of the writ of injunction is unjustified.

 

Contrary to what the respondent judge wrote, there was no urgent necessity to issue the writ to protect the rights and interest of private respondents over either the Borja or the Lumbia property during the pendency of Civil Case No. 98-765.  Assuming for argument that private respondents’ rights over said property need legal protection, an annotation of lis pendens would, as petitioner pointed out below, have been an adequate protection.  And besides, they could participate in the foreclosure sale and get their properties unencumbered by paying the obligations that they admit in the first place owing.

 

Significantly, respondent judge issued the writ of injunction on the finding that petitioner acted in bad faith in scheduling a foreclosure sale “despite [the] pendency of this case.”  We view the perceived bad faith of the petitioner to be of little moment.  For, the bona fides of the author of the act against which the injunction is directed is not, in the strict legal viewpoint, a recognized requisite to justify the issuance of an injunction.[42]

 

 

Petitioners assail the Court of Appeals Decision primarily on the ground that it based its findings of facts on evidence not formally offered and submitted to the trial court during the hearing on the propriety of the issuance of the Writ of Preliminary Injunction.[43]

 

Respondent CBC counters that, although it was allowed to begin presentation of its evidence before the trial court, it was not given by said court with the opportunity to conclude its presentation and to formally rest its case.  Respondent CBC was still in the middle of presenting its evidence when the trial court issued the questioned 25 March 1999 Order.[44]  Respondent CBC thus claims that it should not be faulted for its supposed failure to formally offer its evidence, which it would certainly have made if the trial court had not terminated the hearings.

 

Petitioner maintains that it was respondent CBC’s fault why they were not able to finish presenting their evidence, quoting the trial court’s Order denying respondent CBC’s motion for reconsideration:

 

Moreover, the preliminary injunction in question was issued after due hearing, wherein the parties are given a chance to present evidence in support of their respective case.  In that hearing, it was very apparent that defendants employed tactics which have delayed the proceedings in order that the Temporary Restraining Order (TRO) earlier issued by the Court, which has a lifetime of only twenty (20) days, will expire and so that they could proceed again with the extrajudicial foreclosure and sale at public auction of the properties involved in this case, thinking that the Court cannot issue a second TRO during the pendency of the hearing of the application for a preliminary injunction.

 

            Defendants, during the hearing, presented voluminous documents which are no longer relevant to the issue which was the propriety for issuance of a preliminary injunction but which dealt mostly on matters involved in the main case.  In the meantime, after the expiration of the TRO, defendants filed again a Petition for Extrajudicial Foreclosure and scheduled the Sale at Public Auction of the property on March 29, 1999.  It was at this juncture that the Court, finding that there is bad faith on the part of the defendants and taking into account that plaintiffs will suffer great and irreparable damage, and the case will be rendered moot and academic, issued the preliminary injunction.  There is no truth to the allegation of defendants that there was an understanding between the parties and the Court that the public auction sale of the properties was to be rescheduled after the expiration of the TRO and even before the termination of the hearing.[45]  (Underscoring supplied by petitioners.)

 

 

We find that there was, indeed, grave abuse of discretion on the part of Judge Calingin.  While we agree with petitioners that “the assessment and evaluation of evidence in the issuance of the writ of preliminary injunction involves findings of facts ordinarily left to the trial court for conclusive determination,”[46] and that the Court of Appeals had been in error when it sought to determine the facts based on evidence not presented or offered in evidence in the trial court, we would still find grave abuse of discretion on the part of the trial court even if the facts contested by petitioners are determined in their favor. Section 5, Rule 58 of the 1997 Rules on Civil Procedure provides:

 

Sec.5. Preliminary injunction not granted without notice; exception. – No preliminary injunction shall be granted without hearing and prior notice to the party or person sought to be enjoined.  If it shall appear from facts shown by affidavits or by the verified application that great or irreparable injury would result to the applicant before the matter can be heard on notice, the court to which the application for preliminary injunction was made, may issue ex parte a temporary restraining order to be effective only for a period of twenty (20) days from service on the party or person sought to be enjoined,

except as herein provided.  Within the said twenty-day period, the court must order said party or person to show cause, at a specified time and place, why the injunction should not be granted, determine within the same period whether or not the preliminary injunction shall be granted, and accordingly issue the corresponding order.  (Emphases supplied.)

 

 

The trial court failed to comply with the above provision when it failed to let respondent CBC finish its presentation of its evidence proving why injunction should not be granted.

 

          Hearings on the application for preliminary injunction were held on 25 February 1999, 2 March 1999, 16 March 1999, and 19 March 1999.  As pointed out by respondent CBC, the hearing on 19 March 1999 was adjourned upon motion of petitioners’ counsel and over the objections of counsel for respondent CBC and despite the fact that there was ample time left for further proceedings on that day.   The application was also set for hearing on 18 March 1999; however, said hearing was canceled at the instance of petitioners’ counsel.

 

          On the hearing held on 19 March 1999, respondent CBC’s counsel tried to have the continuation of the hearings set before 29 March 1999, the date at which the extra-judicial foreclosure sale of the subject property was re-scheduled; to no avail.

 

As early as 16 March 1999 and before the hearing of 19 March 1999, petitioners and the presiding judge of the trial court were aware of the public auction set on 29 March 1999.  At the hearing held on 19 March 1999, petitioners could, therefore, have joined respondent CBC in the latter’s efforts to have the hearings continued on a date prior to 29 March 1999.  Instead of doing so, petitioners’ counsel, however, informed the court that he did not have any available date in his calendar for that week.

 

Section 5, Rule 135 of the 1997 Rules of Civil Procedure provides:

 

Sec. 5.  Inherent powers of courts. – Every court shall have the power: x x x (b) to enforce order in proceedings before it, or before a person or persons empowered to conduct a judicial investigation under its authority; x x x (d) to control, in furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a case before it, in every manner appertaining thereto; x x x    

 

By means of its inherent powers stated in the above provision, the trial court should have forced respondent CBC, under pain of contempt, to finish presenting its evidence within the scheduled hearings, and to focus only on the most important evidence.  It should have proceeded with marathon hearings if necessary, which would seldom be the case because of its power to limit the same in accordance with the summary nature of such proceeding.  But the trial court cannot issue a writ of preliminary injunction based solely on plaintiff’s evidence, as was expressly stated in the Order itself. [47]  The trial court cannot, without gravely abusing its discretion, issue such writ prior to the termination of the presentation of evidence by the party against whom the injunction shall be issued.  The order to show cause (why the injunction should

not be granted) stated in Section 5, Rule 58, is precisely directed on such party, and not on the party asking for the injunction, and therefore it was an error for the trial court to have given priority to petitioners’ presentation of evidence.

 

WHEREFORE, the Decision and Resolution, dated 24 October 2000 and 19 February 2001, respectively, of the Court of Appeals are hereby AFFIRMED.  Costs against petitioners.

 

          SO ORDERED.

 

  MINITA V. CHICO-NAZARIOAssociate Justice

 

 

 [1]               CA-G.R. SP No. 53789.  Penned by Associate Justice (now Supreme Court Associate Justice)

Cancio C. Garcia with Associate Justices Romeo A. Brawner and Andres B. Reyes, Jr., concurring.  CA rollo, pp. 307-322.

 [2]               CA rollo, p. 416.[3]               Rollo, pp. 47-53.[4]               Id. at 61.[5]               Id. at 408-410.[6]               Id. at 422.[7]               Id. at 424-425.[8]               Id. at 344-346.[9]               Id. at 374-378.[10]             Id. at 477-479.[11]             Id. at 472.[12]             Id. at 473.[13]             Id. at 473.[14]             CA rollo, p. 356.[15]             Id. at 423.[16]             Security First National Bank v. Sartori, 34 Cal App 2d 408, 93 P2d 863.[17]             Rollo, p. 426.[18]             43A C.J.S. , Injunctions, Sec. 288.[19]             Id.[20]             359 Phil. 425 (1998).[21]             The original complaint filed earlier was dismissed on the ground that it was not properly verified.[22]             Verzosa v. Court of Appeals, supra note 18 at 438-439.[23]              “SEC.3.  Indirect contempt to be punished after charge and hearing. – After a charge in writing

has been filed, and an opportunity given to the respondent to comment thereon within such period as may be fixed by the court and to be heard by himself or counsel, a person guilty of any of the following acts may be punished for indirect contempt:

                                x x x x(b) Disobedience of or resistance to a lawful writ, process, order, or judgment of a court,

including the act of a person who, after being dispossessed or ejected from any real property by the judgment or process of any court of competent jurisdiction, enters or attempts or induces another to enter into or upon such real property, for the purpose of executing acts of ownership or possession, or in any manner disturbs the possession given to the person adjudged to be entitled thereto; x x x”  (Rules of Court, Rule 71.)

[24]              “SEC. 4. How proceedings commenced. – Proceedings for indirect contempt may be initiated motu proprio by the court against which the contempt was committed by an order or any other formal charge requiring the respondent to show cause why he should not be punished for contempt.

                                In all other cases, charges for indirect contempt shall be commenced by a verified petition with supporting particulars and certified true copies of documents or papers involved therein, and upon full compliance with the requirements for filing initiatory pleadings for civil

actions in the court concerned.  If the contempt charges arose out of or are related to the principal action pending in the court, the petition for contempt shall allege that fact but said petition shall be docketed, heard and decided separately, unless the court in its discretion orders the consolidation of the contempt charge and the principal action for joint hearing and decision.”  (Rules of Court, Rule 71.)

[25]             43A C.J.S., Injunctions, Sec. 285.[26]             Id., Sec. 286.[27]             Id.[28]             264 SCRA 271 (1996).[29]             42 Am Jur 2d, Sec. 317.[30]             Id.[31]             CA rollo, p. 253.[32]             Id.[33]             Rollo, p. 428.[34]              Section 1, Rule 22: “SEC. 1. How to compute time. – In computing any period of time prescribed

or allowed by these Rules, or by order of the court, or by any applicable statute, the day of the act or event from which the designated period of time begins to run is to be excluded and the date of performance included.  If the last day of the period, as thus computed, falls on a Saturday, Sunday, or a legal holiday in the place where the court sits, the time shall not run until the next working day.”

[35]             CA rollo, pp. 205-212.[36]             Id. at 220-230.[37]              Section 3.  “x x x  The period of appeal shall be interrupted by a timely motion for new trial or

reconsideration.  No motion for extension of time to file a motion for new trial or reconsideration shall be allowed.”  (Rules of Court, Rule 41.)

[38]              Section 6, Rule 1: “SEC. 6. Construction. – These Rules shall be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action or proceeding.”

[39]             Soriano v. Court of Appeals, G.R. No. 100525, 25 May 1993, 222 SCRA 545, 553.[40]             Rollo, pp. 56-57.[41]             Id. at 90-91.[42]             Id. at 58-60.[43]             Id. at 411.[44]             Id. at 448.[45]             CA rollo, p. 51.[46]             Lopez v. Court of Appeals, G.R. No. 110929, 20 January 2000, 322 SCRA 686, 693.[47]                             Based on plaintiffs’ evidence already presented and because of another

purported extrajudicial foreclosure on March 29, 1999, which this Court finds to be an utter disregard of the proceeding which is still ongoing and there being bad faith on the part of defendants in pursuing the same despite pendency of this case, this Court finds enough reason for the issuance of the writ of preliminary injunction prayed for so as to preserve the status quo, to prevent any irreparable damages or injuries to plaintiffs, and likewise to prevent the claim of plaintiffs which is still to be investigated, heard and adjudicated, from becoming moot and academic.  (CA rollo, p. 43.)

[G.R. No. 164171. August 22, 2006]HON. EXECUTIVE SECRETARY, et al. v. SOUTHWING HEAVY INDUSTRIES, INC., et al.

En BancSirs/Mesdames:Quoted hereunder, for your information, is a resolution of this Court dated AUG. 22, 2006

G.R. No. 164171 (Hon. Executive Secretary, et al. v. Southwing Heavy Industries, Inc., et al.);G.R. No. 164172 (Hon. Executive Secretary, et al. v. Subic Integrated Macro Ventures Corp., etc.);G.R. No. 168741 (Hon. Executive Secretary, et al. v. Motor Vehicle Importers Association of Subic Bay

Freeport, Inc., etc.)This resolves the separate Motions for Clarification and Reconsideration filed by

respondents Southwing Heavy Industries, Inc., (SOUTHWING), United Auctioneers, Inc. (UNITED AUCTIONEERS), and Microvan, Inc. (MICROVAN); Subic Integrated Macro Ventures Corporation (MACRO VENTURES); and Motor Vehicle Importers Association of Subic Bay Freeport, Inc. (ASSOCIATION).  Respondents seek a definite ruling on whether used motor vehicles may now be imported into the Philippines in view of the issuance on April 4, 2005 by the Office of the President of Executive Order (E.O.) No. 418, imposing an import duty of P500,000.00 on used motor vehicles, except trucks, buses and special purpose vehicles.  They contend that E.O. No. 418 impliedly repealed E.O. No. 156 which prohibits the importation of used motor vehicles.  They thus prayed that the Court's Decision dated February 20, 2006 be reconsidered by clarifying that used motor vehicles may now be imported into the country, subject only to the payment of the additional import duty.

In its Motion for Partial Reconsideration, respondent ASSOCIATION claims that E.O. No. 156 is void because it failed to satisfy the requisites of a valid delegation of legislative power, hence, importation of

used motor vehicles should be allowed subject to the payment of additional duties as provided in E.O. No. 418.

The motions are without merit.In the February 20, 2006 Decision of the Court, we held that E.O. No. 156 which imposes a ban on the

importation of used motor vehicles is applicable only in the Philippine territory outside the presently secured fenced-in former Subic Naval Base area as stated in Section 1.1 of E.O. No. 97-A.  Simply put, respondents may import used motor vehicles into the presently secured fenced-in former Subic Naval Base area, but since entry of said used motor vehicles is prohibited in other parts of the Philippine territory, they may be stored, used or traded in the presently secured fenced-in former Subic Naval Base area, or exported to other countries, but they cannot be introduced in the other parts of the Philippine territory.

The subsequent issuance of E.O. No. 418 increasing the import duties on used motor vehicles did not alter the policy of the executive department to prohibit the importation of said vehicles.   In his Comment, the Executive Secretary through the Solicitor General stated a clear and unequivocal intention to ban the importation of used motor vehicles into the country, notwithstanding the issuance of E.O. No. 418.  Moreover, there is nothing in the text of E.O. No. 418 which expressly repeals E.O. No. 156.  The Congress, or the Office of the President in this case, is presumed to know the existing laws, such that whenever it intends to repeal a particular or specific provision of law, it does so expressly.  The failure to add a specific repealing clause indicates that the intent was not to repeal previous administrative issuances.[1]  In order to effect a repeal by implication, the later statute must be so irreconcilably inconsistent and repugnant with the existing law that they cannot be made to reconcile and stand together.  The clearest case possible must be made before the inference of implied repeal may be drawn, for inconsistency is never presumed.[2]  There must be showing of repugnance clear and convincing in character.  The language used in the later statute must be such as to render it irreconcilable with what has been formerly enacted.  An inconsistency that falls short of that standard does not suffice.  For it is a well settled rule in statutory construction that repeal of statues by implication is not favored.[3]

In the instant case, E.O. No. 156 is very explicit in its prohibition on the importation of used motor vehicles.  On the other hand, E.O. No. 418 merely modifies the tariff and nomenclature rates of import duty on used motor vehicles.  Nothing therein expressly revokes the importation ban. The full text thereof, reads:

EXECUTIVE ORDER NO. 418MODIFYING THE TARRIF NOMENCLATURE AND RATES OF IMPORT DUTY ON USED MOTOR VEHICLES UNDER SECTION 104 OF THE TARIFF AND CUSTOMS CODE OF 1978 (PRESIDENTIAL DECREE NO. 1464, AS AMENDED)

WHEREAS, it is the policy of the State to maintain a balance between development and environmental protection, and hence, between motorization and air quality management.

WHEREAS, it is the policy of the State to protect the public against unreasonable risks to injury associated with consumer products;

WHEREAS, there is a need to mitigate the impact of used motor vehicle trading on air quality and road safety;

WHEREAS, Article II:1 (b) of the 1994 General Agreement on Tariffs and Trade allows the unilateral imposition of other duties and charges on tariff items that were not previously the subject of concession;

WHEREAS, motor vehicles were not covered by Schedule LXXV - Philippine Schedule of Concessions and therefore, do not have tariff bindings;

WHEREAS, of Section 401 of the Tariff and Customs Code of 1978, as amended, empowers the President of the Republic of the Philippines to increase, reduce, or remove existing rates of import duty, as well as to modify the form of duty and the tariff nomenclature under Section 104 of the Code;

NOW, THEREFORE, I, GLORIA MACAPAGAL ARROYO, President of the Republic of the Philippines, by virtue of the powers vested in me by law, do hereby order[:]

SECTION 1. The articles specifically listed in Annex “A” hereof, as classified under Section 104 of the Tariff and Customs Code of 1978, as amended, shall be subject to the rates of import duty indicated opposite each article, except for trucks, buses and special purpose vehicles.

SEC. 2. In addition to the regular rates of import duty, the articles specifically listed in Annex "A" hereof, as classified under Section 104 of the Tariff and Customs Code of 1978, as amended, shall be subject to additional specific duty of PhP500,000.00.

SEC. 3. The amount of specific duty will be indexed by the Secretary of Finance once every two (2) years if the change in the exchange rate of the Philippine peso against the United States (U.S.) dollar is more than ten percent (10%) from the date of the effectivity of this Order, in the case of initial adjustment and from the last revision date in the case of subsequent adjustments.

In case the change in the exchange rate of the Philippine peso against the US dollar is more than twenty percent (20%) at any time within the two-year period referred to above, the Secretary of Finance shall index the amount by the full rate of depreciation or appreciation, as the case may be.

SEC. 4. The following motor vehicles shall be considered “used” and shall be subject to the duties herein prescribed: (a) all motor vehicles that have been sold, registered and operated in the roads/highways of any foreign state or country; or (b) all imported motor vehicles that has a mileage of more than 200 kilometers regardless of year model.

SEC. 5. Upon the effectivity of this Executive Order, the articles, specifically listed in the aforesaid Annex, which are entered and withdrawn from warehouses in the Philippines, shall be levied the rates of import and specific duties herein prescribed.

SEC. 6. All Presidential issuances, administrative rules and regulations, or parts thereof, which are inconsistent with this Executive Order are hereby revoked or modified accordingly.

SEC. 7. This Executive Order shall take effect thirty (30) days following its complete publication in two (2) newspapers of general circulation in the Philippines.

X X X X

The positive and categorical language of the proscription on the importation of used motor vehicles and the clear intent of the executive department to enforce the ban can only be superseded by another issuance revoking the same in terms so certain and unmistakable that needs no further interpretation or construction.  Since no such express repeal is stated in E.O. No. 418, the conclusion is that the said executive issuance did not supersede E.O. No. 156.

Where it is possible to do so, it is the duty of courts, in the construction of statutes, to harmonize and reconcile them, and to adopt a construction which reconciles them with other statutory provisions.  The fact that a later enactment may relate to the same subject matter as that of an earlier statute is not of itself sufficient cause of an implied repeal.[4]  As asserted by petitioners, E.O. No. 418 is only a temporary measure to address the influx of used motor vehicles in the country while E.O. No. 156 is under legal challenge.  With the categorical intent of the Office of the President to ban the importation of used motor vehicles, E.O. No. 418 should be made operative only pending the finality of this decision upholding the power of the President to ban the importation of used motor vehicles.  This way, we can give efficacy not only to the executive policy proscribing the importation of used motor vehicles but also to the executive issuance increasing the applicable import duties that would discourage the entry into the country of the same vehicles pending the finality of this decision sustaining the power of the President to issue an importation ban to protect the local automotive industry.

Likewise, the Motion for Partial Reconsideration of respondent ASSOCIATION must fail.  It argues that E.O. No. 156 is in effect extended to the Freeport because motor vehicle importers can no longer continue their respective business if they cannot bring the imported used motor vehicles into other parts of the Philippine territory.  Respondent, however, totally misses the point.  While the presently secured fenced-in formerSubic Naval Base area enjoys the privilege of being considered as a "foreign territory," and therefore, entry of used motor vehicles cannot be proscribed by E.O. No. 156, such privilege should be construed as operative only within said area.  Any movement or entry of used motor vehicles to other parts of the Philippine territory would logically subject said vehicles to the laws of the customs territory, specifically the importation ban.  To rule otherwise would be to put premium on the interest of a few businessmen and to deprive the Congress or the President of the power to issue measures protective of our domestic markets and air quality.

As exhaustively discussed in our February 20, 2006 Decision, the issuance of E.O. No. 156 has constitutional and statutory bases and the issuance thereof was in accordance with the prescribed procedure.  We also held therein that issuance of the ban to protect the domestic industry and the environment including its air sheds against pollution from mobile sources is a reasonable exercise of police power.  RespondentASSOCIATION's contention that petitioners failed to prove that the importation of used motor vehicles caused the deterioration of the local automotive industry lacks merit.  Laws and other administrative issuance enjoy the presumption of validity and the burden of proving its invalidity rests upon those who assert the contrary.[5]  It is therefore the obligation of respondents and not of petitioners to show factual basis in support of their allegation that E.O. No. 156 is void.  However, respondents failed to do this because they moved for rendition of summary judgment on the ground that there are no issues of facts necessary to be resolved in the instant controversy.[6]  Estoppel in presenting factual basis in support of their argument operates against respondents.  This Court is not a trier of facts and the allegation of factual matters by the ASSOCIATION can no longer be entertained.

ACCORDINGLY, respondents' separate motions for clarification and reconsideration are DENIED.  Notwithstanding the issuance of E.O. No. 418, used motor vehicles imported via the presently secured fenced-in former Subic Naval Base area cannot further be imported into the other parts of the Philippine territory.  Used motor vehicles may be imported into, stored, used, and traded within the presently secured fenced-in former Subic Naval Base area, or exported to other countries, but entry thereof into the other parts of the Philippine territory is prohibited pursuant to E.O. No. 156.  (Corona, J., On leave)

Very truly yours,

(Sgd.) MA. LUISA D. VILLARAMAClerk of Court

[1] Gayo v. Verceles, G.R. No. 150477, February 28, 2005, 452 SCRA 504, 518.[2] Agujetas v. Court of Appeals, 329 Phil. 721, 745-746 (1996).[3] Id.[4] Philippine Trading International Corporation v. Angeles, 331 Phil. 723, 748 (1996).[5] Heirs of Ardona v. Reyes, 210 Phil. 187, 207 (1983).[6] Decision, rollo of G.R. No. 164171, p. 12; Motion for Summary Judgment, rollo of 164172, pp. 255-256; Decision, rollo G.R. No. 168741, p. 17.G.R. No. 164171             February 20, 2006

HON. EXECUTIVE SECRETARY, HON. SECRETARY OF THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), COMMISSIONER OF CUSTOMS, ASSISTANT SECRETARY, LAND TRANSPORTATION OFFICE (LTO), COLLECTOR OF CUSTOMS, SUBIC BAY FREE PORT ZONE, AND CHIEF OF LTO, SUBIC BAY FREE PORT ZONE, Petitioners, vs.SOUTHWING HEAVY INDUSTRIES, INC., represented by its President JOSE T. DIZON, UNITED AUCTIONEERS, INC., represented by its President DOMINIC SYTIN, and MICROVAN, INC., represented by its President MARIANO C. SONON, Respondents.

x - - - - - - - - - - - - - - - x

G.R. No. 164172             February 20, 2006

HON. EXECUTIVE SECRETARY, SECRETARY OF THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATION (DOTC), COMMISSIONER OF CUSTOMS, ASSISTANT SECRETARY, LAND TRANSPORTATION OFFICE (LTO), COLLECTOR OF CUSTOMS, SUBIC BAY FREE PORT ZONE AND CHIEF OF LTO, SUBIC BAY FREE PORT ZONE, Petitioners, vs.SUBIC INTEGRATED MACRO VENTURES CORP., represented by its President YOLANDA AMBAR, Respondent.

x - - - - - - - - - - - - - - - x

G.R. No. 168741             February 20, 2006

HON. EXECUTIVE SECRETARY, HON. SECRETARY OF FINANCE, THE CHIEF OF THE LAND TRANSPORTATION OFFICE, THE COMMISSIONER OF CUSTOMS, and THE COLLECTOR OF CUSTOMS, SUBIC SPECIAL ECONOMIC ZONE, Petitioners, vs.MOTOR VEHICLE IMPORTERS ASSOCIATION OF SUBIC BAY FREEPORT, INC., represented by its President ALFREDO S. GALANG,Respondent.

D E C I S I O N

YNARES-SANTIAGO, J.:

The instant consolidated petitions seek to annul and set aside the Decisions of the Regional Trial Court of Olongapo City, Branch 72, in Civil Case No. 20-0-04 and Civil Case No. 22-0-04, both dated May 24, 2004; and the February 14, 2005 Decision of the Court of Appeals in CA-G.R. SP. No. 83284, which declared Article 2, Section 3.1 of Executive Order No. 156 (EO 156) unconstitutional. Said executive issuance prohibits the importation into the country, inclusive of the Special Economic and Freeport Zone or the Subic Bay Freeport (SBF or Freeport), of used motor vehicles, subject to a few exceptions.

The undisputed facts show that on December 12, 2002, President Gloria Macapagal-Arroyo, through Executive Secretary Alberto G. Romulo, issued EO 156, entitled "Providing for a comprehensive industrial policy and directions for the motor vehicle development program and its implementing guidelines." The challenged provision states:

3.1 The importation into the country, inclusive of the Freeport, of all types of used motor vehicles is prohibited, except for the following:

3.1.1 A vehicle that is owned and for the personal use of a returning resident or immigrant and covered by an authority to import issued under the No-dollar

Importation Program. Such vehicles cannot be resold for at least three (3) years;

3.1.2 A vehicle for the use of an official of the Diplomatic Corps and authorized to be imported by the Department of Foreign Affairs;

3.1.3 Trucks excluding pickup trucks;

1. with GVW of 2.5-6.0 tons covered by an authority to import issued by the DTI.

2. With GVW above 6.0 tons.

3.1.4 Buses:

1. with GVW of 6-12 tons covered by an authority to import issued by DTI;

2. with GVW above 12 tons.

3.1.5 Special purpose vehicles:

1. fire trucks

2. ambulances

3. funeral hearse/coaches

4. crane lorries

5. tractor heads and truck tractors

6. boom trucks

7. tanker trucks

8. tank lorries with high pressure spray gun

9. reefers or refrigerated trucks

10. mobile drilling derricks

11. transit/concrete mixers

12. mobile radiological units

13. wreckers or tow trucks

14. concrete pump trucks

15. aerial/bucket flat-form trucks

16. street sweepers

17. vacuum trucks

18. garbage compactors

19. self loader trucks

20. man lift trucks

21. lighting trucks

22. trucks mounted with special purpose equipment

23. all other types of vehicle designed for a specific use.

The issuance of EO 156 spawned three separate actions for declaratory relief before Branch 72 of the Regional Trial Court of Olongapo City, all seeking the declaration of the unconstitutionality of Article 2, Section 3.1 of said executive order. The cases were filed by herein respondent entities, who or whose members, are classified as Subic Bay Freeport Enterprises and engaged in the business of, among others, importing and/or trading used motor vehicles.

G.R. No. 164171:

On January 16, 2004, respondents Southwing Heavy Industries, Inc., (Southwing) United Auctioneers, Inc. (United Auctioneers), and Microvan, Inc. (Microvan), instituted a declaratory relief case docketed as Civil Case No. 20-0-04,1 against the Executive Secretary, Secretary of Transportation and Communication, Commissioner of Customs, Assistant Secretary and Head of the Land Transportation Office, Subic Bay Metropolitan Authority (SBMA), Collector of Customs for the Port at Subic Bay Freeport Zone, and the Chief of the Land Transportation Office at Subic Bay Freeport Zone.

Southwing, United Auctioneers and Microvan prayed that judgment be rendered (1) declaring Article 2, Section 3.1 of EO 156 unconstitutional and illegal; (2) directing the Secretary of Finance, Commissioner of Customs, Collector of Customs and the Chairman of the SBMA to allow the importation of used motor vehicles; (2) ordering the Land Transportation Office and its subordinates inside the Subic Special Economic Zone to process the registration of the imported used motor vehicles; and (3) in general, to allow the unimpeded entry and importation of used motor vehicles subject only to the payment of the required customs duties.

Upon filing of petitioners’ answer/comment, respondents Southwing and Microvan filed a motion for summary judgment which was granted by the trial court. On May 24, 2004, a summary judgment was rendered declaring that Article 2, Section 3.1 of EO 156 constitutes an unlawful usurpation of legislative power vested by the Constitution with Congress. The trial court further held that the proviso is contrary to the mandate of Republic Act No. 7227 (RA 7227) or the Bases Conversion and Development Act of 1992 which allows the free flow of goods and capital within the Freeport. The dispositive portion of the said decision reads:

WHEREFORE, judgment is hereby rendered in favor of petitioner declaring Executive Order 156 [Article 2, Section] 3.1 for being unconstitutional and illegal; directing respondents Collector of Customs based at SBMA to allow the importation and entry of used motor vehicles pursuant to the mandate of RA 7227; directing respondent Chief of the Land Transportation Office and its subordinates inside the Subic Special Economic Zone or SBMA to process the registration of imported used motor vehicle; and in general, to allow unimpeded entry and importation of used motor vehicles to the Philippines subject only to the payment of the required customs duties.

SO ORDERED.2

From the foregoing decision, petitioners sought relief before this Court via a petition for review on certiorari, docketed as G.R. No. 164171.

G.R. No. 164172:

On January 20, 2004, respondent Subic Integrated Macro Ventures Corporation (Macro Ventures) filed with the same trial court, a similar action for declaratory relief docketed as Civil Case No. 22-0-04,3 with the same prayer and against the same parties4 as those in Civil Case No. 20-0-04.

In this case, the trial court likewise rendered a summary judgment on May 24, 2004, holding that Article 2, Section 3.1 of EO 156, is repugnant to the constitution.5 Elevated to this Court via a petition for review on certiorari, Civil Case No. 22-0-04 was docketed as G.R. No. 164172.

G.R. No. 168741

On January 22, 2003, respondent Motor Vehicle Importers Association of Subic Bay Freeport, Inc. (Association), filed another action for declaratory relief with essentially the same prayer as those in Civil Case No. 22-0-04 and Civil Case No. 20-0-04, against the Executive Secretary, Secretary of Finance, Chief of the Land Transportation Office, Commissioner of Customs, Collector of Customs at SBMA and the Chairman of SBMA. This was docketed as Civil Case No. 30-0-2003,6 before the same trial court.

In a decision dated March 10, 2004, the court a quo granted the Association’s prayer and declared the assailed proviso as contrary to the Constitution, to wit:

WHEREFORE, judgment is hereby rendered in favor of petitioner declaring Executive Order 156 [Article 2, Section] 3.1 for being unconstitutional and illegal; directing respondents Collector of Customs based at SBMA to allow the importation and entry of used motor vehicles pursuant to the mandate of RA 7227; directing respondent Chief of the Land Transportation Office and its subordinates inside the Subic Special Economic Zone or SBMA to process the registration of imported used motor vehicles; directing the respondent Chairman of the SBMA to allow the entry into the Subic Special Economic Zone or SBMA imported used motor vehicle; and in general, to allow unimpeded entry and importation of used motor vehicles to the Philippines subject only to the payment of the required customs duties.

SO ORDERED.7

Aggrieved, the petitioners in Civil Case No. 30-0-2003, filed a petition for certiorari8 with the Court of Appeals (CA-G.R. SP. No. 83284) which denied the petition on February 14, 2005 and sustained the finding of the trial court that Article 2, Section 3.1 of EO 156, is void for being repugnant to the constitution. The dispositive portion thereof, reads:

WHEREFORE, the instant petition for certiorari is hereby DENIED. The assailed decision of the Regional Trial Court, Third Judicial Region, Branch 72, Olongapo City, in Civil Case No. 30-0-2003, accordingly, STANDS.

SO ORDERED.9

The aforequoted decision of the Court of Appeals was elevated to this Court and docketed as G.R. No. 168741. In a Resolution dated October 4, 2005,10 said case was consolidated with G.R. No. 164171 and G.R. No. 164172.

Petitioners are now before this Court contending that Article 2, Section 3.1 of EO 156 is valid and applicable to the entire country, including the Freeeport. In support of their arguments, they raise procedural and substantive issues bearing on the constitutionality of the assailed proviso. The procedural issues are: the lack of respondents’ locus standi to question the validity of EO 156, the propriety of challenging EO 156 in a declaratory relief proceeding and the applicability of a judgment on the pleadings in this case.

Petitioners argue that respondents will not be affected by the importation ban considering that their certificate of registration and tax exemption do not authorize them to engage in the importation and/or trading of used cars. They also aver that the actions filed by respondents do not qualify as declaratory relief cases. Section 1, Rule 63 of the Rules of Court provides that a petition for declaratory relief may be filed before there is a breach or violation of rights. Petitioners claim that there was already a breach of respondents’ supposed right because the cases were filed more than a year after the issuance of EO 156. In fact, in Civil Case No. 30-0-2003, numerous warrants of seizure and detention were issued against imported used motor vehicles belonging to respondent Association’s members.

Petitioners’ arguments lack merit.

The established rule that the constitutionality of a law or administrative issuance can be challenged by one who will sustain a direct injury as a result of its enforcement11 has been satisfied in the instant case. The broad subject of the prohibited importation is "all types of used motor vehicles." Respondents would definitely suffer a direct injury from the implementation of EO 156 because their certificate of registration and tax exemption authorize them to trade and/or import new and used motor vehicles and spare parts, except "used cars."12Other types of motor vehicles imported and/or traded by respondents and not falling within the category of used cars would thus be subjected to the ban to the prejudice of their business. Undoubtedly, respondents have the legal standing to assail the validity of EO 156.

As to the propriety of declaratory relief as a vehicle for assailing the executive issuance, suffice it to state that any breach of the rights of respondents will not affect the case. In Commission on Audit of the Province of Cebu v. Province of Cebu,13 the Court entertained a suit for declaratory relief to finally settle the doubt as to the proper interpretation of the conflicting laws involved, notwithstanding a violation of the right of the party affected. We find no reason to deviate from said ruling mindful of the significance of the present case to the national economy.

So also, summary judgments were properly rendered by the trial court because the issues involved in the instant case were pure questions of law. A motion for summary judgment is premised on the assumption that the issues presented need not be tried either because these are patently devoid of substance or that there is no genuine issue as to any pertinent fact. It is a method sanctioned by the Rules of Court for the prompt disposition of a civil action in which

the pleadings raise only a legal issue, not a genuine issue as to any material fact.14

At any rate, even assuming the procedural flaws raised by petitioners truly exist, the Court is not precluded from brushing aside these technicalities and taking cognizance of the action filed by respondents considering its importance to the public and in keeping with the duty to determine whether the other branches of the government have kept themselves within the limits of the Constitution.15

We now come to the substantive issues, which are: (1) whether there is statutory basis for the issuance of EO 156; and (2) if the answer is in the affirmative, whether the application of Article 2, Section 3.1 of EO 156, reasonable and within the scope provided by law.

The main thrust of the petition is that EO 156 is constitutional because it was issued pursuant to EO 226, the Omnibus Investment Code of the Philippines and that its application should be extended to the Freeport because the guarantee of RA 7227 on the free flow of goods into the said zone is merely an exemption from customs duties and taxes on items brought into the Freeport and not an open floodgate for all kinds of goods and materials without restriction.

In G.R. No. 168741, the Court of Appeals invalidated Article 2, Section 3.1 of EO 156, on the ground of lack of any statutory basis for the President to issue the same. It held that the prohibition on the importation of used motor vehicles is an exercise of police power vested on the legislature and absent any enabling law, the exercise thereof by the President through an executive issuance, is void.

Police power is inherent in a government to enact laws, within constitutional limits, to promote the order, safety, health, morals, and general welfare of society. It is lodged primarily with the legislature. By virtue of a valid delegation of legislative power, it may also be exercised by the President and administrative boards, as well as the lawmaking bodies on all municipal levels, including the barangay.16 Such delegation confers upon the President quasi-legislative power which may be defined as the authority delegated by the law-making body to the administrative body to adopt rules and regulations intended to carry out the provisions of the law and implement legislative policy.17 To be valid, an administrative issuance, such as an executive order, must comply with the following requisites:

(1) Its promulgation must be authorized by the legislature;

(2) It must be promulgated in accordance with the prescribed procedure;

(3) It must be within the scope of the authority given by the legislature; and

(4) It must be reasonable.18

Contrary to the conclusion of the Court of Appeals, EO 156 actually satisfied the first requisite of a valid administrative order. It has both constitutional and statutory bases.

Delegation of legislative powers to the President is permitted in Section 28(2) of Article VI of the Constitution. It provides:

(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.19 (Emphasis supplied)

The relevant statutes to execute this provision are:

1) The Tariff and Customs Code which authorizes the President, in the interest of national economy, general welfare and/or national security, to, inter alia, prohibit the importation of any commodity. Section 401 thereof, reads:

Sec. 401. Flexible Clause. —

a. In the interest of national economy, general welfare and/or national security, and subject to the limitations herein prescribed, the President, upon recommendation of the National Economic and Development Authority (hereinafter referred to as NEDA), is hereby empowered: x x x (2) to establish import quota or to ban imports of any commodity, as may be necessary;x x x Provided, That upon periodic investigations by the Tariff Commission and recommendation of the NEDA, the President may cause a gradual reduction of protection levels granted in Section One hundred and four of this Code, including

those subsequently granted pursuant to this section. (Emphasis supplied)

2) Executive Order No. 226, the Omnibus Investment Code of the Philippines which was issued on July 16, 1987, by then President Corazon C. Aquino, in the exercise of legislative power under the Provisional Freedom Constitution,20 empowers the President to approve or reject the prohibition on the importation of any equipment or raw materials or finished products. Pertinent provisions thereof, read:

ART. 4. Composition of the board. The Board of Investments shall be composed of seven (7) governors: The Secretary of Trade and Industry, three (3) Undersecretaries of Trade and Industry to be chosen by the President; and three (3) representatives from the government agencies and the private sector x x x.

ART. 7. Powers and duties of the Board.

x x x x

(12) Formulate and implement rationalization programs for certain industries whose operation may result in dislocation, overcrowding or inefficient use of resources, thus impeding economic growth. For this purpose, the Board may formulate guidelines for progressive manufacturing programs, local content programs, mandatory sourcing requirements and dispersal of industries. In appropriate cases and upon approval of the President, the Board may restrict, either totally or partially, the importation of any equipment or raw materials or finished products involved in the rationalization program; (Emphasis supplied)

3) Republic Act No. 8800, otherwise known as the "Safeguard Measures Act" (SMA), and entitled "An Act Protecting Local Industries By Providing Safeguard Measures To Be Undertaken In Response To Increased Imports And Providing Penalties For Violation Thereof,"21designated the Secretaries22 of the Department of Trade and Industry (DTI) and the Department of Agriculture, in their capacity as alter egos of the President, as the implementing authorities of the safeguard measures, which include, inter alia, modification or imposition of any quantitative restriction on the importation of a product into the Philippines. The purpose of the SMA is stated in the declaration of policy, thus:

SEC. 2. Declaration of Policy. – The State shall promote competitiveness of domestic industries and producers based on sound industrial and agricultural development policies, and efficient use of human, natural and technical resources. In pursuit of this goal and in the public interest, the State shall provide safeguard measures to protect domestic industries and producers from increased imports which cause or threaten to cause serious injury to those domestic industries and producers.

There are thus explicit constitutional and statutory permission authorizing the President to ban or regulate importation of articles and commodities into the country.

Anent the second requisite, that is, that the order must be issued or promulgated in accordance with the prescribed procedure, it is necessary that the nature of the administrative issuance is properly determined. As in the enactment of laws, the general rule is that, the promulgation of administrative issuances requires previous notice and hearing, the only exception being where the legislature itself requires it and mandates that the regulation shall be based on certain facts as determined at an appropriate investigation.23 This exception pertains to the issuance of legislative rules as distinguished from interpretative rules which give no real consequence more than what the law itself has already prescribed;24 and are designed merely to provide guidelines to the law which the administrative agency is in charge of enforcing.25 A legislative rule, on the other hand, is in the nature of subordinate legislation, crafted to implement a primary legislation.

In Commissioner of Internal Revenue v. Court of Appeals,26 and Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop, Inc.,27the Court enunciated the doctrine that when an administrative rule goes beyond merely providing for the means that can facilitate or render less cumbersome the implementation of the law and substantially increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard and, thereafter, to be duly informed, before the issuance is given the force and effect of law.

In the instant case, EO 156 is obviously a legislative rule as it seeks to implement or execute primary legislative enactments intended to protect the domestic industry by imposing a ban on the importation of a specified product not previously subject to such prohibition. The due process requirements in the issuance thereof are embodied in Section 40128 of the Tariff and Customs Code and Sections 5 and 9 of the SMA29 which essentially mandate the conduct of investigation and public hearings before the regulatory measure or importation ban may be

issued.

In the present case, respondents neither questioned before this Court nor with the courts below the procedure that paved the way for the issuance of EO 156. What they challenged in their petitions before the trial court was the absence of "substantive due process" in the issuance of the EO.30 Their main contention before the court a quo is that the importation ban is illogical and unfair because it unreasonably drives them out of business to the prejudice of the national economy.

Considering the settled principle that in the absence of strong evidence to the contrary, acts of the other branches of the government are presumed to be valid,31 and there being no objection from the respondents as to the procedure in the promulgation of EO 156, the presumption is that said executive issuance duly complied with the procedures and limitations imposed by law.

To determine whether EO 156 has complied with the third and fourth requisites of a valid administrative issuance, to wit, that it was issued within the scope of authority given by the legislature and that it is reasonable, an examination of the nature of a Freeport under RA 7227 and the primordial purpose of the importation ban under the questioned EO is necessary.

RA 7227 was enacted providing for, among other things, the sound and balanced conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the form of Special Economic and Freeport Zone, or the Subic Bay Freeport, in order to promote the economic and social development of Central Luzon in particular and the country in general.

The Rules and Regulations Implementing RA 7227 specifically defines the territory comprising the Subic Bay Freeport, referred to as the Special Economic and Freeport Zone in Section 12 of RA 7227 as "a separate customs territory consisting of the City of Olongapo and the Municipality of Subic, Province of Zambales, the lands occupied by the Subic Naval Base and its contiguous extensions as embraced, covered and defined by the 1947 Philippine-U.S. Military Base Agreement as amended and within the territorial jurisdiction of Morong and Hermosa, Province of Bataan, the metes and bounds of which shall be delineated by the President of the Philippines; provided further that pending establishment of secure perimeters around the entire SBF, the SBF shall refer to the area demarcated by the SBMA pursuant to Section 1332 hereof."

Among the salient provisions of RA 7227 are as follows:

SECTION 12. Subic Special Economic Zone. —

x x x x

The abovementioned zone shall be subject to the following policies:

x x x x

(a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent provisions of the Local Government Code, the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments;

(b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;

The Freeport was designed to ensure free flow or movement of goods and capital within a portion of the Philippine territory in order to attract investors to invest their capital in a business climate with the least governmental intervention. The concept of this zone was explained by Senator Guingona in this wise:

Senator Guingona. Mr. President, the special economic zone is successful in many places, particularly Hong Kong, which is a free port. The difference between a special economic zone and an industrial estate is simply expansive in the sense that the commercial activities, including the establishment of banks, services, financial institutions, agro-industrial activities,

maybe agriculture to a certain extent.

This delineates the activities that would have the least of government intervention, and the running of the affairs of the special economic zone would be run principally by the investors themselves, similar to a housing subdivision, where the subdivision owners elect their representatives to run the affairs of the subdivision, to set the policies, to set the guidelines.

We would like to see Subic area converted into a little Hong Kong, Mr. President, where there is a hub of free port and free entry, free duties and activities to a maximum spur generation of investment and jobs.

While the investor is reluctant to come in the Philippines, as a rule, because of red tape and perceived delays, we envision this special economic zone to be an area where there will be minimum government interference.

The initial outlay may not only come from the Government or the Authority as envisioned here, but from them themselves, because they would be encouraged to invest not only for the land but also for the buildings and factories. As long as they are convinced that in such an area they can do business and reap reasonable profits, then many from other parts, both local and foreign, would invest, Mr. President.33(Emphasis, added)

With minimum interference from the government, investors can, in general, engage in any kind of business as well as import and export any article into and out of the Freeport. These are among the rights accorded to Subic Bay Freeport Enterprises under Section 39 of the Rules and Regulations Implementing RA 7227, thus –

SEC. 39. Rights and Obligations.- SBF Enterprises shall have the following rights and obligations:

a. To freely engage in any business, trade, manufacturing, financial or service activity, and to import and export freely all types of goods into and out of the SBF, subject to the provisions of the Act, these Rules and other regulations that may be promulgated by the SBMA;

Citing, inter alia, the interpellations of Senator Enrile, petitioners claim that the "free flow or movement of goods and capital" only means that goods and material brought within the Freeport shall not be subject to customs duties and other taxes and should not be construed as an open floodgate for entry of all kinds of goods. They thus surmise that the importation ban on motor vehicles is applicable within the Freeport. Pertinent interpellations of Senator Enrile on the concept of Freeport is as follows:

Senator Enrile: Mr. President, I think we are talking here of sovereign concepts, not territorial concepts. The concept that we are supposed to craft here is to carve out a portion of our terrestrial domain as well as our adjacent waters and say to the world: "Well, you can set up your factories in this area that we are circumscribing, and bringing your equipment and bringing your goods, you are not subject to any taxes and duties because you are not within the customs jurisdiction of the Republic of the Philippines, whether you store the goods or only for purposes of transshipment or whether you make them into finished products again to be reexported to other lands."

x x x x

My understanding of a "free port" is, we are in effect carving out a part of our territory and make it as if it were foreign territory for purposes of our customs laws, and that people can come, bring their goods, store them there and bring them out again, as long as they do not come into the domestic commerce of the Republic.

We do not really care whether these goods are stored here. The only thing that we care is for our people to have an employment because of the entry of these goods that are being discharged, warehoused and reloaded into the ships so that they can be exported. That will generate employment for us. For as long as that is done, we are saying, in effect, that we have the least contact with our tariff and customs laws and our tax laws. Therefore, we consider these goods as outside of the customs jurisdiction of the Republic of the Philippines as yet, until we draw them from this territory and bring them inside our domestic commerce. In which case, they have to pass through our customs gate. I thought we are carving out this entire area and convert it into this kind of concept.34

However, contrary to the claim of petitioners, there is nothing in the foregoing excerpts which absolutely limits the incentive to Freeport investors only to exemption from customs duties and taxes. Mindful of the legislative intent to attract investors, enhance investment and boost the economy, the legislature could not have limited the enticement only to exemption from taxes.

The minimum interference policy of the government on the Freeport extends to the kind of business that investors may embark on and the articles which they may import or export into and out of the zone. A contrary interpretation would defeat the very purpose of the Freeport and drive away investors.

It does not mean, however, that the right of Freeport enterprises to import all types of goods and article is absolute. Such right is of course subject to the limitation that articles absolutely prohibited by law cannot be imported into the Freeport.35 Nevertheless, in determining whether the prohibition would apply to the Freeport, resort to the purpose of the prohibition is necessary.

In issuing EO 156, particularly the prohibition on importation under Article 2, Section 3.1, the President envisioned to rationalize the importation of used motor vehicles and to enhance the capabilities of the Philippine motor manufacturing firms to be globally competitive producers of completely build-up units and their parts and components for the local and export markets.36 In justifying the issuance of EO 156, petitioners alleged that there has been a decline in the sales of new vehicles and a remarkable growth of the sales of imported used motor vehicles. To address the same, the President issued the questioned EO to prevent further erosion of the already depressed market base of the local motor vehicle industry and to curtail the harmful effects of the increase in the importation of used motor vehicles.37

Taking our bearings from the foregoing discussions, we hold that the importation ban runs afoul the third requisite for a valid administrative order. To be valid, an administrative issuance must not be ultra vires or beyond the limits of the authority conferred. It must not supplant or modify the Constitution, its enabling statute and other existing laws, for such is the sole function of the legislature which the other branches of the government cannot usurp. As held in United BF Homeowner’s Association v. BF Homes, Inc.:38

The rule-making power of a public administrative body is a delegated legislative power, which it may not use either to abridge the authority given it by Congress or the Constitution or to enlarge its power beyond the scope intended. Constitutional and statutory provisions control what rules and regulations may be promulgated by such a body, as well as with respect to what fields are subject to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute.

In the instant case, the subject matter of the laws authorizing the President to regulate or forbid importation of used motor vehicles, is thedomestic industry. EO 156, however, exceeded the scope of its application by extending the prohibition on the importation of used cars to the Freeport, which RA 7227, considers to some extent, a foreign territory. The domestic industry which the EO seeks to protect is actually the "customs territory" which is defined under the Rules and Regulations Implementing RA 7227, as follows:

"the portion of the Philippines outside the Subic Bay Freeport where the Tariff and Customs Code of the Philippines and other national tariff and customs laws are in force and effect."39

The proscription in the importation of used motor vehicles should be operative only outside the Freeport and the inclusion of said zone within the ambit of the prohibition is an invalid modification of RA 7227. Indeed, when the application of an administrative issuance modifies existing laws or exceeds the intended scope, as in the instant case, the issuance becomes void, not only for being ultra vires, but also for being unreasonable.

This brings us to the fourth requisite. It is an axiom in administrative law that administrative authorities should not act arbitrarily and capriciously in the issuance of rules and regulations. To be valid, such rules and regulations must be reasonable and fairly adapted to secure the end in view. If shown to bear no reasonable relation to the purposes for which they were authorized to be issued, then they must be held to be invalid.40

There is no doubt that the issuance of the ban to protect the domestic industry is a reasonable exercise of police power. The deterioration of the local motor manufacturing firms due to the influx of imported used motor vehicles is an urgent national concern that needs to be swiftly addressed by the President. In the exercise of delegated police power, the executive can therefore validly proscribe the importation of these vehicles. Thus, in Taxicab Operators of Metro Manila, Inc. v. Board of Transportation,41 the Court held that a regulation phasing out taxi cabs more than six years old is a valid exercise of police power. The regulation was sustained as reasonable holding that the purpose thereof was to promote the convenience and comfort and protect the safety of the passengers.

The problem, however, lies with respect to the application of the importation ban to the Freeport. The Court finds no logic in the all encompassing application of the assailed provision to the Freeport which is outside the customs territory. As long as the used motor vehicles do not enter the customs territory, the injury or harm sought to be prevented or remedied will not arise. The application of the law should be consistent with the purpose of and reason for the law. Ratione cessat lex, et cessat lex. When the reason for the law ceases, the law ceases. It is not the letter alone but the spirit of the law also that gives it life.42 To apply the proscription to the Freeport would not serve the purpose of the EO. Instead of improving the general economy of the country, the application of the importation ban in the Freeport would subvert the avowed purpose of RA 7227 which is to create a market that would draw investors and ultimately boost the national economy.

In similar cases, we also declared void the administrative issuance or ordinances concerned for being unreasonable. To illustrate, in De la Cruz v. Paras,43 the Court held as unreasonable and unconstitutional an ordinance characterized by overbreadth. In that case, the Municipality of Bocaue, Bulacan, prohibited the operation of all night clubs, cabarets and dance halls within its jurisdiction for the protection of public morals. As explained by the Court:

x x x It cannot be said that such a sweeping exercise of a lawmaking power by Bocaue could qualify under the term reasonable. The objective of fostering public morals, a worthy and desirable end can be attained by a measure that does not encompass too wide a field. Certainly the ordinance on its face is characterized by overbreadth. The purpose sought to be achieved could have been attained by reasonable restrictions rather than by an absolute prohibition. The admonition in Salaveria should be heeded: "The Judiciary should not lightly set aside legislative action when there is not a clear invasion of personal or property rights under the guise of police regulation." It is clear that in the guise of a police regulation, there was in this instance a clear invasion of personal or property rights, personal in the case of those individuals desirous of patronizing those night clubs and property in terms of the investments made and salaries to be earned by those therein employed.

Lupangco v. Court of Appeals,44 is a case involving a resolution issued by the Professional Regulation Commission which prohibited examinees from attending review classes and receiving handout materials, tips, and the like three days before the date of examination in order to preserve the integrity and purity of the licensure examinations in accountancy. Besides being unreasonable on its face and violative of academic freedom, the measure was found to be more sweeping than what was necessary, viz:

Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the alleged leakages in the licensure examinations will be eradicated or at least minimized. Making the examinees suffer by depriving them of legitimate means of review or preparation on those last three precious days — when they should be refreshing themselves with all that they have learned in the review classes and preparing their mental and psychological make-up for the examination day itself — would be like uprooting the tree to get rid of a rotten branch. What is needed to be done by the respondent is to find out the source of such leakages and stop it right there. If corrupt officials or personnel should be terminated from their loss, then so be it. Fixers or swindlers should be flushed out. Strict guidelines to be observed by examiners should be set up and if violations are committed, then licenses should be suspended or revoked. x x x

In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc.,45 the Court likewise struck down as unreasonable and overbreadth a city ordinance granting an exclusive franchise for 25 years, renewable for another 25 years, to one entity for the construction and operation of one common bus and jeepney terminal facility in Lucena City. While professedly aimed towards alleviating the traffic congestion alleged to have been caused by the existence of various bus and jeepney terminals within the city, the ordinance was held to be beyond what is reasonably necessary to solve the traffic problem in the city.

By parity of reasoning, the importation ban in this case should also be declared void for its too sweeping and unnecessary application to the Freeport which has no bearing on the objective of the prohibition. If the aim of the EO is to prevent the entry of used motor vehicles from the Freeport to the customs territory, the solution is not to forbid entry of these vehicles into the Freeport, but to intensify governmental campaign and measures to thwart illegal ingress of used motor vehicles into the customs territory.

At this juncture, it must be mentioned that on June 19, 1993, President Fidel V. Ramos issued Executive Order No. 97-A, "Further Clarifying The Tax And Duty-Free Privilege Within The Subic Special Economic And Free Port Zone," Section 1 of which provides:

SECTION 1. The following guidelines shall govern the tax and duty-free privilege within the Secured Area of the Subic Special Economic and Free Port Zone:

1.1. The Secured Area consisting of the presently fenced-in former Subic Naval Base shall be

the only completely tax and duty-free area in the SSEFPZ. Business enterprises and individuals (Filipinos and foreigners) residing within the Secured Area are free to import raw materials, capital goods, equipment, and consumer items tax and dutry-free. Consumption items, however, must be consumed within the Secured Area. Removal of raw materials, capital goods, equipment and consumer items out of the Secured Area for sale to non-SSEFPZ registered enterprises shall be subject to the usual taxes and duties, except as may be provided herein.

In Tiu v. Court of Appeals46 as reiterated in Coconut Oil Refiners Association, Inc. v. Torres,47 this provision limiting the special privileges on tax and duty-free importation in the presently fenced-in former Subic Naval Base has been declared valid and constitutional and in accordance with RA 7227. Consistent with these rulings and for easier management and monitoring of activities and to prevent fraudulent importation of merchandise and smuggling, the free flow and importation of used motor vehicles shall be operative only within the "secured area."

In sum, the Court finds that Article 2, Section 3.1 of EO 156 is void insofar as it is made applicable to the presently secured fenced-in former Subic Naval Base area as stated in Section 1.1 of EO 97-A. Pursuant to the separability clause48 of EO 156, Section 3.1 is declared valid insofar as it applies to the customs territory or the Philippine territory outside the presently secured fenced-in former Subic Naval Base area as stated in Section 1.1 of EO 97-A. Hence, used motor vehicles that come into the Philippine territory via the secured fenced-in former Subic Naval Base area may be stored, used or traded therein, or exported out of the Philippine territory, but they cannot be imported into the Philippine territory outside of the secured fenced-in former Subic Naval Base area.

WHEREFORE, the petitions are PARTIALLY GRANTED and the May 24, 2004 Decisions of Branch 72, Regional Trial Court of Olongapo City, in Civil Case No. 20-0-04 and Civil Case No. 22-0-04; and the February 14, 2005 Decision of the Court of Appeals in CA-G.R. SP No. 63284, are MODIFIED insofar as they declared Article 2, Section 3.1 of Executive Order No. 156, void in its entirety.

Said provision is declared VALID insofar as it applies to the Philippine territory outside the presently fenced-in former Subic Naval Base area and VOID with respect to its application to the secured fenced-in former Subic Naval Base area.

SO ORDERED.

CONSUELO YNARES-SANTIAGO Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN Chief Justice

REYNATO S. PUNOAssociate Justice

LEONARDO A. QUISUMBINGAsscociate Justice

ANGELINA SANDOVAL-GUTIERREZAssociate Justice

ANTONIO T. CARPIOAsscociate Justice

MA. ALICIA AUSTRIA-MARTINEZAssociate Justice

RENATO C. CORONAAsscociate Justice

CONCHITA CARPIO-MORALESAssociate Justice

ROMEO J. CALLEJO, SR.Asscociate Justice

ADOLFO S. AZCUNAAssociate Justice

DANTE O. TINGAAsscociate Justice

MINITA V. CHICO-NAZARIOAssociate Justice

CANCIO C. GARCIAAsscociate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

ARTEMIO V. PANGANIBAN Chief Justice

Footnotes

1 Rollo (G.R. No. 164171), pp. 81-90.

2 Id. at 68; rollo (G.R. No. 164172), p. 65. Penned by Judge Eliodoro G. Ubiadas.

3 Rollo (G.R. No. 164172), pp. 78-86.

4 The Executive Secretary, Secretary of Transportation and Communication, Commissioner of Customs, Assistant Secretary and Head of the Land Transportation Office, Subic Bay Metropolitan Authority (SBMA), Collector of Customs for the Port at Subic Bay Freeport Zone, and the Chief of the Land Transportation Office at Subic Bay Freeport Zone.

5 The dispositive portion thereof is identically worded as the quoted decretal portion of the decision in Civil Case No. 20-0-04.

6 Rollo (G.R. No. 168741), pp. 139-153.

7 Id. at 264. Penned by Judge Eliodoro G. Ubiadas.

8 Docketed as CA-G.R. SP. No. 83284.

9 Dated February 14, 2005, rollo (G.R. No. 168741), p. 125. Penned by Associate Justice Perlita J. Tria Tirona and concurred in by Associate Justices Delilah Vidallon-Magtolis and Jose C. Reyes, Jr. Petitioners filed a motion for reconsideration but was denied by the Court of Appeals on June 28, 2004, id. at 126.

10 Id. at 354.

11 Miranda v. Aguirre, 373 Phil. 386, 397 (1999).

12 Rollo (G.R. No. 164171), pp. 94-96 and rollo (G.R. No. 164172), p. 88.

13 422 Phil. 519, 531 (2001).

14 Republic v. Sandiganbayan, G.R. No. 152154, November 18, 2003, 416 SCRA 133, 140.

15 Coconut Oil Refiners Association, Inc. v. Torres, G.R. No. 132527, July 29, 2005, 465 SCRA 47, 62.

16 Camarines Norte Electric Cooperative, Inc. v. Torres, 350 Phil. 315, 331 (1998).

17 Cruz, Philippine Administrative Law, 2003 Edition, p. 24.

18 Id. at 41.

19 Essentially the same provision is embodied in the 1935 and 1973 Constitutions.

Constitution (1935), Art. VI, Sec 22, par. (2):

The Congress may by law authorize the President, subject to such limitations and restrictions as it may impose, to fix, within specified limits, tariff rates, import or export quotas, and tonnage and wharfage dues.

Constitution (1973), Art. VII, Sec 17, par. (2):

The Batasang Pambansa may by law authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts.

20 Bernas, S.J., The 1987 Constitution of the Philippines: A Commentary, 1996 Edition, p. 610.

21 Enacted on July 17, 2000. See Filipino Metals Corporation v. Secretary of Trade and Industry, G.R. No. 157498, July 15, 2005, 463 SCRA 616, 619.

22 "Secretary" as defined under Section 4 (n) of the SMA refers to either the Secretary of the Department of Trade and Industry in the case of non-agricultural products or the Secretary of the Department of Agriculture in the case of agricultural products.

23 Cruz, supra note 17 at 53.

24 Commissioner of Internal Revenue v. Court of Appeals, 329 Phil. 987, 1007 (1996).

25 Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary, G.R. No. 108524, November 10, 1994, 238 SCRA 63, 69.

26 Supra.

27 453 Phil. 1043, 1058 (2003).

28 Sec. 401. Flexible Clause. —

a. In the interest of national economy, general welfare and/or national security, and subject to the limitations herein prescribed, the President, upon recommendation of the National Economic and Development Authority (hereinafter referred to as NEDA), is hereby empowered: (1) to increase, reduce or remove existing protective rates of import duty (including any necessary change in classification). The existing rates may be increased or decreased but in no case shall the reduced rate of import duty be lower than the basic rate of ten (10) per cent ad valorem, nor shall the increased rate of import duty be higher than a maximum of one hundred (100) per cent ad valorem; (2) to establish import quota or to ban imports of any commodity, as may be necessary; and (3) to impose an additional duty on all imports not exceeding ten (10) per cent ad valorem whenever necessary; Provided, That upon periodic investigations by the Tariff Commission and recommendation of the NEDA, the President may cause a gradual reduction of protection levels granted in Section One Hundred and Four of this Code, including those subsequently granted pursuant to this section.

b. Before any recommendation is submitted to the President by the NEDA pursuant to the provisions of this section, except in the imposition of an additional duty not exceeding ten (10) per cent ad valorem, the Commission shall conduct an investigation in the course of which they shall hold public hearings wherein interested parties shall be afforded reasonable opportunity to be present, produce evidence and to be heard. The Commission shall also hear the views and recommendations of any government office, agency or instrumentality concerned. The Commission shall submit their findings and recommendations to the NEDA within thirty (30) days after the termination of the public hearings.

29 SEC. 5. Conditions for the Application of General Safeguard Measures. – The Secretary shall apply a general safeguard measure upon a positive final determination of the Commission that a product is being imported into the country in increased quantities, whether absolute or relative to the domestic production, as to be a substantial cause of serious injury or threat thereof to the domestic industry; however, in the case of non-agricultural products, the secretary shall first establish that the application of such safeguard measures will be in the public interest.

SEC. 9. Formal Investigation. – Within five (5) working days from receipt of the request from the Secretary, the Commission shall publish the notice of the commencement of the investigation, and public hearings which shall afford interested parties and consumers an opportunity to be present, or to present evidence, to respond to the presentation of other parties and consumers, and otherwise be heard. Evidence and positions with respect to the importation of the

subject article shall be submitted to the Commission within fifteen (15) days after the initiation of the investigation by the Commission.

The Commission shall complete its investigation and submit its report to the Secretary within one hundred twenty (120) calendar days from receipt of the referral by the Secretary, except when the Secretary certifies that the same is urgent, in which case the Commission shall complete the investigation and submit the report to the Secretary within sixty (60) days.

30 Rollo (G.R. No. 168741), pp. 144-145; rollo (G.R. No. 164172), pp. 205-206; rollo (G.R. No. 164171), pp. 87-86.

31 Coconut Oil Refiners Association, Inc. v. Torres, supra note 15 at 62-63.

32 Section 13 of the Rules and Regulations Implementing RA 7227 provides: Establishment of Secure Perimeters, Points of Entry and Duty and Tax Free Areas of the SBF. - Pending the establishment of secure perimeters around the entire SBF, the SBMA shall have the authority to establish and demarcate areas of the SBF with secure perimeters within which articles and merchandise free of duties and internal revenue taxes may be limited, without prejudice to the availment of other benefits conferred by the Act and these Rules in the SBF outside such areas. The SBMA shall furthermore have the authority to establish, regulate and maintain points of entry to the SBF or to any limited duty and tax-free areas of the SBF.

33 Records, Senate 8th congress, Session (January 14, 1992).

34 Id.

35 SEC. 45. Importation of Articles. – In general, all articles may be imported by SBF Enterprises into the SBF free of customs and import duties and national internal revenue taxes, except those articles prohibited by the SBMA and those absolutely prohibited by law. (Rules and Regulations Implementing RA 7227)

36 Whereas clauses of EO 156.

37 Rollo (G.R. No. 168741), pp. 77-79; rollo (G.R. No. 164172), p. 46; rollo (G.R. No. 164171), p. 48.

38 369 Phil. 568, 579-580 (1999).

39 Definitions, Section 3 (n).

40 Lupangco v. Court of Appeals, G.R. No. L-77372, April 29, 1988, 160 SCRA 848, 858-859.

41 202 Phil. 925, 935-936 (1982).

42 Vergara v. People, G.R. No. 160328, February 4, 2005, 450 SCRA 495, 508.

43 208 Phil. 490, 499-500 (1983).

44 Supra note 40 at 860.

45 G.R. No. 148339, February 23, 2005, 452 SCRA 174.

46 361 Phil. 229 (1999).

47 Supra note 15.

48 Article 7, Section 3:

Sec. 3. Separability Clause. – The provisions of this Executive Order are hereby declared separable and in the event any of such provisions is declared unconstitutional, the other provisions, which are not affected, thereby remain in force and effect.

EN BANC

G.R. No. 169466             May 9, 2007

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

D E C I S I O N

GARCIA, J.:

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

1. Decision1 dated July 7, 2005 which affirmed in toto the decision of the Regional Trial Court of Manila, Branch 32, in Civil Case No. 02-103702, a suit for declaratory relief, declaring the herein respondents entitled to the same retirement benefits accorded upon retirees of the Philippine National Police (PNP) under Republic Act (R.A.) No. 6975, as amended by R.A. No. 8551, and ordering the herein petitioners to implement the proper adjustments on respondents’ retirement benefits; and

2. Resolution2 dated August 24, 2005 which denied the petitioners’ motion for reconsideration.

The antecedent facts:

In 1975, Presidential Decree (P.D.) No. 765 was issued constituting the Integrated National Police (INP) to be composed of the Philippine Constabulary (PC) as the nucleus and the integrated police forces as components thereof. Complementing P.D. No. 765 was P.D. No. 11843dated August 26, 1977 (INP Law, hereinafter) issued to professionalize the INP and promote career development therein.

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

SEC. 23. Composition. – Subject to the limitation provided for in this Act, the Philippine National Police, hereinafter referred to as the PNP, is hereby established, initially consisting of the members of the police forces who were integrated into the Integrated National Police (INP) pursuant to Presidential Decree No. 765, and the officers and enlisted personnel of the Philippine Constabulary (PC).

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

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

Retirement Rank Monthly Pension Difference

INP PNP INP PNP  

Corporal SPO3 P 3,225.00

P 11,310.00

P 8,095.00

Captain P. Sr. Insp. P 5,248.00

P 15,976.00

P10,628.00

Brig. Gen.

P. Chief Supt.

P 10,054.24

P 18,088.00

P 8,033.76

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

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

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

The ensuing legal skirmish is not relevant to the disposition of the instant case. The bottom line is that, on March 21, 2003, the RTC came out with its decision6 holding that R.A. No. 6975, as amended, did not abolish the INP but merely provided for the absorption of its police functions by the PNP, and accordingly rendered judgment for the INP retirees, to wit:

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

The respondents Government Departments and Agencies shall IMMEDIATELY EFFECT and IMPLEMENT the proper adjustments on the INP Retirees’ retirement and such other benefits, RETROACTIVE to its date of effectivity, and RELEASE and PAY to the INP Retirees the due payments of the amounts.

SO ORDERED.

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

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

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

Their motion for reconsideration having been denied by the CA in` its equally assailed resolution of August 24, 2005,8 herein petitioners are now with this Court

via the instant recourse on their singular submission that -

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

We DENY.

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

A flashback at history is proper.

As may be recalled, R.A. No. 6975 was enacted into law on December 13, 1990, or just about four (4) years after the 1986 Edsa Revolution toppled down the dictatorship regime. Egged on by the current sentiment of the times generated by the long period of martial rule during which the police force, the PC-INP, had a military character, being then a major service of the Armed Forces of the Philippines, and invariably moved by a fresh constitutional mandate for the establishment of one police force which should be national in scope and, most importantly, purely civilian in character,9 Congress enacted R.A. No. 6975 establishing the PNP and placing it under the Department of Interior and Local Government. To underscore the civilian character of the PNP, R.A. No. 6975 made it emphatically clear in its declaration of policy the following:

Section 2. Declaration of policy - It is hereby declared to be the policy of the State to promote peace and order, ensure public safety and further strengthen local government capability aimed towards the effective delivery of the basic services to the citizenry through the establishment of a highly efficient and competent police force that is national in scope and civilian in character. xxx.

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

Pursuant to Section 23, supra, of R.A. No. 6975, the PNP initially consisted of the members of the police forces who were integrated into the INP by virtue of P.D. No. 765, while Section 8610 of the same law provides for the assumption by the PNP of the police functions of the INP and its absorption by the former, including its appropriations, funds, records, equipment, etc., as well as its personnel.11 And to govern the statute’s implementation, Section 85 of the Act spelled out the following absorption phases:

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

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

The PC officers and enlisted personnel who have not opted to join the PNP shall be reassigned to the Army, Navy or Air Force, or shall be allowed to retire under

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

Phase III – Adjustment of ranks and establishment of one (1) lineal roster of officers and another for non-officers, and the rationalization of compensation and retirement systems; taking into consideration the existing compensation schemes and retirement and separation benefit systems of the different components of the PNP, to ensure that no member of the PNP shall suffer any diminution in basic longevity and incentive pays, allowances and retirement benefits due them before the creations of the PNP, to be completed within eighteen (18) months from the effectivity of this Act. xxx.

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

From the foregoing, it appears clear to us that the INP was never, as posited by the petitioners, abolished or terminated out of existence by R.A. No. 6975. For sure, nowhere in R.A. No. 6975 does the words "abolish" or "terminate" appear in reference to the INP. Instead, what the law provides is for the "absorption," "transfer," and/or "merger" of the INP, as well as the other offices comprising the PC-INP, with the PNP. To "abolish" is to do away with, to annul, abrogate or destroy completely;12 to "absorb" is to assimilate, incorporate or to take in.13 "Merge" means to cause to combine or unite to become legally absorbed or extinguished by merger14 while "transfer" denotes movement from one position to another. Clearly, "abolition" cannot be equated with "absorption."

True it is that Section 9015 of R.A. No. 6975 speaks of the INP "[ceasing] to exist" upon the effectivity of the law. It ought to be stressed, however, that such cessation is but the logical consequence of the INP being absorbed by the PNP.1a\^/phi1.net

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

Even the petitioners’ effort at disclosing the legislative intent behind the enactment of R.A. No. 6975 cannot support their theory of abolition. Rather, the Senate and House deliberations on the bill that eventually became R.A. No. 6975 reveal what has correctly been held by the CA in its assailed decision: that the PNP was precisely created to erase the stigma spawned by the militarization of the police force under the PC-INP structure. The rationale behind the passage of R.A. No. 6975 was adequately articulated by no less than the sponsor16 of the corresponding House bill in his sponsorship speech, thus:

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

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

With the conclusion herein reached that the INP was not in fact abolished but was merely transformed to become the PNP, members of the INP which include the herein respondents are, therefore, not excluded from availing themselves of the retirement benefits accorded to PNP retirees under Sections 7417 and 7518 of R.A. No. 6975, as amended by R.A. No. 8551. It may be that respondents were no longer in the government service at the time of the enactment of R.A. No. 6975. This fact, however, without more, would not pose as an impediment to the respondents’ entitlement to the new retirement scheme set forth under the aforecited sections.

As correctly ratiocinated by the CA to which we are in full accord:

For sure, R.A. No. 6975 was not a retroactive statute since it did not impose a new obligation to pay the INP retirees the difference between what they received when they retired and what would now be due to them after R.A. No. 6975 was enacted. Even so, that did not render the RTC’s interpretation of R.A. No. 6975 any less valid. The [respondents’] retirement prior to the passage of R.A. No. 6975 did not exclude them from the benefits provided by R.A. No. 6975, as amended by R.A. No. 8551, since their membership in the INP was an antecedent fact that nonetheless allowed them to avail themselves of the benefits of the subsequent laws. R.A. No. 6975 considered them as PNP members, always referring to their membership and service in the INP in providing for their retirement benefits. 19

Petitioners maintain, however, that NAPOLCOM Resolution No. 8,20 particularly Section 1121 thereof, bars the payment of any differential in retirement pay to officers and non-officers who are already retired prior to the effectivity of R.A. No. 6975.

The contention does not commend itself for concurrence.

Under the amendatory law (R.A. No. 8551), the application of rationalized retirement benefits to PNP members who have meanwhile retired before its (R.A. No. 8551) enactment was not prohibited. In fact, its Section 3822 explicitly states that the rationalized retirement benefits schedule and program "shall have retroactive effect in favor of PNP members and officers retired or separated from the time specified in the law." To us, the aforesaid provision should be made applicable to INP members who had retired prior to the effectivity of R.A. No. 6975. For, as afore-held, the INP was, in effect, merely absorbed by the PNP and not abolished.

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

Most importantly, the perceived restriction could not plausibly preclude the respondents from asserting their entitlement to retirement benefits adjusted to the level when R.A. No. 6975 took effect. Such adjustment hews with the constitutional warrant that "the State shall, from time to time, review to upgrade the pensions and other benefits due to retirees of both the government and private sectors,"24 and the implementing mandate under the Senior Citizen’s Law25 that "to the extent practicable and feasible, retirement benefits xxx shall be upgraded to be at par with the current scale enjoyed by those in actual service."1awphi1.nét

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

Section 75. Retirement benefits. x x x: Provided, finally, That retirement pay of the officers/non-officers of the PNP shall be subject to adjustments based on the prevailing scale of base pay of police personnel in the active service.

Then, too, is the all familiar rule that:

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

The petitioners parlay the notion of prospective application of statutes, noting in this regard that R.A. No. 6975, as amended, cannot be applied retroactively, there being no provision to that effect.

We are not persuaded.

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

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

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

Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the filing of a counterclaim based on the same transaction, deed or contract subject of the complaint. A special civil action is after all not essentially different from an ordinary civil action, which is generally governed by Rules 1 to 56 of the Rules of Court, except that the former deals with a special subject matter which makes necessary some special regulation. But the identity between their fundamental nature is such that the same rules governing ordinary civil suits may and do apply to special civil actions if not inconsistent with or if they may serve to supplement the provisions of the peculiar rules governing special civil actions.28

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

x x x Under Sec. 6 of Rule 64, the action for declaratory relief may be converted into an ordinary action and the parties allowed to file such pleadings as may be necessary or proper, if before the final termination of the case "a breach or violation of an … ordinance, should take place." In the present case, no breach or violation of the ordinance occurred. The petitioner decided to pay "under protest" the fees imposed by the ordinance. Such payment did not affect the case; the declaratory relief action was still proper because the applicability of the ordinance to future transactions still remained to be resolved, although the matter could also be threshed out in an ordinary suit for the recovery of taxes paid …. In its petition for declaratory relief, petitioner-appellee alleged that by reason of the enforcement of the municipal ordinance by respondents it was forced to pay under protest the fees imposed pursuant to the said ordinance, and accordingly, one of the reliefs prayed for by the petitioner was that the respondents be ordered to refund all the amounts it paid to respondent Municipal Treasurer during the pendency of the case. The inclusion of said allegation and prayer in the petition was not objected to by the respondents in their answer. During the trial, evidence of the

payments made by the petitioner was introduced. Respondents were thus fully aware of the petitioner's claim for refund and of what would happen if the ordinance were to be declared invalid by the court.

The Court sees no reason for treating this case differently from PDIC and Matalin.1awphi1.nét This disposition becomes all the more appropriate considering that the respondents, as petitioners in the RTC, pleaded for the immediate adjustment of their retirement benefits which, significantly, the herein petitioners, as respondents in the same court, did not object to. Being aware of said prayer, the petitioners then already knew the logical consequence if, as it turned out, a declaratory judgment is rendered in the respondents’ favor.

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

WHEREFORE, the instant petition is DENIED and the assailed decision and resolution

of the CA, respectively dated July 7, 2005 and August 24, 2005, are AFFIRMED.

No costs.

SO ORDERED.

CANCIO C. GARCIAAssociate Justice

WE CONCUR:

REYNATO S. PUNOChief Justice

LEONARDO A. QUISUMBINGAssociate Justice

CONSUELO YNARES-SANTIAGOAsscociate Justice

ANGELINA SANDOVAL-GUTIERREZAssociate Justice ANTONIO T. CARPIO

Asscociate Justice

(on leave)MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

(on leave)RENATO C. CORONA

Asscociate Justice

CONCHITA CARPIO MORALESAssociate Justice

ADOLFO S. AZCUNAAsscociate Justice

DANTE O. TINGAAssociate Justice

MINITA V. CHICO-NAZARIOAsscociate Justice

PRESBITERO J. VELASCO, JR.Associate Justice

ANTONIO EDUARDO B. NACHURAAsscociate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court.

REYNATO S. PUNOChief Justice

Footnotes

1 Penned by Associate Justice Lucas P. Bersamin with Associate Justices Noel G. Tijam and Celia C. Librea-Leagogo concurring; Rollo, pp. 11-24.

2 Id. at 23-24.

3 Otherwise known as the Integrated National Police Personnel Professionalization Law of 1977.

4 Rollo, p. 180.

5 Original Records, pp. 1-11.

6 Id. at 207-217.

7 Supra note 1.

8 Supra note 2.

9 Section 6, Article XVI of the Constitution provides that the State shall establish and maintain one police force, which shall be national in scope and civilian in character, to be administered and controlled by a national police commission. xxx

10 SEC. 86. Assumption by the PNP of Police Functions. – The PNP shall absorb the functions of the PC, the INP and the Narcotics Command upon the effectivity of this Act. x x x

11 SEC. 88. Transfer, Merger and Absorption of Offices and Personnel. - All properties, equipment and finances of the transferred and absorbed agencies, including their respective financial accountabilities, are hereby transferred to the [DILG].

The transfer, merger and/or absorption of any government office/unit concerned shall include the functions, appropriations, funds, records, equipment facilities, … of the transferred office/unit as well as the personnel thereof. x x x.

12 Philippine Law Dictionary, 1988 ed.; also Webster’s Unabridged Third New International Dictionary, 1993 ed.

13 Id.

14 Id.

15 Section 90: Status of Present NAPOLCOM, PC-INP. – Upon the effectivity of this Act, the present National Police Commission, and the [PC-INP] shall cease to exist. The [PC] … shall cease to be a major service of the [AFP]. The [INP] which is the civilian component of the [PC-INP] shall cease to be the national police force and in lieu thereof, a new police force shall be established and constituted pursuant to this Act. x x x.

16 Sponsorship Speech of Rep. Nereo Joaquin; Records of House Proceedings, April 25, 1989, p. 28; rollo, p. 298.

17 Section 74. Retirement in the next Higher Grade.- Uniformed personnel covered under this Act shall, for purposes of retirement pay, be retired in one (1) grade higher than the permanent grade last held: Provided, That they have served for at least one (1) year of active service in the permanent grade.

18 Section 75. Retirement Benefits. – Monthly retirement pay shall be fifty percent (50%) of the base pay and longevity pay of the retired grade in case of twenty (20) years of active service, increasing by two and one-half percent (2.5%) for every year of active service rendered beyond twenty (20) years to a maximum of ninety (90%) percent for thirty-six (36) years of active service and over; Provided that, the uniformed personnel shall have the option to receive in advance and in lump sum his retirement pay for the first five years; Provided further, that the payment of the retirement benefits in lump sum shall be made within six (6) months from effectivity date of retirement and/or completion; Provided, finally, that the retirement pay of the officers/non-officers of the PNP shall be subject to adjustments based on the prevailing scale of base pay of police personnel in the active service. (As amended by R.A. No. 8551); (Emphasis supplied.)

19 Rollo, p. 17.

20 Entitled "Resolution Establishing A Retirement and Separation Benefit System For The Uniformed Personnel of The Philippine National Police" done on February 26, 1992; id. at 195-206.

21 Section 11. When an officer or non-officer is retired from the [PNP] under the provisions of sections 2, 3a, 3b, 5, and 6 of this resolution, he shall, at his option, receive a gratuity equivalent … and longevity pay …; Provided, That such retirement pay shall be subject to adjustment on the prevailing scale of base pay of police personnel in the active service; Provided, Furthermore, That when he retires, he shall be entitled at his option, to receive in advance and in lump sum his annual retirement pay for the first three (3) years and thereafter receive his annual

retirement pay payable in equal monthly installment as they accrue; Provided, Finally, that if he dies within the three-year period following his retirement and is survived by beneficiaries as defined in this resolution, the latter shall only receive the derivative benefits thereunder starting the first mother after the aforecited three-year period. Nothing on this Section shall be construed as authorizing payment of any differential in retirement pay to officers and non-officers who are already retired prior to the effectivity of RA 6975. Id. at 199.

22 In full, this section reads: Sec. 38. Rationalization of Retirement and Separation Benefits. – The Commission shall formulate a rationalized retirement and separation benefits schedule and program within one (1) year from the effectivity of this Act for approval by congress: Provided, That the approved schedule and program shall have retroactive effect in favor of PNP members and officers retired or separated from the time specified in the law, unless the retirement or separation is for cause and the decision denies the grant of benefits.

23 Rollo, p. 195.

24 Article XVI, Section 8, Phil. Constitution.

25 Republic Act No. 7432, Section 6.

26 Request of Clerk of Court Tessie L. Gatmaitan for Payment of Retirement Benefits of Hon. Associate Justice Jorge S. Imperial, A.M. No. 9777-Ret., August 26, 1999, 313 SCRA 134, 140.

27 G.R. No. 126911, April 30, 2003, 402 SCRA 194.

28 Id. at 201, citing Visayan Packing Corporation v. Reparations Commission, No. L-29673, November 12, 1987, 155 SCRA 542, 546.

29 G.R. No. L-28138, August 13, 1986, 143 SCRA 404, 408-409.

THIRD DIVISION

G.R. No. 159022             February 23, 2005

Mayor EDGARDO G. FLORES, petitioner vs.SANGGUNIANG PANLALAWIGAN OF PAMPANGA, GOVERNOR MANUEL M. LAPID OF PAMPANGA, MUNICIPAL COUNCILORS VANZALON F. TIZON, ROMULO N. MANDAP, EDGARDO P. YAMBAO, JEROME M. TONGOL, MARCIANO L. SACDALAN, and RICKY Y. NARCISO, respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

For our resolution is the petition for review on certiorari assailing the Decision1 of the Court of Appeals dated February 17, 2003, in CA-G.R. SP No. 72958 and its Resolution2 dated June 27, 2003.

On December 19, 2001, an administrative complaint for dishonesty and gross misconduct against then Mayor Edgardo G. Flores of Minalin, Pampanga, petitioner, was filed with the Sangguniang Panlalawigan of the same province, one of the respondents herein. The complainants were the municipal councilors of Minalin, namely: Vanzalon F. Tizon, Romulo N. Mandap, Edgardo P. Yambao, Jerome M. Tongol, Marciano L. Sacdalan, and Ricky Y. Narciso, now respondents.

The administrative complaint against petitioner alleged that on August 1, 2001, he executed Purchase Request No. 1 for the acquisition of a communication equipment amounting to P293,000.00 without any Resolution or Ordinance enacted by the Sangguniang Bayan of Minalin. The winning bidder was one Kai Electronics. On August 6, 2001, or while the bidding was still being conducted, Kai Electronics delivered the communication equipment to the municipality of Minalin. The Notice of Award of Bid to Kai Electronics states that the bidding took place also on August 1, 2001 when respondent executed the Purchase Request No. 1. The communication equipment delivered by Kai Electronics was overpriced by more than one hundred percent (100%) or in the amount of P129,600.00.

On September 9, 2002, respondent Sangguniang Panlalawigan issued an Order recommending to Governor Manuel M. Lapid of Pampanga, also a respondent, that petitioner be preventively suspended from office for a period of sixty (60) days.

Without seeking a reconsideration of the Order of respondent Sangguniang Panlalawigan, petitioner sent a letter dated September 12, 2002 to respondent Governor Lapid requesting him "to veto" the same.

Also, without waiting for respondent Governor Lapid’s action on his letter, petitioner, on September 24, 2002, filed with the Court of Appeals a petition for certiorari,3 docketed as CA-G.R. SP No. 72958. He contended that respondent Sangguniang Panlalawigan acted with grave abuse of discretion in issuing the Order of preventive suspension, hence, the same should be nullified.1awphi1.nét

On February 17, 2003, the Court of Appeals rendered its Decision, the dispositive portion of which reads:

"WHEREFORE, the instant petition is DENIED and DISMISSED for lack of merit. The assailed Order dated September 9, 2002 issued by respondent Sangguniang Panlalawigan of Pampanga in Administrative Case No. 02-2001 is AFFIRMED.

SO ORDERED."4

In ruling against the petitioner, the Court of Appeals held that he failed to exhaust all administrative remedies before going to court. Moreover, respondent Sangguniang Panlalawigan of Pampanga did not gravely abuse its discretion when it issued the challenged Order considering that the allegation of overpricing is supported by documentary evidence. There is also sufficient evidence to prove that the bidding and the awarding of the contract to Kai Electronics were done under questionable circumstances.

Petitioner then filed a motion for reconsideration, but this was denied by the Appellate Court in its Resolution dated June 27, 2003.

Hence, the instant petition.

The pivotal issue here is whether the Court of Appeals erred in holding that the petition in CA-G.R. SP No. 72958 was prematurely filed as petitioner failed to exhaust first all administrative remedies.

Section 61 of Republic Act No. 7160 (the Local Government Code of 1991) partly provides:

"SEC. 61. Form and Filing of Administrative Complaints. – A verified complaint against any erring local elective official shall be prepared as follows:

x x x;

(b) A complaint against any elective official of a municipality shall be filed before the Sangguniang Panlalawigan whose decision may be appealed to the Office of the President; and

x x x." (underscoring ours)

The administrative complaint against petitioner was filed with respondent Sangguniang Panlalawigan of Pampanga in accordance with the above provision. After receiving the Order of respondent Sangguniang Panlalawigan preventively suspending him from office, petitioner should have filed a motion for reconsideration in order to give the latter the opportunity to correct itself if there was any error on its part. Such motion is a condition sine qua non before filing a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended.5 Section 1 of the same Rule requires that petitioner must not only show that respondent Sangguniang Panlalawigan, in issuing the questioned Order, "acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction," but that "there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law."6 We have held that the "plain" and "adequate remedy" referred to in Section 1 of Rule 65 is a motion for reconsideration of the assailed Order or Resolution.7 Petitioner may not arrogate to himself the determination of whether a motion for reconsideration is necessary or not.8 To dispense with the requirement of filing a motion for reconsideration, petitioner must show a concrete, compelling, and valid reason for doing so.9 This, petitioner failed to do. Thus, the Court of Appeals correctly held that petitioner should have first interposed a motion for reconsideration of the questioned Order issued by respondent Sangguniang Panlalawigan.

We must add that petitioner, before filing with the Court of Appeals his petition for certiorari, should have waited for respondent Governor Lapid’s action on the recommendation of respondent Sangguniang Panlalawigan that he be preventively suspended from office; and on his letter requesting the Governor to veto the questioned Order, considering that the latter is the one empowered by law to impose preventive suspension upon him.l^vvphi1.net Section 63 of the Local Government Code of 1991 partly provides:1awphi1.nét

"SEC 63. Preventive Suspension. –

(a) Preventive suspension may be imposed:

(1) By the President, if the respondent is an elective official of a province, a highly urbanized or an independent component city;

(2) By the governor, if the respondent is an elective official of a component city or municipality; or

(3) By the mayor, if the respondent is an elective official of the barangay.

x x x." (underscoring ours)

Petitioner has not shown any valid and compelling reason why, without waiting for the Governor’s action on the matter, he immediately filed with the Court of Appeals a petition for certiorari. By doing so, petitioner effectively deprived the Governor of his duty to take appropriate action on the controversy.

It is a well-settled rule that where, as here, the petitioner has available remedies within the administrative machinery against the action of an administrative board, body, or officer, the intervention of the courts can be resorted to by him only after having exhausted all such remedies.10 The rationale of this rule rests upon the presumption that the administrative body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly. The strict application of the doctrine of exhaustion of administrative remedies will also prevent unnecessary and premature resort to the court.11 We cannot countenance petitioner’s utter disregard of this procedural norm and frustrate its purpose of attaining a just, speedy, inexpensive and orderly judicial proceedings.

We likewise find untenable petitioner’s contention that respondent Sangguniang Panlalawigan "acted capriciously and arbitrarily by reason of passion and personal hostility" when it issued the challenged Order "without constituting itself into a Committee of the Whole, as required by its rules of procedure, x x x and without a Committee Report having been prepared yet x x x."12 Suffice it to say that this issue involves an examination of factual matters and could have been properly raised by petitioner in a motion for reconsideration of the questioned Order before the Sangguniang Panlalawigan of Pampanga, the proper forum. But he did not do so. He thus forfeited such an important procedural remedy.

WHEREFORE, the petition is DENIED. The appealed Decision dated February 17, 2003 and Resolution dated June 27, 2003 of the Court of Appeals in CA-G.R. SP No. 72958 are AFFIRMED. Costs against petitioner.

SO ORDERED.

Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.

Footnotes

1 Per Associate Justice Bernardo P. Abesamis (retired) and concurred in by Justices Juan Q. Enriquez, Jr., and Edgardo F. Sundiam;Rollo, 26-35.

2 Rollo at 38.

3 Filed under Rule 65 of the 1997 Rules of Civil Procedure, as amended.

4 Rollo at 35.

5 Yau vs. Manila Banking Corporation, G.R. No. 126731, July 11, 2002, 384 SCRA 340; Republic vs. Express Telecommunication Co., Inc., G.R. No. 147096, January 15, 2002, 373 SCRA 316; Lee vs. People, G.R. No. 137914, December 4, 2002, 393 SCRA 397.

6 Union of Nestle Workers Cagayan de Oro Factory vs. Nestle Philippines, Inc., G.R. No. 148303, October 17, 2002, 391 SCRA 204.

7 Metro Transit Organization, Inc. vs. Court of Appeals, G.R. No. 142133, November 19, 2002, 392 SCRA 229.

8 Id.

9 Id.

10 Lopez vs. City of Manila, G.R. No. 127139, February 19, 1999, 303 SCRA 448.

11 Id., citing Cruz vs. Del Rosario, 9 SCRA 755 (1963); Jao Igco vs. Shuster, 10 Phil. 448 (1908); Lamb vs. Phipps, 22 Phil. 456 (1912); Miguel vs. Reyes, G.R. No. L-4851, July 31, 1953; Arnedo vs. Aldanese, 63 Phil. 768 (1936); Tuan Kay vs. Import Control Commission, G.R. No. L-4427, April 31, 1952; Veloso vs. Board of Accountancy, G.R. No. L-5760, April 20, 1953; Lubugan, et al. vs. Castrillo and Malinay, G.R. No. L-10521, May 29, 1957.

12 Petition, Rollo at 19.

THIRD DIVISION

G.R. No. 139658               June 21, 2005

PO3 WILLIAM M. MENDOZA, petitioner, vs.NATIONAL POLICE COMMISSION, REGIONAL APPELLATE BOARD and THE DISTRICT DIRECTOR, SOUTHERN POLICE DISTRICT, PHILIPPINE NATIONAL POLICE, respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us for resolution is a petition for review on certiorari1 assailing the Decision2 dated August 12, 1999 of the Court of Appeals in CA-G.R. SP No. 46387, entitled "The National Police Commission (NAPOLCOM) Regional Appellate Board (RAB) and District Director, Southern Police District, Philippine National Police (PNP), Petitioners, versus Hon. Fernando B. Gorospe, Presiding Judge, Regional Trial Court of Makati City, Branch 61, and PO3 William M. Mendoza, Respondents."

This case stemmed from the affidavit-complaint for illegal arrest, illegal detention, physical injuries, and robbery filed by Teodoro V. Conti against PO3 William M. Mendoza, now petitioner, and PO2 Angelita Ramos. Both were members of the Philippine National Police (PNP).

On the basis of the complaint, P/Chief Superintendent Orlando H. Macaspac, then District Director of the PNP Southern Police District Office (SPDO), National Capital Region, administratively charged petitioner and PO2 Ramos with grave misconduct quoted as follows:

"That on or about 2:30 a.m., 21 February 1993, inside the HI-PITCH Disco Club located at Roxas Boulevard, Pasay City, two (2) above-named respondents forcibly arrested one Teodoro Conti y Viceran, Floor Manager of Nikko’s Music Lounge and at gunpoint brought the victim to the Office of the District Special Operations Unit (DSOU). While inside said Office, PO2 RAMOS ordered the victim to remove his gold necklace, then forced him to swallow it. When the victim resisted, PO2 RAMOS struck him with the butt of the gun and subsequently inserted the barrel of the gun to the mouth of the victim. Thereafter, both the above-named respondents mauled the victim, thereby inflicting multiple injuries on the face of the latter. Furthermore, the respondents placed the victim inside a detention cell and took his money amounting to NINE HUNDRED SEVENTY PESOS (P970.00), including three (3) pieces of jewelry: gold necklace, wrist watch, and gold bracelet."

Petitioner and PO2 Ramos submitted their joint-affidavit denying the charge.

On April 15, 1993, after conducting a summary proceeding, PNP Regional Director Oscar T. Aquino rendered a Decision finding the two policemen guilty as charged and ordering their dismissal from the service.

Claiming that they were denied due process, the two police officers interposed an appeal to the Regional Appellate Board (RAB) of the National Police Commission (NAPOLCOM), National Capital Region.

On August 23, 1993, the RAB rendered its Decision affirming the Decision of the PNP Regional Director.

Petitioner then filed a motion for reconsideration on the ground that he "was not able to participate in the clarificatory hearing." However, the RAB, in its Resolution dated December 17, 1993, denied his motion for lack of merit.

Thereafter, petitioner filed with the Regional Trial Court (RTC), Branch 61, Makati City a petition for certiorari, docketed as Special Civil Case No. 96-074. In his petition, he alleged that he was denied due process and prayed that the RAB Decision dated August 23, 1993 and Resolution dated December 17, 1993 be annulled.

The RAB, through the Office of the Solicitor General (OSG), filed a motion to dismiss the petition, contending that petitioner failed to exhaust all administrative remedies; that before seeking judicial

intervention, he should have first appealed the RAB Decision to the Secretary of the Department of the Interior and Local Government (DILG), then to the Civil Service Commission (CSC); and that contrary to petitioner’s claim, he was accorded due process during the administrative proceedings before the RAB.

In its Order dated April 21, 1997, the RTC denied petitioner’s motion to dismiss for lack of merit, holding that "as an exception to the rule on non-exhaustion of administrative remedies, a party may go directly to the court where x x x the controverted acts were allegedly performed without or in excess of jurisdiction for utter disregard of due process."3

The RAB filed a motion for reconsideration but was denied by the RTC in an Order dated September 26, 1997.

Thereafter, the RAB, again assisted by the OSG, filed with the Court of Appeals a petition for certiorari4 alleging that the RTC, in denying the motion to dismiss, committed grave abuse of discretion amounting to lack or in excess of jurisdiction. Despite due notice, herein petitioner did not file his comment thereon.

In its Decision, the Court of Appeals granted the petition and dismissed Special Civil Action No. 96-074 filed with the RTC.

Without filing a motion for reconsideration, petitioner filed with this Court the instant petition for review oncertiorari.

Petitioner contends that the Court of Appeals, in rendering its challenged Decision, "committed grave error of law" in dismissing Special Civil Action No. 96-074 on the ground that he failed to exhaust all administrative remedies.

The petition must fail.

It is significant to note that petitioner, as stated earlier, did not file his comment on the RAB’s petition for certioraribefore the Court of Appeals. And when the said court rendered the assailed Decision granting the petition and dismissing petitioner’s petition in Special Civil Action No. 96-074, he again did not interpose a motion for reconsideration thereof. He did not even explain why he failed to do so. Certainly, this is not the normal actuation of a party who claims so aggrieved by an adverse court decision. Such omissions by petitioner indicate that his cause lacks merit and his appeal is frivolous.

The importance of a motion for reconsideration cannot be overemphasized. We have held that such motion is a "plain," "speedy," and "adequate remedy" in the ordinary course of judicial proceedings.5 The filing of a motion for reconsideration will give the court the opportunity to either (a) correct the error/s imputed to it or (b) clarify and strengthened its ruling on the issue and hopefully convince the movant of his wrong position. In either case, the controversy ends right there, thus preventing unnecessary and premature resort to appellate proceedings.6Consequently, we cannot countenance petitioner’s disregard of this procedural norm and frustrate its purpose of attaining speedy, inexpensive, and orderly judicial proceedings.

Coming now to the merits of the case, Section 45 of Republic Act No. 6975, otherwise known as "The Department of the Interior and Local Government Act of 1990," provides:

"SEC. 45. Finality of Disciplinary Action. – The disciplinary action imposed upon a member of the PNP shall be final and executory; Provided, That a disciplinary action imposed by the Regional Director or by the PLEBinvolving demotion or dismissal from the service may be appealed to the Regional Appellate Boardwithin ten (10) days from receipt of the copy of the notice of decision: Provided, further, That the disciplinary action imposed by the Chief of the PNP involving demotion or dismissal may be appealed to the National Appellate Board within ten (10) days from receipt thereof: Provided, furthermore, That, the Regional or National Appellate Board, as the case may be, shall decide the appeal within sixty (60) days from receipt of the notice of appeal: Provided, finally, That failure of the Regional Appellate Board to act on the appeal within said period shall render the decision final and executory without prejudice, however, to the filing of an appeal by either party with the Secretary." (Underscoring supplied)

It is clear from the above provisions that the Decision of the PNP Regional Director imposing upon a PNP member the administrative penalty of dismissal from the service is appealable to the RAB. From the RAB Decision, the aggrieved party may then appeal to the Secretary of the DILG.

Here, petitioner did not interpose an appeal to the DILG Secretary.

It bears emphasis that in the event the Secretary renders an unfavorable decision, petitioner may still elevate his case to the Civil Service Commission.

Section 6, Article XVI of the Constitution provides that the State shall establish and maintain one police force which shall be civilian in character. Consequently, the PNP falls under the civil service pursuant to Section 2(1), Article IX-B, also of the Constitution, which states:

"Section 2. (1). The civil service embraces all branches, subdivisions, instrumentalities and agencies of the Government, including government-owned or controlled corporations with original charters."

Corollarily, Section 91 of the DILG Act of 1990 provides:

"SEC. 91. Application of Civil Service Laws. – The Civil Service Law and its implementing rules and regulations shall apply to all personnel of the Department [DILG]."

Section 47 of the Civil Service Law7 provides inter alia that in cases where the decision rendered by a bureau or office is appealable to the Civil Service Commission, the same may initially be appealed to the Department and finally to the Commission.

Petitioner’s failure to exhaust all administrative remedies is fatal to his cause. It is elementary that where, as here, a remedy is available within the administrative machinery, this should first be resorted to.8

We thus find that the Court of Appeals, in its assailed Decision, did not commit a reversible error.

WHEREFORE, the instant petition for review on certiorari is hereby DENIED. The challenged Decision dated August 12, 1999 of the Court of Appeals in CA-G.R. SP No. 46387 is AFFIRMED. Costs against petitioner.

SO ORDERED.

Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.

Footnotes

1 Filed under Rule 45, 1997 Rules of Civil Procedure, as amended.

2 Penned by Justice Artemon D. Luna and concurred in by Justice Bernardo P. Abesamis and Justice Candido V. Rivera, all retired.

3 Rollo at 19-20.

4 Docketed as CA-G.R. SP No. 46387.

5 See Metro Transit Organization, Inc. vs. Court of Appeals, G.R. No. 142133, November 19, 2002, 392 SCRA 229; Mayor Edgardo G. Flores vs. Sangguniang Panlalawigan of Pampanga, et al., G.R. No. 159022, Febraury 21, 2005.

6 Yau vs. Manila Banking Corporation, G.R. No. 126731, July 11, 2002, 384 SCRA 340.

7 Book V (Subtitle A), Administrative Code of 1987.

8 Lopez vs. City of Manila, G.R. No. 127139, February 19, 1999; Aquino vs. Mariano, G.R. No. L-30485, May 31, 1984.

G.R. No. 141796               June 15, 2005

REPUBLIC OF THE PHILIPPINES, Represented by THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, petitioner, vs.SANDIGANBAYAN (4th Division) and POTENCIANO T. ILUSORIO, Substituted by Ma. Erlinda Ilusorio Bildner, respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 141804               June 15, 2005

INDEPENDENT REALTY CORPORATION and MID-PASIG LAND DEVELOPMENT CORPORATION, petitioners, vs.

SANDIGANBAYAN (4th Division) and POTENCIANO T. ILUSORIO, Substituted by Ma. Erlinda Ilusorio Bildner, respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us for resolution are two (2) consolidated petitions for certiorari1 assailing the Resolution2 dated December 20, 1999 of the Sandiganbayan in Civil Case No. 0009, entitled "Republic of the Philippines, plaintiff, versus Jose L. Africa, Manuel H. Nieto, Jr., Ferdinand E. Marcos, Imelda R. Marcos, Ferdinand R. Marcos, Jr., Roberto S. Benedicto, Juan Ponce Enrile, and Potenciano Ilusorio." The Resolution denied the above-named petitioners’ separate motions to vacate the Sandiganbayan’s Order dated June 8, 1998 approving the Compromise Agreement entered into between the Presidential Commission on Good Government (PCGG) and Potenciano Ilusorio.

The antecedent facts are as follows:

Immediately after the people power revolution on February 25, 1986 at EDSA, then President Corazon C. Aquino issued Executive Order No. 1 dated February 28, 1986 creating the Presidential Commission on Good Government (PCGG). The task of the PCGG is to "assist the President in … the recovery of all ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates, whether located in the Philippines or abroad, including the takeover or sequestration of all business enterprises and entities owned or controlled by them during his administration, directly or through nominees, by taking undue advantage of their public office and/or using their powers, authority, influence, connections or relationships."3

Subsequently, Jose Y. Campos, "a confessed crony of former President Ferdinand E. Marcos," voluntarily surrendered or turned over to the PCGG the properties, assets and corporations he held in trust for the deposed President. Among the corporations he surrendered were the Independent Realty Corporation and the Mid-Pasig Land Development Corporation, now petitioners in G.R. No. 141804.

On July 22, 1987, the Republic of the Philippines (now petitioner in G.R. No. 141796), represented by the PCGG and assisted by the Solicitor General, filed with the Sandiganbayan a complaint4 for "reconveyance, reversion, accounting, restitution and damages," docketed as SB Civil Case No. 0009. Impleaded as defendants were Jose L. Africa, Manuel H. Nieto, Jr., former President Ferdinand E. Marcos, former First Lady Imelda R. Marcos, Ferdinand R. Marcos, Jr., Roberto S. Benedicto, Juan Ponce Enrile and the late Potenciano Ilusorio (now respondent).

The complaint alleged inter alia that the defendants "acted in collaboration with each other as dummies, nominees and/or agents of defendants Ferdinand E. Marcos, Imelda R. Marcos and Ferdinand R. Marcos, Jr. in several corporations, such as the Mid-Pasig Land Development Corporation (MLDC) and Independent Realty Corporation (IRC) which, through manipulations by said defendants, appropriated a substantial portion of the shareholdings in Philippine Overseas Telecommunications Corporation (POTC)–Philippine Communications Satellite Corporation (PHILCOMSAT) held by the late Honorio Poblador, Jr., Jose Valdez and Francisco Reyes, thereby further advancing defendants’ scheme to monopolize the telecommunications industry."5 Through their illegal acts, the defendants acquired ill-gotten wealth. Their acts constitute "breach of public trust and the law, abuse of rights and power, and unjust enrichment." Their ill-gotten wealth, real and personal, "are deemed to have been acquired (by them) for the benefit of the plaintiff (Republic) and are, therefore, impressed with constructive trust in favor of (the latter) and the Filipino people."6 The complaint thus prayed for (a) the reconveyance/reversion to the Republic of all the funds, properties and assets illegally acquired by the defendants, or their equivalent value; (b) accounting; and (c) damages.

Traversing the complaint, respondent Potenciano Ilusorio, in his Amended Answer with Cross-Claim (against the Marcoses) and Third-Party Complaint (against MLDC and IRC), denied that he acquired ill-gotten wealth and unjustly enriched himself by conspiring with any of the defendants in committing a breach of public trust or abuse of right or power, since "he has never held any public office nor has he been a government employee." He further denied being a dummy or agent of the Marcoses. He interposed the affirmative defense that he owned 5,400 POTC shares of stock, having acquired them through his honest toil. However, "he incurred the ire of Imelda Marcos," hence, the Marcos spouses took from him the said shares through threats and intimidation, without any valuable consideration, and placed them in the names of their alter egos, namely: the IRC – 3,644 shares; the MLDC – 1,755 shares; and Ferdinand Marcos, Jr. – 1 share. He thus became "the hapless victim of injustice." He prayed that the said shares be returned to him, together with their corresponding dividends.

For failure to answer respondent Ilusorio’s third-party complaint, despite notice, the Sandiganbayan declared petitioner MLDC in default.7 Its motion to lift the order of default was denied.

For its part, petitioner IRC filed its answer8 to the third-party complaint, admitting inter alia that it is "now owned by the Government" after it was turned over to the latter by Jose Y. Campos; and that "the 3,644 POTC shares of stock under the name of Independent Realty Corporation is part and parcel of the ill-gotten

wealth of the deposed President Marcos and his family, which were acquired during his incumbency under the circumstances alleged in the plaintiff’s complaint." Being no longer the owner of said shares, petitioner IRC prayed for the dismissal of the third-party complaint for lack of cause of action.9

On June 28, 1996, the PCGG, acting in behalf of petitioners Republic, IRC and MLDC, entered into a Compromise Agreement with respondent Ilusorio.10 The agreement was later approved by then President Fidel V. Ramos. In a marginal note dated October 5, 1996, he directed its submission to the Sandiganbayan for approval.11 The pertinent portions of the Compromise Agreement read:

"WHEREAS, this Compromise Agreement covers the full, comprehensive and final settlement of the claims of the GOVERNMENT against ILUSORIO in Civil Case No. SB-009, pending before the Third Division of the Sandiganbayan; the Cross-Claim involving several properties located in Parañaque, Metro Manila; and, the Third-Party Complaint filed by ILUSORIO, in the same case, involving the Five Thousand Four Hundred (5,400) shares of stocks registered in the names of Mid-Pasig Land Development Corporation (MLDC) and Independent Realty Corporation (IRC), respectively, in the Philippine Overseas Telecommunications Corporation (POTC);

WHEREAS, the GOVERNMENT and ILUSORIO desiring to avoid a costly and protracted litigation, motivated by their desire to effect the proper restitution of properties, assets and other interests to their rightful owners, benefit the Filipino people through an efficient and economical telecommunications system, and in order that they be able to freely use their respective properties, assets and other interests in the peaceful and normal pursuit of their legitimate endeavors, have decided to withdraw their mutual claims and counterclaims in the aforementioned case;

NOW, THEREFORE, for and in consideration of the foregoing premises and the covenants hereafter contained, the GOVERNMENT and ILUSORIO have mutually agreed on a settlement, as they hereby agree, on the following:

1.0 Cession and Concessions

1.1 ILUSORIO recognizes the right and ownership of the GOVERNMENT over Four Thousand Seven Hundred Twenty Seven (4,727) shares of stocks in POTC under the names of IRC and MLDC, respectively, and the GOVERNMENT recognizes the right and ownership of ILUSORIO over Six Hundred Seventy Three (673) shares.

1.2 ILUSORIO waives in favor of the GOVERNMENT all his claims, rights and interests to the cash dividends appertaining as of the signing of this Agreement to all the shares of stocks mentioned in par. 1.1, including those appertaining to the Six Hundred Seventy Three (673) shares.

1.3 The GOVERNMENT and ILUSORIO shall have a right of first refusal over the transfer of their respective shares covered by this Compromise Agreement in POTC and in the Philippine Communications Satellite Corporation (PHILCOMSAT).

1.4 With respect to the houses and lots and all improvements thereon covered by Transfer Certificates of Title Nos. S-54804, S-54857 and S-54806, respectively, all of the Register of Deeds for Metro Manila, District IV, located in Parañaque, Metro Manila, which were turned over by Mr. Jose Y. Campos to the GOVERNMENT, ILUSORIO hereby waives any and all claims, rights and interests he has over such properties.

1.5 The GOVERNMENT and ILUSORIO hereby waive any and all claims each one may have against the other with respect to other properties, assets and interests involved in Civil Case No. SB-009 and such other properties, assets and interests as may hereafter be identified.

1.6 The GOVERNMENT and ILUSORIO recognize this Compromise Agreement as full, comprehensive and final settlement of their claims and counterclaims against each other, and hereby renounce any interest in all past, present and future cases and investigations.

1.7 ILUSORIO shall defend the right of the GOVERNMENT over the assets abovementioned.

1.8 ILUSORIO undertakes to fully cooperate with the GOVERNMENT/Presidential Commission on Good Government in all investigations, criminal prosecutions, and civil actions, whether in the Philippines or abroad, in connection with the recovery of ill-gotten wealth of Ferdinand E. Marcos and Imelda R. Marcos, members of their families and all the Marcos cronies against whom the GOVERNMENT/Presidential Commission on Good Government is currently suing or may sue to recover ill-gotten wealth, including giving evidence for the GOVERNMENT/Presidential Commission on Good Government in the aforesaid cases.

2.0 Mechanics for Implementation

The GOVERNMENT and ILUSORIO shall x x x file with the Sandiganbayan the appropriate Joint Motion for the approval of this Compromise Agreement: for the GOVERNMENT to drop ILUSORIO as defendant in Civil Case No. SB-009; for ILUSORIO to drop his Cross-Complaint; for ILUSORIO to drop his Third-Party Complaint; and, for ILUSORIO to drop his Motion for Injunction and Contempt in Civil Case No. SB-009 against the GOVERNMENT, its officers and agents involved in the exercise by the GOVERNMENT of its preemptive rights over shares in Oriental Petroleum and Minerals Corporation (OPMC).

x x x

3.0 Cooperation in Preservation/Recovery Efforts

The GOVERNMENT and ILUSORIO hereby undertake to cooperate with each other in the preservation or recovery of properties and businesses, including a joint action or defense in the enforcement or resistance, as the case may be, of claims related to, involved in, or connected with, this Compromise Agreement.

4.0 Warranty and Authority

Hermilo R. Rosal, whose signature is affixed hereto in a representative capacity, and Potenciano T. Ilusorio represent and warrant that they are duly authorized to execute this Compromise Agreement for themselves and on behalf of, and to bind, the entities on whose behalf their signatures are affixed.

5.0 Further Acts or Documents

The GOVERNMENT and ILUSORIO agree to execute and perform such other and further acts and authorizations, including the execution and delivery of such other and further documents as may be reasonably necessary to carry out the, provisions of this Compromise Agreement.

6.0 Binding Effect

All provisions of this Compromise Agreement shall extend and be binding on the GOVERNMENT and ILUSORIO and on each of their respective officers, employees, directors, agents, heirs, executors, administrators, legal successors and assigns.

7.0 Effectivity

This Compromise Agreement shall be effective immediately upon its approval by the Sandiganbayan in accordance with existing law and rules.

IN WITNESS WHEREOF, the parties have hereunto affixed their signatures on the date and at the place abovementioned.

REPUBLIC OF THE PHILIPPINES

By:

(SGD) HERMILO R. ROSALCommissionerPresidential CommissionOn Good Government

(SGD) POTENCIANO T. ILUSORIO"12 (underscoring ours)

On June 8, 1998, upon motion of the parties, the Sandiganbayan issued an Order13 granting the same and approving the Compromise Agreement, thus:

"WHEREFORE, and as prayed for in the Motion dated June 3, 1998, which is hereby granted:

1. The foregoing Compromise Agreement dated June 28, 1996 executed by and between the plaintiff and defendant Potenciano T. Ilusorio is hereby approved, the same not being contrary to law, good morals and public policy. The parties thereto are hereby enjoined to strictly abide by and comply with the terms and conditions of the said Compromise Agreement;

2. The complaint as against defendant Potenciano T. Ilusorio only in the above-entitled case No. 0009 is hereby dismissed;

3. The Motions for Injunction and Contempt, respectively, filed by defendant Potenciano T. Ilusorio against the Government/PCGG, its officers and agents, in Civil Case No. 0009 are hereby withdrawn;

4. The Third-Party Complaint and the Cross Claim of defendant Potenciano T. Ilusorio are herebydismissed; and

5. The Board of Directors, President and Corporate Secretary of the Philippine Overseas Telecommunications Corporation are hereby ordered to issue the corresponding stock certificates to, and in the names of Potenciano T. Ilusorio, Mid-Pasig Land Development Corporation, and Independent Realty Corporation, respectively.

SO ORDERED."

Subsequently, petitioner MLDC filed a motion dated August 16, 1998 seeking to vacate the above Order. On October 9, 1998, petitioner IRC likewise filed a similar motion. In the main, both petitioners alleged in their motions that: (1) the Compromise Agreement does not bind them because they are not parties thereto, although they have substantial interests in the POTC shareholdings subject of the agreement; and (2) the Compromise Agreement is void since its terms are grossly and manifestly disadvantageous to the Government, hence, contrary to law, good morals and public policy.

Commenting on the above motions, the present PCGG stated that it is in full accord with the position of MLDC and IRC, and that the Compromise Agreement is fatally defective for lack of a PCGG Resolution authorizing former Commissioner Hermilo Rosal to enter into such agreement in behalf of the Government.

Respondent Ilusorio vehemently opposed petitioners’ motions.

The Sandiganbayan, in its Resolution dated December 20, 1999, denied the motions for lack of merit, thus:

"WHEREFORE, premises considered, third party defendant Mid-Pasig’s [now petitioner in G.R. No. 141804]Motion to Vacate Resolution Approving Compromise Agreement dated August 16, 1998, and third party defendant Independent Realty Corporation’s [now petitioner in G.R. No. 141804] Manifestation and Motion dated October 2, 1998, and the redundant and inappropriate concurrence of the PCGG [now petitioner in G.R. No. 141796] and the OSG are hereby denied for lack of merit.

The court also declares all POTC shares in the name of Mid-Pasig and IRC as null and void. Accordingly, out of the 5,400 POTC shares, six hundred seventy three (673) is hereby directed to be issued in the name of Potenciano Ilusorio and four thousand seven hundred twenty seven (4,727) in the name of the Republic of the Philippines. The Board of Directors, President and Corporate Secretary of the POTC are hereby ordered to comply with this requirement within ten (10) days from receipt of this Resolution.

On the matter of the proxy or side agreement or arrangement, which is not included in the Compromise Agreement, the court resolves to receive evidence on the matter. For said purpose, the motion of the OSG and the PCGG for the court to declare the proxy agreement as null and void is hereby set for hearing on January 25, 2000 at 8:30 a.m.

Finally, lest this Resolution create a misimpression that the case is already deemed terminated with the approval by this court of the Compromise Agreement, we reiterate that the present Compromise Agreement concerns only defendant Potenciano Ilusorio and does not include the other defendants in this case.

SO ORDERED."14

In denying petitioners’ motions, the Sandiganbayan ruled that: (1) the June 8, 1998 Order approving the Compromise Agreement is immediately executory; (2) MLDC has no legal standing to file the motion to vacate since it has been declared in default in the Resolution dated May 15, 1989, and its motion for reconsideration and subsequent motion to lift the Order of default were denied in the Order dated August 18, 1989 and Resolution of May 19, 1992, respectively; (3) the PCGG has full authority to act in behalf of petitioners Republic, MLDC and IRC on the questioned POTC shares since the same were already turned over/surrendered by Jose Y. Campos to the Government, as admitted categorically by MLDC and IRC; and (4) the Compromise Agreement was properly executed by the PCGG in behalf of the Republic and was in fact approved by then President Fidel V. Ramos.

Without filing a motion for reconsideration of the Resolution approving the Compromise Agreement, petitioners separately interposed the present petitions for certiorari alleging that the Sandiganbayan, in issuing the said Resolution, acted "with grave abuse of discretion amounting to lack or excess of jurisdiction."

The instant petitions must fail.

As a rule, the special civil action of certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, lies only when the lower court has been given the opportunity to correct the error imputed to it through a motion for reconsideration of the assailed order or resolution.15 The rationale of the rule rests upon the presumption that the court or administrative body which issued the assailed order or resolution may amend the same, if given the chance to correct its mistake or error. The motion for reconsideration, therefore, is a condition sine qua nonbefore filing a petition for certiorari.16

Here, petitioners filed the instant petitions for certiorari without interposing a motion for reconsideration of the assailed Resolution of the Sandiganbayan. Section 1 of the same Rule 65 requires that petitioners must not only show that the trial court, in issuing the questioned Resolution, "acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction," but that "there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law."17 We have held that the "plain," "speedy," and "adequate remedy" referred to in Section 1 of Rule 65 is a motion for reconsideration of the questioned Order or Resolution.18 It bears stressing that the strict application of this rule will also prevent unnecessary and premature resort to appellate proceedings. We thus cannot countenance petitioners’ disregard of this procedural norm and frustrate its purpose of attaining speedy, inexpensive, and orderly judicial proceedings.

In justifying their failure to file the required motion for reconsideration, petitioners vehemently assert that they were "deprived of due process and there is extreme urgency for relief, and that under the circumstances, a motion for reconsideration would be useless."19

We are not persuaded.

Petitioners may not arrogate to themselves the determination of whether a motion for reconsideration is necessary or not.20 To dispense with the requirement of filing a motion for reconsideration, petitioners must show concrete, compelling, and valid reason for doing so.21 They must demonstrate that the Sandiganbayan, in issuing the assailed Resolution, acted capriciously, whimsically and arbitrarily by reason of passion and personal hostility.22Such capricious, whimsical and arbitrary acts must be apparent on the face of the assailed Resolution. These, they failed to do.

In denying petitioners’ motions to vacate the Compromise Agreement, the Sandiganbayan held:

"We find the subject motions (to vacate the Order approving the Compromise Agreement) to be devoid of merit. No procedural basis exists for the instant motions of Mid-Pasig (referring to MLDC) and IRC. x x x. Moreover, we should point out that Mid-Pasig has been declared in default by this court in its Resolution dated May 15, 1989 and its Motion for Reconsideration of the same has been denied by the court in its Order dated August 18, 1989. Likewise, its Motion to Lift Order of Default etc. dated December 23, 1991 was denied by this court in the Resolution of May 19, 1992. Hence, being in default, Mid-Pasig has no legal standing to file the subject motion dated August 16, 1998.

x x x

x x x. Significantly, Mid-Pasig does not dispute the authority of the PCGG to sign the Compromise Agreement on its behalf. The only issue it raised in this regard is the alleged absence of a Resolution adopted by the PCGG approving the Compromise Agreement. However, in its Reply (to Opposition of Potenciano Ilusorio, etc.), it avers that PCGG Commissioner Rosal had not been authorized either by Mid-Pasig or by IRC to negotiate the 673 POTC shares; that his act of disposing shares of stocks belonging to corporations not parties to the agreement is fraudulent and tainted with bad faith and that such unauthorized disposition of shares of stocks constitutes unlawful deprivation of property without due process.

The foregoing arguments are flawed. Undoubtedly, the PCGG had full authority to act on behalf of the Republic and on behalf of Mid-Pasig and IRC, as well as to dispose of 673 of the 5,400 POTC shares registered in Mid-Pasig and IRC’s names in favor of Potenciano Ilusorio, as an integral part of the Compromise Agreement. In fact, it is our view that Mid-Pasig and IRC have no right to, or interest to protect over the POTC shares. In its May 3, 1989Answer to the Third Party Complaint, Mid-Pasig averred:

‘4. It admits that defendant-third party plaintiff requested the PCGG to sequester MLDC but the same had in fact been turned over as an admitted part and parcel of the ill-gotten wealth of the defendants Marcoses and cronies.’

Earlier, IRC made similar admissions in its verified Answer dated September 29, 1988, where it alleged:

‘2. That it specifically denies the allegations under paragraph 75 of the Third-Party Complaint, the truth of the matter being that answering third-party defendant has been sequestered by the Presidential Commission on Good Government (PCGG) and it is now owned by the Government after same was voluntarily turned over to it in accordance with the compromise settlement entered into by and between J.Y. Campos, Sr. and his Associates and the PCGG; consequently, Mr. Jose Y.

Campos has nothing to do anymore with the Independent Realty Corporation and its subsidiaries corporations;

x x x

4. That it specifically denies the allegations under paragraph 77 of the Third-Party Complaint, the truth of the matter being the 3,644 shares of stock of POTC under the name of Independent Realty Corporation is part and parcel of the ill-gotten wealth of the deposed President Marcos and his family and the same was acquired during the incumbency of Marcos under the circumstances alleged in the plaintiff’s complaint;

5. That it specifically denies the allegations under paragraph 78 of the Third-Party Complaint, although there was such request, the PCGG sequestered Independent Realty Corporation because it forms part of the illegally acquired wealth of Marcos and his family and cronies;

6. That it specifically denies the allegations under paragraph 79 of the Third-Party Complaint, the truth of the matter being those alleged in the plaintiff’s complaint which we are adopting as forming an integral part of ourAnswer herein; moreover, IRC acquired the shares of stocks of POTC in question for and on behalf of Marcos and his family in the manner described in the complaint filed by plaintiff, and has no right whatsoever on the said shares of stock as they now belong to and owned by the Government because IRC was voluntarily surrendered by Jose Y. Campos, Sr. to the PCGG.

RE ANSWER TO ALLEGATIONS COMMON TO THECROSS CLAIM AND THIRD PARTY COMPLAINT

x x x

8. That it specifically denies the allegations under paragraph 81 of the Third-Party Complaint, the truth of the matter being that insofar as the shares of stocks of POTC acquired by IRC are concerned, the Government is now the owner thereof and that third-party plaintiff has no rights whatsoever thereon since they formed part of the hidden wealth of Marcos, his family and cronies.

BY WAY OF AFFIRMATIVE AND SPECIAL DEFENSES, THIRD PARTY DEFENDANTRESPECTFULLY STATES, THROUGH COUNSEL

x x x

10. That the filing of Third-Party Complaint against IRC is improper and procedurally incorrect since it is now owned by the Government who is the plaintiff in the main case and as such no cause of action for the Third-Party Complaint may be established herein against IRC.’

Evidently, by Mid-Pasig and IRC’s own admissions, they have been turned over to the Government. Hence, both corporations have no right or interest over the subject POTC shares surrendered by Jose Y. Campos to the Government. Mid-Pasig and IRC themselves were sequestered, and then voluntarily surrendered as part of the res covered by the Campos Compromise Agreement. Moreover, there is nothing inconsistent with the PCGG’s role as conservator of Mid-Pasig and IRC, and its entering into a Compromise Agreement on behalf of the Republic and of Mid-Pasig and IRC, over the subject POTC shares precisely because,insofar as Mid-Pasig and IRC are concerned, they have relinquished all rights or interest over all POTC shares registered in their names in favor of the Republic represented by PCGG.

Mid-Pasig, in its Motion to Lift Order of Default and to Consider the Answer of Third-Party Defendant Independent Realty Corporation as the Answer and/or inuring to the Benefit of Third-Party Defendant Mid-Pasig Land Development Corporation dated December 23, 1991, also made the following admission:

‘2. That the third-party defendant corporations are two of the corporations turned over to the PCGG by Mr. Jose Y. Campos who along with Mr. Rolando Gapud, executed an affidavit that third-party defendant corporations were in fact organized by Mr. Jose Y. Campos for and in behalf of the late former President Ferdinand Marcos.’

x x x

In light of these admissions and circumstances, we do not see what interest Mid-Pasig or IRC would still have over the POTC shares they themselves have acknowledged as no longer belonging to them. They cannot pretend that they still have separate juridical personalities to possess such shares in their own right, considering that their erstwhile veil of corporate fiction have long been discarded and shredded, revealing them as mere silhouettes purposely created to nest and shelter ill-gotten wealth. A fortiori, Mid-Pasig and IRC are in estoppel to claim otherwise, such that, with respect to the POTC shares subject of the Compromise Agreement, Mid-Pasig and IRC have no discernible interest therein, nor they possess any legal personality to question the PCGG’s authority on behalf of the Republic to enter into a

Compromise Agreement over such surrendered shares. There is, therefore, rhyme and reason to reject as baseless Mid-Pasig and IRC’s claim of any real or material interest in the POTC shares, or of the alleged grave or irreparable injury they stand to suffer."23 (underscoring supplied)

As regards the contention of petitioner Republic-PCGG that the Compromise Agreement is fatally defective because it lacks a Resolution from the PCGG authorizing former Commissioner Rosal to enter into such agreement with respondent Ilusorio, the Sandiganbayan ruled:

"The subject Compromise Agreement which was signed by PCGG Commissioner Hermilo R. Rosal on June 18, 1996 was thereafter endorsed for executive approval in a Memorandum for President Fidel V. Ramos dated September 20, 1996. The said endorsement was signed by PCGG Commissioner Herminio A. Mendoza and PCGG Chairman Magtanggol Gunigundo. On the other hand, the Motion to Dismiss and for Approval of Compromise Agreement dated June 3, 1998 was signed by PCGG Commissioner Herminio A. Mendoza on behalf of the plaintiff Republic of the Philippines. These circumstances clearly show that three (3) out of the five (5) members of the Commission had participated singly or jointly in the documentation of the Compromise Agreement, in its endorsement to the President for executive affirmations, and in its eventual submission to this court for judicial approval. Thus, it is reasonable to assume that they acted in accordance with a Commission decision to enter into the subject Compromise Agreement. This conforms to the presumption of regularity in the performance by public officers of their functions (Sec. 5[m], Rule 131, Rules of Court). Furthermore, in the January 20, 1999 PCGG’s letter addressed to Mr. Alejandro S. Soler of Mid-Pasig (Annex "b," PCGG’s Rejoinder [to the Consolidated Reply of Potenciano Ilusorio]), the following information was relayed to the addressee:

‘Per verification with available records/Minutes of the Executive Meeting held on:

1. 08 February 1996 at the PCGG Conference Room, 6th Floor, Philcomcen Building, Ortigas Avenue, Pasig City, the following was resolved:

‘1.3 POTENCIANO ILUSORIO

‘With the Chairman inhibiting himself from the deliberation, the four Commissioners unanimously agreed to issue a Resolution authorizing the Chairman to sign the Compromise Agreement with Mr. Potenciano Ilusorio, as approved by the Commission en banc in its last meeting.’

2. 19 December 1996 at the PCGG Conference Room, 6th Floor, Philcomcen Building, Ortigas Avenue, Pasig City, the following was resolved:

‘2.1 JOINT MOTION TO DISMISS RE: COMPROMISE AGREEMENT BETWEEN RP AND ILUSORIO

‘Comm. Mendoza presented to the Commission the Joint Motion to Dismiss to be filed with the Sandiganbayan relative to the Compromise Agreement between the Republic of the Philippines and Potenciano T. Ilusorio.

‘After the discussion, the Commission required proof of the surrender of the Parañaque property before the motion could be filed in court. The Chairman inhibited himself.’

The foregoing statements clearly show that the Compromise Agreement dated June 28, 1996 was approved by the Commission en banc, and that the signing and filing before this court of the subjectMotion (to Dismiss and For Approval of Compromise Agreement) by Potenciano Ilusorio, thru counsel, dated June 3, 1998 was conformed to by the PCGG as represented by Commissioner Herminio A. Mendoza.

It bears emphasis that any perceived deficiency with respect to the PCGG’s approval of the Compromise Agreement has been cured by no less than President Ramos’ approval of the latter and the OSG’s concurrence in its validity."24 (underscoring supplied)

Likewise, the Sandiganbayan properly rejected petitioners’ assertion that the Compromise Agreement should be nullified as its terms are grossly and manifestly disadvantageous to the Government. It bears stressing that under the Compromise Agreement, the Government is given substantial shares of 4,727 out of the 5,400 POTC shares, as against Ilusorio’s measly shares of 673. They cannot claim that the terms of the settlement are unconscionable considering that the Government was able to secure from Ilusorio a waiver in its favor of "all his claims, rights and interests" in: (a) the cash dividends on all the POTC shares of stocks given to the Government, including his own shares; and (b) the valuable properties (houses, 3 titled lots and all improvements thereon) located in Parañaque, Metro Manila. It is not surprising then that the PCGG and then President Ramos gave their imprimatur to the Compromise Agreement.

The Republic, through the present PCGG, further contends that the Compromise Agreement violates the letter and spirit of Executive Order No. 1 because the Government reconveyed to respondent Ilusorio the 673 POTC shares which were part of the ill-gotten wealth previously surrendered or turned over by Jose Y.

Campos to the PCGG. What petitioners are saying is that the Government cannot give to Ilusorio a portion of the ill-gotten wealth earlier surrendered by Campos.1avvphi1.zw+

We are not convinced. It bears stressing that this case takes its roots from the complaint filed with the Sandiganbayan by petitioner Republic-PCGG against respondent Ilusorio and other defendants for reconveyance of ill-gotten wealth. Among the properties sought to be forfeited were the 5,400 shares of stocks issued by POTC. The complaint alleged that that the defendants therein acted in collaboration with each other as dummies of defendants Marcoses in several corporations, such as the MLDC and IRC which, through their manipulations, appropriated to themselves substantial portion of the shareholdings in POTC. Ilusorio, in his Amended Answer with Cross-Claim and Third Party Complaint, denied the material allegations of the complaint, claiming that he owns the 5,400 POTC shares which the Marcoses later took from him, through threats and intimidation and without any valuable consideration, and placed them in the names of their alter egos (IRC – 3,644 shares; MLDC – 1,755; and Marcos, Jr. – 1). Ilusorio prayed for the recovery of said shares and the corresponding dividends.

By denying the material allegations of the complaint in his answer, and setting up the affirmative defense that he owns the questioned shares, respondent Ilusorio has definitely joined issues with the plaintiff Republic as to the ownership of those shares. As such, he has the right to prove his allegations during the trial on the merits. However, the Republic-PCGG and Ilusorio chose not to go to trial but to settle their respective claims amicably. Thus, they entered into a Compromise Agreement with respect to the questioned shares and their corresponding dividends, as well as his rights and interests over the houses and lots in Parañaque City. Their settlement was "motivated by their desire to avoid a costly and protracted litigation;" "to effect the proper restitution of properties, assets and other interest to their rightful owners;" to "benefit the Filipino people through an efficient and economical telecommunications system;" and "in order that they be able to freely use their respective properties, assets and other interests in the peaceful and normal pursuit of their legitimate endeavors."25

With the imprimatur of no less than the former President Fidel V. Ramos and the approval of the Sandiganbayan, the Compromise Agreement must be accorded utmost respect. Such amicable settlement is not only allowed but even encouraged. Thus, in Republic vs. Sandiganbayan,26 we held:

"It is advocated by the PCGG that respondent Benedicto retaining a portion of the assets is anathema to, and incongruous with, the zero-retention policy of the government in the pursuit for the recovery of all ill-gotten wealth pursuant to Section 2(a) of Executive Order No. 1. While full recovery is ideal, the PCGG is not precluded from entering into a Compromise Agreement which entails reciprocal concessions if only to expedite recovery so that the remaining ‘funds, assets and other properties may be used to hasten national economic recovery’ (3rd WHEREAS clause, Executive Order No. 14-A). To be sure, the so-called zero retention mentioned in Section 2(a) of Executive Order No. 1 had been modified to read:

‘WHEREAS, the Presidential Commission on Good Government was created on February 28, 1986 by Executive Order No. 1 to assist the President in the recovery of ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates;’

which undoubtedly suggests a departure from the former goal of total restitution.

x x x

The authority of the PCGG to enter into Compromise Agreements in civil cases and to grant immunity, under certain circumstances, in criminal cases is now settled and established. In Republic of the Philippines and Jose O. Campos, Jr. vs. Sandiganbayan, et al. (173 SCRA 72 [1989]), this Court categorically stated that amicable settlements and compromises are not only allowed but actually encouraged in civil cases. A specific grant of immunity from criminal prosecutions was also sustained. In Benedicto vs. Board of Administrators of Television Stations RPN, BBC, and IBC (207 SCRA 659 [1992]), the Court ruled that the authority of the PCGG to validly enter into Compromise Agreement for the purpose of avoiding litigation or putting an end to one already commenced was indisputable. x x x. (underscoring supplied)

Having been sealed with court approval, the Compromise Agreement has the force of res judicata between the parties and should be complied with in accordance with its terms.27 Pursuant thereto, Victoria C. de los Reyes, Corporate Secretary of the POTC, transmitted to Mr. Magdangal B. Elma, then Chief Presidential Legal Counsel and Chairman of PCGG, Stock Certificate No. 131 dated January 10, 2000, issued in the name of the Republic of the Philippines, for 4,727 POTC shares.28 Thus, the Compromise Agreement was partly implemented.

WHEREFORE, the instant petitions are hereby DISMISSED.

SO ORDERED.

Corona, Carpio-Morales, and Garcia, JJ., concur.

Panganiban, (Chairman), no part, former counsel of party in the case of origin.

Footnotes

1 Filed under Rule 65, 1997 Rules of Civil Procedure, as amended.

2 Penned by Justice Rodolfo G. Palattao and concurred in by Justice Narciso S. Nario (both retired) andJustice Godofredo L. Legaspi.

3 Section 2 (a) of Executive Order No. 1, dated February 28, 1986.

4 Rollo at 87-116.

5 Paragraph 15 (e), Republic’s Complaint in Civil Case No. 0009; Rollo at 99, 101-102. The complaint also alleged:

"4. Defendants JOSE L. AFRICA, MANUEL H. NIETO, Jr., former Ambassador to Spain, ROBERTO S. BENEDICTO, former Ambassador to Japan, JUAN PONCE ENRILE, former Minister of National Defense, and POTENCIANO ILUSORIO were close associates and confidants of defendants Ferdinand E. Marcos and Imelda R. Marcos. Among the corporations in which defendants had substantial shares were: (a) Philippine Overseas Telecommunications Corporation (POTC); (b) Eastern Telecommunications Phils., Inc. (ETPI); (c) Philippine Satellite Communication Corporation (PHILCOMSAT); (d) Domestic Satellite Communication Corporation (DOMSAT); and (e) Oceanic Wireless Network, Inc. x x x.

x x x

15. Defendants Jose L. Africa, Manuel H. Nieto, Jr., Roberto S. Benedicto, Potenciano Ilusorio, Juan Ponce Enrile and Ferdinand E. Marcos, Jr. by themselves and/or in unlawful concert with defendants Ferdinand E. Marcos and Imelda R. Marcos, and taking undue advantage of their relationship, influence and association, desired schemes and stratagems to acquire and conceal their ill-gotten wealth in various ways, such as:

(a) knowingly and willingly acting as dummies, nominees and/or agents of defendants Ferdinand E. Marcos and Imelda R. Marcos in several corporations, such as the Philippine Overseas Telecommunications Corporation (POTC) which, through manipulations and dubious arrangements with officers and members of the Board of the National Development Corporation (NDC), a corporation owned and controlled by the government, purchased NDC’s shareholdings in the Philippine Communications Satellite Corporation (PHILCOMSAT), also a government owned and controlled corporation, under highly unconscionable terms and conditions manifestly disadvantageous to Plaintiff and the Filipino people;

x x x;

(c) illegally manipulated, under the guise of expanding the operations of PHILCOMSAT, the purchase of major shareholdings of Cable and Wireless Limited, a London-based telecommunication company, in Eastern Telecommunications Philippines, Inc. (ETPI); x x x

x x x." (Rollo at 90, 98-102)

6 Id. at 103.

7 Resolution dated May 15, 1989, cited in Resolution dated December 20, 1999, Rollo at 67.

8 Dated September 29, 1988.

9 Petitioner IRC’s Answer to Third-Party Complaint of respondent Ilusorio, pars. 2, 4-6, 8, 10, cited in Resolution dated December 20, 1999, Rollo at 70-71.

10 Order dated June 8, 1998, Rollo at 152-156.

11 Resolution dated December 20, 1999, Rollo at 55-56.

12 Rollo at 152-156.

13 Penned by Justice Sabino R. de Leon, Jr. (retired member of the Supreme Court, now deceased), and concurred in by Justice Narciso S. Nario (retired) and Justice Teresita Loenardo-De Castro (now Presiding Justice of the Sandiganbayan); Rollo at 156.

14 Rollo at 85-86.

15 Yau vs. Manila Banking Corporation, G.R. No. 126731, July 11, 2002, 384 SCRA 340.

16 Mayor Edgardo G. Flores vs. Sangguniang Panlalawigan of Pampanga, et al., G.R. No. 159022, February 21, 2005, citing Yau vs. Manila Banking Corporation, id.; Republic vs. Express Telecommunication Co., Inc., G.R. No. 147096, January 15, 2002, 373 SCRA 316; Lee vs. People, G.R. No. 137914, December 4, 2002, 393 SCRA 397.

17 Union of Nestle Workers Cagayan de Oro Factory vs. Nestle Philippines, Inc., G.R. No. 148303, October 17, 2002, 391 SCRA 204, cited in Mayor Edgardo G. Flores vs. Sangguniang Panlalawigan of Pampanga, et al., id.

18 Metro Transit Organization, Inc. vs. Court of Appeals, G.R. No. 142133, November 19, 2002, 392 SCRA 229, cited in Mayor Edgardo G. Flores vs. Sangguniang Panlalawigan of Pampanga, et al., id.

19 Petition, Rollo at 16.

20 Mayor Edgardo G. Flores vs. Sangguniang Panlalawigan of Pampanga, et al., supra; Metro Transit Organization, Inc. vs. Court of Appeals, supra.

21 Id.

22 Duero vs. Court of Appeals, G.R. No. 131282, January 4, 2002, 373 SCRA 11; Vda. de Draffon vs. Court of Appeals, G.R. No. 129017, August 20, 2002, 387 SCRA 427.

23 Assailed Sandiganbayan Resolution dated December 20, 1999, Rollo at 67-74.

24 Id., Rollo at 74-76.

25 2nd WHEREAS of the Compromise Agreement.

26 G.R. No. 108292, September 10, 1993, 226 SCRA 314.

27 Republic vs. Sandiganbayan, id., citing Araneta vs. Perez, 7 SCRA 923 (1963).

28 Annexes "A" and "C" of Respondents’ Comment, Rollo at 299-300, 349.

D E C I S I O N

G.R. No. 166429           December 19, 2005

REPUBLIC OF THE PHILIPPINES, Represented by Executive Secretary Eduardo R. Ermita, the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), and the MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA), Petitioners, vs.HON. HENRICK F. GINGOYON, In his capacity as Presiding Judge of the Regional Trial Court, Branch 117, Pasay City and PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., Respondents

TINGA, J.:

The Ninoy Aquino International Airport Passenger Terminal III (NAIA 3) was conceived, designed and constructed to serve as the country's show window to the world. Regrettably, it has spawned controversies. Regrettably too, despite the apparent completion of the terminal complex way back it has not yet been operated. This has caused immeasurable economic damage to the country, not to mention its deplorable discredit in the international community.

In the first case that reached this Court, Agan v. PIATCO,1 the contracts which the Government had with the contractor were voided for being contrary to law and public policy. The second case now before the Court involves the matter of just compensation due the contractor for the terminal complex it built. We decide the case on the basis of fairness, the same norm that pervades both the Court's 2004 Resolution in the first case and the latest expropriation law.

The present controversy has its roots with the promulgation of the Court's decision in Agan v.

PIATCO,2 promulgated in 2003 (2003 Decision). This decision nullified the "Concession Agreement for the Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III" entered into between the Philippine Government (Government) and the Philippine International Air Terminals Co., Inc. (PIATCO), as well as the amendments and supplements thereto. The agreement had authorized PIATCO to build a new international airport terminal (NAIA 3), as well as a franchise to operate and maintain the said terminal during the concession period of 25 years. The contracts were nullified, among others, that Paircargo Consortium, predecessor of PIATCO, did not possess the requisite financial capacity when it was awarded the NAIA 3 contract and that the agreement was contrary to public policy.3

At the time of the promulgation of the 2003 Decision, the NAIA 3 facilities had already been built by PIATCO and were nearing completion.4However, the ponencia was silent as to the legal status of the NAIA 3 facilities following the nullification of the contracts, as well as whatever rights of PIATCO for reimbursement for its expenses in the construction of the facilities. Still, in his Separate Opinion, Justice Panganiban, joined by Justice Callejo, declared as follows:

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.5

PIATCO and several respondents-intervenors filed their respective motions for the reconsideration of the 2003 Decision. These motions were denied by the Court in its Resolution dated 21 January 2004 (2004 Resolution).6 However, the Court this time squarely addressed the issue of the rights of PIATCO to refund, compensation or reimbursement for its expenses in the construction of the NAIA 3 facilities. The holding of the Court on this crucial point follows:

This Court, however, is not unmindful of the reality that the structures comprising the NAIA IPT III facility are almost complete and that funds have been spent by PIATCO in their construction. For the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures. The compensation must be just and in accordance with law and equity for the government can not unjustly enrich itself at the expense of PIATCO and its investors.7

After the promulgation of the rulings in Agan, the NAIA 3 facilities have remained in the possession of PIATCO, despite the avowed intent of the Government to put the airport terminal into immediate operation. The Government and PIATCO conducted several rounds of negotiation regarding the NAIA 3 facilities.8 It also appears that arbitral proceedings were commenced before the International Chamber of Commerce International Court of Arbitration and the International Centre for the Settlement of Investment Disputes,9 although the Government has raised jurisdictional questions before those two bodies.10

Then, on 21 December 2004, the Government11 filed a Complaint for expropriation with the Pasay City Regional Trial Court (RTC), together with an Application for Special Raffle seeking the immediate holding of a special raffle. The Government sought upon the filing of the complaint the issuance of a writ of possession authorizing it to take immediate possession and control over the NAIA 3 facilities.

The Government also declared that it had deposited the amount of P3,002,125,000.0012 (3 Billion)13 in Cash with the Land Bank of the Philippines, representing the NAIA 3 terminal's assessed value for taxation purposes.14

The case15 was raffled to Branch 117 of the Pasay City RTC, presided by respondent judge Hon. Henrick F. Gingoyon (Hon. Gingoyon). On the same day that the Complaint was filed, the RTC issued an Order16 directing the issuance of a writ of possession to the Government, authorizing it to "take or enter upon the possession" of the NAIA 3 facilities. Citing the case of City of Manila v. Serrano,17 the RTC noted that it had the ministerial duty to issue the writ of possession upon the filing of a complaint for expropriation sufficient in form and substance, and upon deposit made by the government of the amount equivalent to the assessed value of the property subject to expropriation. The RTC found these requisites present, particularly noting that "[t]he case record shows that [the Government has] deposited the assessed value of the [NAIA 3 facilities] in the Land Bank of the Philippines, an authorized depositary, as shown by the certification attached to their complaint." Also on the same day, the RTC issued a Writ of Possession. According to PIATCO, the Government was able to take possession over the NAIA 3 facilities immediately after the Writ of Possession was issued.18

However, on 4 January 2005, the RTC issued another Order designed to supplement its 21 December 2004 Order and the Writ of Possession. In the 4 January 2005 Order, now assailed in the present petition, the RTC noted that its earlier issuance of its writ of possession was pursuant to Section 2, Rule 67 of the 1997 Rules of Civil Procedure. However, it was observed that Republic Act No. 8974 (Rep. Act No. 8974), otherwise known as "An Act to Facilitate the Acquisition of Right-of-Way, Site or Location for National Government Infrastructure Projects and For Other Purposes" and its Implementing Rules and Regulations

(Implementing Rules) had amended Rule 67 in many respects.

There are at least two crucial differences between the respective procedures under Rep. Act No. 8974 and Rule 67. Under the statute, the Government is required to make immediate payment to the property owner upon the filing of the complaint to be entitled to a writ of possession, whereas in Rule 67, the Government is required only to make an initial deposit with an authorized government depositary. Moreover, Rule 67 prescribes that the initial deposit be equivalent to the assessed value of the property for purposes of taxation, unlike Rep. Act No. 8974 which provides, as the relevant standard for initial compensation, the market value of the property as stated in the tax declaration or the current relevant zonal valuation of the Bureau of Internal Revenue (BIR), whichever is higher, and the value of the improvements and/or structures using the replacement cost method.

Accordingly, on the basis of Sections 4 and 7 of Rep. Act No. 8974 and Section 10 of the Implementing Rules, the RTC made key qualifications to its earlier issuances. First, it directed the Land Bank of the Philippines, Baclaran Branch (LBP-Baclaran), to immediately release the amount of US$62,343,175.77 to PIATCO, an amount which the RTC characterized as that which the Government "specifically made available for the purpose of this expropriation;" and such amount to be deducted from the amount of just compensation due PIATCO as eventually determined by the RTC. Second, the Government was directed to submit to the RTC a Certificate of Availability of Funds signed by authorized officials to cover the payment of just compensation. Third, the Government was directed "to maintain, preserve and safeguard" the NAIA 3 facilities or "perform such as acts or activities in preparation for their direct operation" of the airport terminal, pending expropriation proceedings and full payment of just compensation. However, the Government was prohibited "from performing acts of ownership like awarding concessions or leasing any part of [NAIA 3] to other parties."19

The very next day after the issuance of the assailed 4 January 2005 Order, the Government filed an Urgent Motion for Reconsideration, which was set for hearing on 10 January 2005. On 7 January 2005, the RTC issued another Order, the second now assailed before this Court, which appointed three (3) Commissioners to ascertain the amount of just compensation for the NAIA 3 Complex. That same day, the Government filed a Motion for Inhibition of Hon. Gingoyon.

The RTC heard the Urgent Motion for Reconsideration and Motion for Inhibition on 10 January 2005. On the same day, it denied these motions in an Omnibus Order dated 10 January 2005. This is the third Order now assailed before this Court. Nonetheless, while the Omnibus Order affirmed the earlier dispositions in the 4 January 2005 Order, it excepted from affirmance "the superfluous part of the Order prohibiting the plaintiffs from awarding concessions or leasing any part of [NAIA 3] to other parties."20

Thus, the present Petition for Certiorari and Prohibition under Rule 65 was filed on 13 January 2005. The petition prayed for the nullification of the RTC orders dated 4 January 2005, 7 January 2005, and 10 January 2005, and for the inhibition of Hon. Gingoyon from taking further action on the expropriation case. A concurrent prayer for the issuance of a temporary restraining order and preliminary injunction was granted by this Court in a Resolution dated 14 January 2005.21

The Government, in imputing grave abuse of discretion to the acts of Hon. Gingoyon, raises five general arguments, to wit:

(i) that Rule 67, not Rep. Act No. 8974, governs the present expropriation proceedings;

(ii) that Hon. Gingoyon erred when he ordered the immediate release of the amount of US$62.3 Million to PIATCO considering that the assessed value as alleged in the complaint was only P3 Billion;

(iii) that the RTC could not have prohibited the Government from enjoining the performance of acts of ownership;

(iv) that the appointment of the three commissioners was erroneous; and

(v) that Hon. Gingoyon should be compelled to inhibit himself from the expropriation case.22

Before we delve into the merits of the issues raised by the Government, it is essential to consider the crucial holding of the Court in its 2004 Resolution in Agan, which we repeat below:

This Court, however, is not unmindful of the reality that the structures comprising the NAIA IPT III facility are almost complete and that funds have been spent by PIATCO in their construction. For the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures. The compensation must be just and in accordance with law and equity for the government can not unjustly enrich itself at the expense of PIATCO and its investors.23

This pronouncement contains the fundamental premises which permeate this decision of the Court. Indeed, Agan, final and executory as it is, stands as governing law in this case, and any disposition of the

present petition must conform to the conditions laid down by the Court in its 2004 Resolution.

The 2004 Resolution Which Is Law of This Case Generally Permits Expropriation

The pronouncement in the 2004 Resolution is especially significant to this case in two aspects, namely: (i) that PIATCO must receive payment of just compensation determined in accordance with law and equity; and (ii) that the government is barred from taking over NAIA 3 until such just compensation is paid. The parties cannot be allowed to evade the directives laid down by this Court through any mode of judicial action, such as the complaint for eminent domain.

It cannot be denied though that the Court in the 2004 Resolution prescribed mandatory guidelines which the Government must observe before it could acquire the NAIA 3 facilities. Thus, the actions of respondent judge under review, as well as the arguments of the parties must, to merit affirmation, pass the threshold test of whether such propositions are in accord with the 2004 Resolution.

The Government does not contest the efficacy of this pronouncement in the 2004 Resolution,24 thus its application to the case at bar is not a matter of controversy. Of course, questions such as what is the standard of "just compensation" and which particular laws and equitable principles are applicable, remain in dispute and shall be resolved forthwith.

The Government has chosen to resort to expropriation, a remedy available under the law, which has the added benefit of an integrated process for the determination of just compensation and the payment thereof to PIATCO. We appreciate that the case at bar is a highly unusual case, whereby the Government seeks to expropriate a building complex constructed on land which the State already owns.25 There is an inherent illogic in the resort to eminent domain on property already owned by the State. At first blush, since the State already owns the property on which NAIA 3 stands, the proper remedy should be akin to an action for ejectment.

However, the reason for the resort by the Government to expropriation proceedings is understandable in this case. The 2004 Resolution, in requiring the payment of just compensation prior to the takeover by the Government of NAIA 3, effectively precluded it from acquiring possession or ownership of the NAIA 3 through the unilateral exercise of its rights as the owner of the ground on which the facilities stood. Thus, as things stood after the 2004 Resolution, the right of the Government to take over the NAIA 3 terminal was preconditioned by lawful order on the payment of just compensation to PIATCO as builder of the structures.

The determination of just compensation could very well be agreed upon by the parties without judicial intervention, and it appears that steps towards that direction had been engaged in. Still, ultimately, the Government resorted to its inherent power of eminent domain through expropriation proceedings. Is eminent domain appropriate in the first place, with due regard not only to the law on expropriation but also to the Court's 2004 Resolution in Agan?

The right of eminent domain extends to personal and real property, and the NAIA 3 structures, adhered as they are to the soil, are considered as real property.26 The public purpose for the expropriation is also beyond dispute. It should also be noted that Section 1 of Rule 67 (on Expropriation) recognizes the possibility that the property sought to be expropriated may be titled in the name of the Republic of the Philippines, although occupied by private individuals, and in such case an averment to that effect should be made in the complaint. The instant expropriation complaint did aver that the NAIA 3 complex "stands on a parcel of land owned by the Bases Conversion Development Authority, another agency of [the Republic of the Philippines]."27

Admittedly, eminent domain is not the sole judicial recourse by which the Government may have acquired the NAIA 3 facilities while satisfying the requisites in the 2004 Resolution. Eminent domain though may be the most effective, as well as the speediest means by which such goals may be accomplished. Not only does it enable immediate possession after satisfaction of the requisites under the law, it also has a built-in procedure through which just compensation may be ascertained. Thus, there should be no question as to the propriety of eminent domain proceedings in this case.

Still, in applying the laws and rules on expropriation in the case at bar, we are impelled to apply or construe these rules in accordance with the Court's prescriptions in the 2004 Resolution to achieve the end effect that the Government may validly take over the NAIA 3 facilities. Insofar as this case is concerned, the 2004 Resolution is effective not only as a legal precedent, but as the source of rights and prescriptions that must be guaranteed, if not enforced, in the resolution of this petition. Otherwise, the integrity and efficacy of the rulings of this Court will be severely diminished.

It is from these premises that we resolve the first question, whether Rule 67 of the Rules of Court or Rep. Act No. 8974 governs the expropriation proceedings in this case.

Application of Rule 67 Violates the 2004 Agan Resolution

The Government insists that Rule 67 of the Rules of Court governs the expropriation proceedings in this case to the exclusion of all other laws. On the other hand, PIATCO claims that it is Rep. Act No. 8974 which does apply. Earlier, we had adverted to the basic differences between the statute and the procedural rule. Further elaboration is in order.

Rule 67 outlines the procedure under which eminent domain may be exercised by the Government. Yet by no means does it serve at present as the solitary guideline through which the State may expropriate private property. For example, Section 19 of the Local Government Code governs as to the exercise by local government units of the power of eminent domain through an enabling ordinance. And then there is Rep. Act No. 8974, which covers expropriation proceedings intended for national government infrastructure projects.

Rep. Act No. 8974, which provides for a procedure eminently more favorable to the property owner than Rule 67, inescapably applies in instances when the national government expropriates property "for national government infrastructure projects."28 Thus, if expropriation is engaged in by the national government for purposes other than national infrastructure projects, the assessed value standard and the deposit mode prescribed in Rule 67 continues to apply.

Under both Rule 67 and Rep. Act No. 8974, the Government commences expropriation proceedings through the filing of a complaint. Unlike in the case of local governments which necessitate an authorizing ordinance before expropriation may be accomplished, there is no need under Rule 67 or Rep. Act No. 8974 for legislative authorization before the Government may proceed with a particular exercise of eminent domain. The most crucial difference between Rule 67 and Rep. Act No. 8974 concerns the particular essential step the Government has to undertake to be entitled to a writ of possession.

The first paragraph of Section 2 of Rule 67 provides:

SEC. 2. Entry of plaintiff upon depositing value with authorized government depository. - Upon the filing of the complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall have the right to take or enter upon the possession of the real property involved if he deposits with the authorized government depositary an amount equivalent to the assessed value of the property for purposes of taxation to be held by such bank subject to the orders of the court. Such deposit shall be in money, unless in lieu thereof the court authorizes the deposit of a certificate of deposit of a government bank of the Republic of the Philippines payable on demand to the authorized government depositary.

In contrast, Section 4 of Rep. Act No. 8974 relevantly states:

SEC. 4. Guidelines for Expropriation Proceedings.- Whenever it is necessary to acquire real property for the right-of-way, site or location for any national government infrastructure project through expropriation, the appropriate proceedings before the proper court under the following guidelines:

a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency shall immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR); and (2) the value of the improvements and/or structures as determined under Section 7 hereof; . . .

c) In case the completion of a government infrastructure project is of utmost urgency and importance, and there is no existing valuation of the area concerned, the implementing agency shall immediately pay the owner of the property its proffered value taking into consideration the standards prescribed in Section 5 hereof.

Upon completion with the guidelines abovementioned, the court shall immediately issue to the implementing agency an order to take possession of the property and start the implementation of the project.

Before the court can issue a Writ of Possession, the implementing agency shall present to the court a certificate of availability of funds from the proper official concerned. . . .

As can be gleaned from the above-quoted texts, Rule 67 merely requires the Government to deposit with an authorized government depositary the assessed value of the property for expropriation for it to be entitled to a writ of possession. On the other hand, Rep. Act No. 8974 requires that the Government make a direct payment to the property owner before the writ may issue. Moreover, such payment is based on the zonal valuation of the BIR in the case of land, the value of the improvements or structures under the replacement cost method,29 or if no such valuation is available and in cases of utmost urgency, the proffered value of the property to be seized.

It is quite apparent why the Government would prefer to apply Rule 67 in lieu of Rep. Act No. 8974. Under Rule 67, it would not be obliged to immediately pay any amount to PIATCO before it can obtain the writ of

possession since all it need do is deposit the amount equivalent to the assessed value with an authorized government depositary. Hence, it devotes considerable effort to point out that Rep. Act No. 8974 does not apply in this case, notwithstanding the undeniable reality that NAIA 3 is a national government project. Yet, these efforts fail, especially considering the controlling effect of the 2004 Resolution in Agan on the adjudication of this case.

It is the finding of this Court that the staging of expropriation proceedings in this case with the exclusive use of Rule 67 would allow for the Government to take over the NAIA 3 facilities in a fashion that directly rebukes our 2004 Resolution in Agan. This Court cannot sanction deviation from its own final and executory orders.

Section 2 of Rule 67 provides that the State "shall have the right to take or enter upon the possession of the real property involved if [the plaintiff] deposits with the authorized government depositary an amount equivalent to the assessed value of the property for purposes of taxation to be held by such bank subject to the orders of the court."30 It is thus apparent that under the provision, all the Government need do to obtain a writ of possession is to deposit the amount equivalent to the assessed value with an authorized government depositary.

Would the deposit under Section 2 of Rule 67 satisfy the requirement laid down in the 2004 Resolution that "[f]or the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures"? Evidently not.

If Section 2 of Rule 67 were to apply, PIATCO would be enjoined from receiving a single centavo as just compensation before the Government takes over the NAIA 3 facility by virtue of a writ of possession. Such an injunction squarely contradicts the letter and intent of the 2004 Resolution. Hence, the position of the Government sanctions its own disregard or violation the prescription laid down by this Court that there must first be just compensation paid to PIATCO before the Government may take over the NAIA 3 facilities.

Thus, at the very least, Rule 67 cannot apply in this case without violating the 2004 Resolution. Even assuming that Rep. Act No. 8974 does not govern in this case, it does not necessarily follow that Rule 67 should then apply. After all, adherence to the letter of Section 2, Rule 67 would in turn violate the Court's requirement in the 2004 Resolution that there must first be payment of just compensation to PIATCO before the Government may take over the property.

It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit under Rule 67 with the scheme of "immediate payment" in cases involving national government infrastructure projects. The following portion of the Senate deliberations, cited by PIATCO in its Memorandum, is worth quoting to cogitate on the purpose behind the plain meaning of the law:

THE CHAIRMAN (SEN. CAYETANO). "x x x Because the Senate believes that, you know, we have to pay the landowners immediately not by treasury bills but by cash.

Since we are depriving them, you know, upon payment, 'no, of possession, we might as well pay them as much, 'no, hindi lang 50 percent.

x x x

THE CHAIRMAN (REP. VERGARA). Accepted.

x x x

THE CHAIRMAN (SEN. CAYETANO). Oo. Because this is really in favor of the landowners, e.

THE CHAIRMAN (REP. VERGARA). That's why we need to really secure the availability of funds.

x x x

THE CHAIRMAN (SEN. CAYETANO). No, no. It's the same. It says here: iyong first paragraph, di ba? Iyong zonal - talagang magbabayad muna. In other words, you know, there must be a payment kaagad. (TSN, Bicameral Conference on the Disagreeing Provisions of House Bill 1422 and Senate Bill 2117, August 29, 2000, pp. 14-20)

x x x

THE CHAIRMAN (SEN. CAYETANO). Okay, okay, 'no. Unang-una, it is not deposit, 'no. It's payment."

REP. BATERINA. It's payment, ho, payment." (Id., p. 63)31

It likewise bears noting that the appropriate standard of just compensation is a substantive matter. It is well within the province of the legislature to fix the standard, which it did through the enactment of Rep. Act No. 8974. Specifically, this prescribes the new standards in determining the amount of just compensation in expropriation cases relating to national government infrastructure projects, as well as the manner of payment thereof. At the same time, Section 14 of the Implementing Rules recognizes the continued applicability of Rule 67 on procedural aspects when it provides "all matters regarding defenses and objections to the complaint, issues on uncertain ownership and conflicting claims, effects of appeal on the rights of the parties, and such other incidents affecting the complaint shall be resolved under the provisions on expropriation of Rule 67 of the Rules of Court."32

Given that the 2004 Resolution militates against the continued use of the norm under Section 2, Rule 67, is it then possible to apply Rep. Act No. 8974? We find that it is, and moreover, its application in this case complements rather than contravenes the prescriptions laid down in the 2004 Resolution.

Rep. Act No. 8974 Fits to the Situation at Bar and Complements the 2004 Agan Resolution

Rep. Act No. 8974 is entitled "An Act To Facilitate The Acquisition Of Right-Of-Way, Site Or Location For National Government Infrastructure Projects And For Other Purposes." Obviously, the law is intended to cover expropriation proceedings intended for national government infrastructure projects. Section 2 of Rep. Act No. 8974 explains what are considered as "national government projects."

Sec. 2. National Government Projects. - The term "national government projects" shall refer to all national government infrastructure, engineering works and service contracts, including projects undertaken by government-owned and controlled corporations, all projects covered by Republic Act No. 6957, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer Law, and other related and necessary activities, such as site acquisition, supply and/or installation of equipment and materials, implementation, construction, completion, operation, maintenance, improvement, repair and rehabilitation, regardless of the source of funding.

As acknowledged in the 2003 Decision, the development of NAIA 3 was made pursuant to a build-operate-and-transfer arrangement pursuant to Republic Act No. 6957, as amended,33 which pertains to infrastructure or development projects normally financed by the public sector but which are now wholly or partly implemented by the private sector.34 Under the build-operate-and-transfer scheme, it is the project proponent which undertakes the construction, including the financing, of a given infrastructure facility.35 In Tatad v. Garcia,36 the Court acknowledged that the operator of the EDSA Light Rail Transit project under a BOT scheme was the owner of the facilities such as "the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant."37

There can be no doubt that PIATCO has ownership rights over the facilities which it had financed and constructed. The 2004 Resolution squarely recognized that right when it mandated the payment of just compensation to PIATCO prior to the takeover by the Government of NAIA 3. The fact that the Government resorted to eminent domain proceedings in the first place is a concession on its part of PIATCO's ownership. Indeed, if no such right is recognized, then there should be no impediment for the Government to seize control of NAIA 3 through ordinary ejectment proceedings.

Since the rights of PIATCO over the NAIA 3 facilities are established, the nature of these facilities should now be determined. Under Section 415(1) of the Civil Code, these facilities are ineluctably immovable or real property, as they constitute buildings, roads and constructions of all kinds adhered to the soil.38 Certainly, the NAIA 3 facilities are of such nature that they cannot just be packed up and transported by PIATCO like a traveling circus caravan.

Thus, the property subject of expropriation, the NAIA 3 facilities, are real property owned by PIATCO. This point is critical, considering the Government's insistence that the NAIA 3 facilities cannot be deemed as the "right-of-way", "site" or "location" of a national government infrastructure project, within the coverage of Rep. Act No. 8974.

There is no doubt that the NAIA 3 is not, under any sensible contemplation, a "right-of-way." Yet we cannot agree with the Government's insistence that neither could NAIA 3 be a "site" or "location". The petition quotes the definitions provided in Black's Law Dictionary of "location'" as the specific place or position of a person or thing and 'site' as pertaining to a place or location or a piece of property set aside for specific use.'"39 Yet even Black's Law Dictionary provides that "[t]he term [site] does not of itself necessarily mean a place or tract of land fixed by definite boundaries."40 One would assume that the Government, to back up its contention, would be able to point to a clear-cut rule that a "site" or "location" exclusively refers to soil, grass, pebbles and weeds. There is none.

Indeed, we cannot accept the Government's proposition that the only properties that may be expropriated under Rep. Act No. 8974 are parcels of land. Rep. Act No. 8974 contemplates within its coverage such real property constituting land, buildings, roads and constructions of all kinds adhered to

the soil. Section 1 of Rep. Act No. 8974, which sets the declaration of the law's policy, refers to "real property acquired for national government infrastructure projects are promptly paid just compensation."41 Section 4 is quite explicit in stating that the scope of the law relates to the acquisition of "real property," which under civil law includes buildings, roads and constructions adhered to the soil.

It is moreover apparent that the law and its implementing rules commonly provide for a rule for the valuation of improvements and/or structures thereupon separate from that of the land on which such are constructed. Section 2 of Rep. Act No. 8974 itself recognizes that the improvements or structures on the land may very well be the subject of expropriation proceedings. Section 4(a), in relation to Section 7 of the law provides for the guidelines for the valuation of the improvements or structures to be expropriated. Indeed, nothing in the law would prohibit the application of Section 7, which provides for the valuation method of the improvements and or structures in the instances wherein it is necessary for the Government to expropriate only the improvements or structures, as in this case.

The law classifies the NAIA 3 facilities as real properties just like the soil to which they are adhered. Any sub-classifications of real property and divergent treatment based thereupon for purposes of expropriation must be based on substantial distinctions, otherwise the equal protection clause of the Constitution is violated. There may be perhaps a molecular distinction between soil and the inorganic improvements adhered thereto, yet there are no purposive distinctions that would justify a variant treatment for purposes of expropriation. Both the land itself and the improvements thereupon are susceptible to private ownership independent of each other, capable of pecuniary estimation, and if taken from the owner, considered as a deprivation of property. The owner of improvements seized through expropriation suffers the same degree of loss as the owner of land seized through similar means. Equal protection demands that all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed. For purposes of expropriation, parcels of land are similarly situated as the buildings or improvements constructed thereon, and a disparate treatment between those two classes of real property infringes the equal protection clause.

Even as the provisions of Rep. Act No. 8974 call for that law's application in this case, the threshold test must still be met whether its implementation would conform to the dictates of the Court in the 2004 Resolution. Unlike in the case of Rule 67, the application of Rep. Act No. 8974 will not contravene the 2004 Resolution, which requires the payment of just compensation before any takeover of the NAIA 3 facilities by the Government. The 2004 Resolution does not particularize the extent such payment must be effected before the takeover, but it unquestionably requires at least some degree of payment to the private property owner before a writ of possession may issue. The utilization of Rep. Act No. 8974 guarantees compliance with this bare minimum requirement, as it assures the private property owner the payment of, at the very least, the proffered value of the property to be seized. Such payment of the proffered value to the owner, followed by the issuance of the writ of possession in favor of the Government, is precisely the schematic under Rep. Act No. 8974, one which facially complies with the prescription laid down in the 2004 Resolution.

Clearly then, we see no error on the part of the RTC when it ruled that Rep. Act No. 8974 governs the instant expropriation proceedings.

The Proper Amount to be Paid under Rep. Act No. 8974

Then, there is the matter of the proper amount which should be paid to PIATCO by the Government before the writ of possession may issue, consonant to Rep. Act No. 8974.

At this juncture, we must address the observation made by the Office of the Solicitor General in behalf of the Government that there could be no "BIR zonal valuations" on the NAIA 3 facility, as provided in Rep. Act No. 8974, since zonal valuations are only for parcels of land, not for airport terminals. The Court agrees with this point, yet does not see it as an impediment for the application of Rep. Act No. 8974.

It must be clarified that PIATCO cannot be reimbursed or justly compensated for the value of the parcel of land on which NAIA 3 stands. PIATCO is not the owner of the land on which the NAIA 3 facility is constructed, and it should not be entitled to just compensation that is inclusive of the value of the land itself. It would be highly disingenuous to compensate PIATCO for the value of land it does not own. Its entitlement to just compensation should be limited to the value of the improvements and/or structures themselves. Thus, the determination of just compensation cannot include the BIR zonal valuation under Section 4 of Rep. Act No. 8974.

Under Rep. Act No. 8974, the Government is required to "immediately pay" the owner of the property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property based on the current relevant zonal valuation of the [BIR]; and (2) the value of the improvements and/or structures as determined under Section 7. As stated above, the BIR zonal valuation cannot apply in this case, thus the amount subject to immediate payment should be limited to "the value of the improvements and/or structures as determined under Section 7," with Section 7 referring to the "implementing rules and regulations for the equitable valuation of the improvements and/or structures on the land." Under the present implementing rules in place, the valuation of the improvements/structures are to be based using "the replacement cost method."42 However, the replacement cost is only one of the factors to be

considered in determining the just compensation.

In addition to Rep. Act No. 8974, the 2004 Resolution in Agan also mandated that the payment of just compensation should be in accordance with equity as well. Thus, in ascertaining the ultimate amount of just compensation, the duty of the trial court is to ensure that such amount conforms not only to the law, such as Rep. Act No. 8974, but to principles of equity as well.

Admittedly, there is no way, at least for the present, to immediately ascertain the value of the improvements and structures since such valuation is a matter for factual determination.43 Yet Rep. Act No. 8974 permits an expedited means by which the Government can immediately take possession of the property without having to await precise determination of the valuation. Section 4(c) of Rep. Act No. 8974 states that "in case the completion of a government infrastructure project is of utmost urgency and importance, and there is no existing valuation of the area concerned, the implementing agency shall immediately pay the owner of the property its proferred value, taking into consideration the standards prescribed in Section 5 [of the law]."44 The "proffered value" may strike as a highly subjective standard based solely on the intuition of the government, but Rep. Act No. 8974 does provide relevant standards by which "proffered value" should be based,45 as well as the certainty of judicial determination of the propriety of the proffered value.46

In filing the complaint for expropriation, the Government alleged to have deposited the amount of P3 Billion earmarked for expropriation, representing the assessed value of the property. The making of the deposit, including the determination of the amount of the deposit, was undertaken under the erroneous notion that Rule 67, and not Rep. Act No. 8974, is the applicable law. Still, as regards the amount, the Court sees no impediment to recognize this sum of P3 Billion as the proffered value under Section 4(b) of Rep. Act No. 8974. After all, in the initial determination of the proffered value, the Government is not strictly required to adhere to any predetermined standards, although its proffered value may later be subjected to judicial review using the standards enumerated under Section 5 of Rep. Act No. 8974.

How should we appreciate the questioned order of Hon. Gingoyon, which pegged the amount to be immediately paid to PIATCO at around $62.3 Million? The Order dated 4 January 2005, which mandated such amount, proves problematic in that regard. While the initial sum of P3 Billion may have been based on the assessed value, a standard which should not however apply in this case, the RTC cites without qualification Section 4(a) of Rep. Act No. 8974 as the basis for the amount of $62.3 Million, thus leaving the impression that the BIR zonal valuation may form part of the basis for just compensation, which should not be the case. Moreover, respondent judge made no attempt to apply the enumerated guidelines for determination of just compensation under Section 5 of Rep. Act No. 8974, as required for judicial review of the proffered value.

The Court notes that in the 10 January 2005 Omnibus Order, the RTC noted that the concessions agreement entered into between the Government and PIATCO stated that the actual cost of building NAIA 3 was "not less than" US$350 Million.47 The RTC then proceeded to observe that while Rep. Act No. 8974 required the immediate payment to PIATCO the amount equivalent to 100% of the value of NAIA 3, the amount deposited by the Government constituted only 18% of this value. At this point, no binding import should be given to this observation that the actual cost of building NAIA 3 was "not less than" US$350 Million, as the final conclusions on the amount of just compensation can come only after due ascertainment in accordance with the standards set under Rep. Act No. 8974, not the declarations of the parties. At the same time, the expressed linkage between the BIR zonal valuation and the amount of just compensation in this case, is revelatory of erroneous thought on the part of the RTC.

We have already pointed out the irrelevance of the BIR zonal valuation as an appropriate basis for valuation in this case, PIATCO not being the owner of the land on which the NAIA 3 facilities stand. The subject order is flawed insofar as it fails to qualify that such standard is inappropriate.

It does appear that the amount of US$62.3 Million was based on the certification issued by the LBP-Baclaran that the Republic of the Philippines maintained a total balance in that branch amounting to such amount. Yet the actual representation of the $62.3 Million is not clear. The Land Bank Certification expressing such amount does state that it was issued upon request of the Manila International Airport Authority "purportedly as guaranty deposit for the expropriation complaint."48 The Government claims in its Memorandum that the entire amount was made available as a guaranty fund for the final and executory judgment of the trial court, and not merely for the issuance of the writ of possession.49 One could readily conclude that the entire amount of US$62.3 Million was intended by the Government to answer for whatever guaranties may be required for the purpose of the expropriation complaint.

Still, such intention the Government may have had as to the entire US$62.3 Million is only inferentially established. In ascertaining the proffered value adduced by the Government, the amount of P3 Billion as the amount deposited characterized in the complaint as "to be held by [Land Bank] subject to the [RTC's] orders,"50 should be deemed as controlling. There is no clear evidence that the Government intended to offer US$62.3 Million as the initial payment of just compensation, the wording of the Land Bank Certification notwithstanding, and credence should be given to the consistent position of the Government on that aspect.

In any event, for the RTC to be able to justify the payment of US$62.3 Million to PIATCO and not P3 Billion Pesos, he would have to establish that the higher amount represents the valuation of the structures/improvements, and not the BIR zonal valuation on the land wherein NAIA 3 is built. The Order dated 5 January 2005 fails to establish such integral fact, and in the absence of contravening proof, the proffered value of P3 Billion, as presented by the Government, should prevail.

Strikingly, the Government submits that assuming that Rep. Act No. 8974 is applicable, the deposited amount of P3 Billion should be considered as the proffered value, since the amount was based on comparative values made by the City Assessor.51 Accordingly, it should be deemed as having faithfully complied with the requirements of the statute.52 While the Court agrees that P3 Billion should be considered as the correct proffered value, still we cannot deem the Government as having faithfully complied with Rep. Act No. 8974. For the law plainly requires direct payment to the property owner, and not a mere deposit with the authorized government depositary. Without such direct payment, no writ of possession may be obtained.

Writ of Possession May Not Be Implemented Until Actual Receipt by PIATCO of Proferred Value

The Court thus finds another error on the part of the RTC. The RTC authorized the issuance of the writ of possession to the Government notwithstanding the fact that no payment of any amount had yet been made to PIATCO, despite the clear command of Rep. Act No. 8974 that there must first be payment before the writ of possession can issue. While the RTC did direct the LBP-Baclaran to immediately release the amount of US$62 Million to PIATCO, it should have likewise suspended the writ of possession, nay, withdrawn it altogether, until the Government shall have actually paid PIATCO. This is the inevitable consequence of the clear command of Rep. Act No. 8974 that requires immediate payment of the initially determined amount of just compensation should be effected. Otherwise, the overpowering intention of Rep. Act No. 8974 of ensuring payment first before transfer of repossession would be eviscerated.

Rep. Act No. 8974 represents a significant change from previous expropriation laws such as Rule 67, or even Section 19 of the Local Government Code. Rule 67 and the Local Government Code merely provided that the Government deposit the initial amounts53 antecedent to acquiring possession of the property with, respectively, an authorized

Government depositary54 or the proper court.55 In both cases, the private owner does not receive compensation prior to the deprivation of property. On the other hand, Rep. Act No. 8974 mandates immediate payment of the initial just compensation prior to the issuance of the writ of possession in favor of the Government.

Rep. Act No. 8974 is plainly clear in imposing the requirement of immediate prepayment, and no amount of statutory deconstruction can evade such requisite. It enshrines a new approach towards eminent domain that reconciles the inherent unease attending expropriation proceedings with a position of fundamental equity. While expropriation proceedings have always demanded just compensation in exchange for private property, the previous deposit requirement impeded immediate compensation to the private owner, especially in cases wherein the determination of the final amount of compensation would prove highly disputed. Under the new modality prescribed by Rep. Act No. 8974, the private owner sees immediate monetary recompense with the same degree of speed as the taking of his/her property.

While eminent domain lies as one of the inherent powers of the State, there is no requirement that it undertake a prolonged procedure, or that the payment of the private owner be protracted as far as practicable. In fact, the expedited procedure of payment, as highlighted under Rep. Act No. 8974, is inherently more fair, especially to the layperson who would be hard-pressed to fully comprehend the social value of expropriation in the first place. Immediate payment placates to some degree whatever ill-will that arises from expropriation, as well as satisfies the demand of basic fairness.

The Court has the duty to implement Rep. Act No. 8974 and to direct compliance with the requirement of immediate payment in this case. Accordingly, the Writ of Possession dated 21 December 2004 should be held in abeyance, pending proof of actual payment by the Government to PIATCO of the proffered value of the NAIA 3 facilities, which totals P3,002,125,000.00.

Rights of the Government upon Issuance of the Writ of Possession

Once the Government pays PIATCO the amount of the proffered value of P3 Billion, it will be entitled to the Writ of Possession. However, the Government questions the qualification imposed by the RTC in its 4 January 2005 Order consisting of the prohibition on the Government from performing acts of ownership such as awarding concessions or leasing any part of NAIA 3 to other parties. To be certain, the RTC, in its 10 January 2005 Omnibus Order, expressly stated that it was not affirming "the superfluous part of the Order [of 4 January 2005] prohibiting the plaintiffs from awarding concessions or leasing any part of NAIA [3] to other parties."56 Still, such statement was predicated on the notion that since the Government was not yet the owner of NAIA 3 until final

payment of just compensation, it was obviously incapacitated to perform such acts of ownership.

In deciding this question, the 2004 Resolution in Agan cannot be ignored, particularly the declaration that "[f]or the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures." The obvious import of this holding is that unless PIATCO is paid just compensation, the Government is barred from "taking over," a phrase which in the strictest sense could encompass even a bar of physical possession of NAIA 3, much less operation of the facilities.

There are critical reasons for the Court to view the 2004 Resolution less stringently, and thus allow the operation by the Government of NAIA 3 upon the effectivity of the Writ of Possession. For one, the national prestige is diminished every day that passes with the NAIA 3 remaining mothballed. For another, the continued non-use of the facilities contributes to its physical deterioration, if it has not already. And still for another, the economic benefits to the Government and the country at large are beyond dispute once the NAIA 3 is put in operation.

Rep. Act No. 8974 provides the appropriate answer for the standard that governs the extent of the acts the Government may be authorized to perform upon the issuance of the writ of possession. Section 4 states that "the court shall immediately issue to the implementing agency an order to take possession of the property and start the implementation of the project." We hold that accordingly, once the Writ of Possession is effective, the Government itself is authorized to perform the acts that are essential to the operation of the NAIA 3 as an international airport terminal upon the effectivity of the Writ of Possession. These would include the repair, reconditioning and improvement of the complex, maintenance of the existing facilities and equipment, installation of new facilities and equipment, provision of services and facilities pertaining to the facilitation of air traffic and transport, and other services that are integral to a modern-day international airport.

The Government's position is more expansive than that adopted by the Court. It argues that with the writ of possession, it is enabled to perform acts de jure on the expropriated property. It cites Republic v. Tagle,57 as well as the statement therein that "the expropriation of real property does not include mere physical entry or occupation of land," and from them concludes that "its mere physical entry and occupation of the property fall short of the taking of title, which includes all the rights that may be exercised by an owner over the subject property."

This conclusion is indeed lifted directly from statements in Tagle,58 but not from the ratio decidendi of that case. Tagle concerned whether a writ of possession in favor of the Government was still necessary in light of the fact that it was already in actual possession of the property. In ruling that the Government was entitled to the writ of possession, the Court in Tagle explains that such writ vested not only physical possession, but also the legal right to possess the property. Continues the Court, such legal right to possess was particularly important in the case, as there was a pending suit against the Republic for unlawful detainer, and the writ of possession would serve to safeguard the Government from eviction.59

At the same time, Tagle conforms to the obvious, that there is no transfer of ownership as of yet by virtue of the writ of possession. Tagle may concede that the Government is entitled to exercise more than just the right of possession by virtue of the writ of possession, yet it cannot be construed to grant the Government the entire panoply of rights that are available to the owner. Certainly, neither Tagle nor any other case or law, lends support to the Government's proposition that it acquires beneficial or equitable ownership of the expropriated property merely through the writ of possession.

Indeed, this Court has been vigilant in defense of the rights of the property owner who has been validly deprived of possession, yet retains legal title over the expropriated property pending payment of just compensation. We reiterated the various doctrines of such import in our recent holding in Republic v. Lim:60

The recognized rule is that title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle is consistent both here and in other democratic jurisdictions. In Association of Small Landowners in the Philippines, Inc. et al., vs. Secretary of Agrarian Reform[61], thus:

"Title to property which is the subject of condemnation proceedings does not vest the condemnor until the judgment fixing just compensation is entered and paid, but the condemnor's title relates back to the date on which the petition under the Eminent Domain Act, or the commissioner's report under the Local Improvement Act, is filed.

x x x Although the right to appropriate and use land taken for a canal is complete at the time of entry, title to the property taken remains in the owner until payment is actually made. (Emphasis supplied.)

In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to property does

not pass to the condemnor until just compensation had actually been made. In fact, the decisions appear to be uniform to this effect. As early as 1838, in Rubottom v. McLure, it was held that 'actual payment to the owner of the condemned property was a condition precedent to the investment of the title to the property in the State' albeit 'not to the appropriation of it to public use.' In Rexford v. Knight, the Court of Appeals of New York said that the construction upon the statutes was that the fee did not vest in the State until the payment of the compensation although the authority to enter upon and appropriate the land was complete prior to the payment. Kennedy further said that 'both on principle and authority the rule is . . . that the right to enter on and use the property is complete, as soon as the property is actually appropriated under the authority of law for a public use, but that the title does not pass from the owner without his consent, until just compensation has been made to him."

Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that:

'If the laws which we have exhibited or cited in the preceding discussion are attentively examined it will be apparent that the method of expropriation adopted in this jurisdiction is such as to afford absolute reassurance that no piece of land can be finally and irrevocably taken from an unwilling owner until compensation is paid....'"(Emphasis supplied.)

Clearly, without full payment of just compensation, there can be no transfer of title from the landowner to the expropriator. Otherwise stated, the Republic's acquisition of ownership is conditioned upon the full payment of just compensation within a reasonable time.

Significantly, in Municipality of Biñan v. Garcia[62] this Court ruled that the expropriation of lands consists of two stages, to wit:

"x x x The first is concerned with the determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context of the facts involved in the suit. It ends with an order, if not of dismissal of the action, "of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the filing of the complaint" x x x.

The second phase of the eminent domain action is concerned with the determination by the court of "the just compensation for the property sought to be taken." This is done by the court with the assistance of not more than three (3) commissioners. x x x.

It is only upon the completion of these two stages that expropriation is said to have been completed. In Republic v. Salem Investment Corporation[63] , we ruled that, "the process is not completed until payment of just compensation." Thus, here, the failure of the Republic to pay respondent and his predecessors-in-interest for a period of 57 years rendered the expropriation process incomplete.

Lim serves fair warning to the Government and its agencies who consistently refuse to pay just compensation due to the private property owner whose property had been expropriated. At the same time, Lim emphasizes the fragility of the rights of the Government as possessor pending the final payment of just compensation, without diminishing the potency of such rights. Indeed, the public policy, enshrined foremost in the Constitution, mandates that the Government must pay for the private property it expropriates. Consequently, the proper judicial attitude is to guarantee compliance with this primordial right to just compensation.

Final Determination of Just Compensation Within 60 Days

The issuance of the writ of possession does not write finis to the expropriation proceedings. As earlier pointed out, expropriation is not completed until payment to the property owner of just compensation. The proffered value stands as merely a provisional determination of the amount of just compensation, the payment of which is sufficient to transfer possession of the property to the Government. However, to effectuate the transfer of ownership, it is necessary for the Government to pay the property owner the final just compensation.

In Lim, the Court went as far as to countenance, given the exceptional circumstances of that case, the reversion of the validly expropriated property to private ownership due to the failure of the Government to pay just compensation in that case.64 It was noted in that case that the Government deliberately refused to pay just compensation. The Court went on to rule that "in cases where the government failed to pay just compensation within five (5) years from the finality of the judgment in the expropriation proceedings, the owners concerned shall have the right to recover possession of their property."65

Rep. Act No. 8974 mandates a speedy method by which the final determination of just compensation may be had. Section 4 provides:

In the event that the owner of the property contests the implementing agency's proffered value, the

court shall determine the just compensation to be paid the owner within sixty (60) days from the date of filing of the expropriation case. When the decision of the court becomes final and executory, the implementing agency shall pay the owner the difference between the amount already paid and the just compensation as determined by the court.

We hold that this provision should apply in this case. The sixty (60)-day period prescribed in Rep. Act No. 8974 gives teeth to the law's avowed policy "to ensure that owners of real property acquired for national government infrastructure projects are promptly paid just compensation."66 In this case, there already has been irreversible delay in the prompt payment of PIATCO of just compensation, and it is no longer possible for the RTC to determine the just compensation due PIATCO within sixty (60) days from the filing of the complaint last 21 December 2004, as contemplated by the law. Still, it is feasible to effectuate the spirit of the law by requiring the trial court to make such determination within sixty (60) days from finality of this decision, in accordance with the guidelines laid down in Rep. Act No. 8974 and its Implementing Rules.

Of course, once the amount of just compensation has been finally determined, the Government is obliged to pay PIATCO the said amount. As shown in Lim and other like-minded cases, the Government's refusal to make such payment is indubitably actionable in court.

Appointment of Commissioners

The next argument for consideration is the claim of the Government that the RTC erred in appointing the three commissioners in its 7 January 2005 Order without prior consultation with either the Government or PIATCO, or without affording the Government the opportunity to object to the appointment of these commissioners. We can dispose of this argument without complication.

It must be noted that Rep. Act No. 8974 is silent on the appointment of commissioners tasked with the ascertainment of just compensation.67 This protocol though is sanctioned under Rule 67. We rule that the appointment of commissioners under Rule 67 may be resorted to, even in expropriation proceedings under Rep. Act No. 8974, since the application of the provisions of Rule 67 in that regard do not conflict with the statute. As earlier stated, Section 14 of the Implementing Rules does allow such other incidents affecting the complaint to be resolved under the provisions on expropriation of Rule 67 of the Rules of Court. Even without Rule 67, reference during trial to a commissioner of the examination of an issue of fact is sanctioned under Rule 32 of the Rules of Court.

But while the appointment of commissioners under the aegis of Rule 67 may be sanctioned in expropriation proceedings under Rep. Act No. 8974, the standards to be observed for the determination of just compensation are provided not in Rule 67 but in the statute. In particular, the governing standards for the determination of just compensation for the NAIA 3 facilities are found in Section 10 of the Implementing Rules for Rep. Act No. 8974, which provides for the replacement cost method in the valuation of improvements and structures.68

Nothing in Rule 67 or Rep. Act No. 8974 requires that the RTC consult with the parties in the expropriation case on who should be appointed as commissioners. Neither does the Court feel that such a requirement should be imposed in this case. We did rule in Municipality of Talisay v. Ramirez69 that "there is nothing to prevent [the trial court] from seeking the recommendations of the parties on [the] matter [of appointment of commissioners], the better to ensure their fair representation."70 At the same time, such solicitation of recommendations is not obligatory on the part of the court, hence we cannot impute error on the part of the RTC in its exercise of solitary discretion in the appointment of the commissioners.

What Rule 67 does allow though is for the parties to protest the appointment of any of these commissioners, as provided under Section 5 of the Rule. These objections though must be made filed within ten (10) days from service of the order of appointment of the commissioners.71 In this case, the proper recourse of the Government to challenge the choice of the commissioners is to file an objection with the trial court, conformably with Section 5, Rule 67, and not as it has done, assail the same through a special civil action for certiorari. Considering that the expropriation proceedings in this case were effectively halted seven (7) days after the Order appointing the commissioners,72 it is permissible to allow the parties to file their objections with the RTC within five (5) days from finality of this decision.

Insufficient Ground for Inhibition of Respondent Judge

The final argument for disposition is the claim of the Government is that Hon. Gingoyon has prejudged the expropriation case against the Government's cause and, thus, should be required to inhibit himself. This grave charge is predicated on facts which the Government characterizes as "undeniable." In particular, the Government notes that the 4 January 2005 Order was issued motu proprio, without any preceding motion, notice or hearing. Further, such order, which directed the

payment of US$62 Million to PIATCO, was attended with error in the computation of just compensation. The Government also notes that the said Order was issued even before summons had been served on PIATCO.

The disqualification of a judge is a deprivation of his/her judicial power73 and should not be allowed on the basis of mere speculations and surmises. It certainly cannot be predicated on the adverse nature of the judge's rulings towards the movant for inhibition, especially if these rulings are in accord with law. Neither could inhibition be justified merely on the erroneous nature of the rulings of the judge. We emphasized in Webb v. People:74

To prove bias and prejudice on the part of respondent judge, petitioners harp on the alleged adverse and erroneous rulings of respondent judge on their various motions. By themselves, however, they do not sufficiently prove bias and prejudice to disqualify respondent judge. To be disqualifying, the bias and prejudice must be shown to have stemmed from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case. Opinions formed in the course of judicial proceedings, although erroneous, as long as they are based on the evidence presented and conduct observed by the judge, do not prove personal bias or prejudice on the part of the judge. As a general rule, repeated rulings against a litigant, no matter how erroneous and vigorously and consistently expressed, are not a basis for disqualification of a judge on grounds of bias and prejudice. Extrinsic evidence is required to establish bias, bad faith, malice or corrupt purpose, in addition to the palpable error which may be inferred from the decision or order itself. Although the decision may seem so erroneous as to raise doubts concerning a judge's integrity, absent extrinsic evidence, the decision itself would be insufficient to establish a case against the judge. The only exception to the rule is when the error is so gross and patent as to produce an ineluctable inference of bad faith or malice.75

The Government's contentions against Hon. Gingoyon are severely undercut by the fact that the 21 December 2004 Order, which the 4 January 2005 Order sought to rectify, was indeed severely flawed as it erroneously applied the provisions of Rule 67 of the Rules of Court, instead of Rep. Act No. 8974, in ascertaining compliance with the requisites for the issuance of the writ of possession. The 4 January 2005 Order, which according to the Government establishes Hon. Gingoyon's bias, was promulgated precisely to correct the previous error by applying the correct provisions of law. It would not speak well of the Court if it sanctions a judge for wanting or even attempting to correct a previous erroneous order which precisely is the right move to take.

Neither are we convinced that the motu proprio issuance of the 4 January 2005 Order, without the benefit of notice or hearing, sufficiently evinces bias on the part of Hon. Gingoyon. The motu proprio amendment by a court of an erroneous order previously issued may be sanctioned depending on the circumstances, in line with the long-recognized principle that every court has inherent power to do all things reasonably necessary for the administration of justice within the scope of its jurisdiction.76 Section 5(g), Rule 135 of the Rules of Court further recognizes the inherent power of courts "to amend and control its process and orders so as to make them conformable to law and justice,"77 a power which Hon. Gingoyon noted in his 10 January 2005 Omnibus Order.78 This inherent power includes the right of the court to reverse itself, especially when in its honest opinion it has committed an error or mistake in judgment, and that to adhere to its decision will cause injustice to a party litigant.79

Certainly, the 4 January 2005 Order was designed to make the RTC's previous order conformable to law and justice, particularly to apply the correct law of the case. Of course, as earlier established, this effort proved incomplete, as the 4 January 2005 Order did not correctly apply Rep. Act No. 8974 in several respects. Still, at least, the 4 January 2005 Order correctly reformed the most basic premise of the case that Rep. Act No. 8974 governs the expropriation proceedings.

Nonetheless, the Government belittles Hon. Gingoyon's invocation of Section 5(g), Rule 135 as "patently without merit". Certainly merit can be seen by the fact that the 4 January 2005 Order reoriented the expropriation proceedings towards the correct governing law. Still, the Government claims that the unilateral act of the RTC did not conform to law or justice, as it was not afforded the right to be heard.

The Court would be more charitably disposed towards this argument if not for the fact that the earlier order with the 4 January 2005 Order sought to correct was itself issued without the benefit of any hearing. In fact, nothing either in Rule 67 or Rep. Act No. 8975 requires the conduct of a hearing prior to the issuance of the writ of possession, which by design is available immediately upon the filing of the complaint provided that the requisites attaching thereto are present. Indeed, this expedited process for the obtention of a writ of possession in expropriation cases comes at the expense of the rights of the property owner to be heard or to be deprived of possession. Considering these predicates, it would be highly awry to demand that an order modifying the earlier issuance of a writ of possession in an expropriation case be barred until the staging of a hearing, when the issuance of the writ of possession itself is not subject to hearing. Perhaps the conduct of a hearing under these circumstances would be prudent. However, hearing is not mandatory, and the failure to conduct one does not establish the

manifest bias required for the inhibition of the judge.

The Government likewise faults Hon. Gingoyon for using the amount of US$350 Million as the basis for the 100% deposit under Rep. Act No. 8974. The Court has noted that this statement was predicated on the erroneous belief that the BIR zonal valuation applies as a standard for determination of just compensation in this case. Yet this is manifest not of bias, but merely of error on the part of the judge. Indeed, the Government was not the only victim of the errors of the RTC in the assailed orders. PIATCO itself was injured by the issuance by the RTC of the writ of possession, even though the former had yet to be paid any amount of just compensation. At the same time, the Government was also prejudiced by the erroneous ruling of the RTC that the amount of US$62.3 Million, and not P3 Billion, should be released to PIATCO.

The Court has not been remiss in pointing out the multiple errors committed by the RTC in its assailed orders, to the prejudice of both parties. This attitude of error towards all does not ipso facto negate the charge of bias. Still, great care should be had in requiring the inhibition of judges simply because the magistrate did err. Incompetence may be a ground for administrative sanction, but not for inhibition, which requires lack of objectivity or impartiality to sit on a case.

The Court should necessarily guard against adopting a standard that a judge should be inhibited from hearing the case if one litigant loses trust in the judge. Such loss of trust on the part of the Government may be palpable, yet inhibition cannot be grounded merely on the feelings of the party-litigants. Indeed, every losing litigant in any case can resort to claiming that the judge was biased, and he/she will gain a sympathetic ear from friends, family, and people who do not understand the judicial process. The test in believing such a proposition should not be the vehemence of the litigant's claim of bias, but the Court's judicious estimation, as people who know better than to believe any old cry of "wolf!", whether such bias has been irrefutably exhibited.

The Court acknowledges that it had been previously held that "at the very first sign of lack of faith and trust in his actions, whether well-grounded or not, the judge has no other alternative but to inhibit himself from the case."80 But this doctrine is qualified by the entrenched rule that "a judge may not be legally prohibited from sitting in a litigation, but when circumstances appear that will induce doubt to his honest actuations and probity in favor of either party, or incite such state of mind, he should conduct a careful self- examination. He should exercise his discretion in a way that the people's faith in the Courts of Justice is not impaired."81 And a self-assessment by the judge that he/she is not impaired to hear the case will be respected by the Court absent any evidence to the contrary. As held in Chin v. Court of Appeals:

An allegation of prejudgment, without more, constitutes mere conjecture and is not one of the "just and valid reasons" contemplated in the second paragraph of Rule 137 of the Rules of Court for which a judge may inhibit himself from hearing the case. We have repeatedly held that mere suspicion that a judge is partial to a party is not enough. Bare allegations of partiality and prejudgment will not suffice in the absence of clear and convincing evidence to overcome the presumption that the judge will undertake his noble role to dispense justice according to law and evidence and without fear or favor. There should be adequate evidence to prove the allegations, and there must be showing that the judge had an interest, personal or otherwise, in the prosecution of the case. To be a disqualifying circumstance, the bias and prejudice must be shown to have stemmed from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case.82

The mere vehemence of the Government's claim of bias does not translate to clear and convincing evidence of impairing bias. There is no sufficient ground to direct the inhibition of Hon. Gingoyon from hearing the expropriation case.

In conclusion, the Court summarizes its rulings as follows:

(1) The 2004 Resolution in Agan sets the base requirement that has to be observed before the Government may take over the NAIA 3, that there must be payment to PIATCO of just compensation in accordance with law and equity. Any ruling in the present expropriation case must be conformable to the dictates of the Court as pronounced in the Agan cases.

(2) Rep. Act No. 8974 applies in this case, particularly insofar as it requires the immediate payment by the Government of at least the proffered value of the NAIA 3 facilities to PIATCO and provides certain valuation standards or methods for the determination of just compensation.

(3) Applying Rep. Act No. 8974, the implementation of Writ of Possession in favor of the Government over NAIA 3 is held in abeyance until PIATCO is directly paid the amount of P3 Billion, representing the proffered value of NAIA 3 under Section 4(c) of the law.

(4) Applying Rep. Act No. 8974, the Government is authorized to start the implementation of the NAIA 3 Airport terminal project by performing the acts that are essential to the operation of the NAIA 3 as an international airport terminal upon the effectivity of the Writ of Possession, subject to the conditions above-stated. As prescribed by the Court, such authority encompasses "the repair,

reconditioning and improvement of the complex, maintenance of the existing facilities and equipment, installation of new facilities and equipment, provision of services and facilities pertaining to the facilitation of air traffic and transport, and other services that are integral to a modern-day international airport."83

(5) The RTC is mandated to complete its determination of the just compensation within sixty (60) days from finality of this Decision. In doing so, the RTC is obliged to comply with "law and equity" as ordained in Again and the standard set under Implementing Rules of Rep. Act No. 8974 which is the "replacement cost method" as the standard of valuation of structures and improvements.

(6) There was no grave abuse of discretion attending the RTC Order appointing the commissioners for the purpose of determining just compensation. The provisions on commissioners under Rule 67 shall apply insofar as they are not inconsistent with Rep. Act No. 8974, its Implementing Rules, or the rulings of the Court in Agan.

(7) The Government shall pay the just compensation fixed in the decision of the trial court to PIATCO immediately upon the finality of the said decision.

(8) There is no basis for the Court to direct the inhibition of Hon. Gingoyon.

All told, the Court finds no grave abuse of discretion on the part of the RTC to warrant the nullification of the questioned orders. Nonetheless, portions of these orders should be modified to conform with law and the pronouncements made by the Court herein.

WHEREFORE, the Petition is GRANTED in PART with respect to the orders dated 4 January 2005 and 10 January 2005 of the lower court. Said orders are AFFIRMED with the following MODIFICATIONS:

1) The implementation of the Writ of Possession dated 21 December 2005 is HELD IN ABEYANCE, pending payment by petitioners to PIATCO of the amount of Three Billion Two Million One Hundred Twenty Five Thousand Pesos (P3,002,125,000.00), representing the proffered value of the NAIA 3 facilities;

2) Petitioners, upon the effectivity of the Writ of Possession, are authorized start the implementation of the Ninoy Aquino International Airport Pasenger Terminal III project by performing the acts that are essential to the operation of the said International Airport Passenger Terminal project;

3) RTC Branch 117 is hereby directed, within sixty (60) days from finality of this Decision, to determine the just compensation to be paid to PIATCO by the Government.

The Order dated 7 January 2005 is AFFIRMED in all respects subject to the qualification that the parties are given ten (10) days from finality of this Decision to file, if they so choose, objections to the appointment of the commissioners decreed therein.

The Temporary Restraining Order dated 14 January 2005 is hereby LIFTED.

No pronouncement as to costs.

SO ORDERED.

DANTE O. TINGAAssociate Justice

WE CONCUR:

HILARIO G. DAVIDE, JR.Chief Justice

REYNATO S. PUNOAssociate Justice

ARTEMIO V. PANGANIBANAssociate Justice

LEONARDO A. QUISUMBINGAssociate Justice

CONSUELO YNARES-SANTIAGOAssociate Justice

ANGELINA SANDOVAL-GUTIERREZAssociate Justice

ANTONIO T. CARPIOAssociate Justice

MA. ALICIA AUSTRIA-MARTINEZAssociate Justice

RENATO C. CORONAAssociate Justice

CONCHITA CARPIO-MORALESAssociate Justice

ROMEO J. CALLEJO, SR.Associate Justice

ADOLFO S. AZCUNAAssociate Justice

MINITA V. CHICO-NAZARIOAssociate Justice

CANCIO C. GARCIAAssociate Justice

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

HILARIO G. DAVIDE, JR.Chief Justice

Footnotes

1 450 Phil. 744 (2003). The Motions for Reconsideration were denied in a Resolution dated 21 January 2004, see 420 SCRA 575.

2 Ibid.

3 "In sum, this Court rules that in view of the absence of the requisite financial capacity of the Paircargo Consortium, predecessor of respondent PIATCO, the award by the PBAC of the contract for the construction, operation and maintenance of the NAIA IPT III is null and void. Further, considering that the 1997 Concession Agreement contains material and substantial amendments, which amendments had the effect of converting the 1997 Concession Agreement into an entirely different agreement from the contract bidded upon, the 1997 Concession Agreement is similarly null and void for being contrary to public policy. The provisions under Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997 Concession Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA, which constitute a direct government guarantee expressly prohibited by, among others, the BOT Law and its Implementing Rules and Regulations are also null and void. The Supplements, being accessory contracts to the ARCA, are likewise null and void." Id. at 840.

4 Id. at 898. Per Separate Opinion, J. Panganiban.

5 Ibid at 899. Per Separate Opinion, J. Panganiban. Emphasis supplied.

6 G.R. Nos. 155001, 155547 & 155561, 21 January 2004, 420 SCRA 575.

7 Id. at 603. Emphasis supplied.

8 Rollo, pp. 27-28.

9 Id. at 60-61.

10 Ibid.

11 Particularly the Republic of the Philippines, represented by Executive Secretary Eduardo Ermita, the Department of Transportation and Communcations, represented by its Secretary Leandro Mendoza, and the Manila International Airport Authority, represented by its General Manager Alfonso Cusi. See rollo, pp. 88-90.

12 Rollo, p. 93.

13 For brevity's sake, all further references to this amount will be to this rounded off figure

denominated in Philippine Pesos.

14 Based on the resolution by the Board of Directors of the Manila International Airport Authority to use the amount of P16,450.00 per square meter as the assessed value of the NAIA 3 Terminal. See rollo, p. 103.

15 Docketed as Civil Case No. 04-0876-9.

16 Rollo, pp. 108-109.

17 Cited as G.R. No. 142304, June 20, 2001. See rollo, p. 109.

18 Rollo, p. 255. According to PIATCO, on 21 December 2004, the same date of the filing of the complaint for expropriation and the issuance of the writ of possession, "hundreds of PNP fully armed (sic) SWAT teams flanked [the NAIA 3 facilities]", even though it had not yet been served summons.

19 Id. at 76-77.

20 Id. at 87.

21 Id. at 240-241.

22 Id. at 34-35.

23 Id. at 603. Emphasis supplied.

24 See rollo, p. 297-298. "Petitioners agree with this Honorable Court's statement that 'f]or the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures.' However, petitioners would like to stress the qualification enunciated by this Honorable Court that the 'compensation must be just and in accordance with law and equity.'"

25 The NAIA 3 facility stands on a parcel of land owned by the Bases Conversion Development Authority. See rollo, p. 27.

26 See Article 415(1), Civil Code.

27 Rollo, infra.

28 See Section 1, Rep. Act No. 8974.

29 As prescribed by Section 10 of the Implementing Rules to Rep. Act No. 8974, in relation to Sections 4(a) and 7, Rep. Act No. 8974.

30 See Section 2, Rule 67, Rules of Court.

31 Private Respondent's Memorandum, pp. 26-27. Emphasis not ours. See rollo, infra.

32 See Section 14, Implementing Rules.

33 See Agan 1, supra note 1 at 631-632.

34 See Section 2(a), Rep. Act No. 6957, as amended.

35 See Section 2(b), Rep. Act No. 6957, as amended.

36  G.R. No. 114222 , 6 April 1995, 243 SCRA 436.

37 Ibid.

38 See Article 415(1), Civil Code.

39 Rollo, p. 42.

40 Black's Law Dictionary, 6th ed., p. 1387.

41 See Section 1, Rep. Act No. 8974.

42 See Section 10, Implementing Rules to Rep. Act No. 8974. The replacement cost method is generally defined as "the amount necessary to replace the improvements/structures, based on the current market prices for materials, equipment, labor, contractor's profit and overhead, and all other attendant costs associated with the acquisition and installation in place of the affected improvements/structures."

43 The replacement cost method is generally defined as "the amount necessary to replace the improvements/structures, based on the current market prices for materials, equipment, labor, contractor's profit and overhead, and all other attendant costs associated with the acquisition and installation in place of the affected improvements/structures." Ibid.

44 See Section 4(c), Rep. Act No. 8974.

45 See Section 5, id.

46 "In the event that the owner of the property contests the implementing agency's proffered value, the court shall determine the just compensation to be paid the owner within sixty (60) days from the date of filing of the expropriation case." See Section 4, id.

47 Rollo, p. 84.

48 Annex "K-1" to Petition. See rollo, infra.

49 Rollo, p. 397.

50 Complaint dated 21 December 2004. See rollo, infra.

51 Rollo, p. 394.

52 Id. at 393.

53 The assessed market value under Rule 67 of the Rules of Court, and 15% of the fair market value under the Local Government Code.

54 See Section 2, Rule 67, Rules of Court.

55 See Section 19, Local Government Code.

56 Ibid.

57 Cited as 299 SCRA 549 (1998). Rollo, p. 413.

58 "In exercising this power, petitioner intended to acquire not only physical possession but also the legal right to possess and ultimately to own the subject property. Hence, its mere physical entry and occupation of the property fall short of the taking of title, which includes all the rights that may be exercised by an owner over the subject property." Republic v. Tagle, 359 Phil. 892, 902 (1998).

59 Republic v. Tagle, id. at 903.

60 G.R. No. 161656, 29 June 2005.

61 G.R. No. 78742, July 14, 1989, 175 SCRA 343.

62 G.R. No. 69260, December 22, 1989, 180 SCRA 576, 583-584.

63 G.R. No. 137569, June 23, 2000, 334 SCRA 320, 329.

64 The Court in Republic v. Lim however recognized the exceptional circumstances in that case, wherein the government had not paid just compensation in the 57 years that had passed since the expropriation proceedings were terminated. The general rule, as stated in Republic, remained that "non-payment of just compensation (in expropriation proceedings) does not entitle the private landowners to recover possession of the expropriated lots." Id.

65 Republic v. Lim, supra note 60. The 5 year period set in Lim was based on Section 6, Rule 39 of

the Rules of Court, which sets a 5 year period within which a final and executory judgment or order may be executed on motion. Id.

66 See Section 1, Rep. Act No. 8974.

67 Section 11 of the Implementing Rules does allow the implementing government agency to engage the services of government financing institutions or private appraisers duly accredited by those institutions to undertake the appraisal of the property, including the land and/or improvements and structures. Yet the engagement of these appraisers at the election of the Government is clearly different from the appointment by the trial court of commissioners. The differences extend beyond merely the selecting authority. The engagement of appraisers under Section 11 primarily occurs before the filing of the expropriation complaint, when the Government is obliged to determine the current relevant zonal valuation of the land to be expropriated, the valuation of the structures and improvements using the replacement cost method, or the proffered value of the property for expropriation, all for the purpose of making the initial payment necessary for the writ of possession under Section 4 of Rep. Act No. 8974. This initial determination of the amount is generally made by the Government, and not by the courts, and the engagement of appraisers is attuned for such purpose. However, if the Government engages these appraisers after the initial payment has been made to the property owner, for the express purpose of making the final determination of just compensation, there is no rule that binds the trial court to the findings of these appraisers. Neither are these appraisers obliged to receive evidence submitted by the parties, unlike the commissioners, who are expressly authorized to do so under Section 6, Rule 67.

68 Supra note 42.

69 G.R. No. 77071, 22 March 1990, 183 SCRA 528.

70 Id. at 532.

71 See Section 5, Rule 67, Rules of Court.

72 By virtue of the issuance of the Temporary Restraining Order dated 14 January 2005.

73 See Estrada v. Desierto, G.R. Nos. 146710-15, 146738, 3 April 2001, 356 SCRA 108.

74 342 Phil. 206 (1997).

75 Id. at 216-217. See also Aleria v. Velez, G.R. No. 127400, 16 November 1998; People v. Court of Appeals, G.R. No. 129120, 2 July 1999; Seveses v. Court of Appeals, G.R. No. 102675, 13 October 1999; Soriano v. Angeles, G.R. No. 109920, 31 August 2000; People v. Gako, G.R. No. 135045, 15 December 2000; Gochan v. Gochan, G.R. No. 143089, 27 February 2003.

76 Shioji v. Harvey, 43 Phil. 333, 344 (1922).

77 Section 5, Rule 135, Rules of Court.

78 See rollo, p. 82.

79 Tocao v. Court of Appeals, G.R. No. 127405, 20 September 2001, 463 SCRA 365. See also Astraquillo v. Javier, L-20034, January 26, 1965, 13 SCRA 125.

80 See e.g., Gacayan v. Pamintuan, A.M. No. RTJ-99-1483, 17 September 1999, 314 SCRA 682.

81 See e.g., Pimentel vs. Salanga, 21 SCRA 160.

82 G.R. No. 144618, 15 August 2003, 206 SCRA 409.

83 Infra.